War By Other Means

“War is not merely an act of policy but a true political instrument, a continuation of political intercourse carried on with other means.”

— Carl von Clausewitz

Things remain tense in Ukraine, with Russian troops poised to cross the border at any time. What’s there besides people and pipelines?

China is still committed to reabsorbing Taiwan, with one Chinese scholar recently predicting “the leadership will move toward armed unification by 2027” — if not sooner. What’s there besides people and a semiconductor industry?

It’s hard to fathom these guys, from wherever they heil, willing to send young men to their deaths just to do what…?

The question in both cases is what the United States will do if either scenario occurs. The $700 billion or so that Uncle Sam gives to the military each year wasn’t enough to prevail in Afghanistan, even after two decades.

One small difference. We fight our wars by issuing debt and giving money to contractors who make weapons that kill people.

And in this case we’re dealing with larger groups of better armed troops… backed by nuclear arsenals.

Oy. This is like one of those emails we’ve gotten accustomed to receiving feedback like, “Stay in your lane…” “Don’t give us health advice,” “Stick to investing.”

What better way to stick to investing than to ignore the calls for war.

Besides, Russia and China don’t need to resort to such things to get the United States to stand down. They can hit Americans where it will hurt the most — their wallets. In 2009, a high-level Pentagon war game showed that China could absolutely wreck the United States without bombs or even guns.

As a Barron’s article about the exercise explained:

Whenever the U.S. did something Beijing didn’t like, China began dumping a fraction of its dollar-backed assets, driving down the currency, sowing economic chaos and prompting U.S. leaders to appease the Chinese.

The article is titled, “China Guts Dollar, Crushes U.S. in Alarming Financial War Game.” What it doesn’t mention is that our Jim Rickards helped design the scenario… and played the part of China.

How did a kid from a fishing and farming town go from negotiating a world-spanning bankruptcy to designing economic war games for the Pentagon? As we discussed yesterday, when Jim’s family went bankrupt, Jim devoted himself to studying.

The dedication landed him at Johns Hopkins University, where he got a master’s degree in international economics. Then he got a law degree from the University of Pennsylvania. He used that to land a job with Citibank in New York, where he also earned a law degree in taxation from New York University.

“My father did ask me at one point when I was going to stop going to school,” he quips. At the time, Citibank “had more overseas offices than the State Department had in embassies.” So he took advantage of the opportunity to work around the world. He started out in Europe, then moved to Asia Pacific and Africa.

In the early 1980s, he “converted CitiBank Pakistan to Islamic banking” — that is, making the bank adhere to Muslim beliefs and still be profitable. The experience made him “one of the leading Western experts on Islamic banking,” he says.

That knowledge was suddenly in high demand after Sept. 11, 2001. Jim reports, “I got tapped by the CIA intelligence community to work on counter-terrorism finance.”

A lot of what he worked on is top-secret, of course. “Some things that I can say about that and some things I can’t,” he tells me.

He still has many connections to the intelligence community, which gives him a deeper understanding of what’s really going on in China and Russia. In fact, the last briefing for his Strategic Intelligence readers was called, “The Ukraine Problem: What It Means for Investors.”

Reserve members can watch it for free right here.

Now that you know a bit more about where Jim comes from, we’ll spend the rest of the week looking at what he sees coming next.

Follow your bliss,

Addison Wiggin