Scotland’s referendum – Brown’d off

Gordon Brown has now thrown his hand into Scotland’s referendum debate.  Just as we all thought he had crawled back under a stone, he re-emerges.  Perhaps he yearns to relaunch his political career in Scotland.

History will not revere Gordon Brown in British politics.  It looks to me that he is now doing his phoenix act in Scotland.  It also looks to me as if he has picked the side who, in his judgement, will prevail and pitched his tent there.  Fortunately, I don’t think we should fear Brown’s judgement.

Clearly though, he has had his eye on the prize.  However, when you have your eye on the prize it is also important to be able to see where you are going? Sorry!

So, let’s have a look at Gordon Brown.  We all know about his latter loathing for Tony Blair – perhaps he’s not all bad after all?

We know that he was arguably the most disrespected UK Prime Minister, forever, and he hung around like Japanese knot weed. However, he was credited, at one time for his handling of the ‘global’ financial crisis.  He called it a global crisis.  It certainly was global, but not in terms of global that affected us.  More likely global as a measure of the impact of the mess he got us into.

If I was writing Gordon Brown’s CV here’s what I would include:

We have all heard now of the Libor rate scandal and how certain banks have been implicated and heavily fined for manipulating it.  Libor is the inter-bank interest rate that governs bank cross trading and that of other financial institutions, that is set and published daily. So that’s ‘interest rate’ based trading.  But that is not the only trading standard.  Another example would be gold.  Now some of you will immediately make the link between gold and oor Gordon – wiz he no the bloke that flogged it off at a car boot?

So what about Gordon’s gold.  Well gold is priced internationally by the ounce.  The price per ounse is dictated by normal market trading – supply and demand if you will.  What if that was ‘affected’ and why would anyone want to do that?  First of all, how can gold prices be used to generate vast profits?  Here’s how; the ‘Carry trade’ where gold was a favoured commodity. Banks used this financial tool called the ‘Carry trade’ to make fortunes.  They ‘borrowed’ gold, which was both cheap and stable, for a small fee and sold it at full value.  They used the money for different and more profitable trade that earned them money.  They then ‘bought’ back the gold with the profits and ‘trousered’ the difference – usually a substantial sum. That’s fine if gold stays cheap and the bank’s new trade is more profitable. However, around 1999 and 2002 the banks came up short by the equivalent of 2 tonnes of gold, around £18.35 million, because gold had risen in value.  To ‘bail them out’ Gordon Brown did two ‘unusual’ and distinctly odd things according to that well respected journal the Telegraph.  He decided to dump 400 tonnes of the UK’s gold reserves by auction.  He also pre-announced the forthcoming sale of bulk gold.  This had the effect of suppressing the gold price i.e. forcing it down, and thereby allowing the banks to buy back cheap gold and avoid losses over £18 million.  However, to achieve this he sold off the UK gold reserves of 400 tonnes for around £3.67 billion.  The value subsequently rose until around 2012 it stood at around £23.15 billion. So, to bail out the banks to the tune of £18 million Gordon Brown effectively cost the taxpayers £19.48 billion. Strictly speaking this was not illegal – but was it morally sound?  you judge!

One of the banks in question, according to the Telegraph, Goldman Sachs sent their Head of Commodities, Gwyn Davies, to explain this banking issue to the Treasury.  Gwyn Davies went on to ‘head up’ the BBC and was married to Sue Nye.  Sue Nye ran Gordon Brown’s private office?

Gordon Brown is the man who now lectures Scots on the merits of remaining in the union.

Let’s look at some of his other remarkable achievements.  Mention Quantitative Easing and most of us think Gordon Brown.  This is another financial instrument that in the right hands and with great care and attention and fully cognisant of the risks, can bring benefits in the fight against the negative impacts of inflation and deflation.  QE as it is referred to is less an investment tool and more a highly dangerous game.  What is that old saying? a little knowledge is a dangerous thing.  Here’s an analogy.  Someone goes to the market with a tenner and tries to get a bargain.  With a tenner in your pocket you have very little bargaining power.  Someone else borrows a grand and flashes it under the noses of traders and gets no end of bargains – money talks, as they say.  But then the guy who lent you the grand needs it back now.  No matter how good a bargain you got, you’re caught short and may find yourself in the hands of the payday lenders to bail yourself out.  QE is often the last chance saloon when your normal monitory policies have failed you.

Far and away, Brown’s biggest impact was on UK pensions.  One of his first initiatives as Chancellor came in 1997 when he scrapped the tax relief on pension firm’s dividends.  At a stroke he all but wiped out an industry.  To date this has cost UK workers £118bn and counting – I say, and counting because Osborne’s promise to reverse this has yet to be realised.  If Brown knew what he was doing he is pathologically callous.  However, I suspect he was just plain incompetent.  Like a kid in a sweetie shop he recognised that pension funds had a healthy ‘reserve’ so he plundered it to give himself a load of cash to fund his secret ambition – popularity.  With hindsight we can see just how this all played out in the course of events.  In these austere times we recognise, and New Labour has been heavily criticised for not saving in the good times.  Look no further than Brown for the blueprint.

I believe that Gordon Brown was a man desperate for recognition and popularity.  He always saw himself as the Prime Minister.  He courted popularity as Chancellor by bankrolling massive public spending to the point of unsustainability then had to resort to extremely unconventional and risky financial measures to try to balance the books.  Remember when he was kicked out in 2010 his Chief Secretary to the Treasury, Liam Byrne left a note to say ‘sorry, there is no money left’!

This is the same Gordon Brown who, together with his big mate at the time, Tony Blair, secretly partitioned 6000 square miles of the North Sea from Scotland’s international waters securing for the UK, 15% of the oil and gas reserves?

What Gordon Brown has failed to understand is that the YES campaign will be successful on 18 September and once again he will be on the losing side.  I wouldn’t be surprised if he even got it in the neck from his fellow Better Together lot, including Darling Alistair (who is in my cross-hair next).  Well at least Gordon has a date for the end of his political career – 18 September 2014.

Is there no salvation for Gordon? I see one possibility.  If Gordon found some balls and announced publicly that he had reconsidered his position and came across to the YES campaign.  Even in the unlikely event of defeat he would still be able to hold his head up – a kind of modern day Gordon the Bruce to Alex Salmon’s Wallace.  Failing that he might be remembered as Gromit!