Currency Wars_ The Making of the Next Global Crisis - James Rickards [8]
The game would have three moves played over two days. Two moves would be played on day one and one additional move on day two, with time at the end for debriefing. The cells would have private facilities to use as their “capitals” for deciding each move, and there would be plenary sessions in the war room, where the cells would make their moves and their opponents would respond. The white cell would preside over the plenary sessions and award or subtract power points to each cell’s “national power index.” Cells could conduct bilateral summits or negotiations with other cells at designated locations while each turn was being played.
Most intriguingly, each cell would have a set of wild cards that allowed for actions and responses not included in the opening set of scenarios for each turn. Although this was being conducted for the first time on a tight budget and the results were far from clear at the outset, the combination of summit conferences and wild cards was enough to suggest that we might show the Pentagon how real unconventional financial warfare could occur.
As we completed our overview, I again pointed out that we were top-heavy with military, intelligence and think tank participants but didn’t have anyone from Wall Street except me. I knew we were going to get very predictable action-response functions by inviting the usual suspects. These people are brilliant on macroeconomics and strategy, but none of them really understands how capital markets function in the trenches. I told them I wanted to recruit some investment bankers and hedge fund people to join us. There was room in the budget for two more participants, they said, and I could have my pick.
My first recruit was Steve Halliwell, a seasoned banker and private equity investor. Steve is trim, dapper, animated and highly recognizable with his thick-framed glasses and shaved head. He is the epitome of the Old Russia Hand, having made his first trip to Russia in 1963 during the Kennedy-Khrushchev era as an early exchange student while an undergraduate at Wesleyan. He later went to grad school at Columbia and had a long career at Citibank, where he was involved in opening Citibank’s Moscow branch, before he launched one of the first U.S.–Russia investment funds in the 1990s. Steve’s supply of Russian anecdotes is inexhaustible and he tells each one in vivid detail with a strong sense of humor. He speaks Russian like a native and has a dense network of connections in that country as a result of his banking and investment activities. Steve and I had spent a week in Moscow in the winter of 2008 doing market research for some hedge fund clients of mine. The trip was memorable for the beauty of the nighttime snowfall on Red Square and copious amounts of vodka and caviar consumed with our Russian hosts. I knew he’d be perfect to play the Russian side in the Pentagon’s financial game. He readily agreed to come on board.
Now I had one more recruitment to make. Since Steve was a private equity fund guy and a more long-term investor, I wanted someone closer to the day-to-day action of the markets, someone who understood what are called “technicals”—that is, short-term supply and demand imbalances that could push security prices away from their fundamental values and catch supposedly rational investors off guard. I needed someone who knew every trick in the book when it came to handling the kind of huge orders that could push markets around and steamroll the unsuspecting. I called a friend who had been in the trenches for over thirty years and was known on the Street as “O.D.”
I had known Bill O’Donnell for decades, going back to our days at