iOS Warfare
Original author: Arthur Hayes
Peggy, BlockBeats
Editor’s Note: From the Gulf War to the Global War on Terror and the Afghanistan “surge,” U.S. military operations in the Middle East have spanned nearly every major international political cycle over the past several decades. Alongside these conflicts have come not only geopolitical tensions and massive fiscal expenditures, but also a frequently overlooked variable: monetary policy.
This article reviews key wartime milestones since 1990 to examine the nuanced relationship between war, fiscal pressure, and Federal Reserve policy: following multiple Middle East conflicts, the Fed has often responded with interest rate cuts or accommodative policies to stabilize the economy and financial markets. Based on this, Arthur Hayes (co-founder of BitMEX) offers a market-oriented observation: when geopolitical tensions escalate and government spending expands, accommodative monetary conditions often follow—and these conditions may significantly impact risk assets such as Bitcoin.
The following is the original text:
Under the direction of Donald J. Trump, America’s “most peaceful president” in history, the U.S. Department of War partnered with OpenAI to launch an offensive, agent-based AI weapon: a deadly new Apple iOS operating system. Once implanted into a nation’s digital infrastructure, this system attempts to instigate a “regime change”—often accompanied by indiscriminate bombings of military and civilian infrastructure, resulting in massive casualties and costs ranging from hundreds of billions to trillions of dollars.
After the local political resistance was dismantled, a new political elite, backed by the United States, emerged. This group drew funding from American taxpayers while also extracting resources from the local society, channeling these funds into asset pools within their J.P. Morgan Private Wealth accounts. Over time, public resentment grew toward this regime—reminiscent of the Vichy-style governments the U.S. had supported in the Middle East—until it was ultimately overthrown by violence, replaced by a more indigenous, often more reactionary, oppressive, and even bloodthirsty political structure.
With this entire sales cycle now complete, OpenAI is poised to launch its next-generation product. Are you already eager for OpenAI’s IPO, valued on the premise of an infinite forward P/E ratio?
Since 1985—the year my consciousness began recording human experiences within this so-called "quantum continuum"—the "Pax Americana" has scarcely paused in its crusade-like campaigns against Middle Eastern oil-producing nations and key geopolitical nodes along vital oil and gas pipelines, all in the name of "justice." Take a look at this chart generated by Perplexity’s latest Computer model and feel its "grandeur."
From a macro perspective, this chart aims to illustrate the human cost of war, centered on three key metrics: the proportion of the U.S. federal budget allocated to the Department of Veterans Affairs (VA), the nominal total spending of the federal government, and the effective federal funds rate. The chart also marks a series of representative—though not exhaustive—U.S. missile strikes or full-scale wars against Middle Eastern nations.
Data shows that spending on veterans has grown nearly twice as fast as the overall federal budget. More importantly, and the focus of this article, almost every time Pax Americana launches a major "selective war" in the Middle East, the Federal Reserve soon lowers the price of capital. Although every U.S. president during my lifetime has tried to convince the public that the Middle Eastern wars, which appear like video games on nightly news, do not inflict real suffering on the universe’s only "important humans"—American soldiers—the data clearly reveals that America’s obsession with military adventurism in the Middle East is consuming American lives at an extremely costly rate.
The so-called “ovary lottery” placed me on this continent, arbitrarily drawn with crooked lines and called “America.” Over the past four decades of my life, whether a Republican president from the “red team” or a Democratic president from the “blue team,” each has launched missiles—or even full-scale wars—against some Middle Eastern country deemed “deserving of punishment.” It’s as if, the moment you’re elected president, senior bureaucrats drag you into a top-secret room, clamp pliers around your testicles, and force you to swear that during your term, you must make at least one Middle Eastern country feel the “searing heat of democracy,” or face the consequences.
Whether or not you believe the various conspiracy theories circulating today to explain why the United States bombs a particular Middle Eastern country, this chart presents a clear fact in my lifetime: since 1985, every U.S. president has been involved in military conflict with one or more Middle Eastern nations. Therefore, when President Trump now speaks of potentially “assassinating” Iran’s Supreme Leader Khamenei and publicly supports a “people’s revolution” to overthrow Iran’s theocratic regime, investors like us must consider: how will our portfolios be affected as Trump embarks on this political rite of passage that every U.S. president before him has taken?
Given that I’m just a simple-minded crypto bro with a touch of toxic masculinity, my logic for judging Bitcoin’s price movements is actually very straightforward.
The longer Trump invests time in Iran’s “nation-building”—an extremely costly endeavor—the more likely the Federal Reserve will finance a new wave of U.S. military adventures in the Middle East by lowering the cost of capital and increasing the money supply.
To test this hypothesis, let’s review the Federal Reserve’s policy actions following every major military conflict in the Middle East since 1985.
1990 Gulf War: "Father" (President George H. W. Bush)
At its first policy meeting after the outbreak of war, the Federal Reserve chose to hold interest rates steady but signaled that monetary easing might be necessary if the conflict persists for an extended period.
Below is the direct quote from the FOMC statement, retrieved and organized for me by Perplexity.
August 21, 1990: "The increased uncertainty stemming from events in the Middle East and the potential for weaker-than-expected economic performance has made the formulation of effective monetary policy extremely complex." "Several members believed that developments were likely to point in one direction—that at some point, policy easing would be necessary to offset the economic weakness that had already become apparent prior to the rise in oil prices."
Subsequently, the Federal Reserve lowered interest rates at its meetings in November and December 1990, subtly portraying the war as a significant source of uncertainty influencing its decisions. The Gulf War ultimately ended in March 1991.
The significant decline in business and consumer confidence likely reflects not only the developments in the Middle East itself but also uncertainty about future changes in the region and their impact on oil prices.
In other words, the Federal Reserve chose to loosen policy despite inflationary pressures triggered by a surge in oil prices.
2001 Global War on Terror (GWOT): "The Son" (President George W. Bush)
The Global War on Terror was launched rapidly after the collapse of the Twin Towers at the World Trade Center in New York. Soon after, Iraq and Afghanistan became targets of cruise missile interrogations. To stabilize economic confidence, the Federal Reserve almost immediately accelerated its pace of interest rate cuts.
At an emergency meeting following the attack, Alan Greenspan, then Chairman of the Federal Reserve and known as "the Maestro," stated: "Clearly, the events of last week have introduced a higher degree of fear and uncertainty, which has exerted significant downward pressure on asset prices and increased the likelihood of asset price deflation—effects that are plainly detrimental to the economy. Therefore, I propose lowering the target federal funds rate by 50 basis points."
Essentially, if economic confidence under the "Pax Americana" system falters and causes asset prices to fall, the Federal Reserve must act swiftly. And as always, the "cure" is cheaper and more abundant money.
Another statement from the Federal Reserve 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 resource reallocation to enhance security may temporarily limit productivity gains, long-term productivity growth and the overall economic outlook remain positive.
2009 "The Surge": "The Holy Spirit" (President Barack Obama)
Ordinary people in Iraq, Syria, and Afghanistan may have once believed that a president who won the Nobel Peace Prize would not unleash hellfire upon their countries. But it turned out that this expectation was an illusion—and false hope is often the most deadly.
Although Obama did not launch new large-scale wars in the Middle East, he did increase troop levels in Afghanistan (known as the "surge"), as he viewed it as a "just war."
Since the Federal Reserve had already lowered interest rates to zero by the end of 2008 and begun large-scale money creation through quantitative easing (QE), there was virtually no further room for monetary policy action when Obama increased troop deployments to Middle Eastern war zones. The cost of capital had approached zero, and liquidity was nearly unlimited. America’s war machine and its contractors naturally benefited immensely.
Iran in 2026: "The Messiah" (President Donald Trump)
Fate seems to have played a rather ironic joke: after surviving an assassination attempt during the 2024 presidential campaign, Trump has almost seemed to rise from the dead. As Kanye sang, “Jesus walks.” Now I suppose I can talk about Kanye—he’s already “ bowed down and submitted,” right?
Trump’s performance in office, and the reelection prospects of his Republican “red team” lawmakers in the November election, will largely depend on whether financial asset markets rise or fall, and whether oil prices decline or rise. Since the 1979 overthrow of Iran’s Shah Pahlavi, regime change in Iran has long been an obsession of the U.S. bipartisan political elite. Against this backdrop, the Federal Reserve possesses full political “legitimacy” to significantly ease monetary policy. If the Fed fails to fulfill its duty by financing the plan to “rebuild Iran as a U.S. vassal state” with cheaper, more abundant money, it would instead be viewed as “unpatriotic.”
Trading strategy
At this moment, we do not know how long Trump will remain interested in reshaping Iran’s political structure—a process that could cost hundreds of billions, or even trillions, of dollars. We also do not know how much political pain he can endure under the pressure of geopolitical and financial markets before choosing to step back.
Therefore, a more cautious approach is to wait and observe how the situation develops.
The right time to significantly enter the market is after the Federal Reserve lowers interest rates or resumes money printing to support the U.S. government’s policy objectives regarding Iran. At that point, consider buying large amounts of Bitcoin and high-quality altcoins like $HYPE.
Take care, everyone.