NOTE: This is the third part of a continuing online novel. Here is the Table of Contents.

Unlike novels written by novelists, The Chinese Century uses real people and takes place in the present day. The links, and pictures, are real. The story is made up.

Let me repeat this for all who might be offended. The story is made up.

By the time Philippe Khuong-Huu got to his desk at Goldman Sachs on November 29, it was already too late.

The head office was begging him to sell into the rally, convinced that the Federal Reserve would quickly intervene to push the yuan back to its old level.

But Khoung-Huu, respectful of both the Chinese and Soros, would do nothing. Why should the U.S. intervene, he asked his bosses in an e-mail. A more-expensive Yuan meant more expensive imports from China, cheaper exports. Why should the U.S. central bank move against it. Just to get a political opponent?

It made no sense.

Over at the Chicago Board of Trade, CNBC reporter Rick Santelli silently agreed with Khoung-Huu. Why should the U.S. intervene in a market when it was to its advantage for the Yuan to rise? We'd let the Euro rise, we'd let the Yen rise. The falling dollar was holding up the U.S. recovery. Let the Yuan join the party, he told his listeners. Besides, the Board of Trade didn't even have a Dollar-Yuan pit.

Suddenly, at 10 AM, as he prepared to go on again, he saw and heard a great commotion coming from the pit where Fed Funds were traded. Santelli had been working this station for five years, and knew the sound well. He glanced up at the board where prices were posted.

Prices had been rising, and yields falling steadily, since the election. Wall Street loves Republicans, regardless of the results they get, and they had been swaggering into work for weeks.

Now Santelli saw a reversal, a dramatic one. Funds were trading limit down. Rates were going up. He punched his screen, looking for an explanation. There was none. The market knew something the news didn't. This frequently happens. Sometimes it's a rumor, sometimes it's real.

He reported the news calmly, speculating that it might have to do with rumors. Then, after issuing his all-clear, with the camera off him, he looked at the numbers on 30-year paper. The rate had been falling throughout the month, from 4.67% down to 4.4%, a tidy profit that had fueled a "Bush Relief Rally" on the stock market.

Now it was reversing, and quickly. He waited several minutes for the market to stabilize. It should if what had just happened with short-term paper was just a blip.

But it was no blip.

The price of a bond moves in inverse to the yield. That is, if you sell a bond at 4.5% and interest rates dip, the price of the bond goes up, and vice versa. These numbers were hard to fathom. Prices had fallen the equivalent of 25 basis points and showed no sign of stopping.

He heard a ringing in his ear. It was the desk. "What's going on?" asked his producer.

"You tell me. Any news on your Bloomberg?"

There was silence for several long moments. "The Chinese government has announced a plan to support the Yuan by selling U.S. government debt," the producer said, reading her screen.

"Is this a short-term deal?"

"It doesn't say."

"Are you certain it says support the Yuan? It's way up. Selling debt means buying Yuan. That should mean a level price, not a rising one."

"That's all it says," said the producer. "Make some calls."

(CBOT image from Geckosoftware.) The calls shook Santelli as he'd seldom been shaken in his years covering the market. The traders he talked to were as confused as he was, both about the move in the market and the release. They had theories. Some suggested Soros was pushing the market to support his Yuan play. But these sounded like guesses. And a confused broker is a panicked broker.

That's what Santelli reported, at 10:30, that traders really didn't know why the bonds were selling off, but that no one was rushing to support them. Don't get in the way of a falling knife, the saying went.

In New York, meanwhile, prices of stocks plunged, in a way that hadn't been seen since the 2000 crash. The Dow was off 100, then 200, then 300 points, seemingly within minutes. Again, the old cliche came up. No one wanted to get in the way of the falling knife. Everyone stopped buying, waiting for the plunge to stabilize. A few got in at down 400, but then the plunge began again. Circuit breakers kicked in.

By 12:19 Eastern, the New York Stock Exchange had closed for the day.