No helicopters are flying in the cold clear skies above Liberty Street, home of the Federal Reserve Bank of New York, from which I assume that monetary policy is in neutral. If money were running short, Ben Bernanke, successor-designate to Alan Greenspan as chairman of the Fed, would be prepared to contemplate an air-supply of dollar bills, dropping as the gentle rain from heaven upon the place beneath. An air-drop of gold ingots would, by contrast, constitute a health hazard, which is one reason why Mr Bernanke has no plans for it. Another is that he cannot produce the ingots for the asking. For that purpose, nothing compares with the printing press which, as he has pointed out, can produce extra dollars to order. It has already supplied most of the $2 trillion held in reserve by China, Japan, South Korea and Taiwan, and is still able to meet the demand which has been stoked up by the Fed’s repeated increases in interest rates. No wonder that, although the dollar has been rising, the price of gold has been rising faster. Supply and demand must have something to do with it. Pushing up towards $500 an ounce, gold is at its highest level for the best part of two decades. It is also $200 above the price at which the Chancellor sold half the nation’s gold reserves — but then, he had waited for the price to fall to its lowest level for the previous two decades. He was apparently looking for some eye-catching initiative which would upstage his next-door neighbour. Not his best call.
Ministers — and central bankers, too — are apt to resent gold, because it competes with their own branded products. When gold is at a premium, that implies that paper money is a leaky store of value, so, rather than mend the leaks, they attack the premium. Their reserves represent the world’s biggest holdings of gold, so you would think that a rising price would suit them, but they would rather be sellers and hope to drive the price down. A useful exception is Tito Mboweni, who governs the Reserve Bank of South Africa. He sits on four million ounces of gold, is happy to own them and says that he might consider buying more. Failing that, he could try digging under his office, for he must be as well-placed as any central banker when it comes to producing ingots. What he likes about gold, he says, is that it is no one’s liability. Its value, that is to say, does not depend on anybody’s promises — not his own, not even Mr Bernanke’s, never mind our own dear Chancellor’s. I like that, too.
Snow falls — forecast
The entangled affair of I. Lewis ‘Scooter’ Libby, featuring a not very secret agent of the CIA and a supporting cast of thousands, would be one for enthusiasts only — except that Mr Libby was chief of staff to the vice-president and his fall from grace may precipitate a general reshuffle. Andrew Card, the President’s own chief of staff, is being tipped as the next secretary of the Treasury. As for John Snow, who is there now, he would presumably make a convenient discard. He is the genial businessman — indeed, a railwayman — who was brought in when his predecessor tried to tell the President that there had to be limits to tax cuts. Whatever Mr Snow may have tried to tell the President, it is unlikely to have made much difference, for in this administration the Treasury has been out of the loop. This is government on the principle of refusing to open letters from the Inland Revenue. However unwelcome they may be, they are better tackled sooner rather than later. To think that, when this President took over, the public finances were so strong as to threaten the national debt with extinction…. Let us hope that Mr Card does not prove to be plastic.
Turkey on wheels
Rick Wagoner, who runs General Motors, likes to tell the good news before the bad news. First of all he writes to everyone on the payroll of what was, not long ago, the world’s biggest industrial company to assure them that it is not going bust. Then he tells them how he intends to achieve this, which is by firing 30,000 of them just in time for Thanksgiving. Even that may not suffice, for GM is bleeding money, not so much from its business of making cars and trucks, but from its alter ego as a provider of pensions and welfare services, honouring promises made long ago and no longer affordable. A portent.
Some talk of Alexander
The chairman of NatWest had resigned on the steps of his bank, some of its dealmakers were under arrest, the inspectors were in, and the Bank of England took a hand. ‘The Governor likes a lawyer — he was one’, I was told, ‘and he likes a grandee — he is one.’ Sure enough, Lord Alexander of Weedon QC came in as chairman and as the voice of sweet reason. Everyone calmed down, messes were tidied up and changes came without drama. No one could be more persuasive. A friend of mine, hearing tones of musical allurement in the Palace of Westminster, followed them and found that Bob Alexander was addressing five law lords on a point of law. At NatWest he nearly persuaded himself to cut the deal-making out and play to the business’s strengths as a high-street bank with a marvellous franchise. Instead he was persuaded to build an investment banking business which would be in the world’s top ten. None of his competitors brought that one off — not Barclays, not Warburgs — and for NatWest there were to be no more chances. The Royal Bank of Scotland bid for it and brought it back to profitable basics. Bob moved on, more happily, to be master treasurer of his inn of court and president of the MCC, but never liked to be called a grandee — his father, he would tell me, kept a garage in the Potteries. Now the news of his death reaches me in New York, and that uniquely persuasive voice is silent.
On the rocks
My research into the price of martinis has left me dispirited. Not only has the exchange moved against us but the inflation rate is rising. The Consumer Prices Index has a sub-section for the New York area and, within that, a sub-sub-section for alcohol. This is the fastest rising sector of the whole index, with an inflation rate of more than 6 per cent. Statisticians put it down to the cold weather, but, as Professor Charles Goodhart has taught us, blaming the seasonal adjustment is the last refuge of a scoundrel. Even more research is needed.