Do you focus almost solely on the present? Do you assume tomorrow will be just like today? Do you think that just because your current behavior regarding debt has not created trouble or hardship thus far, that it won’t tomorrow or on into the future? Would you not be able to get by if debt/credit were outlawed? Really?? Then you’re an economic zombie – or perhaps even an economic idiot!
So says “Monty Pelerin” (economicnoise.com) in edited excerpts from his original article* entitled How To Identify Economic Zombies.
[The following is presented by Lorimer Wilson, editor of www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Pelerin goes on to say in further edited excerpts;
Linearity describes the thinking and the world of an economic zombie – 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.
Osavi Osar-Emokpae colorfully described debt:
“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 but then the Osavi Osar-Emokpae quote takes over. The reality is that negative borrowing, that is 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!
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://www.economicnoise.com/2014/02/25/identify-economic-zombies/ (© 2014 Monty Pelerin’s World. All rights reserved.)
Related Articles: (Please note: The articles posted on munKNEE.com deliberately present a diverse perspective on subjects discussed. Below are links, with introductory paragraphs, to a variety of related articles designed to help you become truly informed regarding both sides of the issues so that you can assess the merits of all points of view and come to your own conclusion.)
Do you have what it takes to pay off your debts and become comfortable financially or perhaps even rich, even VERY rich? You probably do but don’t know exactly what to do or think your situation is just too dire to possibly turn around. Read the following articles for some encouragement, financial advice and ideas on how to make considerably more income, pay off your debts and possibly even become that millionaire you’ve always wanted to be but didn’t know how to accomplish. Read More »
Personal finance isn’t nuclear physics – just spend less than you earn, save and invest the rest – but knowing what should be done and actually doing it, however, are two different things. Here are 10 money lessons I wish I had known when I was 20 which have the power to change your life if you are willing to embrace them. Words: 1340
The reason you are not a millionaire (or even on your way to becoming one) is really quite simple. You probably assume it’s because you aren’t earning enough money but the truth is that, for most people, it does not matter how much money you make… [but, rather,] the way you treat money in your daily life. [Let me explain.] Words: 866
Many people assume they aren’t rich because they don’t earn enough money. If I only earned a little more, I could save and invest better, they say. The problem with that theory is they were probably making exactly the same argument before their last several raises. Becoming a millionaire has less to do with how much you make, it’s how you treat money in your daily life. The list of reasons you may not be rich doesn’t end at 10. [Here are 10 more.] Words: 842
Saving money isn’t all about whether or not you know how to score screaming bargains. It has more to do with your attitude toward money. Many millionaires, in fact, have frugal ways and understanding how personal traits can influence your finances is an essential ingredient for building wealth. Do you have the 10 key traits to become rich let alone very, very rich? Words: 815
Graduating from college can be an exciting and stressful time. Suddenly you need to find a job, replay loans and make solid financial decisions. Fortunately, you don’t need to be unprepared. Below are some budgeting basics to keep your spending under control, some suggestions on how to set financial goals and a list of the top 10 American cities for starting out.
If you’re among those struggling with debt and just want to be rid of it and move on with your life, it can be helpful to find some information and inspiration from others who are financial experts or people working to pay off substantial amounts of debt. You’ll find all of that, and more, in these inspirational personal finance blogs that can offer you advice, motivation, and guidance in paying down your debts so you can start putting that money to other uses. Words: 1010
Objective and independent thinking is increasingly important to investing and trading success, particularly in the current and prospective economic and financial market times. How do you score yourself against the 15 ‘successful people traits’ outlined below? Words: 855
Frugality often gets a bad rap. Many people misunderstand frugality and assume that it’s nothing more than being “cheap” when, in reality, frugality is making sure that you get the most from the money and resources you have, even if they are limited. [Here are 10 ways to do just that.] Words: 1132
What is the best way to reduce debt? The most-efficient means is probably the snowball method. There are two main variations of the snowball method, but you must consider your personality to determine which of the two is right for you. [Let me explain.] Words: 1251
When people talk about getting their personal finances in order, they usually try to find relatively pain-free and low-cost ways to reduce debt and increase savings but this is a long-term approach which some people just cannot “afford”. [For them] …it may be worthwhile to consider taking the hard way out of debt. [Let me explain.] Words: 1370