Currency Wars_ The Making of the Next Global Crisis - James Rickards [18]
Just when it looked like the game would wind down anticlimactically, O.D. played a wild card of his own. Speaking on behalf of the gray cell, he announced that the Japanese coast guard had interdicted large shipments of nearly perfect counterfeit hundred-dollar bills, called supernotes by U.S. Treasury officials. Supernotes are produced by North Korea’s infamous Bureau 39, the state-sponsored racketeering agency set up in 1974 by Kim Il Sung to conduct money laundering, counterfeiting, drug smuggling and other acts usually perpetrated by criminal groups, in order to raise hard currency for the regime. O.D.’s move had a nice historical resonance with countries that had engaged in financial warfare by counterfeiting the currency of their enemies and flooding enemy territory with the counterfeits in order to cause distrust of legitimate bills and contribute to an economic collapse. During the U.S. Civil War, a Union sympathizer and Philadelphia stationery shop owner named Samuel Upham printed over $15 million in counterfeit Confederate bills, about 3 percent of the total amount in circulation. Many of these were carried south by Union soldiers and did undermine confidence in the real Confederate currency. O.D.’s counterfeit dollar discovery was a distant echo of this earlier episode of currency warfare.
O.D. also reported that Swiss banks had been scammed by deposits of these supernotes, which seemed to be flooding in from all over the world. The Swiss banking losses and the large size of the interdicted shipment were enough to cast doubt on the value of U.S. currency held abroad, mostly in the form of one-hundred-dollar bills. Dollars were now reported to trade on the black markets at a discount to their face value on world currency markets. The cash portion of total dollar holdings is small relative to the much larger amounts held in electronic form in banks, so the effect of the proliferating supernotes was not catastrophic. Still, it was one more swipe at the dollar and a nice parting shot from O.D.
Finally, the white cell seemed to be impressed with Russia’s tenacity on the alternative currency, especially its overture to OPEC, and awarded the country additional national power points. This was a complete turnaround from day one, when Russia’s play had been ridiculed. China was awarded more points mostly for doing nothing. It was a case study in how to win a zero-sum game just by keeping your head down while everyone else blundered around. The United States lost national power, partly because of Russia’s dollar assault, but also because it appeared that East Asia was coalescing around a China-Japan bloc that would eventually include most of the region and exclude the United States from its key decisions on trade and capital flows. In the end, China gained the most by doing the least while Russia and East Asia gained slightly and the United States was the biggest loser.
The rest of the session was taken up with debriefings. It had been a fascinating two days on top of all the work that had gone into the preparation. It is genuinely helpful to U.S. national security when so many experts, with varied perspectives and some from distant locations, gather under one roof to exchange ideas and give the military new ways of understanding potential threats. When the Treasury and Fed did scenarios, they usually thought about bursting bubbles and market crashes, not state-sponsored financial wars. Former Fed chairman Alan Greenspan liked to say that the Fed had no expertise in stopping bubbles and that its resources were better utilized cleaning up the mess after a bubble had burst. That Greenspan view works only for messes of a certain size. For the really big messes—those involving civil unrest, food riots, looting, refugees and general collapse—the Fed has no answer and societies inevitably turn to the military for solutions. So the military