National Geographic : 1993 Jan
"It's like having Wall Street in your hand," says New York money broker Walter Kaczor, who keeps an eye on a portable quote receiver and an ear on a cellular phone during the U. S. Open. Speculating on the foreign-currency market is, like tennis, a game of split-second decisions. Outside the Istanbul stock exchange bootleg ging brokers with transis tor radios pick up price information from cordless phones used inside. how that's done from the Centre for International Documentation of Organised and Economic Crime in Cambridge, England. This is a real-life example: A U. S. organized crime group with a lot of hot cash forms a cozy relationship with the central bank of a British Commonwealth coun try. Diplomats of that country carry the cash out of the U. S. If it's $10,000 or more, they are supposed to report that to U. S. Customs, but they don't; they "externalize" the cash. It goes into the central bank and then into various dummy companies in different countries in return for shares in those companies. The money is thus "agitated," so it'll be just about impossible for investigators to follow. Then, to "repatriate" the money, dummy companies in the U. S. sell their worthless shares to investors in Britain-who are in fact in on the scam-and behold, the money is back in the U. S., clean! Now it buys legitimate businesses, banks, political power. An operation like this, involving highly placed officials and busi nessmen, will cost quite a bit, maybe 35 percent, but once the system is in place, people will want to use it-not only drug profiteers but also arms dealers, terrorist organizations, intelligence agencies ... A prime haven for such shady customers was BCCI, the Bank of Credit and Commerce International, headquartered in Luxembourg and the Cayman Islands with branches in 72 countries. It is said to have secretly controlled the First American Bank of Washington, D. C. After BCCI collapsed in 1991, having defrauded depositors of several billion dollars, it became known as the Bank of Crooks and Criminals International. B ACK HOME I RUN ACROSS a little formula that bankers and financial analysts know, that everybody should know-the rule of 72. No one is certain who first developed the rule, but the principle is quite simple: Divide any number into 72 and the answer tells how long it will take for a sum to double in financial terms. Are you charged 18 percent interest on the unpaid balance of your credit-card account? Eighteen goes into 72 four times-so the debt would double in four years. Say your annual raise is 6 percent; that number goes into 72 twelve times, so in twelve years your salary will double. The same will be true of any investment. And what if inflation runs at 6 percent a year? Then after a dozen years your money will be worth half as much-so in a sense you'll be back where you started. But look what can happen when inflation runs wild, when govern ments simply issue more and more currency to cover increasing obliga tions as prices rise. In 1986 Peru's currency-the sol, which is Spanish for sun-fell to 14,000 to the U. S. dollar, so the government lopped off three zeroes and called it the inti, which means sun in Quechua, a language spoken by more than half the Peruvians. By mid-1991 a cup of coffee cost 500,000 intis. The government lopped off six zeroes and called it the sol again. Over five years the inflation rate was 2,200,000 percent! The most drastic inflation ever? Hungary 1946, after World War II, when Germany had taken away the national bank's gold reserves. By June the Hungarian pengo appeared in notes of a million million bil lion, which would look like this: 1,000,000,000,000,000,000,000. Then the gold came back, confidence returned, and in August Hun gary had a stable new currency, the forint.