The library at Kykuit was a sanctuary to learning, yet Jason was treating it like a war room. The thick leather-bound volume of Goethe's poems that usually dominated the center of the great oak table was shoved to one side. Instead, its place was taken by the slim, elegantly understated-looking file marked CREDITANSTALT.
For two days, Ezra—or the spirit of Jason Underwood in his flesh—had scarcely slept. He prowled with feverish, intense energy, a man obsessed with a dilemma. He called for his servants to bring him maps of Europe after the war, unsimplified ledger books, and the latest issues of European trading statistics. The folder held in his hands the bank's published statements of finances, a factual list of assets and debts that explained but a portion of the narrative.
He was merely reading to any ordinary eye, but in his mind he was building up a living, multi-dimensional picture of a continent in trouble. He drew diagrams on pieces of paper, links between German machine shops and Austrian steel works, Hungarian farmlands and Viennese banking houses, and all of them ultimately to Paris and London financial centers. He wasn't looking at a bank; he was mapping the circulatory system of a dying empire.
He was stopped in his tracks by the voices from the hallway. Junior was accompanying Mr. Harrison, the banker, their tone that of soothing, dismissive accord.
"It's an Austrian mess, pure and simple," Harrison was explaining to him, his voice laced with the silky confidence of a man in charge of billions. "They overleveraged holding dead industries from the old empire. They're going to need to be bailed out by the French, maybe establish a consortium loan. They can't afford to have some Bolshevik-style collapse standing in their doorstop. It's political, John, not all that much of a financial contagion to us. A storm in a Viennese teapot."
"My thoughts exactly," junior agreed. "A local tragedy. Our exposure remains negligible."
Jason listened, a grim smile playing upon his lips. It was ideal. They were viewing a two-dimensional picture while he was observing a three-dimensional movie. Their dependence on common sense, upon the public pronouncements of governments and assurances of colleagues, was the same weakness he meant to capitalize upon.
That afternoon, he asked for an appointment. "With my father," he said to the servant. "And, yes, make sure my brother-in-law comes too. I expect he will find the conversation enlightening."
The summons had brought him to Senior's study, the command center. The room was thick with the odor of old books and latent gravity of consequences. Senior sat in his habitual armchair, blanket around his knees, like a volcano that hadn't woken up in centuries. Junior stood beside the fireplace, his posture radiating a stiff moral superiority. Evidently he thought this his moment to sit back and watch Ezra crucify himself in public with his own alarmist theories.
Ezra did not sit. He stood in front of the fireplace, making the mantelpiece his lectern, the Creditanstalt open file in front of him. He did not start with figures, but with a story.
"Gentlemen," he started, his voice ringing in the room that was silent. "You've both looked at this file. You see a bank in Vienna that made poor decisions. You look at it and you think in terms of a localized problem." He glared at Junior. "A storm in a teapot. You are wrong."
He pointed to the top of the file. "You look at a bank; I look at the key to the entire Central European economy. Creditanstalt isn't any old commercial bank. It's the successor to the financial debt of the late Austro-Hungarian Empire. Its balance books aren't exactly containing Austrian debt. They're intertwined with Czechoslovakian, Hungarian, and Yugoslavian industrial debt. Its collapse will not be a ripple in a pond. It will be a tidal wave that will ravage the entire Danube basin."
Junior sneered. "A literary hyperbole, Ezra, but one devoid of—"
"I haven't finished," Ezra said, his voice cutting like steel, so powerful that it left Junior speechless. He looked back at the patriarch. "That's just the first domino. That second domino? It's Germany."
He picked up a sheet of paper on which he had sketched a crude diagram. "What the public statements do not show, what your man Harrison does not know, is the extent of the secret, unofficial credit lines between the Viennese and Berlin banking houses. They are bound together like drowning men. When Creditanstalt admits insolvency—and it will—the great German banks like the Danatbank will be immediately exposed as holding worthless Austrian paper. The German people, who have already lived through the hell of hyperinflation, will not wait for reassurance. They will panic. There will be a run on every bank in Germany within weeks of the Vienna collapse."
He paused, holding the silence, allowing the repulsive logic to sink in. Junior's face lost some of its healthy glow.
"And that," Ezra explained, his tone low and foreboding, "is where we get to the last domino. The one that falls here. In our home."
He glared at Junior, then at Senior. "Who bears the main credit for the German government and its industrial apparatus? Who covered their comeback? It's the City of London. And to a minor degree, our banks in New York's Wall Street. When Berlin freezes, London will bleed. The Bank of England will be confronted with a dilemma impossible to overcome: respect their standard of gold obligations and witness their entire national reserve disappearing in the Atlantic, or... default."
"Default? Britain?" Junior stuttered. "Absurd! The pound sterling is the foundation of international finance!"
"A bedrock isn't any stronger than the ground it's rooted in," replied Ezra in a cold tone of voice. "And the ground will give way. Britain will be pushed off the gold standard. When that happens, the entire global financial system constructed in reliance on the pound sterling as a storehouse currency, will give way. This Depression today will be a soft, mild recession in comparison."
The room was utterly silent except for the clicking of the clock. Ezra's ominous forecast hung in the room, a minute-by-minute, step-by-step blueprint to a global catastrophe. It was so rational, so chillingly feasible, that it couldn't be contradicted.
Junior, heaving to find his balance, clutched at the sole straw his advisor had given him. "This is sheer wild guessing! Fear-mongering of the worst possible kind! You're drawing connections that aren't there! You've forgotten the key player in your little scenario—the French government. They enjoy the strongest gold reserves in all of Europe. Politically speaking, to keep their grip and to prevent pandemonium, they will never let Creditanstalt go under!"
Ezra allowed himself a thin, predatory smile. "That, Junior, is where you are most profoundly wrong."
He moved in closer. "The French will do nothing. They will silently ensure that it will break down. They will let it burn. Why? Because the one thing France fears more than financial ruin and is German resurgence. There are currently underground talks of a German-Austrian customs union. That's the start of Anschluss, a greater German Empire. There can't be a failed Austria in a customs union. France will use this financial breakdown to politically emasculate Germany for a generation. This isn't finance, Junior. This is war economics. And they're going to win a decisive war."
Junior looked at him in horror, his whole sense of the world disintegrating. He'd been contemplating finance. Ezra was contemplating a multi-front war waged with gold, debt, and national honor.
Senior, who had sat through the entire presentation without flinching, broke his silence at last. His voice was a rough rasp, but he carved through the thick tension like a scalpel.
"It's a grim and fascinating history, Ezra." Ancient eyes stared at him. "If you're in the right, what would you advise?"
Ezra straightened up, his face hardening into a mask of pure, cold calculation. He looked at the old man who had built an empire on the ruins of his competitors.
"We don't do anything."
"Nothing?!" Junior cried out in disgust. "We have the power, the influence! We can cooperate with our London-based partners, issue a line of credit, stabilize the situation—"
"That," said Ezra, his hand waving in negation, "would be trying to reinforce a ruined edifice in an earthquake. That's a fool's errand and a massive investment of capital. The house of cards comes crashing down anyway. We simply stand back and let it."
He paused, his eyes glinting. "And while the entire world is staring at the fire in Vienna, we place our bets elsewhere."
Senior's eyebrow, a faint line in his wrinkled skin, rose a fraction of an inch. "Where?"
Ezra smiled, a cold-looking sight. "Simple," he said. "We short the British Pound."