[Fresh Ink] Pentagon - War Game Simulates World Financial Crisis

[May at Appleby Books]

Pentagon holds war game simulating world financial crisis
By Patrick Martin
13 April 2009


Two weeks before the April 2 economic summit of 20 leading capitalist
countries in London, the American military held a war game simulating
a concerted financial attack on the United States. The two-day event
was held March 17-18 near Ft. Meade, Maryland, according to report
published Thursday by the web site politico.com.

Three participants discussed the first-ever financial crisis war game
with the web site, describing how they sat "along a V-shaped set of
desks beneath an enormous wall of video monitors displaying economic
data." One participant described the experience as "a little bit like
Dr. Strangelove."

Those engaged in the exercise included hedge fund managers, economics
and business professors and executives from UBS, a major investment
bank, invited by the Pentagon to help it role-play a global economic
crisis in which five "teams" participated, representing the United
States, Russia, China, East Asia and "all others." Uniformed military
officers and US intelligence agents observed the exercise and took
notes.

According to the account published by politico.com, "the savviest
economic warrior proved to be China, a growing economic power that
strengthened its position the most over the course of the war game.
The United States remained the world's largest economy but
significantly degraded its standing in a series of financial
skirmishes with Russia, participants said."

The exercise was clearly driven by recent economic events. It was
held only a few days after the Chinese premier publicly questioned
the safety of his country's vast holdings of dollar-denominated debt,
including more than $1 trillion in US government bonds. Shortly after
the exercise, a top Chinese central banker raised the possibility of
replacing the dollar as the principal world reserve currency.

Professor Paul Bracken of the Yale School of Management told
politico.com, "The purpose of the game is not really to predict the
future, but to discover the issues you need to be thinking about."
The ongoing world financial crisis "loomed large over what everybody
was doing," he said.

Another participant underscored the political implications of the
economic crisis, saying, "Why would the military care about global
capital flows at all? Because as the global financial crisis plays
out, there could be real world consequences, including failed states.
We've already seen riots in the United Kingdom and the Balkans."

While the event was not officially classified, many participants
declined to discuss it with the press. It was conducted at the
Warfare Analysis Laboratory in Laurel, Maryland, run by the Johns
Hopkins University Applied Physics Laboratory.

Among the eventualities examined in the war game were the collapse of
North Korea, a US blockade of Iran, Russian manipulation of natural
gas prices, and increasing tension between China and Taiwan, leading
to China dumping some of its US dollar holdings. A group of referees
dubbed the "White Cell" decided what the impact of the moves by each
team would be.

According to politico.com, "At the end of the two days, the Chinese
team emerged as the victors of the overall game-largely because the
Russian and American teams had made so many moves against each other
that they damaged their own standing to the benefit of the Chinese."

Bracken told politico.com that the war game shed light on the
connection between political-military events, like the US embargo of
Iran, and the economic consequences, and also demonstrated that China
could successfully sell off at least a portion of its dollar assets,
undermining the financial standing of the United States, without
wiping out its own reserves.

US security officials have already pointed to the political impact of
the world financial crisis in terms of threats to the dominant
position of American imperialism. Admiral Dennis Blair, Obama's
choice to head the US spy apparatus as director of national
intelligence, told a Senate hearing February 12 that the economic
crisis, not terrorism or the wars in Iraq and Afghanistan, is "the
primary near-term security concern" of Washington.

In delivering the "annual threat assessment" coordinated by the DNI
across 16 separate US intelligence agencies, Blair was setting aside
the Bush administration's professed obsession with Al Qaeda, as well
as more traditional security concerns with Russia and China, to
suggest that "the global economic crisis and its geopolitical
implications" constituted a greater danger.

He described the financial crisis in apocalyptic terms, as "the most
serious one in decades, if not in centuries," and cited the
possibility that economic turmoil could produce political instability
and "high levels of violent extremism," not only in the Middle East
and South Asia, but in Latin America, Africa and the former Soviet
Union.

Only a month after this blunt warning of the threat of social
revolution, the Pentagon held its exercise simulating the
geo-strategic impact of the crisis on relations among the great
powers. It is only logical to assume that similar exercises, albeit
unpublicized, are being conducted to prepare the US military forces
to repress revolutionary uprisings of the working class both abroad
and at home.


http://www.wsws.org/articles/2009/apr2009/game-a13.shtml