I've been emailed a link to this article, which reminds us that Brown decided to sell the bulk of the Bank of England's gold a while back, netting about £2.3 billion, and that had it been sold at today's prices, this would have netted about five times as much, so in theory, the taxpayer has made a 'loss' of £10 billion, or at least not made that amount of profit (which would by and large be just on paper if we just left it in the vaults).
Fair enough, Brown handled the sale badly by announcing it in advance, thus depressing the market price slightly, but I do wonder how many of those people who are whining now made the decision at the time to buy gold? And what is £10 billion in today's money? It's about five days' worth of public spending/waste, big deal.
Let's contrast that with the loss suffered by the taxpayer as a result of the council house sell-offs, which were deliberately and calculatingly far below market value. In round terms, let's call it two million units and a loss of £70,000 on each, that's a loss of £140 billion, so which you can add about £60 billion extra Housing Benefit paid to the owners of those units where the original purchaser had moved out, so the loss to the taxpayer is around £200 billion (big margin of error) i.e. twenty times as much as the notional loss on the gold sales, that's nearly three months' worth of public spending
Hmmm.
What this boils down to is that Brown made a huge mistake by presenting this as an economic decision, by which he sold the stuff at or close to market prices to private investors, rather than a political decision to create a "gold-owning democracy". Had he done a Thatcher and sold it at undervalue to a defined class of deserving UK investors, would people still be complaining like this? I know that I would - the fact I could kick myself for not having bought gold ten years ago (to match HM Treasury's sale thereof) is an entirely separate issue, but that was my decision.
Local Council Efficiency
2 hours ago
11 comments:
You might have a point if Gorgon had sold the countries gold off at spot to the public at large and not to vetted institutional investors in auction at below market value.
Thatchers selling of council house stocks was to the public and not to institutional investors, unlike the MOD sell offs. (although not sure if Thatcher was responsible for those)
Do you think that properties in Bovington (Wareham) and Church Fenton (York) would have sold for an average £14k if they'd been sold at auction on the open market?
No? Neither do I.
Much as I hate to take issue with Mark, I cannot agree. The sale of so many gold reserves (in exchange for Euros, not US$, if I recall correctly) at a pre-arranged time was an ideological one, connected to the 'stability' fantasy, aka 'No more boom and bust'. Further, insecure politicians hate gold, for reasons which are now clear.
It may also be the case that Broon actually thought that he might abolish this component of the business/confidence cycle. Because he has never understood markets.
And never will; but the damage is done, now. I do recall loading up on mining stocks and gold certs shorly afterwards - another example of 'take the other side of the trade, whatever it is...'
Wish I'd kept them all! But the real crime was to let the market see us coming...
You'd have to deduct from the cost of council house sales the subsidies that were no longer required on those properties.
Budvar, the sales were pre-announced and gold is a freely traded commodity. if you really think it was at undervalue, did you buy as much gold as you could at the time?
RE, you loaded up with gold at the time, well done you. But you admit to having sold them all. It was your decision to buy and your decision to sell again, if you'd been in charge of HM Treasury, when would you have decided to sell?
BFOD, the bulk of council house sales were of the nicer stuff to better earning tenants who were paying full rents anyway (they might have been 'below market rents', but the cash rent paid more than covered running costs) and so these people weren't receiving subsidies in the first place.
Plus, I'd rather pay £30 a week towards subsidising a council house for a sitting tenant than pay £100 a week subsidy to the 'private' landlord who now owns it.
I bought as much as I thought prudent! Seriously, though, I took a view on other things at the time. There was a serious danger of an inflationary bond bubble, volatile stocks and signs that the bear market was over. That was all. I had been a metals and commodities trader and remembered the lessons. And the signals.
But I agree re. personal choice. I also agree re. subsidy which goes into public housing is a sounder thing than subsidy which lines the pockets of slum landlords, which is essentilally what many of them are.
Juggling reserves around is a relative value exercise, though, and ploughing the proceeds of an idealogically driven act into an untested currency is simply irresponsible...
Budvar,
Thatcher's selling of council house stocks was to the public and not to institutional investors, unlike the MOD sell offs.
It was to certain members of the public, who received an asset at below market value. That's an asset that we all owned, and the government gave it to them at below market value. How is that different from selling to institutional investors?
I wasn't in favour of any of the government sell offs, be it BT, British gas, and especially water. It was nothing short of theft plain and simple.
Assets bought and paid for by the tax/rate payers and sold from under them by a government for idiological reasons.
What governments and councils for that matter fail to realise is it's the people who own these assets, and they are there only to administer them on our behalf.
RE, thanks for response, in theory, G Brown did you a favour by giving you the opportunity to 'buy cheap' :-)
JT, Bud, we appear to be agreed that ideologically motivated sell offs of taxpayer-owned assets, be that gold, council housing, MoD land, shares in Qinetiq or anything else is usually A Bad Thing, which was my whole point, really.
There's a pretty good reciprocal pattern to land and gold values. Some saw it coming, Gordon clearly didn't.
I think there was a European Currency element to this story. The scenario was something like, - the ECB was buying gold in 1999. The UK was selling gold. So via the markets the UK swapped gold for Euros, and the ECB swapped Euros for gold, which is a simillar process to the UK joining the Euro and made it a controversial issue from a Euro currency aspect at the time.
One could even say that Brown deliberately reduced the price to help his euro-mates and support the single currency without actually having to join...
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