Pentagon Preps For Economic Warfare

CBS News reports that pentagon preps for economic warfare.

(emphasis mine) [my comment]

Pentagon Preps For Economic Warfare
Politico: New War Game Focuses On Financial Attacks, Not Armed Conflict
April 9, 2009
By Eamon Javers

Pentagon building from river entrance, Arlington, Virginia, Sept. 26, 2003 (AP (file))

(The Politico) The Pentagon sponsored a first-of-its-kind war game last month focused not on bullets and bombs - but on how hostile nations might seek to cripple the U.S. economy, a scenario made all the more real by the global financial crisis.

The two-day event near Ft. Meade, Maryland, had all the earmarks of a regular war game. Participants sat along a V-shaped set of desks beneath an enormous wall of video monitors displaying economic data, according to the accounts of three participants.

"It felt a little bit like Dr. Strangelove," one person who was at the previously undisclosed exercise told POLITICO.

But instead of military brass plotting America's defense, it was hedge-fund managers, professors and executives from at least one investment bank, UBS - all invited by the Pentagon to play out global scenarios that could shift the balance of power between the world's leading economies.

Their efforts were carefully observed and recorded by uniformed military officers and members of the U.S. intelligence community.

In the end, there was sobering news for the United States - the savviest economic warrior proved to be China, a growing economic power that strengthened its position the most over the course of the war-game.

The United States remained the world's largest economy but significantly degraded its standing in a series of financial skirmishes with Russia, participants said.

The war-game demonstrated that in post-Sept. 11 world, the Pentagon is thinking about a wide range of threats to America's position in the world, including some that could come far from the battlefield.

And it's hardly science fiction. China recently shook the value of the dollar in global currency markets merely by questioning whether the recession put China's $1 trillion in U.S. government bond holdings at risk - forcing President Barack Obama to issue a hasty defense of the dollar.

"This was an example of the changing nature of conflict," said Paul Bracken, a professor and expert in private equity at the Yale School of Management who attended the sessions. "The purpose of the game is not really to predict the future, but to discover the issues you need to be thinking about."

Several participants said the event had been in the planning stages well before the stock market crash of September, but the real-world market calamity was on the minds of many in the room. "It loomed large over what everybody was doing," said Bracken.

"Why would the military care about global capital flows at all?" asked another person who was there. "Because as the global financial crisis plays out, there could be real world consequences, including failed states. We've already seen riots in the United Kingdom and the Balkans."

The Office of the Secretary of Defense hosted the two-day event March 17 and 18 at the Warfare Analysis Laboratory in Laurel, MD. That facility, run by the Johns Hopkins University Applied Physics Laboratory, typically hosts military officials planning intricate combat scenarios.

Paul Bracken, Yale School of Management

A spokesperson for the Applied Physics Laboratory confirmed the event, and said it was the first purely economic war game the facility has hosted. All three participants said they had been told it was the first time the Pentagon hosted a purely economic war game. A Pentagon spokesman would say only that he was not aware of the exercise.

The event was unclassified but has not been made public before. It is regarded as so sensitive that several people who participated declined to discuss the details with POLITICO. Said Steven Halliwell, managing director of a hedge fund called River Capital Management, "I'm not prepared to talk about this. I'm sorry, but I can't talk to you."

Officials at UBS also declined to comment.

Participants described the event as a series of simulated global calmities, including the collapse of North Korea, Russian manipulation of natural gas prices, and increasing tension between China and Taiwan. "They wanted to see who makes loans to help out, what does each team do to get the other countries involved, and who decides to simply let the North Koreans collapse," said a participant.

There were five teams: The United States, Russia, China, East Asia and "all others." They were overseen by a "White Cell" group that functioned as referees, who decided the impact of the moves made by each team as they struggled for economic dominance.

At the end of the two days, the Chinese team emerged as the victors of the overall game - largely because the Russian and American teams had made so many moves against each other that they damaged their own standing to the benefit of the Chinese.

Bracken says he left the event with two important insights - first, that the United States needs an integrated approach to managing financial and what the Pentagon calls "kinetic" - or shooting - wars. For example he says, the U.S. Navy is involved in blockading Iran, and the U.S. is also conducting economic war against Iran in the form of sanctions. But he argues there isn't enough coordination between the two efforts.

And second, Bracken says, the event left him questioning one prevailing assumption about economic warfare, that the Chinese would never dump dollars on the global market to attack the US economy because it would harm their own holdings at the same time. Bracken said the Chinese have a middle option between dumping and holding US dollars - they could sell dollars in increments, ratcheting up economic uncertainty in the United States without wiping out their own savings. "There's a graduated spectrum of options here," Bracken said.

For those who hadn't been to a Pentagon event before, the sheer technological capacity of the Warfare Analysis Laboratory was impressive. "It was surprisingly realistic," said a participant.

Still, the event conjures images of the ultimate Hollywood take on computer strategizing: the 1983 film "War Games" in which a young computer hacker nearly triggers a nuclear apocalypse.

The film and the reality had one similarity: The characters in the movie used a computer called WOPR, or War Operation Plan Response. The computer system used by the real life war-gamers? It was called WALRUS, or Warfare Analysis Laboratory Registration and User Website.

My reaction: It is interesting to find the pentagon prepping for economic warfare. Seems the military and intelligence community is beginning to realize that the financial/economic threats facing America are far greater than the military ones.

Unfortunately, Pentagon's economic war games are flawed because they are based on false assumptions, the biggest being China's dollar holdings. As I written about before, hyperinflation in China will force the nation to start dumping its dollars on the global market to save its own currency.

This entry was posted in Currency_Collapse, Financial_Wizardry, News_Developments, Wall_Street_Meltdown. Bookmark the permalink.

10 Responses to Pentagon Preps For Economic Warfare

  1. Anonymous says:

    I guess the South Park guys got it wrong, it was Blame China all along.

  2. Mackey says:

    You miss the biggest element that is assumed in this idea of economic war - to wage economic war the government must have unquestioned and unlimited control of the economy.
    You worried your son or daughter might be drafted - but instead they will come for your company.

  3. We are already under economic attack by an elite group of banksters who have seized a segment of our government.

    Significant damage has already been received by the American people.

    I thought the U.S. Armed Forces took an oath to defend the Constitution and is not beholden to any political faction.

    I suppose that is merely theory, otherwise we would be getting protection already. These games seem focused in the wrong direction.

  4. Anonymous says:

    Economics have always been a "war".

    Japan had its revenge over WWII through economic growth.

    Now what I find scary, it that for now, it is just... a simulation, a game or whatever you want to call it.

    But instead of the US blaming themselves for the situation they got into, they will find again an ennemy... And then go to the media, push bullshit everywhere and change the mindset of the public opinion.

    If history repeat itself :
    - Recession
    - Depression
    - Close trade barrier, protectionnism...
    - War ?

    I do not really like the course of event for the next 10 years.

    If the mess is everywhere, it will be easy to blame the OTHERS for it !

  5. Anonymous says:

    as usual, the rich elitist will ultimately divide and conquer by divisive measures among the people. Divisiness is here, and has been here for many decades. Americans are especially vulnerable because of their sense of entitlement. The elitists will sit in their castles, surrounded by guards, and watch as the peasants destroy each other over trivialities.

    We will destroy ourselves unless we get our sh$t together, and take the power from the small group of egomaniacs that rule over us.

    What I see happening today is freaking ridiculous. I wonder if others are as enraged as I. One can only hope.

  6. Numonic says:

    This whole attack from the US on China is like the USA saying to China, "if we can't eat, neither can you." even though China has been starving itself feeding us for years.

    Anyway, i have my own theory about why what is going on is going on. Allot of things going on politically are to hide the fact that allot of the results of what is happening is because of the failed system called "banking". Obama and Presidents before are just patsies for what's wrong with this system called banking. The politicians are taking the blame for the system. Why? So the system can continue, while the politicians change and the people think that they can change things by changing the politician. This whole issue about higher taxes is not something that needs to be legislated, we are going to get higher taxes regaurdless because of this enormous debt deleveraging that is causing higher borrowing costs that companies need to pay to stay in business, thus companies will raise prices. Right now massive companies are refusing to raise prices and thus are going out of business. Granted demand is falling but supply is falling for the same reason: no credit. Companies need credit to run their business just as much as customers need credit to buy things. The fact that we are having rising unemployment and companies going out of business while prices drop, means these prices aren't dropping because of an increase in supply, the prices are dropping because of decreased demand but behind the scenes supply is dropping for the same reason: no credit. The difference is the decrease in demand will bottom as people need neccessities while the decrease in supply will continue as the enormous credit contraction will continue contracting way after everyone is reduced to only purchasing neccessities. The only reason prices aren't high right now is because instead of these companies coming to the customers for the money they need, they are going to the govt. through these bailouts. And the govt. is more than willing to help because higher prices of things(not debt) is bad for the currency. But very soon the credit markets will take a hit soo hard that the govt. will not be able to keep up with the credit contraction and these companies will have to tap all resources and the rich, those who can afford non-neccessities are still a market to tap in to. So this is why the rich will be taxed, not because of who is in office. It's a con game to blame the politicians, the real culprit is the system of banking. And no, I'm not saying something's wrong with OUR banking system, I'm saying banking in general is inherently flawed.

    Get gold and silver now! The price of everything right now, not just gold and silver is being artificially depressed with these bailouts, but the credit contraction will win and cause companies to tap the customers for the increased borrowing costs govt. bailouts will not be able to stop.

    We are in hyperinflation. A credit contraction is in fact hyperinflation. The effects are rising prices through rising borrowing costs and the only reason we see larger bills is because the govt.'s attempt to stop the credit contraction(hyperinflation) by supplying the needed currency. Those rising prices would still appear even if the govt. stopped printing the currency. The bailouts are stalling those rising prices. This is your chance, your opening. Get whatever you can while it's cheap. The govt. can only slow the credit contraction for so long. Soon(before this year ends I believe) the credit contraction will get too much for the govt.'s printing presses to handle and those rising prices will be exposed. Get gold and silver now while it's cheap.

  7. Anonymous says:

    To Anonymous at 7:03pm on Apr. 15,

    I am also very enraged, the only way we will be able to take our country back when the dollar collapses is when the U.S. citizens march on Washington & demand without fail to let banks file bankruptcy & oust the federal reserve & reinstitute the gold standard.

  8. Numonic says:

    stop trying to legislate what the free market controls. gold and silver will become money because the free market will dictate not the govt. or the people. Stop trying to do the job of the free market. bankruptcy will happen and prices will soar sky high. hyperinflation is here.

  9. Hugo says:

    When I read this article, first I laughed, but then I wonder why the US military are realising this info.

    It is not random. They are realising this info about the chinese wining an economic war for something.

  10. Numonic says:

    I'm against the immorality of the bailouts and I understand how the bailouts will lead to "mal-investment" as lenders lend with ease and no regard as they are given assurance that they will be bailed out but allot of people think that bankruptcy would have a different effect. Bankruptcy would not have a different effect. Bankruptcy would lead to higher borrowing costs and thus higher prices. All this money through these bailouts if not coming from the govt. would be coming from you and me(the customers) as companies raise prices to pay the increasing borrowing costs. We should be thanking the govt. for these bailouts as they are a window in a burning house that we are trapped in. That window can only stay unblocked by the fire for so long as the credit contraction moves faster than the govt. can print $100 bills. So thank the govt. for suppressing the price of silver and gold and thank the govt. for these bailouts that are suppressing the price of everything else and take advantage of these suppressed prices before the fire blocks the window, that's before the next shoe drops in this credit contraction(which looks to be the commercial real estate market). It's not the credit contraction that is making things cheaper, it's the govt. bailouts in combination with the credit contraction causing prices to drop or not rise high. Removing either 1 of these 2 things(bailouts & credit contraction) would cause prices of things(not debt) to sky rocket. The thing is there is a limit to the bailouts as the govt. can only print $100 so fast while the credit contraction can take $100 allot faster. The govt.(with these bailouts) is doing everything in their power to be the only one these companies take their money from. They don't want these companies to start charging customers higher prices because that would be bad for the currency, so these companies are taking those higher prices to the govt. and the govt. through these bailouts are paying those higher prices so we don't have to(for now). But there is going to come a point where the credit contraction intensifies and the govt. will not be able to bear the load by itself and the companies will have to raise prices to make the difference the govt. could not handle, either that or the govt. will print larger bills to combat this increase in the credit contraction. But this won't really help as the bailouts at the current stage are drawing distrust in our debt. If we increase the bailouts by creating larger bills, the credit contraction will be intensified by holders of our debt dumping our debt as larger bills are a sign the govt. has lost control of the credit contraction and that there is high risk of the debt defaulting. And thus the govt. will be forced to print even larger bills to combat the increased credit contraction. At this point prices of things(not debt) will be going through the roof. And eventually it won't matter if we print or let the credit contraction run because the area between too much debt and too much base money will be miniscule and whether we stop printing or continue printing prices will continue rising. I expect us to go through all of this before this year ends. So take advantage now and get whatever you can and need before you can't afford it. I expect the prices of everything regardless of how unnecessary/easy to produce to rise although the price of things more necessary and hard to produce to rise more.

Leave a Reply to Anonymous Cancel reply

Your email address will not be published. Required fields are marked *


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>