Recently by Bill Bonner: America: Lower Taxes, More Spending and FewerRiots
A warning Bad stuff coming!
Weve come to the warm latitudes for our Christmas holiday. Your editor didnt 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 havent been down there for 2 years. Were 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.
Whats Kalyug?
Its 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, doesnt it? By our calculation, de-leveraging will end and well still have about 431,992 years of Kalyug to get through.
Those Hindus really do think long-term, dont they?
We Episcopalians are more short-term oriented. Well worry about things 6 months out. Maybe 24 months. But thats 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, youll probably think were kidding about this, but were actually very serious:
The zombies are taking over.
Were not joking about this zombie thing. Look at what is happening. Heres 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 nations 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 worlds 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, youre no longer creating wealth; youre consuming wealth that others created. Thats 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.
Lets look at how it works
In an economy like Indias, a man who wants to prosper will start a business of his own or invest in someone elses business. If he wants a decent retirement, he will have to save real money. Hell need real capital which supports him by producing real interest or real earnings. He has a claim against future increases to the worlds 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 worlds 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 dont 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 Feds purchases of US Treasury bonds will likely signify the end of the great 30-year bull market in bonds. Thats 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).