Dollar Down (21 page)

What would Gavizon say? "
Que tacaño
,
make it fifteen." I mulled that over and said, "Thanks, Jim."

I called McNulty as soon as Burroughs rang off. He
sounded as alert as a squirrel in springtime.

"Can you plant a bug on Hall's person tomorrow
morning, before he goes to work?"

McNulty chuckled. "There's one for a trickster, isn't it?
I like it."

We discussed tactics briefly, but nothing seemed viable.
He said he would think it over and call me back.

Marie sat up and gave me a questioning look.

"I need to see someone," I said. "If you or Pascal leave
before I get back, call me."

She closed her eyes and turned to face the back of the
sofa. "Does that mean I can get some sleep now?"

I washed up as quietly as I could and tiptoed out. Bizet
gave me directions to his home in the city. I felt vulnerable on
the street in the open air, as though Cervantes could see every
move.

This situation wasn't strictly business anymore. Things
had gotten personal. He'd had me in his power, and I escaped.
By now I should have either been under interrogation in
someone's cellar or lying at the bottom of the Seine. As it was,
one of his men may have been questioned by police. That is if
he had recovered adequately from his concussion. Beaten by a
patsy and a pixie, Cervantes had lost face with his driver.

If I had more of an ego problem, I might have felt
ashamed to duck like a scared rat into the first Metro entrance
I came to. After two stops, I got off, walked up to the street, and
went into the lobby of a random hotel. I tipped the concierge
two euros to call a taxi for me. It wasn't until then that I felt
ashamed.

Get a grip, Mick.

Grandma Fitzgerald emerged in my mind and gave a
little "tsk." "Some Irishman you are," she said.

Bizet was waiting in style. A maid escorted me to a
parlor furnished in baroque elegance. "Monsieur will be with
you momentarily."

A minute or two later, Bizet and I were shaking hands,
and the maid was back with a tray of fruit and pastry and a pot
of coffee. With any luck, our consultation would last until
lunchtime.

Bizet cut to the chase. "Quite a shock wasn't it?" He
smiled and sipped coffee. "This news from OPEC. Under other
circumstances, it would be good news for us—for the EU that
is—but as things stand, it is a bit worrisome. Don't you
agree?"

"I might, if I had a better understanding of what's
happening." I braced for a condescending lecture.

Bizet was borderline gallant. "First, I salute you." He
raised his coffee cup. "Without your observations we might not
have been able to realize what was..." He fluttered his free hand
in the air. "...being done to our financial institutions, to the
world's economy."

I'd have to take his word. I still didn't get it.

"You were concerned with more, ah, visceral crimes. I
believe that it is imperative that you continue that pursuit. Our
friend Burroughs agrees. However, there is the issue of
someone tampering with the foreign exchange market. Did
Burroughs mention compensation?"

"He said that if you could keep the dollar out of the
target range, he would profit and I would get ten percent. He
didn't say what it might come to."

"You suggested that you could provide advance
information on trades. Is that correct?"

"It isn't done yet, but that's my intention."

"If you succeed and if we manage the necessary
funding, I will match M. Burroughs offer of ten percent."

"Of...?"

"Whatever I earn from your information."

"I have a few people on contract. I would need
to—"

"Pay them, of course. I can't say with any precision
what ten percent would come to, but in rough numbers I would
expect some odd hundred thousands."

I gave myself a few seconds to let that sink in. These
men were obviously big players. Bizet had just described a
payoff of millions dollars each for himself and Burroughs in the
course of a day. That was wild speculation, but I supposed a
few thousand or so might be feasible. It might be enough to
convince Pascal to stay on.

"I won't know until we actually start getting data
whether or not we can get the live feed. You said the OPEC
decision to price oil in euros was a shock. Is that because it will
make the dollar fall?"

Bizet's face took on a pained expression as though he
was grappling with some sort of paradox. "Yes, but it is not the
most significant matter. Money has three roles: a store of
wealth, a medium of exchange and a unit of account. It is the
final role that gives America great advantage over other
nations. It controls the currency in which much of international
trade is priced."

Bizet rubbed the back of his neck and squeezed his
eyes shut, as though he was working through a problem he
didn't want to face.

"Suppose Venezuela told OPEC that it will price oil in
euros. With the prospect that it could flood the world with
cheap oil thanks to the magic bacteria, OPEC would have to
follow suit. Then who knows? Malaysia might start pricing
nickel and rubber in euros; Chile, copper; South Africa,
diamonds; Russia, manganese; and so forth. Eventually,
manufactured goods become priced in euros.

"Which would benefit the euro zone."

"The crisis of sovereign debts in Greece, Ireland, Italy
wouldn't disappear, but they would become a footnote.
External debt would no longer be an issue and it would make
federalization of fiscal policy much easier to sell. Then Greece's
deficit would be no bigger an issue than say Montana's deficit
vis a vis
Texas or some other state."

I was beginning to understand. "Interest-free
debt."

Bizet brightened. "Exactly. Every country but America
has to buy dollars to pay for most of their imports. America has
a huge balance of payments deficit, but it doesn't matter much.
As long as goods are priced in dollars, the global economy is
effectively an extension of America's domestic economy. To
use round numbers, say OPEC is charging a hundred dollars for
a barrel of oil, and overnight the value of the U.S. dollar drops
five percent against the euro. The next morning, America still
pays a hundred dollars for the oil, at least in the short
term.

"Nothing changes from America's viewpoint. But, a
Frenchman, for example, is now paying five percent less for the
dollars he buys to purchase oil. It is the OPEC member selling
oil who loses. If he spends his oil money in Europe, his
purchasing power is five percent less."

"So if you turned that around and had oil priced in
euros, overnight, America would have had to pay one hundred
five dollars for the same amount of oil with foreign currency it
doesn't have."

Bizet smiled as though he were a care worker who just
brought a bashful child out of his shell.

"Obviously things are much more complex, not all
global trade is priced in dollars, and exchange rates can
indirectly affect prices. But basically those are the dynamics.
Charles de Gaulle said that the U.S. dollar lets America be
indebted to the world free of charge. It was true when he said it.
It has remained true until now."

"Except the dollar is more vulnerable now."

"Vulnerable was yesterday. With OPEC's decision, the
end has begun. Look at the function of money as a store of
wealth. The world is flooded with untold billions of dollars. If
the currency loses its intrinsic value as the medium of global
exchange, there is no reason for nations, central banks or
corporations to hold great stores of them. So dollars would be
exchanged for euros, yen, Swiss francs, gold. Eventually, they
must return to America. With little demand outside the United
States, the exchange rate thus plunges. Only this time, it makes
a difference. Americans will have to buy increasingly expensive
euros to purchase their next Audi or the petrol to fill it up
with."

I held up a finger. I saw a catch. "But in that case,
American goods become cheap, exports rise and the dollar
strengthens."

Bizet grunted. "It would take a long time, but America
would never be the same. Remember, the primary issue is
pricing, not exchange rates. It would be decades before
unwanted dollars abroad and U.S. exports balanced out. In the
meantime, there would be financial disruption, along with
political ramifications. It would become increasing difficult for
America to maintain forward deployment of troops abroad, for
example."

Troop deployment. Another piece of the puzzle might
be falling into place. "Wouldn't havoc in America hurt China's
economy?"

His expression serious, Bizet nodded.

"If China and Venezuela used the liquefaction scam to
persuade OPEC to price in euros, then there must have been a
motivation besides business."

"That would seem to be the case," Bizet said. "Maybe
China thinks it's time to assert its mandate as the leading
power in Asia and on the seas along its borders, if not in the
western Pacific. If America is suddenly struggling with an
imploding currency, there might not be much it could do."

The picture was getting larger than I had guessed. "A
weakened U.S. Pacific fleet would give China control of
shipping lanes from the Middle East to Japan and South Korea
and beyond. As I recall, more than half of all global trade passes
through the region."

David's speech came to mind. China takes Taiwan and
extends its strike zone to Oahu. "If it came to it, though, Japan
would join the fight."

"You might be too hopeful, M. Sanchez. Without U.S.
muscle, Japan might capitulate. After all, China is nuclear and
Japan isn't."

"Japan can develop nuclear weapons very quickly, if its
security is seriously threatened. India and Australia might also
worry about China becoming too strong. India is nuclear," I
said.

"If India became embroiled in such a conflict, Pakistan
might see it as an opportunity to redress old grudges and ally
with China. India would be facing nuclear armed enemies on
two separate borders. It bears the seeds of a very frightening
scenario."

"Isn't there one significant problem with all of this?" I
said. "The liquefaction process doesn't work. The other OPEC
countries besides Venezuela might not know that now, but
they will find out."

Bizet dismissed that concern with a little "pfft" sound.
"By then it won't matter," he said. "Once the shift in pricing is
made, there would be no reason to go back."

I was a lot closer to understanding, but one other thing
bothered me. "If that's the case, then what would be the reason
for the foreign exchange ploy."

Bizet shrugged. "I can think of a few rationales.
Debasing the dollar would be a factor in influencing countries
to abandon it. Also, China would need to offer Venezuela an
enormous incentive to go through with the scheme. It's risky.
Rigging the forex market would be a way to acquire many
billions in euros for free, which China could use as a payoff.
Another reason might be to prime the psychological pump so
to speak. It has been a few hours since the OPEC
announcement. There has been a lot of dollar selling, but
nothing close to a panic. National treasuries and major players
in the foreign exchange market would prefer to wait to see
what develops. A gradual devaluation of the dollar would be
much easier for everyone to live with. If China could engineer a
steep, sudden drop there might be a rush to exchange as many
dollars as possible while they were still worth
something."

With that level of geopolitics at stake, why use a
business consultancy. "You used to work with Winchell &
Associates. Where do they fit in?"

"Official channels are not always the best way to get
things done. There is a lot of deal making in this 'scam,' as you
called it, and Winchell has extensive experience working under
the radar for both governments and corporations."

I thanked Bizet for his time and promised to do all I
could to get a line on the LIFFE systems chief.

After I left Bizet, I called Mumby to see if he had
worked out a plan to bug Tom Hall's person. He had two, a
main plan and a backup. The backup was the telephone
repairman ploy. As for the main plan, I kept that to myself. I
didn't think Bizet would understand.

Pascal and Marie were watching a midmorning news
report over coffee when I got back. China had test fired a
missile that violated Taiwan's air space and splashed down in
the Pacific.

I called Jim Burroughs. "Do you have any idea what
that missile test was about?"

"I reckon China's making its move, saber rattling,
shaking things up."

"Has that got anything to do with their dollar attack? I
thought foreigners bought dollars when politics got
nasty."

"They go to a safe haven. That used to be the dollar. It's
a different game after OPEC's announcement. Heavy selling had
already started a short while before the missile test was
announced. Now it's gaining momentum, with most of the
buying going into euros and gold. Hold on."

While Jim took care of whatever called him away, I
wondered how far and how fast China was going to take its
ambitions.

Jim returned. "I just got a message that Japan briefly
considered intervening in the currency markets. Apparently,
they thought the yen was going up. After they realized it was
dollar that was going down, they quashed the idea. Washington
is trying to talk the dollar up. The administration was
blindsided by OPEC's announcement. It's still trying to figure
out what's going on. Even if the U.S. knew exactly what's
happening, there's not much it could do. It has roughly a
hundred and forty billion in foreign currency reserves, about
the same as Great Britain and way less than Mexico, or even
Thailand or the city of Hong Kong. China has more than four
trillion dollars. Economically, it wouldn't make sense for China
to dump dollars. Strategically, maybe another matter."