As Ronald Reagan once said (although he did mean to say “stubborn”)

Regarding the implications of optimal currency area theory and Scottish independence, Reader Patrick Sullivan continues his reign of error, trying to argue that Canada did just fine, just like a bank crisis-free Scotland in a currency union would:

Canada didn’t have a central bank until sometime in the 1930s, and had a less severe depression than the USA.

Well, with a little help from Louis Johnston, (who knows economic history much better than I), I generate the following plot:

Figure 1: Log per capita income in 1990 International dollars for Canada (blue) and United States (red), normalized to 1929=0.

Source: Maddison and author’s calculations.

I dunno, but these seem to be comparable declines in output. So, yes, no central bank operating until 1935 [1] (p.22), but no, Canada suffers a pretty big shock (Canada on a de facto gold standard until 1931 (p.21)).

It constantly amazes me how people make easily falsifiable statements with such astounding confidence…

So, I think Scotland should consider very carefully independence conjoined with monetary union with England.