Rehearsal (4)
“Miss, but why did Crédit Lyonnais crash so hard? They took a $10 billion hit from that movie studio acquisition, but even that alone shouldn't have sunk them this bad. The report pins it mostly on real estate, though...”
Suddenly struck by the root of the issue, Seo Ji-yeon turned to me with the question. Even with a cold, her thirst for knowledge was insatiable—she had no intention of stopping her studies.
“Hmm, investment failures piled up with all sorts of bad luck... Light regulations are great for investing in bull markets, but they bite you in the ass during downturns. They shove money into obvious losers just to chase a quick buck, and boom—losses everywhere.”
To put it simply, it's like a leverage ban. In a rising market, borrowing other people's money doubles your gains, so no one gets why you'd avoid leverage. But when it crashes, forced liquidations hit, and that's when it clicks. Oh, that's why everyone says no leverage. That's the whole point of basic financial regulations. Left unchecked, these suit-wearing lunatics in finance will hawk anything, even stuff they shouldn't.
“...So why did the downturn even happen? It didn't feel like just a correction after a big run-up.”
“Interest rates went up. When rates rise, the economy contracts; when they fall, it perks up... That's the basics. Plus, France had high unemployment—not as bad as the UK, but still crappy economic vibes.”
“...?”
Seo Ji-yeon tilted her head, clearly puzzled.
“Why?”
“If the economy's in a slump, don't you lower rates? You just said falling rates stimulate the economy.”
“Normally, yeah. But we attacked their ERM, remember? If they cut rates now, the franc bolts from the mark, and the exchange rate gets wrecked.”
The web of interconnected economics leaves no strand untouched. This time was no different.
“Ah.”
Seo Ji-yeon nodded, convinced.
“Get it now?”
“So it's all because of you in the end... Then why feel guilty about it?”
Even without me, Uncle Soros would've hammered it anyway—it was doomed from the start. And it's not like I kept it secret. Check Alpha Fund's investments closely, and you'd see the short positions on real estate derivatives. Anyway.
France's real estate prices, booming through the '80s, were now tanking in real time. I planned to pump them up, just for a little while.
“What I'm doing here is rigging the board so it looks like government regulations tanked property values. That way, I can stir up public backlash against CL for meddling where they shouldn't have.”
They'd romanticize paths untrodden, planting the seeds for their future screw-ups.
“Ah, so artificially inflate real estate, then crash it right when the French government steps in? Hmm, but how?”
Damn, she's quick on the uptake. I flashed a bright smile and patted her head.
“Make interest rates low. The hedge funds just finished pounding the franc one last time and got wrecked, right? So now the exchange rate's stabilizing... perfect timing for a low-rate policy.”
Of course, even saying that leaves one massive elephant in the room: inflation. Cutting rates fuels it. Solving that's a real bitch. Duh. It's every central bank's wet dream—low inflation with booming growth. Nail all those issues, and you get the mythical Goldilocks economy.
“How are you gonna fix it?”
To her sparkling eyes, I had bad news... even I couldn't. I had no plans to actually solve it. Just pretend to.
“Get Si-hyun on the line—she's got the Russian commodities market locked down. That'll pause inflation for a bit. She's itching to break into Europe anyway. The Euro governments will greenlight a little Russian import if it tames inflation.”
The simplest way to kill inflation: Companies eat the losses and slash prices.
France counts as a heavily regulated financial market. By 21st-century standards, anyway.
“How's the French real estate scene right now? Frozen solid, or just a temporary dip...?”
Yoo Sun-jun, back from a quick business trip to France with my plan in hand, tilted his head.
“...Hmm, lots of real estate outfits shutting down, from what I saw. Told 'em I was house-hunting in Paris, and they lit up—scored a bargain.”
Still breathing, then. At least they had the lung power left to scream.
I beamed and handed over the keys.
“Part of the slush fund stashed in Swiss banks. Grab the cash there, then... let's go shopping for Paris real estate.”
Ramp up demand, prices rise. Shady? Sure, but with low rates incoming, no one bats an eye. Prices are in freefall, low-rate vibes are brewing—buying property's the most natural play. Plenty of others will jump in too. I'm just fanning the flames.
“You said short it last time... Ah, pump and dump, huh?”
“Yup, spotted some tasty bait. Told Alpha Fund to hold off too. Gobble on the way up, feast again on the way down?”
Big volatility? Institutions with the inside scoop scalp both sides. Retail can try... but most get chopped legs jumping the gun, out of sync. Even pros bleed in this chop. Me? I'm the one rigging the market—easy pickings.
Ah, making money's a breeze.
A thrill shivered down my spine, that godlike rush of puppeteering the world. Impossible in the 21st century. Foreigners couldn't snap up property like this. Fake names? Busted in seconds. Tweaking inflation this way? Laughable. Unless you're the US president going full psycho, no single player moves modern markets solo.
But now? It works. 20th century for the win.
...
...
...
First time properly hijacking a national economy? Kinda felt that way. Fittingly, a few mid-game slips and one unforeseen wrinkle: I wasn't the only one calling low rates.
Columns popped up on Paris price surges; pundits yapped about Russian commodity exports paving the way for rate cuts. Exchange rates jittered again.
“...Mark-franc rate's looking dicey. Rates might hike again at this rate. What now?”
Sigh, unavoidable. I loosened my stifling shirt button and sipped coffee.
Click.
“Use BBB to drop a news bomb in Germany. If saving France is tough, kneecap Germany's economy for a sec. Short and sweet—no blowback. Detonate one of those East German 'bombs' we planted, and it'll settle.”
Good call buying that bank. Swaying a Euro major means big leverage. Beyond cash, banks carry trust. History, tradition, Euro clout—can't buy that.
“Got it. I'll loop in Young Master Yoo Sun-jun right away.”
I watched the franc's dip reverse as a German financial scandal exploded, a warm smile creeping in. Not that the franc strengthened absolutely—the mark just weakened relatively. Good enough. French central bankers aren't total idiots; spoon-feed 'em this, and they'll handle the rest.
Two weeks later.
The Bank of France announced a base rate cut.
Meanwhile, at a certain French mansion.
“Hahaha! We're saved! Whew, vive la France!”
A Crédit Lyonnais exec, grin splitting his face, clenched his fist in triumph.
He let out a sigh of relief and steeled himself. The bribes he'd shoveled out—government scrutiny hit the moment eyes turned, and they tore into Crédit Lyonnais like rats. Hanging by a thread; one slip, and it all unravels.
But heaven smiled on France—inflation tamed, exchange woes fixed, like magic.
“Yeah, we're in the clear. Paris prices are up—reprice now, and the bad loans shrink big time.”
“But... isn't there still a chunk left? Another $10 billion in losses, easy. Hell, not even sure. Anyone here know the exact number?”
Of course not. Logging losses gets you caught. Sure, neat books might hide it somewhere. Government's problem.
For now, plug the holes.
“...”
He swallowed hard and pitched the board.
“How about a gamble while we're at it? We're entering Goldilocks—five years of bull market minimum. Pump more into real estate.”
Objectively? Terrible call.