Survivors - A Novel of the Coming Collapse Page 3
Foreign investors began liquidating their U.S. paper assets: stocks, bonds, T-bills—virtually anything denominated in U.S. dollars. After some weak attempts to prop up the dollar, most of the European Union nations and Japan announced that they would no longer employ the U.S. dollar as a reserve currency.
The Federal Reserve began monetizing larger and larger portions of the debt. The Fed already owned $682 billion in Treasury debt, which was considered an asset for the purposes of expanding the money supply. In just a few days, Federal Reserve holdings in Treasury debt more than doubled. The presses were running around the clock printing currency. Soon after, the domestic inflation rate jumped to 16 percent in the third week of August. To the dismay of the Fed, the economy refused to bounce back. The balance of trade figures grew steadily worse. Leading economic indicators declined to a standstill.
Legislators in Washington, D.C., belatedly wanted to slash federal spending but were frustrated that they couldn’t touch most of it. The majority of the budget consisted of interest payments and various entitlement programs. Previous legislation had locked in these payments. Even worse, by law, many of these spending programs had automatic inflation escalators. So the federal budget continued to expand, primarily because of the interest burden on the federal debt. The interest payments grew tremendously as rates started to soar.
It soon took 85 percent interest rates to lure investors to six-month T-bills. The Treasury Department stopped auctioning longer-term paper entirely in late August. With inflation roaring, nobody wanted to lend Uncle Sam money for the long term. Jittery American investors increasingly distrusted the government, the stock market, and even the dollar itself. In September, new factory orders and new housing starts dropped off to levels that could not be properly measured. Corporations, large and small, began massive layoffs. The unemployment rate jumped from 12 percent to 20 percent in less than a month.
Then came the stock market crash in early October. The bull stock market had gone on years longer than expected, defying the traditional business cycle. Nearly everyone thought that they were riding an unstoppable wave. Just before the Crunch, the Dow Jones Industrial Average was selling at a phenomenal sixty-five times dividends—right back where it had been just before the dot-com bubble explosion. The market climbed to unrealistic heights, driven by unmitigated greed. Soon after the dollar’s collapse, however, the stock market was driven by fear.
Unlike in the previous crashes, this time the U.S. markets slumped gradually. This was due to circuit-breaker regulations on program trading, implemented after the 1987 Wall Street slump. Instead of dropping precipitously in the course of one day as it had in ’87, this time it took nineteen days to drop 7,550 points. This made the dot-com bubble burst in 2000 and the 2008 stock market meltdown both look insignificant.
The London and Tokyo markets were hit worse than the U.S. stock exchanges. The London market closed five days after the slump started. The Tokyo market, which was even more volatile, closed after only three days of record declines. Late in the second week of the stock market collapse, the domestic runs on U.S. banks began. The quiet international run on U.S. banks and the dollar had begun a month earlier. It took the citizenry in America that long to realize that the party was over.
The only investors who made profits in the Crunch were those who had invested in precious metals. Gold soared to $5,100 an ounce, with the other precious metals rising correspondingly. Even for these investors, their gains were only illusory paper profits. Anyone who was foolish enough to cash out of gold and into dollars after the run-up in prices would have soon lost everything. This was because the domestic value of the dollar collapsed completely just a few weeks later.
The dollar collapsed because of the long-standing promises of the FDIC. “All deposits insured to $100,000,” they had pledged. When the domestic bank runs began, the government had to make good on its word. The only way that it could do this was to print money—lots and lots of it. Since 1964, the currency had no backing with precious metals. Rumors suggested, and then news stories confirmed, that the government mints were converting some of their intaglio printing presses. Presses that had originally been designed to print one-dollar bills were converted to print fifty-and one-hundred-dollar bills. This made the public suspicious.
With overseas dollars being redeemed in large numbers and with the printing presses running day and night turning out fiat currency, hyperinflation was inevitable. Inflation jumped from 16 percent to 35 percent in three days. From there on, it climbed in spurts during the next few days: 62 percent, 110 percent, 315 percent, and then to an incredible 2,100 percent. The currency collapse was reminiscent of what had happened in Zimbabwe.
The value of the dollar began to be pegged hourly. It was the main topic of conversation. As the dollar withered in the blistering heat of hyperinflation, people rushed out to put their money into cars, furniture, appliances, tools, rare coins—anything tangible. This superheated the economy, creating a situation not unlike that in Germany’s Weimar Republic in the 1920s. More and more paper was chasing less and less product.
With a superheated economy, there was no way for the government to check the soaring inflation, aside from stopping the presses. This they could not do, however, because depositors were still flocking to the banks to withdraw all of their savings. The workers who still had jobs quickly caught on to the full implications of the mass inflation. They insisted on daily inflation indexing of their salaries, and in some cases even insisted on being paid daily.
Citizens on fixed incomes were wiped out financially by the hyperinflation within two weeks. These included pensioners, those on unemployment insurance, and welfare recipients. Few could afford to buy a can of beans when it cost $150. The riots started soon after inflation bolted past the 1,000 percent mark. Detroit, New York City, and Los Angeles were the first cities to see full-scale rioting and looting. Soon the riots engulfed most other large cities including Houston, San Antonio, Chicago, Phoenix, Philadelphia, San Jose, San Diego, Dallas, Indianapolis, and Memphis.
It was when the Dow Jones average had slumped its first 1,900 points that Lars Laine decided to stock up. But by then it was nearly too late. Gas cans had all been snapped up a week before. The shelves at the supermarkets were already being cleaned out. Unable to find extra batteries at department stores, Lars and Beth started looking elsewhere. They finally found some that had been overlooked at a Toys “R” Us store. They were able to find a few first-aid supplies, but those, too, were being rapidly depleted, along with everything else at the local CVS drugstore. The local gun shops had been completely cleaned out of inventory. There wasn’t a single gun or box of ammunition left for sale.
At night, after the stores closed, Lars and Beth stayed up late, ordering things like batteries, lightbulbs, Celox wound coagulant, mason jar lids, and gun cleaning equipment from Internet vendors and from individual sellers on eBay. They placed multiple orders, realizing that in the scarcity of the new market paradigm, at least half of these orders would never arrive.
To their dismay, they found that the Internet ammunition vendors had completely run out of ammunition and extra magazines. After much searching, Lars did manage to order a spare firing pin, a spare extractor, and a few stripper clips for the pair of Finnish-made M39 Mosin-Nagant rifles that he and his brother had inherited from their father.
As the local stores began to run out, there were fewer and fewer things that Lars and Lisbeth could buy. Beth suggested buying extra blue jeans and tube socks, to trade, but they found that the clothing store shelves had already been decimated. Realizing that their money was rapidly becoming worthless, they resorted to buying motion-sensor yard floodlights, plumbing parts, sheets of plywood, and two-by-four studs at the local building store, just as something that they could later barter. A week later, even those were unavailable. It was like a huge nationwide fire sale in progress. Everyone wanted out of dollars and
into tangibles. But it soon became abundantly clear that there were too many dollars and too few useful tangibles available. Prices could only go one way: up.
The local banks were overwhelmed with cash withdrawals and soon got into the pattern of having their cash supply wiped out each morning, and then renewed each night, as local merchants made their deposits. Their transaction volume soared, but their deposit accounts quickly dwindled to below regulation levels. The queue of customers outside the bank each morning soon became the inspiration for jokes and jeering. “They have to print fresh money each night” became the standard joke.
Lars was thankful that he had a three-hundred-gallon aboveground tank of gasoline at the ranch, and that it was nearly full when the economic crisis set in. He added a padlock to it, but he was worried that someone might try to steal the gas at gunpoint.
Both in Bloomfield and the much larger city of Farmington just a few miles west, many of the retail businesses that remained open were cleaned out, leaving the owners with piles of increasingly worthless greenbacks. Eventually, even the local gift store ran out of inventory. People had become so desperate to get rid of their dollars that they traded them for New Mexico logo T-shirts and coffee mugs made for the tourist trade.
3
The Crunch
“If the American people ever allow private banks to control the issue of their currency, first by inflation then by deflation, the banks and the corporations will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
—Thomas Jefferson, from the debate on the recharter of the Bank Bill (1809)
An Najaf, Iraq
Two Years Before the Crunch
Pain. That was his most vivid memory of the past two years. It had started with a fairly routine convoy of five up-armored Humvees in the old quarter of An Najaf. His last memory of that drive was of sitting in the sweltering backseat of the Humvee, looking down at a map and gripping a SINCGARS radio handset. Captain Lars Laine had been in liaison with his Afghanistan National Army (ANA) counterpart, discussing the planned locations of a couple of random checkpoints for the next day. The .50 gunner standing above him yelled “Possible device, left!”—a warning that he had spotted a suspicious object that might be an improvised explosive device. Then he saw a flash and heard a loud explosion.
The next thing that Lars remembered was waking up in a field hospital, trying to focus his vision. And no sooner did he realize that he was in a hospital than he passed out again.
He awoke again twenty-eight hours later, more than three thousand miles away, at Landstuhl Regional Medical Center in Germany, with his head throbbing. He asked in an almost unintelligible voice, “Can you take the edge off this pain?” He vaguely remembered the face of the E-6 male nurse who stood by his bedside. The nurse obliged with a fresh dose of Demerol IV via his Luer-Lock intravenous fluid connector.
The nurse gave Lars some water on a sponge stick that looked like a lollipop. It was as Lars was getting these first dribbles of water that he realized that he had no vision in his left eye. Several hours later he further realized that the vestiges of his left eye had been removed from its orbit and replaced by a nitrile rubber and gauze packing, supplemented with a drainage tube.
Losing his eye put Lars into a brief depression. But then seeing much more badly wounded soldiers around him made him count his blessings. As he later told Beth: “At least I’m walking around on two good legs. Every day aboveground is a gift from God.”
Lars gradually regained some awareness of his surroundings. A male nurse walked up to his bed and handed him a cup of water with a straw. The nurse held the cup while Lars took a couple of clumsy sips.
Lars nodded and said, “Thanks, that’s better.”
The nurse put the glass down within reach on Laine’s bed table and said, “You were delirious. The first time I gave you water on a sponge stick, you tried to eat the sponge. Oh, and you kept repeating some phrases; I think they were Pashto or Arabic.”
“Such as?”
“Two of them that I remember are ‘Wayne riff attack’ and ‘Erf-e-dack.” What language was that?”
Lars thought for a moment and answered, “That was Arabic. Uhhh, well, ‘Wayn rifakak’ means ‘We are your friends’ and ‘Irfa’a eedak’ is an order—it means ‘Put your hands up!’”
“Kinda strange that you’d be using both of those in the same conversation,” the nurse said, looking bemused.
“No, not where I’ve spent the last couple of years, up in Injun Country. It happens all the time, believe me.”
It was while at the Landstuhl hospital that Lars was told the extent of his injuries: Most of his left hand had been amputated. His left arm was broken in three places, and he had six broken ribs. His left eye, left cheekbone, and nine teeth were gone. There were multiple lacerations and second-degree burns to his face, neck, and arms. Days later he was told that he also had a “mild to moderate” traumatic brain injury (TBI). It was much later that he learned that he had lost all hearing in his left ear and had a 60 percent hearing loss in his right ear. This news made Laine doubt whether he’d ever return to regular duty, and pushed him into another bout of depression.
After four days at Landstuhl, Lars was flown on a C-5 to Andrews Air Force Base and transferred to Walter Reed Army Medical Center, in Washington, D.C. It was the most agonizing flight of his life. It seemed to last for days, and the pain was incredible. Lisbeth was there to meet him at Walter Reed. She and Grace stayed at the home of her cousin in Silver Spring, Maryland, for the next five months, visiting him almost every day. Lars spent four months at Walter Reed, where he got his reconstructive surgery and skin grafts. More pain. Then another month at a Walter Reed satellite hospital, getting his hearing aid and glass eye. It was there that he started doing more intense physical therapy.
It was also while he was at Walter Reed that Lars was awarded a Purple Heart, pinned on his pillow by the vice president, who was there for a photo op. Lars caused quite a stir when the vice president asked him what he planned to do when he got out of the Army and went home.
Lars responded, “Home? If I may speak freely, sir, I intend to return to the Big Sandbox and take command of a Civil Affairs Company. I’m not a quitter, unlike some people at the top of the chain of command. Your administration’s Accelerated Draw-Down is premature: it’s putting both American soldiers and the citizenry of Afghanistan in peril. Now, sir, please leave my room before I say something rude about your boss!” Just minutes after the vice president and his entourage left the hospital, Lars Laine was dressed down by the attending physician (an O-6), who very soon after placed a letter of reprimand in Laine’s permanent 201 personnel file.
Finally, he was transferred to Fort Sam Houston Hospital, in Texas. That was where he got the rest of his dental work, his prosthetic hand, and an Army commendation (ARCOM) medal.
Lars jokingly called his spring-loaded prosthetic left hand “Mr. President,” in homage to the movie Dr. Strangelove. He hated the hand. The hand had very few advantages. One was that it allowed him to do electrical work without fear of getting shocked. It also gave him the ability to pick up hot pots and pans from the kitchen stove without using a hot pad. But in almost all other respects, it was a hindrance and an annoyance.
Hampered by the letter of reprimand, Lars was never approved to return to active duty without limitations. Then came a frustrating year of branch immaterial duty, pushing quartermaster paperwork at Fort Hood, spending as much time with the MEDDAC oral surgeons and physical therapists as he did behind a desk. Lars held on for that last year to finish his dental work and to get his bump to major—the O-4 pay grade—providing him with a more substantial disability retirement. His branch manager at PERSCOM confi
ded that it was only because of some politicking of the promotion board by two of Laine’s former brigade commanders that he was not passed over for promotion to O-4. Once his promotion to major came through, Laine immediately resigned his commission.
When he was discharged, Lars was thirty years old, and an “O-4, over six”—a major with more than six years of service. He was also suffering from depression. His arm had healed well, and he was back to his normal exercise regimen of running two miles every two days, with two hundred sit-ups on the alternating days. Physically, aside from some nerve damage in his left arm, he was nearly as strong and limber as he had been before the ambush. But if it were not for his faith in God and the presence of his wife and his daughter, he had doubts that he would have ever recovered mentally.
4
Fujian Tulou
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out