Emailed to me by a friend:
"Glenn:
Along the lines of GST's posts, but far more ominous is the writing below from a fellow named C. J. Seymour .
I see no reason to believe Japan or China would want to cut off their noses to spite their faces but....
The most important development in recent years is that the value of international trade in bonds, currency and derivatives has grown to historic proportions. It is now possible to cause as much damage to a foreign country by large scale currency operations or trading securities, as if war were declared.
When countries fire economic missiles by, for example, erecting trade barriers, they are travelling a dangerous road indeed. The potential for economic conflict was highlighted by Japanese Prime Minister Ryutaro Hashimoto who said on 23rd June 1997:
"I hope the U.S. will engage in cooperation to maintain exchange stability, so that we will not succumb to the temptation to sell U.S. Treasury Bills and switch our funds to gold."
Hashimoto also said:
"There are many countries in the world which conduct the management of their foreign exchange reserves in Treasuries. These countries continue to hold on to those Treasuries, even when the dollar plummets. And to some extent, it is this continued holding of Treasuries which supports the U.S. economy."
Hashimoto's underlining of the potential for economic warfare through the repatriation of dollar assets applies not only to Japan, but other countries who hold large amounts of such assets. These include the UK, the EU, and China. And last but not least, consider the traditional form of economic warfare, the 'beggar thy neighbour' competitive currency devaluation. Should China devalue its Yuan, we will see the power of this economic weapon.
As Alan Greenspan said in his 1999 Humphrey Hawkins testimony [July 22],
"Something has got to give somewhere... Where it apparently will give at some point in the future is a lesser inclination to hold dollar claims on the United States..."
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