Unless you bet your life savings on gold some time in the past three years — after its price had passed on the way up the level to which it has now fallen back — there’s no need to be distressed by headlines about a ‘gold rout’, nor even the prospect of a ‘bear embrace’.
The impulses behind this sudden downward lurch are positive for expectations of economic revival. Gold is the timeless safe haven for those who distrust governments and fear inflation, so a stampede of sellers — on Monday there seemed to be virtually no buyers — indicates an ebb tide in those sentiments. In the US in particular, there’s a feeling that what ideological gold enthusiasts regarded as the inflationary debasement of the dollar by the Federal Reserve’s programme of quantitative easing is finally over, and that equities are the attractive option as recovery gradually takes hold.
Gold’s all-time high above $1,900 per ounce occurred back in September 2011; the price has slid by a third over the past six months while stock markets have steadily risen. Two factors that might have revived the metal’s safe-haven appeal — North Korea’s nuclear sabre-rattling, and the confiscation of bank deposits in Cyprus — failed to do so, indicating that a bear mood (in which a market barely responds to bullish signals) had truly set in. Many investors decided to get out even quicker when they heard that Cyprus intends to sell ten tonnes of gold reserves to raise cash for its bailout, prompting fears that other busted euro countries will do likewise, thereby driving the price downwards in a repeat of the notorious Gordon Brown Gambit of 2002.
So that’s why gold has fallen off a cliff. I don’t wish ill fortune on anyone — not even the New York hedge fund manager John Paulson, who made a billion dollars shorting UK bank stocks in 2008 but may now lose a billion on his gold positions. My sympathies are, however, limited by the fact that I’ve always thought of ‘gold bugs’ as the crashing bores of the investment world — the same personality type who bangs on obsessively at dinner about the evils of Europe or the perils of climate change. I once wrote that precious metals are ‘essentially negative choices: investments for the pessimist, the recluse and the dictator’s wife’, while praising Warren Buffett’s observation that if you owned all the gold ever mined, you could trade it for all the farmland in America, ten blue-chip companies and a trillion dollars of change. ‘Or you could have a big cube of metal. Which would you take?’
Big Brother burden
I spent last week with a hot towel on my head on behalf of a social enterprise in which I’m involved, grappling with the implications of HMRC’s nightmarish Real-Time Information system, which now requires instant online reporting of every payment by employers to staff. Though a late concession has given small firms six months’ grace before they have to comply in full, this Big Brother-ish new burden is just what British businesses of all sizes don’t need after a deep-frozen first quarter.
And what’s most irritating is the spin that RTI is ‘positive for employers and employees’ and will ‘save business £300 million’ — when, as I discovered in my brief exploration, it will clearly add to overhead costs while causing tension between employers and low-paid or part-time workers. Its real purpose is first to reduce the huge number of tax-coding errors that resulted from the last round of pay-as-you-earn reforms, and secondly to feed data to the Department of Work and Pensions in order to eliminate benefit cheats from the equally nightmarish Universal Credit system, which is due to be launched nationally in October.
But while all firms with more than 50 employees have to cope with RTI from the beginning of this tax year, a test run for Universal Credit has been scaled back to a single job centre at Ashton-under-Lyme amid rumours that the whole scheme has been ‘placed on a Whitehall watch list of projects in crisis’, as the Guardian reported. So the sector that generates the tax revenues is bullied into compliance with every new policy wheeze, however ill-designed, while the bureaucrats blunder from one giant cock-up to the next. And it’s no use ringing the helpline, by the way, because last year — according to the Commons public accounts committee — HMRC cost callers £136 -million by failing to answer 20 -million calls and one in three of all the letters it received. Enterprise-friendly, joined-up government? Don’t make me laugh.
Brought to book
‘The financial miscreants of the last decade in Britain remain at large,’ wrote George Trefgarne in Metroboom, his 2012 Centre for Policy Studies pamphlet on ‘Lessons from Britain’s recovery in the 1930s’. ‘The political will to enforce the law in a just and unemotional manner has been lacking by the authorities in the City and in Westminster. Perhaps they are worried about what they will find.’ I commented last week on the extraordinary length of time taken to bring any kind of official reprimand against the failed bosses of HBOS — and it’s only in the past month that RBS shareholders have at last been able to file suit against that bank and four of its former directors, including Fred Goodwin, alleging that investors were misled as to the underlying strengths of RBS at the time of its April 2008 rights issue, and lost many millions as a result.
Compare the timetable of justice for Clarence Hatry, whose City empire collapsed in 1929. This was a criminal rather than civil case, Hatry having confessed to fraud, but still the contrast in the authorities’ determination to get on with it is instructive. Chris Swinson, an expert on Hatry matters, reminds me that the appointment of an investigating accountant on 18 September 1929 led to an arrest within three days, a swift Old Bailey trial, and sentencing to 14 years’ penal servitude on 24 January 1930. Brought to book in four months flat, not five years and counting.