Fragmenting Countries, Part 1: Catalonia Is Just The Beginning
Politics / European Union Oct 31, 2017 - 11:52 AM GMTBy: John_Rubino
Picture a life where you do most of your shopping through Amazon.com and the local farmers’ market, most of your communicating through Facebook and Instagram, much of your travel via Uber, and much of your saving and transacting with bitcoin, gold and silver.
Do you really need an immense, distant, and rapacious central government? Maybe not. Perhaps your region or ethnic group would be better off forming its own independent country.
This question is being asked — and answered — in a growing number of places where distinct cultures and ethnic groups within larger nations now see their government as more burden than benefit. The result: Secession movements are moving from the fringe to mainstream.
In just the past couple of weeks, Iraqi Kurdistan and Spain’s Catalonia declared their independence. Neither succeeded, but the fact that they felt free to try illustrates how times have changed.
This is fascinating on a lot of levels, but why discuss it on a gloom-and-doom finance blog? Because secession is about the messiest event a country can experience short of civil war. And few things are more financially disruptive for an already over-leveraged society than potential dissolution.
Today’s fiat currencies depend for their value on the belief that the governments managing them are coherent and competent. Let a major region break away and plunge a debtor country into political/civil chaos and the markets will abandon its currency in a heartbeat.
The Scottish Government has also sent a message of support, saying that Catalonia “must have” the ability to determine their own future.
Scotland, of course, is itself considering secession from the UK, which recently voted to leave the European Union.
The political class, meanwhile, is trying to figure out where it went wrong. See the New York Times’ recent What Is a Nation in the 21st Century?
If the combination of long-term financial mismanagement and sudden technological change really has made large, multi-cultural nations dispensable, then some of them are going to fragment. This in turn will contribute to the failure of the fiat currency/fractional reserve banking system that’s ruining global finance. Poetic justice for sure, but of an extremely messy kind.
By John Rubino
Copyright 2017 © John Rubino - All Rights Reserved
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