bill-99002c-sm2

The Secession Scenario

by Hogeye Bill


Nov 4, 2019

Devolution is the dissipation of power from a
central locus to smaller and more local loci.

  1. The Triggers
    1. US Dollar Inflation
    2. Protectionism and Trade Wars
    3. Terrorism - State and Non-state
  2. The Event
    1. Hyperinflation Hits
    2. All Government Payments Fail
    3. Central Government Effectively Gone
    4. Psychological Results
  3. The Transition Period
    1. Local and State Governments Continue
    2. Alternate Currencies Spring Up
    3. Supply and Transport Quickly Resumes
    4. States & Regions Declare Independence
    5. Civil War is not a Danger
  4. Summary

I. The Triggers

A. US Dollar Inflation

It is clear that the dollar is debased (“inflates”) over time. The American public is generally unaware of this for a couple of reasons. First, since the US dollar is the world reserve currency, most other currencies are, directly or indirectly, pegged to the dollar. What this means is, other State central banks have to have US dollar reserves partially backing their new money, but the US has no such restriction - it can print money out of thin air. This privileged position is called monetary hegemony. Spain had it at one time with the Spanish Dollar. Then Britain had world monetary hegemony with its pound sterling.

When the US inflates the dollar, other States then proceed to inflate their currencies at about the same rate or (often) more. This is a modern tool that States use to covertly tax their subjects. Very few people are economically astute enough to realize that printing money steals from all existing money holders by making their money buy less. Since one cannot observe the pocket-picking, and the effect has a time lag, this seigniorage theft is easy for rulers to explain away by blaming greedy bankers, speculators, or some trade policy.

There are actually two ways for the ruling caste to address monetary debasement, since it is in their interest to keep the free money gravy coming. They can either restrict the money supply somehow, or they can just say “damn the torpedoes” and milk the system until it dies, that is, hyperinflation ends the current State.

Why do I predict the latter? Because the gravy is here and now, and who knows how long it will last? Political power is only temporary, especially in a democracy. Elected rulers are temporary stewards, not permanent owners. Their incentive is to get while the getting’s good.

If the incentive argument does not convince you, then look at history. Once the world went off a commodity standard (gold and silver), governments have inflated their currencies unremittingly. The data shows this conclusively. If you give ruling politicians the power to print money, they will print it.

B. Protectionism and Trade Wars

trumptradewars

While I expect inflation to be the main trigger, no doubt trade wars will exacerbate the problem. If a State’s currency is cheaper, then ceteris paribus there will be more exports. Another way to attempt to favor crony firms is to bestow favors, such as imposing tariffs or quotas on their foreign competition. The diabolical genius of State propagandists is to convince people to cheer about helping the rather small constituency of crony export firms. Wouldn’t lower prices from free trade be more rational for all but special interests? Yes, of course. The trick is to point at specific beneficiaries, while ignoring all the people who, as customers and consumers, pay more. When framed correctly as the people versus privileged exporters, the crony favoritism of tariffs is obvious.

The establishment factions of the War Party favor a World Cartel, a kind of shared empire mainly controlled by the winners of WWII. Call it the Anglo-American Empire. They want the international corporatism of cartels like the World Bank, WTO, and UN. World corporatism and economic nationalism aka protectionism are painted as the only two options by the War Party. Freed markets are off their radar. It is an open question whether protectionism is better or worse for people than international corporatism, or which will cause the hyperinflation to occur sooner.

C. Terrorism - State and Non-state

US-Israel-Islamic-State-Terrorism

Most people consider terrorism as done by non-state entities, but it is likely that most terrorism is done by State militaries and police. Even some of the terrorist attacks blamed on non-state entities turn out to be false flag operations by States. I think that terrorism will not be a trigger for devolution. I would say that, quite the contrary, domestic terrorist events may, through fear, bolster a dying State, and perhaps make people more likely to opt for a new dictator rather than devolution.

II. The Event

zimbabwe-dollar

A. Hyperinflation Hits

It is safe to assume that existing rulers will not just give up and declare moral and financial bankruptcy. Instead, they will continue to inflate the money supply, hoping to “kick the can down the road” until they are out of power and it becomes somebody else’s problem. With both ruling factions playing hot potato, neither attempting nor wanting a sustainable currency, sooner or later hyperinflation will occur. The only question is when, not if.

B. All Government Payments Fail

It is important to note that, when government stipends and subsidies and social security and medicare payments all fail - become worthless in buying power - the State will lose legitimacy even among its strongest proponents. Thus, in addition to all the current libertarians and libertarian-leaning people, even former flaghumpers such as ex-military and retired government bureaucrats will be disgusted with the State. The natural inclination will be to switch allegiance to local governance units, and/or to create market-based alternatives to what were formerly government functions.

C. Central Government is Effectively Gone

As small ‘s’ states (provinces of the US) and local governments take over the functions of the crippled central State, it will become obvious that the central State is useless and obsolete. Remember, there are no federal government pension checks - or if there are they will not even buy a loaf of bread - so even the formerly bought and paid for pensioners will be condemning the State. Many people will be, in effect, new but naïve anarchists - shallow in understanding but ardent in their hate for the “backstabbing, lying, no-good” former US.

There will not be significant diminishing of trade between the new, former US, entities. It is a mistake to assume that trade can occur only within a State. On the contrary, free trade among individuals, across the former artificial state borders, will (after a short transition period) increase over present levels, there no longer being Central State cartelization (“regulatory”) agencies. Quality of goods and services will be assured by superior means, including voluntary accreditation, retailers, word of mouth, consumer associations, and professional association.

Law enforcement is already primarily state and local, as is a lot of charitable functions. The main effect most people will experience from the death of the US will be quite pleasurable: no longer will the State steal a major portion of people’s wealth or earnings. People will not miss being robbed of a significant part of their income - most taxes being extorted by the central State. Local taxes will likely remain in most places, but they will be only a small fraction of the current federal toll.

D. Psychological Results

In addition to the sudden hate for the US State, there will be suspicion of all compulsory government and all taxation. People will relearn how to solve problems locally, rather than hoping and praying that Great Rulers from Afar will solve things through statist magic. The belief in central planning will diminish, and conversely the confidence in emergent processes and local community will increase.

The American culture of liberty, familiarity with markets, and traditions of local governance will quickly dispel any worries about legitimate services being provided. Voluntary associations such as churches and charities will handle poverty in a manner significantly more efficient and effective than the State ever did. For one thing, the idea of “deserving poor” will regain prominence, while the notion of charity mugging - robbery and redistribution schemes - will lose support.

In short, popular opinion will see the former US State as a massive failure, just as the vast majority of “soviet” people (outside Russia) thought the USSR was a failure once it disbanded. The few residual statists won’t matter, since they will have no State armies, police, or courts to enforce their authoritarianism. And importantly, markets will continue to function just fine, after a short transition period to discover the moneys to replace the now-worthless dollar. I predict that silver and gold backed crypto currencies will become standard. That is, the world will return to a free commodity standard. The experiment in fiat money, started in 1971, will end ignominiously.

III. The Transition Period

A. Local and State Governments Continue

In most cases, local governments will simply take over any central government function that is actually wanted by locals. Since local governments do all the necessary things already, the transition will be easy. The market, of course, will handle most human needs, certainly more morally and more efficiently than the former State.

B. Alternate Currencies Spring Up

Crypto currencies are already here, and “stable coins” - backed crypto currencies are the latest rage. Thus, we are already set up for when the dollar dies. The only question is which commodities are likely to back the new crypto currencies, and whether the storage of monetary commodities will be centralized or decentralized. I hope for the latter, with something akin to Ripple or Stellar technology, since this seems both more secure and less susceptible to manipulation. Also, this would be truly “people’s money” in the sense that there would be no central authority over it. The reality of a stable amount of silver or gold or kilowatt hours is the best defense against money debasement.

C. Supply and Transport Quickly Resumes

As the money standards are determined in the post-fiat period, commerce will resume in days or weeks, except for some vulnerable urban areas where it may take longer. The supply chains will not be affected, nor will transportation. The main difference will be that, within a few weeks of devolution, people will be using silver or gold (crypto currency) for their transactions. People will, of course, easily embrace no longer paying tax-extortion to the US.

D. States and Regions Declare Independence

Since the US will be irrelevant, the states (provinces) of the US will secede, formally declaring their sovereignty and independence. But this will not only happen in states, but also some half-states and city-states. For example, one can expect Northern and Southern California to be distinct entities. One might expect New York City, Los Angeles, and Houston to become city-states. The San Francisco Bay Area would likely be a separate entity, with SF, Oakland, and Berkeley. Other regions will similarly break off from former states.

Just as the former Soviet Union left a rump State, Russia, after it broke up, it is possible that the former US will have an analogous rump State in the Washington DC Beltway. Like Russia, it is likely to be the refuge of old-time conservative statists hoping to revive their old empire. Most people in the former US, with thriving local governance, will pretty much ignore those Hitler want-to-be’s. Will Washington Beltway become a danger to free America? I doubt it. Russia was the main economic power in the USSR, but the Washington Beltway has always been an economic drain on the rest of America - and the world. I do not see a significant danger of falling back into centralized statism from Washington DC.

E. Civil War is not a Danger

A note for the race war bigots, and USAmericans who are victims of government school victor’s history: There will be no civil war when states and regions start seceding. There are two reasons why civil war is unlikely. First, recall that the central government is broke, its money is no good, and even its pensioners hate it. There is no central State to take control over. The present array of ardent flaghumpers has disappeared with the value of the dollar. In all likelihood, relatively free markets will prevail among the new entities, and no one will want to have a race or culture war to force others into their new, freer entities. I see panarchy as prevailing - people creating communities with others holding similar values.

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IV. Summary

The US cycle of empire is coming to an end, and devolution - the breaking up into smaller units - is on the horizon. We have the technology to come through this splendidly, with strong crypto providing trust without authority (blockchains) and money without authority (crypto currency.) Any valid and necessary functions currently done by the central State will easily be done better by market mechanisms and local governance. Pluralism and diversity - panarchy - will replace winner-take-all democracy as the governance of choice for most people.

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