In recent years, we have seen economic attacks used to take down regimes. In the 2011 uprising in Egypt that displaced Hosni Mubarak, for example, the final trigger to the unrest was food prices, not anger about human rights abuses. It has been widely reported that inflated food prices were a primary factor behind the initial unrest. Egyptian households spend about 40 percent of their budget on food, and food prices had jumped 20 percent prior to the Egyptian revolution. Corn prices shot up 90 percent, and wheat slightly less. Speculation played a role in higher food prices. Certainly the global monetary inflation made this possible.
There should be no doubt that there was a serious economic driver behind the revolution in Egypt. The question then arises whether additional speculation on food prices could have been a geopolitical lever. Based on our research, the answer is an unequivocal yes.
Rapidly rising food prices can destabilize a society, and our enemies know how to drive prices higher through speculative market activity. We will see more destabilization caused by inflation-based riots.
I am not saying that the Muslim Brotherhood speculated on food prices as a weapon to topple Mubarak, although some sources say it did. I am saying that it is obvious that such a weapon could have been employed, profitably if imprecisely. The cost is certainly less than a major arms program, but the results are more dramatic.
Now, attacking America with food-price inflation would be difficult because we produce our own food. But energy, especially oil, is another matter. Could a huge oil price shock destroy our economy? Many think so. As long as the Arab nations, Russia, Iran, and Venezuela are the major producers, a supply shock is always possible, and it is even called for by liberated Iraq. And, as with food, speculation can push prices higher even in the face of ample supply.
That’s an oblique attack. A currency war, a selling of U.S. bonds, or an attempt to set another currency as the reserve currency would be far more direct and just as damaging. Whether from China or Russia or from rogue states like North Korea counterfeiting currency, America has left herself wide open to all sorts of economic attacks.
A common objection to my warning about China is that is the Chinese are so connected to our economy that “they” would never harm us. The idea that “the Chinese” would never harm us is ridiculous on its face; there are Chinese who continually hack our systems and who manipulate and undermine our markets. But don’t the Chinese hold so much in dollar debt that they couldn’t afford to see the dollar go down? China’s military doesn’t care. It has a much longer view of things than the next quarter’s export sales. The smug response of those who believe China needs us so much that it must remain our friend is another example of American arrogance.