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THE chateau sat in a valley near the base of Mount Pilatus just south of Lucerne and only a short train ride from Zurich. Although the forty-room mansion looked as if it had dominated the landscape for generations, it had been constructed only five years earlier. With traditional steeply pitched slate roofs and countless gables and chimneys, the structure was storybook beautiful. The circular drive curved around an enormous marble fountain decorated with a dozen nymphs who poured water into the clear pool from filigreed urns.
Around the main house were several stone outbuildings to make the estate look like it had once been a working farm. In the surrounding alpine meadows, brown Jersey cows sporting bronze bells kept the fields trimmed and fertilized.
Seven dark limousines were ranked in a parking annex next to the garage, and behind it lay an enclosed field where a pair of Aerospatiale Gazelle helicopters sat, their pilots drinking thermos coffee in the cockpit of one of the executive choppers.
The summit meeting of European finance ministers in Zurich drew little media attention, since nothing much was expected of the gathering. However, it provided an excuse for the men meeting at the chateau to be in the same city at the same time. They met in the mansion’s great hall, a lofty two-story room paneled in oak and decorated with boar and stag heads and large Swiss horns crossed over the walk-in fireplace.
As Switzerland is one of the world’s great banking centers, it was little wonder that with one exception the fifteen men represented some of the largest banking concerns in Europe and America.
At the head of the table sat Bernhard Volkmann. Raised Catholic in a strict household run by his banker father, Volkmann had forsaken his religion early in life for another, that of wealth. Currency had become his god, cash his Eucharist. He was a high priest in the world of finance, respected for his dedication and a little feared for his uncanny instincts. Every action of every day went toward the accumulation of more money, for his bank and for himself. Volkmann had a wife because it was expected of him and three children because he’d allowed himself to sleep with her on a half-dozen occasions. He considered them a necessary distraction from his professional life but could not recall any of their birthdays or the last time he’d even seen his youngest, a twenty-year-old student he believed was at the Sorbonne.
Volkmann arrived at his office on Zurich’s Bahnhofstrasse at six each morning and left at eight each night. This routine varied begrudgingly on Sundays and holidays when he would work out of his home for at least twelve hours a day. Volkmann neither drank nor smoked and would be no more likely to enter a casino than a Muslim would become a swineherd. At sixty, he was paunchy and almost uniformly gray. His skin was the same washed-out shade as his hair, and behind his glasses his eyes were the murky color of dishwater. He even took to wearing gray suits, and though his shirts were white, they invariably took on his gray cast.
Those who worked for him had never seen Volkmann smile, much less laugh, and only a severe financial upheaval would elicit a slight downward tug at the corners of his mouth.
Around him were similarly severe men whose dedication to money was no less intense. They were presidents of banks whose decisions affected billions of dollars and millions of lives. And today they were gathered because the very foundation of the world’s economy was about to crumble.
On the table in front of Bern Volkmann a simple black cloth covered a small rectangular object. When the men were settled around the table, water poured, and attendants withdrawn, Volkmann reached out and pulled away the cloth.
The bankers and their guest were among a handful of people in the world who wouldn’t noticeably react to the object on the table. Yet Volkmann saw that even these seasoned professionals couldn’t mask all emotion. A few drew shallow breaths, one contemplatively stroked his chin. Another’s eyes widened for an instant, then the person glanced around as if he’d given a tell in a poker game. The six billion other people on the planet would have gasped in wonder and rushed to touch the object as their minds filled with possibilities.
The trapezoidal bar weighed twenty-seven pounds and was known as a London Good Delivery. Its facets radiated a warm buttery yellow, and it possessed an almost oily sheen in the subtle lighting of the great hall. Refined to 99.9 percent, the ingot of pure gold was worth approximately one hundred sixty thousand dollars.
“Gentlemen, we have a crisis,” Volkmann began in accentless English. He spoke crisply, enunciating every word so there could be no confusion or misinterpretation. “As you are all aware, the world will run out of gold very shortly. In fact, demand far outstrips supply for a very simple reason. Some of you became greedy.
“Starting more than a decade ago many of you approached your country’s central banks with a proposition that at the time seemed profitable for everyone concerned. You, as bankers, would borrow the gold held on deposit with the promise to repay at one-quarter percent interest. The gold, as it sat in vaults in New York, Paris, London, and elsewhere, had no value so long as it was kept out of circulation. By paying a quarter point you would make the gold work for the central banks as it never had in the past.
“Had it ended there, we would not be facing a crisis. But it did not end. You turned around and either sold the gold on the open market or used the value of your holdings as leverage and collateral for other ventures. In essence you pledged or sold a commodity you had only the right to borrow. The central banks gave tacit approval to this action yet maintained the right to recall the gold at any time. Had this scheme taken place in only one country or on a small scale, there would remain enough surplus gold on the market to cover such a call.
“However, your greed got the best of you all. As it stands today, twelve thousand tons of gold valued at one trillion euros is on the books of central banks but is, in fact, on the fingers and around the necks of women all over the world. In a word, gentlemen, it is beyond redemption.
“Several central banks are aware of the situation and continue to accept their quarter percent on the gold’s value, but some are asking for the gold’s return. Two years ago the French national bank announced they were going to sell some of their reserves. We got together to finance the purchase of enough gold to replenish their treasury so the sale could go through. As you recall, the price of gold rose fifty euros in just a few weeks when traders realized such buying was taking place. The French then sold their gold, and the price stabilized once again. Our scramble to cover the call cost us nearly a billion euros. We told our stockholders it was a one-time charge-off, but in truth it is a charge-off we will face any time a central bank calls in their assets.”
“Bern, we don’t need a history lesson,” a New York banker said testily. “If you look around you’ll see there’s a few familiar faces missing because they were canned by their boards of directors.”
“Being ‘canned by their boards’ as you put it, Mr. Hershel, is now the least of our worries.” Volkmann gave the American a stare that silenced any follow-up rejoinder.
“Banking is a business of trust,” he continued. “A worker cashes his paycheck, spends what money he needs to survive, and trusts a bank to hold the rest. What happens to it afterward is frankly beyond his understanding or threshold of interest. He has done his job of converting labor to capital and trusts us to do our job of maximizing that capital. We lend it to entrepreneurs who build new businesses to employ more workers to transform more labor into more capital in a system that has worked well for centuries.
“But what happens when that trust is abused? Surely there have been banking scandals in the past; however, what we now face is a crisis of confidence of unprecedented proportions. The store of capital that governments use to assure their people of the country’s strength, their gold reserves, has been sold off for what is in essence an IOU that can no longer be paid. We cannot honor our promise to the central banks. Even if we had the money to buy the gold to return to the central banks, there isn’t enough of it in the world to cover what we owe.”
“Production can be increased to buy us the time to fill a call order.” This from an Englishman in a Savile Row suit.
“It can’t.” The answer was short and blunt, like the person who gave it. He, too, had an accent, somewhat British in nature but with a Colonial twang.
“Mr. Bryce, would you care to explain.”
Bryce stood. Unlike the others, he had tanned, weathered skin, and his blue eyes were hidden behind a permanent squint. His hands were large, with swollen knuckles. He was someone who’d worked to obtain his wealth, toiled in ways the bankers could never understand.
“I’ve been chosen to represent South Africa’s mining concerns here,” Bryce said. “Mr. Volkmann told me what we were to discuss, so I talked with my people beforehand to give you accurate information. Last year South Africa produced about thirty-four hundred tons of gold at a cost of around two hundred and eighty dollars an ounce. This year we project the same tonnage but at a price of three hundred and eighteen dollars an ounce. Labor costs have risen since the end of apartheid because of the power of the trade unions, and we’re under heavy pressure to sign a new contract that’s even more generous.”
“Don’t give in to them,” the president of Holland’s biggest bank interjected.
Bryce shot him a look. “Hard rock mining isn’t assembly line work. It takes years of training to become proficient. A strike now would cripple us all, and the unions know it. They see gold trading near five hundred an ounce and know the mines aren’t losing money.”
“Can you increase production?” Another at the table asked.
