Forging America: My Campaign Manager is Roosevelt

Chapter 386: Chapter 181: The Fundamental Axiom of Finance (Part 3)

"Yes, Leo."

"This is the ugliest side of financial capitalism."

"Industrial capitalists still need their workers alive because they need labor. But financial capitalists don’t. All they need are assets."

"She’s right. In the logic of power, dependency breeds loyalty."

"But I must remind you, that loyalty is to a creditor, not to a leader."

"If she succeeds in this, the person on the throne won’t be you."

Leo looked at Evelyn.

"Those surrounding cities—Erie, Scranton, Johnston—they’ve been sending large quantities of raw materials and primary products to Pittsburgh. Now they’re holding a ton of credit notes, which are considered wealth within the system."

"But what happens when they need US Dollars?"

"When the Erie city government needs to pay the interest on its US Dollar debt for the next quarter? When Scranton needs to procure external equipment that can’t be paid for with these notes? When their fiscal deficits force them to liquidate these notes?"

"What will they do?"

"They’ll flock to your redemption window."

Leo closed in on Evelyn, step by step.

"The model I designed was too idealistic. I thought that as long as the closed loop functioned well, everyone would keep their funds rolling within the system. But I forgot about human nature, and I forgot about the pressures of reality."

"No one is going to bet their entire livelihood on a piece of paper that can only be circulated internally. They need US Dollars. They need hard currency."

"When hundreds of millions in redemption requests come flooding in like a tsunami, who is going to provide the liquidity?"

Before Evelyn could speak, Leo answered the question for her.

"You are."

"The capital pool led by Saint Claude Capital."

"Right now, the liquidity of the entire system is propped up by you."

"You have enough funds to cover the redemptions. I never doubted that."

Leo’s voice grew colder.

"But will you let them redeem their notes easily?"

"Will you act like a dutiful bank teller, giving them US Dollars as soon as they show up with their notes?"

"No."

"You’ll name your price."

"You’ll demand their cities’ prime assets as collateral."

"You’ll demand control of Erie’s waterworks, Scranton’s power grid, and Johnston’s toll roads."

"You might even demand they mortgage their municipal tax revenue for the next ten years."

"This is your real goal."

"You’re not just trying to make a little something on the interest spread."

"You want to use this inevitable redemption crisis to complete a hostile takeover of all the municipal assets in Western Pennsylvania."

"You want to turn these cities into the private property of the Saint Claude Family."

"You knew all along that my system had this fatal flaw, didn’t you?" Leo demanded. "Those elites on your team, the ones with Goldman Sachs and JPMorgan Chase on their résumés, they would have seen the holes in this idealistic model in a heartbeat."

"But you didn’t warn me. You didn’t correct it."

"You left it there on purpose, maybe even fanned the flames behind the scenes, just so it would blow up at this very moment."

"Leo," Roosevelt cautioned, "this is the price of not having your own people."

"You’re still weak right now. Your team is too thin. You’re not like I was back in my day, with Morgenthau and Ike by my side."

"You have no leverage to counterbalance these financial titans."

"They didn’t dare fool me, because I held greater power than they did."

"But they can fool you."

"They exploited your idealism, your haste, and dug a trap for you, then watched as you jumped right into it."

Evelyn said softly, "That’s right. It’s a debt trap. In international finance, it’s the most common method powerful nations use to control weaker ones. The International Monetary Fund has used it for decades, and it works every time."

"I just brought it to Pennsylvania."

"Is there anything wrong with that?"

Evelyn spread her hands, her expression one of utter self-assurance.

"In their hands, those assets will only depreciate. Those bureaucrats don’t know the first thing about management. Give them to me, and I’ll make the waterworks profitable and upgrade the power grid."

"Efficiency will improve. Service will get better."

"And, as I said, it will make them dependent on us."

"It will consolidate your alliance."

"No."

Leo cut her off, his tone sharp as steel.

"This will not consolidate my alliance."

"This is you building your empire by destroying my alliance."

Leo stood before Evelyn, so close he could smell the perfume on her skin.

But in that moment, he found the scent sickening.

"Have you thought about it, Evelyn?"

"When all this happens—when you are their creditor, the one who collects their utility payments, the one who issues their paychecks."

"Where does that leave me?"

Leo pointed to his own chest.

"What purpose would I serve then?"

"Who will they listen to?"

"Me, the Mayor who just shouts slogans and paints them pretty pictures of the future?"

"Or you, the creditor who holds the power of life and death over them, who can cut off their funding at any moment?"

Leo spoke, enunciating every word.

"At that point, the political alliance I worked so hard to build, the base I secured with five hundred million US Dollars in bonds, will become your plaything."

"My administrative power will be hollowed out."

"Every order I issue will have to be run by you first."

"If I want to implement a policy and you feel it might affect your profits, you’ll just have to lift a finger, and those cities will band together to oppose me."

"You would be their emperor."

"And I would become your puppet."

Rage burned in Leo’s eyes.

"Evelyn, you are using financial means to usurp my administrative power."

"You’re trying to turn me into one of your assets, too."

A dead silence fell over the study.

Evelyn watched Leo, the smile slowly fading from her face.

She hadn’t expected him to see through it all so completely.

In her plan, Leo was a young man with immense ambition.

This city of smog and rust was too small for him. It was destined to be a temporary springboard, a training ground for his path to the heart of power in Washington.

Since he was destined to leave, destined to climb higher, then the most rational choice was to sacrifice a few insignificant peripheral cities and suck his allies dry to strengthen his own position and solidify the foundation beneath his feet.

As long as Pittsburgh prospered, as long as his political record was impressive, who would care about the fate of Erie or Scranton?

It should have been an extremely profitable political transaction.

After all, for most politicians, as long as they could keep their seats, maintain control, and secure a ticket to the next level, it didn’t matter who controlled the economic lifelines or who was left crying in the dust.

But Leo was different.

His sensitivity to power transcended simple calculations of profit and loss.

What he valued was the integrity of his power.

"So?"

Evelyn set down her wine glass, her voice turning cold and hard.

"You’ve seen through it. So what?"

"Don’t forget, Leo, the system is already running."

"The problem already exists."

"Unless you shut down the entire platform right now, the tide is irreversible."

"But do you really dare to shut it down?"

"If you shut down the platform, it means all the credit notes will lose their value in an instant. They’ll become worthless paper, unless you redeem them with cold, hard cash."

"So here’s the question."

Evelyn took two steps forward, her gaze fixed on Leo.

"How much of your five-hundred-million-dollar bond fund is left?"

"Is your current cash flow really enough to cover the massive amount of notes hoarded by those cities?"

"The moment you dare to halt redemptions, a run will occur. Your credit note platform will collapse, and that so-called Industrial Revival Alliance will fall apart."

"Immediately after, the port project will grind to a halt, and Murphy’s campaign will be finished."

"So, I ask again, do you dare?"

With that, Evelyn crossed her arms, a look of haughty confidence on her face as she waited for Leo to submit.

In her eyes, it was only a matter of time.

Any rational politician, when faced with the bankruptcy of their allies, the loss of votes, and the imminent end of their political career, would choose to compromise.

After all, compromise meant survival.