From Monty Pelerin: How to Identify an Economic Zombie

Find the original here: How to Identify an Economic Zombie.

This post is relatively oversimplified, but I think it captures the bullshit espoused by the neo-Keynesians, such as former economist Paul Krugman, and the nonsense inherent in the progressive, neo-liberal mindset that eternal deficits won’t have any negative long-term impacts on main street.  The permanent inter-temporal dislocation of consumption essentially demands that (1) inflation skyrockets at some point in the future, (2) taxes skyrocket at some point in the future, or (3) government services decline precipitously in the future.  The only thing supporting fiscal profligacy is monetary recklessness – a return to rectitude on both would (hopefully) allow interest rates and economic behavior to normalize.*  Unfortunately, none of this is possible while regulatory over zealousness demands permanent stimulus and social welfare to support the new populist progressive dream of lavish social safety nets (and a permanent underclass voting block for populist politicians).

Economics is not a difficult subject, unless you try to learn it from an economist. As described by John Kenneth Galbraith, who posed as an economist but was far better as a critic:

Economics is a subject profoundly conducive to cliche, resonant with boredom. On few topics is an American audience so practiced in turning off its ears and minds. And none can say that the response is ill advised.

Common sense is all that is required to be a good economist. Unfortunately, in order to get your union card, you must pretend to have none. Belief in fairy tales like more spending and “free lunches” is also necessary.

But that is of little import in regard to the title – How to identify economic zombies.  

What Is A Zombie?

Webster defines zombie as

… a will-less and speechless human in the West Indies capable only of automatic movement who is held to have died and been supernaturally reanimated

An economic zombie can speak and is not dead in any physical sense. His defining feature is a focus almost solely on the present. He assumes tomorrow will be just like today. If his current behavior has not created trouble or hardship thus far, then it won’t tomorrow or on into the future. Linearity describes his thinking and world. The future will be just like today.

A Simple Test For Economic Zombie Determination

The test to determine whether you or your friends are zombies is simple. Answer the following question: How would you live if debt/credit were outlawed? The economic zombie has difficulty comprehending the question, no less answering it. If you or your friends do, then you are well on your way toward full zombie-hood, if in fact you are not already there.

The question is relevant because it identifies those too ignorant to comprehend the fact that you cannot consume more than your income will support, at least not forever.

Income for a period determines the amount you can spend that period, or it would in the absence of debt or savings. Borrowing this period enables spending to exceed income this period. But borrowing is nothing but advancing consumption that otherwise would occur in a later period. Whatever is borrowed raises consumption this period but reduces it next period when some of the income earned then cannot be spent because it must be used to service the prior debt. Total consumption for both periods is lower than it would have been without the borrowing. That is due to the paying the carrying cost of debt, interest.

If you cannot understand this concept or you believe that you can nullify it by borrowing again next period, you qualify as an economic zombie. If you answered that you could not live if debt/credit were outlawed, you are an economic zombie, and perhaps also an economic idiot. Osavi Osar-Emokpae colorfully described debt:

And don’t tell me debt is not a big deal. Debt will cut off your legs and laugh at you as you grovel in the dirt begging for mercy. If you don’t need it, don’t get it. If you can’t afford it, don’t get it. If you’re already in debt, get out quickly. If you think you’ll never get out, you’re right, you won’t.

If you are using your credit cards as loans (i.e., you are not paying in full the balance each month) then you are zombie-qualified.

Economic zombies are not born. They are made. They choose their lifestyle. Behind every economic zombie is someone who believes he should live better than his abilities allow. That may work for a time. Then the Osar-Emokpae quote takes over.

The reality is that negative borrowing, saving, should be occurring every year. Man has a finite lifespan and a finite earning career. The latter is shorter than the former. Part of life is to be responsible enough to prepare for the future when income stops. Borrowing is a sign of immaturity and ignorance. Occasionally borrowing is necessary to meet an unforeseen emergency. If it is routine, then you are an economic zombie

I suppose that if credit/debt were outlawed, my response would be disappointment at the loss of all of my rewards and airline points…  As long as your answer is as inane as mine, you’re probably okay.  Remember, debt is for productive activities and long-term appreciable assets.  If you rely on debt to subsist as a consumer?  You’re fucked…

 

*(Economic behavior is always “normal” when it responds to incentives, regardless of the nature of the incentives.  So the behavior we see now, cash hording, bubble investing, having the option to not work, etc…, is “normal,” but distorted by bizarre incentives.  When I say normal behavior, I mean market based allocations of resources to their most productive use in a relatively undistorted manner.)