We present a schematic model for baryonic galactic halos and hot gas in the intergalactic medium of the Local Group. We follow the dynamics, chemical evolution, heat flow and gas flows of a hierarchy of scales: protogalactic clouds, galactic halos, and the Local Group. Within this hierarchy, the Galaxy is built via mergers of protogalactic fragments. Hot and cold gas components are distinguished, with star formation occurring in cold gas clouds, while supernovae and mergers convert cold gas into a hot intercloud medium. We find that early bursts of star formation lead to a large population of remnants (mostly white dwarfs), which would reside presently in the halo and contribute to the dark component observed in the microlensing experiments. The early starbursts and merging also produce hot, metal-rich gas which evaporates from the clouds and is eventually incorporated into the intergalactic medium. The model thus suggests that most microlensing objects could be white dwarfs ($m \sim 0.5 \msol$), which comprise a significant fraction of the halo mass. Further, the intergalactic medium of the local group could have a component of metal-rich hot gas, similar to although less than that observed in larger clusters. We discuss several known constraints on such a scenario, and show that while all are satisfied with present data, observational signatures are within reach which could test the model.