Gold (10 page)

Kraml reached his trading high very quickly. Juggling the half-dozen phone receivers snaking out from his terminal, two or three of them dangling over his shoulders he made the lightning calculations in his head while the three screens in front of him flashed a steady stream of information and prices.

When London came on, the pace quickened. Kraml’s instincts, so in tune with the market, made him realize that something peculiar was happening with the gold trading. He had the feeling that Blacky was not responding to the market but controlling it. The price was rising steadily, but apparently at the pace and with the volume that Blacky wanted. He sat there, imperturbably chomping on his cigar, constantly on the phone, working his console to feed prices to his dealers.

Where was he getting all the gold? Kraml wondered. The trader knew that he at least was not talking to any sellers; Bahrain and Kuwait were flooding the market with buy orders.

The morning went by quickly, never hectic but always busy. Things finally let up a bit as the market waited for the morning fixing in London. Blacky talked to the London man about their strategy in the price-setting session and quickly ducked out when Marcus appeared at the door, leaving Frey, the usual chief trader, in charge.

Kraml decided to break for a quick coffee. Rounding the corner to the canteen, he passed Marcus and Blacky flanking a third man, gray-faced, who was wearing a heavy coat and broad-brimmed hat. Not too many visitors came to Zug, but Kraml didn’t think much about it until he heard the voice of the stranger. Kraml could not make out the words, although he could tell the language was English. What struck the Austrian was the accent— the unmistakable nasal monotone of a Russian. Like most of his compatriots, Kraml felt an antipathy to the Russians for their long postwar occupation of Austria.

Kraml resisted the urge to turn around and watch the trio. After all, Marcus always had some deal brewing; Kraml just hoped he would not have too much to do with the Russians.

Back at the desk, Frey called out to him, “Personal call.” Kraml punched the lighted button.

“Hello, Drew, how goes it?” he said when the journalist identified himself. The two of them had gotten to be fairly close in London, but Kraml felt ambivalent about taking this call. He was still uneasy in his new situation; he felt self-conscious and was worried about giving something away.

“Market’s steady enough. Busy, not hectic,” he said in response to Drew’s questions.

“Sellers? Somebody’s selling, I guess,” he said. “We seem to be getting some supply, yeah, but I’m not on the buying side.” Drew was getting insistent. “No, I don’t really know where it’s coming from, probably a bit from all over.” He didn’t really know, but the buying was coming from all over so he didn’t think the selling was from all over. It was hard for him to dissemble with Drew; they had closed many a pub in London.

Kraml suddenly thought of the Russian in the corridor. He bit his tongue not to blurt out the news to Drew. But the journalist’s next question threw him off balance.

“Well, yes, I suppose it’s possible the Russians are selling,” he responded, probably too quickly. “But I haven’t seen anything myself.... Marcus does have some connections with the Russians, I think, yes,” he conceded, under a barrage of questions from the journalist.

“Look, Drew, I’ll keep my ears open, and let you know what I find out. It’s a promise, OK? But it’s really busy now, and I have to get back to work.” He rang off quickly.

Was Blacky getting all that gold from the Russians? As Kraml puzzled over the problem, Marcus’s sidekick returned. The trader turned to catch a last glimpse of the gray-faced man standing at the dealing-room door for a moment before he moved away. Kraml was certain the man was Russian. But how much gold could the Russians have?

~

Even at this time of year, Miami seemed steamy from the humidity. Halden didn’t visit Florida’s biggest city often, and the vaporous air always surprised him. The palm trees looked limp under the overcast sky; the heavy warmth was oppressive rather than refreshing after New York’s cold and damp.

The limousine sent by Southern Bank passed several construction sites on the road in from the airport. Would the building never stop? The central banker grunted; Miami’s prosperity seemed to wax and wane in inverse proportion to Latin America’s financial problems. Even without the statistics to prove it, Halden could not help sharing the view that much of the money missing in the big debtor countries had found its way across the Gulf.

The driver pulled into the U-shaped drive off Ocean Boulevard, and Halden got his first view of Southern Bank’s massive new skyscraper. He shivered slightly in spite of the humid warmth as he stepped out of the Cadillac. The gold-tinted glass of the fifty-six-story building shone against the leaden sky. The bank now dominated Miami’s skyline. The slight feeling of terror he always felt at the thought of interstate banking welled up as he tilted his head back to take in the building’s size. He was afraid of the power one bank could accumulate if it was free to stretch its tentacles across the entire country. On his last visit to Miami, the headquarters of what had become the third largest bank in the country had still been a construction site too.

Carol, who had taken an earlier plane to prepare the meeting, came out to meet Halden at the car.

Inside the huge atrium of the front entrance, Halden met a delegation from the bank headed by Hugh Vane, the chairman. Between the grinning Vane’s white teeth and white hair, his skin had the odious brown of a suntan that never faded. Halden had never reconciled his notions of hard work with the Sun Belt lifestyle. At least no one in the Southern Bank group was wearing white shoes.

The executive elevator rocketed them up to the conference rooms at the top floor. Halden felt palpable relief as José Martinez broke off from the group of men at the top to greet him with his big, warm smile. This time Halden’s own smile was genuine. The two men shook hands and clasped each other’s arms with real pleasure. Since Wagner’s ouster, they had learned to rely on each other in the endless round of conferences to resolve the debt issue.

The Mexican, who had held on as his country’s finance minister through the difficult series of reverses over the past few years, took Halden by the arm to greet the finance ministers of Brazil, Argentina, Venezuela, and Peru. The American knew them all but rarely saw them as a group.

“Thank you for coming, Mr. Halden,” said Carlos Angouros, the Brazilian, who had called him the previous night. His voice betrayed a genuine relief. Halden did not tower over the others as Wagner had, but his muscular physique instilled immediate confidence when he walked into a room. The central banker had earned a high regard among the debtor countries for an intellectual toughness that fully matched his physical appearance.

The markets had reopened as planned this morning. Gold had moved steadily upward, although Tuesday’s panic had abated. Shutting down the markets had worked like a cold shower to calm the incipient hysteria. The gold stampede already showed some signs of petering out, but markets remained jittery.

One sign of the uncertainty was the desperate lack of liquidity for the Latin American debtor countries. That was why Angouros had called Halden for this impromptu meeting in Miami. “Let’s get started,” said the Brazilian, leading the group of ministers and central bankers into the conference room. Vane and his courtiers smiled as they backed into the elevator. They were glad to offer their premises for the meeting, but that was to be the extent of their involvement.

“It’s the interbank lines again,” Angouros said immediately, referring to the short-term funds banks lend each other. “And this time it wasn’t only us who got hit.” His colleagues quickly buzzed affirmation.

“We really must do something, Mark,” Martinez said when the hubbub subsided.

Halden hunched up in his chair, which offered a view of the Atlantic horizon. Yesterday and the day before, he had put up $2.5 billion in emergency loans to tide over the Banco do Brasil and certain other Latin American banks after the big international banks had withdrawn all their interbank lines. One of the great fictions maintained in the wake of the debt crisis that Mexico had set off in 1982 was that these interbank lines were temporary and short-term. The fact was that the funds, amounting to hundreds of millions of dollars, had to be maintained at certain levels to keep up the illusion of sovereign solvency. If the New York Fed had not been there yesterday to tide over the Banco do Brasil, the reality of bankruptcy might have overtaken the bank, and Brazil as well. Can a country go bankrupt? Even Halden wondered.

The interbank lines were not included in the multibillion-dollar debt reschedulings agreed to by the banks and the debtor countries. Nonetheless, there was a clear understanding that they had to be maintained—clear at least until panic clouded the minds of the creditor banks.

“What do you suggest?” Halden said. He had spent more than an hour the previous evening on the phone to bank chairmen, twisting their arms to reopen the lines to the Latin American banks. His efforts had reduced the Fed bailout from $1.5 billion on Tuesday to $1 billion by Wednesday night.

“Would it be possible for the Fed to install an automatic safety net for situations like this?” Martinez asked. It was an idea he and Halden had discussed over many a late-night drink. Halden knew it would come to this sooner or later, anyway. Whether the bailout was automatic or ad hoc, it always came down to the Fed putting up the money. The Fed, the great, powerful, magical Fed—Halden sighed in frustration at the blind confidence placed in his imperfect institution. Even the Fed could not simply print money without paying the consequences. Angouros was listing the advantages of this new plan, parroting without knowing it the arguments Halden and Martinez had long since made.

The gold crisis threatened to light the fuse of the debt powder keg. As Halden listened, a profound sense of futility came over him. The alarming suddenness of the gold mine sabotage threatened to topple the hodgepodge of arrangements and agreements cobbled together in the past few years to avoid the worst consequences of the overwhelming Third World debt. The shock of the sabotage shook that fragile structure with more force than it could bear.

Halden had been a football player at Princeton, a middle linebacker. His was the duty to follow the offensive play, to back up the front line and plug the holes to keep the ball-carrier from crossing the line of scrimmage. It had been a good preparation for his Fed duties, as it turned out.

But his feeling of impotence grew. What if the safety net were put in place? That would not remove the debt. It would remain there, like a sleeping dragon, waiting for the next financial crisis to wake it up and unleash it on a vulnerable world. The only answer would be to slay the dragon. But how?

In the meantime, he would go along with the aid sought by the anxious politicians around the table. It was no solution, but as much of a solution as anything else for right now. Fed chairman Roberts could not say anything against it. Halden sat back, though. He would let the Latin Americans convince him for a while—his Delta flight to London didn’t leave until
4
p.m
.

FIVE

Drew sat fidgeting in his office. The conversation with Kraml had left him confused, but he hesitated to make too many phone calls. The market was brooding, and no question was innocent.

He jumped up and walked through the office, calling to Tom that he would return shortly. Coming out to Fleet Street, he made two rights, into a narrow lane. Without pausing, he walked one hundred yards briskly and stepped into the Cock and Bull, his regular pub.

It was nearly 3 p.m., and most of the lunch crowd had already drifted away. Drew ordered a pint of bitter. The barman, Ralph, had a friendly smile on his face, but Drew put on a preoccupied look to discourage conversation. He was not in the mood for idle chatter.

The journalist retreated with his pint to the corner of the padded bench lining one side of the pub.

The Russians. What could they be up to? Kraml had sounded edgy on the subject. What connection did Marcus have with the Russians? Presumably, Marcus had connections with just about everyone who traded commodities, which made Kraml’s remark even more curious. The trader had been affirming the connection, as though he himself had just received confirmation. Something seemed to be going on in Zug.

Whether Zug was the missing link or not, there was simply too much gold in the market. Kraml had been uncharacteristically evasive about gold selling. Drew needed to see the Austrian in person, to have a talk more private than international phone lines permitted.

Even if the Russians had been stockpiling gold, which ran counter to all analyses of the gold market, could they be selling enough to compensate for the sudden loss of the South African production?

Drew mulled over these questions. Could South Africa, or some South African firm like Anglo American, be unloading stockpiles of gold? But Preston would have told him if Anglo was thought to have that amount of gold.

The panic had sharply increased demand for gold, and the price had shot up correspondingly. Now the price was stable. Was there a limit, after all, to gold demand, panic or no panic? Or was there a large supply source that was meeting demand at this higher price level?

The amount of trading going on, in fact, was only slightly short of the normal volume in bullion. It was almost as if, aside from the higher price, the mine sabotage had not taken place.