A tide in the affairs of men

Over the last 100 years there have been two turning points in the evolution of the main economic philosophy that have supported economic policy in the UK and the US – the third such turning point appears to be now in progress.

In 1936 Keynes published his General Theory of Employment, Interest and Money in which he demonstrated that the economy could be in a state of equilibrium but with very high levels of unemployment. His policy prescription that the government make up for insufficient private sector demand by borrowing to fund public sector investment spending was the first time that an economist had argued that there was a key role for government within economic policy. This prescription was adopted in both the UK and the US (Roosevelt’s New Deal) in the next few years to deal with the Great Depression of the 1930s. The post-war economic policy conventional wisdom was that governments had a legitimate and necessary role to play by intervening in the economy in order to boost growth.

In 1976, the UK was forced by the weakness of its economy, to go and borrow money from the IMF and put in placer what would now be called policies of austerity. Most famously, the then Prime Minister, James Callaghan said “We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists …”. This was also the year that Milton Friedman received the Nobel Prize for his work on the importance of the money supply in generating inflation and marked a key change in mainstream economic orthodoxy which led to the rise of Thatcher and Reagan who looked to roll back the influence of government in the economy and re-focussed the target of central banks’ policy on containing inflation rather than supporting growth. Terms such as economic liberalism and free market capitalism also reflect the same direction of economic thought and in particular the deregulation of the financial sector that has marked economic policy in both the UK and the US from that point. Globally, free trade was a concept that dominated international policy-making as it was seen as both containing inflation and boosting growth.

In 2016, it appears that the tide of economic ideas is once again turning, and once more it is led by the UK and the US (with the UK again just a little ahead). The motto of the Brexit Leave campaign to “take back control” and of Donald Trump’s campaign to “make America great again”, are both calls to move away from the economics of free markets and the philosophy of free trade.

As in the 1930s, this follows a period in which a laissez-faire philosophy has not delivered improved living standards for the average person, but instead seen the share of wealth amongst the very richest in society rise sharply, boosting inequality. Interestingly is the right-wing of political thought that have understood and sought to exploit this. Trump’s calls to fight immigration and renege on trade deals have strong appeal to the (white) working classes who have suffered most the globalisation of the world economy. Even in the UK, the words of the incoming prime minister have pointed to the need for business to work for all sections of society, rather than the elites. Central banks around the world have for a few years now quietly been pursuing policies designed to increase inflation rather than contain it, though without success to date.

We have passed the point of “peak free markets”, and changes in the direction of the dominant economic meme tend to be long-lasting (40 years going by recent experience). We should expect governments to become increasingly involved in the affairs of men.

For investors, the key correlation to note at these tide-turning points is for interest rates and bond yields. The history of greater government action in economies is marked by rising interest rates and inflation, with real returns from government bonds the key outcome. These were disastrously poor from 1936 to 1976 but have fabulous from 1976 to 2016. A long period of very poor real returns from government bonds is now at hand.

Forgive us our debts!

An open letter to Messrs. Osborne and Balls

Dear George and Ed,

Are you seeking a policy that you can surprise markets with on the first day after the General Election, just as Gordon Brown managed when he made the Bank of England independent in 1997, that you cannot talk about ahead of the election, but has no cost and will probably boost your chances of winning the 2020 election?

Well here it is – tell the Bank of England to cancel all the government bonds it has bought through its QE policy intervention in financial markets. I am sure your advisers have already produced papers looking into this for you. Obviously if one of you announces it before the election, the other will denounce it as dangerous and totally irresponsible but I think it works for whichever of you is Chancellor in May.

The Bank of England bought £375bn of gilts in their quest to support the UK economy between 2009 and 2012, which represents about 25% of the total gilts outstanding and about 23% of UK GDP. Since the Bank of England is an arm of the UK government (though acts independently when setting monetary policy) then these gilts represent debt that the UK owes to itself – each year the government pays interest on these gilts to the Bank of England, which books the interest as income and can be used to pay a dividend back to the government. On the national balance sheet, the gilts are an asset of the Bank of England but a liability of the government, and so cancel each other out. Although when QE was originally announced in 2009, it was expected to be temporary and would be unwound (ie the gilts sold back into the secondary market) when policy was to be tightened again, it is now clear that this remains a long way away and policy tightening will initially be implemented through interest rate increases. These gilts will be held for a long time.

The advantage to you in cancelling these gilts is that the ratio of debt to GDP falls from around 90% of GDP to around 70% of GDP and the UK balance sheet suddenly looks much healthier in absolute terms and compared with the major European countries as well as the US and Japan. The pressure from being an economy with too much debt disappears and gives you as politicians much more flexibility in how rapidly you need to deal with the debt. Further, ahead of the 2020 election you will have lots of very attractive charts showing that the UK has much less debt than all those around – what a sound economy the UK will seem to be!

What are the downsides? – well, the Bank of England will technically be bankrupt since the value of the bulk of its assets fall to zero, but that doesn’t matter because it can then print the money it needs to rebuild its capital base. This will enable to others to say that it represents pure money printing on a permanent basis, which may be argued to be hugely inflationary and risky. But this has been the case for almost 6 years now with QE and there are still no signs of these inflationary risks – all that is happening is that the pretence that QE will be reversed has been taken away. Also it does rather suggest that the Bank of England is not actually independent of the government – however, since the financial crisis it is very clear that governments and central banks around the world have been working together rather than independently of each other – central bank independence is a convenient illusion.

A bold act to start the next government which costs nothing to implement and provides lots of advantages to you ahead of the next election – what’s not to like?

Kind regards,

Jeremy

Low growth; more jobs?

Over the ten complete quarters that the current UK government has been in power, economic growth has been minus 3%, but total employment has risen by 1%.  For the last calendar year, the data show the size of the economy as unchanged but total employment up by over 550,000 or about 1.6%.  In contrast to the jobless recoveries seen in many Western countries after the 2001 downturn, the UK is experiencing a job-creating recession that is the cause of great head-scratching amongst economists.

Productivity is defined as total output divided by the amount of labour used to produce that output.  It is increasing productivity that produces the increases in the standard of living within an economy.  Historically, productivity growth in the UK economy has averaged about 1.5% per annum, but over the last ten quarters, the UK’s productivity has been averaging minus 1.5% per annum – indicating that the overall standard of living in the UK is declining.

Two sectors in particular account for much of the fall in productivity.  First, North Sea oil output has been in decline for some time now, and requires more effort and resource to produce that declining output.  Secondly, the banking sector (which delivered dramatic productivity growth before 2008) has seen a dramatic fall in output, with little change in total employment.  Many highly-paid bankers have lost their jobs, but the banks have had to hire just as many people in the compliance, risk and legal areas to deal with the aftermath of the banking crisis.

It is also undeniably true that the UK labour market has become very flexible with many businesses making much more use of variable pay structures through bonus systems, meaning that labour costs can be initially lowered by reducing the variable element of compensation, rather than immediately reducing the size of the workforce.  There are also many examples of businesses where workers have agreed to lower wages and benefits, to maintain their jobs.  Average wage growth in the UK has been below inflation for the last four years, so real wages have been falling steadily.

The statistics of the numbers of people employed also show a steep increase in the numbers of self-employed.  However, many of these are actually working very few hours, and so the official data show them as employed but in fact with very little economic output.

Elsewhere, surveys indicate that there is a degree of labour hoarding going on within companies, who fear that by reducing their workforce, they may lose key skills that they might not be able to replace in an upturn.  This however becomes progressively more difficult to maintain as time passes.  It also acts as a potential overhang to the unemployment rate and restrains business and consumer confidence.

The paradox of a job-creating recession reinforces the views and sentiments that were set out in our 2013 investment outlook: 2013 – Limited Growth and New Monetary Policy Regimes .  The UK economy is likely to continue to struggle in 2013.  However, the combination of (i) a governing coalition in the second half of its life and needing some positive economic news, and (ii) the summer arrival of a newly-imported Governor of the Bank of England, who is generally regarded as being much softer on inflation than Lord King, could well lead to a new direction in economic policy, which would bring long-term inflationary consequences.  We continue to recommend positions in index-linked gilts and gold for most investors, to act as a portfolio insurance policy against these inflationary possibilities.

A layman’s guide to Quantitative Easing

Until very recently, Central Banks generally conducted their monetary policy through changing their key reference interest rate, which was generally the rate at which they would lend to the commercial banks on a short term basis supported by acceptable collateral. Thus the economy was regulated by changing the price of money. Theoretically, by increasing the rate of interest in the economy, the desire to borrow and spend would be reduced and the desire to save would be increased, and economic growth and inflation should fall back. Conversely, reducing interest rates should help to boost economic growth. It is generally accepted by monetary economists that the impact of changing interest rates takes between one and two years to have its full effects on the economy.

However in late 2008, the shock to the global economy from the financial crash that most Central Banks cut interest rates to the lowest practical levels (somewhere between zero and 1%, depending on the system), but still felt that they needed to ease policy further to offset the strong recessionary forces that were being experienced.

Thus, they turned from easing through changing the price of money in the economy to easing through changing the quantity of money in the economy (hence the rather ugly term “Quantitative Easing” (“QE”)). The Federal Reserve and the Bank of England began their QE programmes in April 2009, but in fact the Bank of Japan had been engaging in QE policies since 2003, its rates having reached zero in the previous global downturn.

Until this century, QE had only ever been seen as a theoretical tool in the Central Banker’s arsenal. It was a lesson that some (most notably Ben Bernanke) learned from the Great Depression, where once interest rates reached a low point, the Central Banks felt that there was nothing else they could do. There is thus no history or experience to examine to determine if it works or how it works. The current policy is therefore a live economic experiment.

The manner in which Central Banks have indicated they expect QE to work is as follows. The Central Bank goes into the financial markets and buys securities, typically government bonds, although the Federal Reserve has also bought mortgage-backed securities, and the Bank of Japan has also bought equities and REITs. To finance this they create the money (digitally) and use it to pay the seller of the security (typically a bank). The bank’s assets now consist of more cash and less securities. Typically the income return on the cash will be lower than the income return on the securities they have just sold, and so they have a decision to make. They could choose (i) to maintain the lower income stream, because they might have a great need for liquidity, (ii) to go back into the securities markets and buy some other securities to maintain their income, or (iii) increase their lending to companies or households. Choosing (i) has no impact on the real economy and choosing (iii) clearly has a major impact because it is helping directly to boost demand and spending in the economy.

In practice, what has happened is that banks have chosen (ii), and have sought to maintain their income stream by investing in higher-risk securities. Thus yields have fallen first on government bonds, then on investment-grade corporate bonds and finally on high-yield bonds. This then gives companies the opportunity to borrow at lower rates of interest in the financial markets, which could be used to fund investment. QE, to date, has been a policy that has clearly supported financial markets – it is difficult to see a direct effect on bank lending and economic growth, but it is likely (and claimed by the Central Banks) that economic growth would have been much weaker without QE.

There are some problems with continued applications of QE. Firstly, it is generally believed by economists that QE policies have less impact as they are repeated. Since it is such an unusual policy, the first time it is deployed it has a shock effect, but later iterations do not as the financial system adapts its behaviour to the policy. Secondly, the liquidity of the underlying financial markets may be damaged. For example, the Bank of England now owns more than one-third of all gilts outstanding, and has no current plans to sell them, so the level of liquidity in the gilt market has been reduced by the policy.

The great fear that many commentators have about QE is that by creating more and more money in the financial system without greater economic output, the end result must inevitably be higher prices. In fact higher expected inflation is one of the objectives of the policy, since if people expect higher prices in the future it is rational to buy things now before they rise in price, and so boost demand in the economy today. The response of the Central Bankers would be to say that QE is a reversible policy, and the bonds that they have purchased, can very easily be sold back into the financial markets, so reducing the excess liquidity in the system, and the inflationary threat.

To date, a more realistic concern has been that there is no evidence anywhere in the world where QE has worked. It clearly has not brought Japan out of its long term stagnation, and so far neither the US or UK economies can be said to have recovered strongly. The reason for this is that the extra liquidity generated has remained within the financial system and not found its way into the real economy, and so boosted real demand. If the underlying causes of weak economic growth are that the banking system has overlent relative to its capital, that consumers feel their debt levels are too high, and both feel that they need to retrench (or in the jargon, deleverage their balance sheets), then the current policy of QE will not actually affect the desire to borrow or to lend.

A more radical policy option would be to print money and ensure that it was only used in ways that directly benefitted the consumer’s balance sheet. Thus £450 billion (only a little more than the total QE to date) could be used to give every adult in the country £10,000 to be used either to repay debt, or towards a deposit for the purchase of a first home or into a pension pot. By improving the savings to debt ratio of each adult in the country, the time at which they will once again feel happy to spend more will be brought forward.

The single currency – making Germany more European or Europe more German?

Following the fall of the Berlin Wall when Kohl wanted to press ahead with the reunification of Germany, the price of Mitterand’s acceptance of this was to demand that Germany share the power of its currency with the rest of Europe (or more particularly France) in a monetary union. Germany agreed provided that the guardian of the currency, the ECB, was made in the image of the Bundesbank, with its rigorous implementation of policies to control inflation. Both were happy because Mitterand believed he was making Germany more European, Kohl believed he was making Europe more German and the Bundesbank believed that it had the right to criticise and have a special influence over the policies of the ECB.

Until last year, the ECB did indeed operate in much the same way as the Bundesbank would have done, tending to be quick to raise interest rates and rather slow to cut them. After a Dutchman and a Frenchman, it was to have been a German, Axel Weber, who was expected to take over the ECB Presidency. However, he resigned following the introduction of the ECB policy of limited buying of the bonds of troubled peripheral governments, which in retrospect was a fairly minor breach of Bundesbank monetary orthodoxy. The man selected to take over the Presidency was Mario Draghi, an Italian and a former investment banker.

By the time Draghi took over as President in November, Europe was in deep crisis, and the ability of the politicians to respond with bailout money funded by the other governments was almost nil. If the Euro were to survive it would require extraordinary monetary policy measures. Draghi understood this and introduced two Long Term Repurchase Operations, lending unlimited money to any Eurozone bank at 1% for 3 years. Much of this was used by the Spanish and Italian banks to buy their own government bonds trading at much higher yields. For the Bundesbank this was pretty close to the direct funding of government deficits, which is illegal – they were unhappy but did not oppose it.

The crisis has worsened during this year and Spain has become close to joining the ranks of those on the bailout list. Doing so would use up most the capacity of the bailout funds (which were designed to be so big that they would never need to be used). Over the summer, Draghi has come out with a new bond-buying plan for which he has garnered substantial support. Under the plan, if the politicians agree to a sovereign bail-out with conditions, and use some of the bail-out funds set up for the purpose, then the ECB will buy bonds of those countries to maintain their deficit financing costs at a reasonable level, in potentially unlimited amounts.

Rather neatly, everyone, except the Bundesbank is happy with this. The German politicians can claim that any bail-out requires German approval and will be subject to strict conditions, thus making Europeans more German, whilst the rest of Europe sees the ECB being publicly prepared to print large quantities of money to support the weaker European economies even though this creates the risk of inflation in Germany, making Germany more European! The Bundesbank reject it because the ECB is now no longer operating in the Bundesbank’s image.

The history of the crisis in Europe is that at each step Germany talks tough and finally gives in and pays up to keep the Euro alive. It has reached the end of contributing to bail-out funds with taxpayer funds and future bail-outs need the money to be printed by the ECB. Draghi’s plan allows this to happen, once the politicians agree to a bail-out. Despite their talk, German politicians always do seem to agree to them, and so, ineluctably, the Germans are giving up on the sound money orthodoxy, which has served them so well over the last 50 years. It is the Germans who are becoming more European rather than the Europeans becoming more German.

The implication for markets is that the pattern of markets is set to continue on a loop: creating crises in the bond markets of weaker countries, followed by those counties requesting assistance from Germany and Germany demanding more austerity from them before acquiescing, leading to a rally in markets before the cycle starts again. Draghi’s plan is a good solution for today but doesn’t solve the fundamental problems. However, if German politicians continue to become more European, the clearest market implication is to sell German government bonds, because Germany will either take on the debts of the rest of Europe in some way or the money printed by the ECB will create inflation in Germany.

Mario Draghi – boiling the German frog!

The anecdotal boiling frog story holds that if you throw a frog into a pot of boiling water it will immediately jump out, but if you place it in a pot of cold water and slowly boil the water, it will not perceive the danger and will be cooked to death. The recent announcement by Mario Draghi, the President of the ECB, of how the ECB believes it can bring the Eurozone crisis under control, smacks of these tactics.

By the end of July, as many of Europe’s leaders had set off for their holidays, Spanish bond yields hit critical levels, which if maintained would shortly leave Spain unable to raise money in the financial markets and requiring a full-scale bailout from the other governments. Spain is however too big for the other Eurozone countries to bail out without considerable help from the ECB in the form of printing money.

Mr Draghi has carefully constructed a plan of action that garners just enough political support to be workable. First, a country must ask for assistance from its fellow Eurozone governments, which must be approved (thus achieving full political buy-in) unanimously. They and the ECB will then set out the conditions for such assistance (achieving the strict conditionality criterion demanded in particular by Germany) and the ECB will then be free to buy short and medium-dated debt in any amount in the secondary market.  That should, in theory bring down yields and enable the country to continue to fund itself in markets. Draghi has promised that he would also deal with the issue of ECB priority in the repayment of debt which bedevilled the Greek bailouts.

As an idea this has the support of the “moderates” within the Eurozone, essentially most of the political leaders and Central Bankers with the sole exception of the Bundesbank, which firmly opposes any Central Bank buying of government debt. The Bundesbank though is a greatly weakened institution today. On the ECB it has only vote out of 17, and only has influence to the extent that the German government agrees. In this case, both Merkel and Schaeuble have come out in favour of the Draghi plan – the Bundesbank is therefore rather isolated. Draghi has successfully driven a wedge between the Bundesbank and the German government

The realpolitik logic of such a plan however is where the boiling frog appears. Once one starts buying up the debt of credit-challenged countries, one begins to incur a large cost should it cease. Since the ECB can create money at will, the cost to it of buying more debt (if conditions do not improve) is zero, but the cost of stopping buying more debt will be considerable if the country defaults on the debt already owned. The German politicians may choose to believe that by imposing conditionality on a country before the ECB starts buying its debt, they are not creating an inflationary problem, but they are the frog being placed into tepid water. Every successive purchase of debt will be the equivalent, in the eyes of the Bundesbank, of raising the water temperature another notch.  

Europe continues to march ever closer to a denouement to its crisis, but the ultimate choice to be made is still the same. Germany has to decide very soon between the lesser of two very large evils.  Should it maintain its foreign policy objective to be a good European and keep the euro together, it will have to accept massive money printing to bail out the sovereign debts of the other countries, and suffer the consequent inflation. Alternatively, should it maintain its key economic policy objective of a sound currency with tight control of the money supply, it will have to accept the break-up of the euro and possibly of Europe as other countries find themselves politically unable to cope with the resultant economic depression..

 

From Heroes to Zeroes – 21st Century Central Banking

At the beginning of this century, the reputation of Central Banks in the West was at its apogee – over the previous 20 years inflation had been wrung out of the global economy by maintaining interest rates consistently higher than the rate of inflation. If inflation threatened to rise too sharply then raising rates by a few hundred basis points was sufficient to choke off consumer demand (since their mortgage repayments formed such a significant part of their disposable income) and slow the economy and inflationary pressures. Once this had been achieved, often requiring a quick recession, rates could be cut again and the restoking of consumer demand would reignite the economy. In short, it was apparent that Central Banking that had as its main target the control of inflation could be successful at only a small cost to growth. Politicians found themselves able to give up their desire to control interest rates for electoral purposes and give independence to their Central Banks. Central Bankers became Heroes!

The recession in the US following the bursting of the internet bubble and fears for the US economy following 9/11 however, saw the Fed cut US rates right down to 1% in 2002 and hold them there until 2004. 1% interest rates were much lower than seen in previous cycles and in hindsight were responsible for a massive inflation of the US housing market. Whilst the internet bubble was essentially financed by equity, since the new companies had no cash flow, the housing bubble was financed by debt. Debt-financed bubbles we now know inflate far further than equity-financed bubbles and then burst in a far more devastating fashion. Central Banks meanwhile, focussing only on the Consumer Price Inflation targets did not spot the bubble in the debt markets and so did not increase interest rates sufficiently to manage things better.

Following the 2008 meltdown in the global financial system and subsequent recession, Central Banks found that even interest rates that were effectively set at zero no longer helped to boost consumer demand. This was for two reasons, first consumers realised that they had already got too much debt and no longer wished to borrow more, even with low interest rates and secondly the all economic agents (banks, companies and consumers) had lost confidence in the future growth prospects of the economy that they did not want to lend, borrow or spend.

The Central Banks went back to their old textbooks to search for policy tools when interest rates can no longer be reduced and discovered Quantitative Easing (QE) which pushes money into the financial system in an effort to boost the demand for financial assets and thus stimulate the real economy. Many Zeroes of dollars, euros, yen and pounds have been created in this way. QE has almost certainly worked in the sense that economic growth in 2009, 2010 and 2011 would have been much worse without this policy, but it has not been enough to boost growth back onto a sustainable path. Worse still, repeated applications of QE seem to be less effective at doing this than the first effort. The scale of these interventions has brought forth much criticism of Central Banks in the US and the UK for creating the risks of hyperinflation from the creation of so much money. In Europe where monetary orthodoxy of the Bundesbank is enshrined in the ECB’s mandate, the Central Bank is criticised (outside Germany) for not doing enough to support the Eurozone economy.

For politicians, who are policy-constrained by huge fiscal deficits and debts, the only hope is that Central Banks solve their problems, but whilst Central Banks have the tools for fighting inflation, they do not have the tools for fighting deflation. They have done what they can (zero interest rates and QE) but have little more to offer bar providing liquidity to keep troubled banks alive and adding more zeroes to the money supply. The Age of the Heroic Central Banker is now behind us.

Reasons to be happy – if you own gold!

Gold is money whose supply is not decided at the whim of human leaders. Annual gold production is about 1.5% of the total amount of gold in existence, so it is the demand for gold which determines its price. In contrast the major paper monies of the world, the dollar, euro, yen, pound  and Swiss franc all have Central Banks whose job it is to determine how much of their currencies to be created. Before the crisis, the rate of increase of supply of a currency was kept roughly in line with the nominal growth rate of their economy, somewhere around the 3-6% per annum range. However in recent times, this has gone out of the window. The policies of Quantitative Easing seen in Japan, the US and the UK in the last few years have massively expanded the amount of money in their financial systems. In Switzerland, in response to the massive appreciation of the exchange rate, the Central Bank has made public on several occasions its intention to create unlimited amounts of Swiss francs in order to prevent further appreciation. The ECB (with its Germanic bias) has indicated that it would never a policy of Quantitative Easing, but within weeks of taking office as President, Mario Draghi announced 2 Long Term Repurchase Operations, which permit European banks to borrow unlimited amounts of money for 3 years at 1% and encouraged all banks to make full use of this facility – a policy which has similar short-term effects as QE. The supply of paper money across the Western world has increased sharply in recent years and the rhetoric of those in charge implies that they remain very happy to continue that policy for years to come if they feel it necessary.

Interest rates are very low. Gold brings no income return, and so tends to perform poorly when the income return on other assets is high. Today the opportunity cost of owning gold is very low since the return on other assets is so low. In addition, such low rates of interest tend to occur at times of low or tough rates of inflation and …

Gold is the best hedge against inflation. Recent analysis by Credit Suisse looking at the performance of different asset classes in times of rising inflation over the last 100 years, showed that gold delivered the best correlation to rising inflation. A relatively new asset class that might also do this is inflation-linked bonds, however were the inflation to be substantial the amount that would have to be repaid by governments would rise significantly and could cause a sovereign debt crisis. Gold is no one’s liability, unlike inflation-linked bonds, and in that sense remains the best inflation hedge.

Gold is a great hedge against political uncertainty. The Arab Spring has brought enormous political instability into the Middle East. One of gold’s huge advantages over other tangible assets is it very high value to weight ratio – and this fact has meant it is very portable. If a rapid departure from home suddenly becomes necessary, the most convenient medium for taking your wealth with you is gold.

Gold is an indicator of wealth. Through the centuries in both China and India (representing one-third of today’s global population), gold has been the first port of call for household savings. However from 1952-2002, Chinese individuals could not buy gold. Indian per capita consumption is over twice that of China, so the Chinese still have some catching up to do. At a national level, the reserves of many Asian countries have historically been held in dollars with very little held in gold (in sharp contrast to the Western Central Banks which have always maintained very high weightings in gold).

There are about 5 billion ounces of gold in the world and about 7 billion people alive today – that is about $1250 or £800 worth of gold for each person. Do you have your share?

 

PS Note too that Greece’s credxitors were quick to ensure that they can seize Greek gold.