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  • From: bobf <bobford79 AT yahoo.com>
  • To: homestead AT lists.ibiblio.org
  • Subject: [Homestead] Economioc Doomsday -- The Navy
  • Date: Fri, 19 Dec 2008 18:58:04 -0800 (PST)

I just ran across this from a lecture for The Navy. The most interesting ,
to me, is " The Alternate-Dollar Nightmare " which is the potential of a new
gold backed currency which would destroy the dollar and the world economy

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Information Dissemination

Observations of an Armchair Admiral


Thursday, December 18, 2008

The Navy Discussing Economic Doomsday

The Navy and the Office of the Secretary of Defense for Policy sponsored a
policy discussion yesterday focusing on the national security implications of
the financial crisis. The featured speaker was James Rickards, the Senior
Managing Director for Market Intelligence at Omnis, an applied research
organization. As reported in Politico, the four doomsday scenarios Mr.
Rickards is focusing on are:


The Bait Effect

Terrorists, and al Qaeda in particular, are fascinated with the idea of
destroying the U.S. economy. Rickards worries that the economic meltdown in
the United States could serve as bait of sorts for a terrorist attack, as
plotters calculate that a strike now could have a “force multiplier” effect
because of the already skittish U.S. stock market.

The China Syndrome

The Chinese own more than $500 billion worth of U.S. Treasury bonds, and
billons more in the debt of other U.S. entities such as those held by Freddie
Mac and Fannie Mae. And a general sense of mutually assured financial
destruction keeps them from wielding that debt like a weapon: if the Chinese
dumped U.S. debt on the global market, their own holdings of U.S. debt would
decline in value, the U.S. economy would be damaged, ultimately harming the
Chinese economy by reducing American ability to buy more Chinese goods.

They’d have to be crazy to try it. But Rickards points out that governments
don’t always do the rational thing. And in the meantime, their holdings give
the Chinese incredible power over American decision making.

The Existential Crash

A pessimist by nature, Rickards believes that many economic forecasters are
wrong, and the recession will get far worse than predicted.

He sees an epic disaster scenario in which the U.S. gross domestic product
declines by a staggering 35 percent over the next six to seven years.
Crippling deflation could take hold. Unemployment, he says, could approach 15
percent.

That’s a calamitous rate, but it would not be an all-time high: unemployment
hit 25 percent during the Great Depression.
...
In this scenario, the possibilities for global unrest increase dramatically
as a staggering United States retreats from foreign aid and global diplomacy
and the list of dangerous failed states grows sharply.

The Alternate-Dollar Nightmare

“The Number One vulnerability is the dollar itself,” Rickards concluded.
“We’re printing them and shoving them out the door, and the Fed is basically
out of bullets. So why hasn’t the dollar collapsed? The short answer is,
global investors don’t have any other choice.” That is, there simply aren’t
enough Euro- or Yen-backed securities for investors to shift their money out
of dollars and into some other currency.

But what if some kind of global coalition – say a trillion-dollar sovereign
wealth fund allied with several countries around the world – banded together
to create a gold-backed alternative to the dollar?
Why do I mention this in a forum on naval strategy and policy? Mr. Rickards
explains:

“The national security community needs to be conversant with this,” Rickards
said. “In defense, intelligence, and national security, you earn your money
by preparing for things that may be remote, but pose an existential threat if
they come to pass.”
Indeed. So, what are the ramifications for the Navy? On one hand, immediate
examples seem to be decreased operating and maintenance funds, long-term
impact on acquisitions and perhaps even a surge in seaborne instability, like
piracy and smuggling. On the other hand, with a global economic crunch
potential peer competitors like China and Russia would also be slowed. The
possibilities seem endless, so what say you?

http://informationdissemination.blogspot.com/2008/12/navy-discussing-economic-doomsday.html







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