by Tom Clancy
The business day started in Central Europe at ten o'clock local time, which was nine o'clock in London, and a dark four o'clock in New York. That made it six in the evening in Tokyo after what had been at first an exciting week, then a dull one, which had allowed people to contemplate their brilliance at the killing they had made.
Currency traders in the Japanese capital were surprised when things started quite normally. Markets came up on-line much as a business might open its doors for customers waiting outside for a long-awaited sale. It had been announced that it would happen that way. It was just that nobody here had really believed it. As one man they phoned their supervisors for instructions, surprising them with the news from Berlin and the other European centers.
At the New York FBI office, machines wired into the international trading network showed exactly the same display as those on every other continent. The Fed Chairman and Secretary Fiedler watched. Both men had phones to their ears, linked into an encrypted conference line with their European counterparts.
The Bundesbank made the first move, trading five hundred billion yen for the current equivalent in dollars to the Bank of Hong Kong, a very cautious transaction to test the waters. Hong Kong handled it as a matter of course, seeing a marginal advantage in the German mistake. The Bundesbank was foolish enough to expect that the reopening of the New York equities markets would bolster the dollar. The transaction was executed, Fiedler saw. He turned to the Fed Chairman and winked. The next move was by the Swiss, and this one was a trillion yen for Hong Kong's remaining holding in U.S. Treasuries. That transaction, too, went through the wires in less than a minute. The next one was more direct. The Bern Commercial Bank took Swiss francs back from a Japanese bank, trading yen holdings for them, another dubious move occasioned by a phone call from the Swiss government. The opening of European stock markets saw other moves. Banks and other institutions that had made a strategic move to buy up Japanese equities as a counterbalance to Japanese acquisitions in European markets now started selling them off, immediately converting the yen holdings to other currencies. That was when the first alarm light went on in Tokyo. The Europeans' actions might have appeared to be mere profit-taking, but the currency conversions bespoke a belief that the yen was going to fall and fall hard, and it was a Friday night in Tokyo, and their trading floors were closed except for the currency traders and others working the European markets.
"They should be getting nervous now," Fiedler observed.
"I would," Jean-Jacques said in Paris. What nobody quite wanted to say was that the First World Economic War had just begun in earnest. There was an excitement to it, even though it ran contrary to all their instincts and experience.
"You know, I don't have a model to predict this," Gant said, twenty feet away from the two government officials. The European action, helpful as it was, confounded all computer models and preconceptions.
"Well, pilgrim, that's why we've got brains and guts," George Winston responded deadpan.
"But what are our markets going to do?"
Winston grinned. "Sure as hell we're going to find out in, oh, about seven and a half hours. And you don't even have to shell out for the E-Ticket. Where's your sense of adventure?"
"I'm glad somebody's happy about this."
There were worldwide rules for currency trading. Trading stopped once a currency had fallen a certain amount, but not this time. The floor under the yen was yanked out by every European government, trading didn't stop, and the yen resumed its fall.
"They can't do that!" someone said in Tokyo. But they were doing it, and he reached for a phone, knowing even then what his instructions would be. The yen was being attacked. They had to defend it, and the only way was to trade the foreign-currency holdings they already owned in order to firm the yen holdings back home and out of the playing field of international speculation. Worst of all, there was no reason for this action. The yen was strong, especially against the American dollar. Soon it would replace it as the world's benchmark currency, especially if the American financial markets were foolish enough to reopen later in the day. The Europeans were making a sucker bet of such magnitude as to defy qualification, and since it didn't make sense, all the Japanese traders could do was to apply their own experience to the situation and act accordingly. The irony of the moment would have been delicious, had they been able to appreciate it. Their actions were virtually automatic. Francs, French and Swiss, British pounds, German D-marks, Dutch guilders, and Danish kroner were disbursed in vast quantities to purchase yen, whose relative value, everyone in Tokyo was sure, could only appreciate, especially if the Europeans pegged their currencies to the dollar.
There was an element of nervousness to it, but they did it, acting on the orders of their superiors, who were even now leaving their homes and catching cars or trains to the various commercial office buildings in which world trading was conducted. Equities were traded off in Europe as well, with the local currencies converted to yen. The expectation again was that when the American collapse resumed, the European currencies would fall, and with them the values of stock issues. Then Japan could reacquire even larger quantities of European stocks. The European moves were a sad case of misplaced loyalty, or confidence, or something, the people in Tokyo thought, but sad or not, it worked in their favor. And that was just fine. By noon London time a massive movement had taken place. Individual investors and smaller institutions, seeing what everyone else had done, had moved in—foolishly, the Japanese knew. Noon London time was seven in the morning on America's East Coast.
"My fellow Americans," President Durling said at exactly 7:05 A.M. on every TV network. "On Wednesday night I told you that today American financial markets are going to reopen…"
"Here it goes," Kozo Matsuda said, just back in his office and watching CNN. "He's going to say that they can't, and Europe is going to panic. Splendid," he told his aides, turning back to the TV. The American president was smiling and confident. Well, a politician had to know how to act, the better to lie to his citizens.
"The problems which the market experienced last week came from a deliberate assault on the American economy. Nothing like this has ever happened before, and I am going to walk you through what happened, how it was done, and why it was done. We've spent an entire week accumulating this information, and even now Treasury Secretary Fiedler and the Chairman of the Federal Reserve Board are in New York, working with the heads of the great American financial institutions to set things aright.
"I am also pleased to report that we have had the time to consult with our friends in Europe, and that our historic allies have chosen to stand with us as faithfully in this time of difficulty as they have in other times.
"So what really happened last Friday?" Roger Durling asked. Matsuda sat his drink down on his desk when he saw the first chart appear on the screen.
Jack watched him go through it. The trick as always was to make a complex story simple, and that task had involved two professors of economics, half of Fiedler's personal staff, and a governor of the Securities and Exchange Commission, all working in coordination with the President's best speech-writer. Even so, it took twenty-five minutes, six flip charts, and would require a number of government spokesmen talking who were even now on background to reporters whose briefings had started at 6:30.
"I told you Wednesday night that nothing—nothing of consequence had happened to us. Not one piece of property has been affected. Not one farm has lost anything. Each of you is the same person you were a week ago, with the same abilities, the same home, the same job, the same family and friends. What happened last Friday was an attack not on our country itself, but on our national confidence.
"Our confidence is a harder and tougher target than people realize, and that is something we're going to prove today."
Most of the people in the trading business were en route to their offices and missed the speech, but their employers had all taped it, and there were also printed copies on every desk and at every
computer terminal. The trading day would not start until noon, moreover, and there were strategy sessions to be held everywhere, though nobody really had much idea of what to do. The most obvious response to the situation was indeed so obvious that no one knew whether or not to try it.
"They're doing it to us," Matsuda said, watching his screens. "What can we do to stop it?"
"It depends on what their stock market does," his senior technical trader replied, not knowing what else to say and not knowing what to expect, either.
"Do you think it'll work, Jack?" Durling asked. He had two speeches sitting in folders on his desk, and didn't know which he would be giving in the evening.
The National Security Advisor shrugged. "Don't know. It gives them a way out. Whether or not they make use of it is up to them."
"So now we just get to sit and wait?"
"That's about it, Mr. President."
The second session was held in the State Department. Secretary Hanson huddled with Scott Adler, who then met with his negotiating team and waited. The Japanese delegation arrived at 9:45.
"Good morning," Adler said pleasantly.
"A pleasure to see you again," the Ambassador replied, taking his hand, but not as confidently as on the day before. Not surprisingly, he had not had time to receive detailed instructions from Tokyo. Adler had halfway expected a request for a postponement of the session, but, no, that would have been too obvious a sign of weakness, and so the Ambassador, a skilled and experienced diplomat, was in the most precarious of diplomatic positions—he was forced to represent his government with nothing more to fall back on than his wits and his knowledge. Adler walked him to his seat, then returned to his side of the table. Since America was the host today, Japan got to speak first. Adler had placed a side bet with the Secretary as to the Ambassador's opening statement.
"First of all it needs to be said that my government objects in the strongest terms to the attack on our currency engineered by the United States…"
That's ten bucks you owe me, Mr. Secretary, Adler thought behind an impassive face.
"Mr. Ambassador," he replied, "that is something we could say just as easily. In fact, here is the data which we have developed on the events of last week." Binders appeared on the table and were slid across to the Japanese diplomats. "I need to tell you that we are now conducting an investigation that could well lead to the indictment of Raizo Yamata for wire- and securities fraud."
It was a bold play for a number of reasons. It showed everything that the Americans knew about the attack on Wall Street and pointed to the things yet to he learned. As such, it could have no effect other than to ruin the criminal case against Yamata and his allies, should it come to that. But that was a side issue. Adler had a war to stop, and stop quickly. He'd let the boys and girls at Justice worry about the other stuff.
"It might be better of course for your country to deal with this man and his acts," Adler offered next, giving generous maneuvering room to the Ambassador and his government. "The net effect of his actions, as may be seen today, will be to cause greater hardship to your country than to ours.
"Now, if we may, I should like us to return to the issue of the Mariana Islands."
The one-two punch predictably staggered the Japanese delegation. As was often the case, nearly everything was left unsaid: We know what you did. We know how you did it. We are prepared to deal with all of it. The brutally direct method was designed to conceal the real American problem—the inability to make an immediate military counter—but it also provided Japan with the ability to separate her government from the acts of certain of her citizens. And that, Ryan and Adler had decided the previous night, was the best means of achieving a quick and clean end to the situation. To that end, a large carrot was required.
"The United States seeks little more than a return to normal relations. The immediate evacuation of the Marianas will allow us to consider a more lenient interpretation of the Trade Reform Act. This, also, is something we are willing to place on the table for consideration." It was probably a mistake to hit him with this much, Adler thought, but the alternative was further bloodshed. By the end of the first session of formal negotiations, something remarkable had happened. Neither side had repeated a position. Rather, it had been, in diplomatic terms, a free-form exchange of views, few of them well considered.
"Chris," Adler whispered when he stood. "Find out what they're really thinking."
"Got it," Cook replied. He got himself some coffee and headed out to the terrace, where Nagumo stood on the edge, looking out toward the Lincoln Memorial.
"It's an elegant way out, Seiji," Cook offered.
"You push us too hard," Nagumo said without turning.
"If you want a chance to end this without getting people killed, this is the best one."
"The best for you, perhaps. What of our interests?"
"We'll cut a deal on trade." Cook didn't understand it all. Unschooled in financial matters, he was as yet unaware of what was happening on that front. To him the recovery of the dollar and the protection of the American economy was an isolated act. Nagumo knew different. The attack his country had begun could be balanced only by a counterattack. The effect would not be restoration of the status quo ante, but, rather, serious damage to his own country's economy on top of preexisting damage from the Trade Reform Act. In this, Nagumo knew something that Cook did not: unless America acceded to Japanese demands for some territorial gain, then the war was quite real.
"We need time, Christopher."
"Seiji, there isn't time. Look, the media haven't picked up on this yet. That can change at any moment. If the public finds out, there's going to be hell to pay." Because Cook was right, he'd given Nagumo an opening.
"Yes, there may well be, Chris. But I am protected by my diplomatic status and you are not." He didn't need to say more than that.
"Now, wait a minute, Seiji…"
"My country needs more than what you offer," Nagumo replied coldly.
"We're giving you a way out."
"We must have more." There was no turning back now, was there? Nagumo wondered if the ambassador knew that yet. Probably not, he judged, from the way the senior diplomat was looking in his direction. It was suddenly clear to him. Yamata and his allies had committed his country to action from which there was no backing away, and he couldn't decide if they'd known it or not when they'd begun. But that didn't matter now. "We must have something," he went on, "to show for our actions."
At about that time, Cook realized how slow he'd been on the uptake. Looking in Nagumo's eyes, he saw it all. Not so much cruelty as resolve. The Deputy Assistant Secretary of State thought about the money sitting in a numbered account, and the questions that would be asked, and what possible explanation he might have for it.
It sounded like an old-fashioned school bell when the digital clock turned from 11:59:59 to 12:00:00.
"Thank you, H. G. Wells," a trader breathed, standing on the wooden floor of the New York Stock Exchange. The time machine was in operation. For the first time in his memory, at this hour of the day the floor was clean. Not a single paper slip lay there. The various traders at their kiosks looked around and saw some signs of normality. The ticker had been running for half an hour, showing the same data it had displayed the previous week, really as a way of synchronizing their minds with the new day, and everyone used it as a touchstone, a personal contact with reality that both was and was not.
It was a hell of a speech the President had given five hours earlier. Everyone on the floor had seen it at least once, most of them right here, followed by a pep talk from the head of the NYSE that would have done Knute Rockne proud. They had a mission that day, a mission that was more important than their individual well-being, and one that, if accomplished, would see to their long-term security as well as that of the entire country. They had spent the day reconstructing their activities of the previous Friday, to the point where every trader knew what quantities of which stock he or she held, wha
t every position was. Some even remembered the moves they'd been planning to make, but most of those had been "up" moves rather than "down" ones, and their collective memory would not allow them to follow through on them.
On the other hand, they remembered well the panic of the afternoon seven days before, and, knowing that it had been both artificial and malicious, no one wished to start it afresh. And besides, Europe had signaled its confidence in the dollar in the strongest terms. The bond market was as solidly fixed as though set in granite, and the first moves of the day had been to buy U.S. Treasuries to take advantage of the stunning deal offered by the Fed Chairman. That move was the best confidence-builder they'd ever seen.
For over ninety seconds by one trader's watch, exactly nothing happened on the floor of the exchange. The ticker simply displayed nothing. The phenomenon evoked snorts of disbelief from men whose minds raced to understand it. The little-guy investors, without a clue, were making few calls, and those who did were told by their brokers to sit tight. And for the most part that was what they did. Those who did make sell orders had them handled in-house by their brokerage houses from the reservoir of issues that they had on hand, left over from the previous week. But the big traders weren't doing anything, either. Each of them was waiting for somebody else to do something. The inactivity of merely a minute and a half seemed an eternity to people accustomed to frantic action, and when the first major play happened, it came as a relief.
That first big move of the day, predictably, came from the Columbus Group. It was a massive purchase of Citibank common. Seconds later, Merrill Lynch pushed the button for a similar acquisition of Chemical Bank.
"Yeah," a few voices said on the floor. It made sense, didn't it? Citibank was vulnerable to a fall in the dollar, but the Europeans had seen to it that the dollar was rising in value, and that made First National City Bank a good issue to pick up on. As a result, the first tick of the Dow Jones Industrial Average was up, defying every prediction of every computer.