Keep IMF gold reserves
From Sir Peter Tapsell, MP
Sir: Christopher Fildes is to be congratulated on his article on gold (City and Suburban, 26 February). May I add the following supportive arguments to his general thesis?
The Bank of England has a long, lamentable record on gold. It persuaded Winston Churchill in 1952 to return to a fixed gold standard at the wrong time and at the wrong price. The Bank has also, in my own political lifetime, twice sold large quantities of Britain’s gold reserves at low points in the history of the gold market, as detailed by Mr Fildes.
Not content with this, Mr Gordon Brown, having reduced Britain’s gold reserves to 312 tonnes (less than those of Austria or Venezuela), now wants the IMF to start selling its gold reserves ‘to help the poorest countries’. It so happens that many of the poorest countries most of them in Africa — derive a substantial proportion of their export revenues from gold (Tanzania, Mali and Ghana are typical examples). They will be hard hit by a forcing-down of the gold price, the main beneficiaries of which (as when Mr Brown sold) will be investment banks that would adopt large ‘short’ positions in gold.
Much the better way to achieve Mr Brown’s admirable desire to help poor countries is not by utilising the 3,217 tonnes of IMF gold, but by revaluing the IMF stock, by perhaps five-fold, to current market levels (as was partially done in 1999/2000) to release capital. The reason that a similar wheeze to that now proposed by Mr Brown — the issue of Special Drawing Rights in 1978 — failed was precisely because SDRs were not goldbacked. As Lee Kuan Yew famously remarked at the time: ‘I have no intention of putting a paper tiger into Singapore’s tank.’ Peter Tapsell
London SW1
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