Wednesday, July 3, 2013

How the State Starts, Implodes and Ends

The state is a peculiar institution that has dramatically changed over thousands of years.  Historically, the state was nothing more than a murderous and militaristic crime syndicate that ruthlessly plundered and murdered folks for the glory of the empire, its wealth and its real estate holdings.  Men were slaughtered, women were raped and women and children were carted off to slave markets which was pretty much the fate of the conquered.

The state is still a murderous and militaristic institution but these days it operates as a so-called benevolent democracy wherein the state legitimizes its plunder and murders with an election.  Nothing has really changed except that the illusion of freedom is a fraud that we happily accepted.  From kings and their courts to elections, presidents, prime ministers and and legislative bodies, We the Sheeple People eagerly embraced the state as the cornucopia of plenty.   Throughout human civilizations, there were always the elites who controlled money and power, as well as its concentration into the hands of a few.

The birth of Western Civilization attempted to change that paradigm and damn near succeeded.  Monarchies were busted up as was the feudal land holding system that bestowed privilege upon the titled aristocracy who were loyal to the crown.  To maintain absolute power, the elites needed a new paradigm that they could sell because power was no longer absolute.  Briefly, the state feared the people and was forced to allow them to flourish under the banner of liberty.  Humanity busted out of the Dark Ages, the Middle Ages and propelled themselves into Enlightenment that spawned a  new era of We the People power that embraced property rights, human rights, civil rights, political rights and natural rights.

It was a cataclysmic leap for humankind as progress in science, technology and the arts flourished as the middle class was born.  Freedom and free markets catapulted folks into a new reality of We the People power.  The elites were threatened with extinction and ferociously fought back.

They created the modern nation state complete with entitlements.  The elites understood that the Sheeple People would never vote away their power without getting something in return.  And thus socialism and the socialist state was born.  While the socialism of Mao and Stalin resulted in wiping out over 100 million folks, the soft socialism of the West was deemed the perfected reality of Marx wherein the elites were still in control of all money, power and resources.

For a while, everybody was happy.  The elites had the power and the Sheeple People got free food, housing, healthcare and other goodies.  There was a problem with the plan.  The state never had the resources to fund the promises to the people.  So they heavily borrowed to deliver the statist socialist goodies.  Governments borrowed so much money to fund the delusion of prosperity and well being that they literally bankrupted themselves.

Then headlines started appearing that the Greek bond rate was triple digit and that Greece was so broke that he needed bailout after bailout, which it got.  Then Spain and Portugal started going the way of Greece and it's even speculated that France and Italy aren't too far behind.  Today, Mish is reporting that the interest rate on Portuguese bonds had risen to 8%.

Herein lies the fatal flaw of the state.  It can only tax and borrow so much until it implodes.   Eventually, the taxes destroy the revenue producing economy and the interest on the debt eats up most tax revenues and then the entitlements are cut way back because there is no money to fund them.  What happens next is people marching in the streets opposing enforced austerity.

The Sheeple People can march and scream all they want but at the end of the day there still isn't sufficient money, not even in the fiat money universe, to meet their demands.  Governments will inflate the currency but this only destroys purchasing power and the people then need more and more funky money to provide basics like food, medicine and shelter.

Reality is difficult to swallow because it's painful but there is no way to avoid the pain and it will descend upon the West like a tidal wave.  The cradle to the grave entitlement state is on life support, as is the whole rotten financial system that fictitiously props it up.

Is humanity about to embrace a new paradigm shift and one that has no use whatsoever for the state and its plunder?  If the survival instincts of humans are any predictable barometer of future behavior, it's already playing out.  In Greece it's been estimated that up to 50% of all Greek GDP is underground and beyond the tax collectors reach.  In Spain and Portugal, the underground economy is growing rapidly.  Folks can and do reach a point when opting out of the state is their only viable solution for survival.

Governments understand what is happening.  They are talking about outlawing cash money because it's untraceable and so forcing folks into government traceable electronic money represents the last gasp of the dying modern nation state.   Understand that once the government loses its power to plunder, it really is toast.  But folks can resort to old fashion bartering and cyber-currencies like Bitcoin.  They may not be as convenient as government money but they work and will be embraced because stiffing the evil government will definitely become the new game in town.

One thing is certain - things will never be the same.  We can't go back to what obviously is a big fail.  Exactly where humanity ends up as it once again embarks on another major paradigm shift is anybody's guess.  Third world and Asian nations are likely to come out on top because these folks aren't pampered and spoiled like whinny westerners, and poor third world folks already possess razor sharp survival skill.

The real tragedy?  The glorious rise of the West will meet a most inglorious death unless its people change and that's not about to happen until all is lost.

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