Crypto’s Counterpunch to U.S. Hegemony and Empire

“The Muslim world should be designing measures to save themselves from the domination of the United States dollar and the American financial regime.” —Hassan Rouhani, President of Iran

Also Read: Crypto Confronts Social Justice Warriors

Hegemony and Muslim Resistance

Hegemony refers to the leadership or dominance of one country or group over others. A nation with the most powerful fiat and control of international banking can achieve hegemony through trade wars, financial sanctions or bribery (aid), and the flex of expensive military might. A dominant state is known as the hegemon. The United States has been the global hegemon for more than half a century.

The globe is rebelling. According to the bitcoin.com article “Iran, Turkey, Malaysia Discuss Creating Unified Muslim Cryptocurrency”, at the Kuala Lumpur Summit 2019 — a four-day event that began on December 18 — the Malaysian Prime Minister Mahathir Mohamad, Iranian President Hassan Rouhani, and Turkish President Recep Tayyip Erdogan “discussed the prospect of creating a unified cryptocurrency for Muslim countries. Rouhani proposed an Islamic financial payment [system] with Muslim countries trading in local currencies and the creation of a Muslim cryptocurrency to cut reliance on the U.S. dollar.” The Malaysian P.M. declared himself open to the “idea of a unified cryptocurrency for Muslim countries.”

Circumventing Established Superpowers

Muslim nations are not alone. Russia launched its System for the Transfer of Financial Messages (SFPS) in December 2017 as an alternative to the Society for Worldwide Interbank Financial Telecommunication (SWIFT). SWIFT is an identification-code network for international transfers that allows financial institutions to send data to each other in a standardized and reputedly secure way. SWIFT is the default global system for financial transfers, which has been called the central nervous system of international banking.

Although its messaging platform is based in Belgium, the U.S. exerts undue influence upon SWIFT. Consider the U.S. sanctions imposed late last year on Iran as a way to rein in its nuclear ambitions. Targeted Iranian banks were excluded from SWIFT access after U.S. Treasury Secretary Steven Mnuchin threatened the SWIFT itself with sanctions if it did not comply. Without access, Iran could not easily pay for imports or receive payment for exports.

A state that incurs American wrath is vulnerable to economic sanctions through SWIFT. In response, the BRICS joined the Russian alternative to SWIFT—the SFPS, which is based on the ruble or the fiat of members, not on the dollar. (BRICS is an acronym for five emerging economies: Brazil, Russia, India, China, and South Africa.) Russia also reached out to China, Iran, and Turkey to integrate SPFS with their financial systems. Most significantly, some Russian banks have joined the China (or Cross-Border) International Payments System (CIPS) to facilitate economic transfers between the two.

The European Union (EU) has been crying for more financial independence from America. A headline in Deutsche Welle declared, “Germany urges SWIFT end to US payments dominance.” The article opened, “Germany’s foreign minister has reiterated calls for the EU to free itself from dependence on the US and adopting its own international payments channel is one way of doing that.” According to Christopher Bovis, professor of international business law at the University of Hull (UK), “The European Commission has been developing … a parallel system to SWIFT which will allow Iran to interface with European financial systems, European clearing systems, using the nominations supported and created by the European Investment Bank based on the euro.”

The SWIFT alternatives have stumbled on the road to realization, but they are moving forward. The day when there will be several default currencies is foreseeable. When this comes, U.S. hegemony will be cut off at the knees.

Over Half a Century of U.S. Financial Hegemony

U.S. hegemony is rooted in World War II (WWII), which ran from 1941 to 1945 in terms of America’s direct involvement. During WWII, America ascended to military dominance largely through developing the atomic bomb and demonstrating a willingness to use it. Of equal or greater importance was the ascendancy of the American dollar as the foremost fiat and reserve currency of the world; a reserve currency is one used by states for foreign exchange and usually preferred by institutions or individuals for international transactions.

1944 cemented the supremacy of the U.S. dollar. While WWII still raged, more than 700 delegates from 44 nations met at Bretton Woods, New Hampshire in order to regulate post-war international finance. Officially labeled the United Nations Monetary and Financial Conference, the gathering became known as the Bretton Woods Conference. It established a system of institutions and procedures for the international monetary system, which persists to this day; the International Monetary Fund was created, for example. The U.S. dollar became the reserve currency, with the central banks of other nations maintaining fixed exchange rates between their currencies and the dollar — that is, buying or selling the dollar to regulate their own money supply and value. A “floating rate” later evolved.

Interestingly, the Soviet Union refused to ratify the agreement, saying the institutions it created were “branches of Wall Street.” Bretton Woods cemented America’s financial hegemony through the global post-war institutions that functioned largely as agents of U.S. power and policy, which explains America’s initial enthusiasm for them. The global agencies have experienced several decades of evolution, however, and they now often act against U.S. interests. America’s enthusiasm has declined.

America’s superpower status was also cemented by post-war policies such as the Marshall Plan. The Plan pumped approximately $13 billion into Western Europe, allegedly to rebuild the economies of shattered nations. ($13 billion is about $183.48 billion in 2019 dollars. Some historians place the original figure as high as $17 billion.) The Marshall Plan explicitly partnered with the anti-communist Truman Doctrine, which passed the U.S. Congress in 1947. This is where many historians date the beginning of the Cold War. It erupted into the Korean War (1950-1953) and culminated in the Vietnam War (1965-1973, American military involvement).

In his path-breaking essay, “Myths of the Marshall Plan,” economist Tyler Cowen exploded five myths surrounding the Marshall Plan, which was said to create a miracle of European revival. Myth #2 offered a glimpse of the Plan’s true face.

Myth #2: The Plan encouraged free enterprise and sound economic policy. “[Those] directing postwar U.S. foreign economic policy had strong interventionist sympathies; when faced with any problem, their instinct was to seek a governmental solution … Furthermore, the very structure of the Marshall Plan encouraged state planning.” In most cases, state regulation increased. The “West German miracle,” for which the Marshall Plan is credited, occurred only after the economic director, Ludwig Erhard, acted unilaterally and against American wishes to abolish most of the Allied economic controls.

With ownership of the world’s reserve printing press and control of the major European economies, post-WWII America achieved a dominance that endured into the 21st century.

Crypto is Anti-Empire, Anti-Hegemony

Competition is always desirable because it offers more choices to the individual. But a statist competition between global payment systems does not necessarily increase the financial freedom of individuals. The state — one state or another — remains in control of the wealth transfer; only direct payment or barter allows hands-on privacy and control.

In this, the blockchain is a game changer. Investopia explained, “With its distributed ledger and ability to enable transactions with minimal fees, blockchain poses a tangible threat to cross-border funds transfer systems … And none of those systems is more threatened than SWIFT, a consortium of banks that manages a bulk of global transactions.”

SWIFT itself is assisting in its own decline. In recent years, a series of SWIFT hacks have raised questions about its ability to protect money and data. The hacks led the investment bank Credit Suisse to post on its site, “Forget Bitcoin, but Remember Blockchain?” Credit Suisse stated its belief that “interbank payment systems are ripe for disruption. Interbank payment systems such as SWIFT are old, inflexible, slow, and increasingly prone to cyberattacks at a time when banks are under tremendous pressure to cut costs and protect customer data from hackers, which blockchain could achieve.”

Again, this solution solves nothing for the individual. If SWIFT is replaced by a major bank’s blockchain — a bank that functions as an arm of the state — then financial freedom is not advanced. This is evidenced by Credit Suisse’s praise of distributed ledgers as an efficient way to collect taxes, pay government benefits, issue permits and licenses, and create universal identification networks. But Credit Suisse’s acknowledgement of blockchain’s payment power means that crypto has caught the establishment’s attention, and it wants to harness crypto’s power to serve its own purposes. Credit Suisse’s rejection of free-market blockchain recognizes that Bitcoin is either useless for its purpose or a threat.

It is both. The state most often ignores the merely “useless,” however, and attacks threats. In a recent article, the Bulgarian journalist Lubomir Tassev asked, “Is the Dollar Era Under Threat?” Yes, it is. Crypto endangers the dollar and SWIFT in at least two ways.

First: a free-market blockchain vests financial control in the hands of individuals who sidestep the state. The state cannot survive being widely sidestepped. Its existence depends on stealing wealth and returning a small fraction of it as services that are either unwanted or more efficiently provided by the marketplace. As the power of individuals grows, that of the state declines. And the state is extremely good at one thing — recognizing an enemy.

Second: the blockchain payment system out-competes those of traditional finance that are controlled by the state and state-aligned banks. Tassev observed, “Decentralized cryptocurrencies have their own shortcomings if they were to be used as reserve or global currencies. However, many of these drawbacks can be attributed to their infancy. Take volatility for example, which has decreased significantly in the past year.” As the blockchain evolves naturally, the threat to traditional systems of control increases exponentially.

Conclusion

The stakes are high on both sides. Consider one aspect that is rarely discussed. The state’s financial monopoly allows it to equate wealth with fiat itself. The control is so great that people think about money and finances in statist terms.

Real wealth is not about money. Real wealth is: not having to go to meetings, not having to spend time with jerks, not being locked into status games, not feeling like you have to say ‘yes,’ not worrying about others claiming your time and energy. Real wealth is about freedom. —James Clear, author of Atomic Habits

Wealth is power, and this is a most excellent thing when it is used to pursue and express freedom. But freedom only occurs when individuals control their wealth, especially the return on their labor and capital. When the state controls wealth, then it benefits from the wealth through stripping away individual freedom. And there can be no greater control than to enter the mind of a person and define the terms in which he thinks of an issue. This is what happens when wealth is conflated with fiat. What would a house sell for? How much has the dollar value of gold risen? What is the price of a loaf of bread today? How much do you earn for your labor? What are you “worth”?

The conflation accrues to the state’s advantage. Clarity of thought is always individual, and this clarity is the basis of survival and progress. Few things are as clear as the fast flow of electrons over an immutable blockchain. It can literally bring down empires.

Op-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.

Images courtesy of Shutterstock.

Want to create your own secure cold storage paper wallet? Check our tools section. You can also enjoy the easiest way to buy Bitcoin online with us. Download your free Bitcoin wallet and head to our Purchase Bitcoin page where you can buy BCH and BTC securely.

The post Crypto’s Counterpunch to U.S. Hegemony and Empire appeared first on Bitcoin News.