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How States/Empires Collapse in Four Easy Steps

There is a grand, majestic tragedy in the inevitable collapse of once-thriving states and empires: it all seemed so permanent at its peak, so godlike in its power, and then slowly but surely, too many grandiose, unrealistic promises were made to too many elites and constituencies, and then as growth decays to stagnation, the only way to maintain the status quo is to appear to meet all the promises by creating money out of thin air, i.e. debauching the currency.

This political expediency works most wonderfully for a time: people don't realize the silver content of their coinage is being cut to near-zero, or there's nothing holding up the value of their currency but trickery and vague allusions to past glory.

Trust in the state/empire's currency suddenly collapses in a phase shift: all seems well until the moment the avalanche sweeps it all away.

It's a simple progression: during the permanent-growth-is-our-birthright phase of self-reinforcing virtuous cycles, when everything is expanding rapidly--credit, resources, jobs, capital, profits, state tax revenues, etc.--promises are made to elites and constituencies that look easy to meet as the economy is projected to expand rapidly essentially forever.

But virtuous cycles decay to unvirtuous cycles of bureaucratic sclerosis and corruption, systemic friction, declining productivity and resource depletion, and the rise of parasitic elites who contribute nothing but skim plenty saps the surplus available for productive reinvestment.

Every elite under pressure to satisfy the demands of those who were over-promised in the good times reverts to the same two financial fixes: debt and currency debasement. First the state borrows and borrows and borrows, all under the belief that "the government can't go broke because it issues its own money."

Any rationalization will do in the phase of stagnation, but the reality is it's all political expediency: lacking the resources to pay all the promises, the state borrows from the future to maintain the illusion of stability.

Alas, the future arrives, and the interest on the debt begins stripmining tax revenues needed to fund the essential responsibilities of the state/empire. At this point, the ruling elites pursue two equally fatal fixes: they raise taxes on the remaining productive class while the parastic elites pay little or nothing, and they devalue the currency so they can continue to pay the promised sums with less actual wealth.

The productive class either escapes to other climes, goes underground or opts out. As tax revenues fall, the ruling elites turn in desperation to debauching the state currency, in effect issuing 10 units of currency for every 1 unit of actual purchasing power.

This maintains the fiction that the promises are being met, but the purchasing power of the currency erodes so drastically that the parasitic elites and the constituencies eventually catch on and demand a full payment of what was promised back in good times.

This demand cannot be met, and so society decays into warring elites and competing constituencies. The only real solution--to make severe sacrifices in order to live within the modest means available and jettison the parasitic elites--is politically and culturally unpalatable to a citizenry steeped in a belief that good times should be forever and it's the fault of the ruling party of the moment rather than a failure of the entire system.

Then the "free" distribution of bread and circuses ramps up and the silver shipped to phantom legions defending the borders ends up in the quartermasters' pockets. The delusional state of the ruling elite infects the general populace, and magical thinking abounds, as do vague claims to future greatness based on the mythologies of previous eras that had earned prosperity with sacrifice and thrift.

The entire global status quo is in the stagnation phase, and the promises that cannot be met are looming large. And so the politically expedient ruling elites turn to debt and financial trickery to stave off the reckoning. This works for a few years but it guarantees the coming collapse.