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Product Details
| ISBN-13: | 9780486828114 |
|---|---|
| Publisher: | Dover Publications |
| Publication date: | 11/14/2018 |
| Pages: | 240 |
| Product dimensions: | 5.40(w) x 8.40(h) x 0.60(d) |
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CHAPTER 1
The president of the United States did not suffer from such disadvantages of birth. He claimed both Irish and Jewish blood, a contention which, though never proven, was of itself sufficient to carry New York State regularly for his party. Sceptics pointed out that the man was neither rich nor drunk very often. The behaviour of his crony and secretary of the treasury, Henry Crosby, they said, was much more in keeping with such ancestry; he never refused a drink, and he had been the roughest and thus most successful banker in the history of Ohio before assuming public office. What was proven was that these two men represented as potent a political pair as Washington had seen in many a year. Henry Crosby's brash imagination, tempered by the president's cool judgment, was known to be the source of most of the administration's successful policy innovations.
Their connection with Sammy Bechot? None, of course. Except for the fact that it was a meeting between Crosby and the president which had led to the creation of that ominous dossier with the red cover. It had happened on September 29. That morning Crosby had burst into the presidential office for their usual ten o'clock appointment and, unilaterally waiving all greeting formalities, exclaimed:
"Those bastards in Rome are out to screw us. And by God, this time I think they're going to get away with it!"
"Henry," replied the president, "take a seat and take it easy. What problem could we possibly have with the Italians that could get you into such a state?"
"Italians, hell," replied Crosby, "It's the Germans, the Japs, and of course those fuckin' Frenchmen."
The president's eyebrows rose but he did not appear unduly alarmed. For he realized that Crosby had a thing about most foreigners and that his lack of appreciation of offshore cultures was absolute where the French were concerned. The origin of this, as the insiders knew, had been a dinner party in San Francisco back in the fall of 1957, given in honour of visiting General Charles de Gaulle. The Midwestern banker Crosby, liked for his money if not for his manners, had been included among the guests summoned by the Western Establishment. Not one to pass up an opportunity, he had broken into a circle of people conversing with the great man during the preliminary cocktails to inquire about the future of what he had termed "the eternally sick French franc."
The general had first blessed him with the iciest of stares, then had spoken to the aide at his side: "Qui a fait entrer ce cochon ?"
Then he had turned and strode across the room. The rather pronounced lull in the conversation which he left behind had been first broken by the startled Crosby: "What'd he say?"
A refined lady from Atherton, who obviously felt a closer spiritual affinity to Colombey-les-deux-Eglises than Columbus, Ohio, offered a translation: "Monsieur le general inquired," she said, "'who let that pig in?'"
After that Crosby's views on France were something less than strictly objective and everybody in Washington knew it. With this obviously in mind the president said, "Henry, surely you're overreacting. But to what is still a total mystery to me."
Crosby, by now seated, seemed to have regained control of his emotions and answered, "Mr. President, you know that the annual meeting of the International Monetary Fund is taking place in Rome this week. Well, some of our so-called friends there have decided to gang up against the dollar. They plan to present us with a fait accompli."
Now the president's face did cloud over. The monetary issue, and the international weakness of the dollar, had been plaguing him ever since he had taken office. The problem had become critical with the breakdown of the gold-dollar link which had occurred in 1971. Until that time the world's monetary system had functioned reasonably well. Under the rules established at the close of World War II when the IMF was founded, each nation had related its currency — marks, yens, francs, pesetas — to the U.S. dollar. Thus one Swiss franc had been "worth" about 23 cents, one German mark approximately 28 cents, and so forth. Everyone agreed that the dollar was the natural benchmark for all other currencies. For one, it was the currency of the largest and most powerful economic unit in the world. For another, the dollar was the only currency which was officially and directly tied to that most ancient medium of exchange and store of value — gold. Since 1934, by law, one U.S. dollar was worth 1/35 of an ounce of gold. The United States had declared to one and all throughout the world that any foreign government which wanted to cash in dollars for gold, or vice versa, could do so at the rate of $35 per ounce.
All this was very agreeable, since it meant that everybody in the world could look toward one standard of value, the American dollar. And for those really sticky types who did not especially hanker for newfangled money, there was always the ultimate comfort that if not they, at least their governments, could always get the real thing — gold.
In August 1971 this thought occurred to some of the more tricky Europeans who suspected that the dollar was getting a bit dicey. So they decided to opt for gold. The Belgians, the Swiss, the French of course, and even the Vatican. As you can imagine, this moment was more than just slightly awkward for the United States. How could it pay off over $65 billion in debts, when there was only $10 billion of gold left in Fort Knox?
The president's advisors came up with what appeared to be a clever solution. The United States simply announced that the dollar was no longer convertible into gold. As simple as that. Payment was just stopped on all those IOUs which the United States had been issuing to the world in the form of dollar bills for many years past. Having done that, the American government proceeded to tell other nations that it was up to them collectively to find a solution to the world monetary crisis. A few months later the finance ministers of the eleven most powerful nations in the world met in Washington for just that purpose. But as so often before, the wise men of the world played midwife to a mouse. European governments and Japan agreed to revalue their currencies by a few percentage points if the United States devalued the dollar a few percentage points by raising the price of gold from $35 to $38 an ounce. With great pomp and ceremony at the Smithsonian Institution an agreement to this effect was signed, and with a huge sigh of relief the world went back to work as usual.
But there was an extremely serious flaw in the entire Washington settlement, which the U.S. president termed the greatest monetary agreement in the history of the world. It solved nothing. The dollar remained greatly overvalued. Convertibility of the dollar into gold was not restored. It could not be restored at $38 an ounce. If it had been, within hours the entire $10 billion worth of bullion in Fort Knox would have disappeared into the hands of foreign governments. The fact remained that there were still 65 billion unwanted dollars floating around the world, with more going out all the time, which anybody in his right mind would have exchanged for U.S. gold with the speed of light at the price of $38 an ounce. For the free market price of gold was moving inexorably toward $80 an ounce!
Inevitably, new crises occurred. In February of 1973, as a result of yet another run on the dollar, Uncle Sam had no choice but to devalue again, by raising the official price of gold to $42.22 an ounce. But, as before, it was just a temporary patchwork job. The dollar was still not convertible; it was still overvalued.
So the malaise lingered on — until the IMF meeting in Rome.
"Henry, what precisely happened?" asked the president.
"Well, I sent my undersecretary to the meeting with the usual instruction. Just keep the lid on. Do nothing, promise nothing. Stall. Tell 'em we're working on it."
"Which he did, I suppose."
"Of course. And in the public sessions everyone could not have been more sympathetic toward our position. They all agreed that time would heal."
"So?"
"So behind this public smokescreen, the French in their usual underhanded fashion, worked out a deal."
"Go on."
"The French first got to the Germans and convinced them that the time had come for the Common Market to take charge of the world monetary system. Together they bullied the rest of the member countries into going along with the plan. The Japs, our great friends in the East, got wind of it and joined the club immediately."
"And their plan?"
"They will jointly tie their currencies directly to gold. At a higher price, of course. And all their currencies will be freely convertible into gold. Now you know what that means for us."
"That the dollar becomes a satellite currency."
"Right. In about the same class as the Polish zloty."
"Those dirty bastards."
"I've been telling you that for years."
"All right," responded the president, now irritated, "but first tell me how you know all this."
"Our man in the German Ministry of Finance. He was asked to help work out the draft agreement. I've got it here. And as you'll see, it's already been initialled."
Crosby reached into his briefcase and produced a bundle of Xeroxed documents.
"There can be absolutely no doubt of their authenticity."
"O.K., Henry," said the president, after taking just a cursory glance at the papers. "I believe you. What's their timing?"
"On January 2 they'll be making a joint announcement from Paris. They plan to make the whole thing operational immediately the next day."
"But how in the world do they expect to get away with it? Surely they must realize that we will hear of this?"
"They probably do. But they figure, and correctly so, that they've got us over a barrel."
"But are we? I'm not so sure," said the president.
"What do you mean? You know as well as I do —"
"I know this: I'm not going to let the dollar become the laughingstock of the world. I'm not going to let Europe and Japan take over the international monetary system at our expense. God knows what they'll try to take over next."
"But how?"
"Quite simply. We'll make a pre-emptive strike. We'll put the official gold price right up to $125 an ounce and simultaneously return to full dollar-gold convertibility. And well before January 2."
"But," reasoned Crosby, "what will we do if there's a run on gold? There are by now $75 billion out there that would become potentially convertible. I hardly need remind you that our gold supplies —"
"Look, Henry," said the president, "Franklin Roosevelt was in the same position in 1934 when he raised the gold price from $20.67 to $35 an ounce. But he figured that the new price would attract a lot more sellers than buyers. And that's exactly what happened. On dollars you can earn interest, good interest. On gold you cannot."
"Yes," said Crosby, "but the problem will be the speculators."
"I disagree," replied the president. "Look, it's now more than forty years since Roosevelt made that last big hike in the price of gold. You can be damn sure that when I announce this I'll let the world know that I do not expect another change will be necessary before the year 2000."
"Mr. President," said Henry Crosby, "you've got it! Goddammit, you've really got it! And everybody thinks you're some kind of a nitwit where economics is concerned. Brother, I would just love to see the faces of those Frenchmen when they hear about this!"
"Well, you can be sure they're not going to hear about it until I go on TV to announce it. Henry, this thing has got to be kept totally and absolutely secret right up to the last minute."
"I know. That could be a problem since it's still going to take time to work out all the details. In fact, Mr. President, I think that while you're at it, you should go one step further. Put gold up to $125 an ounce, yes. But also devalue the dollar by another 15 percent against other currencies. Those guys keep yapping about the dollar being overvalued, about our balance of payments always being in deficit, about having to swallow more and more dollars. Look, if we devalue by that much we'll be able to outcompete almost every nation on earth again. Even the Japs. As long as we're doing it, we might as well go all the way. Hell, all this should go over great with the voters. You'll be restoring America's leadership of the free world, protecting American jobs, putting the country back on the road to prosperity, restoring the position of the dollar to its rightful place as the currency not only of the United States but of the entire world!"
"Henry," said the president drily, "let's not get carried away. But you're right. As long as we're taking the plunge, let's do it right. Now how much time do you think we'll need?"
The two men discussed the matter for another two hours and finally decided that D day would be Saturday, November 8. The announcement would come on the evening of November 7, after the banks had closed.
During the next few weeks the plan was duly put to paper and five copies only were made, each bound in top-secret red. The White House pair, now complemented by the secretary of state and the chairman of the Federal Reserve Board, decided to bring a fifth man into the plan. He was the secretary-general of the Bank for International Settlements. You probably have heard relatively little about this bank. Yet, next to the IMF, it is no doubt the most important institution in the whole complex network of the international monetary system. It acts as the central bank for the world's central bankers.
It is, for example, the Bank for International Settlements — known as the BIS in professional circles — which, when the pound sterling or the Italian lira periodically comes under pressure, massively intervenes to prevent a blowup. When everybody else is selling, the BIS is buying, and vice versa. It has almost unlimited funds available for this purpose from its owners. For its owners are the major central banks of the world, ranging from the Bank of England to the Swiss National Bank to the National Bank of Hungary. Most important from Washington's standpoint, during every currency crisis since 1971 the BIS has provided major and consistent support to the dollar. It was a friend in enemy territory.
The cooperation of the BIS, and especially its secretary-general, would be absolutely necessary to restore international order after the first major gold price increase in over forty years. Such an event could trigger a tidal wave which would rock every financial market on earth.
It was decided that U.S. Secretary of the Treasury Henry Crosby should brief BIS Secretary-General Bollinger in a private meeting. Discreetly. If Crosby turned up in Basel, the home of the BIS, it might start speculation. It was agreed that London would be better.
A very brief transatlantic phone call and the date was fixed. Four in the afternoon of October 16, at the Savoy.
CHAPTER 2On that same October 16 Dr. Walter Hofer landed in London on Swissair flight 168 from Zurich. It was shortly after seven in the evening. He hurried through the long corridors after leaving the plane, trying to beat the mob to the immigration desks. This was not all that easy for Dr. Hofer since he had unusually short legs. He would never forgive his Creator for this, perhaps deliberate, slight.
Everything else regarding Dr. Hofer was perfect. Impeccable clothes, silver grey hair, perfectly manicured hands; a face which reflected intelligence, culture, wisdom. And a bearing which obviously set him worlds apart from the thousands of others who were also striving toward English soil at this moment.
Hofer was most aware of the "otherness" of himself. His position as chairman of the board of the second largest bank in Switzerland demanded it. He regarded his post as not just a job, but rather a calling. There was little doubt in his mind that his role had been long foreordained by that Power which had seen fit to extend an especially benevolent hand over the people, and especially the currency, of his country.
The rather grubby immigration official gave him a practiced look of disdain which, however, changed into what might even have passed for a slight expression of respect when he noted the profession listed in Hofer's passport.
"On business, sir?" This was only the second "sir" that month, a privilege reserved for quite special occasions.
"Of course," replied Dr. Hofer. He seemed quite unaware of the honour being bestowed.
After ten impatient minutes at the baggage carousel and a wave of the hand from the customs official, Dr. Hofer was once again back in the hands of private enterprise.
"Your car is right outside, Herr Doktor." The manager of the local branch of Hofer's bank was blessed with a central European handshake — firm but correct — and delegated the responsibility of carrying Hofer's overnight bag.
(Continues…)
Excerpted from "The Billion Dollar Sure Thing"
by .
Copyright © 1973 Paul E. Erdman.
Excerpted by permission of Dover Publications, Inc..
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