Conflict by Other Means

Waging Financial War

David J. Katz
2013 David J. Katz

Abstract: Has the emergence of global financial markets brought

with it global financial warfare? This article discusses the canon of
financial warfare and how one might wage it across both the strate-
gic and tactical realms.

I magine warfare waged in financial cyberspace: electronic, remote,

fought in hypervelocity with millions of engagements per second,
and with nations forced to construct redundant systems, sacrificing
billions in economic efficiency for survival capacity. Financial warfare
strikes can blockade vital industries; delink countries from the global
marketplace; bankrupt sovereign economies in the space of a few days,
and cause mass exoduses, starvation, riots, and regime change.
Financial warfare can support US policy objectives by attacking
regime elites, collapsing trade, draining foreign currency reserves,
decreasing economic production, spiking inflation, driving unemploy-
ment, increasing social and labor unrest and accelerating population
migration. Financial warfare can assist the warfighter by halting an
enemys capability to produce and distribute war materials, fund train-
ing, operations, or proxies. Financial warfare can amplify and accelerate
the damage inflicted by economic warfare. Financial warfare spoofing
operations can assist intelligence collection by isolating and mapping
crisis response patterns of individual adversaries, organizations, nations,
and regime elites.
The aim of financial warfare is, quite literally, to disarm opponents
by reducing their ability to finance production or distribution, complete
transactions, or manage the consequences of a transaction failure. If
precisely employed, financial warfare can reduce a targeted societys
will and cohesion by forcing upon it, in stark terms, the daily necessity
to choose between guns or butter. This dilemma highlights and
magnifies the real, immediate, and personal consequences of resource
allocation. Deployed within an indigenous societys political framework,
financial warfare can deepen the divide between rival constituencies,
reducing societal cohesion and inciting civil unrest.
Financial warfare is not a new concept. While many individual
policy actions had financial aspects, perhaps the first pure financial
warfare campaign in United States history occurred in the Eisenhower Mr. David Katz is a 1981
West Point graduate and
administration. It was prompted by the Soviet invasion and suppres- served in Europe, the United
sion of the Hungary Revolution on 4 November 1956 and sparked by States, and Central America.
After obtaining an MS from
the seizure of the Suez canal by NATO allies, Britain and France, in Carnegie Mellon, he became
Operation Musketeer on 5 November.1 President Dwight Eisenhower an institutional investor in
determined he could not effectively oppose Soviet military intervention private equity and founded his
own firm providing guidance
on over $3 billion of client
equity investment. Currently,
1Malcom Byrne, Csaba Bks, Jnos Rainer, eds. The 1956 Hungarian Revolution: A History he is a global finance specialist
in Documents, (New York, N.Y., Central European University Press, 2002): 1, http://www.gwu. and senior staff member in
edu/~nsarchiv/NSAEBB/NSAEBB76/ SRA's Intelligence Practice.
78 Parameters 43(4) Winter 2013-14

in Hungary, while allowing European military intervention in Egypt.2

Diplomacy had not convinced the British or the French to withdraw.3
The United States was hesitant to intervene with military force against
NATO allies. As an alternative, Eisenhower employed financial warfare.
With just three offensive strikes, the United States achieved its immedi-
ate policy aims of forcing Britain and then France to withdraw from
the Suez Canal. The three financial warfare strikes were: (1) blocking
the International Monetary Fund (IMF) from providing Britain with
$561 million in standby credit; (2) blocking the US Export-Import Bank
from extending $600 million in credit to Britain; and (3) threatening to
dump Americas holdings of pound-sterling bonds unless Great Britain
withdrew from the Suez.4 The credit blockade froze Britains ability to
borrow and forced it back onto its negative cash flow, effectively bank-
rupting it. The pound-sterling threat significantly raised the perceived
risk of dealing in British currency. That threat, if executed, would have
directly affected British ability to trade internationally.
By 1956, Britain was grossly overleveraged and dependent on
further international borrowing to maintain its standard of living.
The United States owned $3.75 billion in British debt as a result of the
Anglo-American Loan Agreement of 1945, while the entire foreign cur-
rency reserve of Britain in October 1956 was equivalent to $2.2 billion.5
To finance its WW II efforts, Britain had borrowed extensively from
Commonwealth members and by 1945 owed roughly 14 billion, chiefly
to India, Argentina, and Egypt. Unable to repay in full, Britain froze the
principal balances in these accounts.
The sell-off of US-held pound-sterling bonds, if executed, would
have been catastrophic. The resulting increase of British currency in
circulation would have deflated the value of the pound-sterling. This
deflation would, in turn, have required Britain to drain its foreign cur-
rency reserves to buy pound-sterling bonds to maintain its currencys
parity against the US dollar. If it broke parity, and allowed the devalu-
ation of its currency, Britain would not have the purchasing power or
the foreign reserves to cover its food and energy imports. Additionally,
2Peter L. Hahn, Significant Events in U.S. Foreign Relations: 1900-2001, EJournalUSA
(Washington, D.C.: US Department of State, 2006): 26-30, www.america.gov/media/pdf/ejs/
ijpe0406.pdf; Interview with General Andrew J. Goodpaster, George Washington Universitys
National Security Archive, http://www.gwu.edu/~nsarchiv/coldwar/interviews/episode-8/good-
paster1.html. Eisenhowers aide, General Andrew Goodpaster, recalled that Eisenhowers staff
thought NATO could not present a united front to Soviet aggression in Hungary while Britain and
France were occupying Suez; Byrne and Bks, Hungarian Revolution.
3Memorandum of a Conference with the President, White House, Washington, October 29,
1956, 7:15 PM, Office of the Historian, US Department of State, http://history.state.gov/his-
toricaldocuments/frus1955-57v16/d411; Message from President Eisenhower to Prime Minister
Eden, US Department of State, Office of the Historian, Washington, October 30, 1956, http://
history.state.gov/historicaldocuments/frus1955-57v16/d436;
4James M. Boughton, Was Suez in 1956 the First Financial Crisis of the Twenty-First
Century? Finance and Development 38, no. 3 (September 2001): 1, http://www.imf.org/external/
pubs/ft/fandd/2001/09/boughton.htm; Rose McDermott, Risk Taking in International Politics
(Ann Arbor, MI: University of Michigan Press, 2001), 162, http://www.press.umich.edu/
pdf/0472108670-06.pdf .
5Nicholas Miller Trebatk, The United States, Britain and the Marshall Plan: An analysis
of Anglo-American relations in the early postwar era, Paper presented at XII Conference on
Contemporary Capitalism and the National and Political Economy of Brazil and Latin America
on Contradictions and Perspectives, Rio de Janeiro, Brazil, 2007. The author was a doctoral student
at the Instituto de Economia, Universidade Federal do Rio de Janeiro (IE-UFRJ); Adam Klug and
Gregor W. Smith, Suez and Sterling, 1956, Working Paper No. 1256 (Kingston, Ontario, Canada:
Queens University Economics Department, 2nd Quarter, 1999), Figure 3: Britains reserves: 36,
http://www.econ.queensu.ca/working_papers/papers/qed_wp_1256.pdf
Conflict by Other Means Katz 79

Commonwealth account holders would probably have withheld further

credit until all prior debts were settled. Without credit, Britain would
have faced a prolonged liquidity crisis and insolvency.
In his response to the Suez Crisis, Eisenhower waged a modern
financial warfare campaign. Without credit-fueled deficit spending,
Britain could not import needed oil and food. It would also have
destroyed Britains trade and its ability to form capital through trade
surpluses, and collapse its ability to import goods at a deficit to maintain
its standard of living. These financial strikes operated beyond US legal
jurisdiction and where informal US influence had failed. Eisenhowers
actions were outside conventional or irregular war. Financial warfare
thus supplanted traditional warfare in countering the British and French
seizure of the Suez Canal.
This Suez Crisis example illustrates the importance of understanding
the offensive capabilities and defensive necessities of financial warfare.
The United States successfully waged financial warfare against the third
most powerful nation on the planet at that time; it is likely the United
States will be targeted by financial warfare in the future.

What is Financial Warfare?

Historically, financial depredation has been at best a subsidiary
effect of economic warfare. That has changed. With the emergence
of integrated global financial markets, financial warfare has become a
viable, distinct, and independent means of projecting power. As Yale
Professor Paul Bracken explained: The economic system deals with the hard
and soft outputs of the economythat is, goods and services. The financial system deals
with money and credit.6 Accordingly, economic warfare is circumscribed
to attacks on the enemys ability to produce and distribute goods and
services; financial warfare is confined to attacks on the credit and mon-
etary foundations that underlie production and distribution. Financial
warfare is a potent means of power projection because precluding a
nation's ability to price and to exchange; to form capital and manage
risk; causes production and distribution to cease. Without production
and distribution, the economy grinds to a halt and the adversary is dis-
armed. Financial warfare thus uses money and credit to attack (defend)
an opponent (or a friend).
In practice, financial warfare identifies systemic areas of opacity,
agency and asymmetry in information, risk and reward; focuses on
those areas with a high relative degree of centralization and leverage;
and determines the ranges of integration and diversification that offer
the greatest susceptibility to contagion and cascade failure.7 Offensive
financial warfare seeks to engineer outcomes from altering adversary
capabilities to creating Black Swans, which are large-scale events
of massive consequence that occur far from the means of statistical
6Paul Bracken, Financial Warfare, Foreign Policy Research Institute (2007): 4, http://www.fpri.
org/enotes/200709.bracken.financialwarfare.html;Text is paraphrased from Financial Warfare,
page 4. as originally published in Orbis, Fall 2007 edition.
7Constantine Sandis and Nassim Taleb, The Skin in the Game Heuristic for Protection Against
Tail Events, Social Science Research Network, July 30, 2013, 1, http://papers.ssrn.com/sol3/papers.
cfm?abstract_id=2298292 ; Nassim Taleb, Antifragile: Things that Gain from Disorder (New York:
Random House, 2012); Matthew Elliot, Benjamin Golub, Matthew Jackson, Financial Networks
and Contagion, Social Science Research Network, January 1, 2013, 2-5, 16-26, http://papers.ssrn.com/
sol3/papers.cfm?abstract_id=2175056
80 Parameters 43(4) Winter 2013-14

distributions (fat-tailed events) and accordingly are unpredictable and

irregular.8 Defensive financial warfare seeks to decentralize; de-lever;
reduce opacity, asymmetry, and skewness; or construct extra capacity,
strength, and layers of redundancy to negative outcomes. The intent of
financial warfare is to extend the strategic and tactical engagement of
the enemy from the kinetic battlespace to the financial marketplace. It
engages an opponents financial structure, or operations, by using the
three principal functions of finance: capital formation, capital liquidity,
and risk-management:
Capital formation is the accumulation of real capital surpluses through
public and private savings and borrowings to create or expand future
economic activity.
Capital liquidity is the transaction of capital assets at volume, rapidly
without loss of value, between buyers and sellers and among its forms,
e.g., commodities to currencies, dollars to yen, stocks to bonds, etc.
Risk management is the process of optimizing exposure to financial
volatility.9
Financial warfare engagements occur at both the tactical and stra-
tegic levels. Tactical wins, losses, and draws must be used coherently to
advance strategy. In financial warfare, there is an added dimension best
articulated through the concept of micro and macro. A micro financial
engagement is the singular use of one functional avenue, capital liquid-
ity, capital formation, or risk management, to affect a single transaction.
Macro financial engagements typically occur at system integration points
between an adversary and the global, bilateral, or multilateral markets.
For example, terminating Protection and Indemnity (P&I) insurance
for one ship precludes its use for hauling third party cargo internation-
ally. This is a micro risk-management engagement. Removing an entire
countrys P&I insurance uses a macro risk-management engagement to
shut down a nations international, commercial maritime cargo industry.
The difference lies in whether the exploitation of vulnerabilities is indi-
vidual or systemic, and whether the exploitation occurs within a system
or at the interface between systems.
If global finance is an inescapable component of global trade, then
its corollaryglobal financial warfareis equally inescapable. Every
country involved in the global markets has, by necessity, harmonized
in some degree at both the micro and macro levels with global financial
standards and structures. These harmonized international standards are
vital to the proficient and efficient functioning of global trade, which,
in turn, is crucial to most national economies. The flipside of that coin
is that these harmonized standards offer avenues of approach to wage
financial war.

Waging Financial War

The recent and enormous growth of global financial markets illus-
trates the reach of purely financial actions. For example, the average

8Sandis and Taleb, The Skin in the Game Heuristic for Protection Against Tail Events, 1;
for a more detailed explanation of Black Swans see Nassim Taleb, The Black Swan: The Impact of
the Highly Improbable (New York: Random House, 2007).
9Philippe Jorion, Value at Risk (New York, NY: McGraw Hill, 1997), 3-15.
Conflict by Other Means Katz 81

daily turnover in the foreign currency exchange markets (Forex) is

over $4 trillion.10 As such, the Forex daily turnover is greater than the
annual domestic product of 215 of the worlds 220 countries.11 Financial
warfares capabilities and impact will only increase as global financial
markets grow. With its high-speed, complex interconnectivity, and the
volume of capital moving daily, warfare in the financial marketplace
possesses the capability to operate separately from and at speeds far
beyond economic, conventional, or irregular warfare.
The United States possesses a discrete and immense capacity for
financial warfare. As the provider and guarantor of the worlds reserve
currency, the United States occupies a unique position in global finan-
cial markets. The reach of US currency is global. The Federal Reserve
estimated that 60 percent of total US currency in circulation, roughly
$450 billion, is held outside the United States. 12 Accordingly, the United
States is the preeminent market for raising as well as investing capital. By
2010, foreign borrowers had $2.1 trillion in debt outstanding from US
sources.13 In the period 2003 to 2007, 55 percent of all highly rated US
securities, treasuries, agencies, and AAA-rated private debt issued, $4.5
trillion, were purchased by foreign entities.14
From a policy perspective, financial warfare makes sense because
it makes policy options available through finance that were previously
obtainable solely through armed force; for example, these options could
include ending effective and efficient Saudi financial support to inter-
national jihad; reducing Iranian defensive capability; and constraining
Chinese economic penetration into Africa.
For uniformed military leaders, preparation of the battlespace now
includes informational, cyber, economic, and financial actions. War
plans can and should substitute financial-based risk for manpower-
based risk when more efficient or effective. For example, uniformed
military leaders may consider the use of structured analytics like Critical
Factors Analysis (CFA) to identify the centers of an adversarys defen-
sive capabilities and target them as well as supporting components of
the adversarys military-industrial base with financial strikes prior to air-
strikes. The warfighter now has the choice whether to bankrupt, bomb,
or both. Lastly, commanders in Unconventional Warfare (UW) and
Stability Operations (SO) wield enormous financial clout within their
area of operations. They must use financial warfare to erode adversary

10Bank for International Settlements, Triennial Central Bank Survey of Foreign Exchange
and Derivatives Market Activity in 2010 - Final Results, December 1, 2010, 6.
11Central Intelligence Agency, 2011 World Factbook, Country Comparison: GDP
(Purchasing Power Parity), https://www.cia.gov/library/publications/the-world-factbook/
rankorder/2001rank.html?countryCode=xx&rankAnchorRow=#xx
12United States Department of the Treasury, The Federal Reserve Board. The Use and
Counterfeiting of United States Currency Abroad, Part 3, The Final Report to the Congress by
the Secretary of the Treasury, in consultation with the Advanced Counterfeit Deterrence Steering
Committee, pursuant to Section 807 of PL 104132, September 2006, 4, http://www.federalre-
serve.gov/boarddocs/rptcongress/counterfeit/default.htm
13Board of Governors of the Federal Reserve System. Z.1 Financial Accounts of the
United States, Flow of Funds, Balance Sheets, and Integrated Macroeconomic Accounts, D3
Credit Market Debt Outstanding by Sector, (Washington, DC:The Federal Reserve Board, March
10, 2011), 9, http://www.federalreserve.gov/releases/z1/current/z1.pdf
14Ben S. Bernake et al., International Capital Flows and the Returns to Safe Assets in the
United States, 2003-2007, Board of Governors of the Federal Reserve System, International Finance Discussion
Papers, Number 1014 (Washington, DC: The Federal Reserve Board, February 2011), 8, http://www.
federalreserve.gov/pubs/ifdp/2011/1014/ifdp1014.htm
82 Parameters 43(4) Winter 2013-14

capacity, build capacity of adversary competitors, and ensure that ben-

efits of association with the United States only flow to indigenous parties
who actively share risk, comparable in intensity and duration, with the
United States. To neglect the use of some US capabilities in execution of
policy is to overuse, rely on, and risk other capabilities.
If the intent of financial warfare is to extend the battlespace into
the financial marketplace, then the operational question becomes how
to do it? The answer is through macro and micro engagements or strikes
across the three principal areas of finance initially targeting the interface
between the adversary and the global marketplace.

Capital Formation Strikes

Inflating or deflating an adversarys currency, or any medium used

to store real capital surpluses, is one way to conduct a capital forma-
tion strike. A prior requirement for successfully attacking an adversarys
capital formation capability is to map how he moves capital and where
he aggregates it. This mapping provides, in both broad manner and at
a precise point, the adversarys current financial capacity for funding
military, paramilitary, or proxy operations, as well as providing sig-
nificant intelligence on their war-sustainment capability. Feints and
spoofing operations can provide insight on how and where an adversary
forms capital normally and under duress, as well as uncovering potential
targets.
Capital formation strikes encompass the physical, cyber, and infor-
mational. Physical strikes can range from general to selective attacks
against the telecommunications infrastructure which facilitate financial
information flow. For example, interdicting the automated teller machine
(ATM) communications system could preclude interbranch and inter-
bank retail capital formation. Capital formation strikes can target and
delegitimize the investment sponsor, the investment, or those channels
used to evaluate, price, transact, and own it. Strikes directed against a
channel itself can be used to deter, retard, or preclude the use of that
channel by the investment or its sponsor.

Capital Liquidity Strikes

Capital market liquidity, for example, is systematic aggregation of

capital transactions which are the individual exchange of capital and
financial assets between buyers and sellers at volume, rapidly, without
loss of value, and among its forms, e.g., commodities, currencies, equity,
debt, etc. Deconstructing or reversing the historic arc of capital market
liquiditys upward progress is a blueprint for systematically waging
financial warfare utilizing capital liquidity strikes. The intent of capital
market liquidity strikes, in aggregate, is to target markets and disrupt
their drivers of upward efficiencies, speed, volume, and scale, to create a
downward spiral of inefficiencies driving markets to a measurable policy
objective or collapse. The separation between macro and micro in capital
liquidity strikes mirrors that of capital formation. Macro capital liquidity
strikes target markets. Micro capital liquidity strikes target individual
transactions.
Conflict by Other Means Katz 83

Micro capital liquidity strikes directed at a specific transaction can

include: precluding a buyer from meeting a seller; interfering with or
spoofing that transactions price; preventing title transfer; breaching
legitimate market behaviors, or introducing unwarranted regulatory
requirements into a specific transaction. Macro capital liquidity strikes
can target market capabilities such as transaction speed. Transaction
speed is limited by the speed at which information flows through market
channels. Reduce channel speed and transaction speed will accordingly
reduce. Reduce transaction speed and market throughput will reduce.
Likewise, market consistency, transparency and uniformity can be tar-
geted through discrete strikes reducing channel speeds only for specific
buyers. When the bid ask spreads are small, discrete channel speed
reductions may preclude specified buyers and sellers from transacting
within a timeframe available to other market participants. The targeted
buyer loses the transaction to other, faster buyers. Eventually, targeted
buyers exit, eroding trust in the markets fairness. Trust underlies every
market. Erode trust and participants will exit. The competitive margins
between markets are typically thin. Affect those margins and disadvan-
taged participants will exit to seek other, more consistent, transparent,
and uniform markets. Additionally, spoofing market participants or
deliberately implanting misinformation can attack market transparency,
consistency, and the uniform diffusion of data.

Risk Management Strikes

Risk management is the process of optimizing exposure to financial

volatility.15 Providers or facilitators of risk management include insur-
ance companies, audit and accounting firms, rating agencies and credit
bureaus, and underwriters of collateral, warranties, and hedges. Removal
or reduction of an adversarys financial risk management activities can
constrain its ability to project power at the granular level (micro) or com-
prehensively at a systemic level (macro). Eroding or interdicting specific
financial risk management mechanisms among adversaries and their
commercial enablers can delay or preclude their ability to produce and
distribute war materials, project power internationally, support foreign
operations or favorably prepare their battlespace through commercial
means.
For example, Irans crude oil sales accounts for 80 percent of Irans
hard currency reserves and for 50 percent of its national budget.16, Irans
continued ability to ship oil, a strategic commodity, to Asia gives it sig-
nificant economic and diplomatic leverage as well as the financial means
to support military operations. However, Irans ability to ship crude,
and for that matter to maintain shipping overall, is dependent upon
maritime insurance. Without 3rd party Protection and Indemnity (P&I)
insurance, ships cannot enter most international commercial ports. On
February 18, 2011, Irans biggest crude oil tanker operator NITC said
on Friday its ship insurers had declined to renew policy cover for the
coming year due to the impact of tightening sanctions in the European

15Philippe Jorion, Value at Risk, 3 -15.

16Kenneth Katzman, Iran Sanctions, Congressional Research Service, June 13, 2013, 53; Iran
Oil Exports Top 844mn Barrels, PressTV.com. June 10, 2010, http://previous.presstv.com/
detail.aspx?id=130736&sectionid=351020102
84 Parameters 43(4) Winter 2013-14

Union.17 The ability to disaggregate Iran from the global oil market by
using a simple risk-management mechanism, in this case P&I insurance,
illustrates the leverage financial warfare offers.
International maritime P&I insurance requirements illustrate an
interesting and under-appreciated aspect of financial risk manage-
ment strikes. Financial risk management strikes can utilize established
international regulatory schemas to attack adversary financial systems,
components, or assets. Lacking P&I insurance, adversary commercial
shipping fleets are precluded from many international ports. Insurance
and credit problems can also attack the international operations of an
adversarys commercial airline industry. Macro risk management strikes
can utilize existing safety codes or operating rules to discover fraudulent
behaviors or uncover systemic violations of international commerce stan-
dards by an adversary or their commercial enablers. Weaponizing and
exploiting international commerce schemas can result in delinking entire
industries from global trade. For example, increasing ramp inspections
or targeting operating audits at adversary commercial enablers could
discover violations of safety standards. Many international commercial
systems, maritime, aviation, postal, etc. require and enforce safety and
behavior standards, particularly where fraudulent behaviors can collapse
the system. International commerce rule schemas can legitimately be
used to limit or bankrupt an adversarys commercial enablers.
Lastly, on a cautionary note, just as the United States used finan-
cial warfare to alter British policy in the Suez, financial warfare may
be used against the United States in the future. American vulnerability
to financial strikes includes interruptions to highly centralized capital
formation chokepoints like the Fedwire Funds Service and the Clearing
House Interbank Payment System (CHIPS) which account for more
than 858,000 daily interbank transactions totaling $973 trillion annual-
ly.18 Levered derivative US financial products introduce vulnerabilities
when risk is opaque and agency problems exist, as illustrated by the
role Credit Default Swaps (CDS) played in the 2008 Mortgage Backed
Security (MBS) collapse.19 The result was bankruptcy and liquidation
of major securities as insurance firms induced federal intervention to
subsidize failed corporations. Ironically, the whole financial system
became less robust rather than more robust. Lastly, deficit fueled
(levered) federal spending increases vulnerability to financial strikes
across the board by reducing capacity for managing negative outcomes
such as errors in forecasting future revenues, constraining current policy
due to undercapitalized past actions, and may incent actions such as

17UPDATE 2-Sanctions Hit Irans NITC Ship Insurance Cover, Reuters, February 18,
2011, http://af.reuters.com/article/energyOilNews/idAFLDE71H1ZC20110218?sp=true
18 Bank for International Settlements, Payment, Clearing and Settlement Systems in the United
States, Committee on Payments Systems and Settlement Redbook 2012, January 2013, 487-490.
19Michael Lewis, The Big Short: Inside the Doomsday Machine (New York: W. W. Norton, 2010). The
entire book chronicles how the opacity, agency, and asymmetric nature of the CDS market came
back to impact both the writers of this form of insurance, chiefly AIG-FP, and the buyers to include
Bear Stearns, Lehman Brothers, Morgan Stanley, among others.
Conflict by Other Means Katz 85

nationalization of pension assets, forced loans to the government, or

currency devaluations.20
Financial warfare is a new means of power projection that offers the
United States significant capabilities in addition to its traditional rep-
ertoire. Financial warfare can support US policy objectives by directly
attacking an adversarys sovereign financial structures, individual
regime elites, or commercial industries and enablers. Financial warfare
spoofing operations can assist intelligence collection through isolating,
illustrating, and mapping adversary crisis response patterns. Employing
financial warfare strikes within an indigenous societys political frame-
work can provide leverage assisting the warfighter by reducing the
enemys capability to fund training, operations, or proxies. Lastly, with
significant budget deficits and mounting national debt, the United States
is highly susceptible to, and must consider study and defensive applica-
tion of, financial warfare.

20Nassim Taleb, Antifragile: Things That Gain from Disorder (New York: Random House, 2012);
Alexei Barrionuevo, Argentina Nationalizes $30 Billion in Private Pensions, The New York Times,
October 21, 2008, http://www.nytimes.com/2008/10/22/business/worldbusiness/22argentina.
html?; Niall Ferguson, The Ascent of Money (New York: Penguin Press, 2008), 69-73. The 15th century
Italian city states of Florence and Venice both required wealthy citizens to loan money [Florence:
Prestanze, Venice: Prestiti] to their respective governments; Hiroko Tabuchi, Joining Switzerland,
Japan Acts to Ease Currencys Strength, The New York Times, August 4, 2011. In 2010-2011, Brazil,
South Korea, Japan, and Switzerland all intervened to preclude appreciation of their currencies in
order to maintain exports.