Survivors – A Novel of the Coming Collapse

The reconstructive surgery on his left cheekbone-which had used a piece of one of his ribs-was less than perfect. Sometimes people he hadn’t met before or who hadn’t seen him in many years would approach him from the right side, smiling, and then he’d turn his head toward them and they’d suddenly look repulsed. “The Quasimodo effect” is what Lars called it.

One month earlier, on a street corner in Durango, Colorado-the nearest city with large department stores where Lars was shopping for a new refrigerator-a man who appeared to be in his seventies walked up to Lars, and asked simply, “Iraq?”

Lars answered, “Yes, sir.”

“I was in that little Dominican thing, and then I did a tour in Vietnam. I came back without a scratch.” The old man looked Lars in the eye and said firmly, “Thanks for your service, and for what it cost you. Welcome home.” He shook his hand and strode away. Laine’s eyes welled up a bit, but he didn’t cry. That one encounter made up for a whole lot of previous Quasimodo moments.

Finally, the roll-up door opened, and the crowd rushed in. Lars and Beth headed for the canned-food section and started stacking full cases on the cart. That was just the first cartload. They stacked the cart high on three successive trips into the store that morning.

The television news anchors had recently started calling the intensifying economic crisis “the Crunch.” The term soon stuck with the general public, becoming part of the general lexicon. Government spending was out of control. The credit market was in continuous turmoil. Meanwhile, bank runs and huge federal bailouts had become commonplace.

The debt and budget deficit had spiraled to stratospheric numbers. A Congressional Budget Office report stated that to pay just the interest on the national debt for the year, it would take 100 percent of the year’s individual income tax revenue, 100 percent of corporate and excise taxes, and 41 percent of Social Security payroll taxes. As the Crunch began, interest on the national debt was consuming 96 percent of government revenue.

The official national debt was over $6 trillion. The unofficial debt-which included “out-year” unfunded obligations such as entitlements, long-term bonds, and military pensions-topped $53 trillion. The debt accumulated at the rate of $9 billion a day, or $15,000 per second. The official national debt had ballooned to 120 percent of the gross domestic product and was compounding at the rate of 18 percent per year. The federal government was borrowing 193 percent of revenue for the year.

The president was nearing the end of his term in office. The stagnant economy, rising interest rates, and creeping inflation troubled him. Publicly, he beamed about having “beat the deficit.” Privately, he admitted that the low deficit figures came from moving increasingly large portions of federal funding “off budget.” Behind the accounting smoke and mirrors game, the real deficit was growing. Government spending at all levels equated to 45 percent of the gross domestic product.

In July, the recently appointed chairman of the Federal Reserve Board had a private meeting with the president. The chairman pointed out the fact that even if Congress could balance the budget, the national debt would still grow inexorably due to compounding interest.

In Europe, international bankers began to vocally express their doubts that the U.S. government could continue to make its interest payments on the burgeoning debt. In mid-August, the chairman of the Deutsche Bundesbank made some off-the-record comments to a reporter from the Economist magazine. Within hours, his words flashed around the world via the Internet: “A full-scale default on U.S. Treasuries appears imminent.” His choice of the word “imminent” in the same sentence with the word “default” caused the value of the dollar to plummet on the international currency exchanges the next day. T-bill sales crashed simultaneously. Starting with the Japanese, foreign central banks and international monetary authorities began to dump their trillions of dollars in U.S. Treasuries. None of them wanted the now-risky T-bills or U.S. bonds. Within days, long-term U.S. Treasury paper was selling at twenty cents on the dollar.

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.