This is almost the stuff of a Tom Clancy novel. In 2008 when our financial markets were at their weakest point and there wasn't yet a cogent plan to save them, the Russian government tried to incite the Chinese to sell off their holdings in Fannie Mae and Freddie Mac, thereby destroying the mortgage-backed securities industy entirely. This was revealed in a recent interview with former Treasury Secretary Hank Paulson who explained the plot thusly:
"Here I'm not going to name the senior person, but I was meeting with someone… This person told me that the Chinese had received a message from the Russians which was, 'Hey let's join together and sell Fannie and Freddie securities on the market.' The Chinese weren't going to do that but again, it just, it just drove home to me how vulnerable I felt until we had put Fannie and Freddie into conservatorship [the rescue plan for them, that was eventually put in place]."
While not as overt an act of war as invading Ukraine, a plot like this definitely ranks. It's no secret that the financial markets were our Achilles heel, and a bear raid on the two largest mortgage underwriters and the securities they backed could have plunged the U.S. into the depths of a depression. It also highlights how vulnerable the global economy is to just such an attack.
It's interesting, because bond vigilantes imposing market discipline on sovereign governments through predatory short selling isn't all that different from a move like this. But somehow a coordinated attack on the US markets by other governments feels different. Of course the Chinese never even considered it because they were the world's largest bondholders of Fannie Mae and Freddie Mac, so they'd be shooting themselves in the foot. Suppose they had no stake, though?
I guess my question is, are the global financial markets now so inter-dependent that the costs of an attack like this outweigh the benefits? Or is it possible for a rogue state to destroy the economy of a rival and escape any repercussions?
Also, where do you fall on the whole act of war thing? This definitely had intent to harm US national security.
"meeting with someone..." sounds legit.
This doesn't surprise me at all. After all aren't the Russians the bad guys? As for the US Gov, they would never do anything bad, especially if it involved spying on allies and citizens. Wait, does propping up a failing corporation count as something bad?
-1 grow up.
I'm just waiting for someone in the US government to start addressing them as "the Soviets" again.
McCain accused Putin of trying to build a czarist empire.
Eddie - You should read a book called currency wars. There are so many doomsday scenarios!
Fuckin commies. I have a grudging respect for this.
So I'm trying to figure out how much Crimea even matters. Is this something where we yell, scream and pound our fists but end up doing nothing and moving along in 6 months? Or is this going to get really, really ugly?
Without a doubt the absolute best analysis I've heard of the situation is contained in episodes 270 & 271 here:
http://www.dancarlin.com//disp.php/csarchive
If you respect the perspective history gives you, you'll undoubtedly become a fan. But what Carlin has to say on the obligations of NATO is absolutely clutch and (to me, anyway) makes it likely that Putin is about to call our bluff in a really significant way (and Crimea ain't it).
Thanks for the links Eddie. I'll take a look later tonight when I get a chance. I'm a big history fan so that is encouraging. I just can't listen to one more political show about this anymore.
It's a shitty thing to do but I find the timing of this information release, as well as the inability to verify a word of it....just a bit suspicious. It's something they would totally do, they're bastards, but step back and look at the esoteric propoganda war being waged by both sides today. That said: Russia is a glorified mafia state not unlike the south of Italy, and should be treated as such.
That the last president (Bush) would vouch for Putin is indicative of his own level of corruption and general stupidity. That Obama hasn't taken a more forceful stance earlier is indcative of his arrogance, and thinks no player could do us serious harm. With all their supposed might, just keeping everyone in their so-called-federation is a challenge and their 'big conquest' is a tiny island that's 60% ethnic Russian....so why would they fuck with us? Is Putin delusional enough to think that taking over a tiny island has fundamentally weakened the US to the point where he is the new top dog on earth? I really haven't figured that out yet. I'm inclined to think that Putin stopped taking his meds....and also inclined to think that the billionaires in Moscow are considering having him 'replaced'.
That a state would attack us, especially Russia, is very different than a fund imposing market discipline: they'd take a financial loss to hurt us. Using finances at a national level to attack another nation: that's the definition of a trade war. I think that the US is too laid back in foreign affairs under Obama because he wants to distance himself from the Bush legacy as far as possible. But I think everyone understands that he's a different guy at this point and we should be a bit more engaged. The US isn't the world's cop or king, but we HAVE TO maintain global leadership because the sad truth is a crook like Putin would like to do so. I left the GOP over the flagrant imperialism of the last administration, but now I'm looking at the current president and thinking "DO SOMETHING, ASSHOLE!"
Why did the US wait until there were chemical attacks in Syria, as opposed to the non-chemical killings, before doing anything? Why has not the US flown a squad of planes into a Ukranian air base to make the point that Russia isn't going to annex Kyiv? Why is not Obama approaching China with the message that an aggressive Russia is a destabilizing force in the region and a threat to our mutual interests? That's an easy sell. Why are we not ass raping Russia's banks, who by the way are very puny compared to ours? Most of our BB's alone are almost larger than the entire sector over there. And why are we not making more of an effort to sell energy to the EU....that would largely defang Russia's influence there and force them to deal with China more? Such an arrangement would serve as a leveling force for everyone.
Sure the PETA / green / whatever lobby has influence but Obama is in his second term and doesn't need the support of his small interest groups anymore. The time has come for him to take a more active role. Knowing how Obama has dealt with things in the past, this is either going to A) be a huge scandal for his administration or B) he's got some clever trick up his sleeve like he has for some other problems. I'm inclined to have a larger interest in this issue than maybe others, so I'll cut short my full thoughts on the subject because this post is getting long.
What clever tricks could you possibly be talking about?
If you're asking, I'm assuming you're a partisan?
The irony of this is that the Russians aka the USSR aka the creators of current China had to essentially go to their kids and say "We can't afford to be in the nursing home any more so you are going to pay for it, okay? Good."
On a different note Crimean based stocks and bonds have tanked to a degree that makes me smile.
@"Tony Snark" : Czars were pre-Soviet.
That means it's more true to Russian heritage. Putin hates communism; he warned the US against socialist schemes when he said: "Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors, and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.”
http://www.americanthinker.com/blog/2009/02/putin_warns_us_to_eschew_so…
Paul Craig Roberts on Putin:
//www.youtube.com/embed/ZK6Dk_DUs_4
This is old news. It was even mentioned in the beginning of Too Big to Fail (HBO movie).
I was just going to say that - this is laid out pretty clearly in Too Big to Fail, circa May 2011
I was just thinking the same thing. They had a full scene on this in the movie.
I'm not a fan of John McCain but he nailed it when he said: ''Russia is a gas station masquerading as a country''.
Ouch.
Russia is much more vulnerable than the U.S. During 2008 crisis the Russian Govt. burned reserves at a record pace, a few more years of low oil prices and we have seen Russia in 1995 all over again.
Just curious - but is this technically feasible? As in, could such a coordinated move to sell such a large amount of bonds actually be pulled off in the markets (back then or now) or would there be some sort of limit to what they could do?
Bro, do you even lift?
What if the desired result of the Russians was to have the US gov't back Fannie / Freddie after hearing this plot? What if they knew that in light of the crisis they could simply proposition the Chinese and it would filter to the US gov't and they would act quickly to back them without more time to digest the info? What if they wanted to further destroy our capitalist system by making the gov't drift further away from what has made our country great? It makes no sense that the Russians would proposition the Chinese knowing that they have a heavy interest in these two companies. It sounds like Paulson is just using BS to justify further gov't takeover of industry or we really do have some dumb people running the country.
The whole point is that when news releases like this should not be taken at face value.
I can't say I agree with you at all, but that's a Grade-A alternative explanation.
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