What would it take to overthrow the U.S. government? The question may seem academic, but all governments fail. The U.S. government will too, for the usual reasons: its ever increasing size, rapacity, and attempts to control all aspects of life; the corresponding shrinkage of its constituents’ liberty; imperial overreach; welfare-state bread and circuses; debt; spreading poverty; crony capitalism, rampant corruption; widening income disparities, and oligarchic arrogance. As clearly odious as the government is, shouldn’t we do all we can to move it towards its inevitable rendezvous with failure?
Set aside the notion that the salvation of this creaky and corrupt monstrosity might come from the monstrosity itself. The recently passed Cromnibus (Continuing Resolution + omnibus—further corrosion of the once stately and beautiful English language into a leprous gargoyle) should lay to final rest the pitiably naive dream of Republican partisans that their “revolutionary” November victory would work anything revolutionary in Washington, or any kind of change at all. The first rule for honest people in our nation’s capital (if there are any): run like hell from anything hailed as a “bipartisan success,” and double-fast when The Wall Street Journal is doing the hailing, in a front page headline no less. The Republicans gave the Democrats a year’s more spending on their beloved, bloated beast, and did not mount a funding challenge to either Obama’s immigration policy (that’s supposed to come in two months) or Obamacare.
Hidden within the 1600-plus pages bill that nobody but the lobbyists read were the usual pork, earmarks, subsidies, phony cuts (in Washington, if a program is scheduled to grow 10 percent, and that is reduced to 8 percent, they call it a cut), and a Christmas present for the banks: loosening a requirement that they transfer some of their trading activities to affiliates not covered by federal deposit insurance. Naturally the Republicans, swearing fealty to global interventionism and never-ending war, bumped up the military budget—shiny new toys for the generals and admirals and a jobs program for defense contractors back home. With apologies to Ambrose Bierce, here’s a Devil’s Dictionary definition of “bipartisanship”: spending for all!
So forget revolution arising from the current political system. And don’t think that—taking a page from the first American revolution—rebellion will be led by wealthy and successful merchants and lawyers. Those original revolutionaries pledged their lives, fortunes, and sacred honor; current plutocrats are terrified by a declining share price, pressure from a regulatory agency, a class action lawsuit, or unfavorable press. Many of them have a big, crony capitalistic stake in government; they’re not going to be in the vanguard to overthrow it.
Some, mostly on the left, look to a revolution that foments up from the oppressed and downtrodden. The welfare state has taken the sting out of the good old-fashioned economic oppression that was to fuel Karl Marx’s revolutions. Nowadays, beneficiaries would only revolt if the checks stopped. The focus has shifted to “white privilege” and “minority oppression.”
The left had hopes that recent killings by white police officers of unarmed blacks would spark a nationwide outbreak of demonstrations and upheaval, but the unrest has fallen well short of that. The problem with such upheaval, from a revolutionary point of view, is that it usually degenerates into mindless violence, looting, and vandalism, the perpetrators destroying their own neighborhoods and businesses. An effective revolution must have planning and organization absent in the usual race riot, and a goal more transcendent than the acquisition of a free big screen TV.
Looking the other direction on the political spectrum, one finds planning and organization among the groups that foresee continuing deterioration and either the imposition of a police state or degeneration into chaos. While some of these groups may be planning revolution, for the most part strategies are defensive and reactive. If a police state is the way the US goes, the admirably defiant sentiment is: not without a fight, they’ll pry my cold, lifeless fingers from my firearm! Potential chaos, on the other hand, has prompted extensive preparatory measures: stockpiling food, precious metals, medical supplies, and weapons; acquisition of autonomous power-generation capabilities; survival and guerrilla warfare training, and building small communities of the like-minded. Many of these efforts are well-coordinated, led by former members of the military. They scare the hell out of the US government and much of the intelligentsia.
Unfortunately, a police state would have a massive advantage in firepower and would not hesitate to use tyrannical tactics, including taking full advantage of already existing surveillance capabilities. Chaos would be less problematic for the cause of freedom. Secessionist enclaves could be carved out and defended by people committed to the founding principles of liberty and limited government, although there would be more devil in the details of working out actual arrangements than many envision. (It took the founders over a year to devise the Constitution and get it ratified.)
The “revolutionary” undercurrent flowing through American culture—both fictional literature and drama and nonfictional books and internet articles—focuses on dystopian and apocalyptic scenarios characterized by conflict and violence. However, there are millions of people who work in the private sector, pay their bills, mortgages, and taxes, and buy goods and services that power the U.S. economy and make it the world’s largest export market as well. While they may no longer be Richard Nixon’s “Silent Majority,” they are still the economic backbone of this country. The undercurrent ignores those millions of people and their economic leverage, which, if properly applied, could hit our government at its weakest point: its dependence on its citizenry and the capital markets for funding.
The government has no autonomous ability to pay for itself, and almost everything it does runs at a loss. Magnifying that weakness: it has over $18 trillion in debt and over $115 trillion in unfunded liabilities. Those unfunded liabilities represent only the domestic, welfare-state commitments it will never be able to fulfill, and do not include the extensive foreign commitments made pursuant to its policy of global intervention.
It is a matter of some urgency that the payers apply their leverage while they still have it. Simply put, they need to bankrupt the government before the government bankrupts them. On present course it will go broke, perhaps sooner than most people expect. In its desperate rapacity, it will seize every stream of income and asset it can get its kleptocratic hands on. It is incumbent on those with streams of income and assets to launch a preemptive strike or lose everything, which would surely usher in that dystopian apocalypse.
For years government economic policy has promoted borrowing and discouraged saving. The first step of a well-coordinated, long-term effort would be to give the government what it wants. Everyone to whom the government and its banking arm (Or is it the banks and their government arm? See “Bankers Nirvana,” SLL, 11/8/14) will extend credit should borrow money, as much as they can. They should also gradually (so as not to precipitate a financial crash too early) withdraw their “evil” savings from banks, money market and mutual funds, and other financial intermediaries. The money borrowed and withdrawn will help fund preparation for what’s to come.
Banks are highly leveraged and operate on thin margins. Any concerted refusal for an extended period of time by millions of customers to pay their debts, including mortgages, would force them to start writing down the value of those debts, their assets. For most banks those debts are their primary asset, and they are a multiple of their equity. A typical bank that had to completely write off 20 percent of its loans, or write down all of its loans by 20 percent, would see its equity wiped out (if loans are five times equity, a conservative assumption).
For those with compunctions about not paying their debts, recall how much compunction the banks and the government had about reaching into taxpayer pockets when banks’ speculative, highly leveraged business models fell apart in 2008. How much compunction have they demonstrated since as the central bank has promulgated a microscopic rate regime to artificially lower the banks’ cost of funding, while eliminating the return on honest savings? The banking system is just as speculative and leveraged now as it was in 2008, and even more concentrated. Global debt is over 40 percent higher.
When the next crisis arrives, regardless of Dodd-Frank and whether or not some bank activities are or are not “covered” by FDIC insurance, the government will attempt to bail out the banks. Don’t think it will be any different this inevitable next time; they’ll reach into taxpayer pockets once again, because that will be the only money available. The government has much more debt now, as does the Fed, which makes a big increase in debt problematic, and the Fed is already at the zero bound of administered interest rates, which gives it no room to configure monetary policy for the banks’ benefit.
Count on a new wrinkle: “bail ins.” When people deposit money in a bank, they become unsecured creditors of the bank, and that is all. If the bank goes bust, they stand in line with the bank’s other unsecured creditors. There is the FDIC’s deposit insurance, but if enough banks go bust, the FDIC fund will too. Cyprus was the template for bail ins, which is the euphemism for depositor haircuts (or, more correctly, scalps), which is the euphemism for depositors getting stuck with banks’ losses. After Cyprus, bail ins have become an acceptable option, quietly mentioned in banking, central banking, and government circles here and in Europe. No amount of money printing and government debt will save the financial system when banks fail en masse, and depositors will lose some or all of their deposits, whether it’s called a bail in or by its real name—theft.
So the choice is quite simple: screw or be screwed…again. The best defense is a strong offense, but to go on the offensive requires collective action among those who pay the government’s bills. Solitary non-payers face a credit cut-off and asset repossession. Millions of non-payers are a movement, and it would take years to jump through all the legal hoops, especially foreclosure proceedings, necessary to bring them to account. Some banks are still working through the last financial crisis.
While certainly disruptive, this movement, to reach its full effectiveness, would also have to involve a tax protest. Because of tax withholding, that may be more problematic. Major corporations are not going to stop sending in what they’ve withheld from employees’ paychecks. However, a substantial number of individuals refusing to pay estimated taxes and smaller businesspeople (who employ half the nation’s workforce) refusing to collect withholding would be enough for the government, and more importantly, capital markets, to take notice. Anything that called into doubt the capital markets’ bedrock assumption that U.S. debt was backed by the government’s priority claim on the nation’s private-sector production would send interest rates substantially higher, increasing the government’s debt burden.
What are the chances of getting millions of Americans to, as Lady Macbeth put it, screw their courage to the sticking place? Probably small. However, if one accepts the premise that the government-banking complex’s current course will inevitably render it insolvent, leading to a voracious and indiscriminate expropriation of wealth and savings, then this plan is strategically optimal. It relies on the remaining and still substantial American salt-of-the-earth—productive individuals in the private sector—while excluding the quisling wealthy, crony capitalists, welfare state teat-suckers, and random degenerates. Utilizing the salt’s potent leverage—its economic power—this plan seizes the initiative before the inevitable financial crises eliminates that leverage. It strikes a sharp blow against the complex’s weakest point—its accumulated debt and funding vulnerability—a blow against which it has little effective defense.
Execution of the plan will not prevent the dystopian apocalypse. The plan will hasten that outcome. However, preparations for it will in part be funded with the money that has been withdrawn from the financial system or has been borrowed but not repaid. (The paper claims thus extracted should be converted to real money—precious metals—during the preparation phase, before the government and banks completely devalue their own paper.) Note the irony: the government-banking complex will be providing funds for a revolt against it. By denying the complex funds, this plan shifts the odds between the post-collapse police state or chaotic anarchy outcomes in favor of the latter. Police states are expensive to maintain and retard the economic activity on which they are parasitically dependent. Historically, they have had to beg, borrow, and steal to maintain themselves, and the plan would exacerbate the financial difficulties for an American police state.
There are still millions of fundamentally decent, hard-working, tax-paying Americans who have watched as a deterioration that cannot be hidden has unfolded. Pick a proxy—national debt, the poverty rate, people on food stamps, growth of the Federal Reserve’s balance sheet, the savings rate—they all portend impending disaster. There is widespread revulsion, frustration, and foreboding, and a mounting sense of helplessness: what can we do? Voting, which theoretically gives the electorate power to change things, has changed nothing. The two parties alternate doling out the spoils expropriated by a corrupt government.
Nothing in the world can stop the arrival of the day of reckoning—actions have consequences that debt and fiat money can perhaps forestall, but never prevent. The longer they “work” the worse the eventual consequences. On present course the government will go bankrupt. The one option for those of us who have provided so much of its ill-gotten and ill-spent loot—and received so little in return—is to seize the initiative, strike at its weakest point, extract a small percentage of what has been taken, hasten the inevitable crash, and then rebuild America into the great nation it once was.
It will be difficult, perhaps impossible, to persuade sufficient numbers to take that initiative, but in passivity lies ruin. By the time that ruin is obvious to all, it will be far too late. This plan has been sketched in broad strokes and will benefit from collaborative discussion and refinement from a variety of sources. It is an overall strategy and many details must be filled in. However, the only defense against what is surely to come is a strong offense, before our capacity to launch an offensive is stolen from us.
A REVOLUTIONARY NOVEL
AMAZON
KINDLE
NOOK
