How States Can Protect Themselves From Financial Collapse
April 17, 2012 by Brandon Smith
The States of America are, truly, children of the Constitution. The legal framework that is the foundation of State sovereignty and internal administration was unprecedented when the United States won its independence. States were designed to decentralize and keep in check the power of the Federal government. They were meant to be the guardians at the gate, the barrier to the formation of oligarchy or outright dictatorship. This, of course, has changed drastically.
The battle over centralized versus decentralized authority and economy has been going on for quite some time. It is undeniably critical in our current climate of crisis, under a government that is bankrupt in every sense and a currency that is on the verge of calamity.
A vast shift in State independence was definitely caused by the reformations of the Civil War, but the progressive erasure of financial sovereignty in the States was really placed on the fast track after the Federal Reserve Act of 1913. That’s when the enforcement of new taxes fueled the establishment machine, including Social Security (from which the government constantly steals). Also in 1913, the income tax (which does not pay for any State infrastructure) came to life. By the end of that year, the Federal government could borrow fiat money created at will by the private central bank from thin air and it could tax the populace to feed the Federal Reserve in a cannibalistic circle of doom. This dynamic has grown our government to a size so massive that it is now forced to monetize its own debt just to survive.
Setting aside the inevitable collapse of the dollar and our economic system as we know it, a considerable goal has been achieved by centralists: With so much free money at the disposal of the Feds, they could wipe away the last vestiges of State sovereignty by simply buying State compliance. Through agencies like the Environmental Protection Agency; Food and Drug Administration; Bureau of Alcohol, Tobacco, Firearms and Explosives; etc., 10th Amendment checks and balances are trampled constantly without any regard for local laws or the will of the people. State governments and citizens would be in a far better position to deny such agency intrusions if they didn’t gobble every dollar that Washington, D.C., waves in their faces. In our era of tenuous fiscal stopgaps and imploding economies, the need for Americans, and especially States, to decouple from the Federal government and the mainstream system is more important than ever.
The following is a step-by-step method that States could use to accomplish the task of insulation from financial crisis and Federal control. Much of it hinges on a willingness by State governments to actually pursue independence, which might seem like a naïve dream to most of us. But in the wake of a major breakdown and the fall of the greenback, I believe many States will seek a way to weather the storm, if only out of a desire to survive. This includes walking away from their ties to Washington:
Step 1: Stop Accepting Federal Funding
For States already drowning in debt, this is probably an incomprehensible idea (there is no financial escape for California or Illinois that I can see). But for those States that have some responsibility and lower debt levels, Federal funding is not necessary. Much of the money the Federal government collects comes through State cooperation. The money is then handed back to the States through various avenues with strings attached. The rest of the capital Washington pumps into States is attained through printing without even the pretense of originating at the State level. The fiat money carries the high price of dollar devaluation and the hidden tax of inflation. The fact is States are not required by law (yet) to accept Federal funds. As long as States do so anyway, they expose themselves to Federal influence. As the dollar goes, so shall all those tied to it. States should take a lesson from Asian bloc nations like China or Japan and begin distancing themselves as far away from U.S. currency and debt as possible. In the long term, those that do will endure. Those that don’t will be dragged under the water along with the sinking ship.
Step 2: Enforce 10th Amendment Nullification
Once States are no longer beholden to Federal monies, they have more leeway to obstruct intrusions by alphabet agencies and to deny dangerous legislative programs (like Obamacare) that put them at financial risk. Nullification takes many forms, and numerous issues have the potential to become vehicles for the assertion of 10th Amendment rights. One very fascinating political method was devised by Idaho State Representative Phil Hart (R-Hayden), who used the power to declare emergencies by States themselves to devise a piece of legislation which would allow Idaho to trump Federal and EPA restriction of the local wolf problem. As the bill flew through the Legislature, interestingly, Congress delisted the wolf as an endangered species. Obviously, the Federal government did not want the issue to become a success for 10th Amendment rights, so it defused the situation by pulling back the EPA. Essentially, the Federal government blinked.
This strategy could be used for multiple State conflicts with the Federal government to effectively nullify their ability to lord over and interfere with specific needs of the people of a particular region. The future economic prosperity of the various States will depend greatly on their ability to take decisive fiscal action without constantly having to ask permission from the Feds.
Step 3: Set Up A State Bank
There is certainly some controversy over the idea of a State bank. In the end, any institution can be twisted for devious ends, and a State bank is no different. However, this system has worked well in North Dakota, where a State bank has been in operation for more than 90 years. Some from the “left” (whatever that means anymore) often attempt to use the institution as an example of “socialist banking,” which is not exactly accurate and gives the strategy a bad name. Yes, the bank is State-owned, but its purpose is to invest in and encourage free market enterprise within the State, not create a State-owned and -operated economy.
A State bank would be especially effective in a resource-rich area, where a State government can invest in local projects run by local companies that employ local people. This is the opposite of what we see so often today, where international corporate entities are given monopoly over resource development within a State. They siphon away most of the profits and jobs from the region, while the Federal government thwarts the growth of competing small businesses through concerted taxation and regulation. This goes on because States often do not feel they have the funding capability to encourage local business efforts. The problem diminishes drastically with a State bank, if done correctly, honestly and with oversight from the citizenry.
Step 4: Resource Development
As mentioned above, resource-rich States will have a noticeable advantage in the event of a primary system collapse. As the dollar continues to tumble and inflation rises, trade methods will eventually revert to raw goods and materials. This has taken place in nearly every recorded modern economic crisis. It was especially prevalent during Weimar Germany, when debtor nations began refusing the hyperinflated deutschemark as payment and demanded natural resources from the Germans instead. States with heavy resources will be in a perfect position to decouple from the failing establishment and build their own systems (which is probably a main motivation behind Obama’s National Defense Resources Preparedness Executive Order).
Step 5: Adopt Alternative Currencies
There is a lot of debate over the “legality” of a State coining its own money, so I recommend cutting out the debate entirely and merely adopting metals like silver, gold and copper as recognized methods of payment within the State. Many State governments are considering measures for alternative currencies. Some States, like Utah, have passed bills on precious metals. The problem is that most of these bills do not go far enough. States are going to have to complete the economic chain by paying out precious metals into the system and encouraging businesses to do likewise. It’s not enough for residents to be allowed to pay in.
States that rely on the dollar as their only trade mechanism will fail. States that decentralize currencies by adding other options into the mix will survive. It’s really that simple.
Step 6: Encourage Localized Markets
States will be only as healthy economically as their individual communities allow. Small communities can become independent trade networks on their own, but the right State help and encouragement would make the process move along much faster. The more self-reliant towns and counties become, the more insulated they become from wide-spectrum disaster. During any national breakdown, redundancy is the key. It will mean the difference between a total nightmare scenario and large-scale tragedy, or a minimal system shock followed by rapid rebuilding. Barter must be reintroduced to the American lifestyle, and States have the ability to help nurture network growth. Trade skills and micro-industries can easily be promoted through State programs.
This is the kind of constructive government involvement that is needed. It seeks to open doors and then gets out of the way, rather than closing doors and grasping for more control. Unfortunately, policies like this are not possible under the current Federal construct, but they still could be possible within the States.
In the event that your State government is not receptive to the idea of independent economy, not all is lost. Each of the steps above can be accomplished in reverse at the neighborhood, town and county level. Over a period of time and with relentless drive, solid alternative networks will spread, link and take over a State regardless of what the local government approves of. The secret is this: If you provide for yourself and others what the mainstream system will not, eventually, it will either have to conform to your logic because it works, or it will try to stop you with violence and expose its inherent tyranny, building greater resistance. In either case, you win.