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LargelyIgnorant

Why Did Brown Sell 60% Of Our Nation's Gold

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In 1998 Gordon Brown decided to reduce Britain's gold reserves from 715 tons to 300 tons by the end of 2001 (apparently against the BoE's advice). From the BoE's stated reserves, Gordon has exceeded his own targets and we now have approx 286 tonnes of gold left.

There appear to be only two possible reasons for doing this:

(1) Political - Aim was to make it easier to join the single currency

(2) Economical - Disposing of an outdated relic that had no return for more modern reserves.

According to www.goldensextant.com, The EU contries who are comparable in economic size to the UK have approx an order of magnitude more gold in reserves:

Germany: 3,428 tonnes

France: 2,890 tonnes

Italy: 2,452 tonnes

From the EU's Joint Statement on Gold: http://www.ecb.int/press/pr/date/2004/html/pr040308.en.html

The first point is that "Gold will remain an important element of global monetary reserves."

The ECB currently holds gold reserves of 720 tonnes. European central banks' sales are also much smaller than that permitted by this 2004 agreement.

(1) It appears that the countries that joined the Euro didn't have to sell their reserves, so why did the UK? This would appear to be political incompetence as the sale was clearly unnecessary for Euro entry.

(2) Gordon's sale of 60% of the nation's gold was made at a historic low for gold. It was thus economically incompetent.

IMO, the reason for Gordon's sale of 60% of our reserves was a mixture of political and economic incompetence. Just unsure whether he is/was more politically incompetent, or more economically incompetent. Given that this is the man who wants to run our country, this is an important issue. Any thoughts?

Have been looking for Brown's C.V. for a while, but have been unable to locate a full one. He appears to have no economic qualifications, but a PhD in politics - Does this imply that Gordon's incompetence is economical?

In the unlikely event of a collapse in the global financial system: http://www.safehaven.com/showarticle.cfm?id=5205 - It is interesting to think that the Euro is backed by approximately 10,000 tonnes of gold amongst Euro signatories, The dollar is backed by approx 8,000 tonnes of US gold reserves, whilst the great british pound is backed by... err.... 286 tonnes. Is Gordon completely unaware of the concept of 'risk management'?

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GB would not have made the decision on his own; he was no doubt advised by very clever eggheads at the treasury and in the city.

It's very easy to say now that selling gold was a mistake, but remember that since the BoE was mandated to keep inflation under control, the need to hold gold was (apparently) obviated.

The real mistake is the failure of inflation measures, as evidenced by... the rise in value of gold.

I should have bought property in 2000 when I first got a job and could have borrowed money off my dad to do it. But I didn't. Does that make me economically incompetent? Actually, don't answer that...

Edited by the_duke_of_hazzard

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GB would not have made the decision on his own; he was no doubt advised by very clever eggheads at the treasury and in the city.

The 'rumors' have it that GB's sale was opposed by the BoE. If this is true, then GB acted against the advice of the UK's central bank in his actions. Wonder who's idea it was?

It's very easy to say now that selling gold was a mistake, but remember that since the BoE was mandated to keep inflation under control, the need to hold gold was (apparently) obviated.

The real mistake is the failure of inflation measures, as evidenced by... the rise in value of gold.

Hindsight is a wonderful thing, but:

- Isn't it foolish for GB to have believed (even 8 years ago) that the BoE could control global inflation for the forseeable future?

- It appears that every other central bank (especially european ones) kept the majority of their reserves, whereas GB is apparently the sole western financial leader that sold the majority of his country's reserves.

- GB has not joined the Euro, but sold off all the gold which used to back the pound. In the unlikely event of a fiat collapse, GB has sold our nation's insurance at a pittance.

- There was an awful lot of voices at the time (esp. Tory MPs) who were very against the sell off.

I should have bought property in 2000 when I first got a job and could have borrowed money off my dad to do it. But I didn't. Does that make me economically incompetent? Actually, don't answer that...

:) Wouldn't GB selling the UK's gold be more analogous to something like: You inheriting a very valuable property that previous generations have built up over hundreds of years, then selling it when property was at an all time low? Anyway, even if you were economically incompetent, it wouldn't matter, because you are not running our country's economy.

IMO, it's GB's apparent absence of any economic training that meant that he discounted any possibility of gold having investment/monetary value for the forseeable future.

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I pretty much agree with you - I was playing devil's advocate to an extent. Didn't know there was so much vocal opposition. Why did we have so little gold, relatively speaking, in the first place anyway? What did we buy instead?

GB doesn't exactly fill me with confidence anyway - has he ever run a successful business?

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I pretty much agree with you - I was playing devil's advocate to an extent. Didn't know there was so much vocal opposition. Why did we have so little gold, relatively speaking, in the first place anyway? What did we buy instead?

GB doesn't exactly fill me with confidence anyway - has he ever run a successful business?

I seem to remember the justification by Gordo for the UK gold sale was that it was on the books at about GBP30/oz (or something like that), it was not earning any return and in the context of a steady decline in gold price in the previous few years exchanging it for a reserve currency was a prudent thing to do. :blink:

The sell off does look amazingly stupid now - even at the time people were worried that it was going at a very low price.

JY

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The sell off does look amazingly stupid now - even at the time people were worried that it was going at a very low price.

Some goldbugs of the time believe that it was either to bail out bust bankers (sound familiar?), or to supress the gold price - Perhaps they're the same thing? This is a scary (if long) analaysis of the actual auctions the BoE used, the weird way these were conducted is economically inexplicable: http://www.zealllc.com/commentary/boebomb.htm - Were 60% of the UK's reserves sold merely to supress the POG?

In the first place, the idea of selling something with 6,000 years of unassailable worth, gold, and buying fiat currency is by itself pretty ridiculous. What did the BoE intend to buy to replace gold in its FOREX reserves? A currency that has only been around since WW2, like the fiat Japanese yen, which has performed as well as a blind duck migrating in recent years? The vastly overpriced US dollar, perhaps, which defaulted on its gold backing in 1971, and is from the largest debtor nation in world history? Or, God forbid, that ******* step-child of fiat currencies the Euro, for which not even a single sovereign nation is accountable?

The thing that is impossible to understand is why the BoE acted alone. Why do comparable countries have so much more gold? Why, if the supression motive is correct, is it the BoE's job alone to sell the national reserves? Why don't other central banks sell at the current high levels? - the ECB signatories have sold far less gold than permitted under the 2004 agreement. What UK economist made the decision that fiat currency collapse was utterly impossible for the forseeable future? The BoE sold gold to buy Euros - what UK economist decided that the Euro was a better bet for the future than gold? The pricing of oil in Euros may result in the Euro becoming the world currency, and the gamble may not go too wrong; but why was this gamble taken in the first place? Why is the UK alone? Does the man running our economy have any economic knowledge? Has he just blindly followed Greenspan in his loosening, unable to grasp the fact that you cannot export interior decoration services? Who's GB going to follow now Paulson & the banks want their money back, with increasing interest payments? Grrrrrrr....... The man is the devil incarnate for the UK. All the m*th*rf*ck*r cares about is his career and getting into number 10.

Many apologies that my long, tedious & ignorant rants are mostly just regurgitations of posts from the many far smarter people on here, what GB is doing to the UK just makes me so angry. This obsession with breeze block futures on the queens land is utterly insane.

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Even as an anti-goldbug, I tend to agree the sell-off was a bit risky. Bear in mind that gold had been flat or falling in value for a long time, so it's easy with hindsight to condemn. But on the other hand, gold has a certain historic solidity as emergency currency, and if only for the symbolism I think hanging on might have been better.

But I think all the conspiracy theories (suppressing the price of gold, blah, blah) are balderdash. It's a fairly typical early New Labour move - a "modern", forward-looking break with the past, doing away with stuffy tradition and dealing with the modern world etc etc. They didn't achieve that much in this respect admittedly, but the sell-off probably appealed to Brown as the modern, clever thing to do. In this case, he was probably a bit too "clever" for his own good. He would have taken the outcry from uptight Tory backbenchers as proof that his instincts were right if anything.

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Even as an anti-goldbug, I tend to agree the sell-off was a bit risky. Bear in mind that gold had been flat or falling in value for a long time, so it's easy with hindsight to condemn. But on the other hand, gold has a certain historic solidity as emergency currency, and if only for the symbolism I think hanging on might have been better.

But I think all the conspiracy theories (suppressing the price of gold, blah, blah) are balderdash. It's a fairly typical early New Labour move - a "modern", forward-looking break with the past, doing away with stuffy tradition and dealing with the modern world etc etc. They didn't achieve that much in this respect admittedly, but the sell-off probably appealed to Brown as the modern, clever thing to do. In this case, he was probably a bit too "clever" for his own good. He would have taken the outcry from uptight Tory backbenchers as proof that his instincts were right if anything.

If the conspiracy theories are incorrect, then please, please explain the auction method used by the BoE - either they don't understand basic economics or......? The method used is so incongrous that, IMO, one cannot discount all possability of Occam's razor being correct (in the case of the auction method, at least). http://www.zealllc.com/commentary/boebomb.htm

Perhaps when the http://www.gata.org case is finally heard (if ever?) we'll know.

It is very easy with hindsight to condemn, but GB has gone so far out on a limb, acting so alone & isolated from the other western central banks, it's hard to believe it was solely motivated by a belief in his own cleverness? You do make a very valid point, but what about the auction method?

I wish i had your belief in the young fiat currencies - Just can't understand how the compound fractional pyramid (Derivitives on top of who knows what on top of fractional reserves) is sustainable.

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If the conspiracy theories are incorrect, then please, please explain the auction method used by the BoE - either they don't understand basic economics or......? The method used is so incongrous that, IMO, one cannot discount all possability of Occam's razor being correct (in the case of the auction method, at least).

It's true it's all a bit bizarre, though almost all govt activities when buying and selling are bizarre and enough of the stuff in the conspiracy theories is bunkum to make me doubt the whole caboodle. For instance that article suggests the BOE should have taken the opportunity to get rid of the lot quietly when one of the auctions had a high enough demand, but govt departments are always inflexible and bound to publish intentions etc. I'm sure there were some calculations made about how the sell-off would affect markets, and some of the actions may have been based on that, but I think the basic decision to sell is far more likely to have been Brown trying to be modern and clever. Thereafter, the machinations of the bureacracy are inevitably a bit weird - the peculiar auction method may have had ulterior motives, although this was hardly an open auction in the usual sense, being open to very limited bidders. But the whole notion of trying to permanently suppress the gold price by selling off stocks is a bit peculiar if you look closer. As the UK govt you have a limited amount of gold. If you think market forces are pushing gold prices upwards, you can suppress this by selling some gold. but for how long. You can only do this once or twice, and then the price will go up anyway. I don't think the logic is there really. ****-ups are usually the simplest explanation when you really get Occam's razor going.

I wish i had your belief in the young fiat currencies - Just can't understand how the compound fractional pyramid (Derivitives on top of who knows what on top of fractional reserves) is sustainable.

I don't have any enduring faith in them really. I think all currency systems are flawed and may or may not collapse sooner or later. I think you can be too alarmist about fiat in general as it can function a fair old time without collapsing (though I do agree we're coming into a risky period historically). And I don't see the gold standard as any kind of solution. But that doesn't make me a cheerleader for fiat as such, I just think all systems are flawed and the job of govts is to try and minimise those flaws. I think that makes me more realistic than a goldbug calling for imminent collapse of fiat and return to gold standard, but maybe I'm the unrealistic one.

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It's true it's all a bit bizarre, though almost all govt activities when buying and selling are bizarre and enough of the stuff in the conspiracy theories is bunkum to make me doubt the whole caboodle. For instance that article suggests the BOE should have taken the opportunity to get rid of the lot quietly when one of the auctions had a high enough demand, but govt departments are always inflexible and bound to publish intentions etc. I'm sure there were some calculations made about how the sell-off would affect markets, and some of the actions may have been based on that, but I think the basic decision to sell is far more likely to have been Brown trying to be modern and clever. Thereafter, the machinations of the bureacracy are inevitably a bit weird - the peculiar auction method may have had ulterior motives, although this was hardly an open auction in the usual sense, being open to very limited bidders. But the whole notion of trying to permanently suppress the gold price by selling off stocks is a bit peculiar if you look closer. As the UK govt you have a limited amount of gold. If you think market forces are pushing gold prices upwards, you can suppress this by selling some gold. but for how long. You can only do this once or twice, and then the price will go up anyway. I don't think the logic is there really. ****-ups are usually the simplest explanation when you really get Occam's razor going.

I don't have any enduring faith in them really. I think all currency systems are flawed and may or may not collapse sooner or later. I think you can be too alarmist about fiat in general as it can function a fair old time without collapsing (though I do agree we're coming into a risky period historically). And I don't see the gold standard as any kind of solution. But that doesn't make me a cheerleader for fiat as such, I just think all systems are flawed and the job of govts is to try and minimise those flaws. I think that makes me more realistic than a goldbug calling for imminent collapse of fiat and return to gold standard, but maybe I'm the unrealistic one.

You're probably right, and def. far more realistic! It is prob. very unlikely that it could happen in the near future. Paulson would attempt (successfully?) to stop gold runaway market with real postive interest rates for cash. 15% IR would be needed, higher if excessive delay requires overshoot. Stagflation in the 70s required 20%, maybe stagflation in the noughties will require the same. Not sure, but think the guy who raised rates to this level in the 70s is regarded as a bit of a hero amongst the financial community, is Paulson the bank's next hero stepping in to ('curb excess liquidity' | 'stomp on fiat currency breakdown') thru interest rates?

Still think the gov't willingness to cover bankers' debts on silly bets e.g. LTCM with taxpayer billions shows how fragile the whole system is. They bailed them through fear of possibility of the system collapsing. The authorities don't even have any idea of the size of the derivatives market - you can't have control without any measurement, so is the financial market by definition out of control?

It's just a weird situation GB has got into. It looks like he followed Greenspan's liquidity after .com, but mistook it for a new era of permantly low interest rates. Maybe he dismissed parliament's concerns about the gold sales because of class & modern prejudices - not listening to the redundant posh old tory twits rabbit on about the gold relic. Would a chancellor with sound economic training have believed in a new low interest rate paradigm? It's a shame his doctorate was in politics, not economics.

I think that your analogy of someone getting overexcited by the conspiracy theories the more they learn about fractional banking is valid in my case, and I mostly don't really know what I'm talking about. It's the fact that the current situation and trends look like the goldbug's best chance of being right (after being wrong(?) from 71 onwards) since they begun, that leads to so much fervor on the expert's part, and the resultant swallowing of the story by sheeple believers such as myself. It's going to be interesting to see what happens, though. Just hope the UK comes out OK.

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Still think the gov't willingness to cover bankers' debts on silly bets e.g. LTCM with taxpayer billions shows how fragile the whole system is. They bailed them through fear of possibility of the system collapsing. The authorities don't even have any idea of the size of the derivatives market - you can't have control without any measurement, so is the financial market by definition out of control?

Yes, that's the part of the current economy that really scares me. Hedge funds and derivatives just seem such a potential source of chaos and meltdown if there are sudden unexpected movements. I can certainly imagine that some bizarre central banking things go on to try and cover themselves on this stuff.

It's just a weird situation GB has got into. It looks like he followed Greenspan's liquidity after .com, but mistook it for a new era of permantly low interest rates. Maybe he dismissed parliament's concerns about the gold sales because of class & modern prejudices - not listening to the redundant posh old tory twits rabbit on about the gold relic. Would a chancellor with sound economic training have believed in a new low interest rate paradigm? It's a shame his doctorate was in politics, not economics.

Good point - I do think a lot of his (mostly) good reputation as a Chancellor is sheer luck. He's made a few good big calls (MPC independence...) a few bad ones (selling that gold, I guess). But a lot of what he has been about has been tinkering with the figures in a basically benign economic climate - he's never had anything really hellish to deal with, so far at least.

I think that your analogy of someone getting overexcited by the conspiracy theories the more they learn about fractional banking is valid in my case, and I mostly don't really know what I'm talking about. It's the fact that the current situation and trends look like the goldbug's best chance of being right (after being wrong(?) from 71 onwards) since they begun, that leads to so much fervor on the expert's part, and the resultant swallowing of the story by sheeple believers such as myself. It's going to be interesting to see what happens, though. Just hope the UK comes out OK.

I've said before that at some point the goldbugs will probably be "proved right". Currencies will probably collapse in the end, and gold will be the emergency fallback. But it might happen in a matter of years, decades or even centuries. And the whole of the goldbug case tends only to make sense as economic analysis in the historic period right before serious turmoil. On the other hand there are some real reasons why we may have some proper turmoil soon, so I wouldn't completely ignore the goldbugs either...

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I've said before that at some point the goldbugs will probably be "proved right". Currencies will probably collapse in the end, and gold will be the emergency fallback. But it might happen in a matter of years, decades or even centuries. And the whole of the goldbug case tends only to make sense as economic analysis in the historic period right before serious turmoil. On the other hand there are some real reasons why we may have some proper turmoil soon, so I wouldn't completely ignore the goldbugs either...

FWIW, don't think it's a case of being proved right. For me, it's a vote of mistrust in Bush, Banks, Big Oil, Derivatives etc.

It's the difficulty in distinguishing between:

1) a price bubble in hard assets: property, oil, other commodities, PMs, etc.

2) the beginnings of a fiat currency breakdown caused by excess liquidity

Are they the same thing?

Don't think that a full breakdown is imminent. Just think that if PMs, Oil, etc. rise a lot autumn/winter this year (or next year), breakdown will be averted by IRs that are unbelivably high in relation to today's low IR environment. As others have said, fiat IRs would need to rise until the gold bull is stopped dead. The ex head of Goldman Sachs is in charge now :huh:

If you have/need property, it's always a good idea to try and pay off as much of the loan as possible, as soon as you can. A long time ago, remember my economics teacher at school telling us how he got a 20 year fix at rates that seemed amazingly low (compared to the higher IRs when he told us the story). He told us that at the time, it seemed a relatively risk free hedge against higher IRs because it only had something like a 3 year redemption penalty. If after 3 years, IRs had dropped, he could have simply remortgaged. Can't remember the figures, but he was paying something like half the going IR rate (about 5?) years later. Don't think banks will really be wanting to sell you this type of mortgage at the moment, though! As others have said, in another thread, hard assets with minimum exposure to banker's machinations are probably the way to go!

TTRTR :)

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The present situation in gold is the continuing interference by the UK,US,IMF and other central banks in concert to save the US Dollar from obliteration.

It started as a rescue by the Bank of England and the FED of the LME but there have been unacknowledged bankruptcies already and as was the case of REFCO, you will read little about it as the impending collapse of the Derivatives market must be kept away from the general investing public.

See my post : http://www.housepricecrash.co.uk/forum/ind...60entry392845

Gold will become very volatile as the Reagan/Thatcher era demand payment of the piper and you will see increasing interest rates with rising gold prices as central banks/governments fight the hyperinflation knocking on the door. Its inflation that is favoured over deflation and which will direct Bernanke and thus the whole Western economies to inflate money supply. The UK money supply is increasing by 18 % and is only a little less than China's growth in money supply. The UK treasury is increasing purchase of US debt while others decrease so Brown is sacrificing the UK Gold Reserves for printed paper rubbish....Brown will bankrupt you but you want that so you voted Blair back in. Gold is the only tangible money and that is the only asset that will save you from bankruptcy.

The volatility now in the gold market is the hedge funds being goaded into liquidation by those interests that understand the gold market and how gold plays in the financial economies...in other words the special interest groups are picking up the cheap gold. Who are they...lets call them collectively : Illuminati and its they who want ALL the gold, not SOME of the gold so you now know where the rest of the UK treasuy's gold is heading eventually. They remain rich and powerful while you chase around with ever increasingly printed pieces of paper fiat currency called pound notes to pay bills while inflation rages ever higher.

Your house will not save you as it appeared to when Thatcher applied Reaganomics to the UK.....the £10 coin will buy you little by the end of the decade with interest rates in the teens or higher. The only way to stabilise the Dollar is interest rates higher than 23% which was where they went after the Vietnam war to stabilise the dollar.

Check on www.gata.org to catch up and find out the truth because the truth will enable you to understand and know what the City and their cohorts are up to as they lie to you. Also read Alan Greenspans book called Gold and Economic Freedom... the freedom will come to those that hold the asset gold NOT the liability know now as property.

The Bank of England made a gold loan to a third party to dump on the gold market. It is a LOAN and its you the taxpayer through your MP that must ensure that the LOAN is paid back in GOLD BULLION, not paper money so you must constantly keep an eye on Brown and have a regular audit of the UK gold Reserves. Also note that the IMF has instructed the central banks that they can not loan out gold and then include it in their reserves.....so at the moment about half the gold is loan out and irrecoverable immediately so they have been using creative accounting in their books which is misleading to the gold market and thats why the volatility; also the central banks are compromised and now it is becoming known so those who are short gold ( and know the situation) on the LME need lower prices to attempt to cover. Those hedge funds that advertise in the newspapers who are promising big returns and are players in the gold market but do not understand what they are doing are dangerous but its your money they are losing so avoid them and get your MP to look into this whole gold scam and then apply to Dissolve the Government.

Its been crooked all the way.

All the best,

Iveson.

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- Isn't it foolish for GB to have believed (even 8 years ago) that the BoE could control global inflation for the forseeable future?

Well no. No one can control global inflation, although I suppose it can be influenced. I personally think it was as simple as having an asset sitting around that could be used to generate some income. If gold doesn't back currency and is just another commodity, then why not? I'm not arguing that it was a good idea, just that selling off the gold had nothing to do with inflationary control.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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