I have commented on the so called 'Brown bottom' before but Thomas Pascoe in The Telegraph has an interesting theory, but first some background (my emphasis):
'A great deal of Gordon Brown’s economic strategy would strike a sane man as troubling. Not a great deal was mysterious. The orgy of consumption spending, frequent extensions of the cycle over which he would “borrow to invest”, proclamations of the “end of boom and bust”: these are part of the armoury of modern politicians, of all political hues.Read the article for the explanation, which revolves around the 'carry trade'. Is this true? I cannot say. It might be but then it might also just be true that Gordon Brown saw gold as an unproductive asset and thought that he could do so much more by selling the gold and 'investing' the proceeds. The trouble is that when Gordon Brown said 'investing', he too often meant wasting.
One decision stands out as downright bizarre, however: the sale of the majority of Britain’s gold reserves for prices between $256 and $296 an ounce, only to watch it soar so far as $1,615 per ounce today.
When Brown decided to dispose of almost 400 tonnes of gold between 1999 and 2002, he did two distinctly odd things.
First, he broke with convention and announced the sale well in advance, giving the market notice that it was shortly to be flooded and forcing down the spot price. This was apparently done in the interests of “open government”, but had the effect of sending the spot price of gold to a 20-year low, as implied by basic supply and demand theory.
Second, the Treasury elected to sell its gold via auction. Again, this broke with the standard model. The price of gold was usually determined at a morning and afternoon "fix" between representatives of big banks whose network of smaller bank clients and private orders allowed them to determine the exact price at which demand met with supply.
The auction system again frequently achieved a lower price than the equivalent fix price. The first auction saw an auction price of $10c less per ounce than was achieved at the morning fix. It also acted to depress the price of the afternoon fix which fell by nearly $4.
It seemed almost as if the Treasury was trying to achieve the lowest price possible for the public’s gold. It was.'
"The trouble is that when Gordon Brown said 'investing', he too often meant wasting."
ReplyDeleteIt's a mistake to believe that words mean the same thing to all people.
For instance, when people hear the words: "Islam is a religion of peace.", unless they knew better, they might assume that the the religion of Islam teaches its followers to live at peace with all people. This is not what Islam teaches. The "peace" that proclaims for itself can only be achieved once all of humanity has that Islam is the one true religion. Until then, unbelievers are to be coerced, harried and butchered into submission. Peace is an end, violence is the means of achieving it; it's called Jihad.
For a naive westerner brought up in the Judeo Christian tradition, when they hear Muslims talk of Islam being a religion of peace, there is a willingness to believe what they are told at face value and consign the overwhelming evidence which points to the contrary as an aberration and unrepresentative of true Islam.
Likewise when Mr Brown, the former Chancellor of the Exchequer speaks of "Investment", a naive westerner brought up in the Judeo Christian tradition might assume that he was putting in place the means by which the British economy can improve its productivity, become more competitive in the global economy and lay the foundations for a sound future for this and following generations.
Mr Brown has never had those concerns at heart anymore than Hamas is concerned with seeking a peaceful relationship with Israel.
For Mr Brown, the word investment means creating a social environment which ensures that most, if not all people living in these Islands become, to a large extent, wards of the state. He is not concerned with their prosperity for prosperity brings independence. The investment, therefore, was in the institutions of the state most likely to increase the power of the state through welfarism, regulation, and other similar means and "investing in" (massively increasing) the bureaucracy that sustains it. By so doing, he has succeeded in destroying the Conservative Party and guaranteeing that his ideas are still in force long after he has departed. He has impoverished us all by emptying our coffers and in selling our gold made it even more difficult to find a way out of the trap he has laid.