Financial warfare: history re-visited

Posted on March 15, 2009 by Bill Faiferlick

In the fall of 1956 the world was on the brink of a major international conflict. Americans allies France and England were engaged over a battle with Egypt for control over the Suez Canal. The Soviet Union was threatening to intervene on the side of Egypt. America wanted to avoid military action at any cost and demanded that the British and French allies withdraw from the region. When their request was denied, the U.S. turned to financial warfare. America, which at that time owned much of England’s debt, threatened to sell off or dump much of their holdings in the British pound. This would have effectively destroyed England’s currency. The result was that all British and French military forces withdrew from the Suez region within weeks.

Because other countries hold considerable amounts of our debt they have become the engine behind financing our economy. They can quietly exert pressure or influence regarding U.S. policy and spending. This type of dependence affords other countries an enormous amount control not only over our currency, but our economy and security as well. Because the U.S. was the first to exercise such control in the 50s, it is possible if world events conspire against U.S. interests that other countries could resort to similar economic measures resulting in a financial catastrophe without ever firing a shot.

This is the very real scenario or position the U.S. has allowed and cannot be changed until we put our financial house in order and severely reduce these debts. As many other nations measure time in decades and plan accordingly, it isn’t very difficult to out-maneuver the U.S. since its preoccupation is with short term solutions.