The guest said the economy had stalled some years earlier, with high unemployment and futile government stimulus. Several events had combined, to cause this disaster. The Asian stock markets had gone into a panic when China raised interest rates to crush rampant speculation and stock market swindles. Over the summer, China had made enormous investments in Russian energy, selling their hoard of US bonds to raise the cash.
A dissident Chinese blogger claimed China quietly sold US dollars for months and received as little as fifty cents on the dollar. The American dollar had gradually strengthened over the previous year and spiked higher in the morning as investors rushed to safety. Once the blogger’s claim circulated, the greenback value plunged and still fell when markets closed.
“Yeah, scared people bought US dollars and treasuries.” Sloan talked over the expert, “but others got into the market.” Bill sighed and strained to listen to the radio as he manoeuvred through heavy traffic.
The Rottweiler man went on. “Drought in the US central plains has made wheat and corn futures skyrocket. Fear has captured the Chicago commodity exchange.”
“Will that affect food prices?” The announcer asked.
“It may raise flour prices and sweeteners, your burger bun could become more expensive than the meat,” the expert laughed, “but it will soon hit the livestock industry hard. Feed corn and barley will be expensive and rationed. In the short term, meat prices might fall as ranchers sell off herds they can’t feed.”
“Great,” said the announcer, “my steak is thirty dollars a kilo.”
“Not so fast,” Rottweiler chuckled. “Once the herds decline, meat will be in short supply and prices will skyrocket. Your bun will then be worth less than the burger once again, except the whole thing will cost a lot more.”
“Will we be able to afford food?” The CBC interviewer sounded alarmed. “Will there be any food?”
Bill could not see the Rottweiler’s shrug of uncertainty and would have to wait for the next newscast to discover the full scope of the day’s events.
In the early hours of the morning, Middle East Time, Israel had bombed Iranian nuclear facilities, including the partly completed Ahvaz nuclear generating plant. The radio had referred to that on the way to work. It did not seem too important. Iran counter-attacked by bombarding Saudi oil facilities and sank a couple of tankers to block the entrance to the Persian Gulf, sparking the spike in oil prices. Iran had not attacked American ships or bases, and it had not attacked Israel, other than the downing of several airplanes in the initial attack. They paraded a captured Israeli pilot through the streets of Tehran. There was no current fighting. Iran played the victim.
These political events had caused the chaos in world markets. The European markets had fallen apart, and when the North American exchanges opened, they quickly reached “limit down”. By noon, two Texas refineries had announced they would shut down in six weeks due to lack of affordable crude. The price of gasoline soared. Bids on benchmark Saudi heavy crude hit one hundred and eighty dollars. It was only a year since Mexico announced it was no longer exporting crude oil because of rising domestic demand and falling production. Worldwide commodity prices doubled in response to the collapse of the American dollar.
Australia imposed an additional tax on coal and iron ore exports. China, Australia’s biggest customer, had made their displeasure known, and had sent a delegation to Canberra to “negotiate”.
Later in the morning, the merger of the two largest telecom providers collapsed. No one underwrote the fifty billion dollars of joint debt. A rumour circulated that both companies would declare bankruptcy, looking for a government handout.
The host turned the commentary over to a bank expert.
“It’s only a minor correction. The USA released crude oil from its strategic reserve and calling on OPEC to increase shipments.”
Bill thought the designated expert ignored the fact that this would be impossible with the Persian Gulf closed to shipments from key Saudi terminals.
“The European Union has made hundreds of millions of Euros available to the banks and cutting interest rates,” the banker continued. “The USA followed suit.” He seemed enthusiastic about this, while not bothering to mention that interest rates in the USA and Canada had been effectively zero for years.
“I must admit that bond interest rates are rising in a worrying way, but all will be well,” the banker parroted other commentators. “We have a liquidity crisis, and when we fix that, everything will be normal.”
Much later they realized they faced a solvency crisis. Most governments were bankrupt. Several European and South American countries had announced total default on their national debts. More nations would follow over the coming weeks. Unable to find more experts, reporters interviewed other reporters in a wave of uninformed speculation.
.




