Original Title: iOS Warfare
Original Author: Arthur Hayes
Compiled by: Peggy, BlockBeats
Editor's Note: From the Gulf War to the global war on terror, and to the Afghan "surge," U.S. military actions in the Middle East have almost spanned the past few decades of international political cycles. Along with these wars, there not only arise geopolitical conflicts and massive fiscal expenditures but also a frequently overlooked variable: monetary policy.
This article reviews several key wartime nodes since 1990, elucidating the subtle relationship between war, fiscal pressure, and Federal Reserve policy: After multiple Middle Eastern conflicts, the Federal Reserve often stabilizes the economy and financial markets through interest rate cuts or easy monetary policies. Based on this, Arthur Hayes (co-founder of BitMEX) proposes an observation from a market perspective: when geopolitical conflicts escalate and fiscal spending expands, a loose monetary environment often follows, which may also significantly impact risk assets, including Bitcoin.
The following is the original text:
Under the guidance of the "most peace-loving president" in American history, Donald J. Trump, the U.S. "Department of War" has collaborated with OpenAI to launch an offensive, proxy-style AI weapon: a lethal new Apple iOS. Once implanted within a country's network infrastructure, this operating system would attempt to provoke a "regime change." Such a regime change often accompanies indiscriminate bombings of military and civilian infrastructure, resulting in massive casualties, with costs quickly running into hundreds of billions and potentially as high as trillions of dollars.
Once local political resistance is obliterated, a new political elite, nurtured by the United States, emerges. They draw funds from U.S. taxpayers while also extracting resources from local society, depositing these funds into their asset pools within private wealth accounts at JPMorgan Chase. Over time, public dissatisfaction accumulates against these "Vichy-style regimes," which the U.S. has propped up in the Middle East, often leading to violent overthrows, replaced by more localized and frequently more reactionary, oppressive, and bloodthirsty political structures.
Thus, this entire "sales cycle" is completed, and OpenAI can smoothly launch its next generation of products. Are you already eagerly awaiting an OpenAI IPO priced with an "infinite future P/E"?
Since 1985, the year my consciousness began recording human experience in this so-called "quantum continuum," "American Peace" (Pax Americana) has engaged in a crusade against Middle Eastern oil-producing countries and key oil and gas pipeline geopolitical nodes in the name of "justice," and this has hardly ever paused. Take a look at this chart generated by Perplexity's latest Computer model and appreciate its "grandeur."
From a macro perspective, this chart attempts to present the human costs of war. It focuses on three core metrics: the proportion of U.S. federal budget spending allocated to the Department of Veterans Affairs (VA), the nominal total expenditure size of the federal government, and the effective federal funds rate. The chart also marks a series of representative (but not exhaustive) missile strikes or full-scale war events initiated by the U.S. against Middle Eastern countries.
From the data, the spending growth for veteran care is nearly double the overall growth rate of the federal budget. More importantly, and this is the focus of this article, almost every time "American Peace" (Pax Americana) initiates a significant "selective war" in the Middle East, the Federal Reserve tends to quickly lower the cost of funds. Although every U.S. president during my lifetime has tried to convince the public that those Middle Eastern wars, which seem like video game-like depictions on the evening news, do not inflict real pain on the universe's sole "important human," the American soldier, the data clearly indicates that America's obsession with military adventures in the Middle East is consuming American lives in an extraordinarily costly manner.
It is said that "the ovarian lottery" made me born on this continent defined by human-drawn, wavy lines, known as "America." Throughout my forty years of life, whether under the "red team" Republican presidents or the "blue team" Democratic presidents, missiles have been launched against some "deserving strikes" in the Middle East, and full-scale wars have been initiated. It seems that once elected president, senior bureaucrats lead you into some super-secret room where they clamp your testicles with pliers, making you swear: within your term, at least one Middle Eastern country must feel the "fiery temperature of democracy," or face the consequences.
Regardless of whether you believe the current popular conspiracies that seek to explain why the U.S. bombards a Middle Eastern country, this chart presents a quite clear fact during my lifetime: since 1985, every U.S. president has engaged in military conflicts with one or more Middle Eastern countries. So, when President Trump now talks about potentially "assassinating" Iran's Supreme Leader Khamenei and openly supporting a "people's revolution" to overthrow the Iranian theocratic regime, we as investors must consider: how will our investment portfolio be affected when Trump steps onto the "political rite of passage" path that has been tread by previous U.S. presidents?
Considering I am just a simple-minded individual with a bit of "toxic masculinity" from the crypto circle, I judge that the logic of Bitcoin's price fluctuations is actually very simple.
The longer Trump invests in this exceedingly expensive action of "nation-building" in Iran, the more likely it is that the Federal Reserve will lower the cost of funds and increase the money supply to financially support this new round of military adventures for "American Peace" in the Middle East.
To validate this hypothesis, let's review the historical policy actions of the Federal Reserve following significant military conflicts in the Middle East since 1985.
1990 Gulf War: "Father" (President George H.W. Bush)
At the first meeting after the war broke out, the Federal Reserve chose to keep interest rates unchanged but indicated that if the war lasted too long, it might need to adopt monetary easing policies.
Here’s a direct quote from the FOMC statement, which was retrieved and organized by Perplexity for me.
August 21, 1990: "The increased uncertainty arising from events in the Middle East, along with the potential for economic performance to underwhelm expectations, makes the formulation of effective monetary policy exceedingly complex." "Several committee members believe that the developments are likely to point in a certain direction—specifically, at some point, policy will need to be eased to offset the economic weakening trend that was already evident before the oil price hikes."
Subsequently, the Federal Reserve lowered interest rates consecutively at its November and December 1990 meetings, describing the war as an important source of uncertainty influencing decision-making in a rather subtle manner. The Gulf War ultimately ended in March 1991.
"The significant decline in business and consumer confidence likely reflects not only developments in the Middle East itself but also the uncertainty regarding future changes in the region and its implications for oil prices."
In other words, despite inflationary pressure triggered by soaring oil prices, the Federal Reserve chose to ease policy.
2001 Global War on Terror (GWOT): "Son" (President George W. Bush)
The "Global War on Terror" rapidly unfolded after the collapse of the Twin Towers in New York. Shortly thereafter, Iraq and Afghanistan became targets for cruise missile attacks. To stabilize economic confidence, the Federal Reserve almost immediately accelerated the rhythm of interest rate cuts.
At the emergency meeting following the attacks, the then-Federal Reserve Chairman, known as "the Maestro," Alan Greenspan, stated: "Clearly, the events of last week have brought with them at least a higher degree of fear and uncertainty, which has created evident downward pressure on asset prices and increased the likelihood of asset price deflation, with clear repercussions for the economy. Therefore, I suggest lowering the federal funds rate target by 50 basis points."
Essentially, if the economic confidence under the "American Peace" system falters and leads to falling asset prices, the Federal Reserve must take swift action. And as always, the "prescription" is cheaper and more abundant money.
Another segment of the Federal Reserve's statement reveals a fact: when necessary, the Federal Reserve will fulfill its duty to assist the government in financing the war machine.
November 6, 2001: FOMC Statement
"Although reallocation of resources for strengthening security may limit productivity gains for some time, the long-term outlook for productivity growth and the overall economy remains positive."
2009 "Surge": "Holy Spirit" (President Barack Obama)
The ordinary civilians of Iraq, Syria, and Afghanistan might have thought that a Nobel Peace Prize-winning president would not rain hellfire on their countries. But it turns out that this expectation was merely an illusion, and false hopes are often the most lethal.
Although Obama did not initiate a new large-scale Middle Eastern war, he did indeed expand troop levels in the Afghan war (the so-called "surge"), viewing it as a "just war."
Given that the Federal Reserve had already reduced interest rates to zero by the end of 2008 and had begun large-scale "printing money" through quantitative easing (QE), there was almost no further action possible on the monetary policy front when Obama expanded troop deployments in the Middle Eastern war zone. The cost of funds was near zero, and liquidity was virtually unlimited. The U.S. war machine and its contractors naturally feasted on this.
2026 Iran: "Messiah" (President Donald Trump)
Fate seems to have played a rather ironic joke: after surviving an assassination attempt during the 2024 presidential campaign, Trump almost feels "reborn." Just as Kanye sang: "Jesus walks." Now I guess I can talk about Kanye—after all, he has "humbled himself," right?
Trump's performance in office, along with the chances of his "red team" Republican colleagues being reelected in November, will largely depend on whether financial asset markets rise or fall and whether oil prices drop or increase. Since the overthrow of Iran's Shah Pahlavi in 1979, promoting regime change in Iran has long been an obsession of the elite political class in both U.S. parties. In this context, the Federal Reserve possesses political "legitimacy" to significantly ease monetary policy. If the Federal Reserve fails to fulfill its duties by providing finance with cheaper and more abundant money for plans to "rebuild Iran as a client state of the U.S.," it will instead be viewed as "unpatriotic."
Trading Strategy
At this moment, we still do not know how long Trump will maintain interest in reshaping Iran’s political structure—this could cost hundreds of billions or even trillions of dollars. We also do not know how much political pain he can endure in the face of pressures from geopolitics and financial markets before deciding to back down.
Thus, a more prudent approach would be to observe the situation's development for now.
The right time to "boldly enter the market" would be after the Federal Reserve lowers interest rates or resumes printing money to align with government policy objectives in Iran. At that time, it would be opportune to buy a significant amount of Bitcoin and quality "altcoins" like $HYPE.
Take care, friends.
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