US Wealth Distribution: Where Zombies Go to Feast

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Recently by Bill Bonner: America:
Lower Taxes, More Spending and FewerRiots

 

 
 

A warning…
Bad stuff coming!

We’ve
come to the warm latitudes for our Christmas holiday. Your editor
didn’t really want to do so. He travels so much for business,
he longed to stay home for Christmas. He imagined himself sitting
in front of the fire…happily drinking eggnog and eating fruitcake.
Or, cutting down trees and mending fences.

It was not
to be. He was outvoted. Here we are in Florida…on our way to
Nicaragua…where we will spend Christmas not too far from the
scene of an incipient border war…

We haven’t
been down there for 2 years. We’re going to find out what is
going on.

First, we have
to warn readers. Bad times are coming. Our Indian colleagues alerted
us. The Hindu era of Kalyug is beginning.

What’s
Kalyug?

It’s the
“age of bad stuff…about 432,000 years of it!”

Whoa. Well,
that kind of puts our worries about de-leveraging debt crises into
perspective, doesn’t it? By our calculation, de-leveraging
will end and we’ll still have about 431,992 years of Kalyug
to get through.

Those Hindus
really do think long-term, don’t they?

We Episcopalians
are more short-term oriented. We’ll worry about things 6 months
out. Maybe 24 months. But that’s about it.

Not much action
on Friday. The Dow was down 7. Gold was up $8.

What do we
see 24 months into the future? Well, you’ll probably think
we’re kidding about this, but we’re actually very serious:

The zombies
are taking over.

We’re
not joking about this zombie thing. Look at what is happening. Here’s
a report from Bloomberg:

Dec. 15 (Bloomberg)
– The gap between the haves and have-nots in the US is being
drawn along geographic lines, Census Bureau data showed yesterday.

The number
of counties where median household income decreased is almost
10 times the number that saw an increase, according to a Bloomberg
analysis of Census figures comparing an average of the years 2005-2009
with 2000. The government figures also showed a concentration
of wealth and education in coastal states.

The Washington
metropolitan area emerged as the wealthiest and most educated
region of the past five years. The only three communities with
median household incomes higher than $100,000 are in suburban
counties in Virginia. Maryland, which also borders the nation’s
capital, saw income levels in Howard County increase at the eighth-fastest
pace in the US since 2000.

The Washington
suburbs are home to government contractors such as Bethesda, Maryland-based
Lockheed Martin Corp., the world’s largest defense company,
and General Dynamics Corp., the Falls Church, Virginia-based maker
of Abrams tanks and Gulfstream business jets.

The Washington
Post, the zombie paper, gave the news a positive tune:

“Area
Counties Richest in Nation,” was the headline…or something
like that.

So you see,
this “geographical” distribution is really a zombie distribution.
If you work for the feds – directly or indirectly – you
get more money. Most likely, you’re no longer creating wealth;
you’re consuming wealth that others created. That’s what
being a zombie is all about.

And as a society
becomes more corrupt and degenerate, there are more and more zombies
and fewer wealth-creating citizens.

The zombification
process runs deep. It changes the nature of what most people regard
as “wealth.” Instead of wanting to own a profit-making
business, or lend to a wealth-increasing enterprise, more of what
passes for wealth is actually a claim against the government. It
is a promise by sitting politicians to rip off the future on behalf
of the present.

Let’s
look at how it works…

In an economy
like India’s, a man who wants to prosper will start a business
of his own…or invest in someone else’s business. If he
wants a decent retirement, he will have to save real money. He’ll
need real capital…which supports him by producing real interest
or real earnings. He has a claim against future increases to the
world’s wealth. But that is wealth that he helped create…by
saving and investing.

But in the
US, more and more people depend on the government for their retirement
financing. The government pledges to take money from future earnings
too. But it is a zombie claim; it does not depend on adding to the
world’s wealth. It merely takes away the wealth of others.

If an American
wants a good-paying job, he looks to the government itself, knowing
that its salaries are higher than those in the private sector, and
more reliable. And even if the American invests in a private business,
the enterprise is more and more likely to depend on the government
for contracts, subsidies, tax breaks, regulatory approval or bailouts.

Gradually,
“wealth” itself becomes zombified. Insurance policies
are backed by government bonds – local or federal. Pensions
are heavily dependent on claims against the government. And don’t
forget that 42 million people in the US depend on government handouts
just so they can eat. Food stamps – the breakfast, lunch and
dinner of zombies – have never had so many takers.

This process
is completely predictable. The more you subsidize zombies, the more
zombies you get. And as the zombie population grows, it becomes
more difficult to support. Finally, the paper zombie claims –
US Treasuries/welfare/government employment/the US dollar –
fall in value. There are too many of them for the private sector
to sustain. PIMCO chief and bond expert Bill Gross says the Fed’s
purchases of US Treasury bonds “will likely signify the end
of the great 30-year bull market in bonds.” That’s just
the way it works. As the parasites grow, the host weakens. The more
you borrow, the lower your credit rating. The more women you date,
the harder it is to remember their names.

December
21,
2010

Bill
Bonner [send
him mail
] is the author, with Addison Wiggin, of Financial
Reckoning Day: Surviving the Soft Depression of The 21st
Century
and
The New Empire of Debt: The Rise Of An Epic Financial Crisis

and the co-author with Lila Rajiva of Mobs,
Messiahs and Markets
(Wiley, 2007).

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