(Length: 5200 words approximately)
Copyright (C) Charles Stross, 1989, 1992, 1994, All Rights Reserved
If that kind of thing annoys you, just pretend it's an "alternate history" story ...
The Third World War began this morning with a Russian dawn raid on the City of London. Bombs exploded all over the Docklands Enterprise Zone, disrupting the white-hot core of European industrial asset-stripping; the follow-up raids involved extensive use of lethal virus weapons and tactical assault units. Casualties included Larry Steinberg, a systems analyst for BSF:
Video intercut:
Steinberg: "It was terrible. They must have infiltrated those time bombs weeks ago, but there was no sign of them. They began going off at nine-thirteen this morning, bringing down whole systems. One entire block just crumbled ... it was terrible, I tell you. We lost SEAQ for starters and then it all went to hell. There were casualties everywhere ... I saw this young dealer, she was crying and pulling her hair out over her colleague, he'd copped it but bad, flat on the floor ... "
Voice-over:"Barclays de Stoat Fader is just one of the large financial houses to suffer at the hands of the spetznaz assault this morning. Other large institutions affected include Country NatWest and the European desks of Drexel Burnham.
"Casualty figures are high, possibly running into tens of thousands of city workers and billions of ECU's of damage. Further video updates will follow."
Viral attack was largely confined to peripheral dealer desks where data throughput was limited to those personnel who had time to play a pirated game of Strip Poker which was being passed around. The virus was triggered by a date check, which suggests that the assault has been prepared far in advance. The main network through which it was disseminated appears to have been via SEAQ, the Stock Exchange Automated Quotations system.
BSF have refused to comment on a rumour to the effect that the attack was planned with the assistance of disgruntled employees sacked last year after a securities scandal which led to the company being investigated by the MMC.
The Soviet Embassy in London was unavailable for comment. The US Treasury Department is expected to make a statement later in the day.
Initial damage caused by the Soviet attack appears to have been limited, and the main clearing banks are switching in their reserve and back-up capacity. About 30% of the damaged dealer desks are up and running from back-ups, but the virus-infected optical discs are still in quarantine with DTI investigators and S&Q Enterprises called in. The attack failed to induce a massive slide, but Snake currencies are shaky and an unscheduled internal adjustment has been announced for this afternoon. Interest rates have not yet been affected, but announcements are expected hourly.
At 12:49 the European Currency Unit stood at 0.92 Roubles, down 23 Kopeks in just three and a half hours. The U.S. dollar remained stable at 0.89 ECUs, three cents up on yesterday.
A press conference has been scheduled by the Soviet Embassy in nine minutes time and will be covered by this service.
Just in:
At the press conferance in Washington that has just ended, the U.S. Treasury Department spokesman, Mr John Flatbush, read the following statement but left the platform before he could be asked any questions:
"At nine hundred hours today the Treasury Department monitoring service became aware of the serious nature of the current Russian attack on London. We are of course monitoring the present scenario in real-time, but we do not believe that there are any grounds for alarm in this country. The days of the great corporate raiders -- Ikahn and Boesky and the like -- are over, thanks to the decisive lead provided by the Jackson admin istration in re-structuring the U.S. economy. There are no grounds to fear a joint Japanese-Soviet attack on our corporate heartland, but in order to prevent any localized slides we are taking action to freeze European assets held in U.S. stocks and bonds. These shares will be underwritten by the Federal Reserve Bank for the duration of the -- er, instability.
"It falls to me to say -- off the record -- that any of our boys who go in there deserve the best of luck and our encouragment in fighting the good fight and getting while the getting's good on foreign soil! This could be the offshore investment opportunity of the century, and I for one am gonna be phoning my broker as soon as this conference is over. Goodbye."
At 13:03 today, the Soviet trade attache, Ms. V. I. Retshuchenko, released the following statement, reproduced in its entirety:
"My friends, this morning forces based within the RFSFR launched an economic attack upon the United States of Europe, with the goal of dominating those states. On behalf of the government of the RFSFR, may I express our sincere sympathy for the victims of this unprecedented offensive; unfortunately we are unable to prevent further incursions. The hostile forces appear to be a secret consortium of Soviet industry, including Mikoyan-Gurevitch design bureau, Glavkosmos, and the First Consolidated Peoples' Bank of Azerbaijan; these corporations appear to be co-operating with extra-national powers of unknown identity.
"As you know, such an attack would have been both impossible and implausible if the RFSFR still retained the old, monolithic industrial centralism of the decadent Lenin-Brezhnev era. Following the marked improvements in international progress and trade of the past decade, however, certain organisations listed on the Moscow stock exchange have decided that the Soviet economy cannot support their investment programs. They appear to have decided that a leveraged buy-out of the entire Western economy would be a suitable way of resolving their balance of payments surplus, and unfortunately the Communist Party of the Soviet Union is unable to restrain them.
"Bluntly, such a sequence of events was not considered possible, and no restraining legislation has been drafted. The Politburo is not sanguine about the consequences, however. We have no desire to return to the isolationist, Cold War mentality of the seventies and eighties, and in any event such a policy will inevitably induce considerable public discontent.
"President Boris Yeltsin has expressed his condolences for the victims of the conflict, and has promised maximum cooperation with the European authorities in an attempt to negotiate an end to the shares war before the G-9 talks are jeopardised.
"Thank you very much indeed for coming here. Goodbye."
News is coming in of a bloody attack on Wall Street. As trading opened in New York at 13:00 G.M.T. the ailing infotech giant IBM (US) launched a hostile take-over bid for Mercury Telecom PLC in London. Fund transfers to Europe so far total over ten billion dollars, believed to be close to IBM's entire liquid assets. Mercury is the main PSTN and ISDN operator for the London Stock Exchange and handles the Stock Exchange Automated Quotation system, SEAQ. The Monopolies and Mergers Commission have been notified, but no immediate action is possible because inspectors are working at saturation levels elsewhere in the City.
It appears that IBM has been controlled in large measure by shell corporations registered in Columbia and Peru for the past three months. CEO Debbie Beagle has refused to comment on allegations that her corporation is cooperating with the Soviet offensive in an attempt to dismember Western Europe's high-technology industries.
Closer to home, EuroBank has launched a counter-offensive before the close of trading in Moscow, with a bid for shares in the state airline Aeroflot and a back-up investment of ECU 500m in BSF. Amstrad and News International's Sky Channel have announced a consortium bid for BSB in an attempt to consolidate the satellite TV market under one umbrella. Glaxo, Ciba-Geigy, and the NHS Pharmatech division are reported to be entering the fray with a bid for several small Russian pharmaceutical manufacturing units; and the smell of money may drag British Power and even NHS(PLC) into the trade war.
The government remains silent on the issue so far, but a spokesman for Number Ten Downing Street has re-affirmed the Prime Ministers' commitment to the free market. "The share issue for British Monarchy PLC will not be jeopardized," he emphasized. "There is no alternative!"
The Queen was unavailable for comment.
In Europe there has generally been a measured response to the carnage. Fiat, Dassault-Renault, and Airbus Industrie are conducting intensive merger negotiations in conjunction with BMW, Porsche-SEAT and Arianespace, apparently in an attempt to inflate their group capital beyond any credible takeover attempt. The fact that this would automatically be viewed as monopolistic is irrelevant because the move is purely intended as a short-term defensive measure -- safety in numbers, and the more zeros on the balance sheet the better.
In a move that has shocked industry bystanders, IBM (US) has dismissed the entire board of Mercury Telecom and moved a special Emer gency Task Group into the boardroom. MT apparently held out for a full twenty-seven minutes under the intensive IBM bidding which raised the price of shares from 198 to 323 in less than half an hour. The price of shares has suddenly slumped into the red, with a post-takeover quotation of 121 delivered five minutes ago by human messenger. The SEAQ service appears to have been overloaded by the rapidity of events, with priority going to financial transactions; many smaller desks are apparently 'flying blind' on expert systems alone and praying that their software has no hidden bugs in it.
Judith Richmond, a broker with Copperhouse-Gerbil, had this to say:
"Things are just going crazy today. It's not a classic melt down because some shares are going through the roof in real time, but it's like a shooting war's broken out. Nothing is stable any more, and all we small brokers can do is keep our heads down when the big countercurrent exchange laundries go into action. We're spilling a million ECU's a second right now, draining into the Soviet economy; it's sheer havoc. I'm not going to predict what's going to happen tomorrow, but the day after tomorrow I expect to see a lot of dealers throwing themselves under BMW's ... or Lada's."
Rumours of a second wave of software bombs tomorrow morning have prompted many dealer rooms to call in the security analysts overnight. There're going to be many sleepless engineers earning their overtime checksumming the operating system files for signs of retrovirus in fection.
In Tokyo, the Ministry of Finance announced a suspension of all trading for the next three days, an unprecedented move that echoes Meltdown Monday, October 19th 1987, when Wall Street lost more than a thousand points by closing time as a result of computerised panic selling. People's Hong Kong and Manila are expected to follow suit.
Barclays Bank, the Midland Bank, and all the leading Merchant Banks announced a rise in interest rates of two percent in one day, to be reviewed as soon as the current crisis is defused. The Chancellor of the Exchequer refused to comment, but an official statement from Downing Street is expected imminently, as is a statement from Brussels.
In the past ninety-two minutes this service has been overwhelmed by the pace of developments. But first the general market report:
The London FT100 share index closed down 467.3 points at 2891.7, the largest fall on record since Meltdown Monday or the Wall Street Crash of 1929. The ECU was down 43 kopeks against the Rouble, to an all-time low of 72 kopeks to the ECU. Two hundred billion ECU's was knocked off shares Europe-wide in what commentators have been calling "the Greenback War". The Russian surprise attack this morning caused complete havoc, catching virtually every European conglomerate on the hop. Long term consequences are uncertain, but massive upheavals are expected in every market and a wave of panic selling cannot be ruled out.
Among the most bizarre developments of today was the attack by IBM (US) on Mercury Telecom, which was hijacked -- there is no other word for it -- for an outlay estimated conservatively to be triple its market value. Just what strategic priority IBM places on Mercury cannot yet be assessed, but the sheer scale of the offensive, taking place within hours of the Soviet attack, cannot be a coincidence.
In the United States, the Treasury Department commented on allegations of an 'unholy alliance' between IBM-Telecom and the computer and communications companies AT&T and DEC:
"All such allegations are specious and utterly untrue. We wish to make it clear that no American corporation would dabble in diabolism -- you may remember the rumours concerning Proctor and Gamble's trademark, which was subsequently changed following Moral Majority pressure. Any rumours of an 'unholy alliance' must, a priori, be considered to be malicious gosip and insider scaremongering. Rumours that we are investigating these corporations for monopolism will not be addressed at this date."
There has been no official White House response so far, but a presidential aide has announced that President Jackson will make a substantial statement on the issue tomorrow. It is to be hoped that the President will bring to bear his usual combination of intellectual precision and raw charisma on the issue; at the very least his presence is expected to have a calming affect on the nation. The importance of this speech cannot be underestimated; as the first black president of the Republic, as its' leading intellectual and the most popular supreme executive since John F. Kennedy, anything he says may make a decisive impact on the situation. Meanwhile the atmosphere in New York today is one of quite tension as millions of stockbrokers and company attorneys stay glued to their screens watching the carnage in Europe unfold, and all of them must be asking the same question: "Will it be our turn tomorrow?"
The situation in London this evening is calm but tense, with rumours of imminent government intervention if the situation deteriorates tomorrow. The European multinationals are feverishly negotiating massive mergers which will put them temporarily out of reach of the Russian raiders, even though anti-trust legislation will inevitably break them up within a matter of weeks or months; meanwhile, bank interest rates are expected to go through the roof tomorrow. Already estate agents in central London have been offered houses at less than three-quarters of their market value, in the first ripples to spread out into the broader economy.
Several smaller brokers ceased trading this afternoon, with three companies filing for bankruptcy. These firms were unable to invest heavily in ISDN communication systems and artificial intelligence based dealing desks; when SEAQ overloaded this afternoon their dealing error margin increased catastrophically until they were caught in the general maelstrom of disinvestment by panicked shareholders.
Downing Street has announced the resignation of the Chancellor of the Exchequer, and his immediate suicide by hara-kiri over the events of this morning. The announcement from the P.M.'s office confirms rumours which have been circulating since late afternoon. It is believed that Bank of Europe officials informed the Prime Minister that the current rate of disinvestment could drive UK industry into bankruptcy in five days' trading if strict monetarist policies were adhered to; knock-on effects could be expected to devastate the rest of Europe within a week at most. Despite her well-known attitude to interventionism, the Prime Minister made a statement supporting certain preventative measures at her recent press-conferance:
"It has come to my attention that the current catastrophic situation in the markets is the result of a complacent attitude towards foreign investment and trade, coupled with a very aggres sive, not to say unprincipled, foreign assault on our entire industrial capacity.
"May I take this opportunity to say how deeply concerned I am that, while British industry must stand on its own two feet, this is not a normal situation; this is a perfidious attack upon all things British. It would be tantamount to ignoring our na tional honour were we to refuse aid to our gallant companies in their time of need. Such aid will be forthcoming when it is required. We are fully pursuing all possible diplomatic channels with President Yeltsin, and I am confident that a negotiated settlement will be arrived at shortly.
"Due to a difference of opinion over interest rates, the Chancellor has offered me his resignation, effective as of tonight. I have accepted it. (The terms of his resignation are classified under the Official Secrets Act and any of you reptiles who tries to get hold of it is going in the slammer so fast your feet won't touch the ground. Understood?) In view of the impracticality of appointing a replacement at this short notice, I will be occupying this post until a suitable candidate can be coerced.
"There is no change in our long-term policies of de-nation alization and rolling back the nanny state. We cannot, and will not, permit small-minded and vindictive attacks to divert us from the grand sweep of history. British industry must, indeed is, learning to die on its own two feet, and will continue to do so for as long as I remain Head of State of these isles. As a standard of our determination, we have decided to proceed with the share issues of British Monarchy Group and British Justice PLC, regardless of the current market situation. (I can assure you that the Japs and the Arabs are going to go for these issues, which will add further weight to our balance of payments and cut off some more dry wood in the process).
"It is to be hoped that our friends in Europe will take note of the situation here, and take steps to ensure that economic cohesion triumphs over narrow-minded national isolationism in the hour of our trial. As I have said before, there is no alter native!"
Following yesterdays spectacular events, massive counter-attacks took place in the Moscow stock exchange during the night. While Tokyo and Hong Kong remained closed, GEC-Plessey moved into Moscow with a vengeance, buying up shares in the Samizdata-Krokodil electronic publishing group and Glavkosmos space enterprises. Details are uncertain, and it remains to be seen whether Glavkosmos will succumb to the British counter-offensive, but as the major intermediary in the Soviet consortium Glavkosmos is an obvious target for retaliation.
American neutrality was called into question when, late last night in Washington D.C., President Jackson issued a brief statement supporting IBM and equating the takeover of Mercury Telecom with "Mom and Apple Pie and Coka Cola". It is not clear whether this implies that the Cola Corporation is backing intervention in Europe; more information is expected following his speech later today. Ex-Secretary of State Henry Kissinger announced that a radical policy study was under way into the impact of the trade war on the Far East; he is believed to be especially concerned with rumours of Vietnamese infiltration of the Hong Kong stock exchange.
Fears of a second wave of computer viruses failed to materialise overnight, with many dealing rooms going back on-line at full capacity. EuroBank is today expected to make a general announcement concerning interest rates; rumours of massive inflationary measures cannot yet be discounted, despite the Prime Ministers' known hatred of such techniques.
The mood at many desks in the City can best be described as tense, verging on overwound. Collars are unbuttoned, ties are forgotten, and there are hollows under every eye this morning at the thought of a repetition of the events of yesterday. Dealers at Citibank were issued notification of an imminent 50% pay cut as an alternative to instant dismissal; this was promoted as a necessary fluidity-conservation tactic. Small bank and building society branches around the nation will remain closed today until the situation resolves. Meanwhile, rumours that Army Intelligence Corps and GCHQ systems analysts have been called in to help run BSF's investment net have not yet been confirmed.
EuroBank has just announced an across-the-board ten percent increase in the bank base lending rates. This has prompted sighs of relief from all the major fund clearing houses, but is expected to provoke an angry response in the House of Commons, and subsequently in the European Parliament, where it is perceived as a gamble with political suicide. The increase will be the first result of the crisis that the public at large have experienced, and will affect almost ten million mortgage holders immediately, with repayment increases in excess of 200% likely within days.
The announcement comes on top of panic-selling of GEC-Plessey shares on the basis of rumours that the electronics giant had over- extended itself in the Soviet market and was about to come under threat again from a Gorki-based consortium. Suggestions of an alliance with British Aerospace or Amstrad have been discounted by spokes persons for those companies.
Shares fell sharply from their opening prices, but recovered slightly half an hour into trading when buying programs were activated by unprecedentedly low prices. The DTI has not yet released details of its Emergency Economic Rescue Package, but an announcement from Downing Street is expected this afternoon.
In Moscow, the Politburo released a sharply critical statement, accusing several Soviet-based multinationals of placing personal gain ahead of the public good, and of forgetting their socialist origins. None of the companies concerned had anything to say in response to this accusation.
Catastrophe has struck the Stock Exchange in the past hour, with the revelation that IBM is definitely co-operating with the Soviet MGF consortium and Cola Corporation. Following the IBM takeover of Mercury, the company responsible for running the SEAQ dealer network, confidence in the very medium of trade has collapsed. It in considered likely that details of confidential bids are being piped direct to hostile corporate computers. While this 'outsider dealing' is definitely in breach of the law, it cannot yet be proven and by the time DTI inspectors and Scotland Yard have established the facts, many companies will be in receivership.
It is reported that the main Tandem fault-tolerant mainframes in use by Barcleys de Stoat Fader have become infected by a virus which is systematically downloading all their files into SEAQ. The blatant data piracy has shaken the board of directors, who are expected to announce a suspension of trading by the UK's biggest investment house in less than half an hours' time.
Chaos has hit the international exchange rates, with the ECU falling to 43 Kopeks, a completely unprecedented collapse. The FT100 index at 1100 G.M.T. stood at 1892, it's lowest level in ten years.
President Jackson has scheduled his big speech for 13:00 G.M.T., which will be covered by this data channel.
The initial effect of the rise in interest rates has been a massive drop in the cost of housing. Prices in the high street chains have fallen by up to 60% in one morning, and reports of estate agents engaging in suicide pacts have been coming in. Pedestrians are advised to be careful about venturing out on foot in the Square Mile and the Docklands Enterprise Zone, where eight suicides by jumping have been reported this morning so far. The London Undergrounds' Northern Line was reported to be at a standstill, with a record four bodies on the line in two hours.
The parliamentary Opposition has tabled a vote of no confidence in the government, and is predicting a defection by large numbers of back-bench Thatcherite MP's. Fears of an incoming hard-left government have done nothing to allay share instability in the system; the Opposition remains committed to a massive program of re-national isation, wage and price control, and other policies which in the light of the events of this week can be expected to be massively popular with the electorate.
Amstrad and News International Group have been bought out by Yegor Ligachev Technologies of Novosibirsk, a relatively obscure hydro-electric power project whose fluidity has been massively augmented in the European markets by the behaviour of their commercial big brothers. Rupert Murdock and Alan Sucrose were unavailable for comment, but an unattributable source has stated that Mr. Sucrose is to be offered the Managing Directorship of Sony. With the loss of these two multinationals, the entire UK television industry is now concentrated in the hands of Soviet-owned companies.
A vote of no confidence in the government has been scheduled for 13:30 this afternoon.
Reports are coming in of the lynching of two bank managers in Stoke-on-Trent by customers angered by the rise in mortgage rates. Labour councils in the North-West are said to be considering a general buy-out offer for all mortgage holders unable to sustain re-payments; in return for title to the properties, the councils are offering to maintain the occupants as sitting tenants in normal council accommodation.
The Trades Union Congress has called for an immediate one-week General Strike in those industries affected by Soviet take-overs, in an attempt to 'poison the pill'. General Secretary Todt had this to say:
"We're not going to sit around while them Russians take over our, our entire livelihoods. It's not right! Peoples' jobs are at stake and we can't just sit here while the foreigners move in. Europe is one thing, but the Soviet Union, the Americans, they don't care for our way of life. They don't know what it is to be British.
"We say that by striking now, we can make our companies so unattractive that the Russians will 'ave to scarper. But we got to do it now, because if we leave it t'KGB'll be through Congress House like a dose o'salts inside a month, you mark my words. I know them people.
"I call on the government to back our strike. It's not they we're striking against, it's these foreign loan sharks who're buying up t'country. If they use the trades' union legislation they'll be shooting themselves in the foot.
"Strike now, while it's not too late! Strike a blow for British Industry!"
President Michael Jackson shocked the world half an hour ago with his announcement that American corporations, with his approval, had signed a joint policy agreement with the Soviet MGF consortium. "This is a major breakthrough in international policy relations," the President sang to a mesmerised audience of his fans. "We have the opportunity to forge a lasting bond with our Russian friends and secure peace in Europe forever. We should not let such a thrilling opportunity slip through our hands. What has Britain ever given us besides George the Third, Hitler, and the discovery of Heroin? My fellow Americans, I call upon you to forget the cold war, forget the old fears, and embrace the future with open arms. Nothing less than our share portfolios are at stake here, and our Russian friends have just offered us the deal of the century!"
The President then answered questions and sang an encore from Off the Wall before leaving in a convoy of carnival floats escorted by a National Guard regiment in pink tutus. Throughout the conference he was surrounded by Secret Service men disguised as zombies and Disney dwaves, presumably to deter enraged British expatriates from attempting to assassinate him.
The entire State Department diplomatic machine ground into gear immediately after the speech, which amounts to a declaration of economic war directed at Europe. This is viewed unhappily in some quarters, for many of the Presidents' fans flocked into stadia all over the continent for his last concert tour ten years ago. However, in diplomatic circles it is seen as a shrewd move, adding political substance to the de facto hostilities which appear to be on the verge of succeeding. The presidential song and dance routine will certainly boost morale in the boardrooms of corporate America who elected him and stand to gain most from the conflict, and make it highly improbable that their conduct will now be investigated by the FBI. More significantly, the Presidents' known dislike of Mrs Thatcher now appears to have found a relatively harmless outlet in these corporate outings from his recording studio.
An immediate reaction from the joint European Embassy expressed regret about the Presidents' speech, and warned of possible trade sanctions specifically an embargo on exports of fresh bananas. It is not expected that Lucky's diet will be affected, however; when he arrived, the President insisted that the White House freezers include a decades' supply of his pets' favourite food.
In the Palace of Westminster, MP's are now taking a vote of no-confidence in the government. A large number of Tory MP's are expected to abstain, raising the possibility that this really is the end of the road for Thatcherism.
Reports of rioting in Eastbourne have been coming in. The rioters are predominantly middle-class home-owners with mortgages. Violence has been confined to the town centre, but Estate Agencies have been looted and set alight, and a building society manager has been lynched. Police riot suppression teams are standing by, but have not yet been used to disperse the crowds.
It is anticipated that trading on the Stock Exchange will be suspended within the next two hours.
The Thatcher government has fallen. At this afternoon's vote of confidence, more than two hundred Tory MP's abstained, resulting in a rollover victory for the opposition. After more than fifteen years in office, the Prime Minister now has four weeks to vacate Number Ten Downing Street. In the present climate of public opinion, a MORI poll commissioned by the Guardian newspaper this morning shows support for the Labour Party running at 62%, the highest level on record. The party leader, Mr Ken Leninclone, was unavailable for comment; he is believed to be finalising his cabinet team.
Trading on SEAQ has been suspended indefinitely, pending DTI and Scotland Yard inspection of irregularities in the affairs of at least twenty major companies, including banks, building societies, investment brokers, and multinational corporations.
A total of 32% of all the FT100 company shares are now held in Soviet hands, and 19% in American hands. An announcement on compulsory nationalisation is anticipated as one of the first moves of the incoming left-wing administration.
The outgoing Prime Minister is believed to be seeking asylum with a number of foreign governments. The South African and Paraguayan embassies have indicated that if she makes an application for citizenship it will be well received.
At the suspension of trading, the FT100 index was hovering around the 1600 mark. The number of suicides in the City had risen to twenty-three confirmed and four in intensive care. The ECU was hovering at 41 Kopeks, but showed no signs of making a late recovery.
And finally, we bring you a late announcement from the caretaker government, directed to the Kremlin and the White House:
We surrender, tovaritch.