Debt of Honor - Tom Clancy [286]
The TV told the story. The Chairman of the Federal Reserve Bank had been on all the morning talk shows, which had to have kept his driver busy in D.C. this day, followed by a strong public statement in the White House Press Room, followed by a lengthy interview on CNN. It was working, after a fashion, and TV showed that as well. A lot of people had shown up at banks before lunch, surprised there to find piles of cash trucked out the previous night to make what in military terms was probably called a show of force. Though the Chairman had evidently jawboned every major banker in the country, the reverse was true of the tellers meeting depositors at their windows: Oh, you want cash? Well, of course we have all you need. In not a few cases, by the time people got home they started to feel a new variety of paranoia—keep all this cash at home?—and by afternoon some had even begun coming back to redeposit.
That would be Buzz Fiedler's work, too, and a good man he was, Winston thought, for an academic. The Treasury Secretary was only buying time, and doing so with money, but it was a good tactic, good enough to confuse the public into believing things were not as bad as they appeared.
Serious investors knew better. Things were bad, and the play in the banks was a stopgap measure at best. The Fed was dumping cash into the system. Though a good idea for a day or so, the net effect by the end of the week had to be to weaken the dollar further still, and already American T-Bills were about as popular in the global financial community as plague rats. Worst of all, though Fiedler had prevented a banking panic for the time being, you could hold back a panic only so long, and unless you could restore confidence in a real way, the longer you played stopgap games, the worse would be the renewed panic if those measures failed, for then there would be no stopping it. That was what Winston really expected. Because the Gordian knot around the throat of the investment system would not soon be untied.
Winston thought he had decoded the likely cause of the event, but along the way he'd learned that there might not be a solution. The sabotage at DTC had been the master stroke. Fundamentally, no single person knew what he owned, what he'd paid for it, when he'd gotten it, or what cash he had left; and the absence of knowledge was metastatic. Individual investors didn't know. Institutions didn't know. The trading houses didn't know. Nobody knew.
How would the real panic start? In short order, pension funds would have to write their monthly checks—but would the banks honor them? The Fed would encourage them to do so, but somewhere along the line there would be one bank that would not, due to troubles of its own—just one, such things always began in a single place, after all—and that would start yet another cascade, and the Fed would have to step in again by boosting the money supply, and that could start a hyperinflationary cycle. That was the ultimate nightmare. Winston well remembered the way that inflation had affected the market and the country in the late 1970's, the "malaise" that had indeed been real, the loss of national confidence that had manifested itselt with nut cases building cabins in the Northwestern mountains and had movies about life after the apocalypse. And even then inflation had topped out at what? Thirteen percent or so. Twenty-percent interest rates. A country suffering from nothing more than the loss of confidence that had resulted from long gas lines and a vacillating president. Those times might well seem nostalgic indeed.
This would be far