Preface
The day dawned unremarkably. There was nothing different about its sunrise. The weather was ordinary. There were no hurricanes or heat waves, no earthquakes or volcanoes, no plagues, no assassinations, no wars. The casual observer might have assumed it was actually abnormal only in that perfection of normality, but he would have been mistaken. For though all days contain some small seed of disaster, most, the normal ones, never see the seed germinate.
This one, January 29, 2015 saw its seed not only germinate, but blossom and bloom like few others ever had. No, this was no ordinary day. History would recall this day, if in fact civilization ever regained the strength to write histories again. History would recall this as the day the money failed.
Chapter 1
Kiev, Ukraine
Bright sunlight streamed in through the kitchen window as Natasha Ubinov wolfed down a protein bar and called it breakfast. She was running late, as usual. She could never seem to be the early riser her mother was. “Times change, Mom!” she shouted at no one in particular, as she rushed out the door and on to her day.
First things first, she needed a few groceries, so she needed an ATM. Just like any other significant city in the industrialized world, Kiev, as the capitol of the Ukraine, held its fair share of that symbol of financial freedom, the Automated Teller Machine. Natasha spotted her favorite money machine and pulled up. A quick touch of the keys and…out popped her debit card. Something wasn’t right. After feeding in the card again and actually looking at the screen this time, Natasha read the message, “System Maintenance - Please try again later.” She retrieved her card, mumbled a quick curse and drove off.
The bank was a little out of the way, one street over, and would add an additional ten minutes. “Sorry Mrs. Karkov, your housekeeper will be a little late today,” she muttered to herself. She did that a lot, mutter to herself. Too much stress, she thought. The bank parking lot held only a few cars, so Natasha congratulated herself on some luck. At least it shouldn’t take long.
As she approached the door, two men walking toward the parking lot called out to her, “Don’t bother! It’s closed.”
“Closed?” It can’t be. “It’s Thursday,” Natasha responded.
“See for yourself.”
The door was locked, with a hand printed sign taped to the glass: “Closed until further notice.” What was that supposed to mean? Natasha wasn’t much of a current events or news junkie, music was her thing, but certainly she would have heard if they had made some new holiday. And it said “until further notice.” That, she simply couldn’t puzzle out. She thought she still probably had some room left on her Visa, so she headed to the grocery anyway. She would just have to skimp a little.
The parking lot of the grocery was full as usual, but she was lucky and snagged a spot up close as it opened. As she walked in, some guy was shouting at a cashier. She was in too much of a hurry to really listen, but she felt sorry for the poor checkout girl as she headed for the produce aisle. Another angry shout from another aisle caught her attention. They must be out of something, she thought to herself, oh well. Natasha pulled out Mrs. Karkov’s list and made her way through the store. Finally done, she wheeled her way to the checkout and started to unload.
“Do you have cash?” The checkout girl looked exhausted. Apparently Natasha wasn’t the only one having a hard day.
“No, it’ll be a credit card.” Natasha said, whipping out her plastic.
“Machines are down. We can’t take credit or debit cards. Only cash.”
“Oh… well, I think I’ve got my check book here somewhere,” Natasha said as she started to rummage through her purse.
“Um… the manager said no checks today either. Something about the banks being closed or something. We can only take cash.”
“But I have to get these groceries for my job. I’ve got to have them.”
“Hey, I’m sorry. Got to be cash.”
Natasha walked out, noticing well over half the people headed out were as empty handed as herself. They better get this fixed soon, she thought. Mrs. Karkov isn’t going to like going hungry tonight.
*****
As evening set in in earnest, Yuri Galasnopovic stood staring out of his thirtieth floor balcony at the city of Kiev spread out before him. The lights of Ukraine’s capitol filling his vision like a blinking sea, each pinpoint seemed to be an exquisite opportunity. And every one of them are about to be snuffed out, he thought to himself. Yuri brought a glass of vodka to his lips and washed away the dark thought. “At least we still do that right,” he said out loud as he placed the empty glass on the balcony rail.
There was a quiet knock on the door and a middle aged man entered the room. Yuri turned and greeted him, “Alex.” He sounded tired.
“Yuri, you look a mess.” From anyone else, the comment would have carried serious risk, but Alex and Yuri went too far back.
Yuri peered down at himself, taking in a badly creased jacket with a few stains thrown in for good measure. When had he shaved last? Yuri couldn’t remember. How had it come to this? Yuri Galasnopovic, graduated top of his class in Kiev University, had risen to CEO of the largest commercial bank in the Ukraine and then on to Secretary of the Treasury of the nation he treasured. He may have been forty-four years old and a little balding, but until six months ago he felt himself at his peak of opportunity. Now it was gone, all gone. “Did they finish the report?”
“Yes, I have it here.” Alex stepped to the table and dropped a folder on it. “But it’s every bit as bad as we thought, maybe a little worse. The run started yesterday in Europe. It began with National then spread to the others. Every Ukrainian-based bank is insolvent and all foreign-based banks have shut down their Ukrainian operations, because the minute they open a branch, the run starts. All foreign counterparties have cut off all dealings. Assets were pulled by every major player as fast as they could before we shut the system down. The bond market has taken notice and we have no access to borrowing of any kind.”
“We can‘t keep even one of them solvent?” Yuri already knew the answer, but couldn’t help but ask.
“They’re all so interconnected. And now it’s become obvious that the government doesn’t even have the ability to back the deposits.”
“What about the IMF? Surely they know the consequences of us going under.” There was a hint of hopefulness to Yuri’s voice, but not much.
“Yes they do,” Alex responded, “but after the panic in 2008 they depleted much of their resources. They haven’t had time or the ability to build them back up. They have refused all our appeals. They know what could happen, but frankly I think they’re saving their resources to try to pick up the pieces afterward.”
“What pieces will be left?” Yuri stared into space, then turned back to Alex. “And what of the currency?”
“The hryvnia has collapsed. Some markets don‘t even have a bid. It‘s worth nothing. Even in country, it‘s worthless. I needed some petrol on the way over; it was eighty hryvnia a liter. That’s a month’s salary to fill a tank.”
Yuri turned back toward the balcony and the lights beyond. “Look at them all Alex. They will never make it through the winter. It’s all gone, Alex, all gone.”
“But Yuri what’s to be done? We can’t just stand here and let it happen.”
Yuri remained silent a long time. Alex was almost ready to repeat himself; he thought maybe he hadn’t been heard. As if with a heavy burden, Yuri seemed to escape the depth of his thoughts. He spoke slowly, deliberately. “What could we do? No, there is nothing to be done. People have lost faith in our economy, in our banks, in our businesses. It’s clear they can’t handle the burdens they built up for themselves. But we have been there before. That’s not the real problem. What is really the problem is we, the government, can’t save them this time. We’re in the same position. No one believes we can survive the debt we’ve built. Would you loan us money? I wouldn’t. And the lack of faith runs so deep it won‘t even work to print the money. After all, what is the money worth? It’s all based on faith, and there is none of that left.
“No Alex, you shouldn’t just stand here. Run. Get that sweet little Shasha of yours, and run. Find somewhere far from anywhere, more importantly from anyone, and hide.”
“But Yuri, what about you? Surely it can’t be that bad?”
“If it were just us, it wouldn’t be, but it’s not just us. We’re just the beginning. This is going to cascade until it engulfs everyone. It will be worse than we can imagine and there is nothing we can do to stop it. Just go Alex. Don’t worry about me.… I am a captain and this is my ship. Now go, before what cash you have won’t buy you the gas to get away. That won’t be long, so hurry.”
As they spoke, the Russian natural gas pipelines were shut off. A day later riots started. The looting followed, not far behind. It would be a hard and cold winter for the people of the Ukraine.