COLD WAR 2.0 IS A FINANCIAL WAR

COLD WAR 2.0 IS A FINANCIAL WAR 

By James Rickards, Special Contributor, Money Morning. Ag 7, 2014

http://moneymorning.com/2014/08/07/cold-war-2-0-is-a-financial-war/

Published also by FFF.com : Cold War 2.0 Is A Financial War - By James Rickrads (8/8/14)

EXTRACTS

Relations between the United States and Russia are now at their lowest ebb since the end of the Soviet Union on Christmas Day 1991.

"The world is a mess." Said former Secretary of State Madeline Albright recently

TODAY THE WEAPONS ARE AS LIKELY TO BE FINANCIAL AS MILITARY.

Economic sanctions, asset freezes, and prohibitions on banking transactions are now the weapons of choice. The New York Times recently reported that a senior official responsible for asset freezes in the U.S. Treasury was "President Obama's favorite combatant commander." The danger for investors is that their portfolios and life's savings could end up as collateral damage as the battlefield moves to the banking system.

THIS ALMOST WORKED AGAINST IRAN

The U.S. waged a successful financial war against Iran from 2012 to 2013 by pushing Iran out of the international payments systems. This meant they could not receive hard currency for their oil exports and could not pay for needed imports of equipment and gasoline. This caused a run on the banks and hyperinflation in Iran.

The U.S. was getting close to regime change in Iran without firing a shot when President Obama declared a truce in December 2013 and allowed Iran to gain access to billions of dollars of frozen assets as part of his new détente with Iran.

The U.S. is now trying the same financial tactics against Russia and Vladimir Putin because of Putin's annexation of Crimea and threats to invade eastern Ukraine.

But there is a crucial difference between having Putin as an adversary instead of Iran. Russia has a far greater capacity to fight back. If Russia is pushed too hard, it will strike with financial weapons of its own.

AN OLD, DEADLY DYNAMIC

This dynamic harks back to the Cold War doctrine of Mutual Assured Destruction or MAD. During the Cold War, both Russia and the U.S. had enough missiles to destroy each other. They also had enough missiles to survive an attack and strike back. Neither side would attack because it knew it would be destroyed in the second strike counterattack. Both countries would be wiped out, so neither country would start the conflict.

Something similar exists today in capital markets: WE LIVE IN A WORLD OF MUTUAL ASSURED FINANCIAL DESTRUCTION.

It is true that the U.S. could freeze major Russian banks out of the global payments system and prevent normal credit card processing in Russia by Visa and MasterCard. But Russia could strike back by dumping U.S. Treasury notes, freezing U.S. assets in Russia, and working with the BRICS nations to create alternatives to the U.S. dollar payments system.

RUSSIA'S FINANCIAL DOOMSDAY WEAPON IS ALREADY ON AMERICAN "SOIL"

Russia also has a financial nuclear option that is even more threatening than freezing assets. In its July 27, 2014 issue, BusinessWeek reported the discovery of a Russian "attack code" computer virus buried inside the Nasdaq Stock Market systems. An official of the NSA said the virus "might be capable of wiping out the entire exchange." The Russian attack code was discovered inside Nasdaq in 2010.

On August 22, 2013, the Nasdaq was shut down for half the day due to an unexplained computer glitch. To this day, no credible explanation has been offered as to what caused the shutdown.

If the explanation were straightforward, it should have been offered by now. If the explanation is nefarious, there is good reason not to tell the public. Investors everywhere might be panicked into dumping their stocks if they knew that their digitally recorded investments could be wiped out in the blink of an eye.

Financial warfare is no longer in the realm of war games and futurists. It is happening now all around the world. Wiping out stock exchanges is no longer the stuff of science fiction films. The enemy viruses are already in place.

The only thing holding back full-scale financial warfare is the threat of retaliation, exactly as happened in the Cold War.

Now, in Cold War 2.0, the RETALIATION IS NOT WITH NUCLEAR WEAPONS BUT WITH PARALYZING FREEZES ON STOCK EXCHANGES AND BANK PAYMENTS. Any miscalculation by politicians or accidents caused by technicians could be enough to wipe trillions of dollars of value off the face of the earth.

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