On Brown Gold

If you think Gordon Brown was wrong – and I mean “wrong in a way that could rationally have been predicted”, not “didn’t bet on the horse that ended up winning the Grand National” – to sell off gold reserves, there are two possibilities regarding your belief:

A) you are on record at the time opposing the decision specifically because you believed gold would appreciate faster than a diversified portfolio of other options; and you have personally made signifiants amount of money trading gold over that time period; or

B) you are a stupid ignorant cunt who should shut the fuck up.

Even if you do happen to fall into the first camp, the truth is still that:

A) it makes sense for central banks to hold a more diversified portfolio of assets than just gold;

B) gold prices are more or less unpredictable in the long run, but they generally go up in times of economic uncertainty and fall in times of economic stability – so the only sense in which you can believe the current high price of gold means we’ve “lost out” as a nation is if you think we should sell all the gold right now before the price falls again; and

C) setting up a nationalised hedge fund in order to do massive gilt price speculation would be a REALLY FUCKING STUPID IDEA just generally, never mind if you’re a libertarian and disapprove of nationalising non-essential industries out of principle.

Although if anyone wants to defend the ‘nationalised hedge fund’ concept, do feel free to outline how it would work…

8 thoughts on “On Brown Gold

  1. Surely an element of this is when he sold it though, pigdog? He sold it the gold at an all-time low in the gold market. Whether he was right to sell it or not is a separate issue entirely from selling it at the wrong time.

    R

  2. I’m a stupid ignorant cunt and I’ll spout off all I like! No erudite fuckbucket is telling me when I can and can’t lay into Gordon Brown on the flimsiest of pretexts.

  3. Matthew says:

    “He sold it the gold at an all-time low in the gold market”

    But the point is no-one was to know that it was an all-time low. Of course there were people saying it would go higher, but there were people saying it would go lower. The market price must represent the average view in the market, otherwise it wouldn’t be the market price.

  4. Kit says:

    I think you miss the purpose of reserves. Talking specifically about gold you answer your own question: gold is the reserve of last resort in times of “economic uncertainty”. Lets imagine a time when banks are collapsing and rapid inflation. What would you hope the county has in its rainy-day piggy-bank? Dollars? Yen? Euro? Or Gold? I bet it would be gold not a fiat currency.
    That is why Gordon was and is wrong because he believes his own rhetoric that he has banished boom and bust.

  5. PDF says:

    No; you’re a clueless moron. For the benefit of the crowd, if someone uses the term “fiat” referring to currency, this shows that they are mentally ill.

  6. Alex says:

    if someone uses the term “fiat” referring to currency, this shows that they are mentally ill.

    I am going to call this the Pigdogfucker Principle and take it to the world. Goldbugs are so odd in such a conventional way, aren’t they? I mean, what is it that’s so good about the stuff?

    Further, the purpose of having gold and forex reserves isn’t really “in case of rapid inflation” (I mean, what would you spend them on?).

  7. I said it was reckless (rather than stupid) at the time and I stand by that. What I was particularly critical of is that his intention to sell it off was bruited about so widely beforehand. The scale of the sell-off was also highly disproportionate. It wasn’t a diversification of foreign reserves as much as a wholesale switch into different assets. Of course if this were the worst of Brown’s fiscal cock-ups, we’d all be better off. The few notional billions in paper losses that the current high price of gold represents is a couple of days’ public spending. Gold’s what? A thousand bucks an ounce? So the Treasury is spending 3 million ounces (or ~92 tons) of gold a day. That is the real catastrophe of the Blair/Brown years.

  8. [...] 1) use of the term “fiat money”, as I’ve already highlighted here [...]

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