by Glenn Beck
They are cowards.
It’s time to shine a light on Freeman’s findings—and the threat of financial terrorism in general. This isn’t some conspiracy theory or academic research: this is very real. Remember, terrorists didn’t have bombs or guns on 9/11—just better imaginations. The same applies here. The size of our economy is both our greatest strength and greatest vulnerability. Our enemies don’t need bombs or guns to target it—just better imaginations.
MONEY: THE WORLD’S OLDEST WEAPON
Economic warfare is nothing new; we’ve seen it used many times throughout history:
Under the biblical Joseph’s direction, the Egyptian pharaoh stored grain and cornered the market. This made the Egyptians dominant over the entire region without ever raising a sword. According to the Bible (Genesis 41:57, 47:13–26), the Egyptians were able to force all the surrounding countries to exchange money, livestock, land, and possessions for the food Joseph had stored.
Napoleon was also a big fan of economic weaponry. He waged something of a currency war by only accepting gold for the sale of French goods to Britain.
FDR created a “Board of Economic Warfare” and instituted a blockade of oil against Japan, cutting off 90 percent of their oil imports and setting off a chain reaction that eventually led to the attack on Pearl Harbor. Once World War II began, the Germans counterfeited British currency in the hopes of destroying their economy.
Eisenhower threatened to liquidate our holding of British bonds (which would’ve likely forced them to devalue their currency) if they did not withdraw their troops from the Suez Canal.
OPEC used an oil embargo against the United States and Israel in 1973.
The Reagan administration worked with the Saudis to lower the price of oil and break the “Evil Empire” of the Soviet Union.
George Soros used financial markets to short the British pound and “break the Bank of England.”
The North Koreans have been counterfeiting hundred-dollar bills.
The United States has undertaken an economic warfare approach against Iran, attempting to get them to abandon their nuclear efforts by cutting off access to the international payments systems, thereby straining their economy and ability to sell oil on world markets.
Given that history, it would be naïve to think that others are not plotting to use these same techniques against America one day.
UNRESTRICTED WARFARE
As it turns out, that plotting actually began over a decade ago.
In 1999, the Chinese People’s Liberation Army (PLA) asked two senior colonels to war-game how to defeat the military superiority of the West—namely, the United States. At that point in time, this probably seemed like an impossible task. America was dominant in almost every respect. The nation that had shoved Saddam Hussein out of Kuwait in forty-two days had also reinvented the global economy with the Internet and the Information Age. The American budget was in its best shape in years, with some even saying that our national debt could be extinguished within a decade.
For those who were intent on making the next century a Chinese one, this was a nightmare. So they got creative. The result was a new doctrine—a strategy for taking on the West that would have nothing to do with nuclear arsenals or laser-guided bombs. Roughly translated, it was called “Unrestricted Warfare.”
In the document explaining these tactics, the colonels made the case that a new approach to warfare was needed to derail the West, a kind of warfare that wouldn’t demand new technology, only “lucid and incisive thinking.” They knew that Americans would be so caught up in making the latest stealth fighter or cruise missile that we wouldn’t notice a weapons-grade financial crisis. As they put it, we are “slaves to technology in [our] thinking.”
The colonels wrote that “a single man-made stock-market crash, a single computer virus invasion, or a single rumor or scandal that results in a fluctuation in the enemy country’s exchange rates or exposes the leaders of an enemy country on the Internet, all can be included in the ranks of new-concept weapons.”
The colonels made some other interesting observations as well, especially when looked at with the benefit of hindsight. For one, they directly identified Osama bin Laden more than two years before he became infamous:
Whether it be the intrusions of hackers, a major explosion at the World Trade Center, or a bombing attack by bin Laden, all of these greatly exceed the frequency band widths understood by the American military. The American military is naturally inadequately prepared to deal with this type of enemy psychologically, in terms or measures, and especially as regards military thinking and the methods of operation derived from this.
They also identified George Soros by name and compared him to bin Laden:
[W]e began to get an inkling of a non-military type of war which is prosecuted by yet another type of non-professional warrior. . . . [H]is or her faith is by no means inferior to Osama bin Laden’s in terms of its fanaticism. Moreover, he or she does not lack the motivation or courage to enter a fight as necessary. Judging by this kind of standard, who can say that George Soros is not a financial terrorist?
[W]hen people revise the history books on twentieth-century warfare in the early 21st century, the section on financial warfare will command the reader’s utmost attention. The main protagonist in this section of the history book will not be a statesman or a military strategist; rather, it will be George Soros.
Were they right? Is financial warfare the way future battles will be fought? Only time will tell for sure, but it certainly makes sense. There is even some evidence showing that many of these tactics have already been tried or tested by our enemies in various forms. But before we get to that, let’s go back to the Chinese PLA strategy report, which offers a succinct road map for bringing down the West without ever firing a bullet:
[I]f the attacking side secretly musters large amounts of capital without the enemy nation being aware of this at all and launches a sneak attack against its financial markets, then after causing a financial crisis, buries a computer virus and hacker detachment in the opponent’s computer system in advance, while at the same time carrying out a network attack against the enemy so that the civilian electricity network, traffic dispatching network, financial transaction network, telephone communications network, and mass media network are completely paralyzed, this will cause the enemy nation to fall into social panic, street riots, and a political crisis.
That’s a pretty comprehensive strategy, so let’s go through some of the key components, one by one.
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The Chinese Need America; Why Would They Ever Hurt Us?
The only way to answer that question is by asking another question: Which Chinese are you talking about?
Those in China who depend on exports to the United States wouldn’t want any harm to come to their Wal-Mart customers, but the PLA is a different story. They don’t have customers or experts; their only agenda is world domination. Consider this account from Kevin Freeman’s book Secret Weapon and then decide how much the PLA cares about American consumers:
“It is indeed brutal to kill one or two hundred million Americans,” General Chi said in 2005. “But that is the only path that will secure a Chinese century.” Chi even took a poll to determine whether the “people [of China] would rise up against us if one day we secretly adopted resolute means to ‘clean up’ America.” Eighty percent of those polled approved the secret methods. Why then would they shy away from economic warfare?
General Chi is Chi Haotian, the former minister of national defense for China (1993 to 2003) and a highly respected figure in their military today as vice chairman of the Central Military Commission. In other words, he’s not exactly some low-level soldier speaking out of school.
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THE PLAN: PART ONE
Muster larger amounts of capital.
The best estimate is that the Chinese currently hold a staggering $3 trillion in foreign reserves—virtually all of it accumulated since the year
2000. Most politicians and government officials tell us that there’s nothing to see here, but no one really knows how much of that money has made its way into the global capital markets.
Another way to look at capital accumulation around the world is through something called Sovereign Wealth Funds. These are vehicles in which foreign governments invest capital overseas. They have swelled to an estimated nearly $5 trillion in size, of which nearly $3 trillion is owned by oil-producing states (more than $1 trillion by China). Of the top twenty non-Chinese Sovereign Wealth Funds, all but five are connected to the Middle East or Russia. The vast majority of this wealth has been accumulated since the year 2000 and, it goes without saying, much of it has come directly from the pockets of Americans who buy oil, gas, or products made in China.
That’s a staggering amount of wealth, but it may not even be all they have. The truth is that it’s very difficult to get a good handle on just how much capital our enemies have amassed because they keep that information as confidential as they keep their other military secrets. Nations realize that wealth in itself is a weapon. We don’t advertise the number and locations of our nuclear weapons, or the latest stealth bomber project we’re working on—so why would other countries advertise their wealth?
As an example of how far off these numbers can be, let’s look at the estimates of the “personal” fortune held by Muammar Gaddafi. As recently as February 2011, it was estimated that he had “several billion” dollars. The reality? Experts believe that Gaddafi had secretly stashed away as much as $200 billion in Western markets—four times the estimated wealth of Warren Buffett. That would make him the richest person to have ever lived.
THE PLAN: PART TWO
Launch a sneak attack against its financial markets.
In the 1980s, the Soviet economy was extremely reliant on oil revenues. When prices collapsed, so did their economy, and, eventually, the entire government followed. What many people don’t know (and others dispute) is that, by working with the Saudis, the United States helped to set these dominoes in motion. It’s somewhat ironic that a Cold War that took the world to the brink of nuclear annihilation may have been ended not with guns and bullets but with dollars and rubles.
Unfortunately, we’re on the exact opposite side of that issue now. As the world’s largest consumer of oil, the United States is vulnerable to oil manipulations in the other direction. Higher oil prices are, after all, essentially a tax on consumers, with the majority of that money leaving the country. According to Ross Devol, chief research officer at the Milken Institute, “Each 50 cent increase in the price of gasoline adds almost $60 billion to annual consumer bills” for Americans.
If you consider the fluctuations in the price of oil over the last decade alone, that money can really add up. Oil was about $20 a barrel in 2000, $50 in early 2007, and as high as $147.50 in mid-2008. That spike from 2007 to 2008 alone—which took just eighteen months—meant an estimated $1 trillion in additional dollars was paid by the West.
Despite Wall Street denials, there was actually a serious financial component to the increase in oil prices. According to MIT professor of economics Richard Eckaus, “Hedge funds are very active in the oil market and their activity, along with other speculators, has raised the volume of oil transactions far above the volume warranted by ordinary commercial transactions.” When 60 Minutes correspondent Steve Kroft asked Petroleum Marketers Association president Dan Gilligan if there was manipulation going on, he answered: “I can’t say. And the reason I can’t say it, is because nobody knows. Our federal regulators don’t have access to the data. They don’t know who holds what positions.” Kroft went on to explain that federal law doesn’t give the public the ability to find out who is buying and selling oil contracts.
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Rock, Paper, Oil?
A high-stakes economic warfare drama has been playing out between the United States and Iran—but it’s inadvertently exposing one of our greatest vulnerabilities. Essentially, to punish Iran for their continued nuclear development, we are depriving them of access to the U.S. dollar. That is a serious threat and has serious implications for their economy. The problem is that when all is said and done, the world may actually prefer to have their oil rather than our paper. That is certainly what the market has told us as the price of oil in dollars has risen sharply.
Put it this way: Iran has broken ranks with the rest of the world and is now trading oil for other currencies, and even gold. If the rest of the world sees that strategy turn out well, there will be a massive target painted on the back of the dollar.
In the game “rock, paper, scissors,” scissors beats paper. But won’t oil also beat paper? Do we really want to be so arrogant as to believe that the world prefers American paper to oil from any source? American paper (whether in the form of currency or Treasury debt) has, after all, continued to grow exponentially while the amount of available oil reserves has been reasonably stagnant by comparison. In addition, oil has enormous practical use and the demand for it will grow over the long term. But our paper? Every major nation in the world, including our most trusted trading partners, has begun to question (some publicly, some privately) its long-term usefulness as the world’s reserve currency.
Iran believes this will eventually spell the end for the dollar. Depending how these behind-the-scene monetary tactics play out, the rest of the world may agree.
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Our enemies have, of course, realized this. Muslim Brotherhood spiritual adviser and Islamic theologian Yusuf Qaradawi has often spoken of “the weapon of oil,” or Silah al Naft. According to Walid Phares, a former professor of Middle East Studies at Florida Atlantic University and a Fox News analyst, “For years now, Salafist websites and al-Qaeda spokespersons have loudly called for an ‘oil Jihad against infidel America and its lackeys.’ Online material is still circulating. But more revealing are the official speeches by Osama bin Laden and his deputy on the ‘absolute necessity to use that weapon.’” And that’s exactly how Islamic extremists view oil—as a weapon.
Another way to sneak-attack financial markets is by using a technique called a “bear raid” to bring down vulnerable companies. According to Dictionary.com, a bear raid is “an attempt to force down the price of a security or commodity by sustained selling.” This practice is illegal, but it can still occur when traders work together to lower the price of a stock. If successful, the bear raid creates panic in the wider market, thereby making the problem much worse. Bear raids generally involve short selling and its evil twin, “naked short selling.”
Some people try to deny that bear raids happen, but the New England Complex Systems Institute, an independent academic research institution, proved not only that they exist, but that a bear raid was perpetrated against Citigroup right at the beginning of the market crash. The researchers calculated that the “probability of these two events [the abnormal volume of short positions taken out and subsequently closed] occurring six days apart is . . . 4 billion years.” In other words, this was not normal trading activity: this was a prototypical bear raid.
This idea of a foreign enemy attacking our financial markets may seem like a conspiracy theory, but it’s actually something they’ve spoken about pretty openly. Aside from the Chinese PLA, there have also been some eye-opening quotes from bin Laden and other prominent terrorists through the years that demonstrate their focus on attacking our economy.
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Was the Flash Crash a Weapons Test?
On May 6, 2010, the Dow Jones Industrial Average fell nine hundred points in about six minutes before recovering. This has been dubbed the “flash crash” and it wiped out about $1 trillion in wealth in about the time it takes to eat a bowl of cereal. Reports on the cause of the crash have blamed everything from computer algorithms to high-frequency traders, but Kevin Freeman believes it was something else entirely: a weapons test.
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Just a few months after the 9/11 attacks, bin Laden said, “If their economy is
destroyed, they will be busy with their own affairs rather than enslaving the weak peoples. It is very important to concentrate on hitting the U.S. economy through all means possible.”
A year later, al-Qaeda’s second in command, Ayman al-Zawahiri, continued that theme, saying, “We will also aim to continue, by the permission of Allah, the destruction of the American economy.”
“It is very important to concentrate on hitting the U.S. economy through all means possible.”
On the seventh anniversary of the 9/11 attacks, levels of short selling and credit default swaps began to spike. By September 15, 2008, Lehman Brothers had vanished—its share price had fallen to $0.21 after trading over $30 just a few weeks earlier. It was a very public implosion, one that set off a chain reaction of devastation in the financial markets—but most people don’t know that there was something else, something much more serious, going on behind the scenes that very same day. Speaking on C-SPAN several years ago, Pennsylvania congressman Paul Kanjorski revealed that the financial system was much closer to disaster than anyone realized:
Here are the facts and we don’t even talk about these things: At 11 in the morning the Federal Reserve noticed a tremendous draw-down of money market accounts in the United States, to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there. . . . If they had not done that, their estimation was that by two o’clock that afternoon, $5.5 trillion would have been drawn out of the money market system of the United States, it would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed. . . . It would have been the end of our economic system and our political system as we know it.
