Do not tell Gordon Brown that the economy’s prospects are golden, or not unless you want your nose pushed sideways. Gold is a touchy subject with him. It was his decision to sell half the nation’s gold reserves–some thought that he was trying to upstage his Prime Ministerial neighbour–when the price had fallen to its lowest level for two decades. Since then it has scarcely looked back, and this week, at $425 an ounce, it scaled heights it had not seen since the 1980s. How happily we might have profited from his mistake, but gold is easier for chancellors to sell than it is for citizens to buy. Ask your friendly bank to sell you half a dozen ingots, and watch the faces drop. Coin dealers (Spink is the best known) will sell you gold sovereigns or Krugerrands. Stockbrokers can offer you shares in a wide range of gold mines, some proven, some just a gleam in the promoter’s eye: be careful. New to the market are gold bullion securities, issued with the blessing of the World Gold Council, and the nearest thing yet to a unit trust of gold. All the same, if you want the real thing, to stroke in the firelight, park in the safe or bury in the garden, that is different. You can buy it across the counter in Dubai or Hong Kong, but not here. British banks are scared of being accused of complicity in money-laundering, a charge that they may now incur if a customer so much as blows his nose without a gas bill. Now is the time for one of them to pluck up courage and offer its customers the chance to own a store of wealth that is durable, portable, anonymous and dependent on nobody’s promise, not even a Chancellor’s. It will be just our luck if, on that day, gold’s great rally is over.
Spell with an ‘1’
Gold’s is one price on a two-sided coin. The other side shows the price of the dollar, which has been slithering. The difference is one of demand and supply. Creating more gold is the work of an alchemist, but to create more dollars you need only press the button and set the printing-presses whirring. Hence the plethora of dollars–with a trillion of them stacked away in Asia–and the heady approach of the two-dollar martini. (This week’s update: 1 [pounds sterling] = $1.82: it will soon be time to check that the vermouth is in the next room.) Every dollar bill bears the defiant assertion: In God We Trust. The printers now need to stop the presses and insert, in lower case, the letter ‘1’.
It’s the knowledge
Framlington, the money managers, have a Health Fund run by Antony Milford which has done well by backing small companies with bright ideas. (I declare a modest holding in it.) We can see where he thinks that the brightest and best are, because four-fifths of the fund is invested in American companies–101 of them, from Acusphere to Zimmer. Britain accounts for less than 6 per cent of the fund, and the eurozone scarcely gets a look-in. The moral speaks for itself. If you believe that knowledge and innovation drive growth, you know where to find the world’s greatest knowledge-based economy. Byron Wien of Morgan Stanley makes the point: ‘A very high percentage of the biotechnology, technology hardware, and software patents are held in the United States. Bright and motivated students from all over the planet want to come here for college and graduate education.’ Scholarships can make it possible, the scholars bring their energy and intellectual vitality with them, and once they come, they tend to stay. As the grumbling debate about our own universities and their finances now reaches some sort of a climax in Parliament, ideas like these may take second place to social engineering–but education and health are two subjects on which British governments think they know best. Mr Milford knows better.
Decoding Sir Angus
Sir Angus Grossart, Edinburgh’s one-man Establishment, is in trouble (again) with the corporate governance lobby. Its latest code, the Higgs model, says that when a non-executive director has been there for long enough to understand the business, he ceases to be independent, and should be replaced by a new one with a suitably fresh mind. At the Royal Bank of Scotland, Sir Angus has been on the board for the past eighteen years, and in his time it has moved up from the second division to fifth place in the FT-SE 100 index, well ahead of Lloyds and Barclays. That might suggest to an ordinary shareholder that it has been rather well directed, but the ones who have codes where their wits ought to be want him out. Correctness is all.
Thank you, Jeeves
Courtiers need to time their exits. Jeremy Heywood, once the Treasury’s boy wonder, then translated to 10 Downing Street as the Prime Minister’s private secretary, has opted to take the investment bankers’ shilling, or multiple of shillings. Ed Balls, the Treasury’s chief economic adviser and the Chancellor’s factotum, seems to think (as well he might) that this year’s Budget will be enough for him. I shall miss his long-standing double act as Jeeves to Gordon Brown’s Bertie Wooster. His, probably, were the ideas that led to the Bank of England’s independence. His, certainly, were the five tests which did so much to keep us out of the euro. He was uniquely able to interpret between his master and the outside world, the Treasury included. He may even have been right about endogenous growth theory–but if he now reckons that it’s time to go, be is likely to be right about that, too.
Tutti possono sbagliare: we can all make mistakes, as the hedgehog remarked, disengaging himself from the hairbrush. The proverb may console Calisto Tanzi in the Milanese prison which has been a home from home to so many of his country’s financial elite, when he is questioned about the eight billion euros missing from Parmalat, the company he founded. He has asked for his cell to be furnished with a small camping stove. Perhaps he has remembered the fate of Michele Sindona, the creative financier who ordered a cup of coffee when in prison, discovering too late that it was laced with strychnine. Sindona’s secrets, and others’, died with him. How prudent of Mr Tanzi to do his own cooking.