Reykjavík on the Thames: Hard Times Ahead for Britain

"Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity."

W. B. Yeats, The Second Coming

The UK had another debate last night, and the polls shows the Conservatives and the Liberal Democrats in a surprisingly close race, with Labour under Gordon Brown continuing to slip. We will be looking for more polls (not connected in any way to Mr. Rupert Murdoch thank you) over the weekend after yesterday's televised debates.

The election seems likely to result in a 'hung Parliament' with no clear majority for any party, suggesting the possibility of a coalition government.

As a reminder to American readers, most of whom do not even know that the Brits are holding an election or how their governments are formed, the Liberal Democrats would be considered the 'reform party' in this election, what the Yanks would call a 'third party.'

And to put an edge on it, the New Stateman reports that Mervyn King suggests that the coming austerity to be imposed on UK citizens to support the City Banks will ensure that the next party in power will not be elected again for many many years.

Of course that is what the US newspapers said about the Republicans ahead of their last election, but in a short period of time Mr. Obama has managed to alienate a large share of his election base by acting more like a moderate corporate crony than a reform Democrat.

This election is important in any number of ways, but for the US it is a peek into what the future may bring in their own midterm elections in November. It is unusual for a people to go all out for a third party when they are frightened. There has not been a viable third party in the states for almost a century. But the manner in which the elections are settled in the UK brings forward some interesting possibilities.

New Statesman
Mervyn King: next government will be voted out for a generation
30 April 2010

Governor of the Bank of England warns that austerity measures will be so unpopular that the next party in power will not be voted back in.

Mervyn King's comments were revealed just hours before the final leaders' debate.

The American economist David Hale, who has known King for many years, said in an Australian television interview: "I saw the governor of the Bank of England last week when I was in London, and he told me whoever wins this election will be out of power for a whole generation because of how tough the fiscal austerity will have to be."

The Bank of England declined to comment, but confirmed that King and Hale had had a private meeting in early March.

His comments come amid growing concern that none of the three main parties has been open about the scale of spending cuts and tax rises that will be necessary.

Brown's Bottom: Was This a Bailout of the Multinational Bullion Banks Involving the NY Fed?

The bottom referred to, of course, is the bottom of the gold price, and the sale of approximately 400 tonnes of the UK's gold at the bottom of the market.

The sticky issue is not so much the actual sale itself, but the method under which the sale was taken and who benefited.
There has been widespread speculation that the manner in which the sale was conducted and announced was in support of the nascent euro, which Brown favored. This does not seem to hold together however.

There is also a credible speculation that the sale was designed to benefit a few of the London based bullion banks which were heavily short the precious metals, and were looking for a push down in price and a boost in supply to cover their positions and avoid a default. The unlikely names mentioned were AIG, which was trading heavily in precious metals, and the House of Rothschild. The terms of the bailout was that once their positions were covered, they were to leave the LBMA, the largest physical bullion market in the world.

"LONDON, June 1, 2004 (Reuters) -- AIG International Ltd., part of American International Group Inc., will no longer be a London Bullion Market Association (LBMA) market maker in gold and silver, the LBMA said on Tuesday."

LONDON, April 14, 2004 (Reuters) — NM Rothschild & Sons Ltd., the London-based unit of investment bank Rothschild, will withdraw from trading commodities, including gold, in London as it reviews its operations, it said on Wednesday.

The manner in which the sale was conducted, and the speed at which it was undertaken, without consultation of the Bank of England, made many of the City of London's financiers a bit uneasy. The sale as bailout was given impetus by this revelation which surfaced some years later.

"In front of 3 witnesses, Bank of England Governor Eddie George spoke to Nicholas J. Morrell (CEO of Lonmin Plc) after the Washington Agreement gold price explosion in Sept/Oct 1999. Mr. George said "We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.
Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K."

So it appears that long before AIG crafted its enormous positions in CDS with the likes of Goldman Sachs, requiring a bailout by young Tim and the NY Fed, it may have been engaging in short positions in the metals markets, especially silver, and may have required a bailout by England to preserve the integrity of the LBMA.

There are also some who think that the gold sale provided a front-running opportunity for that most rapaciously well-connected of Wall Street Banks, Goldman Sachs. Gold, Goldman, and Gordon

This is the undercurrent of the inquiries in England today, and the controversy surrounding Brown's Bottom. There is thought that the information disclosed on the London sales will be heavily redacted to protect the involvement of the US Federal Reserve bank, which is said to have engaged in gold swaps to further depress the price, in conjunction with a major producer and a NY based money center bank. The people of the UK deserve answers.
.

UK Telegraph
Explain why you sold Britain's gold, Gordon Brown told
By Holly Watt and Robert Winnett11:55AM GMT 24 Mar 2010

Gordon Brown has been ordered to release information before the general election about his controversial decision to sell Britain's gold reserves.

The decision to sell the gold – taken by Mr Brown when he was Chancellor – is regarded as one of the Treasury's worst financial mistakes and has cost taxpayers almost £7 billion.

Mr Brown and the Treasury have repeatedly refused to disclose information about the gold sale amid allegations that warnings were ignored.

Following a series of freedom of information requests from The Daily Telegraph over the past four years, the Information Commissioner has ordered the Treasury to release some details. The Treasury must publish the information demanded within 35 calendar days – by the end of April.

The sale is expected to be become a major election issue, casting light on Mr Brown's decisions while at the Treasury.

Last night, George Osborne, the shadow chancellor, demanded that the information was published immediately. "Gordon Brown's decision to sell off our gold reserves at the bottom of the market cost the British taxpayer billions of pounds," he said. "It was one of the worst economic judgements ever made by a chancellor.

"The British public have a right to know what happened and why so much of their money was lost. The documents should be published immediately."

Between 1999 and 2002, Mr Brown ordered the sale of almost 400 tons of the gold reserves when the price was at a 20-year low. Since then, the price has more than quadrupled, meaning the decision cost taxpayers an estimated £7 billion, according to Mike Warburton of the accountants Grant Thornton.

It is understood that Mr Brown pushed ahead with the sale despite serious misgivings at the Bank of England. It is not thought that senior Bank experts were even consulted about the decision, which was driven through by a small group of senior Treasury aides close to Mr Brown.

The Treasury has been officially censured by the Information Commissioner over its attempts to block the release of information about the gold sales.

The Information Commissioner's decision itself is set to become the subject of criticism. The commissioner has taken four years to rule on the release of the documents, despite intense political and public interest in the sales. Officials have missed a series of their own deadlines to order the information's release, which will now prevent a proper parliamentary analysis of the disclosures.

It can also be disclosed that the commissioner has held a series of private meetings with the Treasury and has agreed for much of the paperwork to remain hidden from the public. The Treasury was allowed to review the decision notice when it was in draft form – and may have been permitted to make numerous changes.

In the official notice, the Information Commissioner makes it clear that only a "limited" release of information has been ordered.

Ed Balls, who is now the Schools Secretary, Ed Miliband, now the Climate Change Secretary, and Baroness Vadera, another former minister, were all close aides to the chancellor during the relevant period.

If the information is not released by the end of April, the Treasury will be in "contempt of court" and will face legal action. A spokesman said last night that the Treasury was not preparing to appeal against the ruling.

How auctions cost taxpayer £7bn

The price of gold has quadrupled since Gordon Brown sold more than half of Britain’s reserves.

The Treasury pre-announced its plans to sell 395 tons of the 715 tons held by the Bank of England, which caused prices to fall.

The bullion was sold in 17 auctions between 1999 and 2002, with dealers paying between $256 and $296 an ounce. Since then, the price has increased rapidly. Yesterday, it stood at $1,100 an ounce.

The taxpayer lost an estimated £7 billion, twice the amount lost when Britain left the Exchange Rate Mechanism in 1992.

The proceeds from the sales were invested in dollars, euros and yen. In recent years, most other countries have begun buying gold again in large quantities.

Max Keiser Reports