In the United States, the twentieth century commenced with a concentration of authority that supplanted essential components of the American liberty tradition with a fresh interpretation of federal power. Attendees of the 1910 Jekyll Island Conference penned the Federal Reserve Act, enacted in 1913, which created the Federal Reserve, the US Central Bank. The Fed was entrusted with the dual mission of maintaining low inflation and high employment, and the primary instruments at its disposal were regulation of the money supply and manipulation of the money price through the federal funds rate. It wasn’t long before the Fed faced its challenge when an unparalleled financial crisis in 1929 evolved into the economic catastrophe termed the Great Depression. The Fed did not avert nor alleviate these crises, yet many economists and political figures concluded that the government needed to exercise greater control over the economic conditions of America. The ensuing authoritarian shift in the United States reflected the paths taken by other nations: When President Franklin Delano Roosevelt (FDR) enacted Executive Order 6102 in 1933, mandating that all residents of the United States surrender their gold to the US Treasury and suspending the convertibility of dollars for gold, he was participating in asset seizures resembling those executed by other authoritarian figures of the time, including Winston Churchill, Joseph Stalin, Benito Mussolini, and Adolf Hitler.,
Throughout the First and Second World Wars, nations allied with the United States acquired American-produced munitions using gold. This led to the accumulation of the largest gold reserves worldwide by the US. As the Second World War neared its conclusion, allied countries convened in Bretton Woods, New Hampshire, to outline a postwar global monetary framework. They agreed to designate the US dollar—once reclaimable for gold—as the international reserve currency. The same gathering also resulted in the establishment of the International Monetary Fund and World Bank, multinational lending organizations created ostensibly to facilitate and balance trade among nations while encouraging international development, though their mixed legacy has ensnared numerous impoverished nations in inescapable debt bondage.
In the meantime, a postwar military-industrial complex emerged within the United States that solidified both the acceptance of a wartime stance during peacetime and the GDP-boosting arms sales to allies and others. The routine militarization of war as a fundamental aspect of American anticommunist foreign policy—initiating with the Korean War and continuing through Vietnam, Laos, Lebanon, Cambodia, Grenada, Libya, Panama, among several others, in addition to numerous covert operations and proxy wars that transpired during this interval—had to be financed somehow. This necessity prompted the Nixon administration to suspend the convertibility of dollars for gold in 1971 and, a few years later, to reach an informal accord with the Saudi Arabian government to denominate oil transactions in dollars and reinvest those dollars back into the US economy. This petrodollar pact, despite holding the features of a treaty, was finalized entirely in secrecy by the executive branch, partly to circumvent the constitutional obligation that Congress ratifies all treaties made by the United States.
The petrodollar system is now disintegrating, as significant oil producers globally have started pricing oil in alternative currencies. This development is a foreseeable international reaction to US foreign policy since the conclusion of the Cold War, which has insisted on a unipolar American supremacy in the management of global trade and military operations. The terrorist incidents of September 11, 2001, in particular, served as the rationale for the United States to declare an ongoing war on terror and to allocate trillions of dollars toward foreign conflicts, to remilitarize or fragment nations that otherwise might have been moving toward enhanced stability, and, most critically, to formally militarize the US homeland through the creation of a new military command (USNORTHCOM) and a new executive branch (the Department of Homeland Security).
The militarization of the homeland—repugnant to the founders of the United States—has involved extinguishing the final remnants of a citizen’s right to privacy under the guise of counterterrorism via AML/KYC regulations on everything. The origins of this trend trace back to the 1970s, well before the onset of the war on terror. In fact, the 1970s can be viewed as the decade when the Banking Revolution fully matured and the American experiment in liberty truly began to unravel. The Bank Secrecy Act inaugurated the decade with its approval by Congress in 1970. It mandated that US-based financial institutions retain records of all financial activities that “possess a high degree of usefulness in criminal, tax, and regulatory investigations or proceedings,” as interpreted by the US Treasury, and to provide those records to any law enforcement entity upon request. Additionally, financial institutions were compelled to report any transfers exceeding $5,000 into or out of the United States. The Treasury subsequently decreed that all domestic transactions over $10,000 had to be reported. This reporting threshold has remained unchanged to this day, despite the fact that even under conservative estimates, the US dollar has lost nearly 90% of its purchasing capacity since 1970.,
The Bank Secrecy Act represented an unparalleled dilution of the Fourth Amendment protections against unwarranted search and seizure outlined in the Constitution. Although it faced challenges, the Supreme Court upheld the law in United States v. Miller (1976), which established the third-party doctrine: That Americans possess no reasonable expectation of constitutional protections for records maintained by a third party. This ruling startled and incensed some, leading Congress to enact the Right to Financial Privacy Act two years later (1978). However, this act included twenty significant exceptions to the right to financial privacy, which ultimately weakened privacy protections even further. In the same year, Congress also passed the Foreign Intelligence Surveillance Act (FISA), which aimed to restrict illegal surveillance actions by federal intelligence and law enforcement agencies in the wake of abuses by the Nixon administration. However, the FISA sought to achieve this by creating a kangaroo court, the Foreign Intelligence Surveillance Court (FISC), a secret court which issues classified warrants for nearly any surveillance operation requested by the state.,,,
The Bank Secrecy Act (1970), United States v. Miller (1976), the Right to Financial Privacy Act (1978), and the FISA (1978) were the foundational elements of the extensive surveillance framework currently governing the United States. These four legal moves extinguished American liberty long before personal computers or the internet had any substantial foothold in society, yet they have been employed to justify the comprehensive gathering and distribution of financial transaction data (and communication data more broadly) that transpire via software applications and digital networks—the virtually unavoidable infrastructures of contemporary existence. They have also spawned, at minimum, eight additional federal statutes that have greatly expanded the scope of legal scrutiny: 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 Strategy Act (1998); the USA PATRIOT Act (2001); the Intelligence
Reform and Counter-Terrorism Measures Act (2004); and the FISA Amendments Act (2008), which encompasses the notorious Section 702 modification, that empowers the circumvention of even the Foreign Intelligence Surveillance Court when permitted by the attorney general and the director of national intelligence. Ultimately, these statutes and judicial rulings have justified the establishment of at least three new intelligence entities with the task of collecting and disseminating financial transaction data globally: The Financial Action Task Force (1989), FinCEN (1990), and the US Treasury Office of Intelligence and Analysis (2004).
In brief, within a generation, the US banking framework, which had been centralized at the turn of the twentieth century, evolved into an extension of the state’s policing authority. The rotating door between Wall Street, the Federal Reserve, and the Treasury—a career pathway in which elites rotate through roles at these establishments—has only intensified the cycle of collaboration between lawmakers and enforcers and those who oversee financial resources. This has guaranteed that the apparatus initially created by the Banker Revolution and later reinforced by the petrodollar regime continues to thrive for the elites via informal coordination and official bailouts. Actions undertaken by nation-states globally after the 2008 Great Financial Crisis failed to rectify any of these injustices. Bankers received bailouts in nearly all nations, with the exception of outliers like Iceland. They once again received bailouts, along with a substantial part of the industry, in 2020 during the COVID-19 pandemic. In the United States, these bailouts are authorized, repeated, and financed through zero-debate omnibus legislation supported by leaders from both political parties.
However, the 1970s did not merely merge banks with the government and bring about the end of financial confidentiality; this decade also heralded a governance style characterized by states of emergency, whereby US presidents proclaim national emergencies to aggregate powers that would otherwise be constrained by the Constitution. In 1976, Congress enacted the National Emergencies Act (NEA), formalizing the procedure allowing a president to declare a state of emergency. While ostensibly designed to constrain the president’s emergency authority, the formalization was so methodically precise and expansive that it led to presidents declaring national emergencies with heightened regularity. President Jimmy Carter proclaimed the first national emergency under this statute in 1979—Executive Order 12170—imposing sanctions on Iran amidst the Iranian hostage crisis. In doing so, he also relied on the International Emergency Economic Powers Act (IEEPA), a 1977 statute that empowers presidents to freeze assets and halt transactions with any entity outside the United States if they perceive it poses an “unusual and extraordinary threat.”
This amalgamation of laws effectively granted US presidents unilateral authority to prohibit and sanction economic activities conducted by anyone, anywhere globally, simply by declaring a national emergency. Given that transactions in US dollars generally traverse a US-controlled financial network, and due to the dollar’s status as the predominant global commercial currency and sovereign reserve, the NEA and IEEPA—domestic US statutes—have been wielded to sanction individuals and organizations functioning outside of US jurisdiction. Consequently, the executive branch of the US government—comprising US presidents and the US Treasury Department, the cabinet agency that enforces presidential directives regarding financial transactions—exercises a form of effective governance over most of the globe.
Executive Order 12170 was merely the inaugural instance of the United States enforcing sanctions against a foreign nation via executive order. Since then, such orders have become a conventional method for US presidents to circumvent the extensive legislative process to impose sanctions expeditiously. The International Emergency Economic Powers Act, consistently invoked alongside the National Emergencies Act, has been utilized to legitimize nearly seventy distinct emergency declarations, totaling over fifteen thousand sanctions, and counting. Moreover, the US has leveraged its influence over the United Nations Security Council to pass numerous resolutions imposing multilateral sanctions on targeted entities and those connected to them; member nations are then compelled to enforce these sanctions under Chapter 7 of the UN Charter. UN sanctions are administered without legal due process, and many targeted entities have never faced criminal allegations or convictions. The simplicity of imposing sanctions and their popularity as instruments of punishment and coercion, which seemingly bear few drawbacks for American politicians, have fueled their expedited proliferation. As of this writing, the United States has sanctioned roughly one-third of all nations globally. The enforcement of these sanctions has become so burdensome that the Treasury Department is facing unprecedented staff turnover and an overwhelming caseload. Another revolving door has arisen: between the Treasury and private legal, consulting, and lobbying firms, as former Treasury officials capitalize on their understanding of the intricate sanctions system and their governmental contacts to secure favorable political and legal outcomes for their clients.
Perhaps most crucially, however, sanctions seem to exert little political influence on the regimes they target. With few exceptions, autocratic governments remain intact, while democracies facing sanctions typically respond by increasing defense expenditures, further entrenching the prevailing regime’s power. The sheer volume of nations sanctioned by the United States has driven numerous countries to establish new geopolitical partnerships and construct alternative financial systems capable of circumventing the US-controlled banking infrastructure entirely. What sanctions have conclusively demonstrated is a systemic impoverishment, if not economic disintegration, that impacts the citizens of the sanctioned countries. This reliably fosters animosity and resentment toward the United States among the populations of sanctioned nations, generating grievances that may persist for decades. Even so-called targeted sanctions, which aim at specific sectors or entities, often fail to produce the desired political outcomes; their limited reach and feeble incentives for those in power create inadequate pressure to compel changes in policy or regime shifts. Additionally, their practical enforcement generally yields binary repercussions for targeted parties: Travel bans and asset freezes may pose minor inconveniences for powerful figures who have adequately prepared, while arms embargoes and restrictions on commodity exports from targeted nations often result in greater collateral damage than intended. This inevitably raises doubts about whether such sanctions can genuinely be described as smart in the first instance.
There exists a paradox in the consolidation of bank-state authority since the 1970s: Mostof the statute discussed earlier was enacted with the apparent public aim of restricting the influence of seemingly unanswerable entities. The Bank Secrecy Act aimed to restrict the authority of financial institutions. The National Emergencies Act was designed to curtail the powers of the presidency. And the Foreign Intelligence Surveillance Act sought to mitigate the influence of federal law enforcement and intelligence organizations. Nevertheless, all these initiatives resulted in outcomes contrary to their stated objectives due to a fundamental and crucial flaw: attempting to impose through legislation a boundary that already existed within the Constitution’s framework. By superseding the Constitution with federal legislation, legislators have established a legal, political, and military landscape that has reverted political premises to what they were before the American Revolution. The key political entity is now regarded as the state; individual liberties have been redefined as privileges; the individual is now assumed guilty until proven innocent; and the state is now viewed as the possessor of rights, resources, and authority, which it wields in an imperial and unaccountable manner. These reflect signs of a political culture in profound turmoil.
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[6] Franklin D. Roosevelt, “Executive Order 6102—Prohibiting the Hoarding of Gold Coin, Gold Bullion and Gold Certificates,” The American Presidency Project, April 5, 1933, https://www.presidency.ucsb.edu/documents/executive-order-6102-forbidding-the-hoarding-gold-coin-gold-bullion-and-gold-certificates.
[7] Elites predominantly did not lose their gold in this national asset confiscation as they had alternative methods to hold the asset through trusts, corporations, and custodians.
[8] For the comprehensive historical account that succeeds, refer to Josh Hendrickson, “The Treasury Standard: Causes and Consequences,” in The Satoshi Papers: Reflections on Political Economy after Bitcoin, edited by Natalie Smolenski (Nashville, TN: Bitcoin Policy Institute, 2024), XX-XX; Michael Hudson, Super Imperialism: The Economic Strategy of American Empire, Third Edition (Dresden: Islet, 2021); and Jamie Martin, The Meddlers: Sovereignty, Empire, and the Birth of Global Economic Governance (Cambridge: Harvard University Press, 2022).
[9] Norbert Michel and Jennifer J. Schulp, “Amending the Bank Secrecy Act to Safeguard Privacy and Deter Criminals,” Cato Institute, July 26, 2022, https://www.cato.org/policy-analysis/revising-bank-secrecy-act-protect-privacy-deter-criminals.
[10] Aaron O’Neill, “Value of one US dollar (USD) annually from 1635 to 2020*”, Statista, July 4, 2024, https://www.statista.com/statistics/1032048/value-us-dollar-since-1640/.
[11] US Bureau of Labor Statistics, “Consumer Price Index for All Urban Consumers: Purchasing Power of the Consumer Dollar in U.S. City Averages,” FRED, Federal Reserve Bank of St. Louis, October 29, 2024, https://fred.stlouisfed.org/series/CUUR0000SA0R.
[12] Nicholas Anthony, “The Right to Financial Confidentiality,” Cato Institute, May 2, 2023, https://www.cato.org/policy-analysis/right-financial-privacy#right-financial-privacy-act-1978.
[13] Congressional Research Service, “Foreign Intelligence Surveillance Act (FISA): An Overview,” April 11, 2024, https://sgp.fas.org/crs/intel/IF11451.pdf.
[14] Carol D. Leonnig, Ellen Nakashima, and Barton Gellman, “Secret-Court Judges Distressed at Representation of ‘Collaboration’ with Government,” The Washington Post, June 29, 2013, https://www.washingtonpost.com/politics/secret-court-judges-upset-at-portrayal-of-collaboration-with-government/2013/06/29/ed73fb68-e01b-11e2-b94a-452948b95ca8_story.html.
[15] Evan Perez, “Secret Court’s Oversight Faces Examination,” The Wall Street Journal, June 9, 2013, https://www.wsj.com/articles/SB10001424127887324904004578535670310514616.
[16] Electronic Privacy Information Center, “Foreign Intelligence Surveillance Act Court Orders 1979–2022,” https://epic.org/foreign-intelligence-surveillance-court-fisc/fisa-stats/.
[17] Dan Roberts, “US Must Reform Secret Fisa Courts, Says Leading Judge Who Authorized Surveillance Orders,” The Guardian, July 9, 2013, https://www.theguardian.com/law/2013/jul/09/fisa-courts-judge-nsa-surveillance.
[18] Electronic Privacy Information Center, “Foreign Intelligence Surveillance Court (FISC),” https://epic.org/foreign-intelligence-surveillance-court-fisc/.
[19] Congressional Research Service, “The International Emergency Economic Powers Act: Origins, Evolution, and Application,” March 25, 2022, https://crsreports.congress.gov/product/pdf/R/R45618/8.
[20] Congressional Research Service, “The International Emergency Economic Powers Act.”
[21] Among various instances, see, for example, US Department of Justice, “Credit Suisse Consents to Forfeit $536 Million Related to Violations of the International Emergency Economic Powers Act and New York State Law,” Press Release, December 16, 2009, https://www.justice.gov/opa/pr/credit-suisse-agrees-forfeit-536-million-connection-violations-international-emergency.
[22] Brennan Center for Justice, “A Manual on Emergency Powers and Their Application,” September 4, 2019, https://web.archive.org/web/20200401070744/https://www.brennancenter.org/our-work/research-reports/guide-emergency-powers-and-their-use.
[23] Jeff Stein and Federica Cocco, “The Monetary Conflict: How Four U.S. Presidents Initiated Economic Warfare Globally,” The Washington Post, July 25, 2024, https://www.washingtonpost.com/business/interactive/2024/us-sanction-countries-work/.
[24] See, for instance, United Nations Security Council, “Resolution 1267,” Adopted October 15, 1999, 4051st Annual Meeting, https://documents.un.org/doc/undoc/gen/n99/300/44/pdf/n9930044.pdf.
[25] Joy Gordon, “Revisiting Smart Sanctions,” Ethics & International Affairs 25, no. 3 (2011): 315–35, doi:10.1017/S0892679411000323.
[26] Agathe Demarais, Backfire: How Sanctions Reshape the World Against US Interests (New York: Columbia University Press, 2023).
[27] Stein and Cocco, “The Monetary Conflict.”
[28] Ibid.
[29] Ibid.
[30] Demarais, Backfire.
[31] Jerg Gutmann, Matthias Neuenkirch, and Florian Neumeier, “The Economic Impacts of International Sanctions: An Event Analysis,” Journal of Comparative Economics 51, no. 4 (December 2023): 1214–31.
[32] Demarais, Backfire. BRICS+ stands out as the most significant recent instance of this geopolitical and financial shift.
[33] Francisco R. Rodríguez, “The Human Impact of Economic Sanctions,” Center for Economic and Policy Research, May 4, 2023, https://cepr.net/report/the-human-consequences-of-economic-sanctions/.
[34] Gordon, “Revisiting Smart Sanctions.”
