Creating and sustaining a nation of zombies is expensive.
Large sections of the US population have been turned into zombies. Retirees. Medicare dependents. Food stamp recipients. Disabled people. They are not necessarily bad people. They are not necessarily dishonest or lazy. But rather than add to wealth, they consume it. And when you have too many of them, your society consumes more wealth than it produces and you are on the road to The Downside.
But the feds are not only creating individual zombies, they are also creating corporate zombies. An obvious example: "green" energy. Without subsidies, loan guarantees, tax benefits and direct giveaways, the industry as we know it would not exist. Nor would the ethanol industry in the Midwest. Nor the security industry in the Northern Virginia suburbs of Washington, DC.
The financial industry, too, as we know it, would not exist either. Much of it would have been swept away in the financial storm of 2008-09. That story is well-known, but not well understood. Most people believe the authorities acted heroically, saving the nation from a depression. But what the authorities really did was to take the public's money and give it to cronies on Wall Street in order to prevent them from suffering the losses they deserved. The government transferred nearly $2 trillion in various forms from the public purse to the pockets of the financial industry. With that kind of backing, most of the old investment firms survived. The new ones that might have replaced them never saw the light of day.
Industries need to be sustained by the government when they cannot sustain themselves. This is practically the definition of "malinvestment" — putting capital and energy into investments that don't pay off. When an industry is only profitable with government backing it means that the industry uses resources — labor, energy, raw materials — and turns them into finished products that are worth less than the inputs required to make them. The more of these zombie industries the government supports, the poorer the society becomes.
"Rentier" is a French word that has leaked into English. It doesn't mean zombie literally, but it describes people who have found a way to exploit the system for their own benefit — people who have legal entitlements to income streams. In other words, "rentier" describes a class of folks who contribute absolutely nothing to national prosperity — zombies.
Before the French Revolution, favored groups were able to secure special privileges and monopolies giving them the right to income. For example, the people from whom we bought our first house in France had a monopoly on the importation of tobacco from the New World. I don't know who granted this monopoly, but typically it was the monarchy. And typically, such monopolies were given away either to appease a potential adversary or simply to raise cash for the crown by selling off a stream of future income.
The French crown was always short of funds. It found it could raise substantial sums by selling the right to earn a "rent." It might sell the right to collect tolls on a highway or a river, for example. Or it might sell the right to collect taxes (thereby getting its own tax revenue up-front and letting the rentier deal with the hazards of collection).
Any official document needed an official stamp. Naturally, the crown sold off the right to stamp documents. If you wanted to make a business deal, buy or sell land, or get married, you had to pay the person with the stamp.
Over time, the rentier class grew larger and harder to support. More and more of the kingdom's energy went to support what was essentially a group of parasites who produced nothing. This is part of the explanation for the French Revolution. The system became so inefficient and was made so fragile by waste that a relatively minor setback — a couple years of bad harvests — caused widespread hunger and revolt.
In modern, developed societies "rents" come in many forms. They are often granted to favored groups in exchange for political support. Old people vote, for example. Political parties seek their votes by promising ever-larger health and retirement benefits. Rich people make campaign contributions. Politicians typically grant them favors too.
By the close of 2012, there were zombies everywhere. Throw a cream pie from almost any street-corner and you were almost certain to hit one in the face. If the street-corner were in Washington, DC, you'd probably hit two or three of them.
A recent report in The Wall Street Journal confirmed that zombies don't work very hard. The Bureau of Labor Statistics has been compiling detailed data on how people use their time. Researchers tracked how many hours people slept, ate, watched TV and worked. And guess what? They found that federal government employees put in 3.8 fewer 40-hour weeks than employees in the private sector. Here, the cost of zombification is clear: If the zombies were forced to work the same hours as people in the private sector, the government would save $130 billion a year.
Meanwhile, over in the Pentagon, R. Jeffrey Smith had his eye on the zombies too:
Of the many facts that have come to light in the scandal involving former CIA director David H. Petraeus, among the most curious was that during his days as a four-star general, he was once escorted by 28 police motorcycles as he traveled from his Central Command headquarters in Tampa to socialite Jill Kelley's mansion. Although most of his trips did not involve a presidential-size convoy, the scandal has prompted new scrutiny of the imperial trappings that come with a senior general's lifestyle.
The commanders who lead the nation's military services and those who oversee troops around the world enjoy an array of perquisites befitting a billionaire, including executive jets, palatial homes, drivers, security guards and aides to carry their bags, press their uniforms and track their schedules in 10-minute increments. Their food is prepared by gourmet chefs. If they want music with their dinner parties, their staff can summon a string quartet or a choir.
The elite regional commanders who preside over large swaths of the planet don't have to settle for Gulfstream V jets. They each have a C-40, the military equivalent of a Boeing 737, some of which are configured with beds.
And then, even after they retire ... the zombies keep feeding off the productive sector:
Updating a 2010 Boston Globe report that documented the practice, CREW found that over the last three years, 70 percent of the 108 three-and-four star generals and admirals who retired "took jobs with defense contractors or consultants."
As Sen. Claire McCaskill, D-Mo., put it during a 2009 hearing on Obama's nomination of former Raytheon executive William Lynn to become the deputy secretary of defense, "it's an incestuous business, what's going on in terms of the defense contractors and the Pentagon and the highest levels of our military."
During the Presidential campaign, Mitt Romney mentioned that 47 percent of American households now receive some form of support from the government. In a better democracy, none of those people should vote. They all have a conflict of interest. They should admit that they find it difficult to separate their own personal interests from those of the nation and abstain from casting a ballot. Instead, they "vote their own pocketbooks" — usually coming down on the side of diverting more resources from the productive sector to their own personal consumption.
The zombies corrupt the system. The march to Stalingrad continues. And the Downside takes over.
Bill Bonner founded Agora Inc. in 1979 and has been a daily contributor and the driving force behind The Daily Reckoning since 1999. His newest book, Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010.
Posted by Just John on 01/10/13 05:49 PM
Yep, it is a paradim shift for sure. I do not expect to receive any SS being only 58 years young, even thought I too worked and paid into the "system" since I was 16 years old. I did not wait until too late to do anything about it and quit my job, sold my home (2005) cashed out retirement and moved to rural big island Hawaii to grow my own food while building a Family here. Built my own 5 bedroom, commercial quality kitchen, 20 person dining room, all on solar w/ generator backup. Been bringing mulch from greenwaste station for 5+ years and am growing my own food. Water is rain filtered through sediment/carbon activated/germicidal uv system. STAND ALONE! GROW FOOD! GATHER FAMILY CLOSE! LIVE HONORABLY! DO NOT GIVE UP! Farm work is not for zombies, they may go suck wind for all I care.
Posted by libertyjones on 01/10/13 05:44 PM
So let the politicians give up their cushy retirements, pay me back what I was forced to put into SS (it's been doubled for years self-employed) for the past 43 years with reasonable interest, stop taxing me now and I will work until the day I die and forego any SS benefits, ditto for medicare because, Lord help us if we need to be hospitalized in this country any more.
Disgusted and Fed Up
Posted by WorkingClass on 01/10/13 12:32 PM
"I think one of the benefits of what is coming is that families might move back toward the multi-generational model of care and connection."
Agreed. But what is coming is the collapse of empire. Only those not buried in the rubble will benefit. I live close to the street. I have friends and aquaintences living at the Salvation Army and in nurseing homes who have no family. I for one welcome what is coming even though I don't expect to survive it. I am in the position of calling for artillery on my own position because I am being overrun anyway.
Best wishes to you Mosquito. I hope you will have the opportunity to join in building something new after the reset.
Posted by bionic mosquito on 01/10/13 11:21 AM
WC: Paracitism is by no means limited to the unrich.
BM: The biggest parasites (using your term) aren't those on welfare, social security, etc. Those who make millions, if not billions, from their relationship to government win this prize. All the money ever given to the welfare queens won't be a drop in the ocean compared to the wealth transferred to those who live on or through the largesse of the state.
I think one of the benefits of what is coming is that families might move back toward the multi-generational model of care and connection. The destruction of this has been very harmful; one of the effects (by design or by accident) of the many and various government transfer payment schemes.
Posted by WorkingClass on 01/10/13 10:08 AM
Thanks BM. I'm aware that SS is a rip off and that my SS income will be eliminated outright through default or inflated away through monitization. But the same thing will happen to the small pension I receive from one of my former employers. This is not because there are too many children and old people. It's because I am a victim of fraud. It's not because teachers and garbage collectors contribute nothing to society. It's because I am a victim of fraud. All Americans and all holders of FRNs are victims of fraud.
You don't put grandma out on the ice because she's more trouble than she is worth unless you are Bill Bonner. You do it as an act of mercy. Paracitism is by no means limited to the unrich. And most surprising of all - the ruling class has no moral advantage over the working class.
None of this is meant to refute your generous response. I appealed to you because your comments indicate to me that your thinking is not tainted by classism. Bonner may give excellent investment advise. It's his contempt for the working class that I push back against.
Posted by bionic mosquito on 01/09/13 10:33 PM
I believe one of the more difficult issues in this discussion regarding those receiving government benefits is on the issue of social security, a program that no one had a choice about paying for.
However, the fact that there was no choice to pay does not change its nature: you are not receiving your money back; you are receiving money from other people who are paying today. What happens if there aren't enough people willing or able to pay? Will your wish or mine chage that reality?
The reality is, at some point the promises of social security (and even moreso, medicare) will be broken. Means testing, increased retirement age, payments not keeping up with inflation, etc. If there is any truth to be taken away from Bonner's comments, it is this: there are too many people either retired (whether on their own savings or through government payments) or employed in some government enabled job, and not enough productively employed in the private sector - and this ratio is getting worse, not better.
Whatever your or my hope for social security, the laws of economics will not be forever violated, and the laws of economics don't give a hoot about that the politicians say. Eventually, economics will trump the promises of the politicians.
As to giving up your vote - I said nothing about this. But you can't vote for benefits if there aren't enough people to tax.
Posted by 1776 on 01/09/13 08:31 PM
Here is what most should be watching out for!
Op-ed piece on swimming pools vs. guns as the most dangerous weapon Posted by Tim Lambert on July 27, 2001
Click to view link
Posted by WorkingClass on 01/09/13 05:21 PM
I was born in '44 and got my SS card in '58. It was permissable for me at 14 to take a certain job doing field work but I had to have a SS card. From '58 untill now I have worked continualy in the private secter except for three years in the Army. I never had the option of not paying into SS. After paying in all my working life I now get a check. You seem like an honest mosquito so tell me. Should I lose my right to vote?
Posted by bionic mosquito on 01/09/13 10:20 AM
BB: Large sections of the US population have been turned into zombies. Retirees. Medicare dependents. Food stamp recipients. Disabled people. They are not necessarily bad people. They are not necessarily dishonest or lazy. But rather than add to wealth, they consume it. And when you have too many of them, your society consumes more wealth than it produces and you are on the road to The Downside.
BM: The statement, as it stands, is economically correct, although the tone of the entire article leaves the impression that retirees - the ones who are living from their own honestly earned savings - are morally in the same position as the rest.
Retirees do consume wealth. By definition, they are not producing goods and services for market consumption. Even if they are living from their own savings, they are consuming more than they are producing. This is the economic truth. And from the standpoint of economics, Bonner is correct.
But he could have done a better job of distinguishing the moral and ethical positions of the two sub-groups within the broader group of 'zombies' (consumers). One of the sub-groups of consumers of wealth (those living off of various forms of government payments or benefitting from government privilege) certainly can be labeled 'zombies.' The other, those living on their savings in retirement, should not be lumped in. The derogatory term "zombies" should be used only for the first group.
Posted by bgd on 01/09/13 02:42 AM
Dear Daily Bell:
I agree with Bonner about zombies but it seems to me that his brush is a little too broad. His broad category 'Retirees' includes many who are not consumers of wealth as he alleges. For example: people who receive insurance annuities or money from company retirement plans are not consumers of wealth produced by current producers or taxpayers.
These 'Retirees' produced commodities or services during their 'productive' years and put part of their produce (represented by money) aside for future consumption. Thus they made part of their wealth (savings) available for investment in industry to improve productivity. The understanding was that the borrowers would pay back the wealth, plus interest, when the saver retired. Thus, these 'Retirees' are living off past production, not as leeches on the backs of present producers as Bonner alleges.
I've been reading the Daily Reckoning for many years and have a lot of respect for Bill Bonner's writings. Thus when he talks about 'Retirees' I strongly suspect that he has Social Security recipients and retired government employees in mind. However, the Social Security issue isn't as cut and dried as Bill indicates in this article.
Don't get me wrong, I'm not trying to defend the Social Security program, government should not be in the insurance business and this program should never have been started. But that doesn't change the fact that it initially promised people that their Social Security tax money would be put aside in a trust fund which would collect interest and be available when they retired.
A tremendous amount of wealth (commodities represented by money) has been confiscated from the producers and spent to finance today's socialist monstrosity we call government. In the intervening years, this same government has authorized a group of private bankers, called the Federal Reserve System, to flood the economy with legally counterfeited money which has caused the dollar to lose 97% of its purchasing power since 1940.
In other words, the government confiscated the wealth of the people and is now giving it back with dollars which have lost so much of their purchasing power that many recipients can not live on them. This is not a picture of zombies (leeches) living off the productive members of society. However, the fact remains that the government has spent all of the Social Security trust fund on socialist programs that shouldn't exist. Therefore, they make payments from current tax receipts plus fraudulent money created by the FED to fund the debt.
It's true that people receiving Social Security are being supported by the productive members of society. In other words, Social Security recipients and the productive members of society are both being victimized by government. Under these circumstances, I suppose we can call Social Security recipients 'zombies' if we wish, but I think lumping them in with welfare recipients, government employees who have never produced any wealth but are simply consuming it, is a distortion of the facts
Posted by JRuss45 on 01/09/13 01:10 AM
As far as I know, none of the "stimulus" was "invested" in any non-union United States Corporation. A good part of it went to foreign countries, a good part went into pension funds, and much went into corporations that produced products that cost more to make then they were worth. i.e., I cannot give you one example of wealth creation using stiumulus funds.
In the example of ethanol production, it takes more BTUs of gasoline & diesel fuel to make a gallon of ethanol from corn then the number of BTUs in that gallon of ethanol. This is not sustainable because you cannot use ethanol from corn to make enough ethanol to sustain the process and have enough left over to sell.
Cash for clunkers was another loss of wealth. Instead of giving the cars with many miles left in them to poor people who could use them, they were destroyed. I was told they would not take my old Ford as a clunker trade in becase it was, with almost 300,000 miles on it, considered a real 'clunker' even though it was running fine.
It seems that the object of the current administration is to devest the U. S. of wealth prior to the implimentation of a NWO global currency.
Posted by mikef on 01/08/13 08:41 PM
The idea is that at no interest, a loan is not something you would give to someone for your advantage, but only for theirs. And that it would be a personal agreement. I do not advocate government systems, but this is the dialectic you wish to continuously get caught up in - either free market, or communism. How about free market with no interest? It's actually possible, but will need some of that "evil" force. And as we know, being prevented to do what we want is "Evil". Welcome to Crowley/Gnostic Satanism.
Posted by rossbcan on 01/08/13 08:10 PM
Eventually, "Mathematics of Rule" will go mainstream, proving that productive versus predators is not a matter of opinion, but, a matter of FACT, determining collective survival:
Click to view link
Posted by taxesbyanyothername on 01/08/13 08:06 PM
Posted by LauranF on 01/08/13 08:02 PM
I do hope that the word "zombie" (which Mr. Bill Bonner so freely uses) does not equate to the many seniors (who through no fault of their own)MUST be retired; and MUST use Medicare. Having paid into the system my whole life; and expecting that it would be there to help us all in our retirement years... ..I find it hard to listen to those who continue to act like this is some great gift, or that it is some great imperfection on our part... .that we must avail ourselves of it now... ... Click to view linkfe happens... .so does sick children, businesses failing, widowhood, divorce or ?... ... It is not our fault that we have a government in the US that HAS become the "zombie" government... .taking away, taxing so many, and robbing many people of savings... ... ... ... .please choose your words more carefully when referring to the retired!... ... ... ... ... .Blessings.
Posted by alaska3636 on 01/08/13 07:41 PM
If I had investment capital, there are plenty of friends and family who I would loan it to with no expectation of seeing those productive assets again. But if I continue to loan capital to people who squander it on unproductive endeavors, I have no more capital with which to help anybody. That is wealth destruction and is a lose-lose as it lowers the investment capital available for the growth of productive endeavors: it lowers the standard of living across the board. Talk about not helping anybody...
I don't know many people who would let friends or family die in the street for lack of ability to develop wealth producing skills but it is the essence of communistic waste to expect to give fish to people you don't know and to expect them to learn to fish.
This website endorses personal responsibility (a moral) and the free-market gives those of us who wish to practice that responsibility an environment of economic growth (wealth creation - an economic solution) in which to do so.
I'll admit that I can't quote extensively from Jesus or Marx or Adam Smith or whomever, I rely on myself to create an environment in which I thrive, I suspect many of the people who read and contribute to this site do as well.
Reply from The Daily Bell
Posted by mikef on 01/08/13 06:38 PM
Eventually Alaska, if your idea is to make money from loans, you will refuse to loan to someone who does not pay you back. How about the idea of helping people, instead of seeing them as investment units upon which we build our futures, "cash cows". Oh no, cant do that, its their own fault, let them die in the street. Communism just plain sucks, capitalism leads to the bulk of capital in just a few hands. This website and its soothing endorsements of some kind of internet reformation, silver/gold and the freemarket has helped me see through the amoral dialectic, which gives economic solutions to moral problems.
Jesus was a hater of the rich, an advocate of giving all your money away, and an enemy of the family - "lest ye hate both your mother and father..", "I come not to bring peace, but to bring a sword, to set daughter against mother, son against father". What a filthy marxist. Sure, sell everything follow him in his utopian dreams. Just another destabiliser of society, a pre revolutionary - "sell your cloak and buy a sword" - so much for peace.
Posted by oldman67 on 01/08/13 06:08 PM
Someone needs to look at both the 2008 and 2012 exit polls. The one group that did not vote for Obama in mass was senior citizens. Project Vote,successful as it was,it was not aimed at senior citizens.Project Vote/ACORN funded by George Soros.
Posted by scousekraut on 01/08/13 05:52 PM
The author lives in France I believe which has to be the country with the biggest percentage of zombies on the planet.
In some countries hiring older zombies is not considered a good idea and they find it difficulte to get work though they may still be contributing to society in other ways through volunteer work.
If the USA really wants to get its deficit down it should start with the attack budget. Known as the defense budget in Washington. There is enormous potential for saving money.
Posted by alaska3636 on 01/08/13 05:34 PM
Mikef: ... because lending with interest, to whoever, and using whatever kind of currency, enables children to be born with the yoke of debt around their neck.
Alaska: Interest represents the time-value of money. Money today allows me to satisfy greater needs than that same dollar amount the next day. In a loan, the time-value represents the risk a lender takes of distributing his saved (investment) capital to someone else with a premium on the likelihood of getting his investment back. Thus, less risky loans receive lower interest rates, while riskier loans (the risk of never seeing the capital one produced over what one consumed again) receives higher interest rates.
I'm not certain that without coercive institutions that the contract that one man made to pay interest on a loan would ever fall to anyone other than that same person. Default is what would happen in a non-coercive environment, and the defaulter, in the future, would see the interest on his future loans go up representing the risk of his ability to pay back a loan.
Coercive institutions (mafia, government) are what enable the yoke of debt to be strung around unborn necks.
Mikef: ... that great communist, Jesus Christ...
Alaska: Jesus Christ was most certainly an anarchist as a (the) proponent of the Golden Rule (Non-Aggression Principle.) Communism relies on the initiation of force to distribute (redistribute) the productive capital of a population. Ever heard of a voluntary communist government?