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An Unanswered Threat

The 2008-09 market collapse exposed the true vulnerability of the United States - economic weakness. The bursting of the housing bubble and a stock market crash humbled the world’s only superpower, once the dominant force on the planet. This began a domino effect sending millions of people out of work, destroying middle-class wealth, and throwing the government into crisis mode. Resulting sequestration has directly impacted defense expenditures and is blamed for weakening national security. Our government has run trillion-dollar annual deficits, with the Federal Reserve pumping trillions more into the system, yet the economy remains sluggish and national security has suffered.

Our enemies have long recognized that the most successful way to bring down America is via unconventional methods. The Chinese, Russians, and even Osama bin Laden have each expressed interest in damaging our economy as a means of warfare using both cyber and financial weapons including but not limited to mostly unfamiliar tools like dark pools, naked short selling and bear raids. Despite clear demonstrations of capability as well as expressions of intent, the threats of economic warfare remain largely unaddressed. Our federal government has failed recognize the scope of the problem, let alone respond to it. This represents a failure to uphold two primary constitutional responsibilities - to provide for the common defense and to promote the general welfare of its citizens.

Despite widespread ignorance of the risks, a few are undertaking groundbreaking work identifying the reality of economic warfare. They are discovering America’s enemies, including radical jihadists from the Middle East and North Africa as well as elements in China, Russia, Iran, and Venezuela are using tactics much stealthier than old-fashioned bombs to attack America. They have targeted our financial markets. Their stated goal is to collapse our economy. In 2008, hostile foreign governments and terror groups demonstrated the means, motive, and opportunity to hit our economy in ways few thought possible. It was in this context that the Department of Defense turned to Kevin D. Freeman, CFA to understand the vulnerabilities of our economy and markets, to know the how and why an enemy might attack with economic weaponry.

Kevin Freeman’s work for the Defense Department as well as his groundbreaking book, Secret Weapon, explains the history of economic warfare and highlights areas of vulnerability we face today. For example, in the event of a successful attack on the Dollar’s reserve currency status, all Americans would lose, the cost of imports and our $17 trillion (and growing) national debt would rise, taxes would necessarily rise and the economy would suffer. Ultimately we would lose our ability to fund our military and defend ourselves. And, this is just one possible scenario of economic attack.

Without correcting our vulnerabilities, America will ultimately fall victim to economic warfare, and the next attack will be absolutely devastating. We spend hundreds of billions of dollars annually on weapons systems and traditional defense but virtually nothing to address the ongoing and emerging threat economic warfare poses to our economy and our liberty.