Currency Wars: The Making of the Next Global Crisis Read Free

Korea might escalate an incident into a major attack without heed to the consequences. The United States might be drawn into a war involving others such as Iran and Israel if U.S. national interests were affected. Apart from these special situations, a conventional military confrontation with the United States seems highly unlikely because of the United States’ ability to suppress and ultimately decimate the opposing side. As a result, rival nations and transnational actors such as jihadists have increasingly developed capabilities in unconventional warfare, which can include cyberwarfare, biological or chemical weapons, other weapons of mass destruction or now, in the most unexpected twist of all, financial weapons. The financial war game was the Pentagon’s first effort to see how an actual financial war might evolve and to see what lessons might be learned.
    The war game had been many months in the making, and I had been part of the strategy sessions and game design that preceded the actual game. Although a well-designed war game will try to achieve unexpected results and simulate the fog of real war, it nevertheless requires some starting place and a set of rules in order to avoid descending into chaos. APL’s game design team was among the best in the world at this, but a financial game required some completely new approaches, including access to Wall Street expertise, which the typical physicist or military planner does not have. My role was to fill that gap.
    My association with the lab started in December 2006 in Omaha, Nebraska, where I was attending a strategy forum hosted by U.S. Strategic Command, or STRATCOM. I presented a paper on the new science of market intelligence, or what intelligence experts call MARKINT, which involves analyzing capital markets to find actionable intelligence on the intentions of market participants. Hedge funds and investment banks had been using these methods for years to gain information advantage on takeovers and government policy shifts. Now, along with my partners, Chris Ray, a seasoned options trader and risk manager, and Randy Tauss, recently retired after thirty-five years with the CIA, we had developed new ways to use these techniques in the national security realm to identify potential terrorist attacks in advance and to gain early warning of attacks on the U.S. dollar. Several members of the APL Warfare Analysis Lab had been in attendance at the Omaha event and later contacted me about ways we might work together to integrate MARKINT concepts with their own research.
    So it was not a surprise when I received a call in the summer of 2008 to join a global financial seminar sponsored by the Office of the Secretary of Defense and hosted by APL. It was scheduled for that September, its stated purpose to “examine the impact of global financial activities on national security issues.” This was one of a series of such seminars planned by the Defense Department to be held throughout the late summer and fall of that year as preparation for the financial war game itself. Defense wanted to know if such a game was even possible—if it made sense. They needed to think about the appropriate “teams.” Would they be countries, sovereign wealth funds, banks or some combination? They also needed to think about remote but still plausible scenarios for the players to enact. A list of expert participants had to be developed and some recruitment might be needed to reach out to those who had not been involved with war games before. Finally, rules had to be established for the actual play.
    To protect the top secret work that goes on inside the lab, the security procedures for visitors there are as strict as at any U.S. government defense or intelligence installation, starting with advance clearance and background checks. Upon arrival, visitors are quickly sorted into two categories, “No Escort” or “Escort Required,” reflected in different-colored badges. The practical impact of