Praise The Dollar And Pass The Ammunition

An interesting story from Politico about the Pentagon wargaming a few future scenarios. That's not news, but the scenarios are: the DoD is looking into "economic warfare simulations" and the realization is that this is one area where America may not win.

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.”

This makes sense, as China pretty much has us over a barrel on the dollar, and that the US now considers global unrest sparked by the financial crisis as the new terror threat to the country and the world.

You can bet you'll see riots elsewhere in the world as things get steadily worse. Right now in America we're limited to (mostly) non-violent demonstrations and the occasional warning tremor from the militia movements. As it gets worse over the next 12-18 months or so, you'll see a lot more of this kind of thing. Remember, the Murrah Federal building was bombed during the heart of the Clinton boom years in 1995, before Clinton's first term was even up. It's only been eleven weeks for Obama and already we're seeing the return of those elements, fueled by layoffs and racist rage and 8 years of the right wing noise machine under Bush.

Hell, we've already had mass shootings from one unemployed guy and one anti-Obama cop killer, and that's just this month. It'll get worse. Far, far worse. No matter how you personally feel about Obama as President, you'd be crazy not to think it is was going to get worse.