The Illusion of Control, Part Two

Source: Straight Line Logic

October 1, 2019

by Robert Gore

The coming chaos

Part One

The US government has gone all in on taxation, redistribution, spending, expansion of its power, ever more intrusive laws and regulations, the increasing curtailment of liberty, debt funding, and debt-based “money” it and the Federal Reserve produce at will. The coercion and fraud implicit in these measures have been poisons on American political culture and are destroying the US economy and way of life.

Control, illusory or otherwise, requires resources. Government produces nothing, so the resources must be taken or borrowed. The economic grave it’s digging for itself is the greatest threat to the US government’s control. Taxation discourages production. Regulation throws sand in the economy’s gears and can stop it entirely. Steadily mounting debt and its consequent debt service exact an increasing toll. Most US debt funds consumption, which generates no offsetting return, not production, which potentially does.

Monetary flim-flam—the central bank using its created-at-will debt to buy the government’s created-at-will debt—is embraced in some particularly deluded quarters as a panacea, but it’s really a perpetual motion snare. Nothing is created or produced, so it’s tempting to say the central bank-government fiat debt exchanges have the same economic effect as two people exchanging twenty-dollar bills.

Tempting, but wrong, because the $20 exchange is harmless, while the central bank-government shell game produces identifiable, substantial financial and economic harms. Central bank machinations drive down interest rates—now into negative territory across much of the developed world—encouraging borrowing and discouraging saving, the foundation of future growth and progress. They keep zombie companies alive far past there free market sell-by dates. Negative interest rates are the ultimate absurdity—savers paying borrowers to lend them money!

Of course, few actual savers bite on this one, it’s mostly speculators hoping an absurd situation will become even more absurd. Debt so saturates the planet that even when borrowers are paid to borrow, the demand for funds is insufficient to promote the economic growth that cheap, free, or remunerative borrowing is supposed to promote.

Trend growth rates around the world are on a downward path, and in Japan and Europe, where debt and central bank giveaways have become ingrained features of the economy, growth is zero or less. The US hasn’t had 3 percent growth since the George W. Bush administration, and average growth under Trump, not withstanding the stock market he so frequently touts, has been about what it was under Obama. The disconnect between the real economy and financial markets is yet another consequence of monetary flim-flam and it will prove disastrous.

How do you take any government’s growth figures seriously when no provision is made for the debt that was used to fund that growth? If the US government borrows close a trillion dollars this year and growth of the entire economy amounts to $600 billion, has there been any growth? The question is not academic; those figures are pretty close to where borrowing and growth (best case) will come in.

Time and compounding interest, or a bear market in bonds (a bull market in interest rates), will blow mile-wide holes in the budgets of governments that are already heavily in debt, running continuous deficits, and facing the demands of aging populations. The illusory control bubble, especially in the US, may be pricked by the realization that it’s unaffordable as debt service and expanding “entitlement” spending crowd out the rest of the government’s budget and lenders demand higher interest rates.

One item won’t be crowded out: repression, or police state, spending, which will be rightly regarded as essential by the powers that be to maintain their power. Despite an extensive propaganda effort and governments’ capture of the mainstream media, expanding government at both national and international levels—under the guise of globalism—is encountering substantial resistance. Governments’ responses have been the usual: more propaganda, lies, and repression.

Fortunately, governments have not yet wholly tamed the internet, although they’ve coopted most of its technology providers and the social media giants. Lies have been repeatedly exposed, recently those propagated during the Skripal affair and Brexit in Britain, and the Russiagate and now the Ukraine-related attempted coups in the US. The credibility of the mainstream media and its standing with the public have never been lower.

Such exposure helps fuel a resistance of unknown size, to date most visibly manifested in Brexit, Trump’s election, and the Yellow Vest movement in France. The US poses a particular challenge for police statists because much of the resistance can shoot back.

When the violence comes—and it will come—the military and militarized police forces will face domestic insurgents who are better armed, trained, supplied, coordinated, and technologically proficient than the foreign insurgents the military has heretofore been unable to defeat. Among the insurgents will be hackers proficient in shutting down computer and communication systems, or perhaps switching off the poorly protected electric grid. The many hacks of government and business systems, now almost daily, indicate they will have little trouble throwing spikes on the information superhighway, partially or totally disrupting government and corporate computer, communications, and power systems. The havoc insurgents can potentially wreak is limited only by their imaginations.

A police state bent on repressing, incarcerating, torturing, or executing anyone who steps out of line will invariably suppress many of its most productive people. That destroys economic productivity, which is why the relatively brief interludes of human peace and prosperity coincide with the times when humans were most free. Police state economies are stagnant, at best, and eventually decay, wither, and die. (Watch the Chinese economic “miracle” fade as the Chinese government fully implements its social credit system and other repressive measures.)

The elimination of incentives, free markets, and iconoclastic entrepreneurialism leaves police states with little for their sustenance. A dying economy yields dwindling tax revenues, and the purchasing power of the government’s and central bank’s debts—pieces of paper and computer entries—head towards their intrinsic value, worthlessness.

When the government can only pay the military and police in worthless scrip, the end is nigh. They will be waging violence on their fellow citizens, including friends and relatives, and won’t be getting paid for it. With the empire crumbling, it may well be the last war the praetorians ever fight. Some will have paralyzing qualms, balk, or quit and join the resistance. Some will go free lance, joining other criminals terrorizing the populace. Contrary to police statists’ pipe dreams, chaos, not their illusions of enforced order, will reign supreme.

A historical epoch draws to a close. Since the end of the Medieval Ages, order, for better or worse, has been imposed by governments, culminating in the totalitarian governments of the twentieth and twenty-first centuries. They failed or will fail because failure is the inevitable outcome for order imposed by violence. The decentralization inherent in personal computing, cell phones, the internet, 3D printing, encryption, cryptocurrencies, drones, IEDs, alternative medicines, alternative media, alternative farming, widespread private ownership of firearms, secession movements, and a host of other innovations and features of modern life are straining centralized systems past their breaking points.

The coming age will be one of decentralization, dissolution, and chaos. Many political arrangements, possibly including the US as a single nation, will not survive. The rulers, commanders, controllers, police statists, and everyone else bent on forcing others to comply with their dictates will resist to the bitter end. That there will be chaos is perhaps the only clear prediction that can be made about the future; the contours of chaos are notoriously hard to predict.

In accordance with Title 17 U.S.C. Section 107 of the Copyright Act 1976 this material is distributed without profit for research and educational purposes.

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