Absolute Risk (29 page)

He looked at Gage and said, “It’s Ilkay. It has to be.”

Ibrahim lowered his arms and tapped the flowchart.

“If I’d flowcharted the last ten years,” Ibrahim said, “all of the arrows would’ve pointed at Ilkay. He was even the one who arranged for me to be released to the Turkish embassy in Riyadh. He helped get me on a flight to Istanbul and then to Beijing.”

“Does he know you’re here?”

Ibrahim shook his head. “I had a breakdown while I was working for the G12. They put me into an institution, and when my head cleared I got permission to travel to Canada. I needed to think things through. After I decided not to go back, Rahmani met me there and smuggled me across the border. I’d done what I wanted to do to get even for what America had done to me and just wanted to be left alone.”

“Get even how? “

Ibrahim didn’t answer. He just stared at the flowchart. Finally, he said, “It doesn’t make a difference. Even if the Chinese framed me, it was the Americans who had me tortured.”

“All Americans?”

“Have any of them been punished for what was done to me?” Ibrahim’s voice rose, almost to a scream. “Anyone at all?”

Gage paused before he answered. The answer was obvious, but maybe not to a man tortured into hating everything American.

“Yes,” Gage said. “Three weeks ago in Marseilles.”

M
anton Roberts is calling.” Cooper Wallace’s secretary spoke over the intercom. “He wants to know whether there’s anything you’d like him to do.”

Wallace knew that what he wanted Roberts to do was to cancel National Pledge Day. He’d woken up twice the night before: the first time in a hot sweat, his mind pounding out,
Mine eyes have seen the glory of the coming of the Lord,
and the second time in a cold sweat, the words of “For What it’s Worth” coming at him again. He knew that something was happening, and that what it was wasn’t at all clear.

“I’ll talk to him.”

I have read a fiery gospel writ in burnished rows of steel.

Wallace heard the click of the connecting line, then said, “Thanks for calling, Manton.”

“Is there anything—“

“I wish that you’d consider postponing National Pledge Day,” Wallace said. “There’s uneasiness in the country and I wouldn’t want to exacerbate it.”

“I think everyone pausing together will have the opposite effect,” Roberts said. “It will bring us together.”

Wallace felt Roberts’s heavy, evangelical tone seeping into him.

“It will be like a moment of silence at a football game,” Roberts said, “like for fallen soldiers or for police officers.”

“At least keep it short,” Wallace said, “and try to mute the apocalyptic tone that seems to have dominated your recent Sunday services and rallies.”

“I don’t think it’s something that I’m imposing. It feels to me like a welling up of the Holy Spirit.”

Wallace winced. The least attractive aspect of Roberts’s personality was his view of himself not as a self-motivated actor in the world, but as a vehicle of a higher power.

Roberts continued before Wallace had a chance to respond. “Maybe it’s just another way of expressing what you call uneasiness.”

“You could be right.” Wallace felt a sort of relief as he said the words. He did believe in a higher power, and not an impotent one. One that intervened in the world, not observed it like it was a cosmic experiment. But still—

“Would you consider coming to the White House and leading it from here?” Wallace asked, wondering whether Roberts would rather have the long-term prestige of the place than the immediate thrill of standing before a filled stadium.

“I’d be honored,” Roberts said. “Maybe you could lead the pledge and I’ll say the prayer for President McCormack.”

“We’ll work that out between now and then.”

Wallace’s intercom beeped. “I have a meeting that’s about to start,” he said to Roberts. “I’ll talk to you soon.”

Wallace punched the flashing button and said, “I’ll come out.” He then walked from his office and into the reception area. Former president Randall Harris rose from the couch. They shook hands.

“Thanks for seeing me,” Harris said.

Wallace led him back inside and shut the door.

“I expected you’d be dropping by,” Wallace said, directing Harris to one of two wing chairs, then sitting down in the one next to it. “Or someone like you. The president has always had an indirect way of communicating with me.”

In Harris’s stiffening face Wallace saw that Harris knew that was not entirely true, that Harris knew about the private meeting in which President McCormack himself had warned him about Manton Roberts.

Wallace ignored it and asked, “What did he want you to pass on?”

“That you should be prepared to finish out his presidency.”

Wallace drew back. “That’s not what—“

“He doesn’t think he’ll make it.”

“Of course he’s worried,” Wallace said, “but I—“

“It’s not that. He’s had his doctors minimize the seriousness in order to give you breathing space, to reduce the pressure on you by making the public see you as a caretaker for as long as possible.”

Harris leaned forward in his chair. “He realizes that he made a mistake in how he’s treated you over the last few years. Isolating you. I think, and this is just my opinion, that increasingly powerful vice presidents over the years have created an unnecessary imbalance. And in righting it, he’s afraid he overcompensated.”

Wallace used a nod of understanding for his response. It wasn’t an I-told-you-so moment.

“He now realizes that you’ll need time to get your own team together,” Harris said. “Usually new presidents have months for a transition, not days.”

“Is he asking you to help me?” Wallace asked.

Harris shook his head. “I think part of the reason he picked me to meet with you is because he knows I’m in no position to help, or interfere for that matter.”

“Because of Relative Growth?”

Harris nodded. “It’s a mess. I made a serious mistake in getting involved with those people. And as soon as this flurry dies down, I’m getting out.”

I
brahim had remained silent all through Gage’s recounting of how he’d spent the days after he’d been called to New York by Milton Abrams.

“Abrams is driven by questions not only about Hennessy,” Gage said, “but about Relative Growth Funds. He thinks it’s a fraud and that they’re using your academic work as a kind of camouflage.”

Gage expected a protest. Instead, Ibrahim nodded.

“He’s right. It was all nonsense. I was doing what everyone else in academia and Wall Street was doing back then, descending into the occult. There’s no objective reality that matches phrases like ‘two-step binomial trees,’ any more than you can take a stroll down the block into the seventh dimension to buy a pack of cigarettes.”

“Then what did Minsky and Relative Growth want from you?”

Gage guessed the answer before he’d finished the question, and suspected that Abrams would’ve guessed it, too.

“Magic,” Ibrahim said. “You have all of those quantitative analysts on Wall Street and in hedge funds who pray to a mathematical god that speaks in equations. They needed one of their own. More even than money, they needed the magic and the mystery and the miracle. Minsky isn’t an economist. He’s barely a mathematician. But he’s a master psychologist. Untrained, but innate. Like a professional gambler or a mega-church evangelical minister. Newton said that he could ‘calculate the motions of heavenly bodies, but not the madness of people.’ Minsky can do both, but only some of the time.”

“Which means you set him up.”

“Of course. And very personally. It’s his own fault that he began to believe in his own magic. He deserves what’s coming to him.”

“And what’s that?”

“Humiliation.”

Gage shook his head. “Hennessy wasn’t worried about Minsky’s possible humiliation. It was something else.”

Ibrahim pointed at Gage’s flowchart. “It’s right there.”

“You’ve got better vision than I do.”

“Are there more boxes than you’ve shown me?”

Gage drew the rest from memory.

Ibrahim reached over and tore it up.

“Hennessy was close, but didn’t get it quite right.” Ibrahim then drew a new one.

Gage looked it over and said, “I take it that the arrowed lines are investors’ money going into Relative Growth?”

Ibrahim shook his head. “Not only money. The G12 put in something else. And that something else is the foundation for almost everything Relative Growth did.”

“China only has one other asset: U.S. treasury bonds.”

“Bingo. We have a winner. And they dumped every single one into Relative Growth.”

Gage inspected Ibrahim’s face, looking for a sign that the claim was hyperbole or exaggeration. There was no way China could’ve unloaded a trillion dollars’ worth of U.S. debt without anyone in the financial community realizing it.

“When you were in Marseilles,” Ibrahim asked, “did you notice the China-NexCo Towers?”

Gage nodded. The twin structures, slick glass and matte gray, had just risen fifty stories tall next to the container port. Like the Great Wall, they were large enough to be visible from space.

“The construction financing was provided by Relative Growth Funds,” Ibrahim said.

“It was in the news,” Gage said. “No one was hiding it. The money came from investors in the hedge fund.”

Ibrahim leaned toward Gage. “But what secures Relative Growth’s loan to NexCo for the construction?”

“What always secures loans, the land and the building. If NexCo defaults, Relative Growth forecloses and takes the property. No different than a home mortgage.”

Ibrahim shook his head, then grinned with owner’s pride and said, “The loans are secured by U.S. treasury bonds.”

Ibrahim paused to let Gage repeat the phrase in his mind. Only on the second time through did the reality of it hit him: The loan wasn’t secured by the hard asset, but by soft paper, by no more than a promissory note.

“And that’s not the only one,” Ibrahim said. “It’s the same thing with the tens of millions of acres they’ve bought in Africa for bio-fuel production to free themselves from their dependence on Middle East and Russian oil. Same for mines and platinum futures and currency speculation. If NexCo or any other Group of Twelve investment defaults on a loan, the Group of Twelve simply surrenders the treasury bonds to Relative Growth.”

Gage felt the vertigo of free-falling off a cliff. “And when the financial community discovers that China has dumped all of its bonds—“

“The bond value plummets and Relative Growth is left having to make good on the loans, but they won’t have the cash to do it. Their investors will lose trillions of dollars and the banks that Relative Growth borrowed money from will lose trillions more. The entire U.S. economy will collapse and take Western Europe with it.”

The assumption that China needed a strong U.S. economy and needed to support the dollar and the prices of treasury bonds had disintegrated.

Even worse. Gage remembered once listening to Warren Buffett on the radio as he was driving to an appointment in San Francisco. Buffett saying that it was impossible for the Chinese to dump their bonds because they’d just have to exchange them for dollars and if they didn’t, the bond prices would collapse faster than they could sell them since there would be a rush to sell by all of the world’s bondholders.

If Ibrahim was right, Buffett was wrong. Fatally wrong.

Buffeta-buffeta-buffeta.
The secret had been in the ramblings of Hennessy’s deteriorating mind. It wasn’t the sound of a motorcycle, but the sound of wrenching chaos.

“It doesn’t make sense,” Gage said. “Why would they do something like that? The U.S. is their biggest customer.”

“For how long? The Chinese government came to the conclusion that the U.S. economy would eventually collapse under the weight of its debt—not just the mortgage-driven debt and the government debt, but the money Americans spent on junk. iPods, plasma TVs, and SUVs.”

“That’s a long way—“

“No it isn’t. Within ten years, the people of the U.S. will be spending ninety percent of their GNP on two things: debt servicing and food.”

“So they’re grabbing everything they can now and are turning the U.S. into a colony,” Gage said.

“Don’t be an idiot,” Ibrahim said. “It’s already a colony. Eighty percent of the goods in American stores comes from China now. And they’ll still come from there because the U.S. won’t have the money to rebuild its industries.”

“They’re insane,” Gage said.

Ibrahim looked away. Gage saw a flutter of uncertainty in his eyes, as if he himself was drowning in the meaning of the events. He then looked back at Gage, and said, “The Chinese have a concept,
tian ming—
“

“The mandate of heaven.”

Ibrahim nodded. “They watched the growth of religious and political millennial movements in the U.S. The fantastical self-deceptions and delusions of economists and hedge fund managers, the contradiction between building up companies and then cutting them up to sell off the pieces for a short-term profit—and realized that when the going got tough, Americans would turn on each other. American history may be invisible to Americans, but it’s not to the Chinese. They saw that if a civil war happened once, it can happen again. They remember the genocidal violence committed against the native people, and believe that it can be—will be—turned on immigrants and homosexuals and Jews and Muslims.”

Ibrahim’s eyes went blank for a moment, then he blinked.

“I used to watch CNN with my Chinese colleagues. They were fascinated by Manton Roberts and his movement and by people like him, and amazed that Americans couldn’t see him for the revolutionary that he is. To Chinese ears, he’s been saying for a decade that the U.S. was founded as a Christian nation, as the City on the Hill, but that Christ’s mandate has been withdrawn. In his mind, that’s all he needs to justify a revolution.”

“I’m less interested in their theories of politics,” Gage said, annoyed that Ibrahim was drifting into a political justification for his participation in the conspiracy, “than in how the Chinese government pulled off this scam.”

“Easy. It discounted the value of the bonds and put them into the hands of the Group of Twelve. All of them were educated in U.S. business schools and each of them was a bearer of the amorality taught there. They then cut a deal with Relative Growth Funds, with Minsky himself.”

Gage could see the dominoes lined up and realized that there was no way to stop the first one from falling, even if it could be located and exposed.

“I know what you’re thinking,” Ibrahim said. “But if you expose it, it will create a panic that’ll trigger it.”

Gage nodded. “Relative Growth is resting on nothing but air.”

“Worse than that,” Ibrahim said. “What keeps it hovering is its investors’ money and the loans they get to leverage their currency transactions and commodity speculations. The loans are short-term, but massive. Bank after bank will collapse as they discover that Relative Growth can’t pay them back.”

Gage thought of Batkoun Benaroun and the platinum flown out of South Africa on the Chinese planes, and imagined the same thing happening throughout the world.

“They were so powerful,” Ibrahim continued, “that Minsky, with the help of the Chinese, could move the price of almost any currency or commodity or precious metal at will.”

“Including platinum,” Gage said.

“Of course.”

Ibrahim reached for his mouse, searched his document directory, and opened a platinum price chart.

“Virtually every price movement,” Ibrahim said, pointing at the dips and spikes, “was controlled by Minsky. They didn’t gamble on the future price of platinum, they controlled it and leveraged everything they did with it. For every hundred million dollars of their own money they’d use, they’d borrow ten times more. If they forced the price of platinum up a hundred dollars, they’d make a thousand. If they laid out a hundred million, they’d make a billion.”

Gage heard in his mind Abrams’s accusations and former president Harris’s defense.

“Then Relative Growth isn’t a Ponzi scheme,” Gage said.

“Of course not. It was foolish to think it was. But it all rests on one thing, the bonds.”

“But how did they conceal that the Chinese were dumping them? “

“They set up Chinese-sounding front companies as nominal owners, as middlemen for the transfer. It’s just a computer entry for the Treasury Department. There was no paper involved. It looked as though the bonds were simply moved from one Chinese hand into another. It was probably unnecessary, since no accountant would ever check.” Ibrahim shook his head. “The accounting firms that Relative Growth hired certainly didn’t. And they found what they expected to find: two trillion dollars of assets. What Relative Growth hid from the auditors was that their assets were somewhere in the neighborhood of three trillion, not two.”

Gage thought for a moment, then it came together. “And by concealing assets that they were using as security for some of their borrowing, they concealed both their methods and their liabilities.”

“Exactly. It’s not that different from someone applying for a mortgage to buy a house and failing to disclose that he owns a dozen other houses, all with big mortgages.”

Ibrahim spread his right hand open on the desk. “Over here we have what Relative Growth is willing to allow the world to see.” He spread his left hand. “Over here, we have the secret manipulations of an offshore hedge fund.” He brought them together. “In the middle is Minsky.”

“Why the devil did he go along with this?”

“Because he doesn’t understand it, or if he does, he thinks that Relative Growth is powerful enough to control the world—but it isn’t.”

“Can it be stopped?”

Ibrahim glanced at a calendar standing on the far corner of his desk, and then shook his head.

“Right now, Relative Growth needs cash to pay the dividends to its investors that are coming due. And forcing the collapse of a major currency is the fastest way to get it. Just like Soros did in England in 1992 by betting against the pound and breaking the Bank of England—except Relative Growth is wagering not just ten billion like Soros did, but a hundred billion.”

“You haven’t answered my question,” Gage said.

Ibrahim looked again at the calendar.

“The problem is that Relative Growth uses a currency trading system that’s decentralized in a thousand trading desks around the world. When they attack a currency or a commodity, no one can trace the move to them. It just looks like the whole world is moving at once and all in the same direction. And they use an algorithm that’s triggered by a set of events they stage and then it operates on its own.”

“What events?” Gage asked.

Ibrahim shrugged. “Only Minsky knows, but it will happen soon. The Group of Twelve has decided that it’s time to kill off Relative Growth and are arranging it so that Minsky pulls the trigger himself.”

“And you know this because …”

“I designed it,” Ibrahim said, then spread his arms to encompass his cell. “And have been managing it from here since I came to the States.”

Ibrahim lowered his hands and gripped them together on his lap.