Source: By Batholith (Own work) [Public domain], via Wikimedia Commons
When we first started writing this Blog in 2011, few ever considered economic warfare. When we pointed out Vladimir Putin's threats against the dollar, few paid attention. When we explained the risk of EMP, few cared to listen. When we stated that World War 3 could be around the corner, few understood. But, over the past weeks we have seen a slow recognition of these realities. The unfortunate thing is that this recognition is only beginning. And the threat is escalating quickly.
Here are some of the headlines and excerpts from four critical articles over the past week. The first from Ambrose Evans-Pritchard explains the reality of economic warfare:
US financial showdown with Russia is more dangerous than it looks, for both sides
The US Treasury faces a more formidable prey with Russia, the world's biggest producer of energy with a $2 trillion economy, superb scientists and a first-strike nuclear arsenal
By Ambrose Evans-Pritchard 16 Apr 2014
The United States has constructed a financial neutron bomb. For the past 12 years an elite cell at the US Treasury has been sharpening the tools of economic warfare, designing ways to bring almost any country to its knees without firing a shot.
The strategy relies on hegemonic control over the global banking system, buttressed by a network of allies and the reluctant acquiescence of neutral states. Let us call this the Manhattan Project of the early 21st century.
"It is a new kind of war, like a creeping financial insurgency, intended to constrict our enemies' financial lifeblood, unprecedented in its reach and effectiveness," says Juan Zarate, the Treasury and White House official who helped spearhead policy after 9/11.
"The new geo-economic game may be more efficient and subtle than past geopolitical competitions, but it is no less ruthless and destructive," he writes in his book Treasury's War: the Unleashing of a New Era of Financial Warfare.
…The greatest risk is surely an "asymmetric" riposte by the Kremlin. Russia's cyber-warfare experts are among the best, and they had their own trial run on Estonia in 2007. A cyber shutdown of an Illinois water system was tracked to Russian sources in 2011. We don't know whether US Homeland Security can counter a full-blown "denial-of-service" attack on electricity grids, water systems, air traffic control, or indeed the New York Stock Exchange, and nor does Washington.
"If we were in a cyberwar today, the US would lose. We're simply the most dependent and most vulnerable," said US spy chief Mike McConnell in 2010.
The US defence secretary Leon Panetta warned of a cyber-Pearl Harbour in 2012. "They could shut down the power grid across large parts of the country. They could derail passenger trains or, even more dangerous, derail passenger trains loaded with lethal chemicals. They could contaminate the water supply in major cities, or shut down the power grid across large parts of the country," he said.
The second article details economic warfare and mentions the very real risk of EMP as well as the potential for World War 3. Here is just a snippet:
Cold War 2: Could Economic Warfare Be As Bad As Russia's Nuclear Weapons Or An EMP Attack?
April 16, 2014
Cold War 2 may be inevitable even if World War 3 is not around the corner. But could a new Cold War be as damaging to the United States as an EMP attack or Russia's nuclear weapons?…
If events continue to escalate, some fear nuclear weapons could be threatened. Putin already ordered a nuclear weapons ICBM test in response to Obama speaking publicly against Russia. Moscow's state TV also claimed that their nuclear weapons could reduce the United States to "radioactive ash." There's also the worry that even if nuclear weapons are not used then a new type of WMD, an Electro-Magnetic Pulse bomb, could wipe out our defenses:
"EMP is triggered by the detonation of a nuclear weapon at a high altitude over the earth. As a result of this detonation, an electromagnetic field radiates down to the earth, creating electrical currents. These fields cause widespread damage to electrical systems — the lifeblood of a modern society like the U.S. In turn, the damaged electronic systems can cause a cascade of failures throughout the broader infrastructure, including banking systems, energy systems, transportation systems, food production and delivery systems, water systems, emergency services, and — perhaps most damaging — cyberspace. Effectively, the U.S. would be thrown back to the pre-industrial age following a widespread EMP attack."
… now we have a new electronic battlefield in which nations can attempt to ruin each other. For example, Secretary of State John Kerry said the United States "will not hesitate to use 21st century tools to hold Russia accountable for 19th century behavior." But could Obama's economic warfare lead to a new war that's potentially almost as devastating as World War 3?…
Russia is not exactly defenseless and can fight back with their own forms of economic warfare. If the US does something more extreme, like freezing Putin's assets or Russian state assets, they will strike back. They can refuse to pay debts owed to the United States, they can freeze US assets, and they could even unleash their hackers to take down the New York Stock Exchange. Worse, in recent years China and Russia have already made economic and trade agreements that are attempting to remove the US dollar as the world's currency. So, if anything, they already have a head start on any economic war.
The United States also happens to be in a precarious financial state at the moment. Our gross public debt as a percentage of GDP (Gross Domestic Product) is 106 percent. Economists have theorized that any country which reaches this threshold may eventually face severe repercussions. For example, European countries requiring bailout help were as follows: Greece, 158 percent; Ireland, 117 percent; and Italy, 127 percent. Critics point out that the Organization of Economic Cooperation and Development estimates that the debt to GDP ratio of all its member countries combined will be 112.5 percent in 2014. They also highlight Japan, which has the world's highest debt to GDP ratio at 246 percent, yet doesn't need a bailout.
…The only good news is that if Cold War 2 involves economic warfare is that the United States is now the world's largest oil exporter due to the fracking of shale oil and our oil reserves have not been this high since the 1970′s.
Another significant article was written by Harold James, Professor of History and International Affairs at Princeton. It is also well worth reading. Here are just a couple of excerpts:
The West's financial arsenal
By Harold James Project Syndicate (posted BuenosAiresHerald.com April 16, 2014)
Leaders test a new kind of economic warfarePRINCETON — The revolution in Ukraine and Russia's illegal annexation of Crimea have generated a serious security crisis in Europe. But, with Western leaders testing a new kind of financial warfare, the situation could become even more dangerous…
For their part, the European Union and the United States have no desire for military intervention to defend Ukraine's sovereignty and territorial integrity. But verbal protests alone would make the West look ridiculous and ineffective to the rest of the international community, ultimately giving rise to further — and increasingly far-ranging — security challenges. This leaves Western powers with one option: to launch a financial war against Russia.
As the former US Treasury official Juan Zárate revealed in his recent memoir Treasury's War, the US spent the decade after the September 11, 2001, terrorist attacks developing a new set of financial weapons to use against America's enemies — first al Qaeda, then North Korea and Iran, and now Russia. These weapons included asset freezes and blocking rogue banks' access to international finance….
Putin's public speeches reveal his conviction that the EU and the US cannot possibly be serious about their financial war, which, in his view, would ultimately hurt their highly complex and interconnected financial markets more than Russia's relatively isolated financial system. After all, the link between financial integration and vulnerability was the main lesson of the crisis that followed the US investment bank Lehman Brothers' collapse in 2008.
In fact, Lehman was a small institution compared to the Austrian, French, and German banks that have become highly exposed to Russia's financial system through the practice of using deposits from Russian companies and individuals to lend to Russian borrowers. Given this, a Russian asset freeze could be catastrophic for European — indeed, global — financial markets….
The arms race that preceded World War I was accompanied by exactly the same mixture of military reluctance and eagerness to experiment with the power of markets. In 1911, the leading textbook on the German financial system, by the veteran banker Jacob Riesser, warned that, "The enemy, however, may endeavor to aggravate a panic… by the sudden collection of outstanding claims, by an unlimited sale of our home securities, and by other attempts to deprive Germany of gold. Attempts may also be made to dislocate our capital, bill, and securities markets, and to menace the basis of our system of credit and payments."
But this belief fueled excessive confidence among those responsible for the reforms, preventing them from anticipating that military measures would soon be needed to protect the economy. Instead of being an alternative to war, the financial arms race made war more likely — as it may well be doing with Russia today.
Here is a fourth article with a similar theme, all within one week:
Will WWIII Be Fought Using "Financial Warfare"? Will The Ukraine Be What Sets It Off?
Asylum Watch Posted on April 21, 2014
If there is a next world war, it may not be fought with bullets, missiles and, bombs. It may be fought entirely with financial instruments and may very well bring the world to its knees….
Now, compare these thoughts to four Op-Eds we wrote BEFORE the Russian invasion that outlined the specific areas of vulnerability only now being recognized, cyber attacks, EMP risks, a stock market crash, the potential for World War 3, and an attack on the U.S. dollar.
Op-Ed in The Blaze, February 20, 2014:
World War III: The Coming Cyber-Financial Attack that will Shock America
HUMAN EVENTS, January 20, 2014
THE STOCK MARKET WILL CRASH AND IT WILL HAPPEN IN MINUTES
America's Achilles' Heel: Why the Dollar Could Spell the Defeat of a Superpower
World Net Daily, January 9, 2014:
WALL STREET OBLIVIOUS TO CYBER-ECONOMIC WARFARE
Exclusive: Kevin D. Freeman spotlights grave danger facing America's financial system
Click on the links and read past the headlines. You will see that well before the world knew of Putin's plans and our response, we were warning about what was likely to happen. We didn't know that the trigger would be Ukraine but we were pretty certain something would happen quickly. The series of four Op-Eds published in January and February represent just a small portion of the warnings we have long provided.
Here is a warning about the EMP threat last August in this Blog:
The EMP Threat is Growing and We Must Prepare
Here is an article on Putin's planning for economic war we posted in February 2013:
Putin Prepares for a Currency War that He Thinks (Hopes?) Will Collapse America