March 8, 2021

Essay: Coming Soon: ‘Invasion of the Walking Debt’

During, say, zombie movies, we Americans identify with that tough guy on horseback — the survivor with the Stetson and the rifle. It’s always the other guy, that poor sap sitting next to us, we think, who would become the half-eaten corpse.

Which, weirdly, just might explain the recent fascination with how bad things could become for the economy if the United States lost its triple-A credit rating.

Wall Street is worried that America’s gilt-edged rating will slip away. Maybe not today. Maybe not tomorrow. But a reckoning, many economists say, will come, given the nation’s staggering debts and dysfunctional politics. The possible repercussions include an even bigger budget deficit and higher borrowing costs for the government, businesses and consumers.

Just how far the shockwaves might travel is uncertain. So speculating about what an economic apocalypse might look like has become fashionable in both financial and political circles. Of course, for the millions of Americans who are out of work — some for years now — Armageddon is already here. Maybe a little hellfire — if homeowners’ insurance will cover it — is what we need to fix the mess.

But there is nothing so bad that it can’t get worse. And so last year, to great fanfare, “When Money Dies: Germany in the 1920s and the Nightmare of Deficit Spending, Devaluation and Hyperinflation,” first published in 1975, was reissued and found a cult following inside the Beltway and among hedge funds.

In “Zone One,” a forthcoming novel by the Pulitzer Prize finalist Colson Whitehead, a virus turns most of humanity into flesh-eating crazies; the narrator hunts stragglers around Wall Street. In “The Walking Dead,” the hit television series set in a zombie-infested America, an image of Atlanta’s abandoned financial district conjured an end-of-world vibe. Nothing says apocalypse, apparently, like a city without functioning A.T.M.’s.

But for all of our serious economic problems — persistent high unemployment, spreading home foreclosures, the risks that bad policy, bad luck or both will send the economy back into recession — the United States of 2011 is nowhere near as bad as, say, the Vienna of 1918.

“When Money Dies” charts the travails of people like Anna Eisenmenger, who bartered her dead husband’s gold watch for potatoes, watched her malnourished grandson develop scurvy and saw neighbors attack mounted policemen so they could slaughter and eat the horses. Next to the Weimar Republic, higher interest rates on credit cards — a likely outcome of the current debt bickering — seem tolerable.

Indeed, Raghuram G. Rajan, an economist at the University of Chicago, argues that even if the United States were to default on its debt briefly, the world would mostly keep calm and carry on. Americans’ lives probably wouldn’t change markedly, he says. The more troubling and longer-lasting issue would be the United States’ loss of credibility among investors and overseas sovereign wealth funds.

“A failure to compromise sends a signal to the world that U.S. politicians can’t get their act together, and this nation might not be the best choice for guiding the international economy,” Mr. Rajan says. “The real risk is that investors will start looking for another country as the world’s financial standard-bearer.”

Which raises the troubling possibility that what is happening now could stretch on for years. People could remain out of work, businesses could be starved of capital and politics could impede a lasting economic recovery.

At least killing zombies feels like a job.

Debt troubles have come and gone in this country, and not only on Capitol Hill. In the 1970s, New York City defaulted on its debt, and yes, the consequences were painful. Enrollment plummeted at City University campuses, which until then had offered free education. Seven thousand police officers were laid off. Crime skyrocketed. Services for the poor disappeared.

But in the wake of that crisis, the city started changing business regulations and tax structures, setting the stage for a building boom. As blue-collar manufacturing jobs evaporated, in came white-collar jobs in finance, real estate and so on.

Out of the ashes of default, the yuppies rose — and, eventually, the banking and hedge fund classes that helped give us the late, great bubble.

On second thought, maybe we’re better off with the undead.

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