What do zombies do in America? - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 18 August 2011
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Poitou, France

Zombie, zombie in the night

Making cities burn so bright

What immortal hand could frame

Thy fearful symmetry?
Yes, dear reader, the mobs are getting angry. Here's the story from Germany:
Far-left extremists are specifically targeting German luxury cars, symbols of the country's wealth and power, bringing the total number of vehicles torched in the German capital this year to at least 138, more than double the figure for all of 2010.

The rise in Berlin car burnings coincides with widespread lawlessness that erupted last week across England. More than 1,500 people were arrested as rioters looted shops, attacked bystanders and burnt autos. In Berlin, far-left extremists are specifically targeting German luxury cars, symbols of the country's wealth and export prowess, police said.

"The arsonists want to hit what they say are 'Fat Cats,'" Berlin police spokesman Michael Gassen said. A special unit is investigating the fires as political crimes after the police received letters claiming responsibility that derided globalization, gentrification and rising rents, he said.
In England they steal clothes. On the continent, they burn cars. Thousands of Renaults and Citroens have been torched in France in recent years. Now, they're burning BMWs and Mercedes.

But what do zombies do in America? Do they steal clothes? Burn cars? Or join the Tea Party?

First, we need to define our terms. This is a serious matter. And people are beginning to use the word 'zombie' too loosely, causing it to lose its meaning. Poor Thomas L. Friedman, for example, managed to mix everything up...confusing the zombies on the streets of Croydon with Michelle Bachmann and the Tea Party crowd. He sees only that they are all "angry."

So, what's the difference between an angry zombie and a person who is angry because he's tired of supporting zombies?

In economic terms, a zombie is a parasite. He contributes less to the economy than he takes from it. He lives at the expense of others.

Almost any profession or career can be a nest for a zombie; an auto mechanic who rips off his customers, for example, is a zombie...at least in a sense. But most often, zombies are created, enabled, and supported by government. Government transfer payments create whole armies of zombies. Government bailouts turn whole industries in zombies. Government programs and government employment turn millions of otherwise reasonably honest and reasonably productive people into leeches. A guy who might have been a decent gardener, for example, becomes an SEC lawyer or a Homeland Security guard.

Politicians like zombies. Zombies are cheap. If you buy a vote from a man who is independently wealthy, it's gonna cost you. And the bourgeoisie - which earns its money from honest toil and enterprise - is hard to buy. But zombie votes? They're a dime a dozen. Just increase social security or medicare; the zombies will line up to vote for you.

It's relatively easy to turn people into zombies. And it's fairly easy to support them when an economy is healthy and expanding. But when an economy goes into a contraction, you can no longer afford to give the zombies their meat. Then what?

Then, watch out. The zombies rise up.

Germany was the success story of Europe. Until this week. The latest numbers show the German economy has stopped growing. In fact, it is now trailing the rest of Europe...which is said to be growing at a very slow rate.

Friends in Berlin tell us that young people have gotten used to living off the government. Youth unemployment is high. Everybody wants to earn money and status in the easiest way possible. Even well educated young people find they can live better by taking government support payments than by working a regular job.

What will they do when the checks no longer come? Look out.

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*** The price of gold rose $8 yesterday. It is within easy range of $1,800. We can imagine $2,000 by the end of the year.

Meanwhile, Wells Fargo, among others, is warning of a 'bubble' in.

Is there a bubble in the gold market? An AP report explains why people are buying gold:

In October 2007, it sold for about $740 an ounce. A little over a year later, it rose above $1,000 for the first time. This past March, it began rocketing up. On Wednesday, it traded above $1,793 an ounce, just shy of last week's record of $1,801.

Meanwhile, stocks, despite rising sharply in the last two and a half years, are only slightly higher in price than they were a decade ago. Since hitting a record high in October 2007, the Standard & Poor's 500 index is down 23 percent.

Gold hits a sweet spot among the elements: It's rare, but not too rare. It's chemically stable; all the gold ever mined is still around. And it can be divided into small amounts without losing its properties.

Ultimately, though, gold is valuable because we all agree it is. It was used around the world as a currency for thousands of years, and then it gave value to paper currencies for a couple of hundred more.

Now, in a time of turmoil, from the credit downgrade and debate over raising the debt limit in the U.S. to the growing financial crisis in Europe to worries of slow growth across the globe, gold is dazzling investors. .
But wait....there's more to the AP story:
Sharlett Wilkinson Buckner, of Humble, Texas, recently took an old bracelet, ring and necklace to her local jeweler and walked out with $1,070.

"I couldn't wait for my husband to come home," she said. "I fanned my money in front of him and said, 'Look what I got for my gold.'"

The next day, he sold an old gold necklace for $650. .
Do you see what we see? The average person is still 'out to lunch.' He has no idea what is happening. Desperate for cash, he sells gold in order to load up on - paper!

Of course, it may turn out to be a good move. At least, in the near term. The whole world is drowning in a tub of debt. As debt drains away - we are in a Great Correction, remember, a period of debt-reduction - 'money' goes down the drain too.

In an expansion, the banking system turns on the taps. It magnifies purchasing power...by making loans. In a contraction, purchasing power goes down ...as loans are repaid or written off. A $100,000 loan that is repaid reduces the 'money' supply by $100,000 (unless it is lent out to someone else). In a fractional reserve banking system, a loan that can't be repaid...reduces the money supply by as much as $1 million. It wipes out the bank's lending capital, forcing it to reduce its loans outstanding.

This de-leveraging process should help support the value of the dollar and reduce the demand for gold as a refuge. But so far, gold is still going up. And in the long run...after the feds have intervened...it should soar.

Here's our old friend Doug Casey on the subject:
I hate encouraging people to buy gold at $1800 an ounce, because that level is already more than 700% above the bottom in 2001, and I'm a bottom fisher. I like bargains, and I can't call gold a bargain today. But it's plain as day that gold is going to go higher. There's simply no other place for people to try to safeguard their wealth as the dollar, euro, and other currencies plummet toward their intrinsic values. What else could people buy as they get more and more afraid of paper currencies losing acceptance? What are corporations going to do with the billions of dollars in their treasuries when their management gets frightened? Where else can they go when they need to get rid of dollars, euro, yen, and yuan? Central banks, too - what will they do when they need to dump dollars in favor of something that will hold value?

This is why I see a bubble in gold still ahead. It has nothing to do with the supply and demand for gold in the jewelry trade, or whatever - it's going to be a result of there being no viable alternatives when the paper-money con game is over. Gold is the ultimate cash, and that's where people will go when there's a global, total, panic to cash.
Gold is fundamentally a bet that the financial authorities are losers...that the world's paper-based monetary system is headed for destruction, and they can't stop it. It is a good bet.

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

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1 Responses to "What do zombies do in America?"

Devendra Bhat

Aug 18, 2011

Now there will be more paper gold than physical gold.
A time will come soon for redemption of paper gold. Then what happens?

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