Gold (30 page)

“My God, Drew,” Tom said as he read, “do you know what this is going to do to the market?”

“I’ve told Madison and Halden. I can’t hold it back,” Drew responded. The second take came up.

Gold Mine Hoax -2-

The announcement of the gold mine sabotage last month disrupted financial markets throughout the world and prompted central bank officials to halt all currency trading for two days. Major securities and commodities markets in the United States also closed down.

The price of gold has remained fairly steady since its sharp rise, but several experts have expressed their confusion at the amount of gold available in the market.

The documents in the possession of WCN indicate that South Africa and the Soviet Union continued to channel their full production into the market through Marcus Trading of Switzerland. Officials of Marcus Trading were not available for comment.

Drew’s story sent the price of gold plummeting. “The gold price has gone into free fall,” he said. “Bart, get on to the London traders, get a reaction piece—tell them it’s WCN calling; they’ll pick up after this story. Tom, you answer the phone; I’m not available.” All lines were lit up on the phone, which had been buzzing mercilessly but unheeded for several minutes.

“No response yet from South Africa,” Drew said. A news blackout cut both ways; it would take some fancy footwork for Pretoria to issue its denial. But each minute the denial was not forthcoming would lend added credibility to the story.

Was it true? Was the sabotage a hoax? Drew was convinced of it, but he had been equally convinced at one point that the sabotage had occurred.

The market certainly accepted his report as the truth. Gold dipped under the thousand-dollar mark within twenty minutes.

Tom brought a telex to the slot. “’Seaman’s Savings Limited is closing for the rest of the day,’” Drew read aloud. “Write this up, Tom. Try to reach them if they are answering the phone. Call the Old Lady, find out if they knew about this. Will there be others?” The crusty old New England bank had become more daring in recent years. Their London subsidiary probably had gone long in the gold futures market, Drew figured.

“Oh, my God,” he exclaimed, seeing the next item on the screen. He swallowed hard; Halden was making his move. “Look what’s coming in from New York.”

Drew coded the story and flashed a copy to Tom.

New York Fed Withdraws Interbank Safety Net

New York (USCN) — The New York Federal Reserve Bank issued a statement early this morning declaring it was withdrawing the unlimited guarantee for Latin American interbank deposits that it had implemented just two weeks ago.

“The intention of Latin American countries to follow through on their decision to suspend debt payments and repudiate part of their debt leave us no choice,” Mark Halden, president of the New York Fed, said in a prepared statement. “We can no longer countenance or accept their failure to meet their financial engagements.”

Tom whistled. “That means the Latin Americans don’t have a pot to piss in.”

“It will leave big holes in the accounts of a lot of banks who have money out to them—too big for some,” Drew said. “Halden’s acting like this is a preemptive strike, but how can he do it when the markets are already in an uproar?” Drew’s voice was tight with stress.

“’Hunter Bank closing London branch,’” Drew read aloud from the screen. “Call around and see what their exposure was in the interbank market.” It was a bad sign; if Hunter was already experiencing a run in its London branch, a lot of banks were in for a hard ride.

The Fed’s announcement arrested the fall in the gold price, as the market tried to figure out whether it was more urgent to get out of gold or get out of dollars.

“Yen is rising,” Drew announced. European stock markets were posting strong gains.

“I can’t get through to the Bank of England, but there’s a telex coming over from them,” Tom called over from the telex printer. “They’re extending unlimited credit to U.K.-registered banks. They’re reminding all foreign banks of their responsibility for branches in the United Kingdom.”

Drew thought about Halden and what he really sought. The Fed president had simply reversed his stand on the safety net and yielded to the administration, which wanted to take a hard line with the Latin Americans. The difference was that Halden knew how dangerous this was to the U.S. banking system, while the administration seemed blind to the consequences.

Drew wondered as well about Abrassimov and his waiting for “events.” Drew realized that one of the expected events was his own report of the hoax. Did Abrassimov anticipate the crash of the Western financial system?

Drew could see that his report unmasking the South African hoax would play into the hands of both Halden and Abrassimov. But he was not going to be deterred by that realization any more than by du Plessis’s threats. As Abrassimov had said, Drew was not responsible for what happened in South Africa or for what happened with the markets. He was responsible for what happened in this newsroom.

The yen had gained 20 percent in an hour, reaching 150 to the dollar. A Tokyo dateline flashed onto the monitor. “MOF instructs Japanese banks to cease all yen exchange immediately,” Drew said. The all-powerful Japanese Ministry of Finance reacted quickly.

“’Rumors of a bank holiday in the United States.’” Drew read the next headline. Bank holidays stop runs—you cannot withdraw money if the bank is not open—but they don’t stop bankruptcies.

The dollar was taking a beating. If the Big Board opened it would be overwhelmed by sell orders from foreigners anxious to liquidate dollar holdings.

“There’s lots of demand for ECUs,” Tom reported from his calls to currency traders. The European Currency Unit had been created in 1978 as a basket of the European currencies for official monetary cooperation. To the surprise of its creators, a private market in ECUs began to grow, as banks bundled together the component currencies and traded the ECU as a unit, in time deposits, credits, and bonds. By the late 1980s, it was gaining increasing recognition as a genuine pan-European currency.

“Carol Connors on line four,” Bart called.

Drew picked up the receiver and cradled it on his shoulder to keep his hands free for the keyboard. As he listened, his face drained of color. He put down the phone and looked blankly across the rim at Tom.

~

Drew tapped his control keys like a robot as he tried to assimilate what Carol had told him. She had called from the Fed trading room; no wonder she had not answered the phone in her apartment.

Drew could hear voices shouting in the background. Carol had been brisk and businesslike, although Drew had detected the concern in her voice.

She had been right about Halden’s intentions. But neither of them had anticipated the extent to which he was willing to go. Drew felt a pain in the pit of his stomach and a curious detachment from reality looking at the flickering monitors in front of him.

The headline from USCN flashed up on the screen just minutes later:
U.S. SUSPENDS DEBT SERVICE TO FOREIGNERS
. Six words to change the face of world finance forever. The story followed:

Washington (USCN) — U.S. Treasury Secretary Donald Johnson announced that the United States Government was suspending service on all its debt securities held by foreigners, effective immediately.

“It is a measure we adopt with great reluctance,” Mr. Johnson said in an extraordinary predawn announcement. “But we see no alternative in view of the breakdown in international credit resulting from the decision of Latin American countries to suspend their debt service and to repudiate part of their debt.”

The measure affects Treasury bills, bonds and notes registered in foreign ownership, and all bearer notes, which can legally be owned only by foreigners.

The story seemed too sober and dry to contain the explosive message it did. By reneging on the more than one-hundred-billion-dollar debt owed to foreigners, the United States was definitively giving notice that the world monetary system—based on the U.S. dollar and the impeccable credit of the U.S. Government—no longer existed.

The failure of the United States to honor its debt was like Armageddon; it was the event signaling the end of the financial world. U.S. Government debt was the touchstone of the whole system of international credit, the top credit by definition. If the credit of the United States of America was not good, nobody’s was.

Drew could picture the consternation in executive offices and trading rooms around the world as the message flashed across screens and spurted from printers. Central bank governors who held the bulk of their country’s foreign exchange reserves in Treasury bills deposited with the New York Fed had to cope with the realization that these reserves were now worthless.

The measure represented the nadir of America’s sense of responsibility with regard to the world monetary system. In accepting the stewardship of that system after the war, by making the dollar’s link to gold the basis of the system, the United States had pledged to subordinate selfish national interests to the overall benefit of the world economy. Now it was announcing that national interest had ultimate priority. In order to protect its own banks, the United States was willing to scuttle the world monetary system.

Silence reigned in the newsroom, except for the ceaseless patter of the keyboard in the slot. Tom was looking pensively past his screen to the window on the far wall, where closed Venetian blinds kept the light out. Bart kept his eyes on his screen. The untended phones stopped buzzing.

“Gold is quoted at two thousand,” Drew said. The Fed shock had driven all the traders left in the market stampeding into bullion. The removal of the dollar as a reserve currency left gold alone as a reliable store of value. No matter how much there was after the hoax had been revealed, it was not enough to contain the hot money now desperate to get out of dollars.

Nobody wanted dollars now. Calling up the Morgenthorpe page on the trading screen, Drew saw that the British merchant bank was making its gold quotes in pounds sterling, at £700, which meant that the pound had already doubled in value against the dollar.

With no other alternative left, the market desperately was trying to get out of dollars and into gold. The question of whether or not the mine sabotage had been a hoax was rapidly becoming moot. The market right now was ready to buy South Africa’s full production for the next century.

The denial of the South African government finally came.

Pretoria Rejects Hoax Claim

Pretoria (fpa) — The South African government dismissed Western news reports that the sabotage of its gold mines was an elaborate hoax. A communiqué branded the reports as “malevolent propaganda.”

Although the official denial seemed almost irrelevant in the wake of subsequent events, Drew turned it around at urgent priority.

NINETEEN

Ron Sinclair hated to get up this early. Four hours was just not enough sleep.

He forced his eyes open, but only the darkness of his small barracks room greeted him. Outside it remained quiet. Sinclair lay still several minutes, savoring the silence. The last men had regained the surface only at eleven-thirty, and it was midnight before he had collapsed in his cot bed. The noise of the machinery still pounded in his ears.

It could not go on like this, he reflected. The men would start making mistakes, expensive, dangerous mistakes. He found himself forgetting things—the details of the operation he had always prided himself on.

He threw aside the blanket and shuffled over to the sink. The low-wattage bulb above the mirror blinded him as he switched it on.

Sinclair was a big man with a balding head and thick black hair on his chest and arms. At forty-two, there was not a trace of gray, but his undershirt outlined a belly swollen by twenty-five years of steady drinking.

Ron Sinclair was manager of the Witsfontein mine, one of the largest and most profitable mines in South Africa. He had gotten his first mine twelve years ago and was assigned to the Far West Rand just last year. Conditions had been difficult then. Since the “sabotage,” they had become nearly intolerable. The security restrictions and the ambitious production schedule created unbearable stress.

Sinclair had no assistant, which obliged him to personally oversee the mine when it was in operation. Now they were digging nearly eighteen hours a day to meet the production quotas assigned to them by Pretoria.

Sinclair squinted at his reflection in the mirror. He saw an unhealthy red through the slits of his eyes, surrounded by dark circles. A chalk-gray pallor gave his slack cheeks a ghoulish cast.

He rubbed his hand along his jaw. He could not go another day without shaving. He pawed around the sink until he found the lather. A runny cream came out of the nearly empty aerosol can. He smeared it thinly over the thick stubble and began pulling the dull razor down his cheek.