by Randy Dutton
An untouched tray of locally-produced appetizers lay within reach. Too nervous for food, the group’s attention was focused on the heavy oak door that separated them from the larger conference room. Try as they might, the quartet could hear nothing from the other side.
When the solid door swung open, a cacophony assaulted them.
With a sweep of a hand, the husky female master-at-arms announced, “You may enter now.”
The bankers followed the lawyer and entered the Alaska Provisional Government meeting room.
“The committee shall now come to order!” thundered acting legislative leader Joe Barco, simultaneously gaveling the crowd into submission.
When the noise abated, Barco resumed. “I want to remind everyone that nothing said here shall be discussed to anyone outside this room. The Chair recognizes Mr. James Hancock, Esquire, from the great state of Texas.”
Jim Hancock, stepped to the podium and scanned the waiting faces. “Thank you for your time. I’ll get to the point. What we have put together is a proposal we believe will interest this astute body—”
“And what might that be?” yelled a representative from Nome.
Barco gaveled three times.
The attorney cleared his throat. “We propose Alaskans buy back Alaska from Russia.”
The crowd erupted in jeers and laughter.
Again the gavel pounded while legislators scorned the visitors for wasting their time. Adding over the gaveling, Barco yelled, “Let’s hear them out!”
Finally, the room quieted.
“What they bring to us is a more dispassionate view of our situation,” Barco counseled.
Jim walked to the middle and gravely looked at the delegates. “You were screwed! You know it, and we know it! But we think there’s a way to turn the tables.”
He had their attention.
“We propose floating a $1.5 trillion Alaskan Bond Issue, backed by the full value of Alaska’s resources.... And before the question comes up, yes, this includes developing the CO2-producing oil and gas so plentiful in Alaska.”
“But the UN said we can’t!” an oilman yelled.
“We got guns! Screw the UN!” another cried out.
Hancock’s head shook slowly. “If Alaskans aren’t willing to tap the resources under a free Alaska, the Chinese will...and neither you, nor the UN, will have much to say about it – guns or not. You resist and China or Russia will brutally depopulate The Great Land” — the translation of Alaska’s Inuit name registered with the crowd — “of Alaskans and repopulate with many of the 30 million excess Chinese males for whom there are not enough brides.”
“What would be the bond terms?” asked a delegate.
“The bonds will have to offer a competitive interest rate and will have no early repayment penalty.” Hancock looked around the room authoritatively. “Russia wanted several things when it bought Alaska. It wanted to push America away from Russian borders, which included American military radar and missiles. That would be one of the issues Alaska could guarantee.”
Hancock raised his hand to quell the increasing murmuring.
“Secondly, Russia wants to claim the North Pole and rename the ocean. That also should be acceptable.”
Again he had to quiet them.
“Third, Russia wants money and to distract China from coveting Siberia. Developing Alaska’s resources does that...and Russia would want a profit. I think we could entice them to take $100 billion profit for their share.”
“Why does Russia want to distract China from Siberia?”
“Because Siberia’s resource rich and China needs those resources. China has no intention of abiding by the UN Carbon Law that was put into place last summer. And Russia has a declining population that can’t sustain a significant Siberian presence. Chinese workers already are seeping into Siberia as workers. For centuries, China has considered Siberia in its sphere of influence.”
“Where the hell are we going to get $1.5 trillion?!” a bush pilot delegate from Dutch Harbor challenged.
Jim grinned. “Partly from the Chinese.”
A commercial fisherman stood. “Why would the Chinese give us money when they’ve got a deal with the Russians?”
“Because Alaska’s going to secretly buy up something at a deep discount that they’re going to have to buy back from you for full value – worth about $1 trillion.”
The crowd was completely bewildered.
“Let me introduce Agnes. She’s an investment banker with strong ties to Wall Street. Agnes, it’s all yours.”
A heavy-set middle-aged woman with cropped auburn hair and too much rouge stepped forward. “Good morning. American investors and companies are sitting on a great deal of cash, waiting for America to throw out the current progressive government and restore a capitalist system with fair rules. We propose floating a bond that will tap that cash and provide Alaskans enough funds to pay off the Russians, and secretly buy up the old China Bonds.” She spent the next 10 minutes educating them on the China Bond history.
“If the Republic of China defaulted in paying interest in 1939, why would the Chinese Communists feel obligated?” asked the miner.
“China was fighting the Japanese. The Chinese rulers said it intended to make good the payments...after the war. The civil war prevented fulfillment of that promise.”
“But again, it’s a different government. Why should they pay for the debts incurred by another?”
“China has violated the Successor Government Doctrine.”
Agnes saw a few blank stares.
“It’s a matter of international law that a successor government is held responsible for payment of sovereign debt obligations of its predecessor.... Okay, let’s try this. The US owes over $26 trillion. If just changing leadership meant the new regime didn’t have to honor the old one’s accumulated debt, we’d continue to rack up debt and change governments every few years.”
Every head nodded understanding.
A miner interrupted. “Since Washington, DC created the $26 trillion in current US debt, maybe the US could force DC to secede and alleviate America of debt. Let’s see China get paid for its US bonds then!”
The committee broke into laughter.
Barco’s gavel pounded several times. “The committee will come to order!”
“Could you repeat how China feels it isn’t obligated under that Doctrine?” the fisherman asked when the room had quieted.
“China pretends it’s a responsible international player. But the World Trade Organization requires member countries to meet their economic and financial obligations. China has not done this.”
“Doesn’t not paying the bond affect their credit rating?” A timber company president asked.
“Good question. They are in violation of SEC rules. China and many of its state-owned enterprises participate in US capital markets, thus fall under SEC jurisdiction. At the same time, as issuers under US securities laws, they often omit material information in their offerings such as debt default. This is information investors deserve.” Agnes saw the timber operator wasn’t satisfied. Her index finger rose. “As to your question about their credit rating, the nationally recognized statistical rating organizations—”
“You mean like Fitch, Standards and Poor, and Moody’s?”
“Yes. They consistently give China artificially high long-term foreign currency debt ratings and don’t recognize China’s actual selective-default rating.”
“Why’s that? Don’t they have a self-professed responsibility to investors?” one of the legislators asked.
“Because rating organizations are paid by customers to help their credit rating. Look, back in 2008 the Senate and House had resolutions to restrict China’s access to US capital markets until the bonds were satisfied, or to require full disclosure of their selective default status on pre-1949 bonds in prospectuses registered with the SEC.”
“What happened?”
“Politics. It never got to the floor.”
She looked at a note atop the large file folder on the podium. “Yes. I won’t boor you with the details, and I’ll leave the folder for your financial committee to study. Suffice it to say, in what’s called the Affirmative Concession of Obligation, the PRC selectively paid back the British in 1987 to normalized access to British markets. It is this accession that should apply to Alaska bond holdings.”
“What did the Brits get out of it?” the miner asked.
“Under their Agreement, dated June 5th, 1987, the Chinese government agreed to pay the UK more than 23 million pounds sterling for bond repayment.”
“What was the percent repayment to the accumulated debt?”
“We don’t know. It was lumped together with other debt, and the details are kept secret. But the point is...China acknowledged its obligation.”
“Are there any more questions?” Barco asked.
Jim Hancock led the next part of the discussion. “To make this work, we must strike a deal with the Chinese that Alaskan resources will be developed and will always be available on the open market to countries that honor their debts, without risk of political threats. Threats are China’s great concerns, and why they got in bed with the Russians. They need the unimpeded flow of resources and don’t like resources tied to political goals.”
“But they violate human rights!”
“Yes, they do!” Jim announced just as forcefully. “But if you want a free Alaska, disconnect your political, religious, and cultural beliefs from commerce. To help your bargaining position, I advise you continue with the implementation of the Levx maglev system. It appears the Russians always planned on it crossing into Russian and dipping down to China. It actually makes sense and would reassure China.”
Agnes added, “Once the deal’s struck and the China Bonds are in your hands, then the new Alaskan government will tell the Chinese they must redeem the bonds to be considered as honoring their debts. These are bearer bonds – whoever holds them gets the redemption value.”
The crowd started chuckling.
Someone yelled, “Won’t they see that as a political threat?”
“Since you will have told them up front they must pay their debts, they won’t realize until it’s too late that they essentially agreed that honoring their debts means paying off the bonds.... Let me remind you that if the Chinese find out about our intentions before we acquire the bonds, they may start buying them up at discount themselves, or be more resistant to Alaskans buying Alaska back from Russia.”
“Who’s going to negotiate for us?” a banker asked.
“Senator Barco will lead the team,” Agnes said.
“And underwriting the bond issue?”
“Well, we’ve got some big name investment banks willing to underwrite much of it...and we have a partner lined up.”
“Who’s that?!” asked skeptical delegates in unison.
A blond and very tanned Australian banker stepped forward. “Australia.... G’day. My name’s Tim Perthway, and I’ve personally met with a few officials in Canberra.”
“The government?”
“Yes. The Prime Minister’s willing to help force China to play ball with you. That is assuming you do your part. As a major resource provider to China, we have our own leverage, and concerns, with China. I would add, that if we need to bring more pressure to bear on the Chinese, we may be able to elicit the aid of our Canadian cousins.”
There was considerable nodding of heads and rumbling of excitement at the mention of foreign allies.
“There is a bit more,” Perthway said.
The crowd quieted.
“Australia’s willing to guarantee your bonds and buy a good percentage of the Alaska bonds with the caveat that we hold the funds in escrow—as collateral. That should give the bond issue an AAA-rating, and will encourage the market to bet on Alaska.”
The cheering was immediate.
Perthway raised his voice over the growing excitement. “See, we Aussies still have a bit of cash on hand from selling so much of our own resources to China. We haven’t squandered our economy quite like you yanks. We think a free Alaska is a good investment.”
Agnes spoke up. “We believe we can acquire the China bonds, on average, for about 30 cents on the dollar. Initially we’ll get them much cheaper, and we think we can buy the China Bonds held by the US Departments of State, Justice, and Treasury.”
She held up a bond. “I bought a 1913 China 100-Pound Sterling Note for $2,000 on eBay just before I flew here. At full value, it’s worth about $23 million.”
Delegates’ eyes lit up.
“Once the market sees the bonds being bought up, the prices will soar. In the end, we hope to net about $700 billion from the transaction, which then puts the cost of buying Alaska at about $600 billion...certainly easily paid back within a few years of resource extraction.”
“Won’t speculators bid up the price?” asked a banker from Juneau.
“Yes, but we’ll put out a tender offer that we’ll only pay a set amount to stymie speculation. The bonds won’t do them any good on their own. Just like the British in negotiating redemption as a condition for turning over Hong Kong, the Chinese won’t feel obligated to redeem bonds to an individual, a company, or a country reliant upon them.”
“Excuse me, Mr. Hancock, what’s your stake in this? Who’s paying you?” the timber owner demanded.
“Fair question. You have a benefactor who wishes to remain anonymous and who won't profit off Alaskan independence.” His smile broadened. “It was that person’s creative idea who’s paying my legal expenses and who stressed to me that freedom is life’s most precious gift.”
Chapter 77
January 15, 1900 hours
Heyward House
Anna cradled the VoIP phone. “That was Jim. They voted for it...almost unanimously! And after all the short term capital gains taxes, you, my husband, will be a wealthy man.”
Pete shook his head. “We’ll be wealthy.... You purchased the bonds.”
“But from your savings account.”
“Yeah, and without telling me.” His voice revealed a slight annoyance.
She grinned. “I wasn’t sure you’d approve.”
“And for a good reason. Now, I’m embarrassed that it’ll all be under my name.”
“It’s necessary, Honey. The last thing I need is the IRS scrutinizing me. For all practical purposes, I’m just an unemployed housewife who can’t use my law degree without exposing myself. Most of my assets are offshore and I’ve never reported them to the IRS....”
“Does this qualify as money laundering?”
“It’s more legal than that. We take your earned money, buy some art, and then convert them into capital gains when we sell the bonds to Alaska. It’s like reporting lottery winnings.”
“Is that why you insisted I have a separate savings account?”
She wryly nodded.
“But you told Jim you weren’t making any money off the idea,” he said. “After taxes, this would double your wealth.”
“Ours.... Technically, it’s true.... Once you have the Alaska payout, and all the taxes are paid, I’ll anonymously donate most of my offshore money to Alaskan charities.”
His brow lifted. “You’re going to keep some?”
“I’ve got plans for part.” Her eyes revealed cunning.
“Dare I ask?”
Her head shook. “Not now. But the net gain will be nearly zero.”
His arms wrapped around her. “I’m proud of you, Babe!”—Pete beamed—“You have such incredible ideas sometimes.”
“Just sometimes?” She made a fake pout.
“Well, some of your ideas scare me.... Those few aren’t so incredible as they are nerve-wracking.”
“Wimp. Where’s your sense of excitement?”
He smiled and rubbed her baby bump. “Right here.” His eyes widened at the unexpected kic
k from the unborn child.
Her hand covered his. “He heard you.”
Pete bent down and spoke to her belly. “Stay in there, kid. It’s cooollldddd out here!” He stood. “So, what will the UN will do when they realize their CO2 trapping plan’s falling apart?”
She shrugged. “They may try to interfere...maybe use the UN peacekeepers to go in and arrest the Secret Alaskan Legislature...or do nothing.”
“Nothing?”
“They may see the released plagues as more than adequate.”
“So what mischief are you going to make now?”
“Starting a revolution makes me hungry.... How about baking brownies?”
Chapter 78
January 30, 1400 hours
Free Alaska Legislature
The Great Bear Lodge
The gavel pounded repeatedly. After a minute, Joe Barco finally quelled the arguing. “The Free Alaska Legislature is now in session.”
The noise slowly dissipated.
“Thank you,” he said in irritation when he finally got the group’s undivided attention. “If we are to perform as a government, we must act as one. First order of business, our negotiation with the Russians.”
The lawyer stood at the front table and moved to the podium. He smiled and proclaimed, “The deal is set. We’ve spent the last five days in negotiations. The Russians have accepted our $1.3 trillion proposal. That includes our $100 billion down payment, and the cost increases by $5 billion for every month until final payment. It takes effect March first.”
“Why’s the price going up?” a Nome delegate asked.
“To motivate us to come up with the funds, and to pay for relocating their people. In the interim, they’ll continue adding staff in Alaska.”
“Why would they add staff?”