Threadneedle Street Begged for Mercy
Save me.
Threadneedle Street in London, England.
The street’s name came from the needle makers who had once worked here in the seventeenth century, but no one looking at it now would ever think of needles.
Set in the heart of London’s financial district, this road had stood as a symbol of British finance for more than three centuries, and the Bank of England—the beating heart of the British economy—was located right here.
The neoclassical building rose on a seven-acre site, its immense stone columns and statue of Britannia giving it the severe grandeur of a temple.
Its cream-colored limestone facade, cut from the same material as Buckingham Palace, had very few windows.
Ever since the Gordon Riots in 1780, when rioters had tried to storm the building, the Bank of England had remained faithful to a design philosophy of absolute defensive hardness, a fortress meant to keep the outside world out.
A facade as solid as a stronghold.
And yet inside that fortress, fear was writhing now, long, many-limbed, and impossible to pin down.
“……”
“……”
“……”
“……”
In the third-floor conference room of the main building, a little over ten people had gathered.
At the head of the table sat Eddie George, Deputy Governor of the Bank of England.
At fifty-three, he had been appointed the youngest deputy governor in the bank’s history, the man who effectively held command over Britain’s monetary policy and foreign exchange market.
He was not the sort of person who ever lost his temper, never raised his voice, and could keep his face unreadable in any situation.
But now, a deep furrow had settled plainly between his brows.
The charts spread before him were plastered in red from end to end.
The foreign exchange officer rose with a face gone nearly as pale as paper.
“I’ll report the situation. Since September ninth, two days ago, selling pressure on the pound has surged sharply. We’re seeing sell orders flooding in at more than three times the average daily volume on the London foreign exchange market.”
The pound-mark exchange rate had opened at 2.7950 and plunged to 2.7820.
Only ninety pips from the ERM floor of 2.7730.
One pip was the fourth decimal place in an exchange rate, so ninety pips meant 0.009.
On paper, that might have seemed insignificant, but in a foreign exchange market where hundreds of billions of dollars changed hands, ninety pips was no different from the final wall standing between a defended line and total collapse.
Eddie George roughly swept his silver hair back.
“Have we identified the attacker?”
“That is… yes, we have.”
The officer’s voice trembled faintly.
“The main attacker is an energy company headquartered in Texas, in the United States. It’s called Lee Energy Holdings—”
“An energy company, attacking the foreign exchange market?”
“They built short positions through multiple special-purpose vehicles established in the Cayman Islands. The scale is… as you know, one billion dollars.”
The room fell silent.
One billion dollars.
That was an astounding twenty-five percent of the Bank of England’s forty-billion-dollar foreign exchange reserves.
Eddie George took off his rimless glasses and pressed hard at the corners of his eyes.
“Who is the ultimate owner?”
“Our tracing points to an individual named Sanha Lee. He’s a nineteen-year-old Asian student at Harvard, and…”
The officer paused for a beat before continuing as though forcing the words out.
“He’s also the very same man who sent us a letter through a lobbyist in the United States named Martin Channing just days ago.”
Eddie George nodded slowly.
“A warning that the pound was overvalued, that defending the ERM would be impossible, and that we should consider withdrawing now? That was the one?”
“Yes. At the time, we dismissed it as just another piece of miscellaneous correspondence—”
“And now the man who sent that warning is attacking us with a billion dollars? Just to prove he was right?”
“I can’t speak to his motive, but the present situation is exactly that.”
From one side of the room, another officer took out a file and laid it on the table.
“This is a copy of the letter that arrived then.”
Eddie George picked up the document.
///////
-To: Bank of England
-From: Lee Energy Holdings
…This letter has been prepared to convey concerns regarding your institution’s monetary policy…
…The British pound is currently overvalued at an unsustainable level within the ERM. The divergence between the Bundesbank’s high-interest-rate policy and Britain’s domestic economic slowdown is widening, and this is likely to lead soon to a large-scale speculative attack by the market…
…Your institution’s foreign exchange reserves are not sufficient to defend against a coordinated speculative assault. If the current situation continues, the Bank of England will have to endure substantial losses and either withdraw from the ERM or accept a devaluation of the pound…
…We recommend that you consider an orderly withdrawal now. A voluntary withdrawal, rather than a forced one, can minimize the shock to the British economy…
This letter has been sent as a warning and contains no intent to threaten or coerce.
-Lee Energy Holdings Representative
-Sanha Lee
.
.
///////
Eddie George set the letter down.
“Who received this?”
Silence settled over the room.
One officer answered in a voice so small it was nearly a whisper.
“My subordinate. Deputy Director Macpherson in charge of foreign exchange markets, sir…”
“Why wasn’t it reported up the chain?”
“There are so many vague contacts coming in that… the idea of an American energy company advising the Bank of England on monetary policy sounded absurd… and the representative was supposedly a nineteen-year-old college student, so… they judged it to be a prank or fraud and discarded it on their own…”
“Even so, to treat a formal inquiry that came through a lobbyist so carelessly. Where is he now?”
“He submitted a written apology and is waiting at home. He isn’t taking calls…”
“He probably can’t forgive himself.”
After hearing the report, Eddie George let out a deep breath.
“……Punishing him won’t refill the reserves. If Macpherson can be reached, just tell him to come back to work. Anyone in that chair would have ignored it too.”
The officer lowered his head.
Eddie George picked up the letter again.
“The idea that some unknown American energy entrepreneur—worse, a green college kid—would dare advise the Bank of England on monetary policy is ridiculous enough on its own… but for that ridiculous warning to be precisely correct is even more maddening. And now, to prove he was right, he’s personally leveraging one hundred million dollars into a billion-dollar strike against us… ha. The fact that this isn’t a movie makes me want to leap out that window.”
Groans rippled around the room.
A hundredfold leverage.
In a world where even two-times leverage was treated as dangerous for ordinary retail investors, one hundred times was tantamount to suicide.
A move of only one percent in the wrong direction would wipe out the entire principal.
And yet Sanha Lee, that faceless madman, had carried out the gamble without hesitation.
Against a nation, no less, and against Britain, one of the world’s great powers.
Eddie George pointed at the document.
“So what did he use as collateral?”
“Gold bullion and crude oil futures. He appears to own massive amounts of physical assets, likely because he operates both oil fields and gold mines.”
“If he’s got tangible collateral, then he’s not just some lunatic who doesn’t know how dangerous leverage is.”
Physical assets as collateral.
In a market like this, that was not something just anyone could put up.
Financial assets such as stocks and bonds collapsed in value the moment the market wobbled.
But gold and oil were different.
Those were the assets that tended to rise in value during a crisis.
This unknown figure named Sanha Lee was probably building a structure in which, if the pound fell, he would profit from the position, and if the market moved against him, the value of the collateral assets would offset part of the loss.
A two-way hedge.
For him, this wasn’t recklessness. It was a meticulously calculated war designed so that victory was the only possible outcome.
From across the table, the treasury officer spoke.
“At present, one hundred fifty traders are being rotated around the clock in the foreign exchange dealing room in the basement. While London, Tokyo, and New York open in sequence, they’re pouring in buy orders for the pound without pause.”
The Bank of England’s defense against the exchange rate attack was simple.
Release the German marks and U.S. dollars held in reserves and use them to buy pounds.
When there were many sellers of pounds in the market, the exchange rate fell; when there were many buyers, it rose.
By buying pounds without limit, the Bank of England was trying to stop the currency from sliding.
The problem was, of course, that foreign exchange reserves were not infinite.
“In two days, forty-seven hundred million dollars have been deployed to defend the exchange rate.”
Nine percent of Britain’s foreign exchange reserves had vanished in just forty-eight hours.
Roughly one hundred million dollars an hour.
That staggering sum was being sucked straight into the pocket of a man named Sanha Lee.
“Even now, traders are drawing marks from the Bundesbank, the German central bank. If our reserves run dry, we may have to go begging to Germany for more.”
The officer’s voice sank lower and lower.
“And the crucial point is this: Lee Energy’s position still hasn’t been unwound. If the exchange rate slips another half percent, we’ll have to pour in an additional five billion dollars.”
“……”
Right this instant, Sanha Lee was drinking Britain’s blood.
No, by now it was no longer just blood he was taking. He was mowing through flesh, skin, organs, bones, and beyond that, the soul itself.
But the bad news did not end there.
“And there’s been another move from New York.”
The officer’s expression darkened further.
“The next player to move after Lee Energy was Quantum Fund.”
“……”
Quantum Fund.
The hedge fund led by George Soros had become a legend on Wall Street by posting annual returns of more than thirty percent throughout the 1980s, and that streak was still very much alive.
Soros was no mere fund manager.
He was a being who could take on a nation alone if he wished, the embodiment of money itself, a monster who had almost never made a wrong call.
And that monster had targeted the Bank of England.
“They’ve started expanding their pound short as well, with the target size estimated at the same one billion dollars as Sanha Lee’s. Bruce Kovner of Caxton Associates and Paul Tudor Jones of Tudor Investment are moving too. Their positions are estimated at somewhere between two hundred and three hundred million dollars each.”
Two one-billion-dollar positions, plus another five hundred million, for a total of two and a half billion dollars.
But Quantum Fund moving did not merely mean more money.
Once word spread that Soros had jumped in, hedge funds large and small all over the world would catch the scent of blood and pile on.
The total could swell to three billion, four billion, or even more.
If all of that came crashing in at once, the Bank of England—no, Britain itself—would be finished.
“There are two possible interpretations.”
Eddie George removed the hand that had been pressing at his brow.
“First: this Sanha Lee has enough influence to control Wall Street’s titans all at once. Second: even Wall Street’s titans are so rattled by his analysis that they’re following his lead.”
“Either way, he’s no ordinary man.”
“Personally, I think it’s the latter.”
Eddie George rose from his seat.
“Given that he warned us before entering the short in the first place… I doubt his goal is simply to profit from currency speculation.”
“Agreed. If he only wanted to make money by exploiting our weakness, he wouldn’t have warned us about that weakness beforehand.”
Was he an enemy? That was hard to say, because before attacking he had kindly issued a warning.
Was he an ally then? That was also hard to say, because the beating they were taking was far too painful.
Then what was he? An enemy pretending to be an ally? If so, he was one of the most dangerous and terrifying enemies imaginable.
Or was it the reverse? An ally pretending to be an enemy? If so, Britain had become entangled with the strangest psychopath in the world—but did a human like that even exist?
Amid all those questions, Eddie George made his decision.
“Get me Sanha Lee’s contact information. Through Martin Channing, the lobbyist, if that’s the only way. Through the American embassy if we have to. As fast as possible.”
“W-what should we say to him?”
“……What else?”
At the officer’s question, Eddie George let his head fall with a long, weary sigh.
“We beg him to save us.”