• **The Vast Majority of “Dollars” Are Already Private Bank Money **
• The Myth of the Wild West: Rehabilitating Free Banking
• The IOU at the Bottom of Everything
• The Hormuz Safe: When a “Rogue Regime” Understands Sound Money Better Than the Fed
• Conclusion: The Cartel Cannot Survive Contact with Truth

There is a peculiar form of intellectual dishonesty that infects mainstream financial journalism: the uncritical defense of a monetary system that has failed every society that has ever adopted it. Greg Ip’s May 25th warning in the Wall Street Journal about the dangers of stablecoin “private money” is a masterclass in controlled opposition. It identifies real problems and then, with breathtaking audacity, prescribes the very system that produced those problems as their cure.

The article attempts to frame stablecoins as dangerous financial experiments operating outside the safety of public money, but this argument collapses the moment one asks a simple question: what exactly is modern fiat money if not a gigantic system of privately created credit masquerading as public money? The answer is uncomfortable for establishment economists and journalists like Ip because it reveals the central fraud underpinning the entire global financial order. 

§**The Vast Majority of “Dollars” Are Already Private Bank Money **

Let us begin with unpacking the article’s central absurdity. Ip writes as though the Federal Reserve issues “public money” in any meaningful sense. This is a fairy tale, a comforting fiction for those who have never bothered to understand how the monetary system actually operates. The Federal Reserve is not a public institution, but it’s a cartel of private banks operating under a government-granted monopoly.

Secondly, the overwhelming majority of dollars do not originate from the printing press of the Federal Reserve. They are created by commercial banks through fractional reserve lending. When banks issue loans, they do not lend pre-existing savings. They manufacture new purchasing power ex nihilo through balance sheet expansion. The borrower receives newly created deposits that did not exist moments earlier. This is not a side effect of the system; it is the system. The Fed merely sets the interest rate target and provides a discount window. The actual money creation happens in the private balance sheets of JPMorgan, Bank of America, and Citigroup. If private money is inherently risky, then Ip’s beloved banking system has been a 400-year catastrophe of boom, bust, bailout, and theft. 

The modern economy therefore rests upon this immense pyramid of trust-based IOUs layered upon debt. Governments borrow, banks monetize the debt and central banks backstop the banks; thus the dollar is not a public good but an IOU backed by nothing but the coercive power of the state and the willingness of commercial banks to conjure credit out of thin air.

Then economists pretend this labyrinth of leverage constitutes “public money” while calling stablecoins dangerous because they are “private.” This manufactured distinction between “public money” and “private money” is a rhetorical sleight of hand designed to obscure the reality that money production has been hijacked by a banker-state alliance. 

§The Myth of the Wild West: Rehabilitating Free Banking

Ip reaches for the free banking era of 1837–1863 as his historical cudgel, invoking fraud, instability, and bank failures as self-evident proof that private money cannot be trusted. This is historical revisionism in service of statist ideology. He cites a boilerplate summary, waves at “wildcat banking,” and moves on. .

Murray Rothbard, in A History of Money and Banking in the United States, performs the autopsy the mainstream media pundits refuse to conduct. The free banking era was not a free market experiment that failed. It was a half-measure, permanently compromised by state intervention, that failed because of government interference, not despite the absence of it. In other words, the instability of the free banking era did not arise from free markets in money. It arose from government intervention layered on top of a fundamentally unstable fractional reserve system. Here is what Ip does not tell you: the so-called free banking period was not genuinely free banking at all. It was free in name only. 

States imposed bond-collateral requirements forcing banks to back note issuance with government debt. Branch banking restrictions crippled diversification and made banks geographically fragile. As economist Hugh Rockoff demonstrated, many “wildcat” banks were those whose notes were backed by overvalued securities; bonds valued at par by the state but worth far less in the market. Legal privileges shielded banks from ordinary contractual discipline. Most critically, governments legalized fractional reserve banking itself, thus allowing institutions to issue far more claims to money than actual reserves held. That is the real fraud.

As Rothbard documented, genuine wildcat operations were marginal. The systemic instability came from the very mechanism modern banking celebrates: lending money into existence that doesn’t exist. The free banking era demonstrated, correctly understood, that fractional reserve banking, with or without a central bank, produces boom-bust cycles. The Federal Reserve did not solve this problem, but industrialized it, with legal tender laws ensuring there was no exit.

Fractional reserve banking creates multiple ownership claims over the same base asset. Two parties are led to believe they possess redeemable claims to the same underlying money simultaneously. In any other industry this would be recognized immediately as insolvency or embezzlement. In banking it is called monetary policy. This distinction matters enormously. A genuinely free monetary market rooted in full reserve principles and hard money discipline behaves fundamentally differently from a politically protected banking cartel empowered to inflate credit. The problem was never competition in money itself. The problem was allowing counterfeit credit expansion to masquerade as savings, and that same pathology defines the modern fiat system. The free banking era was not a crisis of private money; it was a crisis of government intervention in private money. 

Ip learnt the wrong lesson from history. The free banking era’s failures were not an argument for the Federal Reserve, but they were an argument against fractional reserve banking, an inconvenient truth and distinction the Wall Street Journal is institutionally incapable of making.

§The IOU at the Bottom of Everything

Modern fiat money is not money in the historical sense. It is debt monetized through political power. Every dollar entering circulation today emerges alongside corresponding liabilities somewhere else in the system. Everything from Government bonds, bank loans, repo facilities, mortgage securities to corporate debt is part of the IOU soup underpinning our global financial system. 

The Federal Reserve Note is a liability of the Federal Reserve. The Federal Reserve’s assets are primarily U.S. Treasury bonds, and these bonds are obligations backed by future tax revenue; the future productive labour of American citizens, expropriated by law. Commercial bank deposits are liabilities of commercial banks, backed by a fractional reserve of Fed liabilities and loan assets that are themselves claims on future economic production. Fiat currency therefore requires continuous credit expansion simply to maintain system stability.

This creates an unavoidable debt spiral, because debt carries interest obligations exceeding the original principal created, the system constantly requires new debt issuance to prevent cascading defaults. Old debts are serviced through new credit creation. Economic growth becomes increasingly dependent on monetary expansion rather than productivity. This is why central banks panic at even mild deflationary pressures.

Deflation under a debt-saturated fiat regime threatens the solvency of the entire structure because falling asset prices expose the fact that the system contains vastly more financial claims than real underlying wealth. In short, the modern monetary system is an interlocking pyramid of IOUs, each layer claiming to redeem the layer below, with nothing at the bottom except the state’s monopoly on violence and its ability to compel tax payments in its own currency.

Stablecoins fit seamlessly into this architecture. They are backed by Treasury bills, government IOUs. They claim parity with the dollar, which is itself an IOU. They are issued by private entities operating under regulatory license. Circle’s USDC is, in its essential economic character, indistinguishable from a money market fund that issues digital tokens. It is simply fiat money on a blockchain. 

When debt grows faster than the economy, the interest burden grows faster than the capacity to service it. Governments facing this arithmetic have three options: grow faster than the debt (increasingly implausible), default explicitly (politically catastrophic), or inflate. Every major central bank has chosen door number three, euphemistically labeled “quantitative easing” or “accommodative policy.”

During Covid, the United States put the money printers in overdrive.. M2 grew from $15.4 trillion in February 2020 to $21.7 trillion by April 2022, a $6.3 trillion expansion, roughly 40%, in twenty-six months. The Fed’s balance sheet ballooned from $4.2 trillion to $8.9 trillion. The consequence: CPI hit 9.1% by June 2022. Real wages fell for twenty-five consecutive months. Savers were punished. Debtors were subsidized.

The Fed faces a choice between fighting inflation (raising rates, which increases debt service costs on $39 trillion in federal debt) and supporting growth (cutting rates, which reignites inflation). There is no clean exit from a system this leveraged.

A major sovereign debt crisis is not a tail risk. It is the base case, deferred by financial engineering and political will. Stablecoins, backed by the very Treasury bonds at the center of this crisis, do not hedge against this outcome, but they amplify it. Stablecoins inherit every pathology of the dollar: inflation, political manipulation, and the need for perpetual debt expansion. The term “stablecoin” is a masterpiece of marketing deception. An asset pegged to a depreciating currency is not stable, but it is guaranteed to lose purchasing power over time. Calling a token that tracks this collapse “stable” is like calling a sinking ship “water-adjacent.” 

Furthermore, stablecoins are, in function and architecture, de facto central bank digital currencies (CBDCs).Their reserves are held by custodians who can freeze, seize, or censor transactions at government request. Tether has frozen over $4.2 billion in USDT at the request of law enforcement and Circle also complies with OFAC sanctions. These are not tools of monetary freedom by any standard or measure. They are leashes, digital shackles that extend the reach of the state into every transaction. 

§The Hormuz Safe: When a “Rogue Regime” Understands Sound Money Better Than the Fed

For decades, dollar dependency created a classic prisoner’s dilemma for sanctioned states: continue using the dollar-denominated system (and remain exposed to US financial weaponry), or exit the system and face the economic isolation that follows. Both choices led to bad outcomes. Exit was severely punished and compliance was exploited. There was no dominant strategy but only varying degrees of submission. Until now, thanks to Bitcoin. It is the antithesis to the USD backed fiat monetary system and restores monetary honesty and increasingly, even geopolitical actors are recognizing this reality. 

Consider the Hormuz Safe program recently launched by Iran. Facing crippling Western sanctions, the Iranian government established a Bitcoin-settled maritime insurance platform for ships transiting the Strait of Hormuz. According to reports from Iran’s Ministry of Economy, the platform offers “cryptographically verifiable insurance policies” with payments settled in Bitcoin, coverage beginning immediately upon blockchain confirmation. Iranian officials project the service could generate more than $10 billion in revenue. Whether that figure is realistic is beside the point. What matters is the strategic choice: Iran deliberately selected Bitcoin over stablecoins and traditional banking rails. 

This is not merely a sanctions workaround, but it’s a sophisticated act of financial insurgency and asymmetric currency warfare aimed directly at the strategic foundations of dollar dominance. Maritime insurance has been a particularly precise vector of this coercive power. Dominated by London’s Lloyd’s market and underpinned by dollar settlement, it functions as a chokepoint within the chokepoint. Deny insurance, and ships won’t sail. If the ships don’t sail, oil revenue evaporates. Iran has been living inside this mechanism for decades. Hormuz Safe represents Tehran’s conclusion that the only way out is to opt out of the dollar regime and use a new rail entirely. Hormuz Safe does not challenge U.S. financial supremacy head-on but simply renders a specific application of that supremacy, maritime insurance coercion, contestable.

 In asymmetric warfare terms, this is deterrence by denial, where not matching the adversary’s capability, but denying the adversary the ability to achieve its objective through that capability. Every tanker that sails under Hormuz Safe coverage is a live demonstration that dollar exclusion is not absolute. Chokepoint control is the oldest principle in resource warfare. Iran already possesses the physical capacity to threaten the strait. Hormuz Safe adds a financial dimension to that leverage: the ability to operate insurance and settlement infrastructure outside Western jurisdiction entirely. 

The Wall Street Journal and establishment commentators would prefer you to focus on Iran as the story. Do not. The real story is the instrument Tehran deliberately chose and, more importantly, the instruments it consciously rejected.  Iran did not build this program on USDC, they did not denominate it in Tether, they did not route it through the SWIFT system, the dollar correspondent banking network, or any other infrastructure that the United States Treasury can freeze with a phone call. They chose Bitcoin because Bitcoin cannot be frozen and Bitcoin cannot be sanctioned. Bitcoin does not require a counterparty’s permission to settle. 

In February 2022, the West demonstrated to every nation on earth what it meant to hold foreign reserves in dollar-denominated assets: Russia’s $300 billion in reserves, accumulated over decades, was frozen overnight by executive decree. The message was received with crystalline clarity in Beijing, Riyadh, Tehran, Ankara, and every other capital that had previously believed financial integration offered protection. That event shattered the illusion that reserve assets held within the Western financial system were politically neutral. A sovereign nation, facing the full coercive apparatus of the Western financial system, has chosen Bitcoin as its financial rail for a commercially significant insurance market. Bitcoin has indeed graduated from a cypherpunk’s dream to an instrument of national economic survival.

What Hormuz Safe represents is the arrival of a new kind of actor in currency warfare; the state that weaponizes decentralization. Iran is not building a yuan-clearing system or a gold-backed instrument, both of which carry their own sovereign dependencies. It is deploying a neutral weapon, one that belongs to no government and can be confiscated by none. Therefore, Iran’s pragmatic decision to build financial infrastructure on Bitcoin is not ideological and changes the equation because it eliminates counterparty dependence. A nation, corporation, or individual holding Bitcoin directly possesses final settlement property that cannot be frozen by foreign states, confiscated through banking intermediaries, or inflated away by central banks. 

The dollar system’s weaponization is not an abuse of its design. It is its design. A global reserve currency controlled by a single sovereign will, eventually, be used as a sovereign weapon. That is not a geopolitical accident but a logical consequence of monetary centralization. The cure is not a better-regulated stablecoin, but a monetary system that no sovereign controls.This is what Bitcoin provides that stablecoins categorically cannot: apolitical finality. 

Iran building maritime insurance on Bitcoin shouldn’t surprise anyone who has been paying attention. It is a case study in rational monetary choice under adversarial conditions, the precise conditions, incidentally, under which sound money has always proven its superiority over politically managed alternatives. 

The Wall Street Journal’s fear of stablecoins is misplaced. It frames private money as dangerous because it escapes centralized control but that is precisely its virtue. The greatest economic catastrophes of the last century were not caused by free markets in money. They were caused by centralized manipulation of money itself. Stablecoins are not the main problem, but they are merely the symptom of a deeper disease, which is the complete collapse of the fiat monetary system. The twentieth century was a graveyard of fiat experiments and the twenty-first century is becoming the bill for those experiments. Stablecoins are not the future of money. They are the digitized afterlife of a dying monetary regime desperately extending itself through blockchain infrastructure.

That is the real significance of Hormuz Safe. It is not about replacing the dollar tomorrow. It is about weakening the dollar’s exclusivity over time and exclusivity is the true source of reserve currency power. 

§Conclusion: The Cartel Cannot Survive Contact with Truth

Ip ends his article with a wistful nod toward “tokenized deposits” offered by banks as the safe, sensible alternative to crypto’s excesses. Tokenized deposits are bank deposits on a blockchain; fractional reserve liabilities, FDIC-backstopped moral hazard, credit-expansion risk, and all, with a more efficient surveillance interface. 

The Wall Street Journal‘s anxiety about stablecoins is not fundamentally about financial stability. It is about a competitive threat to the existing monetary order, an order from which its advertisers, its readers’ portfolios, and the broader financial establishment extract enormous rents. When the paper warns about “private money,” it means: money that we do not control, money that does not require our permission, money that cannot be weaponized by our allies or inflated away by our governments.

Private money is not a risk. It is the only hope. The risk is, and has always been, the state’s monopoly on the mint and the bankers who profit from it. Stablecoins are not the answer. They are the fraud digitized, distributed, and rebranded for a generation that mistrusts banks but has not yet understood why it should also mistrust the dollar those banks serve.

Every dollar in your pocket is a claim on future production, diluted daily by the invisible tax of inflation. Every stablecoin in your wallet is a Trojan horse, extending the reach of the fiat empire into the digital realm. Every central bank is a counterfeiting operation masquerading as a public institution. When you have spent a century building an economy on debt, the last thing you want to admit is that the entire structure is a pyramid scheme. The pyramid is collapsing. The only question is whether you will be holding paper promises or Bitcoin when it does. Choose wisely.