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Flesh Eating Zombies Will Feast on the US Economy

‘In the end more than they wanted freedom, they wanted security. When the Athenians finally wanted not to give to society but for society to give to them, when the freedom they wished for was freedom from responsibility, then Athens ceased to be free.’

Edward Gibbon (1737-1794)

Dow down yesterday. No panic. Just hesitation… and worry.

A TV news report this morning said that Congress only had 18 days to solve the fiscal cliff issue. Seems like plenty of time.

But the fiscal cliff is no big deal anyway. If we go over the cliff, the feds will have to jettison a bit of their projected spending increases. It still leaves them in growth mode.

It still leaves the zombies with about half the nation’s energy, resources and money. The other half is barely able to carry the load… especially since there are so many zombies getting in their way.

Yesterday, we noted that 22 million people had been added to the food stamp and disabled list since Obama took office. At the rate the zombies are multiplying, there will not be a single normal person left in the US by 2052. We’ll all be riding in government-provided wheelchairs… and living on food stamps.

And who will pay for it? That’s the thing about zombies… they need living flesh. In the coming zombie Armageddon the last productive citizens will be hunted down and torn to pieces. Then what?

We don’t know. Our guess is that the whole corrupt system of robbing Peter to pay zombies will blow up long before we get to zombie Armageddon. But we could be wrong.

And since we want to see how this all turns out, we have a proposal. Let’s ‘cut to the chase’, as they say here in Hollywood. At no additional cost, the feds could turn the whole population into zombies right away. Currently, the Fed is paying bondholders – mostly banks – $40bn per month.

Instead of giving it to the fat-cat zombies, why not spread it around to the skinny-cat zombies? Milton Friedman once spoke of dropping money from helicopters as the ultimate way to beat a debt trap. Why not do it? Just drop the money right into households all across the country.

Of course, we’re speaking metaphorically. There aren’t enough helicopters to pull off a trick like that.

Instead, the Fed could just give the $40bn to the Social Security Administration. They’re good at handing out other people’s money. They could easily arrange for every family to get about $500 a month just from the Fed’s new cash. It wouldn’t cost Washington a penny, because the Fed creates its money out of thin air.

This way, the feds would avoid the blockage in the banking system. As it is, the Fed gives the banks the money. They use it to buy financial assets – notably US government bonds. The rich get richer. The poor stay poor. Only a little of the money ends up in consumers’ hands. So, as far as increasing demand – which is the stated policy objective – QE3 and all the QEs that preceded it have been duds.

Giving the money directly to consumers, on the other hand, would produce an immediate increase in demand. Heck, with $500 more a month you can lease a new car. You can upgrade your apartment… or go out to dinner four or five times. You can buy 50 bottles of decent Chilean wine… or 50 packs of cigarettes.

Since most of the money would go to low and middle income families it would almost all be spent. With a modest 1.5 x multiplier… you could expect that the US economy would get a jolt of about $60bn in extra spending per month. Since consumer spending is part of the GDP, no matter how stupid and counterproductive it is, this would boost the GDP by $720bn per year.

Whoa! Now you’re cooking with gas. That’s an increase to GDP of about 5%… bringing the total rate of increase to about 7% per year.

Our plan has a big political advantage too. It gives money directly to the people rather than to the greedy SOBs in the 1%. It creates millions of new jobs. And it actually reduces the US budget deficit, since the feds will collect taxes on all that additional activity.

And it puts all Americans on more or less even footing. We’ll all be zombies. And we’ll all go broke more or less at the same time, as the helicopter money brings our whole system of fraudulent finance to grief much sooner.

Regards,

Bill Bonner
for The Daily Reckoning Australia

From the Archives…

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The US Presidential Election: The other race that stops the other nation…
6-10-2012 – Dan Denning

Why Gold Hasn’t Risen
5-10-2012 – Bill Bonner

3 Comments

  1. Rick W says:

    You statement:
    “Our plan has a big political advantage too. It gives money directly to the people rather than to the greedy SOBs in the 1%”

    It is in no way ‘your’ plan. It is an idea that goes back thousands of years. It is an idea currently gaining favour with the IMF:
    http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf
    Also not all that different to Steve Keens debt jubilee although he prescribes that any windfall going to debtors must be used to pay down debt first.

    It will not happen though because the banks would lose their privileged position and they have too much political clout to let that happen.

  2. Johnny says:

    That is exactly what Kevin Rudd did back in 2008. They gave cash to pensioners, Baby bonus, etc when the crisis hit back then.

  3. Lachlan says:

    When the system has finished transforming itself to some degree and on tax payer funded bailouts and fraud then we will get an inflation for the man on the street lest this crisis weans the masses away from mother governments teat.

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