The Loyal Nine

by Steven Konkoly

  Germany’s strongly articulated position against QE put them at odds with the French. France’s left-leaning politicians had been extremely vocal in their support of more quantitative easing by the ECB. They considered a weak euro to be critical to their economic survival. The far-right Front National party, which had made a resurgence in the wake of renewed French nationalism, vowed to take action to restore France’s independence from the Eurozone if the ECB devalued the currency to the point of an inflation nightmare. A break from the Eurozone was a long shot, but just the talk of it made the rest of Europe nervous. The more anxiety, the better.

  On the opposite side of the spectrum, Europe had its leeches, as Morgan liked to call them—Greece, Spain and Italy. Unwilling to adopt austerity measures, they were doomed to economic failure. It was only a matter of time. No level of International Monetary Fund intervention could prevent the inevitable. The IMF was a speed bump on the road to financial ruin for the leeches. An environment of low growth and high unemployment had bred support for radical political alternatives, few with any basis in rational, constructive nation building. Societal unrest in these three countries made the headlines daily, and would only get worse.

  Morgan contemplated the practical aspects of the Eurozone’s collapse. The demise of the euro would not resolve the problems associated with the U.S. government’s excessive national debt. The Eurozone was a major trading partner of the United States, so the implosion of the euro would undoubtedly produce a period of economic pain and instability. He projected five years—long enough for companies and governments to pick up the pieces. It was a small price to pay to liberate the European markets from the old-world European oligarchs whose fortunes and interests currently held Europe hostage. Serves them right.

  He recalled a statement Winston Churchill made prior to the start of the Second World War. The era of procrastination, half measures and delays is coming to a close. In its place we are entering a period of consequences. A collapsed Eurozone would have particular consequences for United States financial institutions that had financed European banks through low-interest money. Morgan scribbled a note on his pad, which read turn off the spigot. The intercom buzzed on John Morgan’s desk.

  “Yes, Malcolm.”

  “Mr. Morgan, Secretary Lew on the line for you,” said Malcom Lowe.

  Morgan pushed the button to activate the speakerphone. This is unexpected.

  “Hello, Jack, you’re on speakerphone, but we are alone,” said Morgan. “How are you?”

  “Very well, Mr. Morgan,” said Jack Lew, the Secretary of the Treasury. “I will get right to the point. I have some disturbing news for you.”

  Morgan sat back in his chair and rubbed his temples. “Go ahead, Jack.”

  “I’m sure you are familiar with the National Insider Threat Task Force—the NITTF,” said Lew without waiting for a response. “They just completed a briefing of the Senate Intelligence Committee. There’s a leak in the Treasury Department, affecting the Federal Reserve.”

  “Jack, what is it?” said Morgan abruptly.

  “We believe someone within the Treasury is going to leak the details of the Federal Reserve System’s balance sheet,” said Lew. “It’s all going to come out, but we just don’t know how yet. There have been cryptic messages from the hacker group Anonymous. They claim to be acting on behalf of the audit the fed crowd.”

  “Is the good senator from Kentucky behind this?” asked Morgan.

  “We don’t know anything for sure at this point, Mr. Morgan. He stands to benefit the most, because he made this a major platform issue in his presidential campaign,” said Lew.

  “The balance sheet, huh? Break it down for me, Jack,” said Morgan.

  “The liabilities of the Federal Reserve are eight point seven trillion dollars,” said Lew. “This is nearly double the figure the public normally hears.”

  “That doesn’t surprise me,” said Morgan. “I assume you have worse news?”

  “The assets of the Fed are an even bigger issue,” said Lew. “Over half of the Fed’s assets are mortgage-backed securities acquired after the 2008 crisis. These securities are backed by distressed home loans, car loans and near worthless derivatives.”

  “What are the total assets?” asked Morgan.

  “Approximately forty-nine billion,” said Lew. “That’s about half of the commonly assumed estimates.”

  “Of course. So, the Federal Reserve is currently leveraged at a ratio of two hundred to one?” asked Morgan. “Half of those assets are worthless? Is that correct?”

  “Yes, sir,” said Lew.

  Morgan remained silent as he contemplated the revelation. The only way to increase the assets of the Fed was to print an inordinate amount of dollars and hold them on their balance sheet. They wouldn’t become Fed liabilities until they were put into circulation. If the Fed were to pump that much money into the money supply, inflation would skyrocket.

  “Are you going to issue more currency?” asked Morgan.

  “It’s our only option at this point,” said Lew. “There is one additional problem.”

  “I can’t wait to hear about it,” said Morgan with a tone of incredulity. How can these people be so incompetent?

  “It’s the gold number sir,” said Lew. “It is commonly assumed the Federal Reserve has slightly over two hundred billion dollars in gold reserves.”

  “What’s the real number,” asked Morgan.

  “Twenty-three billion,” said Lew.

  “Goodbye, Jack.” Morgan disconnected the call.

  “Malcolm,” he barked into the intercom, “get me Katie O’Shea immediately!”

  Morgan gripped the arms of his chair like a patient at the dentist’s office with no anesthesia. Disclosure of the truth regarding the Federal Reserve would devastate the markets worldwide, bringing an end to the secrecy enjoyed by the shadow bankers in this country—like Morgan and his associates. The buzz of the intercom interrupted his angst.

  “Sir, Miss O’Shea on the line as requested,” said Lowe.

  Morgan slapped the phone to accept the call.

  “Miss O’Shea, why did I have to hear about this from that do-nothing Lew?” said Morgan brusquely.

  “I am sorry, sir, but I was in Director Clapper’s office during the entire briefing, and was unable to make any calls,” apologized Katie.

  “Tell me everything you know,” said Morgan.

  “First, let me summarize the facts,” said Katie.

  She explained the discovery of the leak and the details of the data obtained. She also assured him all law enforcement and intelligence agencies were working on this investigation around the clock.

  “Do you have a working theory, Miss O’Shea?” asked Morgan.

  “Sir, Director Clapper is of the opinion—” started Katie, before Morgan interrupted her.

  “No, Miss O’Shea, if I wanted Clapper’s opinion, I’d call him myself,” said Morgan. “Tell me what you think.”

  “Yes, sir,” said Katie. “I have not discussed my premise with anyone.”

  Morgan had been impressed with Katie’s astute analysis in the past. She had the ability to see situations differently than her counterparts, and was truly a valuable asset.

  “Although my primary responsibilities with the National Insider Threat Task Force deal with internal investigations of intelligence personnel, I have access to information gathered by other agencies within the intelligence apparatus,” said Katie. “This week, while coordinating on a matter with the Cyber Threat Intelligence Integration Center, I stumbled onto something that might be related. Certainly you are familiar with the hacker group Anonymous?”

  “Yes, of course,” said Morgan.

  “Recently, another group has emerged that appears equally skilled in cyber tactics,” said Katie. “They call themselves the Zero Day Gamers. The analysts at CTIIC believe this group was responsible for the cyberattack on the Nevada Energy power grid, resulting in the Las Vegas blackout last month.”r />
  “Has the Nevada incident been officially labeled a cyberattack?” asked Morgan.

  “No, sir, the official explanation is a group of squirrels infiltrated the transformers at their primary power generating station,” said Katie.

  “Why would anyone believe that?” said Morgan.

  “Because the media told them so,” replied Katie dryly. “The White House and our office played an active role in controlling the narrative on that one. The White House does not want the world to know about the vulnerabilities of our power grid to a cyberattack. The United States is wholly unprepared for a coordinated attack on the grid.”

  “What is the relationship between Anonymous and this new group, the Zero Day Gamers?” asked Morgan.

  “Based upon my investigation and the information received by Cyber Threat Intelligence, the two groups operate independently of each other,” said Katie. “But that is about to change.”

  “How so?” asked Morgan.

  “A message was posted by Anonymous onto Internet websites frequented by hackers and cyber-security experts this week,” said Katie.

  “What does it say?”

  “It came in the form of a picture sir,” said Katie. “With a poem superimposed over the image of the Guy Fawkes mask. It will be easier if I email it to you.”

  “Aren’t your activities scrutinized?” asked Morgan.

  “No, sir. Ironic, isn’t it? This department was formed to monitor the movements of every government employee, yet nobody is assigned to watch us,” said Katie. “I’ll send you the image now.”

  Morgan checked his emails and the image finally came through. The text read

  Ode to the Zero Day Gamers,

  ‘tis a game you want to play.

  Our name comes with no disclaimer,

  we’ve no need to gameplay.

  Our countermove has been made,

  of this, the world will soon know.

  For us, our legion is on a crusade,

  for you, your name is apropos.

  WE ARE ANONYMOUS.

  “They’re taunting the other group, it seems,” said Morgan.

  “I believe so,” said Katie. “The Zero Day Gamers responded with an image of a white skull superimposed over a black and blue computer-generated image. I am sending it to you now.”

  Morgan received the email and examined the image. It read:

  ZERO DAY GAMERS

  One man’s gain is another man’s loss; who gains and who loses is determined by who pays.

  “Their name is a play on words,” said Morgan. “A zero-sum game is a situation in which one person’s gain is equivalent to another person’s loss. The net change is zero.”

  “That’s correct, sir,” said Katie. “The substitution of the word day in the place of sum reflects this group’s expertise in exploiting zero-day vulnerabilities in a computer network.”

  “If they took down the Las Vegas power grid, they’re playing a dangerous game,” said Morgan.

  “Yes, sir,” said Katie. “It was the act of shutting down the grid, coupled with the walkout of the unions immediately after the outage, which leads me to believe the hackers worked in concert with the unions. This puts them in a class by themselves—as cyber mercenaries.”

  Katie continued. “You asked for my working theory, so here it is. I believe the Zero Day Gamers have achieved some notoriety in the hacker world through their accomplishments. I believe the Anonymous group has become jealous or envious. As a result, Anonymous has issued a challenge to the Zero Day Gamers—a challenge in the form of hacking the Treasury Department’s network. They are now challenging the Zero Day Gamers, in a not-so-friendly game of one-upmanship, in the form of a virtual cyber war.”

  “When will you know more about this Zero Day group?” asked Morgan.

  “Technically, I am not involved in that investigation. The CTIIC will continue to maintain jurisdictional control over both Anonymous and the Zero Day Gamers.”

  Morgan thought for a moment.

  “Miss O’Shea,” started Morgan, “I am going to arrange a promotion for you. I am going to contact the President’s Chief of Staff immediately. David McDill, or one of his associates, will be in contact with you. You will become the liaison between the two agencies and will report directly to the President’s Intelligence Advisory Board. But Miss O’Shea—you will always report to me first, understood?”

  “Yes, sir,” said Katie.

  Morgan thanked her and hung up. If this situation could not be contained, then it must be profited from—now and in the future.

  Chapter 47

  March 27, 2016

  100 Beacon

  Boston, Massachusetts

  Sarge sat with his legs propped up on the coffee table in the Great Hall, watching the news networks with Julia. He held her head against his chest and stroked her hair, absorbed in the digital chaos. Neither had said a word in the last half hour. Riots continued throughout the United States. European economies continued to teeter on the edge of collapse, tanking the markets. Tensions were escalating in the Middle East. The collapse Sarge had always feared loomed closer than ever.

  “It’s happening, isn’t it?” asked Julia, breaking the silence.

  “I think so,” said Sarge. “Sometimes I wonder if my choice of reading material or news networks would provide me a different outlook on life.”

  “How so?” asked Julia. “Are you telling me you’re no longer going to read my column? Did you block me on Twitter?” They laughed.

  He took another sip of his Tanqueray and tonic.

  “Here’s what I mean,” said Sarge, pausing all six screens and setting down his drink. “Let’s examine the screens one at a time.”

  The first screen was the FoxNews channel, which showed a picture of retired General Bob Scales—military analyst. In the split screen was a map of Eastern Europe, showing the significant advances of pro-Russian forces into Europe.

  “Russia has advanced into Eastern Europe, virtually unchecked,” said Sarge. “They were deterred for a time in Mariupol, but all the Mariupol operation did was delay the inevitable. Putin’s been quoted as saying his forces could reach any western European city in a matter of a few days. Meanwhile, NATO is scrambling to bolster the land forces they’ve gutted over the past decade. It won’t be enough, and that’s only one front.

  “Putin sent a small taskforce of warships and troop carriers to occupy an abandoned NATO facility in the Arctic. The polar route for the Russian Navy to our Atlantic Seaboard is closer than most people realize. Combine that with the recently arrived intelligence vessels in Cuba, and I’d say he’s testing our mettle.”

  “The Russians are preparing for war,” said Julie.

  “Either that, or they’re positioning themselves for the power grab that will result from a Eurozone collapse. The current geopolitical climate doesn’t exactly favor a strong, coordinated response to Russian aggression.”

  “We’ve alienated most of the European countries,” replied Julia.

  “Exactly,” said Sarge. “I doubt the Germans or the French would join in the fray unless they were directly threatened. The English and Canadians will support us, but to what extent? The political climate in both countries won’t support a proactive, sustained military posture against Russian expansion. And let’s be honest, neither country has the military resources to make a significant difference. Their support will be symbolic at best. Russia, on the other hand, has maintained or bolstered their relationships with key agitator-states around the world. China, North Korea, Iran, Syria. And now, through the BRICS alliance—Russia has gained a foothold in South America and in South Africa. They’ve assembled a gang of psychotic ruffians while we’re losing our grip on key, historic allies. The balance will tip in their favor if this continues.”

  Sarge pointed to the television providing coverage by the BBC of the Eurozone debt crisis.

  “And even if Russia and the United States stop their chest-beating, the Ukrainian conflic
t has already devastated the euro,” said Sarge. “The European- and U.S.-sponsored sanctions against Russia have harmed the Europeans more than the Russians. Russia simply established new trade partners, like the Chinese and Iranians.”

  “For over a year, the Europeans stood steadfast in refusing to negotiate with the Russians on the trade and energy sanctions,” said Julia. “When Russia completely cut off the supply of gas to Ukraine late last year, they called Europe’s bluff.”

  “It didn’t help that our administration blocked shipments of gas from the United States due to environmental concerns,” said Sarge.

  Sarge shook his head. He hated to say these things out loud—the threats became more real.

  “Ukraine was in a desperate situation regarding its natural gas supplies. They began to tap the pipelines dedicated for European consumption, creating a shortage in Europe that further damaged the Eurozone economy. Between the energy war and the trade war, Europe is on the brink of collapse,” said Sarge. “It’s just a matter of time before Greece, Italy and Spain fold under the weight of their respective governments’ debt. When France and Germany decline to bail them out, guess where they’ll turn? The only solvent country still making friends in the world—the new USSR.”

  “That’s a scary thought,” said Julia.

  “Even scarier for the people of those countries. The old USSR patented the concept of austerity measures. Which brings us full circle to another organization that could benefit from the concept of austerity. The Federal Reserve.”

  “I was amazed that the information leaked didn’t have a bigger impact on markets,” said Julia.

  “The White House expertly blamed the leak on a disgruntled Edward Snowden type of employee, and the administration-controlled media did the rest. The timing of the announcement didn’t hurt, either. Late Friday before the start of Easter weekend? Well played. The story didn’t get the airtime it deserved. Momentum is the key to any news story, as you well know. This one will sputter along until it fades into obscurity.”