I have been saying for years that the trade deficit with China was a national security issue. If China becomes unhappy with the U.S. it can, A. Stop buying our Treasury bonds forcing the Fed to monetize our debt (print money) resulting in inflation or B. Dump their $trillion holdings of Treasurys forcing interest rates to skyrocket. Read the whole article, China wins the war.-Lou
Forget Nukes -- Watch Out for Economic War
Fought with currencies, embargoes and hackers, economic warfare may lack the “shock and awe” of conventional battles but it could still pose a threat to the U.S., especially in these troubling economic times.
Picture this hypothetical dreamed up by a national security expert obsessed with economic catastrophe:
Angry that U.S. policies aimed at boosting the economy have devalued their $2 trillion of currency reserves, the Chinese decide to stop buying Treasurys just as America tries to finance its massive spending plans.
In response, the U.S. imposes trade sanctions against China, which in turn pushes for a global currency. From there, the U.S. accuses China of manipulating its own currency and things escalate further.
Without a shot being fired, those actions represent a type of unfriendly economic competition that some are very worried about.
‘Unstable Escalation’
“I think it’s very likely the participants wouldn’t call it a war. Each side would say they are acting in their best interest. But this could lead to an unstable escalation,” said James Rickards, co-head of threat finance and market intelligence at consulting firm Omnis.
The struggling U.S. economy and scary financial crisis could make such an escalation more likely and more damaging.
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