Financial Warfare Has Come to the Mainstream, but Arrogance and Ignorance Prevent Preparation

by Kevin D. Freeman on April 24, 2014

In 1999, two Senior Colonels from the People’s Liberation Army in China authored Unrestricted Warfare and made the following observation:


UW Book Cover‘Thus, financial warfare is a form of non-military warfare which is just as terribly destructive as a bloody war, but in which no blood is actually shed . . . We believe that before long, ‘financial warfare’ will; undoubtedly be an entry in the various types of dictionaries of official military jargon. Moreover, when people revise the history books on…warfare in the early 21st century, the section on financial warfare will command the reader’s utmost attention. The main protagonist in this section of the history book will not be a statesman or military strategist; rather, it will be George Soros.”


The two colonels understood that Soros-style market attacks could bring down a nation just as surely as bombs or missiles. They understood that a financial collapse could be caused by market manipulations and that a financial collapse could doom a regime. They were right in multiple respects, not the least of which is the fact that financial warfare is now center stage. Consider the current cover story for Newsweek, The Art of Financial Warfare.



We will share just a few excerpts from this story but you should read the entire article from the May 2, 2014 issue. [Note that according to this article, when Unrestricted Warfare was written in China (15 years ago in 1999), our own government thought the idea “inconceivable.”]

The Art of Financial Warfare

By  and  / April 24, 2014 6:06 AM EDT

The first salvo in modern warfare is likely to be financial—and the result is increasingly effective.  

“Fifteen years ago, the idea that the Treasury Department would be at the center of our national security would have been inconceivable,” Daniel Glaser, assistant secretary for terrorist financing at Treasury, said in an interview. “But we have developed a whole new set of tools to put at the president’s disposal.”


The control room in this new kind of war is a unit inside the U.S. Treasury Department: the Office of Terrorism and Financial Intelligence (TFI) with 730 staff members.

Don’t let the name fool you. This little-known branch of Treasury, created by Congress in the wake of the September 11 attacks, isn’t just going after terrorists or hunting illicit offshore money flows anymore. It is using sophisticated financial weaponry to hit carefully chosen targets linked to hostile governments.

“This is the 21st century version of waging war,” says Judith Lee, a lawyer and sanctions expert at the firm of Gibson, Dunn & Crutcher in Washington . . .


Alarm bells rang inside the U.S. Treasury Department on February 21, around the time then-president Viktor Yanukovych disappeared and fled to Moscow amid escalating protests against his Kremlin-backed government.

Szubin said his group immediately began gathering intelligence on Russia.

“There was a need here for a rapid response—and rapid in a meaningful, not just symbolic, way—to identify key [Russian] cronies and key financial networks,” he said.

At the end of February, amid reports that Russian troops in Crimea were moving out of their barracks, the White House told Treasury that it was preparing executive orders signed by the president and designed to legally underpin the blacklist.

“This is the first time we have articulated such transparent, well-defined sanctions levels,” says Mujtaba Rahman, head of European analysis for research and consulting firm Eurasia Group in London. “There are three levels with escalating triggers and consequences, with level one being symbolic, level two targeting individuals and level three threatening to punish entire sectors of the Russian economy.”

Russia is at level two.

A former senior Treasury official tells Newsweek that “right now, we’re still doing shots across the bow and letting the dust settle. But if Putin takes on more, then the die is cast.”


Until recently, the U.S. relied largely on centuries-old methods of international statecraft rooted in bombs, boots on the ground and broad sanctions—like trade embargoes—used as blunt, unilateral instruments for crushing its opponents. This frequently created unwanted collateral damage that crippled neighboring countries and their economies.

In the new world order of highly targeted financial sanctions, Treasury has turned globalization, and financial domination, to its advantage.

“It wasn’t easy,” recalls the mastermind of this new order, Juan Zarate, a Harvard-trained lawyer who is now a senior adviser at the Center for Strategic and International Studies, a Washington–based think tank. The FBI and the Justice Department didn’t want Treasury meddling with law enforcement. “We had to prove that the greatest power Treasury has…had nothing to do with guns and badges,” he says, “and everything to do with markets and our financial suasion.”…

In 2004, Zarate’s group, by then called TFI, became the nerve center of the U.S. Treasury. It has what Glaser describes as arguably the most formidable Rolodex of financial and intelligence contacts in the world, from central banks to finance ministries to heads of state and law enforcement officials, in addition to every U.S. agency . . . (Zarate wrote about the expansion of financial warfare in his 2013 memoir Treasury’s War.) . . .

Will precision financial warfare make Putin blink?

The White House has “written off” trying to deal with Putin, says a person briefed on the administration’s thinking, adding that administration officials see “no point in trying to reach him directly.”

Another former senior Treasury official tells Newsweek, “These sanctions are designed not to have him back off Crimea, which we’ve already lost, but to act as a prophylactic” against future aggression. “We have a chance of succeeding and in not bringing down Russia and the world economy.”

This Newsweek article essentially proves the two Chinese colonels to have been right. Financial Warfare is at the world’s center stage right now. There’s only one problem with the report–it is only one sided. It mentions nothing about the risks of retaliation. And yet we know from my research that Russia does have the capacity to retaliate, especially if you add in a cyber component.

In 2008-09, I wrote white papers and conducted research for the Pentagon that demonstrated conclusively that our own financial system was also vulnerable to foreign attack. Beyond that, my team uncovered clear and compelling evidence that such attacks had already taken place and were, at least in part, connected to the 2008 financial collapse that nearly destroyed our economy. Those findings were later shared in the 2012 NY Times bestseller, Secret Weapon; How Economic Terrorism Brought Down the U.S. Stock Market and Why it Can Happen Again. Eventually, some of our findings were confirmed by senior officials such as former Treasury Secretary Hank Paulson. There was other validation in various government reports (including a study commissioned by SOCOM and one by the Pentagon’s Office of Net Assessment) but most remain classified.

While Newsweek touts our ability to wage economic war, most are unaware that it has been done to us and far worse remains possible. Casey Research has just released an article and video that spells out the threat. Interestingly, they use the term “Secret Weapon” to describe how Russia could attack us economically:

Putin’s Secret Weapon – How Russia Could Take Down America Without Firing a Single Shot

Casey Research

Here’s a startling fact most investors have never heard: During the last financial meltdown in 2008, when the U.S. economy was on the brink, Russian leaders met with China to persuade them to dump the dollar – and destroy the world’s reserve currency.

Before they could act, the Fed pumped over $700 billion into the economy and delayed their day of reckoning. Still, the threat remains. China holds over $1.2 trillion in U.S. debt today. And with their Russian allies, they could drop the dollar at any moment. This excerpt from our eye-opening documentary called “Meltdown America” explains the severity of this imminent threat.

For the full story and to learn more about what could be “the early stages of the end of the West,” click here to watch the full version of this documentary.

You’ll hear the harrowing and true stories of three people who survived economic and political collapse in Zimbabwe, Yugoslavia, and Argentina… and discover how their powerful stories of hardship foreshadow what’s happening in the U.S.

While this is clearly a promotion piece for Casey Research, the points are valid. We are at risk of financial warfare attacks, especially in retaliation for the financial warfare we are waging. This is the point we have been making since 2008 when we first identified the economic war underway.

The Russians fully understand the “sanctions” and other measures we are using. And, they have clearly threatened to respond. For example, consider these chosen words from Putin ally and Senior Kremlin advisor, Sergey Glaziev:

“An attempt to announce sanctions would end in a crash for the financial system of the United States, which would cause the end of the domination of the United States in the global financial system.”

While this threat seems a bit boastful, it should nonetheless be treated seriously according to our own experts. First, Juan Zarate makes it plain in his book Treasury’s War that we are more vulnerable than we care to admit:

“Perhaps most troubling, the United States faces unique systemic vulnerabilities and internal weaknesses that adversaries in the coming financial wars could exploit …as such, although the United States is well equipped to fight kinetic wars, it remains uniquely vulnerable to financial warfare.”

“The United States faces direct challenges to its economic predominance and financial influence, and is unprepared to defend itself from the looming external threats and internal vulnerabilities.”

Perhaps the biggest source of US vulnerability is not in terms of physical resources but rather in virtual systems …“The blending of financial and cyber warfare represents the new frontier . . . All of this suggests that states are willing to use cyber-weapons to impact the banking system and to engage in open cyber financial warfare…The coming financial battles may find their most serious theater and articulation in cyberspace, with the vulnerability of the financial sector and the international system of trading and commerce potentially at risk.”

You can watch an interview with Zarate at this link. Watch to the end where he admits the Russians CAN bite back.

Zarate’s sentiments are echoed by Jim Rickards as well. Rickards participated in economic war games for the Pentagon that demonstrated that Russia and China could team up and dethrone the dollar with resulting economic chaos for AmericaRickards is also the author of Currency Wars. He points out that while we have the capacity to severely damage Russia, they have a great potential for retaliation. And, in an interesting twist, because we are more developed, we have more to lose. When you combine cyber and financial efforts, it can get pretty scary:

“Russia could bring down the financial markets in the US with a bunch of hackers. Rickards says that although the US could also attack the Russian market with hackers, who do you think has more to lose? The Russian market shutting down would hurt some investors…however the US market closing down would be catastrophic for the American economy.”

Both Zarate and Rickards views were confirmed by General Keith Alexander in a 60 Minutes interview near the end of his tenure with Cyber Command and the NSA. I’ve shared similar things in multiple interviews including this one at Fox and Friends:

Kevin Freeman on Fox and Friends from Eterne Films on Vimeo.

So, the big news is the acknowledgment in Newsweek that we are in a financial war. What’s missing is any concept of the price that war could inflict on the American people. 

The Bible warns against starting a project without considering the cost:

“For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it?”

–Luke 14:28 KJV

Yet, that appears to be precisely what we are doing in the conflict with Russia today. We are conducting financial warfare without understanding how much it will cost us. The American people are particularly at risk although few understand what is at stake. That’s why I wrote Game Plan; How to Protect Yourself from the Coming Cyber-Economic Attack. I believe it is the right of every American to know and understand what we are facing and what can be done about it.

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