Speaker bays for gold at Economics Society talk

An investment manager told Warwick students that “deflation is what we need” after the last credit boom unwinds with a “massive correction”.

Robert Hutchinson, Managing Director of Hutchinson Lilley Investments, said a return to the gold standard was needed to prevent another housing bubble in the future.

At a talk hosted by the Economics Society, Hutchinson admitted such a measure would bring about a further “contraction” but called it a necessary “bit of unwinding”.

Hutchinson argued that, “There is no anchor point without gold. It’s just one bit of paper against another bit of paper.”

Ben Bernanke, chairman of the US Federal Reserve, has found that countries which left the gold standard the earliest during the Great Depression were the quickest to recover from it.

Drawing on past experiences in Ancient Egypt, Weimar Germany and America in 1929, Hutchinson said the “artificially low” price of credit had led banks to loan out funds “that were not there”.

He continued, “There is something fundamentally rotten in the banking system,” as he revealed Barclays’ assets would only have to depreciate by 2.7 per cent, as of the last results, for the bank to become insolvent.

But Barclays is not alone. Other British banks face similar woes, he said.

Hutchinson controversially told those present at the talk that, “Anyone holding shares in banks is stupid.”

Hutchinson’s fund has made a 4 per cent return over the last twelve months, compared to the 20 per cent loss suffered by the average hedge fund.

He put this down to luck and a “genuinely balanced fund” which he equated to the suspension on the Range Rover.

However, two-thirds of the fund is owned by “a wealthy client who does not like leverage”. Perhaps that explains the zest for gold.