Eagle, I don't want to form an alliance anymore.

"...What power?"

“The overall influence and comprehensive strength of rebellious communities and organizations.” After reading the definition, Director Nian paused for a moment, “and at most, it’s fifteen.”

The office fell silent, save for the distant clanging of the tram passing by outside the window. Slava tapped his fingers twice on the windowsill, his smile vanishing completely.

This is the most outrageous part. He could laugh off the exaggerated figures mentioned earlier, but this one was deflating the situation—it told him that the opposition was insignificant and that society was as stable as a mountain, allowing him to rest easy.

This is really going to be a disaster.

"Given the current pace of reform in those Eastern European countries, if we don't intervene militarily with real force, dramatic changes in Eastern Europe will probably happen in just a few years!"

The Solidarity issue in Poland remains unresolved, a headache Jaruzelski has been troubling for years, and Kádár's position in Hungary has long been precarious—this whole mess is raging beneath the surface, and you're telling me this report only shows a 15-degree fire?

He switched the phone from one hand to the other and sighed, "Boss, the data fabrication in this system is outrageous. You exaggerate the good data to the extreme and suppress the bad data to the extreme. It's like this thing came from the same womb as our Planning Commission's reports."

On the other end of the phone, Director Nian didn't respond to his question. Instead, he slowly and deliberately asked a question in return:

"Then how do you know that the reports your newly appointed subordinates submit are true? They go up layer by layer, and with each layer they pass through, they become more and more refined. By the time they reach your desk, how are they any different from my report?"

She added, "Do I need to remind you that when you were working on IT in Ukraine, we both watched as the data entry clerks at those terminals accidentally entered a few extra numbers at the suggestion of their superiors. Should we pretend to be oblivious to that?"

Slava opened his mouth, but couldn't say anything for a long time.

This sentence left him speechless. Before the information systems were installed in those pilot regions of Ukraine, every single figure reported—production, allocation, and inventory—was manipulated and inflated at every level.

He recalled the farmer in Smolensk who fed his pigs bread; had he not personally lifted the straw covering the trough, the state's sideline livestock farming would have appeared thriving on paper. Director Nian's report with its perfect score was a lie, but his other reports, stamped with official seals and filled out by living people, were hardly any cleaner!

It's the same bureaucratic machine, the same self-deception; the only difference is that one is generated by the system, and the other is copied by hand.

Is the perfect score fabricated by the system itself, or is it a bloated report from one of its subordinates?

"See, you can't answer either," Director Nian said gloatingly.

"I'm telling you, this reporting system of mine is a complete waste of time because it only shows data from our own people—the higher-ups have this habit of only reporting good news and not bad, even my system has caught it. This thing would actually be of some use—"

She drew out the word, and Slava could tell she was really thinking about it.

"It's probably only reliable to look at other people's data. Our self-deceptive skills are just fooling ourselves." Director Nian clicked his tongue. "I just glanced at the ocean. The US economy seems to be overheating. The numbers are hot to the touch. I'll check this out for you later. I can't say for sure, but I can see other people's economies on fire much better than my own."

Slava stood by the window, holding the phone that could ring even without being plugged in, and chuckled after a long while.

“Okay,” he said. “A system that can’t see its own house but only stares at the neighbor’s pot, that’s quite unique of you as a system mother.”

"You may complain, but you'll be begging me for help someday." Director Nian said this mercilessly, and then added insult to injury, "First, fix your height problem, so that when you stand up to speak at meetings, people below the stage won't think there's no one behind the podium."

"?"

The call had already ended, leaving only a busy tone.

Slava put the receiver back, looked down at the unplugged phone, then looked up at the stern portrait of Lenin on the wall. He suddenly felt that if there was someone in the house he could banter with, life wouldn't be so hard.

He sat back down behind the General Secretary's desk, which was covered with green felt, and put away his earlier smile. Suddenly, he noticed that the red telephone that he had been holding had teleported to the desk and was placed parallel to the other six telephones.

"What?"

Slava reached out and waved his hand, which actually passed right through the phone. He then went to the KGB's Ninth Bureau's office upstairs and obtained the wiretapping device, only to find that his voice during his conversation with Director Nian was completely absent.

It seems this is also part of the system girl.

He then began handling routine official business; only when you truly become the General Secretary of a superpower do you realize how much there is to do in a day. By the time he finished processing today's documents, it was already 7 p.m.

Slava declined Prime Minister Ryzhkov's invitation to dinner. Ryzhkov could go home after dinner; he wanted to wait for his supervisor to get off work and think about what he should do next.

Yes, he trusted neither the perfect report from the system nor the numbers stamped with red seals on paper. The deepest disease in this country is not the lack of a machine that can do accounting; it is that from top to bottom, from the planning commission to the farms, no one dares to lay out the truth on the table.

He's involved in information technology, public computing centers, and automated control systems. Ultimately, what he wants to dismantle is this black box of power that leeches off the command economy and can whitewash lies into good news!

But on what basis does this black box of power operate? Official privileges? A special supply system? Material shortages?

One problem leads to another, one difficulty follows another, and trying to solve one only leads to being hindered by another...

He lacked the resolve to implement shock therapy as a "quick fix" because he had to be responsible to the people, to his own beliefs, and to the mentor on the wall! Yeltsin was doing just fine with shock therapy; after all, it wasn't him who was in shock or dying. Slava had no intention of following in Yeltsin's footsteps.

He immediately began writing a new economic plan, with the urgent task being to restore the people's confidence in the Party, ensuring that the people had meat in their pots and food on their shelves. Only then would the people support him, and he would have the confidence to challenge the bureaucratic clique.

However, even the most skilled cook cannot cook without rice. The aftermath of the oil crisis is still affecting the alliance, and international oil prices are stagnant. This year's fiscal revenue is much better than in previous years, but there is still no extra spare money for Slava's plans.

Should the US take another hit on US Treasury bonds? Everything will be alright as long as the US launches an offensive?

No, that won't work. The US has already made a fortune in Europe during the oil crisis, and the Americans are starting to get suspicious. We can't be so blatant about it.

...

A few days later, Director Nian came to Slava with her proposal.

When she pushed the door open, Slava was looking at a stack of reports sent by the Planning Commission, frowning. He would mentally halve the numbers filled in with red stamps every time he looked at them, but he had no idea how much of it was actually true after halving.

Director Nian didn't exchange pleasantries with the secretary at the door. He walked straight to his desk and tossed a file bag he had been carrying under his arm onto the table. The bag created a gust of wind as it fell, causing the reports in front of Slava to flip over at one corner.

“Stop looking at that stuff,” she said, sitting down in the visitor’s chair, taking a bag of candied winter melon from her coat pocket, and propping her legs up on the coffee table.

"Anyway, it's just a bad idea to look at it. I've found you a good opportunity to eat lots of American rice."

Slava put down his pen and opened his mouth to accept the feeding from Director Nian: "I guess—the historical cycle is about to begin?"

"Yes, it's the historical cycle of capitalism."

From 1982 to the summer of 1987, the Dow Jones Industrial Average in the United States rose from over 770 points to over 2,700 points, more than tripling in five years!

After Reagan took office, he implemented large-scale tax cuts and loosened restrictions on the financial industry. One after another, leveraged buyouts using borrowed money to acquire entire companies occurred on Wall Street, and large sums of money were poured into the stock market.

This fueled market sentiment to an almost frenzied level. By the summer of 1987, stock valuations were outrageously high, but everyone was still immersed in the illusion that the upward trend would never stop, and no one was willing to be the first to get off the train.

This scene is just like the one in 1929, the only difference being that it was Reagan, not Hoover, who was in power.

By the autumn of 1987, cracks had begun to spread amidst the market frenzy.

Current Treasury bond yields are alarmingly high. Greenspan just took over as Federal Reserve Chairman Volcker in August and began raising interest rates in an effort to curb inflation. The yield on long-term Treasury bonds climbed from 7 percent at the beginning of the year to over 10 percent in October—what does this mean?

This means bonds that offer a stable 10% return without any effort, which is much more appealing than stocks with alarmingly high valuations that could potentially experience a correction at any time.

While ordinary people are still trying to profit from capitalism in the stock market, smart people have already started buying government bonds.

Meanwhile, the dollar continued its downward spiral, and the US trade deficit grew worse year by year. This issue was directly linked to the two agreements that Director Nian himself had overseen back then—the dollar depreciated after the Plaza Accord in 1985, and the Louvre Accord in February 1987, which aimed to stabilize the dollar, failed.

This won't do. The dollar can't be allowed to fall out of control; it needs to be regulated by a powerful force. So, in mid-October, which is historically expected, US Treasury Secretary Baker publicly made a strong statement:

"If West Germany dares to raise interest rates again, the US will simply let the dollar fall!"

These words spread throughout the international investment community the weekend before the crash, terrifying those holding dollar assets. Coincidentally, on October 14th, rumors circulated in Congress that it would eliminate tax breaks for leveraged buyouts.

This made those who specialize in M&A arbitrage restless, and they started rushing to sell. From the 14th to the 16th, the Dow Jones Industrial Average had fallen by nearly 10% in just three days. On Friday alone, it fell by 108 points, which was a record drop at the time.

This is just the beginning of the building's collapse.

"But all of these are just dry tinder. What can really make this fire burn like wildfire is something that capitalists invented themselves, but few people really understand how sinister it is."

She was referring to something called "portfolio insurance".

This is a hedging strategy devised by a few American scholars. It sounds pretty good—using a computer program to automatically monitor the market and sell stock index futures to hedge against losses in the spot market once it starts to fall. In theory, it's like insuring your investment portfolio.

By 1987, it was estimated that over $90 billion in assets had been using this strategy.

The dollar was still very valuable back then.

But this strategy has a major pitfall: sell when prices drop, sell when prices drop further, and sell even more aggressively when prices drop further!

It's a death spiral that pulls itself into an abyss. Once the market starts to decline, all institutions using this program will frantically sell futures in the same direction at the same time. The futures price is smashed through, and then transmitted back to the spot market through arbitrage, turning the spot and futures markets into a chaotic mess.

Others step on their right foot to ascend to heaven, but this person steps on their right foot to fall into hell.

"What's the most amazing thing about it?" Director Nian said proudly, "It's because this thing is a mechanism—it doesn't pick and choose days. As long as the market falls below a certain threshold on a given day, this machine will automatically start up and strangle itself."

Those Western designers weren't unaware of the risks. Fisher Black, the Goldman Sachs executive who developed the Black-Scholes formula, privately grumbled about what would happen if everyone used this approach. But no one dared to say it publicly, and no one listened.

This is the inherent weakness of capitalists: for enough profit, they are willing to sell the rope that hangs them.

Slava paused for a moment, considering the risks.

He knew, of course, that Director Nian wasn't exaggerating. From the oil price collapse in early 1986 until now, the real money Director Nian had saved for the alliance was actually sitting in the national bank's accounts. But he also knew that predicting a crisis was one thing; extracting money from a crisis was quite another—

The latter is far more dangerous; one wrong step could wipe out the alliance's precious foreign exchange reserves in the West!

Because they went too far, the Americans can default on their debts.

"So how do you plan to do it?" he asked.

The leader replied, "We don't create crises. All the fuel for crises—the valuation bubble, the deadlock of the dollar, that self-destructive program—was built by the West itself. It has nothing to do with our Soviet Union."

We'll do only two things: First, pull the person who'll rush out to put out the fire before it even starts; second, add fuel to the fire before it ignites.

The person who had to put out the fire in history was the newly appointed Federal Reserve Chairman Alan Greenspan.

Following the original trajectory, on the morning of October 20, 1987, the day after the crash, Greenspan, who had only been in office for a little over two months, would have issued a statement that later became a textbook example for central banks: the Federal Reserve confirms its readiness to provide liquidity to the economy and the financial system.

The reason this statement was able to quell the near-collapse of the market was partly due to the statement itself and partly due to the person who said it. The New York Federal Reserve then pressured major banks to continue lending to brokerages, and a number of large companies announced stock buybacks. Only then did the market manage to stop at the brink of collapse, preventing a repeat of 1929.

"So as long as we prevent Greenspan from taking this position, this firefighting strategy will be half-useless. And to bring him down, we don't even need to make up a single word—he already has a ready-made bomb sitting on his ass."

That bomb was called the Lincoln Savings and Loans Association.

When Greenspan was still working as a paid consultant, he wrote a letter in 1985 on behalf of a man named Charles Keating, endorsing the management of Keating's Lincoln Savings and Loan Association, praising them as "experienced and prudent" and supporting their exemption from restrictions on direct investment.

Lincoln Savings and Loans collapsed in 1989 on another timeline, becoming one of the most notorious cases in the savings and loan crisis. Keating was imprisoned, and that letter was dug up and repeatedly used to criticize his past.

“The key lies in this time difference,” Director Nian said, flipping through the documents. “In the summer of 1987, the Lincoln Savings and Loans hole was still in the hands of the auditors in San Francisco, within the regulatory system, and it had already begun to be exposed, but the public outside knew nothing about it.”

The chairman of the Senate Banking Committee, Proxmeier, was a well-known anti-waste and populist who was at odds with the financial industry. He had long suspected conflicts of interest when Greenspan was an advisor.

What we had to do was to leak the documents showing Greenspan's endorsement of Lincoln's savings and loans, along with the negative materials from within the regulatory system criticizing Lincoln, to Proxmeier's staff and the Wall Street Journal in June or July.

It's all top-notch ingredients; we just brought forward the time when it was supposed to be launched two years later.

Slava understood; this was exactly what the KGB's economic department excelled at.

We are not spreading rumors; we have simply adjusted the timing of the truth being revealed!

Director Nian continued, "I have already completed the handover with Comrade Kryuchkov of the First Chief Directorate of the KGB."

Our comrades in Washington have received their instructions. The task isn't difficult; we don't need to go to the Federal Housing Loan Bank Committee to get a document. A photocopy is currently circulating among a few low-level staff members on Capitol Hill.

Keating's group is putting pressure on regulators all over the world to protect him, so all we need to do is get a copy from Congress.

Once we have it, we can't hand the material over directly to American newspapers—it would be too easy for the CIA to find out. As usual, we'll have a few left-wing newspapers in Western Europe take the lead, like Der Spiegel in West Germany and Le Monde in France, and then have the mainstream American media 'quote' it.

When Proxmeier's staff 'coincidentally' noticed this foreign news report and dropped it at the confirmation hearing at the end of July—the Fed's savior was finished!

"Then who will come up after him?" Slava asked the most crucial question.

“This is the key person we need to ignite,” Director Nian said excitedly, a cruel smile playing on his lips.

Slava had never seen Director Nian so excited, probably because what they were about to do was just too powerful and exciting.

After all, the thought of recreating 1929 with your own hands is truly exciting!

“We’ll pick the one who’s most advantageous to us from the circle Reagan already knows. The KGB has already identified this person; her name is Beryl Springkel.”

When she mentioned the name, Slava rummaged through her memory—he was Reagan's Chairman of the Council of Economic Advisers, in office in May 1987, a member of the Chicago School, a student of Friedman, an extreme monetarist, a notorious staunch supporter of a strong dollar, and had publicly clashed with Treasury Secretary Baker's "let the dollar depreciate" approach several times during his tenure.

"This person has a flaw that we all dream of: he genuinely believes that the market will clear itself, and his instinctive reaction to the central bank's market intervention is skepticism."

When the stock market crashes, guess what he'll say in the Oval Office? He'll say, "The market needs to correct itself; the Fed shouldn't be driven by panic."

Hayek, look at the fine soldiers you've trained!

In the original timeline, the real crisis occurred on the morning of October 20th. That morning, the Chicago Mercantile Exchange's clearinghouse nearly defaulted—the margin calls due overnight failed to arrive on time, and market makers and options clearinghouses were on the verge of bankruptcy. It was only through pressure from the Federal Reserve Bank of New York and the relentless lending from the Continental Bank of Illinois that the Chicago clearing chain was saved.

Without the Federal Reserve's backing and guarantee, if this futures clearing chain had broken on the morning of October 20th, the drop wouldn't have been just a 22.6% single-day decline!

The entire derivatives market experienced a chain reaction of defaults, major securities firms went bankrupt en masse, and the fire spread to the entire banking system—that was a major event on the scale of 1929.

Trapezes will likely become a daily fixture before the 19th Congress of the Communist Party of the Soviet Union.

The office fell silent for a moment, with only the distant clanging of the tram passing by outside the window.

"What we need to do is, before all this happens, have the State Bank's Foreign Exchange Bureau gradually lay out the short-selling positions through the Moscow People's Bank in London and the banks in Zurich. But there's something important to clarify—in 1987, these two banks had very limited access to the derivatives market. They dealt with Eurodollar lending, syndicated loans, and precious metals; they didn't have futures accounts, and it was impossible for them to go to Chicago to open accounts."

That's like holding up a megaphone and shouting, "The Soviets are here to short the market!"

"So, how do you plan to make your move?"

"Through a few middlemen in Western Europe—small banks in Austria and Liechtenstein with which we have historical ties—we'll have them place short positions in S&P futures in batches, while simultaneously buying long positions in long-term US Treasury bonds," Director Nian calculated.

"On the day of the crash, US Treasury bonds surged, as safe-haven money flocked there, while S&P futures fell by 30%, even worse than spot prices, because the portfolio insurance machine was frantically dumping futures."

We started building positions in batches for these two trades, one long and one short, in May, and filled them by early October. With leverage, the return was ten to twenty times!

"Awesome, damn, awesome!" Slava only understood the phrase "ten times to twenty times".