American Exit Strategy: Book 1 (20 page)

In the comments given by White House Press Secretary, Armando Sanchez, the administration gave an overview of their plan to manage the present crisis. Sanchez told reporters to expect a longer, more detailed explanation of the plan from a speech that the President will deliver tomorrow morning.

Armando Sanchez began by saying the White House was in complete control of the situation. He assured Americans that gas stations would be on line again by tomorrow morning. The US is releasing a large portion of their strategic oil reserves to combat the situation, but Sanchez asked that Americans cancel their plans to travel for the Thanksgiving holiday. Once the gas stations reopen, the US Government will be limiting gasoline purchases to five gallons per week. While law enforcement representatives will be monitoring gas stations to insure that no one purchases more than five gallons at a time, the White House is asking people to respect the restriction on the honor system until Homeland Security can institute a ration system on Monday of next week.

While Sanchez made no mention of it in his address, the Department of Energy has notified all US oil producers and gasoline refineries that the U.S. Government would be nationalizing 20% of their current production until strategic reserves could be resupplied. The notification sent to oil and gas industry executives also included vague language that informed them that essential government services, emergency services, food transportation and public transportation would be supplied with fuel from the strategic reserves until the crisis fully abates.

Wesley Bair snickered to himself at the report.

"What’s funny?" Adam asked.

"Fully abates." Wesley answered. "This isn’t going to 'fully abate'. The government just nationalized the oil industry."

Adam added, "They will never quit taking the 20%. There is nothing temporary about it. "

Karen added "Maybe 20% is temporary. They will probably have to raise it to 30% after a few smaller oil companies go bankrupt from the government theft."

Wesley said, "Taking 20% of production will probably bankrupt all of the oil and gas companies. The only ones that can stay solvent will be the ones the government bails out. That is the design of this move. It will be just like the health insurance industry. The individual mandate had a fine that was lower than the cost of insurance. Everybody waited till they got sick to buy insurance. That bankrupted every insurance company except Medisure, which is every bit as much of a government entity as the D.O.D. or the Social Security Administration. That strategy got the government the single payer system they wanted from the beginning. This move will do the same for the oil industry. The only company that will survive will be the one the government picks. It might be Exxon, BP or whoever they decide to prop up.

People associated fascism with the Nazis, but fascism is really the intertwined relationship between large corporations and the government. Medisure is the government tentacle of healthcare, Howe Clancy is the government tentacle of banking and we will soon see who is to be the government tentacle of the oil and gas industry."

Janice said "Well, I suppose that won't go well for the oil stocks when they reopen the markets."

"You're right about that." Adam agreed.

"Maybe someone could pick the company the government is going to bail out to run the show. That stock might do well." Shelly said. She was shy, but she was eager to be part of the family.

"Possibly." Wesley said. "But I expect the government to watch them all sink to the bottom so they can come in and bailout the company they want with a large stock purchase. They will get it dirt cheap and probably be able to purchase more than 51% of the stock. That would give them controlling interest."

Adam's phone chirped. It was a text from Matt. "Be there by 10pm  we are safe but roads are rough :( "

Adam read the text to everyone.

"Praise God, they are safe." Janice said.

Wesley said "I didn't have any trouble picking up Shelly, but who knows how bad things are in the rest of the country. The news doesn't exactly cover the highway."

"Did they have to go through Atlanta?" Shelly asked.

Adam answered "They had planned to take the I-285 Bypass, but they didn’t have enough fuel to go any further out of the way than that."

Matt, Karen and Miss Mae arrived at 9:30 that evening. They were received with much affection. They told the tales of their adventure and everyone listened with eyes wide open. Adam had seen much worse while deployed in the sandbox, but everyone else was shocked that things could be so bad here in America.

Janice coordinated the sleeping arrangements. The kids went to sleep around 11:00, and the adults sat up discussing the recent events. All were speculating the timing and severity of the collapse that was upon them.

CHAPTER 28

“He that is good for making excuses is seldom good for anything else.”

-Benjamin Franklin

Treasury Secretary Chang and Fed Chair Jane Bleecher needed very little evidence of the impending collapse to convince President Al Mohammad of the need for drastic measures.

President Al Mohammad dictated to his aid the list of those who were to attend the crisis control meeting.

"Call Anthony Howe, this is all going to be his problem in eight weeks. He might as well start learning what this job is all about. Get someone from the Department of Defense in here, but not Allen Jefferson, someone who plays ball. This is too important. I'll lock up anybody who gets in my way. Make sure Gerald Brown is in here from HHS."

"Have Tamara Slocomb from DHS bring a couple of her goons. I have a special project for them. I need chairs all around the back of the room for the Plunge Protection Team traders. I need everyone who is associated with the Plunge Protection Team, all the way down to the NSA analysts who gather Intel for the traders."

"I need to make sure that Tamara's people can put the fear of God in the traders, support staff and analysts so they know how important it is to not speak to anyone about this meeting. The world is falling apart and we have to take any means necessary to hold it together."

The Plunge Protection Team was the nickname that had been assigned to "The Working Group on Financial Markets". The group had been created in 1987 in response to the market crash that year. It consisted of the Fed Chairman, the Chairman of the Securities and Exchange Commission or SEC, the Chairman of the Commodity Future Trading Commission or CFTC and the Secretary of the Treasury. The group had grown to employ an elite force of traders and speculators who operated outside of the government. Most of the traders were tapped from among Howe Clancy's brightest. Their salaries were paid from black box spending allocated through the NSA. They were also awarded huge bonuses deposited into foreign accounts when they were able to manipulate markets successfully to reach specific outcomes.

The 30 traders that acted on behalf of the group were sworn to absolute secrecy. In exchange, they were granted carte blanche on how they accessed their information and how they traded. They were jokingly referred to by support staff and NSA analysts who were assigned to mine information for them as 007 traders. They operated completely above the law. In financial terms, they had a license to kill.

The access to trading information that the traders had from the NSA was so far beyond anything that could be termed insider trading,  the 007 traders referred to it as omniscient trading.

The NSA fed the traders information from tapped e-mails and phone conferences. Company reports on any computer could be viewed by NSA analysts and fed to the traders. Microphones on private laptops, tablets and cell phones could be hacked and remotely activated to get real time information from conversations by company executives. Company earnings reports, financial difficulties, market shortages; every conceivable bit of information regarding statistics and events that effect stock prices was available to the 007 traders. If one could imagine trading today's stock market with tomorrow’s Wall Street Journal, one would just be beginning to grasp the power of the 007 traders.

Treasury Secretary Melinda Chang and Fed Chairwoman Jan Bleecher held a private meeting with the President before the crisis control meeting.

President Al Mohammad displayed his flippant attitude about the crisis to the two women by saying "Well, I hear Mount Weather is nice this time of year. Actually, it’s a pleasant 56 degrees all year around."

Both of the women cracked up laughing. Mount Weather, also known as High Point Specialty Facility was the nearby underground emergency management FEMA facility that was designed for continuity of government in the event of nuclear war or other catastrophe. It was well stocked with food, energy and everything needed to sustain life for an extended period of time for about 200 people.

Al Mohammad continued "All joking aside ladies, you two are very important to this country and you both have your golden ticket to High Point if things get bad. That said, there is very limited spacing, so you would only be able to bring one immediate family member if you chose to come to High Point. There are other installations around the country that I could arrange to have other members of your family sent to if you want to serve your country from High Point in Virginia.

So relax, if it does all fall apart, we'll go underground and come out after the zombies have all eaten each other."

Both of the women were relieved to have received the invitation to Mount Weather.

"Thank you very much Mr. President." Melinda Chang said. "I wish I had better news."

"Now what?" Al Mohammad asked.

"Several sovereign funds, including China, Japan, Brazil, Taiwan, Switzerland and others have contacted the Treasury over concerns about U.S. Bonds.  They all fear staying in U.S. Treasury bonds, but they know that any large sale by any of the others would trigger a stampede out of Treasuries. They are asking us for a solution since it is everyone's interest to keep the prices stable." Chang said.

"Did you ladies come up with a solution." the President asked.

Jane Bleecher responded "We have a tentative agreement to purchase the bonds at face value and the respective countries will agree to keep the bonds and never sell them."

"So we’re going to give them the cash for the bonds and let them keep the bonds?" Al Mohammad asked.

"We have no other choice sir." Chang said. "If they start dumping bonds, the values will crash anyway. This is the last hope of propping up the dollar."

Al Mohammad's desk phone buzzed, "Yes?" he responded.

"Anthony Howe is here, sir." the voice replied.

"Send him in." Al Mohammad replied.

"Mr. President." Howe greeted with a smile.

"Sit down Anthony." the President said with a scowl.

The group proceeded to fill in Anthony Howe on the details of their conversation up to that point.

"So did the representatives of the concerned countries agree to the deal?" Howe asked.

Chang replied "If we settle in gold."

The room was silent as Howe and Al Mohammad processed the implications of the deal. Howe had a better handle on the situation than Al Mohammad.

"So we have about 8,000 metric tons of gold?" Howe asked.

"That’s what is on the balance sheet sir, but we don't actually have access to all of that." Bleecher replied. "Some of it was leased and delivery was taken. The gold we lost possession of was scheduled to be re-accumulated but price volatility has made that impossible. Most all of the remaining gold is presently leased, but we still have physical possession of it."

"How much is that?" Howe asked.

"About 3,000 metric tons sir." Bleecher replied.

"Well at over $7,000 an ounce, that’s still a nice sum." Al Mohammad said.

"It is about $680 billion sir. China's holdings of US debt are near $2 trillion alone." Chang said.

"Could the plunge protection team drive up the value of gold to $14,000 an ounce by the time we actually finalized a deal?" Al Mohammad asked.

"It would likely float to that level on its own if we quit suppressing the price sir." Bleecher replied.

The Plunge Protection team had been suppressing the gold price for years to provide a false sense of value for the U.S. Dollar. The team would slowly make small purchases of gold and gold futures contracts throughout the trading day using money from the Exchange Stability Fund. They would then dump the gold and the gold contracts in after-hours trading. As there were few buyers in the after-hours markets, each successively lower price buyer would be quickly taken out as they bought the gold and the contracts. The result would often be a $30 or $50 per ounce price cut in gold. That lower price would be in place at the beginning of the next trading day and would generally set the trading range for the day. 

The team also used lease contracts on the gold reserves held by the Fed to manipulate the markets lower. As the free market started to recognize the value of the discounted gold price, delivery was often taken on the leases that had been anticipated to expire.

Mohammad was not that well versed in finance, but he knew all about manipulation. It was an international language that most everyone in D.C. could speak fluently.

"So if we pushed it back up, how high could gold go by the time we had to settle?" Mohammad asked.

"I don't know." Bleecher replied. "$15,000 maybe $20,000. But it would absolutely crash the dollar."

"Which is happening anyway," Al Mohammad quickly stepped in to make sure he was still in control of the narrative. "But it would buy us some time."

A deal was struck between the sovereign holders of U.S. Treasuries for a partial settlement in gold and a partial settlement in cash. Additionally, the settlement was pushed back until January 1st of next year. The extra five weeks would give the traders plenty of time to work their magic. In exchange for the deal, the foreign holders of the U.S. debt agreed to never sell the treasuries but find some other means of creative accounting to liquidate the bonds from their balance sheets slowly, over time.