Some capital news Washington Agreement

It was good news for the gold industry that the European Central Bank and its member central banks, plus the Swiss and Swedish central banks, renewed the Central Bank Gold Agreement. It wasn’t, however, an enormous surprise.

The new agreement allows the signatory banks to sell 2,500 tonnes of gold over five years, starting in September. That’s 500 tonnes more than had been allowed under the 1999 agreement, a fact that would have sent the gold market into a tailspin back then.

The interesting thing is this: the European central banks announced that another 100 tonnes — that’s just over 3 million oz., by the way, about two Kinrosses — would come on to the market annually. And the gold market yawned. Such is the change in psychology we have seen in the past three years — but when people pick a watershed moment, many still think of September 1999.

And it has been a good deal: the banks observing the Washington Agreement sold 1,615 tonnes (about 52 million oz.) gold in the first four years of the agreement’s life. A quick back-of-the-envelope calculation puts the revenue at around US$16 billion, or an average of US$306 per oz. Total central bank gold sales in the four years leading up to the agreement were 1,463 tonnes (about 47 million oz.), for somewhere around US$15 billion in revenue and an average near US$315 per oz.

From the banks’ point of view, the least that can be said is that they didn’t lose by the arrangement but may have saved the value of their own gold reserves. Playing “what-if” five years later won’t put an accurate value on the value that was preserved, but during the life of the first agreement, a long-term trend reversed itself.

We have often conceded that central banks had a duty to make a return on their reserves. In the Washington Agreement the banks themselves recognized that they had a duty not to destroy the value of a significant reserve currency too.

Ottawa excitement

The new Conservative party seems to have done the sensible thing in voting in Stephen Harper as its new leader. It was smart, especially, to choose substance over style in rejecting the party heavies that put forward businesswoman Belinda Stronach.

National-affairs hacks — the chattering class’s very own goon squad — have for a long time knocked Harper as a plodding intellectual, one of those bright losers that exist only as a punching bag for more savvy politicians. Much as they might be bored by anything other than their own witty columns, they should have a look at history. The only two fights between plodding intellectuals and savvy politicians in Canadian history were the election of 1911, when Borden beat Laurier, and 1926, when Meighen nearly knocked off King.

Plod away, Mr. Harper. These vandals in Ottawa need to be plodded on, and soon.

Madrid appeasement

Lastly, it’s hard to look at the result of the recent Spanish election without seeing the country’s voters capitulating to terrorism.

Say what you will about the trouble the Popular Party got itself into by first blaming Euskadi ta Askatasuna, then coming to the realization that North African terrorists placed the bombs on Madrid commuter trains on March 11; the men in the dark rooms with the bloody hands will see the election of the Socialist party in only one way.

It has already been remarked elsewhere that any Western country with an election scheduled is now marked out as a target for the next attack. The civilized world is sending signals to the lords of terror. And those signals are all the wrong ones to send if we mean to survive.