Brown blows our cash!

Discussion in 'Current Affairs, News and Analysis' started by Acid_Tin, Dec 23, 2004.

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  1. From the late edition of The Sun:

  2. :lol: :lol: You had me going for the first two lines lol :p :p
  3. Hmmm,

    Not quite as bad as reality. See this little gem. How many regiments could you fund with 2.2 billion dollars?

    Bit long but here is the relevant paragraph.

    Gold for dollars

    Consider the evidence. About six years ago the Treasury announced that it was planning to sell more than half of Britain's gold reserves. It completed the first sale in May 1999 at a price of $260 an ounce and then compounded the error by announcing when the remaining sales would take place. You can imagine the glee at bullion desks all around the City. The government finished the disposal programme in March 2002. Looking at the chart of the gold price over the period, the sale probably netted some $280 an ounce.

    The ostensible reason for the sale was to reduce the dependence on an asset that accounted for a large proportion of the reserves. The real question is where did the proceeds of the sale end up? I am sure someone knows the answer to this, but my suspicion is that most of the proceeds stayed in US dollars, most probably in US Treasury bonds. If it did then we have the situation that the gold was sold at $280 when its current price is $450, while the dollar has depreciated. Not bad for an asset that political sophisticates doubtless consider to be, in Keynes's words, a 'barbarous relic'.

    Flawed logic and nightmare trade

    This is everyone's nightmare trade. It would have got any fund manager who perpetrated it sacked. Selling an asset that has been a reliable store of value for centuries in exchange for bonds in a currency that is capable of being seriously debased by the actions of politicians. Doubtless it seemed a good idea at the time. On the basis of 32,150 troy ounces to the metric ton, the gold would be worth $2.2 billion more now than it was then, except of course for the fact that the value of the dollar has fallen.

    Though this might seem some consolation, of course it only points up the flawed logic of the Treasury decision, because gold is, at it turns out, near enough a perfect hedge for holdings of dollars. So not only has the Treasury sold at the wrong price, it has removed the hedge it had and therefore arguably increased rather than reduced its vulnerability to currency movements, gaining only meagre interest income in exchange.
  4. I learned long ago that with Labour all you have to do is give them time.
    I have conducted quite bitter arguments with folk on other boards on the finanicial policies of Labour and had Gordens "Good House keeping" shoved down my throat.
    Just wait and Labour will burden your children with debts.
    Now we are told that the folks who voted Labour in, in 45 and received the first state pensions, well the children who have paid for those pensions may not get what labour promised all those years ago.
    It's not as if UK pensions where generous, as compared with the financial disaster that is Italy, let alone the Frogs Krauts and every dog they can drag into their new Europe.