STAFF NEWS & ANALYSIS
2008 Crash Caused by Financial Terrorism?
By Staff News & Analysis - March 02, 2011

Financial terrorism suspected in 2008 economic crash … Evidence outlined in a Pentagon contractor report suggests that financial subversion carried out by unknown parties, such as terrorists or hostile nations, contributed to the 2008 economic crash by covertly using vulnerabilities in the U.S. financial system. The unclassified 2009 report "Economic Warfare: Risks and Responses" by financial analyst Kevin D. Freeman, a copy of which was obtained by The Washington Times, states that "a three-phased attack was planned and is in the process against the United States economy." … The report concluded that the evidence of an attack is strong enough that "financial terrorism may have cost the global economy as much as $50 trillion." – Washington Times

Dominant Social Theme: Economic difficulties are military ones.

Free-Market Analysis: In the other article in today's issue, we focused on ways that the power elite memes were designed to avoid casting blame on central banks. The idea is to create diversionary blame that can then be parlayed into further government action, usually via regulation. In the case of this report, excerpted above, we see a new twist however.

While Britain's central banker Mervyn King blames the private sector, US financial analyst Kevin Freeman, at the Pentagon's request, has penned a report (excerpt above) that blames foreign enemies for the 2008 financial crisis. This is a fairly brilliant fear-based promotion in our view because like King's positioning, it doesn't merely push blame away from central banks it also opens up another entire venue for state expansion – military growth to combat economic terrorism.

Not only does this meme logically support military expansion, it has ominous free-market implications as well. By treating the current, fallacious system as a kind of "gold standard" that cannot be taken down without an attack, one enshrines what is injurious. The conversation moves beyond remedies from reconfiguration to strategic necessities intended to defend what is evidently and obviously the Western economic system.

Only it is not. The central bank economic system that has been put in place by the Anglo-American elite is far from a free-market system. It begins by printing money-from-nothing and as this fiat-currency circulates, it begins to inflate various markets, certainly the stock market. It also fools entrepreneurs into thinking times are better than they really are – and thus firms begin to over expand while other companies create trivial or non-essential products that would not have been successful in a less simulative environment.

Eventually, the economy, stuffed with paper money, reaches a breaking point, usually because price inflation has begun to be a problem and the central bank has started to raise rates. This in turn weakens the economy, slows the circulation of money and eventually has an impact on the stock market, which usually crashes.

People begin to wake from their Dreamtime at this point, rubbing their eyes and realizing that much of the wealth they had accumulated yesterday is considerably devalued today. In some cases the companies they work for are seen as inessential in the new, sober light of day. Housing markets crash. Whole industries shrink radically. This is the business cycle at work; this is the economic system that is in place currently. And the Western elites certainly understand its functioning.

None of this finds it way into the Pentagon's report. "Outside forces," are apparently responsible. "There is sufficient justification to question whether outside forces triggered, capitalized upon or magnified the economic difficulties of 2008," the report says, according to the Washington Times, explaining that those domestic economic factors would have caused a "normal downturn" but not the "near collapse" of the global economic system that took place.

There are suspects of course. The article recites them: "enemies" of the West (and particularly the US) including Middle Eastern states, Islamic terrorists, hostile members of the Chinese military, or government and organized crime groups in Russia, Venezuela or Iran. "Because of secrecy surrounding global banking and finance, finding the exact identities of the attackers will be difficult."

What are the most likely enemies? "Unfortunately, the two major strategic threats, radical jihadists and the Chinese, are among the best positioned in the economic battle space." (No surprise there.) Also, the report lists as suspects advocates of Islamic law, who have publicly called for opposition to capitalism as a way to promote what they regard as the superiority of Islam. Here's some more from the article:

The report states that federal authorities must further investigate two significant events in the months leading up to the financial crisis. The first phase of the economic attack, the report said, was the escalation of oil prices by speculators from 2007 to mid-2008 that coincided with the housing finance crisis. In the second phase, the stock market collapsed by what the report called a "bear raid" from unidentified sources on Bear Stearns, Lehman Brothers and other Wall Street firms. "This produced a complete collapse in credit availability and almost started a global depression," Mr. Freeman said.

The third phase is what Mr. Freeman states in the report was the main source of the economic system's vulnerability. "We have taken on massive public debt as the government was the only party who could access capital markets in late 2008 and early 2009," he said, placing the U.S. dollar's global reserve currency status at grave risk. "This is the ‘end game' if the goal is to destroy America," Mr. Freeman said, noting that in his view China's military "has been advocating the potential for an economic attack on the U.S. for 12 years or longer as evidenced by the publication of the book Unrestricted Warfare in 1999."

Additional evidence provided by Mr. Freeman includes the statement in 2008 by Treasury Secretary Henry M. Paulson Jr. that the Russians had approached the Chinese with a plan to dump its holdings of bonds by the federally backed mortgage companies Fannie Mae and Freddie Mac. Among the financial instruments that may have been used in the economic warfare scenario are credit default swaps, unregulated and untraceable contracts by which a buyer pays the seller a fee and in exchange is paid off in a bond or a loan. The report said credit default swaps are "ideal bear-raid tools" and "have the power to determine the financial viability of companies."

Another economic warfare tool that was linked in the report to the 2008 crash is what is called "naked short-selling" of stock, defined as short-selling financial shares without borrowing them … In a section of who was behind the collapse, the report says determining the actors is difficult because of banking and financial trading secrecy. "The reality of the situation today is that foreign-based hedge funds perpetrating bear raid strategies could do so virtually unmonitored and unregulated on behalf of enemies of the United States," the report says.

The last paragraph is most interesting, providing as it does, an argument for investigating unregulated hedge funds. Regulating hedge funds has been on the "agenda" for a while now and this report will provide more ammunition for those who want hedge funds (and black pools, etc.) pried open. "Transparency" is the new normal for everyone but the Bank for International Settlements (see other article, today).

After Thoughts

This is a most cynical presentation, in our view. Modern crashes are a result of central bank monetary stimulation. Variants of the 2008 crash occurred on a lesser scale in 2000, in 1987, in the 1970s, in 1969, in 1963 and, of course, in 1929. Are we to believe that financial terrorism is responsible for each of these slumps? Or only in 2008? It is obvious nonsense, and yet few if any have bothered to point out the repetitive occurrence of modern-day crashes – which would put the presentation into question. Instead, we have no doubt the report will be used for yet more Draconian regulation and to haul the Pentagon directly into economic matters, creating a kind economic-industrial complex to go along with the military-industrial complex and all the rest. Or perhaps the system, struggling as it is, will merely collapse before this takes place. Doubtless, it will still be blamed on an "enemy." Desperation?

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