Too many zombies

Apr 30, 2015

- By Bill Bonner

Bill Bonner
Gualfin, Argentina

Dear Diary,

Little noteworthy action in the markets. Stocks are still near their all time peak. And the price of gold is still clinging to the $1,200 mark.

So, let's return to our series on why the 21st century is such a dud.

Here's a simple answer: there are too many zombies.

First, a reader explains how to become a zombie:

    1. Don't get married to her.
    2. Use your mom's address to get mail sent to.
    3. Guy, (YOU) buys a house.
    4. Guy rents out house to his girl girlfriend who has 2 of his kids.
    5. Section 8 will pay $900 a month for a 3 bedroom home.
    6. Girlfriend signs up for Obamacare so guy doesn't have to pay out the butt for family insurance.
    7. Girlfriend gets to go to college free for being a single mother
    8. Girlfriend gets $600 a month for food stamps
    9. Girlfriend gets free cell phone
    10. Girlfriend get free utilities.
    11. Guy moves into home but uses moms house to get mail sent to.
    12. Girlfriend claims one kid and guy claims one kid on taxes. Now you both get to claim head of house hold at $1800 credit.
    13. Girlfriend gets disability for being "bipolar" or having a "bad back" at $1800 a month and never has to work again.

    This plan is perfectly legal and is being executed now by millions of people.

    A married couple with a stay at home mom yields $0.00 dollars.

    An unmarried couple with stay at home mom nets:

    $21600 disability +
    $10800 free housing +
    $6000 free Obamacare +
    $6000 free food +
    $4800 free utilities +
    $6000 Pell grant money to spend +
    d$12000 a year in college tuition free from Pell grant +
    $8800 tax benefit for being a single mother
    =$75,000 a year in benefits

Okay, $75,000 per year is not chicken feed. But the big money is still not in food stamps and disability. The big money is on Wall Street and in Northern Virginia. That's where the zombies wear suits.
Archaeologist Arthur Demarest explains that we're not the first society to be brought low by zombies. They were the cause of the decline of the Mayan civilization too:
    Society had evolved too many elites, all demanding exotic baubles...all needed quetzal feathers, jade, obsidian, fine chert, and animal furs. Nobility is expensive, non-productive and parasitic, siphoning away too much of society's energy to satisfy its frivolous cravings.
Yes, it's the elite zombies who are most expensive. The hoi-polloi get peanuts (albeit, lots of peanuts). The elite get much more.

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For example, where did that $3.5 trillion in Fed stimulus go? Not much of it went to the guys on disability (although, it did help cover Washington's spending deficits). No, most of that money became the 'liquidity' that boosted prices of financial assets. Shareholders made money. Executives got bonuses. Wall Street firms made out...well, like bandits.

The financial wizards arrange for a company to sell bonds - earning millions in fees for the service. Then the companies take the money thus borrowed, at the lowest interest rates in history, and pay it to their shareholders in exchange for giving up their stock. This causes the price of the stock to go up - triggering bonuses for all the insiders. The trick is so sweet that corporate America is set to hit a new milestone this year, with nearly $1 trillion in buybacks!

Everybody is happy. All the corporate nobility, that is. The poor working stiffs are worse off than ever. Because all this insider financial gaming actually reduces the long-term capital formation and serious investing that creates real jobs and real wealth. But the plain people have no idea how the money system is rigged against them. And at least they have disability.

The elite always figures out ways to crony up with government and always turns itself into zombies.

Louis 16th of France must have been a decent fellow. But he was surrounded by zombies. Almost the entire First and Second Estates - the clergy and the nobility - lived off of privileges, tariffs, taxes, grants, rents, and other entitlements. After they took their share, there was hardly enough of national output left to support the working classes.

And you think America's hedge fund managers have a nice tax deal, with their "carried interest?" France's elite was practically exempt from taxes completely.

But with so many zombies, 18th century France struggled to stay solvent. A couple of bad harvests and people began to starve.

"We're hungry. We want bread," chanted the poor women in front of the Tuileries Palace.

At that moment, if you believe the popular account, the king's wife - Marie Antoinette - needed better PR people.

"They say they are hungry," the flack might have told her. "You should say something about how you care deeply about their hunger. How you feel their pain. And how you are working day and night with the royal court to alleviate the food shortages in France."

Instead, the darling but dim Austrian blurted out what must have sounded, for a moment, like a "bon mot."

"They have no bread? Well, let them eat cake!"

Whether it was true or not, the story got around. And it sounded true enough. Soon the mob was roused and the revolution couldn't be stopped.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

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