Gold (5 page)

Abrassimov walked with du Plessis and his two aides around the pillared half-circle and into the courtyard of the east wing. Du Plessis led them up the wide stone staircase, explaining that the office was just on the first floor.

The half-closed shutters kept the high-ceilinged room dim, but that suited Abrassimov better than the bright sunlight outside. Du Plessis indicated one of the worn leather armchairs at the table opposite the desk.

“My colleague from Foreign Affairs was kind enough to loan us his office,” began du Plessis, taking the second chair. The two aides, one very young and the other somewhat older than du Plessis, sat discreetly to one side in straight-backed chairs. “We thought it would attract less attention to meet up here.”

Abrassimov said nothing. He had met Andreis du Plessis just once before, at the Soviet embassy in London. A plain, trim man in his early forties, du Plessis exuded sobriety.

These were sober days for the director general of the South African Finance Ministry. More than ever, the country depended on gold. South Africa owed its wealth to the rich deposits encircling Johannesburg. The white rulers had exploited the natural resources and the cheap black labor to create a standard of living unparalleled on the African continent and equal to that of the wealthiest Western countries—for the whites. But generations of ruthless oppression had caught up with them. Economic development had compelled them to bring more blacks into the cities, to pay them higher wages, to train them. And now the blacks were no longer willing to play the proletariat; they wanted a greater share of the wealth.

Pretoria’s intransigence in the face of this demand had isolated the country. An economic and financial boycott had crippled South African industry and threatened the basis of that comfortable world the whites so much wanted to keep.

The only exception was gold. Nobody boycotted gold. Middlemen with massive sources of finance bought and sold gold regardless of political resolutions or financial withdrawal. There was no right or wrong, moral or ethical, when it came to the dull yellow metal yielded by the bowels of the Rand.

So now gold was everything for South Africa. It alone could finance the premium prices for the clandestine imports desperately needed to maintain a skeletal industry and basic consumer requirements.

Du Plessis was not a fanatic. Trim, with thinning hair, wire-rimmed glasses suiting his bureaucratic mien, and a Huguenot chin, the veteran number-two had been a familiar and widely respected figure in international financial circles. Before South Africa suspended its debt payments in 1985 and then imposed martial law, he had been invited regularly to business conferences, a peer discussing the course of world finance. But he was also an Afrikaner. The time for debates, for equivocation, was past.

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 quick 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.