Currency War

by Lawrence B. Lindsey

  Bob watched Tom and kept his eye on Deng and his companion. The companion had mumbled something to Deng on Tom’s first pass by their table and Deng was definitely watching as Tom returned. Both men became engrossed in a detailed conversation. Then the companion asked the pit boss to call the casino manager over. Within minutes of Tom’s return there was a dealer change and one from the high limit room moved to their table.

  Suddenly both Bob and Tom were getting the cards. They would split nines and win on both hands, then go against the odds and split sevens, winning both times. Blackjack managed to hit about twenty percent of the time even though the odds of that happening were only seven percent.

  Bob knew that they were being played. They were decisively winning, but not so much that it was obvious. Within a couple of hours they had nearly tripled their starting $1,000 chip piles. Throughout, their dealer was always one of two men who rotated in and out of the high roller area.

  People began standing around them to watch them play. The older middle-aged women would come up and touch them gently as if to suck in their luck and say in probably the only English they knew, “You Lucky.” The cocktail waitresses doted on them, regularly bringing them drinks and being sure to touch them in a sensual way. The waitresses were rewarded with tips of $2 to $5. One of them managed to balance her tray on one arm and slip the other arm down on Tom’s upper thigh. He shook his head and put his arm around Bob’s shoulder. It was correctly taken by the waitress that though they loved the attention, she wasn’t going to get much more.

  Finally, the manager approached them. In respectable and only slightly accented English he said, “You gentlemen. This is your lucky day. Perhaps you should try our high limit table and carry your luck over there. Drinks are free and we can comp your room and meals.”

  Tom looked at Bob and both men played the innocent young tourists. “You mean our room is free if we play over there?” said Bob.

  Tom asked the manager, “Is that offer still good tomorrow? We just arrived and I am dead tired. Jet lag.” And then to make good on his intentions he said, “What time does the high limit area open?”

  The manager said, “Noon, usually. We run all night, though. But if you gentlemen come by and ask for me or whoever is the manager at the time, they will be sure to open it for you.” He then ordered the dealer to cash up their chips. As if he had not done enough already, he handed each man a $1,000 voucher good for matching play at the high limit tables.

  They went to the casino’s restaurant that served Thai and Laotian food.

  “So now we wait,” Bob said. “But it won’t be long. Not long at all.”

  Tom said, “He couldn’t be more obvious, could he?”

  Bob replied, “It was those broad shoulders of yours that we can thank. You should have seen Deng ogle you as you walked past. He was making plans.”

  Tom said, “You’re not so bad yourself. Those killer pecs and squatter’s thighs and all.”

  Both men knew they were starting to flirt and said simultaneously, “Not tonight.” Both had a big day tomorrow and they would need all their wits.

  CHAPTER NINETEEN

  AS HE GOT THE COFFEE for himself and his bride, Ben reflected on yesterday’s meeting in the Oval and all that was going to happen today. He started with the basic premise that if you hear a conspiracy theory about Washington you should dismiss it out of hand. Government was just too incompetent to pull it off. But every now and then, things did function with ruthless efficiency. When everyone comes to believe that the nation is threatened, he thought, this town pulls together. At least for a time. Like after 9-11. And today the Chinese currency and bond move was viewed in Washington as a financial 9-11, thanks in large part to himself.

  Eric Flynn’s men were ready to execute their warrants just before dawn that morning. Federal judges in the D.C. circuit can get as caught up in the moment of unity as anyone else and were happy to help the wheels of justice spin a bit quicker than usual.

  Renee De Angeles was served at her home and taken into custody. Mark Swift was nabbed at the airport, and when CIA later heard there was a ticket to Hong Kong in the pocket of his suit coat, they realized they’d dodged another bullet.

  Once incarcerated, their homes were methodically searched for evidence and boxes of files and notes were confiscated along with their desktops and laptops. The offices of Enough Is Enough were raided and the bank accounts frozen.

  Mark and Renee were both experienced in the ways of Washington crises, though neither had ever experienced anything like this. Both had sensed on Friday that the seizure of the ship could only mean eventual trouble. Captain Bob had gone off book, taken the ship instead of bringing it to a standstill. But there was little they could do.

  Now, as they stood before the Honorable Patricia Jackson, they were being confronted with an offer they couldn’t refuse. Get Captain Bob and his pirates to surrender the ship peacefully and the government would be forgiving—to a point. Enough Is Enough was out of business and its bank accounts would stay frozen. Captain Bob would have to do jail time, but the rest of the men and women on board could plead out to a misdemeanor.

  Swift and De Angeles would be held in custody until the ship was under the government’s control. They would be afforded all necessary communication devices to contact the ship and every other reasonable request to help them accomplish the task. Then they would be released on their own recognizance after surrendering their passports. The final deal would be pleading guilty to a single felony count of conspiracy, paying a manageable fine, and having their prison term commuted by the President.

  The boat was retaken thirteen hours before the President’s deadline.

  An hour before, Ben opened the regular Monday meeting of the Board of Governors of the Federal Reserve System. It was just the seven of them. Ben proceeded with regular order, though he knew that not a person in the room was focused on the review. He was waiting for Avery to grow impatient.

  He was rewarded when Avery finally blurted, “Mr. Chairman. I believe this board has more monumental things to discuss than how many initial claims for unemployment insurance were filed last week and how many building permits were issued.

  “We are on the cusp of a major change in the way monetary policy is conducted. If we adopt your so-called Metropolitan Plan, this board will soon be irrelevant and monetary policy will be driven by the trades of millionaires and billionaires in the market and not by a board constituted with the consent of the governed.”

  Ben wanted to say, That’s precisely the point. Look what a mess we are in when the monetary authority is set up to please the politicians without anything restraining it. Ultimately, he decided it was unwise to pick a fight.

  “Governor Avery,” he said, “I appreciate your concerns. But I must stress that what you are worried about is highly theoretical. At four hundred dollars a gram, we will be minting coins at one-third above the current market price. And that price is likely to fall. So it would be a long time before any future FOMC would be confronted with some form of binding constraint on its actions. And should that occur, we’ll have an important litmus test for it.”

  “That being?” Avery said.

  “If the public perceives a move by the Fed to be inflationary, they’re going to make the decision to convert dollars into gold. It would only happen under these circumstances, so an expansion of the money supply to finance real growth would not be hampered at all.”

  “You sound confident, Mr. Coleman.”

  “Confidence is exactly the word, Mr. Avery. This option for the public could be a valuable signal to the FOMC on how its actions were being perceived, a test of their confidence in the dollar. The gold coin would actually be a much broader based signal than futures markets now provide, and much less susceptible to manipulation.”

  The Greek chorus of the other board members followed suit to corral Avery as soon as Ben stopped. But Avery was not to be mollified. When the committee broke for coffee Ben invited h
im for a private chat in the Chairman’s office off the boardroom.

  “Chris,” Ben said, “I understand your concerns. I really do. And I understand that it would be against your deeply held views about the proper role of monetary policy to return to any tie to gold, even if it is only indirect.

  “For almost two generations many economists have been preaching that gold is a barbarous relic. That a gold standard has no place in a modern economy. I get it. But, as I’ve been saying, this isn’t your father’s gold standard. I doubt you could even call it that. So I am going to ask a big favor of you. Would you be willing to abstain on the vote authorizing this plan? This is a national security moment and I do not want the FOMC to even indirectly hint to the Chinese that there is division within America’s ranks.”

  Avery gave him a hard look. “So, Ben, tell me how we are different from the Politburo? Over there things are discussed and debated but then everyone falls in line in public to affirm the dictatorship of the Communist Party. I know I won’t face a firing squad if I don’t play nice, but this is a strong-arm tactic, and I resent it.”

  Ben decided to gamble and share a piece of information that would become publicly available twenty-four hours from now. He knew at heart Avery was a patriot and could be trusted.

  “I wouldn’t go there if I were you. It is not public yet, but I met with Li Xue on Friday in London. And when you say things like ‘firing squad’ you are coming painfully close to the truth. We actually touched on that issue and the risks involved. So I will be blunt. You go there and you will soon find yourself way over the line.”

  “Sorry, Ben. I was being metaphorical.”

  “Chris, the real world has a finality to it that metaphors do not. And that real world is what I am asking you to think about right now. This is the closest we’ve come to a potentially cataclysmic global war since the Cuban Missile Crisis. And there are real people’s lives on the line as well as trillions of dollars of global GDP.

  “Setting Li aside, there are people who are going to starve in what we euphemistically call developing economies if this goes south. That is much more important than some hypothetical constraint on a future FOMC decades from now.”

  “Ben, it’s incumbent upon me to express my reservations. I can’t go back to academia having betrayed everything I’ve taught and written over my entire career. Frankly, you couldn’t either. It would be a betrayal of everything I’ve always believed about America and how it should run.”

  That statement was a showstopper for Ben Coleman. His mind wandered back to that walk with Bernadette where he explained how he thought the CIA spying at his home had betrayed everything he had believed about his country. The betrayal had been so bad that it had caused probably the biggest fight of their marriage. Only he couldn’t patch this one up the same way he had with Bernadette. However, he had always believed that candor worked. That was something that he had used with Bernadette, and it might work here as well.

  “Tell you what, Chris. Someday when we are both out of this cesspool on the Potomac, I will hop the Acela up to Boston, you and I will get shitfaced over a great wine, and I will tell you how much I truly empathize. Let me assure you that this crisis has caused me to wrestle with my conscience more than anything I ever have had to do. I just hope that on Judgment Day the Lord will understand and tell me that I did the best I could. I have always been an idealist, a strange thing for an economist and financier to say. Didn’t even know that I was until the last month or so. I was so naïve.”

  Ben stared out of the window. There was a melancholy wistfulness in his demeanor that was so strong that it escaped him and began to pervade the room. Some cynic might chalk it down to role playing to gain sympathy, but Avery knew Ben well enough to understand that this was no act. Both men were searching for a way to reach a consensus. To Ben’s surprise it was Avery, the consummate academic, who came out with the solution.

  “Okay. You will have my abstention. But we are going to have to change the rules a wee bit. Usually, dissenting reasons are only provided for those who actually vote no. This time there will be a few sentences in the FOMC statement giving the reasons for my abstention.”

  “And those are?” Ben could sense that a deal might be in hand. Thank God we are both economists, he thought. We all believe in equilibria and do our damndest to get there.

  “I will go easy on you, in return for which I am going to cash in on that offer to get shitfaced. And by the way, you will be paying. You have a few more zeros on your net worth than I do. So how does this sound? ‘Governor Avery abstained because of technical concerns about the long-term implementation of this proposal.’ ”

  “It’s a deal. Thank you, Chris. And you did make this easy. Yes, the rendezvous is on my tab. And in all seriousness, the world is going to be a little bit safer place thanks to your willingness to compromise on this. I owe you and so does the country.”

  It was at that moment that it dawned on Ben exactly how to thank Avery in real time. Presidents usually have no relationship with people appointed by a predecessor from the other party. But Turner had said those magic words—if you ever need a favor….

  Well, Turner owed Avery for this as much as he did. Might as well make him pay part of the tab.

  * * *

  Bob and Tom decided to get in some pool time since they were technically here on vacation and finally hit the high-end blackjack table around two-thirty. There was a dealer rotation within minutes and one of the dealers from the previous evening was back. He high-fived them. A small breach of protocol, but one very suited for the occasion. In passable English the dealer said, “Lucky streak continue? Yes?”

  “We hope,” said Bob. Both men placed the minimum $100 bets. Lo and behold, their luck continued, but at a somewhat slower pace than the previous night. This went on for a good twenty minutes. At $100 per bet instead of $10 the money piled up significantly faster. Once again they got special attention from the cocktail waitresses. This time it was a rub on the back rather than the thighs. The cocktails themselves posed a challenge and both ordered bottles of water with each drink. They needed to keep their wits about them.

  “I’m going up to $200 with this kind of luck,” said Bob.

  Tom gave him a cautious glance. “You can blow through a lot of money that way. Maybe we should quit while we’re ahead and go back to the $10 table.” Tom continued with $100.

  Bob would hear none of it. Three hands later his luck began to change. He lost four hands in a row. He was still solidly up. Had given the casino back only about twenty percent of what the two of them had won. “Bad streaks can’t continue. I’m gonna get this back and then I’ll go back to $100, I promise.” Bob proceeded to put down $500 bets.

  Bob was counting carefully. He knew the score in a dishonest casino. They wanted to keep the fish on the hook. He won the first one at the new higher level. Then lost two. Winning the fourth and the fifth. Psychologically, the optimal way would be to let the player win thirty-five to forty percent of the time. And things became more streaky. The dealer was watching Bob carefully to judge his mood. Bob even caught the cheating on a few occasions. Card up the sleeve that magically gave the dealer blackjack whenever Bob had a twenty. Sometimes it was dealing from the bottom of the deck. By the end of the first hour Bob had given back all their winnings plus a little bit. Bob’s stack was low, and he pulled out another $1,000.

  Tom declared, “I’m quitting,” but stayed at the table. Deng’s companion had entered the casino and spoke to the manager. Deng himself was not in sight. Through careful use of idle chatter, Tom was able to discover the companion’s name was Chen. Probably a lie, like all the other names around here, he thought, but at least a point of reference.

  Playing the role of someone with the gambler’s curse, Bob placed all his chips, including his last thousand, on a single deal. He drew pocket eights, a guaranteed split according to the most basic rules of blackjack, but he lacked the money to do so. He asked Tom to front him th
e $1,200 he needed to match the split. Tom was reluctant, but out came nearly all the money in his wallet. As luck—or the dealer’s skill—would have it, Bob drew a six and then a face card on the first eight and then another eight on the second eight. Another split.

  “Shit,” said Bob, “I’m out of money.” It was clear that Tom was out of money as well. They didn’t have the cash to split the eights again.

  The manager came over to Bob and said, “We can give you a chit for $5,000. Just sign here. It’s been preapproved.” Bob signed. This wasn’t gambling, he thought. This was the smart thing to do given the eights. The first eight drew a five and a four, giving him seventeen and he decided to hold. The second eight gave him a three and then a face card. Twenty-one. A wave of relief flooded over him. The dealer matched the face card that was showing. Bob had won one of the three hands.

  He could pay the $5,000 back and each of them would leave down $2,200, their original thousand plus the extra $1,200 they had just laid down. Had either man been in Vegas or at the MGM National Harbor outside Washington, that is exactly what they would have done. That was the smart thing to do. But it was not part of the plan.

  “I’m leaving,” said Tom. “You’re an idiot if you stick around.” When Bob showed no sign of getting up, he said, “See you at the bar.”

  From then on everything went according to the plan of both the casino and the operatives. The first $5,000 voucher turned into a second and a third. Bob played the role of fish on a hook carefully and even pretended to be a bit drunk. When the last bit of money on the cuff was blown, he got up from the table and, staggering ever so slightly, made his way to see Tom at the bar.

  Tom got up after hearing the news and said loudly, “You fucking idiot. We took our credit cards up to the limit to take this vacation and you blow fifteen grand! What the fuck are we going to do?” With that Tom gave Bob a good shove, one that given his solid frame would have floored most men. Bob staggered back but recovered and proceeded to shove Tom back.