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Doug Noland: An open letter to the U.S. dollar
Brown's Gold Sale Cost the UK 1.5 billion
By Tony Freinberg
The Telegraph, London
Sunday, November 28, 2004
http://news.telegraph.co.uk/news/main.jhtml?
xml=/news/2004/11/28/ngold28.xml
Gordon Brown has cost the British taxpayer almost
1.5 billion by selling off half of Britain's bullion
reserves just before the gold price soared.
The Chancellor sold 395 tonnes of gold at an average
price of $275 an ounce between 1999 and 2001,
raising 2.3 billion for the Exchequer.
At the time, gold was at a 20-year market low. It has
now risen to more than $450 an ounce. Had he waited,
he would have raised a little over 3.77 billion, a
difference of more than 1.47 billion.
The money lost translates to a cost of 58.41 to each
household in Britain. Currently 1.47 billion would
fund 50,840 new policemen, 58,480 new teachers, or
57,640 new soldiers.
Last night Oliver Letwin, the shadow chancellor,
accused Mr Brown of selling Britain's gold reserves at
"knock-down prices."
At the time of the sale, many analysts claimed that
the Chancellor's decision to part with half of Britain's
gold reserves -- overriding, it is said, the objections
of senior Bank of England figures -- was motivated by
political rather than economic factors.
Selling gold was viewed as an important precursor to
joining the euro, because membership of the single
European currency limits a country's need for its own
currency reserves.
In May 1999, Lord Lawson, the former Conservative
chancellor, said the sale was "clearly motivated" by
a desire to join the single European currency.
Patricia Hewitt, who was then the economic secretary
to the Treasury, denied that, telling MPs that over
time gold had been "a very poor investment," an
assertion that clearly she would not be able to make
now.
Since the Government's selloff, gold has been an
excellent holding, rising from a 20-year low of
$255.95 on April 2, 2001, to a 16-year closing high
of $451.70 on Friday. The price of gold has been
buoyed over that time by the declining strength of
the United States dollar.
Mr Letwin demanded an official explanation from Mr
Brown. "People want to know where their money has
gone," he said.
"The answer is that it has been wasted not only on
300,000 extra bureaucrats and 1,000 chairs for
Ministry of Defence officials, but also on selling
gold at knockdown prices."
Vincent Cable, the Liberal Democrat Treasury
spokesman, emphasised his party's belief in the
importance of substantial gold reserves during a
war against terrorism.
While Mr Brown insisted in 1999 that the gold sales
were necessary so that the Exchequer had a "better
balance" across its holdings, Treasury officials said
yesterday that there were no plans to sell off further
reserves.
The Treasury said: "The Public Accounts Committee
addressing the conduct of the gold sales programme
concluded that the Treasury had been rigorous in its
approach to achieving a reduction in the riskiness of
the portfolio."
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