What zombies do with resources... - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 11 December 2012
What zombies do with resources... A  A  A

Baltimore, Maryland

I like to be in America
Okay by me in America
Everything free in America

America, West Side Story

As we reported yesterday, America is the place to be. We've got all that gas and oil. The roughnecks are squeezing it out of rock.

Everybody says that this new energy supply is a 'game changer.'

We don't believe it. If having a lot of energy were the key to success, Venezuela, Iraq, and Saudi Arabia would be the richest countries in the world. Switzerland, Japan, Sweden and Singapore would be desperately poor.

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But that ain't the way it works. What matters is what you do with energy, not how much you've got. And the US is squandering its energy in ways that will make it poorer, not richer.

How? By supporting too many zombies. Zombies to the left. Zombies to the right. And zombies on every street-corner when you're trying to get home. Zombies now control the course of events. They are the voters...and the elected officials... They control the federal government. They are also at the helm of the Fed. They run many of our major corporations and our largest industries. Defense, education, health -- for example!

At every level, zombies are settling in...getting comfortable.

    As the Daily Mail in London reported, "High Fliers: Prince William and his wife Kate spend an incredible £52,000 on the one-way flight from LA to London for themselves and their seven-strong entourage." Incredible! For £52,000, you couldn't take the president from Washington to a state visit to an ice-cream parlor in a Maryland suburb. Obama flew Air Force One from Washington to Williamsburg, Va., requiring a wide-bodied transatlantic jet that holds 500 people to ferry him a distance of a little over 100 miles. And, unlike their British and Canadian counterparts, the American media are entirely at ease with it.

    Just for the record, William and Kate actually spent an "incredible" £51,410 - or about $80,000 - for nine business-class tickets on British Airways to Heathrow. At the check-in desk at Los Angeles, BA graciously offered the Duke and Duchess an upgrade to first class. By now you're probably revolted by this glimpse of disgusting monarchical excess, so, if it's any consolation, halfway through the flight the cabin's entertainment consoles failed and, along with other first-class passengers, Their Highnesses were offered a £200 voucher toward the cost of their next flight, which they declined.

    By contrast, in a republic governed by "we, the people," when the president of the United States wishes to watch a film, there are two full-time movie projectionists who live at the White House and are on call round the clock, in case he's overcome by a sudden urge to watch Esther Williams in Dangerous When Wet (1953) at two in the morning...

    In his recent book Presidential Perks Gone Royal, Robert Keith Gray, a former Eisenhower staffer, revealed that last year the U.S. presidency cost American taxpayers $1.4 billion. Over the same period, the entire royal family cost British taxpayers about $57 million. There's nothing "royal" about the current level of "presidential perks": The Obama family costs taxpayers more than every European royal house put together.

    In the American republic, even the dogs cost more. The Queen is a famous corgi lover and has been breeding them since she was a young girl. Now in her late 80s she's slowing down and only keeps four. The president has one pooch, a photo-op accessory called Bo, who unlike the corgis requires a full-time handler. In contrast to the stingy remuneration offered by the royal household, the presidential dog-walker is one of 226 White House staff earning over $100,000 a year.

    The fish rots from the head down, and so do republics. A $1.4-billion president has a defense secretary with a private plane to fly him home every weekend, and a chair of the "White House Council on Women and Girls" with her own Secret Service detail, and all of them ever more detached from the rhythms of American life.

    (Source: unknown)
By definition, zombies consume resources; they don't add to them. The more resources - including energy - they use up, the less there is left to build a prosperous future. That's the real trouble with zombies: they represent the dead hand of the past. Deceased companies. Moribund industries. Sclerotic investments. Walking dead institutions.

Naturally, the elite in any society want to hold onto their status. They know the future could topple them from their commanding positions, so they use government to try to prevent the future from happening. Their military tries to control events overseas. Their regulations, taxes, subsidies and giveaways maintain their power, blunt competition and stop change at home.

But zombies beget zombies. Once the zombies are in control, more and more resources get shifted their way...leading to more and more zombies, who demand more and more resources! And the government is clearly going for broke in its efforts to keep all the zombies living in the style to which they've become accustomed. But the funny side of this story is the way the zombies are now turning on each other - each trying to protect its fresh meat.

In yesterday's Wall Street Journal we discovered how the US government might default on its obligations to the little guys and still keep the big zombies happy. It will simply change the way it adjusts entitlement payments. Instead of using the current measure, a proposal is on the table to adjust using a "chained" measure of dollar inflation.

How does the 'chained' approach work? Both the current measure and the chained measure use a basket of goods to determine how much prices have risen. But the chained measure gives the statisticians more flexibility as to what goes into the basket. The result is a lower inflation reading.

Switching to this new method would save the feds hundreds of billions of dollars. Retirees wouldn't get what they think they've got coming. But who really knows how the feds adjust their numbers and calculate Social Security checks? Who complains about the inflation measure? Who gets blamed if the feds shave a little bit off every check? Who even notices?

This is a 'default,' in the sense that retirees won't get as much as they are now programmed to receive. But so what? It just goes to show how much wiggle room the feds have. It also shows how federal liabilities will be reduced...and how the feds will be able to avoid running out of money without setting off a zombie revolution. They'll just stab the inattentive, small potatoes zombies in the back.

But neither trimming Social Security checks nor cheaper oil are really game changers. These things just buy time...allowing a corrupt system to continue a little longer. The old shell game continues.

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

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