Gold Page 4

  If that meant dealing now with the Soviet Union, this is what he would do. White South Africans had little choice. The existence that gave Afrikaners their identity was imperiled. For decades, they had dutifully discharged the geopolitical role assigned to them—guarding the strategic sea lanes around the Cape of Good Hope and forming a bulwark against communism in the African subcontinent. And now they had been abandoned. Washington had yielded to short-term political pressures and undermined their very existence.

  A black girl brought in a tray with tea: British influence even in this Afrikaner stronghold, thought Abrassimov fleetingly.

  South Africa was the world’s largest producer of gold, and the Soviet Union the second largest. Soviet production trailed South Africa’s considerably, but not as considerably as Western experts thought. New discoveries in the Siberian tundra had been kept quiet, as well as the new mining technologies that enabled them to exploit the rich ore. For years the Soviets had stockpiled a sizable portion of their production, borrowing on the over-liquid Western financial markets instead of selling their gold at depressed prices. The West’s successful fight against inflation had halted the flight into gold, and the price stagnated at less than half the peak it reached after the oil shocks.

  The news of the terrorist strike in South Africa had changed all that overnight, reflected the deputy chairman of Vnesheconombank, the foreign trade bank of the Soviet Union. Now they could feed their stockpiles of gold to the panic-stricken market at triple yesterday’s price. He had come to discuss with du Plessis how long this price would hold.

  The improved situation gave him a deep secret satisfaction. He had been through a torturous hell for eighteen months after a crooked British trader at the Soviet bank in Zurich had defrauded the bank of millions on the gold futures market. The losses had wiped out the bank’s capital and forced Vnesheconombank to take over the unit, transforming it into a branch. Abrassimov’s career, and, he suspected, his life, had been on the line when he went to Zurich to sort out the mess. The Zurich manager had committed suicide. But now Abrassimov was going to claw back some satisfaction from those markets.

  As the two men talked in the first-floor office, Michael Mijosa crept from flowerbed to flowerbed along the driveway, digging up weeds as he went along. The black gardener had seen the Russian drive up and meet du Plessis. His information had been correct.

  Michael Mijosa had not looked up. He was invisible; it was his function. He had tended the Government Building grounds for more than fifteen years. For the past twelve he had been active in the underground. The Xhosa was one of thousands of members of the Azanian Liberation Front.

  That evening, at home in Alexandra, he would report to his ALF commander. The Russian had come, as they said he would. Now ALF could proceed to the final phase of their agreement with the Russians.

  ~

  Mark Halden sat down at his desk with a groan: 7:30 a.m. The president of the New York Fed had slept only four hours at the Princeton Club, his usual refuge when he worked too late to go home to Long Island. He had talked an hour ago to Hugh Roberts in Basel, just before the Fed chairman went back into conference with the Group of Ten central bank governors. Concern of course was great, but no one seemed panicky at the moment.

  It was a group of men inured to panic after the shocks of the past few years. They had teetered so long at the edge of the cliff without falling off that they began to think the law of gravity didn’t hold anymore.

  Halden sighed. Maybe they were right. Maybe some genius was about to come up with a new theory of economics that made sense of all this mess, a new physics for finance affirming that what went up must no longer come down. In the meantime, though, Halden knew he would continue to experience bouts of profound anxiety. His own studies, including a year at the London School of Economics while he was working on his dissertation, had been progressive enough at the time, but still imbued with classic precepts. Precepts like “You cannot make something out of nothing,” and “What goes up must come down.” Simple precepts.

  He shook off his pensiveness; he had work to do. The President’s statement from the White House the previous evening had been a typical virtuoso performance. The former television announcer told his television audience not to worry, the authorities had everything under control. The markets would remain closed for one day but would probably open again on Thursday. There was no need to panic, the President said. It was just a temporary market imbalance that would be straightened out very soon.

  The authorities had everything under control. Halden shifted in his seat. True enough for the moment, but could they continue to cope?

  Halden scrutinized the one-page memo on his desk. Poor Carol! The memo’s author, his chief international economist, probably didn’t get out of the building at all last night.

  The chronology started with “1538gmt.” (News agencies timed off in Greenwich mean time, five hours ahead of New York, where it would be 10:38 a.m.)

  1538gmt: Reuters, Dow Jones, WCN report London afternoon gold fixing. Price is steady at $347 an ounce.

  1600gmt: Reuters metals wire shows gold at $363, already a strong gain.

  1618gmt: WCN flash cites unconfirmed reports that terrorists have sabotaged South African gold mines.

  1655gmt: Reuters reports Pretoria’s confirmation of sabotage.

  1700gmt: Reuters shows gold price at $620.

  Halden studied the memo. They would have to find out from WCN what their source was. If it had not been for that flash, Pretoria could have delayed the news a good deal longer and given the central banks time to get ready. Halden had inquired yesterday afternoon at the State Department whether Pretoria had given them any notice. Of course they had not, or Halden would have heard of it right away. The president of the New York Fed was responsible for the markets.

  The Federal Reserve Bank of New York, with its thick slate-gray walls and barred windows, loomed up like a fortress in the financial district of lower Manhattan. It was the biggest of the twelve Federal Reserve Banks, which, ostensibly under the control of the Federal Reserve Board of Governors in Washington, constituted America’s central bank. The New York Fed had always been the executive arm of the Board, carrying out the operations decided each week by the Federal Open Markets Committee to control interest rates and money supply growth. New York also was responsible for intervening in foreign exchange markets in concert with other central banks to manage the rate of the dollar against other currencies. This task had increased enormously in significance since the historic decision in September 1985 when the United States reversed its earlier opposition to “managing” what were supposed to be free-floating exchange rates.

  But that was not all. The New York Fed was responsible for supervising the banks in its jurisdiction, which included seven of the nine biggest banks in the country. And the stock, bond, futures, government securities, and commodities markets that made their home in New York. And all the brokerage houses, investment banks, and dealers who operated in these markets. Propelled by the revolution in communications and the worldwide liberalization of financial markets, developments in New York had quickly outpaced the Fed’s ability to keep up with them.

  The phone remained blissfully quiet. Halden had asked his secretary to come in at eight, so he would at least have that formidable line of defense again. After the press conference yesterday, he had called in the heads of the commercial banks, brokerage houses, and investment banks for separate meetings. He wanted to get a picture of the markets and what was happening in the wake of the gold news. It was daunting. The sudden announcement had disrupted the balance the Fed had tried to maintain in the markets. The central bank had put out so many fires in the past few years, from Peruvian default to massive fraud in government securities trading. Who would have expected gold to shut down the markets? The massive flows of capital set in motion by news of the gold mine sabotage had simply been too big for the fragile structure of world finance to support.

  Then the qu
ick flight to Washington, the briefings at Treasury, the meeting in the White House. Halden had been one of the men with the President before his broadcast. He let Hugh Roberts do the talking, though. After the President’s speech, Roberts had boarded an Air Force jet for Basel, and Halden returned to New York for meetings with aides that lasted till 2 a.m. No chance to get back out to Long Island, but it was not the first time Halden had spent the night in town.

  Carol Connors was standing in front of his desk. Halden blinked. Evidently she had made it home. The tall brunette in front of him looked as fresh as though she were just coming back from vacation. Her muted lavender suit and pink blouse brought a welcome dash of color to the somber November morning.

  Not for the first time, Halden was a bit in awe at the woman he had promoted to chief of her section. The Fed had been relatively liberal in its hiring practices, particularly in the economics department. Carol’s place at the Fed had been firmly established by the time Halden came to New York: Princeton undergrad—Halden had noted with favor—Columbia School of International Affairs, followed by a doctorate and seven years of steadily increasing responsibility. A striking, graceful woman, Carol certainly did not fit any stereotypes about backroom drudges. Yet she had toiled long hard hours on tasks that often seemed thankless. With time, however, their accumulated impact had given her a solid reputation within the bank.

  The first reports she had prepared for Halden, on London’s Big Bang, the massive deregulation of the London stock market and its impact on dollar flows, had been brilliant. Halden had assigned her increasingly to the problems of the debt crisis. Not content with her written reports, he had conferred with her more often, asked her to sit in on top-level meetings, and even had her take part in the negotiations leading up to sessions with the Latin American ministers.

  Six months ago, Halden had made Carol the top international person in the economics department, a heady responsibility for a thirty-four-year-old, man or woman. It was a tribute to her professionalism and long years at the bank that, whatever murmurings there had been about her age, there were none about her sex—not even the usual innuendos about how she might have won Halden’s attention.

  “State didn’t have anything for us.” Carol’s question was really a statement.

  “No. Nothing. Just what you read in the newspapers. Pretoria still has given no details about the extent of the damage,” Halden replied.

  “There’s not much in the papers,” she said.

  Halden grunted. A three-line banner headline in the Times and reams of reporting that had pushed everything else off the front page but, yes, not really much in it for them.

  “The market started to move even before the WCN flash,” Carol continued. She had talked at length with the trading department in preparing her chronology. “We’re trying to track it down. London, obviously, but there may be a Middle East connection.”

  Halden reflected a moment. “Do you know the WCN people?” he asked the economist.

  “It’s a professional operation. They get the most out of what resources are allotted to them,” Carol answered. “It’s SBC, and you know their reputation for running a tight ship. The man in London responsible for the story is their managing editor, an Andrew Dumesnil.” As usual, Carol had done her research.

  Hearing the journalist’s name, Halden recalled a tall young man, thoughtful-looking, well dressed for a reporter. “I think I’ve run across him someplace. Was he with the FT before?”

  Carol shrugged. “He’s been in this job three years.”

  Halden paid attention to journalists. He made a point of stopping to talk with them when they chased him coming out of conferences. He would even sit with them in the bar of the Hotel Euler on those occasions when he went to the monthly BIS meetings in Basel. They sometimes had interesting gossip about his counterparts in Europe.

  Halden had a vague recollection of Dumesnil. It must have been during the older man’s brief stint at Treasury, as assistant secretary for international affairs. That post was almost a sine qua non to get anywhere in the Fed nowadays; more evidence of how tightly knit world finance had become.

  He always seemed to be going to Paris in those days. It was a favorite venue for the regular meetings of the so-called deputies of the Group of Ten countries, the number twos from the finance ministries and central banks of the ten largest industrial countries. There were the meetings of the Paris Club, where the same group of governments rescheduled their bilateral loans to Third World countries; the ministerial meeting of the Organization for Economic Cooperation and Development, which was headquartered in Paris; the Fontainebleau summit. The city’s luxury hotels, three-star restaurants, and passion for divertissement exerted an apparently irresistible attraction for the men who managed the world’s money.

  They were not personally wealthy, these men, but they controlled countless billions of official reserves and had the responsibility in the end for all the money in the world. A little foie gras, champagne, and a discreet visit to the Crazy Horse Saloon certainly was not too much to ask under those circumstances.

  Halden was no pinchpenny—his family had money, in fact. But he had wondered at times whether so many meetings were really necessary.

  He recalled Dumesnil now. An American working for the Financial Times, the legendary British business paper printed on pink stock. Halden would often hold a background briefing at the modest quarters of the U.S. delegation to the OECD in rue Franqueville, a more neutral location than the embassy on avenue Gabriel. Dumesnil would always attend, hanging back a bit, letting others get their questions in first. Then he would pinpoint an issue with a question that seemed obvious once he asked it, but that no one else had thought of. It was quite a talent. Halden wondered if he was always that good.

  “We’ll have to find out where they got the news from,” he said aloud. Carol only nodded; as usual, she had anticipated Halden’s curiosity. “I’ve got a call in to the Bank of England’s press people. We’ll have some more information about WCN and Dumesnil as soon as they get back from lunch.”

  Halden looked at Carol and nodded with a smile. “All right, then, let’s get down to the dealing room and see if we can get things sorted out.”

  ~

  Carol walked up to her third-floor apartment. No doorman or elevator for her. And the apartment was small, one bedroom, scarcely six hundred square feet. She made a good salary at the Fed, but Gramercy Park was expensive.

  She patiently found the keys for all three locks. Less patiently, Tiger began reprimanding her for arriving home late once again. She deposited the bulging briefcase—the real kind that lawyers use—in the hallway and attended first to the cat.

  Then she poured herself a glass of white Zinfandel and went into the darkened living room, sinking into the sofa and kicking off her shoes. She sat in semidarkness, with only the light from the kitchen, separated from the living room by a high bar.

  Carol sipped her wine, waiting for the mental numbness to pass. She realized she was exhausted but did not think about it. She never thought about it; she only thought about what she wanted to do.

  She had always known what she wanted to do. But she never thought much about why.

  Back in high school, in Plainview, New Jersey, she already had set her goals. When other pretty girls—Carol always knew she was pretty—had become cheerleaders or drum majorettes, Carol had studied, studied hard. She achieved the highest grade point in her class, became valedictorian, and won a scholarship to Princeton. Again, she studied hard, graduating magna cum laude in economics.

  Then came Columbia, the master’s degree in International Affairs and the doctorate. Banks had begun scouring the Ivy League graduate schools for bright young men and women to spearhead their burgeoning international business. Carol had been invited to four second interviews, and some heady salary figures had been waved at her.

  But she didn’t hesitate in choosing the Fed. She knew it was drone work, compiling and analyzing dry statistics
. Not the glamour of jet planes, exotic capitals, and luxury hotels that lured so many of her classmates into banking, not even the promise of six-digit salaries that enticed others into Wall Street. She wanted to be at the center of power, and the Fed was the center of power.

  Then there was Rick. They had been at Princeton together. He went to Columbia Law School. He took a job with a big corporate law firm. They got married.

  It had been easy, easier even than not getting married. And it had worked out fine. She liked Rick. Their relationship in bed was uneven, but Rick was bright and appreciated what she was doing.

  They had friends, many, like themselves, professional couples. They had less and less time for these friends as work made increasing demands. Then they had less and less time for each other. Then Rick wanted children.

  Carol said no.

  She would never forget the confrontation in the kitchen. It was a sultry July night. The apartment on Central Park West was air-conditioned, but the unrelenting heat and humidity of a Manhattan summer had put everyone on edge. Rick was already upset that they were not in the Hamptons. An emergency at the Fed had sabotaged their plans for a long weekend with two other couples.

  Carol had pleaded with Rick to go without her, but he was too proud to be odd man out.

  By Sunday night Carol still had several thick files spread out over the kitchen table. The large apartment had a study, but that belonged by silent consent to Rick.

  Rick stood in the kitchen door. He had been fidgeting all day long.

  “Any ideas for supper?”

  Carol, immersed in the intricacies of an adjustment in the European currency snake, did not look up. “I’m not very hungry right now,” she said, preoccupied.