Thread by @gladstein

1/ Here are 20 things I learned while writing my new essay on how the US invented central bank imperialism 🧵

First: in 1971 the US defaulted on more than $50 billion in debt held by other nations

IOUs promised as redeemable for gold became IOU nothings

bitcoinmagazine.com/culture/bitcoi…

2/ During World War I, German officials went off the gold standard and increased the country’s money supply from 17.2 billion marks to 66.3 billion marks.

Britain did the same, increasing its money supply from 1.1 billion pounds to 2.4 billion pounds.

jstor.org/stable/2596203

3/ What did 1914 and 1971 have in common?

Governments left the gold standard to wage war.

In the lead up to 71 military spending was *entirely responsible* for the US payments deficit.

Private sector and non-military state transactions were in balance:

amazon.com/Super-Imperial…

4/ In 1933 FDR ended domestic convertibility of $ for gold, made holding gold a felony, and devalued the $ by ~40%

The US also collected gold flows from Europe fleeing impending war.

And so by 49 the USG held 700M ounces of gold: 70% of the world's non-Soviet central bank gold

5/ By the late 50s due to Cold War spending the US promise made at Bretton Woods to redeem $ for gold at $35 per ounce was under pressure.

To prevent collapse one of the last things Eisenhower did as president was ban Americans from owning gold abroad:

nytimes.com/1961/01/15/arc…

6/ In the 60s the US and Europe tried to fix the gold price by centralizing it into the London Gold Pool and conducting market manipulation.

This worked for a few years until it failed completely in 1968 under the strain of US spending in Vietnam:

cambridge.org/core/journals/…

7/ By 1969 the US had drawn down its gold from 700M to 300M ounces.

Congress nixed the 25% gold backing requirement for federal reserve notes, and the IMF created “paper gold” in the form of SDRs.

They would “fill monetary needs but exist only in books"

nytimes.com/1969/10/04/arc…

8/ Between WWII and the 1990s, foreign nations holding US debt "earned" a negative interest rate most years: in effect paying the US to hold their money.

As Nixon’s Treasury Secretary said, “the dollar may be our currency, but now it’s your problem”

ipe.com/the-dollar-is-…

9/ In the 1970s Germany lost 1/3 of its savings (held in US debt) as the $ crashed 52% against the mark.

This was a US tax on foreign nations, where America forced Germany and Japan to pay for the Vietnam War and support for Israel against their wishes.

fx.sauder.ubc.ca/etc/USDpages.p…

10/ In 1974 Saudi Arabia and OPEC were awash in petrodollars.

They had an account surplus of $70 billion, up from $7 billion the year before: an amount nearly 5% of US GDP.

It became US government policy to convince the oil exporters to save in US debt.

brookings.edu/book/the-dance…

11/ In 74 the Fed grew the money supply so much that the US saw its fastest inflation since the Civil War.

But the Saudis and OPEC ate up the deficit, recycling tens of billions of petrodollar earnings into US debt in return for weapons and protection:

cornellpress.cornell.edu/book/978080142…

12/ The US still staunchly defends Saudi Arabia today. This week Biden cleared $650M in weapon sales to MBS.

Aramco is the 2nd most valuable company in the world.

The Saudis were never investigated for 9/11, despite 15/19 hijackers being Saudi citizens.

reuters.com/world/middle-e…

13/ From '48-'69 US receipts from foreign aid were ~2.1x its investments.

From '66-'70 the World Bank made a profit on 20 poor nations.

There's a debate on whether US-directed foreign aid was altruism or a way to harness resources from LDCs in exchange for weapons/food exports

14/ In the 1970s the World Bank argued that population growth slowed down development, and advocated for the Malthusian strategy that growth should be halted to match food output.

In turn, the Indian government forcibly sterilized millions of people.

bbc.com/news/world-asi…

15/ A 1996 report covering the World Bank’s first 50 years of operations found that of the 66 poor nations receiving money from the bank for more than 25 years, 37 were no better off than pre-loan. Of the 37, *most* were poorer than they were pre-loan:

heritage.org/trade/report/t…

16/ Post 1971, capital became much more centralized.

In the early 50s a dominant capital firm made 5000x the income of an average worker; in the late 90s, it was 25000x.

In the early 50s a Fortune 500 firm made 500x the average; in the late 90s, 7000x.

blairfix.github.io/capital_as_pow…

17/ Using historical data we can view consumer prices in the UK dating to 1271. One can see steady prices through the 16th century, when gold was looted from the Americas. Then again, steady prices until the 20th century, when things went hyperbolic with the advent of fiat money.

18/ In 1795 Immanuel Kant wrote “Toward Perpetual Peace”

One of his six primary principles was that “no national debt shall be contracted in connection with the external affairs of the state”:

mtholyoke.edu/acad/intrel/ka…

19/ Kant predicted dollar hegemony.

In 2021 the US spends more on military than the next 10 states combined.

The US has been at war in Afghanistan, Iraq, Syria, Yemen, Somalia, Libya, and Niger.

How much does the average American know about these wars?

defenseone.com/threats/2018/0…

20/ Since 2013 foreign central banks have been dishoarding US debt.

Today, the Fed is the majority purchaser of American debt.

The world is gradually de-dollarizing and witnessing a slow decline of the $ as the dominant reserve currency.

crfb.org/blogs/fed-buyi…

21/ Big lessons?

The US government systematically worked to demonetize gold in the 20th century, and succeeded because of gold’s vulnerabilities: it was easily confiscated, custodial, and centralized.

In its place, the US government convinced the world to save in American debt.

22/ Bitcoin is a trillion dollar open network and will be harder to kill than gold as it is easily custodied, easily verified, invisible, and can teleport.

It is more likely to be held by citizens and less likely to be hurt by paper market manipulation:

blog.bitmex.com/thanks-for-not…

23/ Bitcoin vs Central Bank Imperialism will be a fascinating 21st century plot line.

For more on this topic, see my full essay "The End of Super Imperialism" at @BitcoinMagazine here:

bitcoinmagazine.com/culture/bitcoi…