We are hearing daily about the possibility of “trade wars”. It is this possibility that is being blamed for the increased volatility (read markets dropping), but I do not believe it is the only factor. In fact, equity markets began their upset as interest rates marched higher and prior to any talk of trade wars. Of course other factors exist such as cross currency rates (which directly affect trade) and liquidity, not to mention the gross indebtedness of nations.

Looking at “finance and economics” from a broad view, we can see they are part and parcel of and actually used as tools for outright war. There are many examples of history such as the US civil war where the North embargoed the South, Germany being starved for oil in WWII, and more recently the USSR being forced to overspend militarily and having the ruble undermined leading to their ultimate bankruptcy.

A recent article on Zerohedge discusses several ways China can attack the US financially. We’ve heard many of these before. I would mention that a currency devaluation by China would mean a stronger dollar, not exactly immediately harmful to the US. Dumping US Treasuries is another theoretical attack but the simple answer for the US would be for the Federal Reserve to buy any and all treasuries offered for sale …their balance sheet be damned!

It s also posited China could block US services and stop importing US oil. While both might cause some pain, neither is a knock out punch because they are simply not large enough slices of the overall pie. As for “rare earth” materials, these ARE very significant should a hot (non nuclear) war break out. Most all high tech weapons rely on the use of various rare earth metals. In my opinion, if China wanted a hot war, restricting access to these would be the ticket.