IT seems to me that almost nobody understands the actual process of creating a Scottish pound. That would most definitely apply to Keith Howell (Letters, February 13).

The new Reserve Bank of Scotland creates Scottish pounds and it then uses those to purchase the existing sterling from those of us who wish to use the currency. This exchange is, of course, voluntary but we will only be able to pay taxes and all other official payments in Scottish pounds, plus government salaries, pensions, purchases of goods and services will only be paid in that currency.

So fairly quickly most of us will find it easier to change at least some of our money. If 50 per cent were converted that would be perhaps £70 billion. All of that sterling becomes the property of the Reserve Bank and thus the foreign reserves of Scotland. By comparison, the net foreign reserves of the Bank of England are only $44bn, so Scotland would have twice the reserves and be probably the only currency that was, at least initially, backed one for one by reserves.

So the Reserve Bank would actually have huge firepower for dealing with speculators if it so wished, though I would simply let the currency float rather than waste our reserves fighting the market.

Why would the new Scottish pound crash? The value is simply a matter of supply and demand. At the outset the only people with the Scottish pound are those who have just voluntarily exchanged their sterling. Why would they then rush to sell, especially if that was then at a loss? Is Scotland failing to pay its way in the world? In this context a government deficit does not matter (so the supposed £12bn Government Expenditure and Reserves Scotland deficit is irrelevant), but what does matter is the balance of payments.

The UK balance of payments is the worst ever, at getting on for a £150bn annual deficit. Selling the Shard to foreign investors for £1bn, for example, paid for our deficit for two days. The estimates for Scotland, on the other hand, are that we are roughly in balance. In other words, our imports, exports and capital flows in and out are roughly in balance. So there would be no payments pressure forcing the Scottish pound either up or down.

So what about the massed ranks of speculators just itching to drive the Scottish pound into the dirt? At the point of creation they don’t have any Scottish pounds since the only people who do have them are those like us who just sold our sterling secure them. So how would all these speculators start selling something that they don’t have?

Clearly they can’t. So they could go and buy the Scottish pound and then sell it again but deliberately losing your money isn’t very clever. The only option would be to sell short, in other words to sell Scottish pounds you don’t have for delivery on a date in the future in the hope that you would be able to buy them cheaper just before delivery.

That would be courageous, as they say, because there isn’t initially any large pool (as in billions) of Scottish pounds sitting around waiting to be purchased. All the initial holders of the Scottish pound would have just paid the full one-to-one price. Why would they want to accept an offer at 90p?

So short selling speculators could very easily be trapped where they are forced to buy large blocks of Scottish pounds on delivery dates in the contracts but find they are not readily available in the exchange market, certainly not at the large discount they need to make the trade profitable. The Reserve Bank also has the firepower with the very large foreign reserves to give any such speculators a bloody nose by restricting the availability of Scottish pounds, should that be necessary.

My expectation would be that, while there may be some initial fluctuation up and down, in the longer term the Scottish pound would tend to appreciate against sterling (until and unless the rest of the UK can reverse the huge balance of payments deficit), while staying roughly constant against the euro and dollar.

Dr Tim Rideout,

61 Eskbank Road, Dalkeith.

SINCE the introduction of the Land and Buildings Transaction Tax (LBTT), hardly a month goes past without a well publicised attack from self-styled industry experts and Tory politicians on the Scottish Government for the apparent adverse effect on the sale of higher priced property.

Jody Harrison’s report entitled (“Price boom creates 2,000 more property millionaires”, The Herald, February 10) blows apart this Unionist nonsense as the homes with a seven-digit price tag in Scotland rose by one quarter in 2017. He also quotes Faisal Choudhry, Director of Scottish Research and Residential Research at Savills: “Sales of properties at the highest levels have boomed in recent years”, who also said: “Scotland’s property market offers excellent value for money, compared to some areas of the south of England.” Scottish Tory politicians’ desperate efforts to undermine Scotland’s appeal as a place in which to live and work are yet again exposed by wealthy purchasers who have more faith in Scotland and our quality of life. Would that they had the grace to acknowledge that the stewardship of Scotland’s finances by the Scottish Government excels against the hapless incompetence of the UK Government.

Graeme McCormick,

Conveyancing Direct Solicitors,

The Salmond Chambers,

53 Morrison Street, Glasgow.

SKY News asked Theresa May at a news conference with Angela Merkel in Berlin if she thought it was important for the British Government to set out what it wants rather than find out what the EU offers. The Prime Minister, true to form, replied that it was important that both sides come to an agreement. Her circumlocution spins in ever decreasing circles. This left Ms Merkel, as she stated, “curious” as to what the UK Government wants from Brexit.

After Boris Johnson’s latest failed foray into Brexit updates, Mrs May seems to have forgotten that, to agree on something, one must first set out what one is aiming for in detail.

Brexit Secretary David Davis once boasted that he was conducting discussions using constructive ambiguity. Mrs May is neither constructive nor ambiguous. She has produced nothing substantive to come to an agreement on regarding Brexit.

Her hectoring tone does not help. At the Munich security conference she issued a “warning” about ideology interfering with security.No doubt, she does not see her “red lines” over the European Court of Justice as ideology. Is she aiming for ultimate teleological failure so as to lay the blame on the “other side”?

John Edgar,

4 Merrygreen Place, Stewarton.