WBD468 Audio Transcription
The Economics of War with Alex Gladstein
Interview date: Monday 28th February
Note: the following is a transcription of my interview with Alex Gladstein. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.
In this interview, I talk to Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation. We discuss how the fiat monetary system has broken democratic peace theory, why MMT enables forever wars, how Bitcoin could reduce unnecessary wars, and the need to discuss this more honestly within society.
“Bitcoin stands alone in the world as the only currency that’s non-political. And that’s why I think it’s the only one that has a shot to be this neutral reserve asset that would be globally restraining equally among all players.”
— Alex Gladstein
Interview Transcription
Peter McCormack: Hi there. The show you're about to listen to is a show I recorded with Alex Gladstein on 7 February in San Francisco. It is called The Economics of War and it's a show we wanted to make for a long time, we've been discussing it for a while, Alex had been working on an article. But obviously, since we recorded this, war has broken out. On 24 February, Russia invaded Ukraine.
So, I spoke to Alex over the weekend, and we discussed it, and we said we should probably record an intro, or I would record an intro, and just give some context to this, just for a few reasons really. I won't really go into them now, but primarily, I didn't want people to think we've just reacted to the war and made this show; like I say, this show was made a few weeks ago. But also, I just felt like some context was required.
So in the show, Alex describes the way war is financed in America and the way it's been trending in an undemocratic direction, he explains how decisions about how to pay for war have been, over time, taken out of the people's hands; no longer does the US fund war in a dialogue with its people, through taxation and war bonds, but now pays for conflict entirely through borrowing with very little oversight from Congress.
Now, Alex argues that the most important and attractive features of democracy is that it's less likely to go to war than a dictatorship, and he makes the case that fiat currency and central banking is damaging the American democratic model, making it less connected to the people, and less able to stop wars or shorten wars. I mean, we saw this back in the Iraq War. In the UK, we had the biggest protest in history, we had members of parliament step down, yet still we were unable to stop Tony Blair taking the UK into the Iraq War with America.
Now, when Putin invaded Ukraine, he didn't need permission from the people, he has no checks and balances, he just does what he wants because he's a dictator. But Americans are supposed to be different, they're supposed to have a say. But over the past few decades, they've not had such a say. So, this is a show that focuses on the dangers of modern war finance, and suggests a possible future where citizens can actually constrain their rulers, making events like these invasions of Ukraine and Iraq much more difficult.
So, I felt this context was needed, I felt I just wanted to give an intro for this one. If you do have any questions about this show specifically, you can reach out to me. My email address is hello@whatbitcoindid.com, and I'm sure you can reach out to Alex. I'm sure Alex would be glad to hear from you or answer any questions from you. Anyway, listen, on to the show. I hope you appreciate why we had to give some context to this and, yeah, as I said, if you've got any questions, you can reach out to me.
Good morning, Alex.
Alex Gladstein: Good morning, Peter.
Peter McCormack: It's good to be back in person with you.
Alex Gladstein: Beautiful setup you have here in the Bay area.
Peter McCormack: Yeah, big thanks to Danny and Jeremy for working late last night getting this all set up. We got in late. We went and visited Jack Mallers' mum and dad and then drove up. What time did we get here?
Danny Knowles: 10.30pm-ish?
Peter McCormack: 10.30pm.
Alex Gladstein: You wouldn't know it; it looks spotless and slick here!
Peter McCormack: And, yeah, you give me a lot of content, you give me a lot of opportunities to interview you with all your great work, these massive essays and research topics you've been doing, so thank you for giving me the opportunity to talk to you about them, I really appreciate it. But I'm glad I can sit and talk to you.
Alex Gladstein: Yeah, well I'm happy to give you a sneak peak today of what I'm digging into now, what I've been digging into for the last few months, and what I'll publish eventually as an essay.
Peter McCormack: And hopefully, all collected together in a book sometime.
Alex Gladstein: Yeah, well I have my first book coming out in time, I believe, for Bitcoin 2022, called Check Your Financial Privilege, which is essentially tying together a lot of the writing and research I did over the last year and a half.
Peter McCormack: I still have no idea where you find time. I'm entirely convinced you don't actually sleep.
Alex Gladstein: Late at night!
Peter McCormack: Well, listen, this is an important topic. A lot of bitcoiners talk about money and the incentives with money and war, and how maybe under a Bitcoin standard we don't have war, or maybe less war, so this is a topic that's highly relevant to bitcoiners, and I'm glad you're diving into it; there's probably no one better to dive into the subject than you. Is this a project that is personally important because of the work you do with the HRF?
Alex Gladstein: Yeah. I think that the driving interest for me to look into how wars are paid for is in the social contract between the individual and the state. And there is this idea that drives our appreciation for -- well, one of our greatest appreciations for democracy is something called Democratic Peace Theory, and I've been reading a book called Taxing Wars, which is awesome, by this scholar named Sarah Kreps, that I would recommend people read.
I'm just going to read her thesis; it's just two sentences, and I think that will help set up the table here, "A long-established tradition of democratic theory suggests that a key difference between democracies and non-democracies is that a democratic populace bears the direct cost of war in blood and treasure. The more directly they bear those costs, the more incentives they have to pressure leaders to keep wars short and low cost. My normative concern with this project was the inverse of this logic. If individuals no longer saw the costs of war, would they be less politically engaged with the cost, duration and outcome? The study suggests the answer is yes".
So, what she's essentially concerned about is the way that, especially in democracies, whether it be the US, the UK, India, Israel, etc, over the decades, the way to pay for wars has moved from a very involved taxation and war bond based system, where the citizens knew what was going on essentially, to what we will now call, the age of credit card wars, where wars are literally paid for entirely by borrowing invisible to the citizenry.
The thesis of her book is that this breaks democratic peace theory, because if democracies no longer have that accountability mechanism that's tying you and I to what our governments are doing, then we don't care anymore, and then maybe the democracy isn't any less likely than a kingdom or a dictatorship to go fight. So, that's what's driven my interest, is can democracies essentially survive fiat currency when it comes to warfare, the warfare state?
Peter McCormack: I was sat down with Ragnar, @Ragnarly, the other day, I don't know if you know Ragnar, but he brought up to me that the Bank of England was created to finance a war.
Alex Gladstein: Well again, we have two ways to finance war that puts some sort of restraint on what governments can do. One of course is taxation, because if you and I get taxed too much, we're going to be pretty pissed, right, and we're going to vote for somebody else if it's a democracy, or we're going to protest, no matter what the government structure is. The other one is a war bond, where the government says, "Please buy these promises to pay and we'll pay you back in ten years, or whatever, and we'll use them to buy things for the war effort".
The irony is, in World War I, the British Government actually tried to do this. They held a bond sale, it's detailed in Saifedean's The Fiat Standard, in the beginning of his book, and they tried to raise $350 billion, I think, of bonds for World War I, and the public basically didn't have the appetite for it. So, what ended up happening is secretly, the government bought the bonds themselves. So, this is presaging what happens today, which is what we would call "government intervention in the bond markets", or central banks buying their own government's debt. And that's one of the main things we're going to dive into.
But essentially, we're a long way from the wars of World War I, World War II. Just to give you some idea, some context, almost 50% of World War II was financed by taxes. There was massive increases of tax and taxes in America in the run up to and during World War II. Previous to World War II, very few Americans even paid taxes and afterwards, lots of them did. So, when people talk about the greatest generation, these people who sacrificed so much, this is one of the things they're talking about, is we started to actually pay more for the society around us, and expect more.
Korean War, financed fully by taxes. And again, there were taxes that were war bonds. I have a fun story here. The New York Fed, the reserve bank in New York, has this story on their website. In April 1943, during World War II, the employees pooled their resources together to buy $87,000 worth of war bonds at the time, which was significant at the time. What the government would do is, when you would buy these war bonds, the government would actually come back to you and tell you itemised what they purchased with the money you gave them. So, the employees of the Fed were informed that the money bought a 105mm Howitzer and a P-51 Mustang fighter plane.
I mean, think about how detached and distant we are today from that. We have no idea what our government is doing with this money, and I think it's destroying democracy.
Peter McCormack: Well it came out, after the Afghanistan War, there's that Netflix documentary series, which covers 9/11 through to Afghanistan and Iraq and I can't remember; the Turning Point, was it? It might have been called Turning Point. It's a fantastic series, four or five parts, and they cover the whole part of what happened with the money in Afghanistan, the billions and billions, I'm not even sure if it's trillions of dollars.
Alex Gladstein: Trillions.
Peter McCormack: Trillions, and how much is unaccounted for, where it went, the stupid things that money was spent on. So, I think obviously, we're in a very different place. But I do want to go back. How far back did you go with this; how far back did your research start?
Alex Gladstein: Well again, I think you want to look at the modern state. Pre-World War I states were very different in the way that they were structured and financed. So, if we look at the last 120 years, the point is that wars, at least in America and to a large extent, Europe, were financed by the public, and in a way were, if the war stretched on too long and they didn't want it, the war would end, they would vote somebody else in power.
The thing is, these earlier wars were more popular, especially World War II, it was a popular war. Even if you look at public polling, even the Korean War, Americans were in support of this war. Where things start to change is Vietnam. So, there was actually one tax, one war tax, to help pay for Vietnam in 1968, that Lyndon B Johnson imposed, and the public didn't like that very much. That's one of the things that led to him basically resigning, stepping down, paving the way for Nixon. And there was just tremendous financial pressure during the Vietnam War, and the rest of the world could see that. And it ended up turning into a situation where Vietnam was mostly fought on credit.
Today, Afghanistan and Iraq, fought entirely on credit, entirely by borrowing. That's why we call them the Credit Card Wars. In fact, Americans have spent $1 trillion so far, since 2001 when we started operations in that theatre, only on interest for the war money that we borrowed; so, just on the interest payments alone, we spent $1 trillion. And if we stopped today, all of the war in that region, the whole global war on terror, we'd still owe $6 trillion by 2050, but we're not stopping today.
So basically the point is taht, from a national security perspective, the United States relies on borrowing to pay for its wars, and the key part is, it needs the interest rates to be low. If the interest rates are high, the government will basically collapse. So, I've been looking into this correlation between the low interest rate, modern regime, started by Alan Greenspan in the 1990s, where he basically said, "Look, we're going to fight price inflation, but we're going to ignore asset inflation, and we're going to come and step in and save the economy whenever it collapses". That's the blueprint of the Fed since Greenspan's age, and that's created the monetary environment that we live in today.
That policy was essentially one that said, "Let's just lower rates. Let's use the Federal Reserve's power to go buy and sell treasuries in the open market to lower interest rates". So, what's happening here mechanically on the back end is that, even if other nations are getting sceptical about the United States' credibility, about the value of our debt, that's okay, because we have, much as the example I gave earlier in World War I, the British Government secretly bought its own debt to make it look like the debt was popular. Similar today, you have what we call a Bond Buyer of Last Resort.
So, the US Government is buying to the tune of trillions of dollars in the last decade and a half, or whatever, since the Global Financial Crisis, trillions of dollars, more than $5 trillion of US Government debt, and that makes it much more valuable than it would be otherwise. So, if you didn't have the Fed buying US debt, the wages -- for the listener, just to pause here for a second to describe a bond.
Like, Peter, if you're selling your Bedford squad T-shirts and no one wants to buy them, you have to drop the price, right. This is normal.
Peter McCormack: Of course.
Alex Gladstein: So, with the bond, what happens if no one wants to buy your bonds, you have to actually raise the interest rate to incentivise people to come and buy your bond. Now, if interest rates are rising, that means the US Government has to pay a lot more for all this war debt that it's incurred. So, just to give you a sense, today, the federal funds rate, which is the lowest-bound interest rate that the Central Bank of the United States sets, is 0.08%. If it went to 3%, just to give you an idea, which would be still pretty low in historical context, but a lot higher than today, then more than one-third of the $4 trillion that the government brings in every year in taxes would have to go towards interest payments.
So, they have a huge incentive to keep these interest payments low, and I've been looking into the connection between the war on terror and this regime of low interest rates. And my thesis is essentially that the war on terror wouldn't be possible without these "ZIRP", or Zero Interest Rate Policies, and that's something you never see in traditional discourse about money and banking.
For example, I thought this was crazy, there was a US Government final report on the Great Financial Crisis, it was called The Financial Crisis Inquiry Commission; it doesn't mention the war on terror, Iraq or Bin Laden a single time, as if they didn't even happen. So, people are looking at the Great Financial Crisis, and they're looking at our overextension of debt, and they're not thinking about the war piece; the war piece is really big. And you look at people who are promoting this idea of MMT, or Modern Monetary Theory, saying that we should just spend in an unrestrained manner until we get inflation, that's kind of their idea.
Peter McCormack: Thank, Stephanie Kelton.
Alex Gladstein: Yeah, so I've read her book recently. I would recommend you read it just to understand how farfetched this way of thinking is. But her book is a long book, it's 300 pages. It doesn't mention Iraq or Afghanistan a single time, the word does not appear. So, you have someone who's trying to tell the history of American finance, and give you a framework for how we're going to spend in the future, and war is not even on her radar. War is the single largest, non-discretionary expenditure of the US Government.
So, you have people promoting this idea of easy monetary policy and unrestrained spending, and they're not thinking about the outcome that's going to have on these forever wars, where we already have two factors that make the wars more distant from us. Number one, there's no draft anymore. My dad went to Vietnam, he was drafted, he didn't want to go, he had to go. So, we don't have a national draft anymore. Only a tiny, tiny percentage of Americans actually fight.
Number two, drone warfare. Drone warfare makes it way easier for us to go blow places up and have wars, because we're not going to have as many body bags when we come home. The third element there is this shift away from you having skin in the game, as a citizen of their democracy. You no longer have skin in the game, because the wars aren't paid for by taxes anymore.
In 2007, when we had the Iraq surge, I believe it was three to four different congressmen and women, they tried to pitch the idea of a tax to finance the surge. And Nancy Pelosi basically said no, she canned the idea. She said it wasn't a very democratic idea, which is crazy, because what she's saying is that, "It would be unpopular if we taxed you, so let's just keep borrowing to pay for the wars". But again, borrowing for the war is very similar to going to drone warfare, or to not having a draft; it distances the citizens from the war, and this is something I'm very concerned about.
Peter McCormack: And, you're concerned about that because, under a democracy, it really should be the will of the people to go to war, rather than the will of a few people in Washington?
Alex Gladstein: 100%, and the MMT people say, "Well, Congress gets to decide how much we spend". Well, Congress isn't doing a very good job of reining in the wars. I mean, there's very little congressional oversight or interest, it appears, in war spending. It's like, and I think both people on the left and right could agree here, that we fight about finance for education or healthcare, but as soon as it's the military, it's just unquestioned, very few people fight it. And even if they fight it in the media, the democrats still vote for it anyway, and I don't even know if they should be.
I tend to think that we are very overstretched, and you can make a case for supporting Ukraine, but to me, Iraq especially was extremely unethical and again, trillions of dollars went into paying for these wars, and the public was against it in many ways. I mean, we saw the largest protest since Vietnam.
Peter McCormack: In London, agreed.
Alex Gladstein: But look, Congress voted for it, all of them, Hillary, Kerry, everybody. And the reason there wasn't more fighting against the Iraq War in America, and the reason why actually the anti-war movement died out halfway through the war, I mean today, there is no anti-war, we don't even know what wars we're fighting, is because of the way it was paid for. Listen, if every year when you were paying your taxes, there was a thing saying, "10% to go fight in Iraq", the war would have ended a long time ago.
So the point is that, in a fiat currency system, what people like Sarah Kreps describe is that there's almost this inevitable decline in quality of democracy because of war finance, because we go from an age where rulers are in this dialogue with the people about, "What should we do? Should we go fight there? You're willing to pay for it? Okay, let's go. Oh, you're not willing to pay for it? We're not going to go".
That is no longer a conversation that the leaders and the citizens are having, and that's almost inevitable with the fiat currency system, because of this way you can pay for the war by borrowing and by hiding the costs. These costs are real, it's not like the military contractor is not getting paid money. I mean, I thought it would be interesting to describe the mechanics of how the government actually pays for a tank, and then we can think about the big picture of that.
So basically, the US Government has a finance department, called The Treasury. The Department of the Treasury has a bank account at the Fed, and it's basically a pretty simple bank account, and they use it to pay for stuff like war. So, the idea is that all of this war that we've been fighting over the last 20 years has been paid for by what's known as deficit spending, which means that the government has to go out and raise money from the open market for it, and they do that through bond sales, so they have these auctions. They say, "We're going to sell [whatever] $300 billion, $400 billion of bonds", and these what are known as Primary Dealer Banks line up, and they bid for these Treasuries, because these Treasuries are valuable.
The Primary Dealer Banks buy the bond, the government's bank account at the Fed gets credited, and then they use that money to pay the guys making the tanks or the weapons, or whatever. The thing is, since the Great Financial Crisis, which was 2008, we're talking peak Iraq/Afghanistan War time, there's another buyer in the market for these bonds, and that's the Fed. So, the Fed has been buying trillions of dollars.
So, the questions I'm asking is, "What happens if the Fed is no longer buying the bonds? What kind of interest rates would we be talking about? And, would that limit our ability to fight these wars?" To me, the answer is obviously yes. So, I don't know if this is avoidable though in a fiat currency system. I think the government has figured out, this is almost perfect. They can fight wars, they can cut -- I mean, Bush cut taxes. It's not even like we didn't do war tax, he cut taxes in 2001, 2003. We can cut taxes, we can have all the defence, and people can have all the entitlements.
Well, it's not for free, you eventually pay a cost. And the externalities of that cost have been borne by the American people. Number one, it's pushing the cost to the future generations. Now, we're talking the 2030s and 2040s, there won't be enough money to pay for all the entitlements and all the interest on these wars. And there's trillions of dollars that will need to be spent on healthcare for the veterans who came home, trillions just on that alone. We won't be able to pay for it, and we're leaving that dilemma for future generations, so they'll pay for it.
But in addition, we have two other very big negative externalities that we've already been dealing with. One is asset inflation, and we have to think about the fact that when the Fed -- and this is a theory I'm working through. It's clearly one of the reasons, not the only reason; there's many reasons the government wants low interest rates; but one of them is clearly so they can go fight these wars. I mean, that's again the biggest non-discretionary expenditure they have, right.
So, when they go into the market and they buy these bonds and they keep the demand for the bonds high and keep the yield low to enforce negative interest rates, that interest rate sets the interest rate for everything else in the economy: mortgage, credit card borrowing. So, it really stimulates a lot of borrowing and growth. This is what they tell us, whether it's the Bank of England or the Fed, this is what they tell us QE is for, stimulating growth, when we're in a recessionary environment. But what we've seen is that it essentially creates massive asset inflation, whether it's the stock market, Bitcoin, gold.
I mean, you and I have seen over the last 20 years, things like this get super-expensive in our own countries, and even if there was no price inflation. Now, this is very redistributionary, this isn't an equally-distributed phenomena. To give you an example of the United States, since this policy of easy money started in the 1990s, the top 1% in my country have increased their wealth share from 24% to 33%, and the bottom 90% decreased their wealth share from 40% to 30%. So, you're seeing a tremendous inequality as a result of these low interest rate regimes.
I think that you're going to get other negative externalities here, beyond just our children having to pay for it. There's weird things happening to the economy now that are pretty damaging, and I think that it's especially obvious now. I mean, I don't know if you saw this Oxfam report, but it said that, "The wealth of the world's ten richest men doubled since the pandemic began, while the incomes of 99% of humanity are worse off". I mean, that is pretty condemning, that's a damning statistic.
So, this system that we've set up now, which in some part is there to essentially finance these wars, otherwise the public wouldn't agree to fight, has all of these negative side effects. And when Lyn comes on your show, she talks about this idea of financial repression and the governments keeping the inflation rate higher than the interest rates, and she calls this "financial repression", because it means that holding cash doesn't make any sense. You have to buy other stuff to go up the risk curve.
We're basically in this economy, this environment, as a result of the government trying to keep these interest rates low, where people are getting more risky, and we have all kinds of collateralised debt and crazy debt instruments, and we have big companies that make more money selling their debt than products. For example, Burger King and KFC and companies like that, they make more money selling their debt than selling burgers and fries and stuff. This is all detailed in a great book called The Lords of Easy Money, by Christopher Leonard, that I'd highly recommend you all read. It doesn't really talk too much about the war piece, but it talks about Alan Greenspan and Ben Bernanke, and this idea of, "Let's keep the interest rates low to keep this economy going".
I think that, if we don't have the low interest rates, the whole things stops working. And what's really interesting is that Obama, when he left his office, and look, I'm sure most of the listeners here are sceptical of Obama, and I was deeply disappointed, as someone who originally thought he might be positive, but I have a lot of criticisms of him; but he said, when he was leaving office, in an interview that he was, "Worried about a president who can carry on perpetual wars all around the world, a lot of them covert, without any accountability or democratic debate". I'm worried too, and that's where we are today.
I guess what I'm saying to you is, there are structural forces which are pushing us in this direction, there's very little public knowledge about wars, the public isn't involved with paying for them, and it doesn't really seem like there's a fix on the road map, from the fiat side.
Peter McCormack: So, simple question, why have these wars, if they destabilise regions, they put a higher risk on the US from terror, if they destabilise the US economy; what is the incentive to continue these wars, why are people continuing to choose to enter into these wars?
Alex Gladstein: Well, I mean each war has its own set of incentives. I mean, Vietnam was largely seen by US policymakers as an important step to fight the spread of communism. Obviously, I've come on your show and I've talked about Iraq before. But I think my thesis is this relates a lot to dollar hegemony and needing to protect our allies in the region. Again, these are concerns that are not known or even talked about by the average person.
Peter McCormack: Well, this is the other question I was going to ask you, because the last time we spoke, we discussed the petrodollar and you raised an issue relating to one of the incentives for the Iraq War, which isn't openly discussed: why did they lie, why did they want to push us into the war? I think you told me that Saddam Hussein was going to start trading oil as a petroeuro, and that was one of the reasons that could have been why the US went to war with Iraq again. Are you now connecting the dots from this to that?
Alex Gladstein: Yeah, I am. So, I'll try to break it down. The dollar is the world reserve currency, which was something that was originally created essentially at Bretton Woods, where we basically told the world, "Listen, you're not going to use gold anymore, you're going to use dollars. But don't worry, we'll pay you back in gold whenever you want". Then, we broke that promise, we defaulted on our debt in 1971, and then we needed to find another way of fixing the dollar to value, so we went to the Saudis and said, "Can you just price all of your oil in dollars and only accept dollars?" and they said yes, and this helped to drive a lot of interest and demand for dollars.
Peter McCormack: And, "Here's some fighter planes and some missiles".
Alex Gladstein: Yeah, of course. There was this whole deal where we would protect them in exchange for them doing this. That was kind of enough, the petrodollar system was enough to push the world in a direction where the dollar and the Treasury, let's say, the dollar and dollar debt became these most important instruments in finance in the world. Today, we've been living off this, because at first we had to force other countries, literally, to buy our debt. In the 1960s, Johnson forced the West Germans to buy our debt, and then we did this pact with the Saudis in the 1970s. And, in the 1980s, we forced the Japanese to buy our debt at the Plaza Accord.
Then we also, in some ways, were sort of pushing the Chinese to buy more of our debt. There was, between 2002 and 2008, a whole bunch of trade wars, or whatever, between the US and China, and we were just trying to convince them to buy more and more of our debt as a result of this. That worked for a long time. Foreigners financed a huge percentage of our wars. I think, even in the first decade of Iraq and Afghanistan, they financed about 40% of our wars. They financed a lot more than that of the previous wars, but that interest is drying up. And today, as I think we've said here before, the US Government is the majority buyer of the debt.
Now, it's interesting, because if you look at the idea of a military build-up, obviously a government has to borrow to do this. So, there's three big military build-ups that I would point out. In the 1960s, we had the military build-up for Vietnam; the 1980s, we had the Reagan military build-up against the Soviets, which was triggered by their invasion of Afghanistan; and then, in the 2000s, we had the military build-up after 9/11. These all led to different financial crises.
The military build-up in the 1960s led to the devaluation of the dollar and the breaking of the gold standard; the build-up in the 1980s led to the savings and loan crisis, and the huge stock market crash and the recession at the end of the 1980s, early 1990s; and the military build-up in the 2000s led to the subprime crisis and the Great Financial Crisis. So, these military build-ups are not fully smoothly sustainable. They do result in financial crises.
Now, we haven't had a currency crisis since the 1970s, because everybody else wants Treasuries still; we still have that lingering desire that the US Treasury is still the premium thing in the world that you would go to for safety, it's the thing that people most trust. Maybe they don't really trust the US Government, but they trust us more than Chinese debt, or even British debt.
So, for now, the system still works, and we can do stuff like what we did in March 2020 when literally, when you think about what the crash was in 2020, it was the financial markets, which are very smart saying, "Oh, look, there's a pandemic coming that's going to be very deflationary and everybody's going to stay home for a while. We're going to price that in", and the markets started to go down. It's almost like a biological system.
The US Government said, "No, no, we're going to come in and we're going to buy not just public debt", I told you they bought trillions of dollars of public debt to keep the value of US debt up, keep the borrowing costs down of things like wars, "but also private debt", and this isn't that much discussed. Arthur Hays talks about this in one of his recent posts. The US essentially nationalised the private credit markets also. They didn't have to buy that much, they bought, I think, something like $10 billion or $15 billion of private credit, but it was enough for the market to say, "Oh, look, the Fed's got our back". So, there's a psychological component to this as well.
When you're out there in the markets and you know that the Fed is going to step in and buy, whether it's public or private debt, you're going to be more willing to extend it. And then, that's of course their point, but it causes a system which continues to grow in that direction. I mean, we just topped $30 trillion in debt the other day. And, I think that as long as the US Government has the global reserve currency, unfortunately I think you see these wars continue.
I think though, as we've discussed here, they may not be forever. As Lyn has pointed out on your show before, we're at all time levels of -- the debt-to-GDP ratio is past where it was in World War II, so we're the most indebted we've ever been, and there's not really a clear way out here. So, I think again, we're on life support here. The US Government, I thought this stat was insane, they've been buying $1 million of assets every minute since March of 2020.
Peter McCormack: Every minute?
Alex Gladstein: $1 million of assets every minute. Now, I'm talking about subprime mortgages, I'm talking about government debt. That is keeping the value of American debt higher, it's keeping the interest rates lower, and again it's allowing us to pay for these wars, which again the public just isn't really involved in.
I spoke to a former securities trader, and he told me that the bond market is a check on politicians. I mean, think about it. If people start to question America or Britain, or any other country, and they start to question the sustainability of what we're doing, then they're going to buy less of our debt, and then our interest rates are going to rise, and that's usually a corrective mechanism and it forces them to change.
But he says, "We've lost this check on politicians via the Fed action". Because our central bank is engaged in this basically debt monetisation, there is no check on political power, and this is all connected with, in my opinion, the modern monetary framework. I raised this the other day on Twitter and I was kind of tongue-in-cheek, but I said, "Our MMTers neocons?" and of course they're all like, "No, we're not neocons", but I would actually say that if you're an MMTer, maybe you hate war, that's fine, I get it.
Peter McCormack: "But all neocons are MMTers".
Alex Gladstein: "But all neocons are MMTers", they have to be, this is the only way their wars work. And when I say "neocon", what I'm really talking about is people who believe that these forever wars an important part of America and our identity. And people like me obviously don't think they are, and I think we can be smarter as a country. But unfortunately, we are in a financial reality today, where we're still in the age of dollar hegemony, and politicians have figured out that they don't want to talk about taxes or war bonds, they just want to borrow from the public for general purposes, and then decide what to go do with that money.
I thought this was a funny thought experiment. What if all of the bonds that the US Government sold to pay for war stuff were labelled as such? What if there were specific Treasuries that were War Treasuries? Would they trade at a discount? My thoughts are, "Yeah"! Think about it this way. If you have institutional investors getting pressured to buy green bonds, or to go away from fossil fuels, could you imagine the pressure on going away from financing war? We don't have that, it's completely a blank cheque. When the government raises money, you don't get to choose what they're going to spend it on, so we don't live in that world.
At the end of the day, I agree with Sarah Kreps' thesis, that maybe this breaks democratic peace theory, maybe fiat money breaks democratic peace theory, and I don't know if there's a fix for that, I don't know how, in the fiat system, you go back to a world where there's restraint on war, and this is what the MMTers don't acknowledge, that yes, the same mechanisms are at play here for war, for entitlements, for all kinds of other things, but they don't talk about the war piece. And if you have governments that are just going to spend, spend, spend, guess what? They're going to spend on wars, and I think that's important for us to talk about.
So, I've heard two suggestions of things that could be done in the fiat system to be more responsible as a global power when it comes to war, and avoid unethical fights like Iraq. One would be National Service. That's impossible to consider today, we're not all going back to war, we're just not. The other one would be taxes and again, especially the Democrats have been averse to this. It's considered crazy talk to suggest a war tax. So, we're just going to keep borrowing.
Peter McCormack: Because they can hide it.
Alex Gladstein: Yeah, because they can hide it, because it's not on your taxes, you don't see it, and a lot of the implications may be hidden to you, especially if you're -- asset inflation, when it's going well, most people enjoy it, at least people who have a lot of assets, who are most vocal in the political world in Washington, it's great for them.
Look eventually, you get price inflation. Eventually, if the debt-to-GDP ratio gets too high and you keep financing things like war through debt, and the government does fiscal spending into the real economy, you get what we see today, which is the result of not QE, per se, but because of all this fiscal spending that the Treasury was doing. I mean, they were printing stimulus cheques to trillions of dollars to Americans. Obviously, that's going to cause an increase in CPI.
Now, the question is, can they reverse that? We don't know what's going to happen in the next year. I'm someone who thinks it's going to be extremely difficult for the Fed to hike rates. And again, to our conversation here, and to which it's never mentioned, one of the reasons for that is that they don't want to incur an obstacle in what they call National Security. What used to be called The Department of War is now called The Department of Defence. I mean, it's like this euphemism, right. But that's how the power that we have as citizens, to check our leaders, has been taken from us. A lot of it has been through this idea of debt currency and fiat money.
So, the question is, what would this look like in a Bitcoin standard; or, a question? I think it would be different, because in a Bitcoin standard, the government cannot do the hidden wars, or what Kreps calls "hide-and-seek wars", or these credit card wars; it's not possible. They would have to necessarily raise the money for war through taxes, or through some sort of consensual process.
Peter McCormack: Can you define a Bitcoin standard in this scenario? Is it that the Bitcoin has replaced the dollar; or, Bitcoin has become the global reserve asset?
Alex Gladstein: Yeah, when I said Bitcoin standard, I'm describing a world where Bitcoin takes the role that gold once had as the reserve asset. I think that fiat currencies, at least at the beginning of the Bitcoin standard, will still exist. They should still be pegged to gold in a range. It will be sort of like the gold exchange system, kind of like the Bretton Woods system, "Hey, you guys have all those dollars, but you can redeem them for gold", or maybe it will be like, "You can redeem them for Bitcoin", and that keeps some level of restraint.
In that system, as you saw in US history, you couldn't do credit card wars for World War II, it didn't work, because it was still backed by something. And again, I understand that that prevented us from a lot of entitlements in education. We can have that conversation, but we can't have that conversation without talking about the war piece. So, if it's a Bitcoin standard, you cannot do credit card wars, it's impossible; the interest rates would climb very high on our debt and it would be impossible to finance. So, governments will have to fund war through taxation and through specific war bond programmes.
Peter McCormack: Which is a free market for war.
Alex Gladstein: Well, it means that the citizens get to be involved, and they get to have a say, and I'm optimistic about that. I think that's going to be one of the single greatest externalities, or effects, of the Bitcoin standard, will be less unnecessary war. Again, if you have a World War II scenario, again which was financed half by taxes, and a consensual public that says, "We want to go fight the Nazis", that can be fought on a Bitcoin standard, 100%.
Peter McCormack: Unnecessary, aggressive.
Alex Gladstein: Yeah, World War I, impossible, no. I mean, impossible. Afghanistan and Iraq, impossible.
Peter McCormack: Afghanistan might have been something because of the response from the public of feeling attacked.
Alex Gladstein: Oh, let me clarify. A swift strike --
Peter McCormack: Yeah, a 20-year war, no.
Alex Gladstein: -- Gulf War-style, Colin Powell-led, eight-month intervention could have been financed, yes, absolutely. We can defend ourselves just fine on a fixed monetary standard. But a 20-year forever war that very few Americans even knew what we were doing? No, it's just not possible, they're not going to pay for it. I mean, essentially, the Afghanistan War became an exercise in foreign aid, which Americans aren't very kind towards in terms of a major priority. They'd rather see domestic aid, basically.
So again, I think you may have a situation in a Bitcoin standard where there still are wars, what we would call maybe "just wars", or wars that matter a lot to a particular community or population or city state, or whatever kind of structure is going to do the war fighting; but there's going to be a back and forth and some accountability there, because you can't do a credit card war on a Bitcoin standard. So, I'm very optimistic about that. That's one of the reasons I'm hopeful about the future, is because we may shift to a monetary regime where things like Iraq are impossible.
Peter McCormack: Wow, okay. That's interesting, because there are people who think that under a Bitcoin standard, there will be no war.
Alex Gladstein: I don't think there will be no war. But I think forever wars are really difficult. I know there's a guy, Matthew Pines, he's sharp and he's been writing about this. And you have to acknowledge, of course, that some war fighting is deflationary, it gets cheaper, drones, things like that. But at the end of the day, it's still a cost, and in a Bitcoin standard, there's no free lunch. There's no free lunch ever, but there's no free lunch that you can quietly impose on the population; they have to be involved in the conversation, or else you're not going to have the money to do it.
So, I think that this idea of governments again essentially borrowing from the future and causing currency devaluation and asset inflation today, to fight wars and to occupy other lands, is just not feasible. But again, short, clear, narrow commitments, 100%. There was a great quote in Kreps' book, from a politician who talked about how he lived through World War II and said, "It was such a clear, narrow war with an obvious mission. We were going to defeat Hitler, and then we were going to come back home".
Then he says, "You cannot say what the mission is in Afghanistan or Iraq; there is no mission", and that's concerning. I mean, the mission was essentially to have a stable government ally? There was no clear, overriding thing. I guess what I'm saying is, at least in my country, if you look in history, we showed an appetite for clear, narrow wars that had an objective that seemed reasonable, and Americans were willing to sacrifice for that. We do not show an appetite for unnecessary, unethical wars, and therefore that's why governments have resorted to borrowing to pay for them, and I think a Bitcoin standard fixes that.
Peter McCormack: A lot of this is concerning because of the size of the numbers that we're dealing with here. One-third, did you say, of tax receipts and a 3% interest rate will be used to finance --
Alex Gladstein: Well, let me just give you, so today, in 2022, the US Government -- we'll use my government as a proxy. For anyone listening, your government has a similar dynamic probably. $6 trillion is what we're going to spend this year.
Peter McCormack: On?
Alex Gladstein: On everything.
Peter McCormack: On everything.
Alex Gladstein: $6 trillion on everything. Now, only about $4 trillion of that is coming in through taxes and through other revenue sources, so at least $2 trillion of it, let's say, is new debt that we're adding to this debt pile that keeps growing, that's now at $30 trillion.
Peter McCormack: But of that $6 trillion, $1 trillion is interest?
Alex Gladstein: No, the $1 trillion of interest has been paid since 2002 to today. Of that $6 trillion, it's about $300 billion, is our interest on debt; $300 billion of the $6 trillion, and a lot of that's military related. $750 billion for military spending; it's the single largest non-discretionary item on the menu out of that $6 trillion, is military, plus the interest. So, you're talking close to $1 trillion out of $6 trillion for the 2022 fiscal year that's military-related, and quite a bit of that again is being paid for by borrowing and by pushing it off to the future, so it's a significant percentage of our costs. It's more than what our allies pay.
If you look at other NATO countries, they spend less on military, partly because we're there to be the protector of last resort!
Peter McCormack: Was this what Trump was complaining about, trying to encourage people to increase their spend?
Alex Gladstein: Of course, yeah, it is. And a lot of what he said on these matters had a very big grain of truth to it, 100%; we do spend more. But he was also tapping into concerns in the public about, "Should we really be spending all this money on all this stuff?" and look, at the end of the day, he was happy to line the pockets of the military contractors. But there is a deep-seated question, I think, among a lot of Americans today about our interventions abroad. Anyone who looks into it closely enough is just asking big questions.
I mean, the fact that the biggest war of the last 40 years, we don't even know why we went and fought it, Iraq, should cause concern among Americans. And again, I believe that war was highly unethical and I believe it was only able to be fought the way it was fought, and for the duration it was fought, by this easy monetary regime, borrowing philosophy, that didn't involve the public at all from a financial point of view. We were happy to complain about the Iraq War in the newspapers, and we were happy to protest; but at the end of the day, we didn't have to pay for it.
Peter McCormack: I'm not sure everyone in the newspapers was complaining!
Alex Gladstein: Yeah, to be clear, I understand that in February of 2003, the majority of Americans supported the war. They were brainwashed, of course by, "Oh, the yellow cake" and, "Al-Qaeda used Iraq as a base" and, "They have nukes" and all this stuff.
Peter McCormack: Complicit journalists.
Alex Gladstein: Totally. But by 2005, 2006, 2007, the war became unpopular. So, people got tired of it. The problem is, because they weren't paying for it, there was not a whole lot they could do. So, a democracy, just to conclude that idea, a healthy democracy needs some way for the people to hold their government accountable for war. And the point of Kreps' book is that this is broken now, essentially because of the fiat currency system.
Again, I don't know if there's a way out, but I do think the Bitcoin model, which again, it's not going to be something the US Government goes out and says, "Hey, we'd love to be less war-fighting, let's use Bitcoin", no, that's not --
Peter McCormack: Of course!
Alex Gladstein: It would be a multidecade shift, but it could happen. And the results could be really promising, and I just think that these credit card wars are so terrible for our society at large.
Peter McCormack: Well, you and I are similar in that we're both proponents of democracy, we'd rather see it strengthened.
Alex Gladstein: Yeah, but how do we fix democracy? That's the thing. A lot of people are, "Bitcoin's anti-democratic", and we can have those debates all day long, but this would help address a key flaw in democracy. A key flaw in democracy is the fact that the social contract between the citizens and the people they elect to represent them is broken by the ability to finance wars through borrowing, and I think Kreps' book just makes this case very convincingly. That can be fixed by adding back some sort of restraint to the monetary system.
Peter McCormack: And it's not about a separation of money and state, it's about having a reserve asset that is decentralised and therefore, can't be switched on and off as a government chooses?
Alex Gladstein: Well, it's both though. It's about having a decentralised reserve asset for everyone in the world, but it's also the fact that that's only achievable by separating money from state.
Danny Knowles: Can I ask a question on that?
Peter McCormack: Yeah.
Danny Knowles: So, I totally agree that obviously, the citizen should have control over where their money's spent and on which war, but if it was in a Bitcoin standard and someone like China chose to continually debase their currency at the expense of their people, could they not outspend someone like the US in a war?
Alex Gladstein: Yeah, so great question. An important point to consider is that gold failed as a check on government power. Governments went off the gold standard to fight World War I, and then they never really went back, in a sense. That was possible because gold was centralised in the hands of custodians, and that makes it possible for governments to go off the gold standard, and then just debase their currency to pay for war. It's what Germany did, it's what your country did, Britain did this, etc. I mean, you could argue the Americans did it in Vietnam. We ended up basically saying, "Just kidding, we're not paying you back any more gold, we're running out". That is something again that's possible because gold is centralised, and in the hands of custodians.
Bitcoin's in the hands of its users. So, governments at the moment don't control all the Bitcoin, people do. So, if a government like China or America, or anyone else decided to start debasing its currency, the citizens would just have a check on that. In the same way that a bond market is a check on a government power, Bitcoin is a check on what governments do, because citizens can just save their Bitcoin. And if the government starts debasing their currency, the Bitcoin gets more valuable, and it just defends them. Does it stop a government from completely and thoroughly destroying their fiat currency? I'm not sure. It seems like some governments are happy to do so, but at least it gives citizens a defence mechanism.
I mean today, you'd be powerless without Bitcoin in this world of credit card wars; there's literally nothing we can do to stop them. I mean, what can you do? We've tried protesting, we've tried writing up bits in the newspaper, we've tried electing different kinds of politicians. We haven't been able to stop the forever wars; that's why they're called forever wars. I mean, they just continue in different ways, and Obama was famous for saying, "[He] didn't come into office looking for dragons to slay", but by the end of his office, he was fighting more wars than when he went into office, and he started getting bogged down in fighting ISIS, and stuff like that. Again, very little congressional oversight over any of this stuff, and certainly very little public knowledge.
So, I think that in a Bitcoin standard, you just have less of an incentive to do these broad-based, searching kinds of occupation-type things. And if the government does choose to debase the currency, citizens have protection.
Peter McCormack: It feels like this is another important string to the bow to the ammo of why we should care about Bitcoin, and why we should completely and utterly ignore shitcoins, why Bitcoin is this unique property in this crypto ecosystem.
Alex Gladstein: Yeah.
Peter McCormack: I'm just not sure how many people care.
Alex Gladstein: No, but before we get to that, I think it's important to point out, just generally speaking, that this goes for all government expenditures. So, most of what the government spends its money on today in my country is on entitlements. So, under a Bitcoin standard, that would also be restrained. But I think that people care more about entitlements than wars.
So I think that what you're going to see, if you look at public polling at least, is in a Bitcoin standard, there'd be constraint certainly; but with the money that is spent, it would be more directed towards domestic infrastructure, education, healthcare, etc, and maybe once in a while, a very important war; but not, again, just these decades-long, loose, amorphous wars that people don't know about. That would be the first thing off the chopping block. They just enrich military contractors, they don't really help the American people. That would just be one of the first things off the chopping block.
As far as cryptocurrencies, I mean, look. All money is political except for Bitcoin. I mean, you have fiat currencies, which of course are manipulated, by their very nature, by the governments that issue them. Most money in the world are banking instruments, which can be controlled by the state, whether it's by the state asking, "Please freeze that bank account", or by the state changing interest rates to manipulate the amount of money in the system. You have fintech credits, like most of the money we use on a daily basis today is Apple Pay, or Alipay, or whatever it is, wherever you are, that's extremely easily censorable and freezable, as we saw the other day with GoFundMe.
Then you have the other cryptocurrencies, all of whom are controlled by some group of people who are going to change the monetary ruleset at some point, whether that's an ongoing debate, like it is in Ethereum, where they aren't sure how much money's going to be printed, because they haven't made up their mind yet; or, whether it's something that's baked into it, like in whatever, "Dogecoin's going to keep printing forever".
The point is that Bitcoin stands alone in the world. Even gold is controlled again by -- gold was completely demonetised by the US Government in the last 100 years. Bitcoin stands alone in the world as the only currency that's non-political, and that's why I think it's the only one that has a shot to be this neutral reserve asset, that would be globally restraining, equally among all players. And, look, it has a really great chance of doing that, I think, right now. I'm pretty bullish on that eventually happening.
Peter McCormack: The US defence budget always appears to be the one budget that never seems to get cut. It's $750 billion, did you say?
Alex Gladstein: Yeah.
Peter McCormack: But there obviously are various cuts to other services, whether it's education, health, welfare.
Alex Gladstein: Well, they cut taxes. The point is that it's a defence budget, it's not supposed to be an "occupy a foreign land and steal its resources" budget. That would be a different budget, but it's all lumped under defence. Again, I think in a system where citizens have more control, they would be more interested in that $750 billion. Right now, what am I going to do? I have nothing.
But in a system where the government needs my Bitcoin at some level, and the commercial sector needs my Bitcoin to expand and grow, there has to be more of a two-way street, there has to be a dialogue here. And I suspect that that $750 billion would be a lot closer to, whatever, $300 billion or $400 billion if it was under a Bitcoin standard, because we're just simply not going to pay for these occupations of these foreign lands that are never going to matter to us, and whose outcomes are not even positive.
I thought that this was an amazing thing that the MMT advocate, Kelton, said at the end of her book, and this is something she concludes with, and it made me joke about the neocon MMT thing, because it sounds like somebody who's so sure of America being good all the time. Look, I love my country, but I think we're not good all the time, and I think we're very flawed and we have to be humble about that, but what I'm about to read to you is someone who it doesn't really sound like she thinks that we've done bad stuff, and that's why I'm so concerned about her pushing this idea of unrestrained spending, "What matters is not the size of the so-called debt or who holds it, but whether we can look back with pride, knowing that our stockpile of Treasuries exists because of the many mostly positive interventions that were taken on behalf of our democracy".
I mean to me, that just sucks so rich, especially in the age of two wars, which most Americans, at the end of the day, didn't pay for and weren't that interested in, Iraq and Afghanistan.
Peter McCormack: Well, they will pay for it, or their children will pay for it, or they'll pay for it out of their pensions.
Alex Gladstein: Correct, but they weren't knowingly paying for it, they weren't involved in that at the outset. And, I mean one thing that should be said is that borrowing for war is much more expensive than just paying for it up front. I mean, the interest rate alone that I was describing to you is insane. I mean, had we just paid for the war upfront, through taxation or whatever, we wouldn't have the $1 trillion on interest payments, or the $6 trillion on interest payments by 2050.
Peter McCormack: And also the fiscal control of that budget.
Alex Gladstein: Well, yeah. I mean, look, you also wouldn't -- again, what I'm pointing out is that there is some sort of correlation here between the war on terror and these expansionary wars and this loose monetary policy and these low interest rates. They're connected and I guess, again, my thesis is that this war on terror wouldn't really be possible in a high interest rate environment. So, there needs to be government intervention in the bond markets to fight war, just like there needed to be in World War I for the British Government to finance its war.
It tried to get the public to pay for it and the public said no, basically, "We're not buying your war bonds". So, the government did it anyway. And that is just such a great and tragic little example of where we are today. The government probably would love the people to pay for the Iraq War, but they were like, "There's no way that is going to happen". Maybe they're polling in favour of us going, but if you look, there actually has been extensive polling on taxes for wars. Nobody wants to pay for them.
The difference between, "Is it a good idea for us to invade?" and, "Did you support it?" is a very different poll set in any country.
Peter McCormack: And, "Do you want to lose 10% of your pension?"
Alex Gladstein: Yeah and, "Are you willing to pay for it?" Very different, whether you talk about India's wars in the late 1990s with Pakistan, or even with Israel. Israel hasn't issued war bonds since the 1980s. So, even they've been borrowing heavily. So again, any of these democratic-structured countries are, in my opinion, breaking because of this. Even Denmark, even these other countries, they're doing things that are undemocratic, because they're able to manipulate the fiat system. And again, I don't think that that's fixable, because the fixes would be a full draft national service, or taxes, and people aren't willing to sacrifice their blood and treasure for these wars. If that's the case, we shouldn't be fighting them.
Peter McCormack: When I interviewed Vijay Boyapati last week, he says, "Under a Bitcoin standard you'll most likely see the breakdown of democracy as well into smaller geographical units, potentially balkanising the US, or even heading towards city states".
Alex Gladstein: Yeah, I mean it's possible. But again, I think that at the end of the day, you have this thing that the Bitcoin standard would instil back again, in that it would make a democracy quite capable of this idea of, you have Republican caution, or tyrannical caprice. I mean, again, the whole concept of democratic peace theory, one of the whole reasons I believe democracy is better than a king or a dictator or a city state ruler, is that there is this accountability, that if we don't like what you do, we're going to replace you with somebody else, and that tends to be quite helpful.
That is being undermined by the fiat currency system. It might work better in a Bitcoin system, it might. So, this all remains to be seen, but will nation states shrink in size, or at least become more like a United States-type model? Very possibly. But look, l think politicians who are closer to you, who care more about you, are better anyway. So, maybe you don't see the UK collapse, but maybe you see the powers just getting a lot closer to the communities themselves. You know, maybe Bedford doesn't rely on London anymore for fiscal stuff, maybe it's much more local. Maybe you're still England, or the UK, but maybe you all have a lot more say over what happens.
Peter McCormack: But to Danny's point, do countries under a Bitcoin standard, or the first movers under a Bitcoin standard, become vulnerable to those that aren't?
Alex Gladstein: I think it's the opposite, and this is something Fidelity pointed out strikingly in a recent study, is that the countries that adopt Bitcoin first -- I mean, the El Salvador thing is very unlikely. You're probably not going to see countries do legal tender; I think that eventually comes. But I think again, what you see is maybe, "We're going to buy 5% for our Treasury", or whatever, rather put on as an asset in their central bank balance sheet. And that is going to be a huge advantage for those countries, I think.
Again, look, if we go to a Bitcoin exchange standard, like the gold exchange standard, like the Bretton Woods system for Bitcoin, then your ability to have a strong fiat currency will be completely reliant on how much Bitcoin you have as a country, basically. So, I think countries that get involved earlier would stand to have stronger fiat currencies. I mean, that's why I think the US Government should…
The long-term impact it might have on our inability to fight these unethical wars is sort of a secondary consideration for me. I think that the US Government should adopt Bitcoin now because it will advantage Americans in the future, and it will make our country stronger and it will make our currency stronger, at least in the near future.
Eventually, I don't think we have fiat currencies, but I think there's a long, transitionary period here, where you have dollars or euros, or whatever they are, and we kind of enter into this exchange system, where they're pegged in some way. And if you care about your country, you're not going to want your country to be late in that, because then you're going to have a pretty weak fiat currency.
So, that's the way I'm thinking about it, although who knows? It's a brave new world out there. The crazy part is we get to watch it all happen, which is something that people in history books in the future, if we still have them, will say, "Man, it must have been crazy to be around then".
Peter McCormack: They'll be saying, "Have you read Alex Gladstein's series on Bitcoin?"!
Alex Gladstein: "Did you hear his interview on Peter McCormack's show?"!
Peter McCormack: No, they'll be talking about, "Have you read his trilogy of books?"
Alex Gladstein: Yeah, well look, I think exploring this idea of the price of war has been so illuminating for me, because I just didn't know about it, I didn't know about the history of how we fought wars in the past, and how it's actually tied to democracy, and I think it's a fascinating topic that people should become educated about. And then, maybe you start thinking differently about government intervention in the bond markets.
I'd like to see more dialogue about it, basically, I'd like to see war more discussed and not less discussed, in finance and economics more broadly. I mean, there's a big book called Stigum's Money Market, that's kind of used as the bible for anyone trading in the money markets today, and it doesn't mention war at all, not a single time.
Peter McCormack: I'd like to see you debate Stephanie Kelton, but with her unaware that this is --
Alex Gladstein: I'm actually really interested, because she worked for Bernie, who was against wars. So, how does she square this? How does she write a book that doesn't mention Iraq or Afghanistan at all, and at the end of book, basically says she's proud of the wars we fought through debt?
Peter McCormack: Maybe because she's full of shit!
Alex Gladstein: Maybe, but I would actually like to see her defend that point, so yeah.
Peter McCormack: Well, so would I. That's why I think it would be an interesting debate, the discussion around MMT and its implications, and then you can just slip this one in and ask her to defend this.
Alex Gladstein: Yeah, and then people just say, "No, MMT's just a framework for thinking about domestic financing". It's like, "No, but what about if your country's largest single domestic financing expenditure is wars abroad?" you can't separate the two. So, let's just talk more about it. We've entered into a dark age that was predicted by Tocqueville, by Adam Smith.
I mean, Adam Smith said, I have a quote here from him that I thought was powerful. He says, "The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it; and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so". So, he was able to observe that hundreds of years ago, that the people play this role.
We play an important role in preventing our government from doing stupid wars. That role has been taken from us through this fiat currency system, this debt-based system. And again, Adam Smith spoke about this, Mill, Tocqueville, so many great thinkers in the enlightenment and afterwards, they all saw this, they saw the writing on the wall, that this would be a threat for democracies. And lo and behold, it's happened, and it's really depressing that war is just such a small part of our public discourse.
I think there was some Pew polling that was done about ten years ago, in the peak of the forever wars, that suggested that when Americans answered these questions, they basically said that wars never came up in their conversations at home with family or friends, and that generally speaking, they don't really impact our lives. That's dangerous. If we're going to be in these wars, it should be part of our conversations and it should be part of our lives. And if we're not willing to have a national service, then we should at least be willing to pay for them. And if we're not, that means the government shouldn't wage them, and this is pretty clear to me.
MMT makes it impossible for us to have accountability over our government in war. It also makes it easier for the government to do entitlement spending, I understand that, we can have that dialogue; but it also removes this ability for us to have that constraint. If the government can literally just create the money to pay for the tank without asking us, then that's a problem in my book. But I understand there's different opinions here.
Peter McCormack: There's counterarguments?
Alex Gladstein: No, again the counterargument is that we would have less entitlement spending, we'd have less public healthcare, we'd have less public infrastructure works and less progressive stuff. But my counter to that is, really? Yes, we'd probably have, in total, less; yes, of course, but not in proportion to the forever wars.
If we all got in a room, 50 Democrats and 50 Republicans in America, and said, "Look, we've got to cut X", and it's not politicians who are bought by lobbyists, but actually citizens, I'm pretty sure we would opt to not pay for the invasions and occupations of these foreign lands. That would be one of the top things, certainly before infrastructure spending or healthcare or education, etc. So, let's keep talking about wars, let's keep them in our dialogue. I think it's very, very important.
Peter McCormack: When's this work going to be finished?
Alex Gladstein: Hopefully by the end of the month, I'll have an essay out exploring this and going very deep into a lot of these different areas. And, again, getting people to think about the current monetary system and the relationship to the era we've lived in. I mean, this shaped my life. I'm 36, I was totally shaped by 9/11 and by the Iraq War, and it's interesting to me that someone who could be shaped by it and go to school for international relations, and have a career in human rights, and be pretty inquisitive, be totally ignorant about how these wars were paid for.
I consider myself probably more educated than most people about this topic. I mean, I went to school for four years studying, "Why did we invade Iraq?" and all that stuff, and I have a degree in international relations, and I never even thought about it, until I started getting into looking at things from a monetary point of view. So, I'm grateful that Bitcoin has helped me ask these questions.
Peter McCormack: Okay, so this article out at the end of the month, a book coming out maybe April?
Alex Gladstein: Yeah, definitely the book, Check Your Financial Privilege, that will be a lot of fun.
Peter McCormack: And then, what next? What's burning?
Alex Gladstein: Well, what next is the Oslo Freedom Forum.
Peter McCormack: Yes, of course, I'm very excited about that. I've just accepted.
Alex Gladstein: That's going to be amazing. More details on that soon, but we're going to have a lot of fun there. And just a continuing worldwide quest to talk about Bitcoin and money and educate people about it, so that they can use it if they need it.
Peter McCormack: Well, continue your amazing work. I always feel privileged just to sit here and listen to you. I've learnt so much from you over the years I've known you.
Alex Gladstein: Well, look, politicians have used this fiat system to shield citizens from knowing about what they're doing, especially with war. Bitcoin is our shield to prevent that from happening, and it's pretty awesome that your job is to go around and talk to people about Bitcoin, that's great.
Peter McCormack: It's amazing, but look, your work is incredible. I'm going to embarrass you, or maybe Jeremy a little bit, our camera guy. Jeremy said, "Alex Gladstein is the person I listen to most outside of", was it my podcast, or -- yeah, all podcasts, you're the guy he listens to most, so you've got a fan here.
Alex Gladstein: Well, I'm deeply grateful for that, and I promise to keep hustling.
Peter McCormack: Yeah, keep doing it, man, amazing work and we're going to go out and have some dinner tomorrow, aren't we?
Alex Gladstein: Yeah, we are.
Peter McCormack: Looking forward to it. All right, Alex, keep doing your good work, we'll put everything in the show notes, it's @gladstein on Twitter, Alex works for the HRF. Look at the amazing work they do there as well, not only in the traditional work in supporting human rights, but also in supporting the Bitcoin ecosystem. Take care, man.
Alex Gladstein: Take care.
