Economic Warfare

[selil]

The economy of the world has moved from soley industrial to information based. I've been thinking that fourth generation warfare is about information and not insurgency. Cyber infrastructures and economics are intrinsically linked. Need proof look up the Chicago Board of Trade Outage and some the costs that may have initiated. By the way that was a Y2K outage for those who didn't know. I'm no economic scholar but I remember the Dot Bomb and that was based on what? An idea? Well funded companies? I've read articles in the same paper saying dollar diving bad, and dollar diving good. The United States doesn't have the vast manufacturing that would seem to be tied to a diving dollar and benefitting. One interesting tidbit is that this devaluation will make the United States more competitive in closed economies and protectionist environments. But, who gets rich with that?

At to Tom Clancy and his discussion of an attack on the dollar isnt' that based on stuff that happened in the 70's repackaged?

[Fabius Maximus]

At to Tom Clancy and his discussion of an attack on the dollar isnt' that based on stuff that happened in the 70's repackaged?

Great point! The 1970's saw the forequakes of global peak oil production; the real thing will likely occur sometime in the next 20 years (today, perhaps). The 1970's saw the first great US dollar crisis, foreshadowing the real thing which lies in our future (today, perhaps).

The 1970's were a difficult decade for America. And the next few years...

The geopolitical implications of this could be immense. The great emerging powers will certainly take advantage of any weaknesses in America's power.

[Shek]

Great point! The 1970's saw the forequakes of global peak oil production; the real thing will likely occur sometime in the next 20 years (today, perhaps). The 1970's saw the first great US dollar crisis, foreshadowing the real thing which lies in our future (today, perhaps).

The 1970's were a difficult decade for America. And the next few years...

The geopolitical implications of this could be immense. The great emerging powers will certainly take advantage of any weaknesses in America's power.

Peak oil is a doomsayer's tool. As the price of oil increases and settles at a higher level, the profitability of extracting oil from non-low hanging fruit reservoirs will arrive. While the absolute amount of oil will decrease, the relative amount will continue to increase. As the price goes higher and higher, it will also provide the profit incentive for more serious research on alternatives (and better alternatives than the fallacy of ethanol, which has served to drive up food prices and beer prices ).

Also, let us not forget that some of the pain of the 70s was due to poor fiscal policy choices in the 60s coupled with the fallacy of price controls and a weak Fed response. In some sense, years of inflationary policy along with supply shocks created a perfect storm, and ship captains bungled the response. While there may be some parallels to a "perfect storm" scenario now, you have a Fed that is much wiser as well as much more credible, so I'd be careful in drawing too much off of the experiences in the 70s. Besides, you can look at the rapid rise of the price of oil in the past few years, we have already allowed an oil "shock" to transmit through the economy without seeing the same adverse effects of the 70s.

[Fabius Maximus]

Peak oil is a doomsayer's tool. ... Also, let us not forget that some of the pain of the 70s was due to poor fiscal policy choices in the 60s coupled with the fallacy of price controls and a weak Fed response.

I am not aware of any major energy-related institution that says global oil production will not peak. It's like death, the question is when. Due to lack of knowledge about reserves in the Middle East and Former Soviet Union, there is a wide range of estimates -- from now thru 30+ years, clustering in the 15 year range. Since a crash adaptation program will take roughly 20 years, we're already on the clock. The major agencies -- us DOE and the International Energy Agency -- have been clear on this challenge, esp this year. I recommend reading the IEA's World Energy Outlook 2007 (here's the free Executive Summary)

Which is why the 1970's period tells us so much. As Shek notes, some nations adopted wise policies and did quite well -- global growth was strong for the full decade -- while some (e.g., the US) acted foolishly and suffered.

For more on this see my blognotes:
What's needed to adapt to Peak Oil - part I
Peak Oil - part II

[Global Scout]

With crude oil prices nearing $100 a barrel, there is no end in sight to the redistribution of more than 1 percent of the world's gross domestic product. Earlier oil shocks generated giant shifts in wealth and pools of petrodollars, but they eventually faded and economies adjusted. This new high point in petroleum prices has arrived over four years, and many believe it will represent a new plateau even if prices drop back somewhat in coming months.

"There's never been anything like this on a sustained basis the way we've seen the last couple of years," said Kenneth Rogoff, a Harvard University economics professor and former chief economist at the International Monetary Fund. Oil prices "are not spiking; they're just rising," he added.

http://www.msnbc.msn.com/id/21718926/

By way of introduction, this first post may appear to have a liberal slant to some, but only if you view our national security issues from a political party perspective, where the facts are too often confused with agendas. I have always been an independent with a slight lean to the right, but in the end equally despise both parties and pray for a viable third party.

The enclosed article has little to do with economic warfare directly, but everything to do with your facts and assumptions if you’re a strategic planner looking at future threats to our national security, and as we all know there are other than military threats. Any political party in office would attempt to deny that we are experiencing an energy crisis on their watch, so you’ll start seeing so called experts come out of the woodwork saying there is no such thing as peak oil, or increased demand, and that our infrastructure if sufficient, etc., which is another case of facts being confused with agendas. However, the government is taking steps behind the scenes to address these very real problems.

Our national level instruments for waging war, shaping behavior, however we want to phrase it are diplomatic, information, military and economic (DIME). Unfortunately, all of these instruments have been weakened since our invasion of Iraq. We can overcome this setback with a strong economy, because the bottom line is that money is still king and enables all the other instruments, and our adversaries know this, so it only makes sense that they would wage economic warfare against us to weaken our center of gravity, which is our economy.

We’re definitely vulnerable now with our national debt, foreign investment keeping us afloat, an increased demand for energy resources worldwide, and to top it off our excessive credit based economy is starting to bite us in the butt with the real estate correction and its second order effects. Add to that the costs of the long war, Hurricane Katrina, and the other disasters that are normal drains on any nation and you can see the challenge. It isn’t a disaster if we develop appropriate responses and fiscal policies, but if an adversary wants to influence our economy now with a few hostile acts (informational, military, terrorist, economic policy, etc.) it very well could be, and the way to address it isn’t by being in a state of denial.

[Global Scout]

Fabius: Excellent post on empowered individuals, I remember when the Asians were blaming on international investor for the fairly recent economic down turn in Asia. Very few investors are putting their money into the U.S. now, I even recently read that they preferred Egypt of all places for "safe" investments!

Kehenry 1: I second slapout's comments, you couldn't have phrased it better, we are dropping bombs on our own position.

What's nice about a democracy and free press is we can educate the people and throw the rascals out and create new polices.

[Norfolk]

Quote - Slapout:

I remember Nixon's comment after leaving BW "We are all Keynesian now" (reference to the UK economist John Maynard Keynes). The separation of the dollar from a gold standard to a "production standard" meaning if your country can expand it's productive capabilities it can expand it's money supply.

If your country adopts a policy of exporting it's "productive capacity" to other countries you will be in deep trouble because your currency will end up being worthless!

-Unquote

And add to that how the "production standard" is so often replaced in practice by a "speculation standard", and the divorce between apparent economic performance and real production output is not so much an indicator of real economic performance as it is an indicator of how much creation of wealth there has been for an absolute minority.

Fabius: Excellent post on empowered individuals, I remember when the Asians were blaming on international investor for the fairly recent economic down turn in Asia. Very few investors are putting their money into the U.S. now, I even recently read that they preferred Egypt of all places for "safe" investments!

Kehenry 1: I second slapout's comments, you couldn't have phrased it better, we are dropping bombs on our own position.

Agreed on practically all counts here, with all parties mentioned. Just to remind though, the events of the Asian Currency Crisis were not the result of a deliberate attempt to subvert the economic order of South-East Asia, but of a speculator handed too much rope by his own superiors trying to disguise bad investments. A deliberate plot by an individual, group, or state, could not have done a better job of disrupting the economy of entire region.

The potential of economic warfare along the lines of 4GW Theory is demonstrated here, but it is a way of war no more exclusive to 4GW actors than it is to state actors and the like. It is a capability afforded to all who possess the means at hand.