Satoshi Nakamoto’s paper: How does the United States erode freedom and reshape the global financial order?

Source: Bitcoin Magazine; Translated 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 liberal tradition with a new interpretation of federal power. Participants of the Jekyll Island Conference in 1910 drafted the Federal Reserve Act, which was passed into law in 1913, thus establishing the U.S. central bank, the Federal Reserve. The Federal Reserve has a dual mission of maintaining low inflation and high employment, and its main tools are to control the money supply and control the currency price through the federal funds rate. Soon after, an unprecedented financial crisis in 1929 turned into what we call the Great Depression, and the Federal Reserve was tested. The Fed neither prevented nor alleviated both crises, but many economists and political leaders concluded that the state needs to exert more control over American economic life. The subsequent U.S. authoritarian turn reflects the trajectory of other countries: In 1933, U.S. President Franklin Delano Roosevelt (FDR) issued Executive Order No. 6102, requiring all people living in the United States to hand over gold to the U.S. Treasury Department and suspend the dollar from the exchange of gold. The assets confiscation measures he implemented were exactly the same as those implemented by other authoritarian leaders during the same period, including Winston Churchill, Joseph Stalin, Benito Mussolini and Adolf Hitler.

During World War I and World War II, American allies used gold to buy American-made weapons. This has allowed the United States to accumulate the world's largest gold reserves. As World War II approached its end, allies met in Bretton Woods, New Hampshire, USA to determine the framework for the post- war international monetary order. They decided to establish the US dollar (again convertible gold) as a global reserve currency. The same meeting also led to the establishment of the IMF and the World Bank, two transnational lenders who ostensibly have the role of promoting and balancing trade between countries while promoting international development, have included entanglement of dozens of poor countries in an inescapable web of debt slavery.

At the same time, in the United States, a post-war military industrial complex emerged, which not only ensured the normalization of the wartime situation in peacetime, but also ensured arms sales to allies and other countries to increase GDP. The regularization of war is the core pillar of the U.S. anti- communist foreign policy—starting from the Korean War and continuing to Vietnam, Laos, Lebanon, Cambodia, Grenada, Libya, Panama and other countries, not to mention the myriad secret operations and proxy wars that took place during this period—must be funded in some way. This necessity prompted the Nixon administration to suspend the dollar for gold in 1971 and reached an informal agreement with the Saudi Arabian government a few years later to purchase oil in US dollars and reinvest those dollars into the U.S. economy. Although the petrodollar agreement is characterized by a treaty, it was reached completely secretly by the executive branch, partly in order to circumvent the provisions that the Constitution requires that all treaties that the United States joins must be ratified by Congress.

The petrodollar system itself is collapsed as major oil-producing countries around the world begin pricing oil in other currencies. This is the international community's predictable reaction to the U.S. foreign policy since the end of the Cold War, which has insisted that the U.S. maintains its unipolar dominance in international trade and military operations. In particular, the terrorist attacks on September 11, 2001 have become an excuse for the United States to announce an indefinite war against terrorism, spend trillions of dollars to launch foreign wars, remilitarize or divide countries that would have gone to more stable. Most importantly, formally militarize the United States through the establishment of a new military command (US Northern Command) and a new executive branch (Division of Homeland Security).

Militarization of land – which is extremely unacceptable to the eyes of American founders – means stifling the last trace of privacy of citizens by implementing an anti-money laundering/knowing your customer (AML/KYC) system on everything in the name of counter-terrorism. The roots of this development can be traced back to the 1970s, far ahead of the war on terror. In fact, the 1970s can be seen as a decade when the banker revolution was fully matured and the true collapse of the American free experiment. In 1970, the Bank Secrecy Act was passed in the U.S. Congress, kicking off the 1970s. The law requires U.S. financial institutions to keep all financial transaction records that are “highly practical in criminal, tax and regulatory investigations or litigation” (the U.S. Treasury interprets as “highly practical in criminal, tax and regulatory investigations or litigation”) and share these records with them as required by law enforcement agencies. Likewise, financial institutions must report any transfer of funds of more than $5,000 into or out of the United States. Subsequently, the Treasury Department issued a provision under the bill that all domestic transactions over $10,000 must be reported. Even though the dollar has lost nearly 90% of its purchasing power since 1970, even by conservative estimates, this reporting threshold has not changed to this day.

The Bank Secrecy Act has previously undermined the protections of the Fourth Amendment of the Constitution against undocumented searches and seizures. Despite being challenged, the Supreme Court upheld the law’s original judgment in the U.S. v. Miller (1976), establishing the third-party principle: Americans have no reasonable constitutional protection expectations for records held by third parties. The ruling surprised and angered some, which in turn prompted Congress to pass the Financial Privacy Act two years later (1978). However, the bill provides 20 substantial exceptions to financial privacy rights, ultimately further weakening privacy protections. In the same year, Congress also passed the Foreign Intelligence Surveillance Act (FISA), which was established to curb illegal surveillance by federal intelligence and law enforcement agencies after the Nixon administration abused its power. However, the Foreign Intelligence Surveillance Act claims to achieve this by setting up an illegal court, the Foreign Intelligence Surveillance Tribunal (FISC), a secret court that can issue confidential arrest warrants for almost all surveillance activities required by the state.

The Bank Secrecy Act (1970), the United States v. Miller (1976), the Financial Privacy Act (1978), and the Foreign Intelligence Surveillance Act (1978) are the seeds of the comprehensive surveillance system of the U.S. government today. These four legal means stifled American freedom long before personal computers or the Internet had any meaningful impact worldwide, but they were used to defend the comprehensive collection and sharing of financial transaction data (and broader communication data) occurring through software platforms and digital networks (the almost inevitable infrastructure in modern life). They have also spawned at least eight additional federal laws, greatly expanding the scope of legal surveillance: the Money Laundering Control Act (1986); the Anti-Drug Abuse Act (1988); the Annuzio-Willi Anti-Money Laundering Act (1992); the Money Laundering Stop Act (1994); the Strategic Money Laundering and Financial Crime Act (1998); the U.S. Patriot Act (2001), the Intelligence Reform and Terrorism Prevention Act (2004), and the Foreign Intelligence Surveillance Act Amendment (2008), including the infamous Amendment 702, which authorizes even circumventing the Foreign Intelligence Surveillance Court under the authorization of the Attorney General and the Director of National Intelligence. Finally, these legal and legal judgments provide justification for the establishment of at least three new intelligence agencies whose responsibilities are to collect and share global financial transaction data: the Financial Action Task Force (1989), the Financial Crime Enforcement Bureau (1990), and the U.S. Treasury Office of Intelligence and Analysis (2004).

In short, in a generation, the US banking system, which had been centralized in the early 20th century, became an extension of the national police function. The “revolving door” between Wall Street, the Federal Reserve and the Treasury Department—the career cycle in which elites rotate positions in these institutions—will only speed up the flywheel of collusion between those who make and enforce laws and those who control currency. This ensured that the machine, originally built by the banker revolution and later supported by the petrodollar system, continued to operate for the elite through informal coordination and official rescue. After the 2008 financial crisis, the actions taken by nation-states around the world have not corrected any of these mistakes. Bankers in almost every country have been bailed, with exceptions like Iceland. During the 2020 COVID-19 pandemic, they and many industries have received relief again. In the United States, these bailouts are approved, renewed and funded through the zero-debate comprehensive bill supported by bipartisan leaders.

But the 1970s not only merged banks with states and ushered in the end of financial privacy; this decade also created a state of emergency rule, where the US president declared a state of national emergency in order to take the power prohibited by the Constitution for his own use. In 1976, Congress passed the National Emergency Act (NEA), which formally sets the procedure for the president to declare a state of emergency. Despite the ostensibly intended to limit the president’s emergency powers, the bill is very procedurally accurate and extensive, resulting in a significant increase in the frequency of presidential declaration of a national emergency. In 1979, President Jimmy Carter declared the first state of national emergency under the law — Executive Order No. 12170 — to impose sanctions on Iran following the Iran hostage crisis. To do this, he also invoked the International Emergency Economic Powers Act of 1977 (IEEPA), which authorized the president to freeze any entity outside the United States and block its transactions when it determines that it poses an “abnormal and special threat”.

These two legal combinations actually give the U.S. president unilaterally the power to ban and punish economic activities of anyone anywhere in the world by simply declaring a national emergency. Because US dollar transactions are usually conducted through financial networks controlled by the United States and the US dollar remains the world's leading commercial accountant and sovereign reserve currency, the National Economic Assessment Act and the International Economic Powers Act (U.S. domestic law) have been used to punish individuals and organizations operating outside of U.S. jurisdiction. Therefore, the executive branches of the U.S. government—the U.S. President and the U.S. Treasury (the cabinet body responsible for executing the president’s orders on financial transactions)—have implemented an effective form of domination in much of the world.

Executive Order No. 12170 is the first time the United States has imposed sanctions on foreign countries through an executive order. Since then, executive orders have become a regular means for the US president to bypass lengthy legislative procedures and quickly implement sanctions. The International Economic Powers Act has always been cited simultaneously with the National Emergency Act, which has legalized nearly 70 separate state of emergency declarations, with sanctions totaling more than 15,000, and is still increasing. In addition, the United States has used its influence on the UN Security Council to adopt a series of resolutions to impose multilateral sanctions on specific entities and their related entities; Member States are subsequently obliged to implement these sanctions under Chapter VII of the Charter of the United Nations. The implementation of UN sanctions does not require due legal proceedings and many target entities have never been charged or convicted. The implementation of sanctions is easy and popular as a tool of punishment and coercion, which appears to have little negative impact on American politicians, prompting the accelerated spread of sanctions. As of the time of writing, the United States has imposed sanctions on about one-third of the world's countries. The enforcement of these sanctions has become so arduous that the Treasury is experiencing record turnover and unsatisfactory cases. Another revolving door emerged: between the Treasury and private legal, consulting and lobbying companies, former Treasury officials used their understanding of complex sanctions systems and government relations to fight for better political and legal outcomes for their clients.

Perhaps most importantly, however, sanctions seem to have little political effect on the regime they target. With a few exceptions, authoritarian regimes remain, and sanctioned democracies often respond by increasing defense spending, further consolidating the power of existing regimes. The number of countries sanctioned by the United States has prompted dozens of countries to establish new geopolitical alliances and an alternative financial system that can completely avoid banking systems controlled by the United States. However, the consequences of sanctions have been proven to be conventional poverty, or even economic collapse, which will affect the people of the sanctioned countries. This will undoubtedly turn the hearts and minds of the sanctioned people toward opposition to the United States, and breed resentment and hostility for decades. Even so-called "smart sanctions" targeting specific industries or entities are usually ineffective politically; their scope is limited and the incentives for those in power are weak enough to create enough pressure to force them to achieve the expected policy changes or regime changes. Furthermore, the actual implementation of these sanctions often has a dual impact on the target country: travel bans and asset freezes may be relatively minor trouble for strong actors who have planned in advance, while arms embargoes and bans on target country's export of goods will cause greater collateral damage than they expected. This obviously raises questions about whether such sanctions can be called a wise move.

Since the 1970s, there has been an anomaly in the consolidation of bank- state power: most of the legislation described above has been introduced with the superficial public goal of limiting the power of seemingly irresponsible actors. The Bank Secrecy Act aims to limit the power of banks. The National Emergency Act aims to limit the president's power. The Foreign Intelligence Surveillance Act aims to limit the power of federal law enforcement and intelligence agencies. However, all of these attempts have had the exact opposite effect to public expectations, as they made a fundamentally fatal mistake: trying to implement the limitations already in the constitutional framework through regulations. By overtaking the Constitution with federal law, lawmakers created a legal, political and military environment that brought political assumptions back to their pre-American Revolution. The main political acts are now understood as state; individual rights are reconceptualized as privilege; individuals are now presumed guilty before the law; states are now regarded as holders of rights, money and power, and use these powers in imperialist and irresponsible ways. These are all symptoms of political and cultural in a deep crisis.