Since World War I, the Western world has been dominated by a soft money economic order. The powers took to inflationary finance because it was necessary to fund the wars against one another.

Since World War II, direct interstate competition paused, and the current consensus is that it has stopped indefinitely.

My secret crackpot theory is that the mutually assured destruction is not actually a permanent condition, and that technological counter-measures to MIRV warheads have either already been developed or will be eventually developed, leading to a return to direct interstate warfare.

I base my crackpot, tough-to-prove theory on some of the comments by Samuel Cohen, inventor of the neutron bomb, on how he’d develop an alternative to the ‘Star Wars’ theory of anti ballistic missile defense. Essentially, rather than trying to zap ICBMs shortly after launch with a space-based weapon, you just launch a small neutron warhead at it, and use the air burst to neutralize anything coming at you. Such a technology would render the MAD theory, upon which all post-modern international relations is based, mostly moot. If you can neutralize a lot of warheads before they hit you, they have to use more conventional means to deter you instead.

So, anyway, to return to the ostensible topic of the post, the ability to use inflationary monetary policy to bleed your tax base beyond what would otherwise be the limit has stopped being a competitive advantage. It used to be, especially during a time in which all the European powers had turned to centralized political control, but is less so now that less centralized alternatives are emerging.

For a state competing with the existing superpowers to succeed, it would just need to develop a working anti-ballistic missile defense technology, either along the lines already theorized (which is technically not challenging compared to the dominant, politically correct theory), or along some other lines that have not yet been conceived of, like a Star Trek deflector shield. Whatever that is is what it would take to return the state system to a healthier era of interstate competition.

The debate between hard money and soft money systems is one of trade-offs. As a long time hard-money advocate, it’s difficult for me to deign to provide some positive arguments for a soft-money system.

The reasoning chain goes as follows:

The benefit of the soft-money system is that it allows the central state to mobilize for total war using mass armies. Just about all of the alternative economic arguments for soft money systems are facetious. There is no multiplier effect, ‘deflation’ is not damaging, and Keynes was just a glib pedophile with no special insights into economics.

Technology, even considering a possible neutralization of intercontinental nuclear weapons, has rendered mass armies obsolete.

Because the mass army is obsolete, the monetary system that enables it is also obsolete.

The soft money system, in which money & credit can be manufactured in infinite amounts for reasons of state, disrupts private property on a continuous basis. It re-orders society on the basis of proximity to soft-money banking systems, rather than on more durable measures of service to global markets.

This makes those people close to the source of authority very happy and very rich, and they are loath to give up their privileges. Those farther from that source of privilege are likely to want to kill or otherwise compete with the people close to the enormous soft-money nozzles, forever spewing new emissions of money and credit towards the primary dealers and their special friends.

Emerging hard money systems, whether gold or Bitcoin, represent existential threats to the soft money system, which has also lost its military advantage. The military advantage will continue to pass to decentralized professional military companies, as existed before the emergence of the state system in the 17th century. The loss of the military advantage tends to come before the loss of the monetary advantage, but does not become realized until major military defeat ensues.

The soft money system co-exists with monopoly systems on the legal use of force. Hard money systems coincide with breakdowns of those monopolies. It’s no coincidence that depreciation and Empire are so often coincident: when there is a sole, central government, even the wisest leaders have trouble maintaining a hard money regime.

On an economic basis, hard money systems out-compete the alternative, just because it suffers from fewer calculation problems. Because soft money systems rest on a monetary unit that is flexible, it disadvantages all economic entities that use it, because it introduces systematic inaccuracies into their accounting systems.

Soft money systems can compete on the military level, but only temporarily, based on a strong society created on a hard money basis. When the soft money system destroys the underlying society over time, the military advantage dissipates, because there is no more strong society upon which it can draw from.

Trustless monetary regimes are likely to dominate the international scene following the retraction of the American empire at the physical, moral, and economic levels. This will happen faster than most responsible people who want to present as reasonable are likely to want to represent. It’s the difference between Yahoo circa 1998 and Google circa 2005.

When a power has a crippling vulnerability, other powers notice that vulnerability, and exploit it at the opportune moment. The vulnerability does not need to be public knowledge for it to be exploited in a devastating way.

The future will be more competitive than the past, as a correction to the overly cooperative present.

Universities do a spectacular job of convincing prospective students go to thousands and even hundreds of thousands of dollars into debt to gain liberal arts degrees which are mostly an instruction in post-modern Marxism.

After graduation, many of these students have a hard time finding work that can pay back their loans on a sensible schedule. This problem is more acutely felt at the middle-tier schools, but it affects elite graduates as well, more so than many people would otherwise tell you. An elite degree alone will not get you a good job.

Social justice fanatics may be fanatical because they are justifying to themselves the amount of money and time that they spent on getting a Marxist degree that sets them at odds with their surrounding society. They feel that, unless they join the class struggle, their expenditure has been wasted.

This behavior tends to present itself frequently in victims of scams: the more that they have spent on getting into the scam, the more fervently that they want to believe in it.

The American universities have hoodwinked entire generations of young Americans who have diminished life opportunities due to the same bad policies advocated by the professors at those institutions. It’s more difficult for people to admit that they were fooled than it is for them to double down on the narratives promoted by the people who betrayed them.

This is especially the case for radical feminists, who in many cases have destroyed their chances for having a happy family life — they squeal the loudest because they have the most to lose from any reversal in their gains. At a time when the happy infinite credit regime is loath to give out home and business loans to anyone with a heartbeat, it’s mostly happy to extend credit in enormous amounts to students with no qualifications.

The woman with the master’s degree in gender studies knows how much it cost her to get that degree — more than a dozen diamond bracelets from Tiffany’s — and she has to justify to herself that it was as valuable as the time, money, and energy that she or her family sacrificed to get that certification and the indoctrination that came with it.

Most of this money goes into the pockets of administration bureaucrats and into university endowments, which are essentially hedge funds with more favorable tax treatment.

The passion that social justice warriors show for post-modern Marxism is partly because our system has rigged a bizarrely high valuation for advanced degrees in degree programs that would have been seen as politically correct in the Marxist-Leninist universities of the old USSR. They believe that it was valuable because they saw the high price tag, and noticed that it was the middle-class-responsible thing to do to trundle off to college to learn Marxist dialectics.

This is a social distortion of the kind that is common to all paper money regimes, because the industries chosen for inflationary favor tend to bloat far beyond what they would be able to get to without the mass credit issuance, or the guarantee from the government that the face value of the loan will be repaid.

When the flow of money falters to the social justice training camps, so will the social justice warrioring. Ironically, the best way to destroy the American university system as it stands today would be to remove the government guarantees from student lending, permitting the loans to be discharged in bankruptcy. This would curtail the infinite bloat of tuition and put countless leftists out of work permanently.

John Paulson, a hedge fund manager that you might know from books like The Big Short, has been spending the last couple years promoting Puerto Rico to New York’s financial elite as a way of avoiding Federal taxes without dropping their American citizenship, thanks to a 2012 tax shelter law.

Business Week wrote a long article about it back in June, and various firms are promoting Puerto Rican real estate to entrepreneurs and investors as a way to both reduce their personal and corporate tax burden. The gist is that if you spend half of the year living in Puerto Rico, they don’t have to pay Federal taxes anymore, whereas they would need to if they were living in most other foreign countries while keeping their citizenship. US expats, unlike most other countries, are often double-taxed, although there are some minor loopholes that are more accessible for people earning below a certain amount.

The slogan ‘exit over voice’ is being implemented right now, and being used by some of the biggest names in finance. The funny thing is that it would not take a large number of people listening to Paulson to upset the fiscal boats of both the United States and various extremely left-wing American cities, which are entirely reliant on the very wealthy to handle their budgets. Paulson himself donated $100 million to the upkeep of Central Park — and it’s worth noting that, during the restoration of New York City, the renovations of the parks around the city was handled almost entirely by wealthy donors.  For comparison, Central Park’s annual budget is typically half of what Paulson gave to it.

One of the reasons why Paulson is pushing hard on the Puerto Rico point is that he has personally come into conflict with New York City’s Communist mayor, De Blasio. Whatever you think of Paulson, he’s almost certainly in the region of thousands of times more competent and intelligent than the mayor, and certainly more connected.

If there is a problem with the plan, probably the biggest one is simply the presence of Puerto Ricans, and the connection with the US government. On the other hand, from the government’s perspective, this sort of halfway measure can keep a lot of wealthy people who would otherwise expatriate to remain citizens.

This sort of initiative can do more damage to the size of the American government than 10,000 Ronald Reagans winning elections.