An important part of economic warfare research is to identify vulnerabilities that could be exploited. These encompass the opportunity in a motive,means, and opportunity analysis. At present, there is no greater vulnerability faced by the United States than the removal of "reserve currency" status from the United States dollar. This is a very serious and detailed subject with almost mind-numbing implications.
In late 2008 and early 2009, our initial reports to the defense department indicated the potential for and expectation of a Phase 3 attack directed against the dollar's reserve currency status. If the dollar lost that status, the price of oil in dollars would rise even more dramatically. In fact, the cost of almost all raw materials and commodities would skyrocket in dollar terms. Interest rates would soar as they have in Greece and other debt-laden European nations. This would make it very expensive to finance our debts, forcing massive government cutbacks, particularly in defense. State governments already in financial trouble would be pushed over the edge.
The assumption is that no responsible party in the world would want to see the U.S. economy go down in this way. It would bring about serious global dislocations. Unfortunately, this Pollyannaish view ignores some very harsh realities. First, not all global players have the same time horizon. Americans worry about the implications of actions over the next quarter. The Chinese think in terms of decades and centuries. In addition, not everyone views things in light of economics. Some have non-economic motives such as returning the Caliphate to power and global imposition of Sharia law. Frighteningly, these are two of the primary constituencies that might see benefit to collapsing the dollar that would outweigh the short-term chaos.
The British pound sterling was once the reserve currency of the world. Such status does change over time but often results in serious dislocations. In the case of the transition from pound to dollar, there efforts of cooperation rather than outright economic warfare. Of course, the transition was punctuated by the Great Depression.
No reasonable observer can doubt that the dollar is at risk and the implications are very serious. The question then becomes whether or not enemies of the U.S. are prepared to exploit this looming weakness.
Is there sufficient MOTIVE and are there MEANS? There is no doubt that the OPPORTUNITY exists.
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