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The global movement against free trade and capitalism that burst into public consciousness at the 1999 protests against the World Trade Organization coalesced around the idea that Western elites had ensnared Third World nations in a debt trap to coerce them into adopting neoliberal policies.

When poor nations couldn’t afford to repay what they owed the World Bank and the International Monetary Fund (IMF), these Washington-based organizations agreed to restructure the loans of debtor countries, if they would agree to move in the direction of privatization, deregulation, and free trade—a policy agenda pejoratively termed “shock therapy.”

Leftist leaders like Hugo Chávez claimed that this was part of a pattern of elite subjugation of Latin America that stretched back to Christopher Columbus. He used it as evidence to support Venezuela’s turn toward Cuba-style socialism.

Columbia University’s Joseph Stiglitz, a former chief economist at the World Bank and a Nobel Prize–winning critic of free market capitalism, promoted the same narrative. He blamed the Washington Consensus for pushing policies he deemed too radical and wrongheaded to ever get through in the U.S.

Unlike Stiglitz, Alex Gladstein identifies as a classical liberal. The Human Rights Foundation, where he works as chief strategy officer, condemns socialist dictators like Chávez for their crimes against humanity.

Yet in his recent book Hidden Repression: How the IMF and World Bank Sell Exploitation as Development, Gladstein argues that the story told by the radical left about these two organizations is largely correct.

His work over the last few years has focused on “monetary colonialism,” in which the U.S. and European nations use their control of global currency to override the sovereignty of poor nations in Latin America and Africa. The fix, he says, is for the world to transition to bitcoin, a form of freedom money that no country or corporation can manipulate or control.

Reason sat down with Gladstein at the Miami Bitcoin Conference in May to talk about his new book.

Photo Credits: James W. Prichard/ZUMAPRESS.com; James W. Prichard/ZUMAPRESS.com; Erik Castro/BlackStar Photos/Newscom; Jim Bryant/UPI Photo Service/Newscom; Jim Bryant/UPI Photo Service/Newscom; Seattle Municipal Archives, CC BY 2.0, via Wikimedia Commons; Steve Kaiser from Seattle, US, CC BY-SA 2.0, via Wikimedia Commons; Ph0kin, CC BY-SA 4.0, via Wikimedia Commons; geraldford from Seattle, via Wikimedia Commons; Joe Goldberg from Seattle, WA, USA, CC BY 2.0, via Wikimedia Commons; Xinhua News Agency/Newscom; Li Ye Xinhua News Agency/Newscom; Michael Brochstein/ZUMAPRESS/Newscom; AgnosticPreachersKid, CC BY-SA 3.0, via Wikimedia Commons; Lev Radin/Sipa USA/Newscom; Mihail Siergiejevicz/ZUMAPRESS/Newscom; imageBROKER/Inga Backen/Newscom; Franco Trovato Fuoco/dpa/picture-alliance/Newscom; Allison Sales/dpa/picture-alliance/Newscom; Dilma Rousseff, CC BY-SA 2.0, via Wikimedia Commons; Walter Vargas from San Cristóbal, Venezuela, CC BY-SA 2.0, via Wikimedia Commons; nicolas genin from Paris, France, CC BY-SA 2.0, via Wikimedia Commons; SIU MUI LUN ALAN/Newscom; World Economic Forum, CC BY-SA 2.0, via Wikimedia Commons; Shiny Things, CC BY 2.0, via Wikimedia Commons; APK, CC BY-SA 3.0, via Wikimedia Commons; MohitSingh, CC BY-SA 3.0, via Wikimedia Commons; Graeme Sloan/Sipa USA/Newscom; imageBROKER/Wibke Woyke/Newscom; Jimmy Villalta/ZUMAPRESS/Newscom; CY, Meng, CC BY-SA 4.0, via Wikimedia Commons.

Music Credits: “K,” by Night Rider 87, via Artlist.

Caitlin Long wants to start a new kind of bank…based on a very old model.

“A 100 percent reserve bank that would keep all of our cash at the Fed,” she says. She was influenced by the work of Austrian economist Murray Rothbard, who saw fractional reserve banking as “a shell game, [and] a Ponzi scheme,” arguing that banks should work exactly like safety-deposit boxes, or “money warehouses,” required to keep all of their customers’ money on hand at all time.

Long has a law degree from Harvard and had a conventional career on Wall Street, working at Morgan Stanley, Credit Suisse, and Salomon Brothers. After the 2008 financial crisis, she thought all of the standard accounts explaining the meltdown fell short. In search of a better framework, she discovered the Austrians and Rothbard.

“The concept here is, let’s just turn this into a basic money warehouse to the maximum extent possible within the law,” Long tells Reason.

In March 2023, when rumors started circulating on Twitter that Silicon Valley Bank might be in trouble, its panicked customers withdrew $42 billion from their accounts in a single day, leaving it with a negative cash balance. In short order, regulators shut it down.

It was a classic run on the bank, which is a phenomenon that’s only possible because of a standard practice known as “fractional-reserve banking,” in which the money in your account isn’t actually sitting in your account. The money banks hold for you is mostly loaned out or invested. They just need to make sure that they have enough cash on hand to cover any withdrawals. The system works fine—until everyone comes for their money at once.

“A lot more people in the world now recognize that the money in their bank is an I.O.U. to a leveraged institution,” says Long. “Most people didn’t think about that until recently.”

So she founded Custodia Bank, based in Wyoming, which will hold 108 percent of its customers’ deposits in cash at all times, serving as a true Rothbardian money warehouse that will also custody bitcoin for interested customers.

In January, the Federal Reserve Board denied its application for a master Fed account, which would allow them to store cash and transact using Fed payment rails like every other major bank. Custodia has sued the Fed to force it to reverse that decision.

“They’re basically creating a federal veto that has never in the history of the United States existed,” says Long. “And what I’m standing up for and saying is that it shouldn’t be politicized, period.”

Reason sat down with Long in Miami at the Bitcoin 2023 conference to talk about her case against the Fed, why she believes in full-reserve banking, and how Custodia could help bitcoin go mainstream.

Photo Credits: Minh Nguyen, CC BY-SA 4.0, via Wikimedia Commons; Tony Webster, CC BY 2.0, via Wikimedia Commons; Lian Yi Xinhua News Agency/Newscom; Richard B. Levine/Newscom; Nicolas Economou/ZUMAPRESS/Newscom; Stefan Fussan, CC BY-SA 3.0 DE, via Wikimedia Commons; Ken Cedeno/Sipa USA/Newscom.

Music Credits: “Time to Move,” by VESHZA.

Editor: Adam Czarnecki

Graphics: Regan Taylor

Tag Bank

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