<<Doug, not to be rude, but aren't you being a bit "two-faced" here??>>
Ron, not only did I flush you out a couple days ago so that others on
this thread could see thru your "I am truth, follow me, else burn.." posts,
but you continue to call attention to yourself in a way that adds to this
flushing out of you.
Now you just added another reason for readers of your post to question
your ability by saying that I am two-faced. I guess you have difficulty
when the exchange of thoughts and ideas requires understanding of things
that have more than 2 levels of scope. Just joking of course, as its not
nice to point out things that describes anothers ability, or lack of.
But then saying I am two faced is saying either I am a lier or simply
switch sides without justification. Well, as we know some cannot follow
a discussion that require more than 2 level of scope.
OK Ron, let me back down a number of levels and I put below some small
pieces of that England's government men with white hair pieces telling
each other that their side of the brain is wacko. Please read and comment,
and yes you may ask for help.
Another reason why central banks should hold gold is that,
over the very long term, gold maintains its value.
In 1900, the value of gold was
almost identical to its value in 1717. Although its soaring up to $850
in 1980 artificially over-priced the market--it has been coming down
ever since--gold holds its long-term value, as we have seen throughout
history. On 27 May, the Financial Times pointed out that $35 an ounce,
which was what gold was in 1971 before President Nixon and Treasury
Secretary Connally broke the link between the dollar and gold, would be
equivalent to $281 today. Thus, despite the fact that gold is at the
bottom of a long bear market, it was still worth more than $35, in
today's terms, when the Government made their announcement.
....... My next argument for central banks holding gold is that a
country's reserves should be diversified to minimise risk. Research
shows that gold is an ideal portfolio diversifier.
........ over a long term, the ideal gold holding in a major
portfolio is about 20 per cent. That is because gold is an ideal
diversifier as its returns are what is technically known as "negatively
correlated", which means that they operate in a counter-cyclical manner.
When bonds and equities fall in price, gold tends to go up.
Gold prices are much more volatile than other market prices. It is not
unusual for gold to go up 2 or 3 per cent., or down 2 or 3 per cent. in
a single day. If Wall street falls by 2 or 3 per cent. in a single day,
it is headline news throughout the world. Thus gold has a stabilising
effect in a long-term portfolio.
Gold is also the asset of last resort. Although it is needed in good
times, it can be vital when times are difficult.
......... managing the taxpayer's money. The Minister must reply to
the serious point made by my hon. Friend the Member for Louth and
Horncastle. We cannot allow the rumours to grow, because they are
extremely dangerous to public confidence. It has been suggested that the
market is very short of gold, that the short positions may be a
substantial multiple of the total amount of gold currently held by the
Bank of England, and that the Bank's real motive is to save the bacon of
firms that are running those short positions. If such a suggestion is
being made seriously, it must be dealt with authoritatively and
definitively, and we want an answer from the Government now.
..... the Government had not given us sufficient explanation, my right
hon. Friend the Member for Horsham (Mr. Maude), the shadow Chancellor,
wrote to the Chancellor of the Exchequer, but all that he received was a
lot of waffle. The reply stated:
"As we have been careful to explain this is a prudent restructuring of
the reserves."
This is to do with:
"Prudent management of public finances" to achieve a "better balance in
the portfolio."
Those are evasive answers. We need an answer to the question, why is it
more prudent for gold to constitute 20 per cent. of the net and 7 per
cent. of the gross reserves, rather than 40 per cent. and 17 per cent.,
or whatever the current figures are? We have heard no explanation of the
factors that determined the Government's course of action, and we badly
need one.
Gold has traditionally been held as a reserve because its value is a
negative function of the strength of the dollar, a positive function of
inflation rates and a negative function of real interest rates. It is
possible to construct a hedge against the dollar simply by holding other
currencies, but there is no such obvious way of obtaining protection
against a resurgence of inflation, a collapse of real interest rates or
interest rates becoming negative again, as they have during all our
lifetimes, that is better than holding gold.
........................ We cannot allow the rumours to grow,
because they are extremely dangerous to public confidence. It has been
suggested that the market is very short of gold, that the short
positions may be a substantial multiple of the total amount of gold
currently held by the Bank of England, and that the Bank's real motive
is to save the bacon of firms that are running those short positions. If
such a suggestion is being made seriously, it must be dealt with
authoritatively and definitively, and we want an answer from the
Government now.
As if that were not enough, how extraordinary it was to try to talk the
International Monetary Fund into agreeing on a programme of gold sales a
few weeks before trying to sell our own gold. That was madness. You have
to be as incompetent as the Government appear to be to damage the market
in advance of such a major sales operation. The Minister and, indeed,
her boss the Chancellor, owe the taxpayer an explanation. Why have the
taxpayer's assets been squandered and their value gratuitously reduced?
No sensible business man or woman would dream of conducting his or her
affairs in such a way. Or is it perhaps that the conspiracy theory is
right? Has the Government's whole plan been simply to drive down the
gold price by whatever means, fair or foul, to save the position of
certain figures in the City--the firms that were hinted at by my hon.
Friend the Member for Louth and Horncastle--which, apparently, are so
short and potentially in such trouble? The Minister has an opportunity
to throw light on that. I hope that she will do so.
Finally, what about the idea of a millennium issue--a retail issue of
gold, not sovereigns? The value of each coin would presumably be much
more valuable these days. That might have had distinct marketing
opportunities at the millennium. Had we proceeded down that route, the
Government might even have sold the gold at a premium and a discount
would not have been necessary. Again, we want a clear explanation of why
that route was not chosen.
The Economic Secretary to the Treasury (Ms Patricia Hewitt): I
congratulate the hon. Member for Louth and Horncastle (Sir P. Tapsell)
on securing the debate and on his ..... |
