Source: Bitcoin Magazine; Compiled by: Deng Tong, Golden Finance
In the United States, the twentieth century began with the centralization of power, which replaced key elements of the American tradition of freedom with a new interpretation of federal power. Participants in the 1910 Jekyll Island Conference drafted the Federal Reserve Act, which was passed into law in 1913, establishing the Federal Reserve, the central bank of the United States. The Fed has a dual mission of keeping inflation low and employment high, and its main tools are controlling the money supply and controlling the price of money through the federal funds rate. Soon after, the Fed was tested in 1929 when an unprecedented financial crisis evolved into the economic crisis we know as the Great Depression. The Fed neither prevented nor alleviated these two crises, but many economists and political leaders concluded that the state needed to exert more control over American economic life. The United States’ subsequent authoritarian turn mirrored the trajectory of other countries: In 1933, President Franklin Delano Roosevelt (FDR) issued Executive Order 6102, requiring all people living in the United States to turn over their gold to the U.S. Treasury and suspending the convertibility of dollars into gold. The asset confiscation measures he implemented mirrored those implemented by other authoritarian leaders of the same period, including Winston Churchill, Joseph Stalin, Benito Mussolini, and Adolf Hitler.
During World War I and World War II, America’s allies used gold to purchase American-made weapons. This allowed the United States to amass the world’s largest gold reserves. Towards the end of World War II, the Allies met at Bretton Woods, New Hampshire, to determine the framework of the postwar international monetary order. They decided to establish the U.S. dollar (once again convertible into gold) as the global reserve currency. The same conference also led to the creation of the International Monetary Fund and the World Bank, two multinational lending institutions whose ostensible mission was to promote and balance trade between nations while also fostering international development, but whose drawbacks included entrapping dozens of poor countries in an inescapable web of debt slavery.
Meanwhile, in the United States, the postwar military-industrial complex was born, ensuring both the normalization of wartime postures in peacetime and arms sales to allies and other countries to boost GDP. The normalization of war, a core pillar of America’s anti-communist foreign policy—which began in Korea and continued in Vietnam, Laos, Lebanon, Cambodia, Grenada, Libya, Panama, and more, not to mention the countless covert operations and proxy wars in between—had to be financed somehow. This necessity led the Nixon administration to suspend the convertibility of dollars into gold in 1971 and to reach an informal agreement with the Saudi Arabian government a few years later to denominate oil purchases in dollars and pump those dollars back into the U.S. economy. This petrodollar agreement, while having the hallmarks of a treaty, was struck entirely in secret by the executive branch, in part to circumvent the constitutional requirement that all treaties to which the United States enters must be ratified by Congress.
The petrodollar system itself is unravelling as the world’s major oil producers begin pricing their oil in other currencies. This is the predictable international reaction to US foreign policy since the end of the Cold War, which has insisted on the United States maintaining unipolar dominance in international trade and military operations. In particular, the terrorist attacks of September 11, 2001, became the pretext for the United States to declare an indefinite war on terror, spend trillions of dollars on foreign wars, remilitarize or divide countries that would otherwise be moving towards greater stability, and, most importantly, formally militarize the US homeland through the creation of a new military command (US Northern Command) and a new executive department (Department of Homeland Security).
The militarization of the homeland – something that would have been extremely unacceptable in the eyes of the US founders – means strangling the last shreds of citizens’ privacy rights by imposing anti-money laundering/know your customer (AML/KYC) regulations on everything in the name of fighting terrorism. The roots of this development can be traced back to the 1970s, long before the war on terror. Indeed, the 1970s can be seen as the decade in which the banker revolution came of age and the American experiment in liberty truly unravelled. The 1970s began with the passage of the Bank Secrecy Act by the US Congress. The act required US financial institutions to keep records of all financial transactions that were "of high utility in criminal, tax and regulatory investigations or proceedings" (as interpreted by the US Treasury) and to share those records with law enforcement agencies upon request. Likewise, financial institutions were required to report any transfer of funds in excess of $5,000 into or out of the US. The Treasury subsequently issued a rule under the act requiring reporting of all domestic transactions in excess of $10,000. This reporting threshold remains unchanged today, despite the fact that, even by conservative estimates, the dollar has lost nearly 90% of its purchasing power since 1970.
The Bank Secrecy Act was an unprecedented erosion of the Fourth Amendment's protection against warrantless searches and seizures. Despite challenges, the Supreme Court upheld the original ruling of the law in United States v. Miller (1976), establishing the third party doctrine: Americans have no reasonable expectation of constitutional protection for records held by third parties. This ruling surprised and angered some, which in turn prompted Congress to pass the Financial Privacy Act two years later (1978). However, the act provided 20 substantive exceptions to the right to financial privacy, which ultimately weakened privacy protections further. That same year, Congress also passed the Foreign Intelligence Surveillance Act (FISA), with the stated purpose of curbing illegal surveillance by federal intelligence and law enforcement agencies in the wake of the Nixon administration's abuses. However, FISA purported to achieve this goal by creating an illegal tribunal, the Foreign Intelligence Surveillance Court (FISC), a secret court that could issue classified warrants for almost any surveillance activity requested by the state.
The Bank Secrecy Act (1970), United States v. Miller (1976), the Right to Financial Privacy Act (1978), and the Foreign Intelligence Surveillance Act (1978) are the seeds of today’s sweeping system of U.S. government surveillance. These four pieces of legislation stifled American freedom long before personal computers or the Internet had any meaningful impact around the world, yet they have been used to justify the sweeping collection and sharing of financial transaction data (and communications data more broadly) that occurs through software platforms and digital networks, the nearly inescapable infrastructure of modern life. They also spawned at least eight additional federal laws that greatly expanded the scope of legal surveillance: the Money Laundering Control Act (1986); the Anti-Drug Abuse Act (1988); the Annunzio-Wiley Anti-Money Laundering Act (1992); the Money Laundering Suppression Act (1994); the Money Laundering and Financial Crimes Strategies Act (1998); the USA PATRIOT Act (2001); the Intelligence Reform and Terrorism Prevention Act (2004); and the Foreign Intelligence Surveillance Act Amendments Act (2008), including the infamous Section 702, which authorized the circumvention of even the Foreign Intelligence Surveillance Court with authorization from the Attorney General and the Director of National Intelligence. Finally, these laws and legal decisions provided the rationale for the creation of at least three new intelligence agencies charged with collecting and sharing data on global financial transactions: the Financial Action Task Force (1989), the Financial Crimes Enforcement Agency (1990), and the U.S. Treasury Department’s Office of Intelligence and Analysis (2004).
In short, within a generation, the U.S. banking system, already centralized by the early 20th century, was reduced to an extension of the nation’s police function. The revolving door between Wall Street, the Federal Reserve, and the Treasury—the career cycle in which elites rotate through these institutions—only accelerated the flywheel of collusion between those who make and enforce the law and those who control the money. This ensured that the machine, originally built by the bankers’ revolution and then propped up by the petrodollar system, continued to churn for the elites through informal coordination and official bailouts. Actions taken by nation states around the world after the 2008 financial crisis did not correct any of these wrongs. Bankers were bailed out in nearly every country, with exceptions like Iceland. They and many industries were bailed out again during the 2020 coronavirus pandemic. In the United States, these bailouts were approved, renewed, and funded through zero-debate omnibus bills supported by leaders from both parties.
But the 1970s did more than merge banks with the state and usher in the end of financial privacy; the decade also ushered in emergency rule, whereby the president of the United States declares a national emergency in order to appropriate powers prohibited by the Constitution. In 1976, Congress passed the National Emergencies Act (NEA), which formalized the process by which the president could declare emergencies. Although ostensibly intended to limit the president’s emergency powers, the act was procedurally precise and broad in scope, leading to a dramatic increase in the frequency with which presidents declared national emergencies. In 1979, President Jimmy Carter declared the first national emergency under the law—Executive Order 12170—to impose sanctions on Iran in the aftermath of the Iranian hostage crisis. To do this, he also invoked the International Emergency Economic Powers Act of 1977 (IEEPA), which authorizes the president to freeze the assets and block transactions of any entity outside the United States if he determines that the entity poses an "unusual and extraordinary threat."
This combination of two laws effectively gives the president of the United States unilateral power to prohibit and punish economic activity by anyone, anywhere in the world, simply by declaring a national emergency. Because dollar transactions are often conducted through U.S.-controlled financial networks, and the dollar remains the world's primary commercial unit of account and sovereign reserve currency, the National Economic Assessment Act and the International Economic Powers Act (U.S. domestic laws) have long been used to punish individuals and organizations operating outside of U.S. jurisdiction. As a result, the executive branch of the U.S. government—the president of the United States and the U.S. Treasury (the cabinet agency responsible for executing the president's orders on financial transactions)—has imposed an effective form of rule over much of the world.
Executive Order 12170 was the first time the United States has imposed sanctions on a foreign country through an executive order. Since then, executive orders have become a routine means for U.S. presidents to quickly impose sanctions, bypassing lengthy legislative processes. The International Emergency Economic Powers Act, which is always invoked in conjunction with the National Emergencies Act, has legitimized nearly seventy separate emergency declarations, with a total of more than fifteen thousand sanctions and counting. In addition, the United States has used its influence on the United Nations Security Council to pass a series of resolutions imposing multilateral sanctions on specific entities and their associated entities; member states are then obliged to implement these sanctions under Chapter VII of the United Nations Charter. UN sanctions are imposed without due process of law, and many targeted entities have never been charged or convicted of a crime. The ease with which sanctions are imposed and their popularity as a tool of punishment and coercion, with seemingly few negative consequences for American politicians, has contributed to the accelerated proliferation of sanctions. As of this writing, the United States has imposed sanctions on approximately one-third of the countries in the world. Enforcement of these sanctions has become so onerous that the Treasury Department is experiencing record staff turnover and an overwhelming caseload. Another revolving door has emerged: between the Treasury Department and private law, consulting, and lobbying firms, where former Treasury officials use their knowledge of the complex sanctions system and government connections to obtain better political and legal outcomes for their clients.
Perhaps most importantly, however, sanctions appear to have little political effect on the regimes they target. With few exceptions, authoritarian regimes remain in place, while sanctioned democracies tend to respond by increasing defense spending, further consolidating the power of existing regimes. The sheer number of countries subject to U.S. sanctions has prompted dozens to forge new geopolitical alliances and build alternative financial systems that can circumvent the U.S.-controlled banking system altogether. However, the consequences of sanctions have proven to be routine impoverishment, or even economic collapse, that will affect the people of sanctioned countries. This will undoubtedly turn the hearts and minds of the sanctioned populations against the United States and breed resentment and hostility for decades. Even so-called “smart sanctions” that target specific industries or entities are often politically ineffective; their limited scope and weak incentives for those in power do not generate enough pressure to force them to achieve the desired policy changes or regime change. Moreover, the actual implementation of these sanctions often has a dual impact on the target countries: travel bans and asset freezes can be relatively minor inconveniences for powerful actors who plan well in advance, while arms embargoes and bans on the export of goods to the target countries can cause greater collateral damage than they intend. This obviously calls into question the wisdom of such sanctions.
There is an anomaly in the consolidation of bank-state power since the 1970s: Most of the legislation described above was enacted with the ostensible public goal of limiting the power of seemingly unaccountable actors. The Bank Secrecy Act was designed to limit the power of banks. The National Emergencies Act was designed to limit the power of the president. The Foreign Intelligence Surveillance Act was designed to limit the power of federal law enforcement and intelligence agencies.
However, all of these attempts have had exactly the opposite effect of what the public intended because they made a fundamental and fatal mistake: they attempted to implement through statute limits that were already in the constitutional framework. By placing federal law above the Constitution, lawmakers created a legal, political, and military environment that returned political assumptions to the state before the American Revolution. The main political actor is understood as the state; individual rights are reconceptualized as privileges; individuals are now presumed guilty before the law; and the state is now seen as the holder of power, money and authority, wielding it in an imperialistic and irresponsible manner. These are symptoms of a political culture in deep crisis.
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