What happens when economic coercion meets the bitcoin bros?

Nothing good for American power ...

Abe Newman and I have a piece in the New York Times this morning, with the fantastic Robert Hanson illustration above (I hope it is OK to use it in a free newsletter plugging the original article). Our argument is that Trump’s chaotic approach to policy making, combined with the influence of crypto within his administration, mean that American economic power is on a swift downward trajectory.

There are still traditional economic-security technocrats in the new Trump administration, but they are just one faction, vying with others — crypto fans, Wall Street boosters and America Firsters. … In the longer run, [other countries] will have every reason to pull away from an America that seems willing to crush an ally’s economy on a whim.

Mr. Trump’s love affair with crypto sits awkwardly with his enthusiasm for American power. He has promised to make crypto into a national policy priority, and even issued his own crypto memecoin. He appointed a crypto investor, David Sacks, as “crypto and A.I. czar,” and nominated as commerce secretary Howard Lutnick, whose company, Cantor Fitzgerald, has been a major supporter of the crypto stablecoin Tether.

But crypto’s interests are at odds with U.S. financial and technological power. Crypto makes it easy for rogue states to move money across borders and promises that technological decentralization can provide alternatives to government power.

There’s a lot more in there - it is a long article that has been, in different forms, a couple of months in the making. I’d add two things to it.

First, if you want to get a sense of why the crypto people’s politics are so antithetical to U.S. power, I’d recommend you read Dave Karpf’s recent review of Balaji Srinivasan’s crypto politics magnum opus, The Network State. I would absolutely not recommend you read Srinivasan’s book itself. If you want to go back to the ur-source, Rees-Mogg and Davidson’s The Sovereign Individual makes much the same case, and has the benefit of having been professionally edited.

Second, we briefly describe the Biden administration’s efforts to build an entire global system for regulating AI based on export controls. While we don’t talk about it in the piece (it is already crazy long for a NYT op-ed), I at least am skeptical it would ever have worked. I think at this point, it’s probably OK to put my bit of a FT Swamp Notes conversation with Ed Luce online, since it explains why.

there’s an excellent case to be made that Eric Schmidt is the most influential American foreign policy thinker of the early 21st century. However, no one has really explained what he did and how he did it. The people who have written about Schmidt’s influence have mostly focused on possible conflicts of interest, but that seems secondary to me, as you say. He’s clearly less interested in making more money than remaking the world. Over a few years, Schmidt reshaped America’s understanding of national security through talks like the one you heard, and his leadership of the National Security Commission on Artificial Intelligence.

People used to talk a lot about the so-called “Washington Consensus” — the rules of economic neoliberalism that guided the thinking of the World Bank, IMF and other DC based institutions. Now that economic neoliberalism is moribund, I think that there is a New Washington Consensus, which Schmidt has done more than anyone else to shape.

Instead of multilateral institutions, you should now look to the assumptions of the emerging mind-meld between Silicon Valley and national security policymakers, to see how America wants to shape the world. These assumptions can be boiled down to four claims: that competition between the US and China is everything, that AGI is right around the corner, that whoever gets to AGI first is likely to win, and that America’s big advantage is its chokehold over the chips that you need to train powerful AI.

Those who believe these claims, including Biden’s national security adviser Jake Sullivan, and Trump’s former deputy national security adviser Matt Pottinger and Anthropic founder Dario Amodei, argue that America should focus on slowing down China’s build-up of AI, by denying it access to specific powerful chips. If America can only get to AGI first, it can build up an overwhelming long-term advantage. One of Trump’s first executive orders talked about examining semiconductor export controls to find and eliminate remaining loopholes.

DeepSeek’s success in building new models is troubling for this perspective, because it suggests that Chinese companies can get at least part of the way out of the chip choke, although people such as Amodei think that America still has an overwhelming advantage, as long as it stays on course.

I’m sceptical myself, both because I don’t believe we’re on the verge of AGI, and because I suspect that it is much harder to control future technologies than national security thinkers such as Sullivan contend. But there is another problem. Dan Wang suggests in his fantastic forthcoming book, Breakneck: China’s Quest to Engineer the Future, that China is focusing on building the physical technologies of the future, such as renewable energy, while America obsesses over virtual possibilities and problems. If AGI turns out to be a bust, and the Trump administration does everything it can to squash renewables, America could find itself in real trouble.

By coincidence, Demetri Sevastopulo had an interview with Sullivan that made pretty well the opposite case to my and Abe’s on the same day - “‘The core engines of American power are humming.” So go read and figure out what you think.