We warned about this in our Pentagon research back in late 2008 and early 2009 but there were plenty of skeptics. We emphasized the risk in the 2012 NY Times bestseller, Secret Weapon. In Chapter 9, we made a strong case that China could dump their Treasury bond holdings and work fervently to establish the Yuan as a reserve currency alternative to the American dollar. We pointed out how multiple Chinese sources were planning for this and labeled it “financial warfare.” We made it clear that this would prove deflationary for China but said “If China can tolerate such deflation and if it can transition effectively, it will be sitting in the shade.”
While we knew then that the time had not yet arrived for China to make her move, we also knew it was just a matter of time. Starting in 2011, we began to address the risk of financial warfare in this Blog. Just look back at this February 2011 post where we argued that China had a long-term view and a five-year plan:
World War III may well be underway just as surely as it was on 26 November 1941 when Japanese Admiral Yamamoto set sail for Pearl Harbor two weeks before the formal attack. Then, like now, Americans seemed blissfully unaware that their lives were about to change forever.
Now, it is even worse, as American arrogance assumes we will always be the world’s sole superpower. We tend to look at the world exclusively from our own perspective and that can be very dangerous. A variety of headlines demonstrate this, all of which assume American supremacy. One example, now obvious in hindsight, is when the President’s spokesman Jay Carney warned against buying and actually suggested shorting Russian stocks in light of U.S. sanctions on March 18. From the time of his comments until the end of the month, Russian stocks increased over 6%, far ahead of the U.S. stock market over the same period. Even as the Administration was warning against buying Russian shares, some very successful investors have recommended them. Continue reading
For anyone who, or knows someone who, naively thinks Russia doesn’t have both the capability and the guts to pull the trigger, this is a must-read. It also goes to show you that the Cold War had never died, but had simply gone into a new phase. The phase of which America is going through, and is almost finalized. The US is now stuck with a leader who draws a new line in the sand, or makes a concession, every time another is breached. The Russians smell blood and they, along with the Chinese, won’t stop capitalizing on the opportunities until America is reduced to a third world country. They, who know America lives by an honor system, do not, which makes it even more easier to keep hammering away.
There is a cynicism in the relationship between Russia and the US, being played out in the Crimean crisis, which is deep, rooted in history and shows that the triumph of capitalism over communism wasn’t the end of the power game between these two nations.
The depth of mistrust between the two was highlighted in the interview given by Hank Paulson, the former US treasury secretary, for my recent BBC Two documentary, How China Fooled The World.
The excerpts I am about to quote never made it into the film, because they weren’t relevant to it. But they give a fascinating understanding of the complex relationship between Washington and Moscow. Continue reading
Those who deny the reality of financial terrorism tend to use the same basic arguments. One of those is built on the idea that everyone is motivated by money and so no one would intentionally harm America’s economy. There are many flaws in this reasoning and we will likely catalog them in a future post. Another set of arguments is built on the idea that we brought on the decline all by ourselves through terrible monetary and fiscal policy. There is truth in this line of reasoning but it is not the whole truth.
Few people recall that a little over a decade ago our government was running a budget surplus. In fact in December 2000, the Office of Management and Budget projected that the entire Federal debt would be paid off by 2010. Imagine that. It was less than a dozen years ago but it seems like more than a lifetime. Now, we are almost $16 trillion in debt with $1 trillion deficits projected for years to come.
It was in this context that al Qaeda attacked the World Trade Center with the intention of harming the American economy. Bin Laden even stated as much in his December 2001 speech taking credit for 9/11. This was noted in a September 11, 2007 US News article that actually made the case that bin Laden had failed in his economic attack. Ironically this article was written right as the stock market was peaking just before the horrible 2008-09 collapse still haunting us today.
Full article: Understanding the Big Picture (Kevin Freeman/Global Economic Warfare)