Return to

October 11, 2012
Notes from the Pentagon

New WMD threats
A Pentagon-sponsored report warns that the United States faces new threats from mass destruction weapons in the form of cyber, electronic and financial attacks, in addition to more well-known dangers from nuclear, chemical and biological WMD arms.

“In addition to the prolific conventional [weapons of mass destruction] threats posed by a vast network of state and non-state actors, the U.S. must also contend with emerging threats that are not conventionally recognized as WMD,” said the report produced last month for the office of the Undersecretary of Defense for Intelligence.

“Very few of America’s adversaries will attempt to challenge the unmatched strength of the U.S. military in a traditional conflict, but they may employ alternative asymmetric approaches.

“It is therefore necessary to consider emergent, nontraditional threats, such as cyber, electromagnetic pulse (EMP), and economic attacks, in a comprehensive discussion of WMD threats.”

On financial warfare, the report mentions the 1999 Chinese military book, “Unrestricted Warfare,” which advocates that China’s military utilize stock-market crashes, computer viruses and currency manipulations.

“Essentially, any threat to the U.S. economy is a threat to the country as a whole, and the potential impact of an economic attack is considered increasingly significant,” the report said.

The new Pentagon report appears to build on one produced for the Pentagon in 2009 by financial consultant Kevin Freeman, who stated that the United States’ 2008 financial crash may have been deliberate sabotage by terrorists or foreign states.

That study was criticized by senior Obama administration officials, including the Pentagon’s special operations policymaker, Michael Vickers, who is currently undersecretary of defense for intelligence. U.S. officials said Mr. Vickers blocked further study into possible financial warfare behind the economic crisis. Mr. Freeman wrote a book on the issue called “Secret Weapon.”

The new Pentagon report said the May 6, 2010 “flash crash” when markets fell by 10 percent “may have been caused by an economic attack by one or a combination of methods,” including the manipulation of computer algorithms that control trading or exchange traded funds that allow traders to short sell mass quantities of stock quickly and anonymously. It also could have been the result of covert currency-manipulation by the holder of a significant U.S. debt — such as China — designed to intentionally weaken the value of the dollar by preventing the United States from selling its debt to others.

On cyber-WMD, the report said that in an age when 2 billion people use the Internet, “a coordinated cyberattack could compromise national security, shut down commerce and destroy the U.S. power grid.”

According to the report, China currently has some 180,000 cyberspies; and, during attacks in 2007 and 2009, they hacked into Pentagon networks and “stole several terabytes of data, including the blueprints for U.S. F-35 and F-32 joint-strike fighter planes, essentially compromising America’s defense technology.”

Russia conducted cyberattacks in 2008 against the Republic of Georgia prior to its military strikes. The cyberattacks disabled Georgia’s national network “effectively eliminating the chance to mount an appropriate response to the attack.”

Another emerging WMD threat is an electromagnetic pulse, or EMP, attack — the up to 1,000-mile-wide disruption of all electronics produced by a nuclear burst or a high-tech EMP weapon.

“The detonation of an EMP weapon would cause the disruption or destruction of electrical-based systems, which would lead to chaos by impoverishing or neutralizing a society, rather than annihilating it outright,” the report said.

The United States’ heavy reliance on electronics means an EMP attack would be devastating.

The report concludes that economic vitality is key to U.S. national security; but, with the global economy, the country is facing significant vulnerabilities.

The report urged the U.S. government to develop a national strategy and capability to defend the U.S. economy from every form of economic attack.

The September report, “Weapons of Mass Destruction: An Evolving Threat,” was produced by contractor Universal Strategy Group, Inc., for the undersecretary of defense for intelligence and its Combating Terrorism Support Office.

Pentagon on Financial threat
Chinese military and Communist Party officials have threatened to “dump” some of China’s holding of $1.17 trillion in U.S. Treasury securities to punish the United States and wage financial war in response to arms sales to Taiwan, according to a Pentagon report to Congress.

The July report plays down the prospect of what has been termed the financial “nuclear option” by Beijing against the United States.

“Attempting to use U.S. Treasury securities as a coercive tool would have limited effect and likely would do more harm to China than to the United States,” says the five-page report entitled, “Assessment of the National Security Risks Posed to the United States as a Result of the U.S. Federal Debt Owed to China as a Creditor of the U.S. Government.”

“As the threat is not credible and the effect would be limited even if carried out, it does not offer China deterrence options, whether in the diplomatic, military, or economic realms, and this would remain true both in peacetime and in scenarios of crisis or war.”

If China sold off its U.S. debt holdings suddenly and significantly, short-term disruptions in markets would result, along with an increase in the interest rate for Treasury securities.

However, the report said doing so would impose significant costs on China, such as causing direct financial losses because of the fall in value of China’s holdings. It would also call into question China’s participation as a “reliable and respected economic and financial partner.”

The report said that in 2010 Chinese Gens. Luo Yuan and Zhu Chenghu and Col. Ke Chunxiao urged China to sell off U.S. debt holdings in response to the latest announced arms sale to Taiwan, which China opposes as undermining its effort to reunite the island nation with the mainland. It also quoted Ding Ging, editor of a state-run news outlet, as saying China should “use its financial weapon to teach the United States a lesson if it moves forward with a plan to [sell] arms to Taiwan.”

China so far has not acted on the plans, and China has continued to buy large quantities of U.S. Treasury securities, which Beijing sees as a safe place to park its money, said the report written to comply with recent congressional legislation.

Mr. Freeman, the financial security specialist, took issue with the report. He said that former Treasury Secretary Henry Paulson revealed in a 2010 book that Russia dumped American bonds in 2008 and urged the Chinese to do the same.

“The Chinese did not at that time but this does not mean they won’t,” Mr. Freeman said in an email.

He said the Pentagon report was “naive” and provided a “politically correct answer” that failed to address what he said were very real risks from Chinese financial warfare.

A number of scenarios exist that would involve China's government taking coercive action to dump or threaten to sell off U.S. bonds, Mr. Freeman said.

“If they perceive us as wounded, they might be willing to suffer in the short term to accomplish larger goals,” he said.

Also, the report’s assertion that dumping U.S. securities would be inflicting harm on China “assumes a domestic economic stability [in China] that may not exist ,” he said. “The situation is much more complex than that.”

Twitter, Facebook rule
Social media guru Amy Jo Martin says traditional news media, currently in financial trouble, should look to Twitter and Facebook for the future, as the social media transform global communication and interaction.

“While strides are being made in the social-media space, the newspaper and news business should continue to embrace social media,” Ms. Martin tells Inside the Ring.

Her new book, “Renegades Write the Rules,” is one of the first to reveal the potential practical and financial potential of new social-media tools.

She says the key for both individuals and institutions using Twitter and Facebook is to combine risk and innovation. A committed devotee of the emerging new media, Ms. Martin, in her book, presents both strategy and tactics for effectively employing it.

In addition to news, social media are allowing people living under secretive, oppressive regimes to make their opinions known around the world, openly and quickly, Ms. Martin said.

“Social media is the ultimate equalizer. It gives a voice and a platform to anyone willing to engage,” she said.

“Governments can no longer control 100 percent of the story. Time and geographical boundaries disappear. In places like China and all over the Middle East, social-media outlets are being used to expose and hold accountable public officials that don’t want to be held accountable for corruption and human rights abuses.”

In Libya and Egypt, the dictatorships attempted to censor and shut down social media sites, but “the most tech savvy renegades have found alternatives,” she said.

“They turn to proxy servers, online gaming sites or even dating sites to squeeze under the radar and continue the conversation,” she said. “New connections allow the masses to mobilize [and] accelerate the process of change.”

As for China, Ms. Martin warns that authenticity is vital on social media and China's government has encouraged officials to set up accounts on social media to spread government messages. Beijing also employs people to pose as ordinary citizens to defense government policies on social media.

“Social media allows people to be hyper-connected and causes them to swarm around what matters most at any given moment,” she said.

“If what people are saying matters, other people will tune in and join the conversation. If the Chinese government’s message doesn’t matter to people, they won’t tune in, and the government-sponsored tweets won’t get any traction.”

Ms. Martin recalled how Twitter helped humanitarian efforts after the Great Japan Earthquake in 2011, and how she used her reach and influence with 1.2 million followers to promote relevant tweets and links, and increase their circulation and attention.

“With the help of people from all over the world, I was able to share translations, dial out codes, maps of surrounding regions and maps of where the tsunami would hit next,” she said.

“Some people were even trapped and tweeting for help. Just as a small community bands together in the face of local devastation, Twitter brought the global community together.”

Traditional news covered the disaster but “were not in the social space like millions of others that night,” she said.

“With access to millions, their Twitter accounts sat silent, despite the fact that their Twitter bios read: We provide breaking world news,” Ms. Martin said.

“It was clear that night that ratings were more important. That night, a greater sense of purpose had been integrated seamlessly into a world I was already passionate about. I realized that social media can be powerful force for good in the world and that acts of kindness can be scaled globally.”

Return to