[Corp. Watch] Economy of the Living Dead

[Corporation Watch]

There is No Zombie Free Lunch

  The financial plans of Barack Obama and Ben Bernanke
  will drain life and energy from the rest of the planet

By Krzysztof Rybinski

(Open Democracy, March 18) -- It is a story that could be made into  
"Return of the Living Dead: Part 6".

	A group of good people huddle on a roof, with a limited supply of raw  
meat. A crowd of zombies surrounds the house: hungry, mad, aggressive.  
Fear spreads as the zombies smell blood and flesh on the roof, and  
start climbing the walls.

	The moment the people on the roof stop throwing raw meat to the  
zombies, the zombies will come after them and turn them into the  
living dead. So they keep feeding them in the hope that they can  
survive the night, and a helicopter will arrive the next day to drop  
them more meat.

	It's the only way to survive: Trying to kill all the zombies is very  
difficult, and dangerous: When some people try to do it a few months  
ago, the other zombies swarmed them and ate them.

	This zombie "danse macabre" can be observed in real life. The people  
sitting on the roof are American taxpayers, the zombies gathered below  
are bankers screaming for more and more support, and the taxpayers'  
money is the raw meat being used as zombie-food.

	The leaders of the people on the roof say: "We've got to feed them,  
or they will come after us, shutting down credit to zero, selling all  
world assets, depressing prices to rock-bottom -- and we all turn into  
financial zombies. There is no other option than to feed the zombies."

	And the new supplies of raw meat keep coming. Ben is a very skillful  
helicopter pilot: He always manages to maneuver his helicopter and  
drop new zombie-food supplies in the right place, and just in time.

	Ben's co-pilot is Barack, who came with a fresh idea to keep zombie- 
bankers away from the house: "Let's feed them much more -- maybe if  
they have lots of food, one by one they will transform back into  
humans".

	But as time passed, zombie bankers were joined by zombie car  
manufacturers, and the zombie virus is spreading, which means more  
zombies are on their way.

	But Barack is undaunted. With Ben nodding beside him, he yells down  
to the beleaguered people on the rooftop: "No matter how many zombies  
come, we will feed them to save you."

Two secrets

	Now comes the first of two big secrets. Barack plans to borrow more  
than $2.5 trillion from the rest of the world to pay for the zombie- 
food. And his people are spreading rumors in major financial  
newspapers that the only zombie-free place in the world is the U.S.

	Many think that the U.S. is actually the native habitat of zombie- 
bankers, just as Romania is home to Dracula, but it is being promoted  
as the safest place on Earth to keep your money -- at least according  
to the zombie financial media and the zombie rating-agencies.

	Here is the second secret, concealed or garbled by zombie marketing:  
We, the people of the world, keep on putting money into the zombie  
homeland, thereby effectively funding the zombies.

	In 2009, we will lend to the government of the United States in  
excess of $2.5 trillion (which amounts to 5% of global world GDP). A  
large part of this loan will be used to feed the zombies.

	We get 2.5% interest on this loan, while the only way-out out of this  
zombie-trap for the U.S. is to increase inflation or default on the  
loan.

	Kenneth Rogoff, former chief economist of the IMF, was candid in  
saying that central banks should create inflation in the range of  
5-6%, with a risk of a brief period of much higher inflation (he  
mentions 20%).

	Now it can be seen why feeding the zombies is so cheap for the U.S.  
government: If you borrow at the nominal interest rate of 2.5% and  
then create 6% inflation, then lenders lose part of their loan to  
inflation, while the borrowers get a free zombie lunch.

	Thus, there is very little risk that one night Ben and Barack's  
helicopter will fail to show up and the zombies will climb to the roof.

The true cost

	I'm watching this with growing concern, on two counts. First, without  
my agreement, 5% of my income this year will go into feeding the  
zombies -- even as I'm aware that part of this loan to the U.S.  
government will be lost, most likely because of higher inflation.

	Second, I am even more concerned about the fact that instead of  
feeding zombies, we could do so much good with this money. If we are  
worried about stimulating world demand, we can help restore this  
demand by investing hundreds of billions of dollars in emerging markets.

	For example, we are not even close to achieving the UN Millennium  
Development Goals set in 1990. Some measures -- such as the number of  
people living in extreme poverty in sub-Saharan Africa, or the number  
infected by HIV -- have actually gotten worse instead of better.

	You can feed $100 billion to a zombie bank one night and the money is  
gone by morning; imagine how many schools, roads, and hospitals you  
could build in Africa with $100 billion.

	Or how many teachers you could hire to teach illiterate people in  
poor countries, how many doctors' wages you could pay to provide  
health coverage to millions of poor children who do not have access to  
a doctor.

	How much good could be done if zombies skip just one midnight-feast  
-- and they keep eating every other night.

	I was very disappointed when I saw the Obama grand plan. It does  
promise to cure some of the problems are plaguing the U.S. economy and  
society in both the short-term (falling demand) and long-term (social  
security, medicare costs, high carbon-emissions).

	But at the same time, by sucking in almost all the available world  
savings, it deprives emerging countries of access to capital markets,  
with the result that many poor or emerging countries suddenly find  
themselves in a situation where they are unable to borrow.

	Now the true cost of feeding the zombies can be seen: Large parts of  
the world will not be able to finance necessary investments, and some  
developing countries will not be able to pay their (once again  
growing, and non-zombie) food bill. So the poor will become even poorer.

	There is no free zombie lunch. Is this the change we believed in?  
Maybe the zombies did.

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Krzysztof Rybinski is assistant professor at the Warsaw School of  
Economics, and was deputy governor of the National Bank of Poland from  
2004-2008