Chapter 52: Currency Exposure

Chapter 52: Chapter 52: Currency Exposure

I

Constantinople, Emin?nü — 3 September 1913

Zeynep laid a new sheet beside the lamp, and she had ruled it into two columns headed owed and held.

"Everything that we owe abroad is written on the left, and everything that we hold abroad is written on the right," she said. "The left column is three times longer than the right."

Ayaan read the figures.

The Vienna paper was to be paid in crowns, the second instalment of the Winterthur lathe was to be paid in francs, and the Geneva account held only a small part of the sum.

"How much do we owe in foreign money?" he asked.

"Nine hundred liras within six months, and we hold three hundred in Geneva." She tapped the page. "Our buyers pay us in liras and silver, and the paper must be paid for in crowns, so every change in the rate falls on us."

"The rate has been steady all summer," said Elias from the side table.

"It was steady until the war ended, Elias, and a rate that was steady yesterday tells us nothing about tomorrow."

Ayaan nodded, for he remembered how violently the Ottoman lira would fall in the years to come, and he kept the memory to himself.

"Then we shall learn what the risk costs before we decide how much of it to bear," he said.

II

Constantinople, Galata — 12 September 1913

Agop Kalfayan drew three lines on a blotter and wrote a figure at the end of each.

"A merchant may do one of three things," he said. "He may wait and pay at the rate of the day, he may buy the foreign money now and keep it idle, or he may buy it now for delivery on the day he must pay."

"The third is a forward purchase," said Zeynep.

"It is, and the Ottoman Bank will sell it to you for a fee of one part in a hundred." Agop leaned back. "The fee is small, and it removes the doubt."

Ayaan studied the blotter for a while.

"If the rate falls in our favour, we lose the gain," he said.

"You also lose the loss, which is the purpose of the contract." Agop smiled. "A man who sleeps well pays for his sleep, Efendi."

"And if we buy the crowns now and keep them?" asked Ayaan.

"Then the money lies idle for six months, and idle money earns nothing," said Agop. "Your reserve is meant to work, and a reserve that only waits is a loss of another kind."

Zeynep wrote both answers on her sheet in two short lines.

Zeynep asked whether the forward could cover the whole sum.

"I would cover two thirds and leave the rest to chance," said Agop. "A merchant who covers everything has stopped trading and begun to gamble on caution."

III

Constantinople, Rüstem Pa?a — 20 September 1913

The Vienna house of Pichler and Sons sent its answer by the morning post, and Zeynep read it aloud to Ayaan in the warehouse office.

"They refuse to invoice in liras," she said. "They say that no firm in Vienna can name a price in a money that it does not hold."

"Then we shall pay in crowns," said Ayaan. "But we shall buy the crowns today for the day of payment."

"I wrote to Monsieur Barrault yesterday, and he will sell us six hundred crowns’ worth for delivery in March." She turned over the page. "For the Winterthur instalment, we shall draw upon the Geneva account in francs, and we shall add to it each month from the sales."

"What is the rule?" asked Ayaan.

She took a clean sheet and wrote it in her firm hand.

No debt in a foreign money shall stand uncovered by more than one third. The House shall name every price to its buyers in liras and in nothing else.

Elias read the rule over her shoulder and counted it on his fingers.

"It is short enough to be remembered by every clerk," he said.

"That is why I wrote it short," said Zeynep.

IV

Smyrna — 8 October 1913

Isaac Molho met Ayaan on the quay with a handful of coins wrapped in a cloth.

"The buyers of Smyrna pay in everything," he said, and he laid the coins upon the shed’s counter. "Here are Ottoman silver, French gold, Austrian thalers, and a Greek piece that I do not trust."

"Which does the clerk accept?" asked Ayaan.

"Whichever the buyer offers, at whatever value the buyer names." Molho shook his head. "It is a habit of the port, and it costs the careless merchant a little every week."

Elias took a pencil and a sheet from his pocket.

"The price board shall carry a second board beside it, Molho Efendi, and the second board shall give the value of each coin in liras," he said. "The clerk will read it every Monday from the exchange house, and he will accept no coin at any other value."

"The buyers will complain," said Molho.

"They will complain once, and then they will find that the figure is the same for every man," said Elias. "That is how the first board was accepted."

Within the week the rate board hung beside the price board, and the first buyer who read it grumbled and paid.

The second buyer read it and said that it was fairer than the old way.

V

Constantinople, Galata — 29 October 1913

The crown rose four parts in a hundred in a single week, after the Austrian treasury announced a loan.

Zeynep arrived at the Compact’s hall with the figures in her bag, and she set them before the members without comment.

"The House bought six hundred crowns’ worth in September at the old rate," she said. "At today’s rate, the same crowns would cost us twenty-four liras more."

"Then the fee has paid for itself," said Hac? Arif.

"It has paid for itself twice over, Hac? Efendi, and I wish to say so plainly because I did not know it would." She looked round the table. "Other members hold debts in foreign money, and I fear that some of them have not covered them."

Agop counted the members with his eyes.

"Eleven of the thirty-six trade with Vienna, Marseille, or Manchester," he said. "Three of them told me last week that they would pay when the bill fell due."

"Three of them will pay the extra twenty liras," said Mustafa, who had come as a guest of the hall.

Ayaan rose, and the talk fell silent.

"The Compact can buy forward in one sum, and the fee will be less than each member would pay alone," he said. "The fund will not guarantee the rate, but it will ask Monsieur Barrault to arrange the purchase."

Hac? Arif struck the board once.

"I second it, and I propose that every member with a foreign debt shall declare it to Elias Benveniste by the end of the month," he said.

The vote was taken, and it passed with two members abstaining.

After the meeting, three members came to Elias with their debts written on scraps of paper.

He sorted the scraps into a single list and promised each man a copy by Friday.

VI

Constantinople, Rüstem Pa?a — 5 November 1913

Hasan sent a letter to Constantinople, and Zeynep read it aloud to Ayaan before she passed it to Elias.

Efendi, the farmers of the plain pay in silver mecidiye, and the money changer in the bazaar will give only ninety-six parts in a hundred of its gold value. I have not known whether the shed should take the loss or the buyer.

"It is a fair question, and he has asked it before making a mistake," said Zeynep. "That is why Salih Efendi values him."

"What shall we answer?" asked Ayaan.

"That the rate board shall be hung at Konya as it is at Smyrna, and that the silver shall be taken at the value on the board." She dipped her pen. "The change shall be entered in the ledger as a separate line, so that we may see what it costs us each month."

Elias nodded, and he added a note of his own.

"I shall send him the form of the weekly sheet, and I shall ask him to send the figure every Friday with the count," he said.

Hasan’s reply arrived within a week, and it was brief.

The board is hung. The first buyer disputed it, and the second did not.

VII

Constantinople, Emin?nü — 14 November 1913

Cevdet came to the house in the evening and refused the chair that Zeynep offered.

"A rumour has been spoken in Galata for ten days," he said. "It says that the House of Hassan has borrowed heavily in Vienna and Geneva, and that a fall in the lira would ruin it."

"It is a half truth, and that is the most useful kind of rumour," said Zeynep. "Who speaks it?"

"A clerk of the Berlin house, who is paid by the week and drinks at the same café as the broker of Smyrna." Cevdet paused. "I think he hopes that the Ottoman Bank will withdraw your line."

Ayaan glanced at Zeynep, and she was already reaching for a pen.

"Monsieur Barrault shall have our exposure sheet tomorrow, with the forward contracts attached," she said. "A banker who has read the figures does not need to listen to a rumour."

"And the Compact?" asked Cevdet.

"The Compact will receive a copy, so that every member may answer the rumour with the same page," said Ayaan.

Cevdet inclined his head.

"That is a more honest answer than the rumour deserves," he said. "I approve of it."

VIII

Constantinople, Kas?mpa?a — 28 November 1913

Herr Imhof received the Winterthur instalment in the foundry office, where Yakup and Selim stood on either side of the desk.

"Keller and Son have written that the francs arrived on the day appointed," he said. "They have sent a receipt, and they ask when the testing machine may be delivered."

"In January, if the roads are open," said Zeynep.

Selim looked at the receipt with a puzzled frown.

"Han?m, we paid in liras, but they received francs," he said. "Who decides how many francs a lira is worth?"

"The exchange houses decide it every morning, Selim, and the lira has no say in the matter." She drew a small table upon a scrap of paper. "That is why we kept the francs in Geneva beforehand, and why we did not wait for the instalment to fall due."

Yakup wrote the table into his pocketbook.

"If a foundry is to buy abroad, then its master must learn this as well as he learns the furnace," he said.

"Then we shall add an hour on Saturdays to the engineers’ school, and Agop Kalfayan shall teach it," said Ayaan.

IX

Constantinople, Emin?nü — 20 December 1913

The Friday counts and the exchange sheets lay together on the long table, and the lamp burned late.

Zeynep added the last column and sat back in her chair.

"We owe eight hundred and forty liras in foreign money, and we have covered or hold six hundred and ten of it," she said. "Monsieur Barrault answered the rumour with a note of confidence, and the Compact’s members have declared fourteen debts."

"And the Geneva account?" asked Ayaan.

"It has grown by ninety liras since September, and the Winterthur instalment is secure." She smiled. "With Allah’s permission, we shall pay the lathe without anxiety."

Mehmed came to the doorway in his nightshirt, holding two coins from the money box, a silver one and a copper one.

"This one is bigger, and this one is better," he said gravely.

"It depends upon the day and the buyer," said Ayaan, and he carried the boy back to bed.

Zeynep followed them to the stairs and stood for a moment with the exposure sheet in her hand.

"A year ago I did not know what a forward contract was," she said when Ayaan returned.

"A year ago you taught the rest of us what a reserve was, and that was harder," he said.

She laughed quietly, and she folded the sheet into the ledger for the new year.

When the house was quiet, he took the notebook from the shelf and wrote the date.

A debt in another country’s money is a second debt, and it must be counted as one.