Zombie Economics: Don't Bail out the System that Gave Us SUVs and Strip Malls

By James Howard Kunstler, Kunstler.com. Posted November 25, 2008.

Though Citicorp is deemed too big to fail, it's hardly reassuring to know that it's been allowed to sink its fangs into the Mother Zombie that the U.S. Treasury has become and sucked out a multibillion dollar dose of embalming fluid so it can go on pretending to be a bank for a while longer.

I employ this somewhat clunky metaphor to point out that the U.S. government is no more solvent than the financial zombies it is keeping on walking-dead support. And so this serial mummery of weekend bailout schemes is as much of a fraud and a swindle as the algorithm-derived-securities shenanigans that induced the disease of bank zombification in the first place. The main question it raises is whether, eventually, the creation of evermore zombified U.S. dollars will exceed the amount of previously created U.S. dollars now vanishing into oblivion through compressive debt deflation.

My guess, given the usual time-lag factor, is that the super-inflation snapback will occur 6 to 18 months from now. And the main result of all this will be our inability to buy the imported oil that comprises two-thirds of the oil we require to keep WalMart and Walt Disney World running. At some point, then, in the early months of the Obama administration, we'll learn that "change" is not a set of mere lifestyle choices but a wrenching transition away from all our familiar and comfortable habits into a stark and rigorous new economic landscape.

The credit economy is dead, and the dead credit residue of that dead economy is going where dead things go. It came into the world as "money," and it is going out of this world as a death-dealing disease, and we're not going to get over this disease until we stop generating additional zombie money out of no productive activity whatsoever. The campaign to sustain the unsustainable is, besides war, the greatest pitfall this society can stumble into. It represents a squandering of our remaining scant resources and can only produce the kind of extreme political disappointment that wrecks nations and leads to major conflicts between them. I don't know how much Mr. Obama buys into the current adopt-a-zombie program -- his Treasury designee, Timothy Geithner, was apparently in on this weekend's Citicorp deal -- but the president-elect would be wise to steer clear of whatever the walking dead in the Bush corner are still up to.

All the activities based on getting something for nothing are dead or dying now, in particular, buying houses and cars on credit, and so it should not be a surprise that the two major victims are the housing and car industries. Notice, by the way, that these are the two major ingredients of an economy based on building suburban sprawl. That's over, too. We're done building it, and the stuff we've already built is destined to lose both money value and usefulness as the wrenching transition goes forward.

All this obviously begs the question: What kind of economy are we going to live in if the old one is toast? Well, it's also pretty obvious that it will have to be based on activities productively aimed at keeping human beings alive in an ecology that has a future. Once you grasp this, you will see that there is no reason to despair and more than enough for all of us to do, so we can recover from the zombie nation disease and get on with the next chapter of American history -- and I sure hope that Mr. Obama will get with the new program.

To be specific about this new economy, we're going to have to make things again, and raise things out of the earth, locally, and trade these things for money of some kind that we earn through our own productive activities. Don't make the mistake of thinking this is optional. The only other option is to go through a violent sociopolitical convulsion. We ought to know from prior examples in world history that this is not a desirable experience. So, to avoid that, we really have to put our shoulders to the wheel and get to work on things that matter, and do it at a scale that is consistent with what the world really has to offer right now, especially in terms of available energy.

In my view -- and I know this is controversial -- a much larger proportion of the U.S. population will have to be employed in growing the food we eat. There are many ways of arranging this, some more fair than others, and I hope the better angels of our nature steer us in the direction of fairness and justice. The prospects of a devalued dollar imply that we very shortly will not be able to get the all the oil-and-gas-based "inputs" that have made petro-agriculture possible the past century. The consequences of this are so unthinkable that we have not been thinking about it. And, of course, the further implications of current land-use allocation, and the property-ownership issues entailed, suggests formidable difficulties in rearranging the farming sector. The sooner we face all this, the better.

As the fiesta of "globalism" (Tom Friedman style) draws to a close -- another consequence of currency problems -- we'll have to figure out how to make things in this country again. We will not be manufacturing things at the scale, or in the manner, we were used to in, say, 1962. We'll have to do it far more modestly, using much more meager amounts of energy than we did in the past. My guess is that we will get the electricity for doing this mostly from water. It may actually be too late -- from a remaining-capital-resources point of view -- to ramp up a new phase of the nuclear power industry (and there are plenty of arguments from the practical and economic to the ethical against it). But we have to hold a public discussion about it, if only to clear the air and get on with other things, namely the new activities of alt.energy. But I would hasten to warn readers that we'll probably have to do these things more modestly, too (don't count on giant wind "farms"), and that we are liable to be disappointed by what they can actually provide for us (don't expect to run WalMart on wind, solar, algae fuels, etc.).

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Read more of James Howard Kunstler's work at: Kunstler.com.

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