Hobo with a Shotgun/WMG

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The entire city was driven insane by an Eldritch Abomination

The tentacles that we see trying to escape from The Plague's basement are Cthulhu's tentacles, and since he lives near the town where the movie takes place, he drove all the residents there insane. This would explain Hope Town's ludicrous, Up to Eleven amounts of depravity.

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