I must have overlooked this very interesting blog post by The Telegraph’s Thomas Pascoe (probably because the Scottish holidays had already started at the time).
He’s arguing that Gordon Brown wasn’t an innumerate idiot when he sold most of the UK’s gold reserves at a ridiculously low price, as most people had assumed.
What he really did was trying to salvage the banking system:
It seemed almost as if the Treasury was trying to achieve the lowest price possible for the public’s gold. It was.
Faced with the prospect of a global collapse in the banking system, the Chancellor took the decision to bail out the banks by dumping Britain’s gold, forcing the price down and allowing the banks to buy back gold at a profit, thus meeting their borrowing obligations.
If true, this puts the gold sale in a completely different light. It was perhaps after all the right thing to do at the time (although I wonder whether bailing out a few banks would actually have cost more than the value of all that gold today), but why didn’t Gordon Brown afterwards try to strengthen the banking system instead of letting them continue their merry games until the system finally crashed in 2007?