Macroeconomics in the event of zombie invasion

After last week’s discussions of requirements in case of zombie apocalypse, it seems obvious that we’ll be sorted for the essentials – food, shelter, diesel, chainsaws mounted on big trucks, light armoured vehicles, and the rest. So my brain turns, as it often does at four in the bloody morning, to the harder questions, like how do we maintain a stable currency in the event of zombie invasion?

Currency is useful as a means to store wealth, it’s a promise against the future. You can do an hour’s worth of work now, get back a piece of paper that you can exchange for someone else’s work in the future. Inherent in that is some kind of labour-capital exchange, the ability to swap lots of labour for lots of capital, like a house. You can look at capital as a store of past labour.

Assuming 90%+ of the world’s population is infected, then we’re faced with a quite awkward monetary situation. We’ve got an excess of capital – many houses, cars, factories per person, but it’s all going to depreciate at a horrific rate, coz we don’t have enough people to look after them. So you can have that Ferrari (assuming you can find the particular zombie that has the keys in its pocket), but stocks of petrol will run out in months, and even if we start growing our own biofuels, odd on are that the only Ferrari mechanic in NZ has been infected. So that Ferrari rapidly loses it’s exchange value.

Same for houses. All of a sudden, houses are pretty much free, as we’ve ten times as many of them as we need. Still, you’re only going to live in one, so why bother keeping up maintenance on the rest? It’s not like there’s enough people to rent them to, nor will there be for quite a while. So the housing stock collapses, destroying lots of capital.

Immediately after the invasion, you can get a Ferrari an hour’s labour. Some months later, an hour’s labour might get you half a ploughed field. So people will want to consume now, gather as much physical wealth as they can in preparation for the hard times ahead. The real wage now is high now, decreasing rapidly. An economist’s way of saying this is that real interest rates are very high.* Thus the demand for money increases, leading to inflation.

The usual response, to lower the money supply, is going to be tricky, coz the banks are full of zombies and thus unresponsive to changes in the official cash rate. Given such situations, people may be tempted to throw up their hands, loose their faith in cash and revert to a barter system.

However, cash is handy, and by far the best way to deal with an inflationary crisis when the wealth of a nation changes rapidly is to replace a fiat currency with something that’s backed by some barterable commodity – i.e. a return to the Gold Standard. If everyone’s bartering anyway, then you might as well use money that’s based on barter.

Then, we run into the problem of how much gold have we got in the country? That’s pretty hard to assess, coz as soon as gold backs the currency, it becomes the currency, and we spend all our time picking over the ruins looking for old jewelry. Thus we might get more inflation, or we may invade Australia for the gold mines, resulting in the kind of rampant inflation that Spain saw when it ruled South America. So instead of the gold-backed Pacific Peso, I propose a better currency – the Scandinavian Blond. This is a good fit with our requirements. There’s a fairly fixed supply, they’re inherently valuable and will be accepted in trade by the barbarian hordes (coz, some Aucklanders will probably survive). They do have disadvantages, of course, they’re annoyingly indivisible, so only suitable for large transactions, but that’s hardly insurmountable. If we did decide to increase the money supply, then that would involve long sea voyages, but frankly, that’s a worthwhile hedge against inflation for when the economy does get back on its feet.

(* Or possibly negative. In which case case, remembering that nominal interest rates can’t go below zero, then we still get inflation.)

In other news, and you may want to be sitting down for this – the new Pendulum album sucks. It’s like they thought to themselves, “we’re the most successful Australian drum and bass band ever, but we’re not getting enough groupies.” Then they thought, “who gets lots of groupies? AC/DC!” So, being Australian, they prayed to the great gods who are AC/DC and lo! AC/DC appeared in the sky and the members of Pendulum cried “oh Lords of ROCK!, what should we do to get more groupies?” But AC/DC were busy shagging groupies and didn’t care to answer. So the members of Pendulum thought, “well, if it works for AC/DC, it’ll work for us” and made a whole album of ROCK! But Pendulum are Pendulum, not AC/DC, they did not possess the true essence of ROCK! so they sounded like yet another bad AC/DC cover band. Alas, the groupies said to themselves, “why sleep with yet another bad AC/DC cover band when we could sleep with AC/DC”, and the drum and bass heads said to themselves, “wtf?” and downloaded the JFB dubstep mix wherein JFB decides that there should be more to dubstep than low, dark wobblers. Instead, there can be low, dark wobblers with counterpoint.

8 thoughts on “Macroeconomics in the event of zombie invasion”

    1. That depends on a variety of factors. If it’s my zombie apocalypse, then the male:female ratio amongst survivors will be such that AC/DC will be an appropriate sound track.

      Which raises another interesting research question – if we’re going to be herding zombies en masse into the industrial shredders, what music will attract/repel them? Coz if it turns out that the only way to gather them is to play Rick Astley at apocalyptic volume, 24/7, then I’m not sure that civilisation is worth saving.

  1. this leads me to wonder:

    where can i find a supply of scandanavian blondes to stockpile for the event?
    in case of zombie attack, should i make a beeline for the Norwegian embassy (if we have one here?)

    What is the exchange rate of inferior blondes to scandanavian blondes?

    And what about counterfeiting? I have bleach and a passable faux scandanavian accent? (must stockpile old ABBA interviews to practice up)

    1. Nearest real embassies are in Oz, most nations just have consulates in town (…checks interweb…) and Aucks & Chch. Nearest Icelandic embassy is Beijing, which is less than ideal

      Finland has honorary consulates, meaning there don’t have to be real Finnish people there. Poop.

      Still, thanks to tourism, we should be able to build a liquid supply by rounding up back-packers. To avoid counterfeiting, we will have to inspect them thoroughly, of course, coz we can’t have anyone debasing our currency…

  2. To be tediously serious in contemplation of this event;

    Local currencies could hold up surprisingly well during the Zombie Apocalypse, though I’ve had no personal experience of them. I am pretty sure they have a nice little local currency in Golden Bay, for example. In fact Golden Bay is the ideal haven in the Zombie Apocalypse, you’re surrounded by hippies with farming implements good for beheading, and there’s a fooking great hill which I’m sure will take zombies much more time shambling up, than simply across flat ground, that they’d look at it and decide to go down to Christchurch instead.

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