The dollar collapsed because of the long-standing promises of the FDIC.
“All deposits insured to $200,000,” they had promised. When the domestic bank runs began, the government had to make good on the promises. The only way that they could do this was to print money—lots and lots of it. Many Americans were already leery of Federal Reserve Notes due to successive waves of changes in the large portrait currency that began in 1996.
Strange new money tints caused a subtle change in the American psyche. The paper money didn’t look right. It looked phony. And, in essence, it was.
Since 1964, the currency had no backing with precious metals. All that was backing it was empty promises. Rumors suggested, and then news stories confirmed, that the government mints were converting some of their intaglio printing presses. Presses originally designed to print one-dollar bills were converted to print fifty and one-hundred dollar bills. This made the public even more suspicious.
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 Zimbabwe, just a few years earlier.
Thereafter, the value of the dollar was 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. One radio talk show host described this situation as “watching a snake eat its own tail.”All that the bureaucrats in Washington, D.C. could do was watch it happen. They had sown the seeds decades before when they started deficit spending. Now they were reaping the whirlwind. 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 dollars. The riots started soon after inflation bolted past the 1,000 percent mark. Detroit, New York, and Los Angeles were the first cities to see full-scale rioting and looting. Soon, the riots engulfed most other large cities.
When the Dow Jones average had slumped its first 1,900 points, Todd Gray made his “mobilization” calls to the six members of his retreat group still living in the Chicago area. He followed up with a multiple-addressee e-mail message.
There was no need to call Kevin Lendel. He had been coming over for dinner and extended conversations for the past three evenings. Most of the group members agreed to attempt to make their way to the Grays’ home in Idaho as soon as possible.
The only voices of doubt came from the Laytons and Dan Fong. When Todd first called Dan—before his trip back for the accounting firm meeting—
Dan listened to his full spiel, and then remarked, “Yeah, Todd, remember what you did right after the 9/11 terrorist attacks?You went positively ape. You were Chicken Little, and the sky didn’t fall, now did it? I remember the ‘emergency meeting’ that we had at T.K.’s. You were really panicky. You even had Mary loading magazines from stripper clips during the meeting, as I recall. Now how do you know this isn’t just another false alarm?”
Dan’s doubts disappeared a few days later when he was on his way to work. He slowed down when he saw a queue of people stretching a full block. It ended at the doors of the First Chicago Bank on Columbus Avenue. “Oh maaaan,” he commented aloud to himself, “It’s six o’clock in the morning, and they’re already lined up. This looks way serious.” He remembered that bank lines were one of Todd’s touted “warning signs.”
Turning the corner, Dan had to stop and gawk, along with several other drivers. A man was smashing an ATM machine with a tire iron. The machine was obviously either out of cash or had been shut down by the bank. The man was still in the process of venting his rage with the tire iron when Dan drove away. The food rush started that same day. Supermarket shelves were completely emptied in a coast-to-coast three-day panic.
On the last day of October, the Grays found that their phone was still working, but only for local calls. When they tried making long-distance calls, they got an
“All circuits are busy now” recording, at all hours of the day or night. The next day, there was message advising, “All circuits will be restored shortly.” Two days later, there was no dial tone.
By early November, there was almost continuous rioting and looting in every major city in the U.S. Due to the financial panic and rioting, the November election was “postponed” to January, but it never took place. Rioting grew so commonplace that riot locations were read off in a list—much like traffic reports—by news broadcasters. The police could not even begin to handle the situation. The National Guard was called out in most states, but less than half of the Guardsmen reported for duty. With law and order breaking down, most of them were too busy protecting their own families to respond to the call-up. An emergency call-up of the Army Reserve three days later had an even smaller response. All over America, entire inner-city areas burned to the ground, block after block. No one and nothing could stop it. On the few occasions that the National Guard was able to respond to the riots, there were some massacres that made Kent State seem insignificant.
Many factories in proximity to the riots closed “temporarily” in concern for the safety of their workers, but never reopened. Most others carried on with their normal operation for several more days, only to be idled due to lack of transport. Shipping goods in the United States of the early twenty-first century in most cases meant one thing: eighteen-wheel diesel trucks traveling on the interstate highway system. The trucks stopped rolling for several reasons. First was a fuel shortage. Then came the flood of refugees from the cities that jammed the highways. Then cars that ran out of gas disrupted traffic.
As cars ran out of gas, they blocked many critical junctions, bridges, and overpasses. Some highway corridors in urban areas turned into gridlocked parking lots. Traffic came to a stop, motionless cars began to run out of gas, and the forward movement of traffic was never resumed. In some places, cars were able to back up and turn around. In most others, people were not so lucky.
There, the traffic was so densely packed that drivers were forced to just get out of their cars and walk away.
Every major city in the United States was soon gripped in a continual orgy of robbery, murder, looting, rape, and arson. Older inner-city areas were among the hardest hit. Unfortunately, the design of the interstate freeway system put most freeways in close proximity to inner-city areas. The men who had planned the interstate highway system in the 1940s and 1950s could not be blamed. At that time, downtown areas were still flourishing. They were the heart of industry, population, commerce, and wealth. Thus, it was only logical that the highways should be routed as close to them as possible, and preferably through them. These planners could not then have predicted that in fifty years the term “inner city” would become synonymous with poverty, squalor, welfare, drugs, disease, and rampant crime.