Monday, February 22, 2010

Brown’s gold standard

Here is a wonderful graph created by Giles Wilkes:

It shows that Gordon Brown’s decision to sell a lot of the UK gold reserves in 1999 (when the price was low) has left the Treasury about $10 billion worse off. Oh, and that Geoffrey Howe’s decision not to sell gold in 1979 (when the price was high) has left us about $35bn worse off.

Giles explains it all here.


Liam Murray said...

Erm... isn't there a clever retort here about active & passive errors?

Events might make Geoffrey Howe's reticence appear well-placed but GB has already sold the silver so.... or rather the gold but you know what I mean....

Tom Freeman said...

Yeah, Giles does mention sins of omission vs commission, but I'm not sold on the distinction. You'd have equal scorn for a trader who sold low and for one who failed to sell high - both perhaps under the false impression that recent trends would continue.

And just look at the flak Brown's getting for being supposedly too passive about cutting the deficit - I may not agree with the premise but if it is true then the criticism's fair.

And it's not just 'selling the gold'. It's about moving from X amount of gold and Y amount of other assets to X-Z gold and Y+Z other.

Also, Giles explains why Howe would have had good independent reason, given his policy aims, to sell the gold.

Also also, I think Left Outside posted about how, regardless of long-term market movement, Brown did make quite a pig's ear of handling the sale. So he certainly deserves some stick for that.