How the Zombie System Works


The poor Republicans have their Mitt in the wringer. Everyone is ranting and raving against him. Why?

Romney was at a private fundraiser. They were high-dollar Republicans, many of them from the financial industry. The event was hosted by Marc Leder, a private equity fund manager, who is said to hold wild bacchanalia at his Hamptons, New York house. Mitt must have felt he had to come up with something pretty hot to compete with Leder’s naked women and live sex acts.

So, he told the ground that 47% of the people don’t pay taxes… that they see themselves as “victims”… and that these people are “moochers” living off the government.

Well, he’s mostly right. They don’t really live ‘off the government’. You can’t live off the government because the government doesn’t produce anything. Instead, you have to use the government to live off other people. Which is just what the moochers – aka zombies – are doing.

Just who are these people? The Atlantic reports:

In 2011, 47% of Americans paid no federal income taxes. Within that group, two-thirds still pay payroll taxes. The rest are almost all either (a) old and retired folks collecting Social Security or (b) households earning less than $20,000. Overall, four out of five households not owing federal income tax earn less than $30,000, according to the Tax Policy Center.

Here’s another, slightly wonkier, way to think about the 47%. Divide the group into two halves. The first half is made tax-free by credits and exemptions, the vast majority of which go to senior citizens and children of the working poor. The half that you’re left with is so poor, they wouldn’t owe federal income taxes even if there were zero tax expenditures.

There are some not-so-poor outliers, like the 7,000 millionaires who paid no federal income taxes in 2011. But for the most part, when you hear “The 47%” you should think “old retired folks and poor working families.”

Not necessarily bad folks. Some layabouts and some chisellers. But mostly normal people caught up in the zombie system… just like the rich people listening to Mitt Romney.

How does the zombie system work? You’re probably getting tired of hearing it. But to make a long story short, the Nixon administration took real, gold-backed money out of the system in 1971.

Ever since, it’s been ‘off to the races’ with credit… turning the economy from a productive system (where middle class workers can earn decent wages by making useful things) to a speculative system (where greasy financiers make millions without making anything at all). We don’t know how well Leder made out, but the papers report that 25 of his companies went bankrupt since 2008.

Not that we’re blaming him… or accusing him of anything. We would have done the same thing if we had been smart enough. The money was flowing fast and furious; why shouldn’t he help himself?

And we’re not going to join the crowds pointing their fingers at Mitt Romney either. Au contraire, we rise to his defence, as we do with all mental defectives, drunks… and people who dare to attack the zombies.

Trouble is, many of the people listening to Mr Romney’s speech were zombies themselves – rich zombies. Marc Faber says that 50% of the US economy is now directed, controlled or actually run by the government.

That puts about half the people in the zombie economy – the economy that doesn’t really produce anything itself, but instead lives off the efforts of the other half. The poor among them collect food stamps and disability payments. The rich get defence contracts, farm subsidies, bail-outs, and boondoggles – such as the millions given to ‘green’ energy groups… or the billions given to the banks… or the trillions pumped into the financial system so that rich people wouldn’t lose their money.

The Fed has doubled its assets in the last five years. At the rate announced by Mr Bernanke last week, it will double them again in the next five. That puts a lot of money up for grabs. Who will get it? People who make decent things for decent wages? Or people who figure out some angle… who cosy up to the feds…who have an inside track with the banks… who know somebody important?

Here’s how it works. The Fed prints money. The feds spend it. Where does it go? Over the last four years the price of stocks doubled, more or less. So did gold. More or less.

But the ‘poor’ don’t own gold or stocks. At best, they own houses, which have gone down. At worst, they own nothing but their time… which has also gone down.

The working stiffs… and the stiffs who would like to work if they could find a job… and the shiftless stiffs who prefer to collect food stamps and disability get the short end of the stick.

The combination of higher unemployment, lower wages, and higher living costs mean that most middle class families are no richer than they were 20 years ago.

In material terms, they’ve lost two decades. With more capital and technology available than ever before, these should have been the most productive years in the history of the planet. Instead, they were a total flop.

But the rich did well. As the feds pumped in money, their assets – like boats on a rising tide – went up. And now they gather at fundraisers for Mitt Romney as well as Barack Obama. They make donations, depending on their position. Those who run shyster law firms, ‘green energy’ scams, Hollywood, and bureaucracies tend to put their money on the Democrat.

Those who run defence companies, oil firms, and tobacco companies tend to go with the Republican. Wall Street could go either way… depending on where it thinks it will get the highest rate of return.


Bill Bonner
for The Daily Reckoning Australia

From the Archives…

Be Very, Very Scared
14-09-2012 – Greg Canavan

How QE Favours the Rich
13-09-2012 – Bill Bonner

To the Barricades!
12-09-2012 – Dan Denning

The Power of Pork
11-09-2012 – Dan Denning

Waiting on Beijing
10-09-2012 – Dan Denning

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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3 Comments on "How the Zombie System Works"

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4 years 1 month ago

“moochers – aka zombies” … “use the government to live off other people” – this is the popular view of those who have been able to use the government (regulations, laws etc) to live off the moochers (paying pathetic minimum wages, avoiding taxes, etc) – this arrangement is not sustainable in the long term and eventually breaks down, sometimes more painfully than the rich would wish

4 years 1 month ago

It’s the same old theme since nineteen-sixteen.
In your head, in your head they’re still fighting,
With their tanks and their bombs,
And their bombs and their guns.
In your head, in your head, they are dying…

In your head, in your head,
Zombie, zombie, zombie,

zane zeehan
zane zeehan
4 years 11 days ago
Romney is a private-equity guy. Private equity only works using leverage ie. other people’s money. All the free money courtesy of the Fed and Mr Ben Bernanke ( a zombie if ever I have seen one ) is working pretty well to these guys’ advantage. These guys are free money junkies. So I wouldn’t be expecting much real change to the system from people like Romney. He is a prime beneficiary of the current system. Who is going to end the crazy system of US subsidies to sugarcane and corn growers???. Ethanol is a rort, as is the excessive use… Read more »
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