The Idiot Politician Who Made Me Rich

Gary North - January 31, 2019

Gordon Brown, the former Prime Minister of the United Kingdom, is an idiot economically. This is probably an insult to idiots.

In 1999, he sold half of the gold reserves of the nation. He was Chancellor of the Exchequer. He drove down gold’s price to under $300.

I bought. I bought a lot. I put most of what I owned into gold at that price. I figured he would make me much richer. I was right.

I knew an idiot when I saw one. My view is clear: “Never give a sucker an even break, if he’s a politician.”

An article in The Telegraph reviews his actions.

A great deal of Gordon Brown’s economic strategy would strike a sane man as troubling. Not a great deal was mysterious. The orgy of consumption spending, frequent extensions of the cycle over which he would “borrow to invest”, proclamations of the “end of boom and bust”: these are part of the armoury of modern politicians, of all political hues.

One decision stands out as downright bizarre, however: the sale of the majority of Britain’s gold reserves for prices between $256 and $296 an ounce, only to watch it soar so far as $1,615 per ounce today.

When Brown decided to dispose of almost 400 tonnes of gold between 1999 and 2002, he did two distinctly odd things.

First, he broke with convention and announced the sale well in advance, giving the market notice that it was shortly to be flooded and forcing down the spot price. This was apparently done in the interests of “open government”, but had the effect of sending the spot price of gold to a 20-year low, as implied by basic supply and demand theory.

Second, the Treasury elected to sell its gold via auction. Again, this broke with the standard model. The price of gold was usually determined at a morning and afternoon “fix” between representatives of big banks whose network of smaller bank clients and private orders allowed them to determine the exact price at which demand met with supply.

The auction system again frequently achieved a lower price than the equivalent fix price. The first auction saw an auction price of $10c less per ounce than was achieved at the morning fix. It also acted to depress the price of the afternoon fix which fell by nearly $4.

It seemed almost as if the Treasury was trying to achieve the lowest price possible for the public’s gold. It was.

But why? Because the bank was bailing out the vampire squid. And who might that be? Guess.

If you guessed Goldman Sachs, you are a smart cookie.

To find out how Brown did this and why, read the article.

Thanks, Gordon. I’ll never forget you.

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Published on July 9, 2012. The original is here.