Why the Governor is in the soup — and how I got the soup into the Governor
I’m no WikiLeaker, but I am prepared to reveal that I have, on two occasions, lunched à deux with Professor Mervyn King in his private dining room at the Bank of England. Not a single word of what he said will appear in this column or anywhere else. But I think it’s probably OK to tell you about the soup.
As soon as this smoothly indeterminate vegetable concoction was served at our first encounter, the Governor filled his spoon, raised it halfway to his mouth, and embarked on a tour d’horizon to which, having been a notably slow student of economics long ago, I felt able only to reply ‘Mmm’. Two minutes in, my own plate was empty; 25 minutes in, the Governor’s was still full, his spoon immobile, his butler darting in and out and dancing from foot to foot in frustration at being unable to clear for the main course, which was going cold outside.
But the second time I went better prepared. I read and reread the FT from cover to cover. I blew the dust off textbooks untouched for decades. And when the soup arrived, I launched into my own extended take on the global monetary situation. The Governor gradually emptied his bowl — mission accomplished, I felt — while regarding me through his spectacles with the same mildly puzzled look that my Oxford tutor used to assume, as if to say, ‘Why on earth did we let this boy into the college?’ A third invitation has not been forthcoming.
I tell this tale to explain that the Governor is an economics teacher at heart. That’s what he did for a living before he moved to Threadneedle Street, it’s why he still calls himself ‘Professor’, and it’s why he cannot hide his exasperation at politicians who put electoral gamesmanship ahead of serious economic policy formation. He barely concealed, in Mansion House speeches or select committee hearings, his suspicion that Gordon Brown’s blueprint for ‘financial stability’ was more about maintaining political control than it was about smart regulation. And it comes as no surprise to learn via WikiLeaks that King told the American ambassador before the election how worried he was about the inexperience of Cameron and Osborne and their tendency to see every issue in political terms.
That’s what everyone was worried about at the time. So it’s absurd to suggest that the independence of the Bank was compromised when the Governor urged the Conservative duo to draw up detailed plans for deficit reduction — and even sillier to call it an ‘unforgivable sin’ that requires the Governor’s resignation, as the motor-mouthed former Monetary Policy Committee member David Blanchflower has done. Rather, it was an example of the Governor in tutor mode, soup spoon in mid-air, explaining a basic point to a couple of louche undergraduates who clearly had not been spending enough time in the library.
Silver lining
I asked my man in the commodity market what I should give my godchildren for Christmas. Truckloads of grain or cotton wouldn’t look very festive, but I thought he might go for gold, which is being driven ever higher by Chinese investors — importing it in vast quantities as well as extracting it from their own mines — or copper, of which there is talk of speculative hoarding and a supply shortfall. But in fact his answer was silver, usually regarded as the poor relation among precious metals. As I write, it is trading at $29 an ounce, which means you can buy a far more impressive present for your money than if you venture into gold at a historic high of $1,400 an ounce and rising: for the price of a couple of krugerrands to clink in the godson’s pocket, I could buy him a sack full of American Silver Eagle coins, a bundle of shares in a London-listed silver miner such as Fresnillo or Arian, or an entire George III silver tea service.
But the more important point is that silver has lagged behind the recent surge in gold and is still far below its all-time spike of almost $50, when the Hunt brothers from Texas cornered the market in 1980. At that time, gold was 17 times more expensive than silver. Currently the ratio stands at 48 times, and pundits think there’s scope for it to narrow as gold bulls run out of puff but silver maintains momentum — despite a 60 per cent rise since August. They also proclaim exciting new industrial uses for silver in everything from heart pacemakers to thermal coatings for glass — replacing its traditional use in photographic film, which is slowly being wiped out by digital cameras. So silver is the Any Other Business tip this Christmas, and if the market gets really hot, my lucky godson can melt his teapot for bullion.
Cautionary tales
A last couple of book recommendations, this time from the fiction shelf — and they’ll serve equally well as presents under the tree or to help you wile away 18 hours on a frozen commuter train. There have been two worthy non-fictional attempts to describe the mindset and modus operandi of the short-selling hedge-fund managers who made ruthless billions out of the financial crisis — Michael Lewis’s The Big Short and Gregory Zuckerman’s The Greatest Trade Ever — but both are put in the shade by Sebastian Faulks’s brilliant satirical novel A Week in December. John Veals, the sociopathic hedge-fund boss at the centre of the story who places giant bets on the collapse of a high-street bank, is as vivid as any of Charles Dickens’s characters and the language he speaks is remarkably authentic.
Likewise, In Office Hours by FT columnist Lucy Kellaway precisely captures the games and deceits of corporate life in its account of two women entangled in office affairs, one with a young trainee and the other with her spineless, self-regarding boss. This ultimately sad story will appeal most to female readers, I suspect, but I strongly recommend it as a cautionary tale for any middle-aged middle-management bloke dreaming of bunga-bunga on the boardroom table during the Christmas party. Not that such things ever happen at The Spectator, of course.
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