Economic Warfare

[Global Scout]

We believe that before long, "financial warfare" will undoubtedly be an entry in the various types of dictionaries of official military jargon.

Whose military? Perhaps the Chinese who have some thinkers who may approach war in more holisticly than simply massing their forces on so called decisive points. I can't help but wonder if when the Department of Defense was called the War Department, if it was as restricted to what we commonly call conventional warfare, or if it was more holisitic in its approach? Obviously an area I need to study more, but DoD is not capable (primarily due to authorities) to address financial warfare, so the response would have to come from another, or combination of, other government agencies, orchistrated by the National Security Advisor. DoD could help facilitate blockades, use special operations forces to conduct economic sabotage, or simply seize valuable territory such as the oil fields in Nigeria (or Iraq), but I don't think they would take the lead in developing a response. Where do we develop the strategic thinkers to address these challenges? What is their authorities?

Far out of my area of expertise, but I wonder what type of response is even possible against a non-state actor manipulating the economy through various acts of physical sabotage, subversion, etc.? If a state engages in economic warfare we should have some options, unless that state holds a power card like providing a substantial amount of energy to the emerging world economies, then our options are fewer. Does it really matter anymore if we boycott a product from country X, when every other nation in the world will pay market price for it? 4GW or not, globalism has changed the economy's dynamics and thus the potential responses to economic warfare and to deny that would be, well, to be in a state of denial.

[selil]

One thing to mention is that Keynsian economic theory is not the only theory associated with capitalism. Buddist economics also applies to capitalism quite nicely, but is often mistakenly considered a communist ideology.

Economic warfare is not new (there were early attempts in the thread to link it to 4GW). Nation states have used proxies for economic warfare since long before the "East India Trading Company" in US colonial times. Domestic United States treaties, policies, and as example NAFTA could be considered to create hostile and protectionist policies if you are standing on the wrong side of them. Favored nation status for China, and embargo of Cuba are examples of a similar policies that could be considered equally hostile.

Economic warfare is the "E" in DIME (I guess there's something called MIDLIFE Arghhh). What is likely new is the position the United States is finding itself in with declining dollar. Whether that is totally good or bad is not an answered question and likely will be decided by historians. A declining dollar, receding industrial capability, exploding debtor status, critical energy needs, and a polarized political environment would all be considered the harbingers of societal upheavel. The US consumer though is pretty happy and not reacting from fear. The mortgage foreclosure crisis is hitting the basic consumer fairly hard but from the numbers I've seen it isn't nearly as bad as the early 80's.

The energy crisis of the 70's led to major construction projects in energy development and the last big bang (pun intended) in nuclear energy. The end of the cold war in the 80's included absolute financial recession, the savings and loan fiasco, and substantial changes in economic theory with the creating of the information economy replacing the last vestiges of the industrial economy. There are some suggestions that the replacement of the information economy (transitional actually) will be a bio-engineering economic model which the US lags seriously behind due to internal politics (see the mention of polarization above).

I'm not an expert at these things but this is what I've gleaned from my reading and it seems to make sense.

[Fabius Maximus]

selil correctly reports that the consensus of economists is that the housing crisis will be a normal cyclical event. This is beyond the scope of this thread, but somewhat relevent. There is a minority opinion that this is the end of the post-WWII "debt supercycle" (coined by the people at Bank Credit Analyst)

Each US economic cycle since 1960 has ended with increased household debt. At some point we reach our maximum carrying capacity of debt. That might be now. The housing credit crisis may be the precipitating event. This is known as the Minsky Cycle, and we're at the Minsky moment.

For more on the housing down cycle I strongly recommend this analysis and forecast:
"The Recessionary Macro Effect of the Worst U.S. Housing Bust Ever" by Prof Nouriel Roubini (Economist, NYU). Brief and clear.

[selil]

There is a minority opinion that this is the end of the post-WWII "debt supercycle" (coined by the people at Bank Credit Analyst).....Each US economic cycle since 1960 has ended with increased household debt. At some point we reach our maximum carrying capacity of debt. That might be now.

I looked for a citation and thought Minsky had wrote it, but wasn't the GI Bill and VA home buying loan programs at the end of World War 2 what kicked the debt cycle off? Before WW2 most homes were bought on a cash basis or through family help?