Gordon Brown is probably not going to be remembered as one of the Great British Prime Ministers. His short time in power saw his government lurch from disaster to disaster, eventually culminating in its electoral defeat in May 2010. However before that Brown was Chancellor of the Exchequer for almost a decade during one of the biggest booms in Britain’s economic history. I think as time goes by he will try more and more to restore his reputation by emphasising his achievements as Chancellor, rather than his time as PM.
This has its problems as well though. Brown helped oversee the deregulation of the finance industry that led in part to the credit crunch of 2008. Brown’s defenders point out that the crisis started in America, which is certainly true, but there is no getting away from the fact that we were hit by it a lot worse than many other European countries whose banking sectors was better regulated.
The other great mistake of Brown’s reign is probably his decision to sell off Britain’s gold reserves. Every country likes to have a certain amount of gold in storage as a way of backing currency. When New Labour came to power in 1997 Britain had a relatively large supply of gold compared to other European countries, and the price had been falling for almost twenty years. Gordon Brown decided to diversify the UK’s portfolio by selling off a certain portion of it. In actual fact he sold off almost 60 per cent of it between 1999 and 2002.
The first clear mistake Brown made was announcing the sale a year in advance. This had the effect of driving down the price even further. Eventually the UK sold almost 400 tonnes of gold at the price of 275 dollars an ounce. Effectively Brown sold a huge chunk of the country’s assets at rock bottom prices. This wasn’t a million miles away from Margaret Thatcher’s privatisation programme of the 1980s when she ‘sold off the family silver’.
This would have been less of an issue if the price of gold had stayed low. Instead it almost immediately began to recover. Over the next ten years market prices rose steadily till eventually it passed 1,100 dollars an ounce in 2009. This means that Gordon Brown lost between three and four billion dollars. Now anyone can make a mistake, and some have argued that Brown’s rationale for doing this was perfectly sound, but in retrospect it was clearly the wrong decision taken at the wrong time. Several other countries bought heavily into gold in the late 90s on the assumption that the market had nowhere else to go but up, and made massive profits on it. Brown’s mistake became so infamous though that commentators started referring to it as ‘Brown’s Bottom’. The phrase is now used whenever anyone particularly mis-times the buying or selling of something.
Here is a short video where former stock broker Max Keiser (owner of possibly the worlds most irritating voice), attempts to explain why Gordon Brown decided to sell the gold reserves: