Tag Archives: financial warfare

What’s Important to You?

World is in different place than ever before. That’s true with every generation over the history of time. Ah, but do you know what pitfalls are this time? Have you taken steps to minimize effect of disasters, natural or government induced?

What’s different this time?   Most countries are broke.

So what are most countries doing? And why do you care?

They are relying on printing presses creating a rapidly expanding money supply.  Historically this has happened to many countries at one time or another. We all know the boom bust times in various South American countries.

This time it’s happening at the same time to most industrialized countries at the same time. Think China, Japan, Great Britain, US, India, almost all of Europe and Africa. Governments are increasingly tied to each other in the ways they exchange money and honor currencies.

Japan and China own trillions of the US debt. Countries have huge amounts of actual US dollars. That means re-pegging the value of US dollar won’t work. In past we were tied to gold standard. That would no work in US this time around. Countries that hold trillions of dollars outside the US could still sell the currency for any amount they wanted and US could not stop it.

Back in 2009 US public and private dept was in neighborhood of $55 trillion. That debt had significant impact on US economy. Today, US public and private debt has climbed to $65 trillion. Total US debt is up 150% since 2000. Additionally rest of world has added another $57 trillion in public and private debt.

This is referred to as “hot money” lending. But does it matter? McKinsey points out that debt, around the world, is outpacing economic growth. When economic growth can’t finance all these loans, only governments are willing to step into the breach.

This debt can only be paid off in 3 ways:

-Paid off by the people, businesses, and countries that took on the debt.
-Inflation
-Declaring the debt null and void…destroying relationships with those who provided the money in the first place. This has been used by many countries over the history of the world…but never by a number of countries in a very short period of time. No one knows the effect if several countries started down this path.

Federal Reserve Richmond, VA branch recently reported that 61% of all liabilities in US are now guaranteed by the government, implicitly or explicitly. In 1999 the percentage was 45% (mostly Fannie Mae and Freddie Mac). Today more and more of our financial institutions rely on the government to access credit.

Unfortunately, government guarantees are not shown on any government balance sheet…in US or elsewhere in the world. Governments are relying on massive currency and interest rate manipulation to fund themselves. World has never experienced anything like this by the major economic powers of the world.

Sooner or later this bubble will pop, like many others have over the years. But when?

Nobody knows. But what it means for your personal wealth is known. The biggest threat to your wealth isn’t a stock market crash. Instead it’s from confiscation and/or devaluation by our government. Think Greece last year that took 25% of savings from citizens bank accounts.

In the 1930’s people and companies suffered massive losses. But the actual wealth didn’t disappear. Wealth transferred from creditors to lenders. This time around we will have the above, but will also have major collapse in governments politically. The US government has pledged a large amount of the wealth of the citizens to other people…through all kinds of government programs. We are all familiar with Detroit bankruptcy. That will occur within America and many other countries…within a few years.  What’s a few years? Again, no one knows for sure, but within 10-20 years seems realistic.

Once inflation takes off it can have devastating effects quickly. Think back to the Carter years when inflation in US hit 20%.

US, and most countries of the world can’t sustain government spending that is vastly outstripping tax revenues coming in. Sooner or later the piper has to be paid.

Previously the world would have a 1930’s situation where loans would be called. Difference then and now? Governments were not the primary financiers of the world debt.  Banks and financial institutions had the primary role.  If government can’t pay all the people that have been promised money there will be riots on massive scale.

So what can individuals do?

10,000 doctors every year are refusing to serve Medicare patients. That means many people won’t be able to get doctors appointments. What you can do? Doctors, not participating in Medicare are starting to charge patients monthly fee to see them. In effect doctors are signing up the patients they want to see to give doctors the income they want. These patients at least are assured medical opinions will be available to them. Start understanding medical coverage options in other countries…like Costa Rica or Panama (there are lots of others.) Those two countries have doctors that were educated in US and majority speak English. Last those countries are just few hours away and charge fraction of US doctors and hospitals.

Above is only one example. Many people have majority of their wealth tied up in value of their homes. What happens in major downturn when housing prices drop? In 2009 housing values dropped by over 50% in some markets. For most Americans that means there houses are worth far less than they paid. What can you do? Work to eliminate as much debt as possible, especially credit card debt and auto loans. If you can, pay off your house…or go to 15 year mortgage. Objective is to reduce debt so you can cover any remaining debt in a down turn.

Wages have remained flat in US for many years. How many? Depends whose figures you want to use. Assuredly since at least late 1990’s. Differences in years typically depends on rate of inflation that is applied.

To minimize this, acquire the things you need if times get tough. For some that’s food storage, for others it’s cash, or other products and supplies that are important to them.  If there’s run at supermarkets toilet paper becomes pretty valuable. Natural disasters have cleared the shelves of supermarkets many times. The economy doesn’t have to tank to cause major disruptions. People who have taken, even just a few steps, to prepare for emergencies that would affect them sleep better.

Most people live day-to-day. They assume things won’t happen. They listen and believe the media. Remember, no government cares much about their citizens. We are each just a number. Any of us that think differently aren’t thinking.

China Engaging US and World Financially and Militarily

Last month China fired a shot in the Currency Wars by devaluing the Yuan against the dollar.

For couple of years China has been creating artificial islands in South China Sea. That’s an area claimed by several foreign countries, and hundreds of miles from China. Now China is building military bases on these islands.

Recent satelite pictures show what appears to be an airstrip being built on one of the islands. This is the third runway on an artificially created island.  On another artificial island Chinese are clearly building facilities to handle large ships.

China has adopted a strategy from the founding days of the US. Occupy an area (the Oregon Territory)  and then claim it as your own. Great Britain and Russia were already in the area. Today, several countries already have long established presence in South China Sea. By building military bases and airstrips on islands they have created, the Chinese are saying to the rest of the world, “we are here and claim this, take it away if you dare.”

What is China’s Goal?

To establish military presence closer to Southeast Asia. Establishing themselves in South China Sea, far removed from China, enables them easy military access to Japan, Koreas, Phillipines, etc.

US is calling on China to stop it’s expansion in the area to allow time for diplomatic solution. Apparently America’s politicians and leaders can not be bothered with a study of US history.

Next it would be logical for China to solidify in the area with advanced air defenses.

What Is Importance of South China Sea?

Two fold,

-off-shore oil and gas exploration and

-military domination and threat to several US allies who have treaties that the US will militarily defend on their behalf.

China is challenging US with our Allies. Is US willing to go to war to support our allies and push China out? China is betting US will abandon our allies, forcing them to depend on China, thus establishing China’s domination of a huge area of the world.

American’s need to compare China’s action to China developing military bases in the Caribbean to threaten US and exert their dominance over Central and South America. (China has already invested hundreds of billions throughout Central and South America to further develop resources of those countries, while creating opportunity for improved standard of living for people in those countries. Meanwhile, what is US doing to improve our image and presence in Central and South America?

South China Sea-Why Should We Care Part 3

Last two days we talked about  what China is doing in South China Sea and how it parallels what America did in our early days. About a new type of warfare that is already being tested and has proven effective. Today let’s look at how that can tie up your bank accounts, credit cards, close ATM’s,etc.  Americans have not experienced many of problems that beset most other countries. That has conditioned American’s to be much more complacent than citizens in most countries. Last simple steps to protect yourself.

What Can You Do to Protect Your Assets?

In Greece banks have frozen accounts for the last two weeks. People have not had access to the funds in their own accounts. Many business are shut down. Greek version of Silicon Valley can’t do anything. Their data centers are in cloud in US. Credit card transactions are stopped. Their businesses have been shut down.

An, but that could never happen in US. Don’t be so sure.

Most international financial transactions rely on SWIFT communications.  SWIFT stands for Society for Worldwide Interbank Financial Transactions. If that’s hacked, banks all over the world would not be able to do business. Best move on their part is to freeze assets of customers until situation is resolved. No credit card transactions, no withdrawals, etc.

The Above has Already Happened.

USA used Swift sanctions on Iran. It had and has, very negative effect on Iran’s economy. US Senate recently called for the use of Swift sanctions on Russia. Putin has said if we do, he would consider it an act of war and respond accordingly.

This is the next form of war. Any country can engage in it. Doesn’t require troops or massive arms. Pretty cheap warfare compared to traditional alternative. With countries already starting to use this what should citizens do?

Don’t Become Collateral Damage

What would you do if your bank account was frozen tomorrow? If your credit cards are not accepted? Your investments are frozen. You can’t sell stocks, bonds, treasuries, etc. You may or may not be able to access your safety deposit box.

All it would take for this to happen is an attack on US SWIFT transactions, Mastercard, Visa, Fedwire, etc. All the security breaches through out the world indicate government backed and financed hackers are getting more sophisticated. Several major banks have been hacked…but most have not heard about it.

How Do You Protect Yourself & Your Family?

Have some assets in physical form that can’t be attacked electronically when normal assets are frozen. Normally we think of gold and silver, but stamps and coins fit as well as land, buildings, etc.

Americans are more complacent than citizens in other countries. We’ve watched looting with minor civil disturbances. What is likely to happen when there is a major natural disruption in major city or state (think water in California). If just one major bank had to shut down for a few days it would spill over and impact almost all other banks in US.

When is this likely to happen?

No one knows. Unfortunately we won’t know until it has happened. Government didn’t know when it was going to be hacked and have detailed information on millions of employees compromised. No need to go overboard, but above are simple steps each of us can take.

Remember Boy Scout motto: Be prepared.

Of course there are many more steps to be taken to protect your family. Purpose of these articles is to show how government actions can have immediate, direct impact on our lives. How each of us responds and steps we take are up to us individually.

Information for this series came from Jim Rickard’s Strategic Intelligence Newsletter (AgoraFinancial.com) Jim is expert  currency manipulations and how they can be used to disrupt economy for specific countries or groups of countries.

South China Sea-Why Should We Care Part 2

Yesterday’s post talked about the similarities between America’s expansion west and the role China is taking in the South China Sea. Currently 6 countries claim the same area.  To improve legitimacy of their claim to the South China Sea, China has moved in militarily,  by creating new islands,  populating them, and establishing military presence.

Traditional War is Unlikely, but…

New type of warfare is evolving. It is likely to be a financial war.

Say what? Read interesting article by Jim RIckards in Strategic Intelligence, July 2015 edition. (AgoraFinancial.com) Turns out Pentagon has run couple of financial war games to learn how to fight a financial war and how to react if another country engages in financial war on US. (As China, Russia, and India have already done through electronic disruptions of trade.)

Latest war game, was in May 2015, on VE Day. (70th anniversary of victory in Europe.) It considered impact of disruptions to financial payments system, cyber attacks on banks, trade sanctions, and disruptions to the stock exchanges. Hmm, there have been some of those this year already.

Objective of those kinds of attacks is to interrupt supply chains and dry up imports, with emphasis on energy imports. Easiest way to accomplish that is by disrupting payment transactions between banks and  between countries.

Have You been Hearing much about this?

Of course not. Our media, government and politicians (both sides of the aisle) have no interest in sharing how the world is changing and how our role in it is changing. Media doesn’t want to talk about real issues. They are complex and don’t fit into sound bites. They also are not popular. Likewise politicians don’t want to talk about them. Not good issues to attract voter interest. Only offering more freebies gets attention from majority of voters.

Even if government were willing to talk about real issues and our responses to them, how do they do it? Response to issues above is very complex. Like Iran, they involve lots of negotiations, starts and stops, and changes in direction. People like to have issue explained and then clear, simple solution laid out.

Tomorrow: Simple Steps to Protect You

 

South China Sea-Why Should We Care Part 1

Currently China, Philippines, Vietnam, Taiwan, Brunei and Malaysia all have overlapping claims to the South China Sea

Why Should We Care?

South China Sea is believed to be rich in oil and natural gas reserves. Products all those countries, as well as the rest of the world, need. So why does this involve USA? We have lots of oil and natural gas reserves. USA also has military treaties with Philippines and Taiwan.  Those likely will involve US, it’s only a matter of time. But with different results than traditional conflicts have had. Results that can have direct impact on you and I.

China is trying to usurp claims by other countries by going into area, populating it and building military installations. They are even creating new islands , using sunken ships, reefs, and landfill. Then putting military bases on those islands.

They are taking a page out of America’s play book. Isn’t that how we moved west in early days of America?  Britain and Russia both had claims on the Oregon-Washington areas. Purpose of wagon trains was to establish population in area and establish our sovereignty there. Belief was Russia and Great Britain would not go to war with America over the area. Turned out to be true and area was eventually ceded to America.

All nations above have disputes over various island groups. Best known are the Spratly Islands. There is ongoing saber rattling among those nations. If it goes further the US will likely get drawn into area. US will have same problem as Russia and Great Britain did. We are long way from that part of world. China is right there. China is betting that the US won’t go to war over the area. What’s different? During expansion of America we dealt with Russia and Great Britain directly. South China Sea area is much more complex. We would have to deal through variety of countries.

Sounds like the Iran nuclear negotiations all over again…and we know how those are turning out, relative to enforcing nuclear inspections…and return of American prisoners held by Iran.

Tomorrow: Role new type of warfare will have on citizens.

Use Financial Warfare on Your Competitors

Cause for thought.

SUMMARY

This from recent edition of Addison Wiggin’s Apogee Advisory. Article was about oil as a financial weapon. Also cited China’s acquiring gold to back future currency to eventually undermine the dollar.

Premise of the article is that keeping the price of oil and gas high puts economic pressure on China since they have to import most of their oil . In effect, it becomes a form of economic warfare.

View your business as a video war game.  What could each Department/Division do that would set you apart while putting your competitors at a disadvantage? (If you play, or know video game players, ask them what makes the games they play unique. Video games are one of the most competitive markets there is.)

The most successful companies offer a product or service that perpetuates itself inexpensively and has features that are very hard to replicate. Think of Coca Cola.

The business world isn’t about competing, it’s about winning. Slight tweaks aren’t enough, we each need to differentiate ourselves.

THE DETAILS

Most of us have probably read Sun Tzu’s The Art of War. Jesuit missionaries brought the book to the attention of the western world in 1772. Basic premise:  a skillful strategist should be able to subdue an enemy’s army without engaging it.  (This short book should be must read for anyone in business. Lots of ideas that can be implemented.)

The US keeps the price of oil high which drains more of China’s currency (the Yuan.) Likewise, China has been buying massive quantities of gold bullion to put a stronger base under their currency in an attempt to weaken the worlds reliance on the dollar as the medium of trade. Thus weakening the US.

Sun Tzu was a brilliant military strategist. His objective was to weaken an enemy so they didn’t have the will the fight.

That got me started rethinking our industry and specifically my company. What can I do to differentiate our company from the hundreds of competitors? How do I get an advantage that can be permanent?

Trade publications are full of articles about branding…at the same time most major name brands are finding less and less brand loyalty. Let’s face it, there isn’t much to distinguish brand names any more. Electronic mediums are further breaking down the historic differentiation of brand names.

So what is your brand? Does it convey the difference you want to convey? How is your brand memorable? Have you asked your customers to define your brand?