Friday 14 December 2012

Give The Lady A Break

Her Majesty visited the Bank of England this week.  Sadly it was not to lead her Household Cavalry to arrest the lot and chuck them in The Tower awaiting trial for high treason.  It was one of those endless state visits she has to endure talking to boring evasive people with a shifty look about them.

Past governments have given more than enough of that to do.  The media have dutifully told us that down there in the basement, along with the fine wines and secret expenses files, she was finally given the answer to why it all went wrong in 2008.

She has asked the question before when visiting the London School of Economics and the learned professors, pundits and experts around her gave her some garbled blather about it was all very difficult and they did not quite know but somebody must have been to blame but it wasn’t us. 

Whether they added that the nice Colonel Gaddafi and family who had been so generous to the School had been a great help to us all in our time of trial is not clear.  Sadly, one governor, a Mrs. Blair, was not around to help.  Perhaps she was giving legal advice to people with interests in Libyan oil.

This time round the Bank experts she talked to had obviously been doing a bit of searching on Google and not to check on its tax returns or patterns of capital flow.  They had concluded the crisis was one of unpredictable complexity, as in the science of seismology, earthquakes, volcanoes, tsunami’s and things from outer space that go bump in the night.

As with the LSE they asserted nobody predicted the crash because it was not possible to do so and everyone was taken utterly by surprise.  This may have been the case with the Labour government, The Treasury, the banks, the dealers and the economists with ever more complicated equations based on impenetrable assumptions but not everyone.

Me for a start, who dumped out of all financial and related shares early in 2007 after realising that the US property market was going into a tailspin.  Along with this the high leverages and the huge amounts of credit creation going goodness knows where had all the hallmarks of a big bust to come.

It was not me who was the clever one, there were others out there who had worked out that the pre-conditions were in place for a bad crash and it was only a matter of time before some event or hiccup blew the fuses.  They were much better qualified than me and made sense.

However, in the corridors of power, the meeting rooms in the banks etc. never mind the fantasy world of established academic economists the wildly optimistic believers in the conventional wisdom of the time regarded them as something of a freak show.  If you doubted, then bang went your political, civil service, academic, media or financial career.

The doubters had one common characteristic.  They had read their economic history back for more than a decade and had taken the much longer view.  They asked themselves what was really going on and just what might go wrong.  They looked for examples of the past but knowing that the past may always be different but the key issue was to look at the patterns.

Moreover, if the Bank of England really thinks that unpredictable seismology was the answer then they have not done their homework.  Those who check out the data on earthquakes and volcanoes and related events are aware of the history and the patterns.  They know what the risks are and where events are likely to occur.

Also, they are aware of the difficulties whilst getting a little better year by year in identifying high risk areas and giving advice.  For example, you do not urbanise with poor building standards in earthquake zones.  You should not build too close to a volcano with frequent big eruptions.  You should not put a nuclear power station with dodgy construction on the shoreline where large earthquakes and tsunamis occur.

Nevertheless, humanity continues to ignore these ideas of risk in the immediate need for power and/or profit.  Just as so many of our leaders and their attendants could not and would not see where they were heading in finance, commerce. and production.  Nor can they see what next could be coming.

But down there in the vault, I assume the picture of Her Majesty looking at piles of gold was meant to reassure us that all is well and her that the Crown Jewels were not next on the government’s sales listings.  But all that glisters is not gold. 

First question, how much of it is actually “ours” and not just in storage for some Trusts or “banks” or such that belong to past or future potentially displaced governments that have systematically raided the people’s purses.  Second, if Gordon Brown sold off gold dirt cheap have we been buying recently at much higher prices?  Is this why the national debt remains stubbornly high?

Third, just how much of it is actually gold and not just adulterated ingots or even blocks of tungsten coated with gold?  Apparently, out there in the gold markets the rights to gold being bought and sold are far greater than any estimate of the real quantity of gold available to the markets.  There is real fear that a lot of fake gold could be around.

The last time I attended the Ceremony Of The Keys at the Tower of London, it was my considered opinion that the Crown Jewels could be there for the taking if wanted by someone who knew what to do. Her Majesty should consider beefing up the security there.

If we get a Labour government and the gold goes from the Bank of England, Ed Balls will be round with our foreign creditors within the week.

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