Friday, October 17, 2008

Government's Last Stand: Force Always Eats Itself

Finance is a final constraint upon a government. When it can no longer finance itself, it fails. When its tax collections fail, it fails. When its printing press no longer seizes enough real capital to sustain the government, it turns to brute force seizure. This brings its political power into the open. As greater awareness of the seizures spreads, capital flees. Capital flees taxes and seizures of all kinds. It goes into hiding domestically. It runs off to foreign havens. This has been going on for many years. It will accelerate. The costs to the government of seizing capital will rise sharply, and this will constrain government.

With capital flight, the government’s theft runs into diminishing returns. The cost of enforcing open and direct seizures rises. Furthermore, lenders balk. Interest rates on government debt rise. At the same time, tax collections become more difficult. The government fails to manage the capital it has seized, and that too diminishes its means of finance. The entire economy slows down, harming tax revenues. Underground markets proliferate, undercutting tax revenues.

The principal that capital abhors a negative return (or that it demands a positive return) overcomes the power of government. Government fails. And this is a blessing. If the black hole of government proves too powerful for the concerted action of its citizens to control it, then they will control it by their own personal and individual actions. They will remove their capital from government control.

Government has lived by capital, and it will die by capital.
Denial will reign for a short while as that god also dies.


Full essay.