Rule 34 - Charles Stross [84]
He holds up a hand. “Yes, I know what you’re going to say: They don’t want to be independent. Tough. Anyway, I suspect the angle they’re playing in Bishkek is that IRIK has been set up to fail, declare bankruptcy, and Bishkek is expected to ‘send in the army to re-establish order’ or some such bullshit. Meanwhile, they’ve sold—through cut-outs—a ton of credit default swaps hedged against ARIK’s national debt. In the short term, it looks like they’re selling insurance. What everyone is supposed to think is that they’re stupid-greedy, and when the IRIK collapses, the debt bomb will empty the Kyrgyz coffers.”
“But that’s stupid—” You swallow. “They can’t do that! Can they? Isn’t that what made the banks collapse?”
“Well spotted.” The Gnome grins humourlessly. “It’s not the only thing they might be doing, though. IRIK’s credit rating has got to be in the shitter, so betting they’ll collapse is a sucker bet. What I think Kyrgyzstan is doing is, they’re selling CDSs to foreigners who expect IRIK to collapse under the debt. And they’re over-selling, selling multiple CDSs leveraged against the same asset. Meanwhile they’re using the income from the CDSs to reduce the debt load—until they arrange for reunification, which, with 72 per cent in favour, isn’t going to be hard. The idiots who bet on IRIK collapsing will miss out on the fat payout they were expecting: Serves them right. What interests me is why the IMF and the credit-ratings agencies aren’t yelling about it. The Kyrgyz government must have figured out a way to buy off the regulators and oversight agencies. So what’s the angle? There’s one obvious one: inward investment.”
“Inward—who’d want to invest in Issyk-Kulist . . .” You trail off. The answer stood staring you in the eye a few short hours ago. “Oh.”
“Yes, indeed. Picking the pockets of honest bankers is frowned upon in polite company, but the same people would tend to turn a blind eye to a lawful government’s attempt to sting crime syndicates in the wallet by selling them junk credit default swaps leveraged on a sock-puppet’s debt. Think of it as an anti-money-laundering operation on an epic scale—the cops have laid a trap for the gangs using an entire country as bait. The real problem is avoiding being assassinated afterwards: The RBN and the cartels take a dim view of overly successful confiscatory policies, and they’re bigger than some governments.”
The Gnome drains his glass then waggles it at you. “Will you stay for a refill? I think it’s about time we had a heart-to-heart talk about how to buy and sell derivatives . . .”
When you finally go back to the house, you fail to work up the nerve to tell Bibi about your house guest. She’s home late from work, tired and silent from too many hours in the pharmacy, and lavishes all her warmth on Naseem and Farida, who’ve been staying round at Mrs. Uni’s house after school. The cone of silence she traps you in is poisonous and chilly; you know from bitter past experience that she will make you wait on the threshold for three days and nights before she relents.
Three days is her usual sentence for drunkenness and foolery: not one minute more and not a second less. She has the measure of a judge and the restraint of a probation