The Land of the Free (6 page)

Ensign Kim Soo-Yun was resentful
that this exercise was called so abruptly.  His wedding had been planned for a
long time, but was now suspended just days before it was to happen.  The
expense and inconvenience both families incurred was unreasonable, and he was
afraid it would lead to ill will towards him.  As chief sonar technician, his
role on the T
eukbyeol
Frigate was critical to any mission, but he was sure the mission itself was not
critical.  The Americans were probably just sending another message to the
North.  The drill was routine.  They would sail into disputed waters, the North
would get edgy and make threats, a lot of ruckus would be raised in diplomatic
circles, and he would return home to two angered families.  North Korean submarines
were primitive and very noisy.  He was confident he did not need his listening
gear to hear them.  He could literally pick them up in his sleep, if his head
was anywhere near the hull of the ship.  He sat at his post, dutifully but
unenthusiastically, listening to a background of surface ships’ propellers,
with the occasional sound of a sea mammal punctuating the boredom.  In the
midst of a yawn, he heard something unusual.  In a split second his attitude
changed to alarm when he made out the high pitched whirring sound, quickly
building in its intensity.  He had heard this before, in training, but never in
the field.  It was a torpedo, and it was closing in.  His mind raced for a way
to alert the crew, but it was too late.  The explosion came just a few seconds
later and he was killed instantly.  The rest of the crew joined him over the
next few minutes as the frigate exploded and sank to the bottom.

The South Koreans issued angry
diplomatic statements, accusing the North of murder, and the Chinese did the
same, privately.  Fragments of the torpedo that were recovered by the Americans
promptly disappeared into classified archives.  All that was ever issued was a
brief communiqué stating that “markings on the torpedo match those known to be
used by the North.”  The media picked up the comment as fact and there was
immediate international outrage at the North.  There was no coverage given to
the North’s protest that they lacked the technology to penetrate the defensive
zone around the American and South Korean fleet with their antiquated
submarines. 

…

Having recently arrived in the
South China Sea on short notice, the officers of the aircraft carrier USS
Ronald Reagan began to organize their battle group to create a defensive
perimeter.  China had been modernizing their submarine fleet, so they had to
take that danger into account, ensuring that they would detect any intrusion
into the secure waters occupied by the battle group.  Only after assuring their
own security could they effectively serve as a deterrent to any actions towards
Taiwan.  As they sat down at the Captain’s conference table, the mood was
light.  The weather was much nicer offshore than on the mainland at this time
of year, where the monsoon was in full swing. 

As the meeting began, they were
taken aback when an alert from the sonar technician rang.  The Captain had to
pause the meeting to take the call. “You’re kidding,” he said.  “I’ll sound
general quarters immediately.”

“Gentlemen we’ve been pinged
several times, as have a half dozen other ships in the fleet.  I’m sounding
general quarters.”

The pings stopped as quickly as
they had begun, but the fleet was now aware that it was vulnerable.  Submarines
could not have infiltrated their position without being heard, so they must
have been waiting for them since before they arrived.

…

Junior trader Fanni Ronaldi had
been on a hot streak, and it seemed like every time he used more leverage, his
timing of the market improved.  He could extract tens of millions in profit on
an investment of only a million or so, as a result of small movements in
various indices.  Universal’s risk managers, whose role is normally to oversee
traders and limit their exposure, were more than happy to ride his hot hand,
and had turned a blind eye to the risk involved in those levels of leverage. 
Hehehe,
they’ve never busted a rogue trader for
making
money
he thought to
himself.  This morning, Fanni was betting on a combination of higher bond prices
(lower interest rates), lower gold prices, and higher stock prices.  His
algorithms predicted these movements, and his gut told him the economy was
improving rapidly, yet these indices had not yet showed it, so the price
movements had to be imminent.

The trading day had begun slowly
enough, and Ronaldi gradually levered up his positions, particularly in
Treasury bonds.  He had built up a huge position by 11:00 am, far beyond what
the firm could cover, but confident it would not have to.  After all, his track
record proved he was a sage trader.  He was sure he would be a hero by this
afternoon.  Gold was down slightly and Treasuries were up slightly.  At his
levels of leverage, this would make the firm a fortune.

Shortly after 11:30, gold abruptly
shot up 50 dollars an ounce on strong volume.  Fanni started to break a sweat,
but was sure this would correct quickly enough and was relieved when it fell 10
or so, now up 40 dollars on the day.  But then just as quickly it shot up
another 50.  It was now up 90 dollars for the day.  This was looking
dangerous.  Stocks fell slightly, compounding the problem.  As long as
Treasuries held, he would be okay.  Before he could finish thinking this,
Treasury prices started to plunge, again on heavy volume.

In only a few minutes, Ronaldi had
incurred losses that would bankrupt Universal, among the largest of investment
banks on Wall Street, many times over. 
Things can’t happen like this
,
he rebuked himself angrily.  Yet it was happening exactly like that and it was
getting worse.  He felt sick to the stomach, yet he was still too paralyzed
with disbelief to change course.

It’s going to reverse any second
now.  It has to.  If I cover my positions right now, the company goes broke and
I’m going to jail
thought Ronaldi. 
When you lose money, everyone
insists you acted alone.

Ronaldi saw things only getting
worse, with spikes of heavy volume, putting his positions further and further
underwater.  Finally unable to face the situation, he walked out of the
building for lunch.  Those who saw him leave that day saw tears in his eyes,
and a bereaved expression on his face.  They assumed there must have been a
death in his family.  His abandoned car was found near the George Washington
Bridge.  His body was never recovered.

Had Ronaldi persevered until the
end of the day, he would have experienced the effects of an unseen hand at
work, correcting each of the moves in the market that had initially worked
against him.  Universal’s automated loss warnings alerted them of his positions,
and by the time those positions were liquidated, the losses had been recovered
with the recovery in the market.  At the end of the day, they had realized a
small profit.

…

“Dr. Havenstein, I’m concerned
about today’s 10 year bond auction,” said Tom Gallant.  “Interest rates have
spiked 20 basis points on this auction, and it’s not nearly over.  Also, gold
just popped, and Treasury bills are selling off.”

“Are the foreigners not stepping
in?” asked Havenstein.

Gallant made a few phone calls, and
answered.  “It looks like the Chinese are not buying the 10-year bonds this
time.  I think that’s one thing the President was concerned about.  Gold and
T-bills were the others.”

“I see,” said Havenstein.  “We’ll
have to step in here.”

Havenstein then spent about 15
minutes making calls to various investment banks.  “Tom, check the rates now. 
You should see some improvement.”

When Gallant checked, he found that
Havenstein’s phone calls had quickly brought rates back to their previous levels. 
“How’d you pull that off?”

“I told several investment banks I
wanted rates back to where they started, and I would buy any bonds from them
that they had to buy today to bring those rates down.  They’re making obscene
profits off this, but it’s the price we pay to keep the fingerprints of the Fed
off the actual auction.”

A half hour and a few more phone
calls later, Havenstein was able to bring gold prices and T-bill yields back
down.  “The President was right, Tom.  My deputy Gil Gonneau called and
confirmed it.  There was someone who wanted to bring a panic to the markets
today.  The Fed has loaded up on a lot of securities.  We’d better be able to
unload most of them before our next reports go out or there will be hell to
pay.”

…

Yu-Xin Zheng sat in front of the
central committee, to give his briefing.  The meeting was held in a small board
room devoid of the ornate decorations typical of the ceremonial Chinese
reception rooms.  “Gentlemen, the response of the United States was exactly
what I feared it would be.  They have no interest in accommodating the needs of
the Chinese government to safeguard the value of their savings.”

“What does Zheng Yu-Xin recommend
as our response?” asked one of the leaders.

“I suggest an incremental
response,” replied Zheng, sitting upright in his chair, knowing that despite
their protests, the committee would never condone a radical response.  “To
begin with, do not add further to your portfolio of American Treasury bonds. 
They have an auction tomorrow, so boycott it.  Accumulate gold and sell some
short term T-bills.  Consider doing this in one swift move, to send a clear
message.  Tomorrow would be an ideal date.  Meanwhile, I will seek a willing
buyer of your existing long term debt, so it does not go on the open market and
precipitate a collapse in the value of the American dollars you already hold.”

“The military wants a more forceful
response,” said another member.

“Then restructure your cabinet to
give them an enhanced role,” said Zheng.  “The Americans think your Generals
are all radicals who hate them.  Pick a few Generals you can control and put
them into the cabinet.  The Americans will understand that the stability of
China is not to be taken for granted.”

“What about a concrete military
response?  We believe the incident with the Koreans was set up by Washington to
pressure us.  North Korea is incapable of that kind of attack.”

“Of course it was Washington,” said
Zheng, still sitting upright and relatively motionless.  “This is to be
expected from them.  But remember, you cannot undertake a bigger response than
you can sustain in the long run.  A symbolic move is certainly appropriate. 
You may send a message by exposing the vulnerability of the fleet the Americans
have in the South China Sea, but you cannot risk starting a war without
exhausting diplomacy.  Move some assets to the Taiwan Strait.  The Americans
will understand that and will position their forces accordingly, but they will
also understand it is a symbolic gesture, and not a declaration of war.”

“How will this move us closer to
resolving our issues with American finances?” asked another leader.

“I will speak with my contacts in
the international community and develop a long term solution to the problem of
America’s fiscal irresponsibility,” said Zheng.  “This is a problem for the
world, not just for China.”

“I need to see you John.  Soon.” 
Robbie rarely called this late, and John was concerned to hear the agitation in
his voice.

“What’s up, Robbie? I hope
everything’s okay.”

“It’s not anything personal.  I’m
not in trouble, at least not yet.”

“Is it related to what we spoke
about in the spring, at Jessie’s graduation?” asked John.

“Yes, that and more.  I’ve got the
scoop on it, John.  They’re planning something alright.  It starts in San
Marcos and involves refitted shipping containers.”

“
What
?”

“Does ‘security to be maintained by
any means necessary’ sound serious to you?”

“Yeah, sounds serious,” agreed
John.  “And it also sounds like something you should have left alone.  Are you
sure you want to stay involved in this?”

“It’s too late for that
consideration now.  The guy who faxed me the memo with the proof just
disappeared.  He was supposed to call tonight but never did.  I called his wife
and she says he never came home tonight.”

“That’s awful.  I wish you had
never gotten into this.  I may have hinted at this over the years, but I don’t
think I’ve said it to you plainly.  I’ve always suspected the accident that
killed Joanne and little Sarah was rigged.  I stumbled on a scandal where the
senior executives of a military contractor had loaded up on derivatives backed
by shares in a small oil services company.  Their timing was exquisite, because
the company promptly announced a sweet deal to rebuild Kuwait’s oil
infrastructure after the Gulf War.  I tried to get the SEC to start an
investigation, and they refused.  So I wrote a memo to the chair of the House
Banking committee, explaining the issue.  Not only was there no follow-up, but
the accident happened shortly after that.  There were other incidents that made
it clear in no uncertain terms that I’d be better served not going down this
road.  This kind of thing is just not worth the tragedy it can bring you.

“I never knew you suspected it was
a hit, John.  That’s awful.  You’d probably trade anything to go back in time
and stay out of it.  I don’t blame you in the slightest.  But this is no
financial scandal.  I don’t know how I could live with myself if I did
nothing.  I don’t expect to be called a hero.  I don’t care about that.”

“What are you on to?  And what can
I do to help?  I’ve been out of touch with the process too long to be able to
start any kind of investigation.”

“I’m not interested in an
investigation.  The FBI doesn’t seem interested at all.  I need to decide what
to do with the information.”  Do you have any plans this weekend?”

“No, I’m free.  Where do you want
to meet?”

“I thought it might be good to come
up to my camp in the Adirondacks.  It would make for a nice weekend in any
event.”

John couldn’t resist.  It had been
a long, sticky summer in Philadelphia and he hadn’t properly stretched his legs
or breathed cool mountain air in a long while.  And Robbie’s place on Silver
Lake was just the place.  It was right beneath Whiteface Mountain, which
separated it from the slightly busier but still charming Lake Placid.  He could
almost taste the air already.  “I’ll make my arrangements right away.  Is Jess
coming up?”

“No, she’s got a new job with some
New York State Environment Department and they’re involved with testing for
toxins in the Hudson River.  She’s too busy to join us, and has been all
summer.”

“Well, tell her I’ll miss her.  See
you this weekend.”

“Looking forward to it, John.  I’ll
head up late tomorrow, after I arrange for a little insurance for the
information I have.”