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Tuesday, February 10, 2009

Flexing financial muscle and why we are in deep sh*t...

In the mid 20th century we the people, through our elected officials, managed through what is historically referred to as the Suez Crisis.  In July of 1956 Eqypt, in response to the withdrawal of an offer by the US and Britian to build the Aswan Dam, decided to nationalize the Suez Canal, which had been built with French and Egyptian funds.

For a variety of reasons, which can explored at a different time in a different post, Britian, France, and Israel attacked Egypt in response to the nationalization of the Canal.  The military operation was a sterling success and a political disaster, specifically for the US.  So why are we talking about this and what does it have to do with debt?  Simple, the US felt that the hositilites needed to end quickly for political reasons.  The strongest weapon we had at our disposal was our economic strength.  So...

The United States also put financial pressure on Great Britain to end the invasion. President Eisenhower warned the British that unless they withdrew, he would order the sale of the United States' currency reserves of British Pounds and Sterling Bonds; thereby precipitating a collapse of the British currencies' exchange rate. Eisenhower in fact ordered his Secretary of the Treasury, George M. Humphrey to prepare to sell part of the US Government's Sterling Bond holdings.

The above is an excerpt from a great Wikipedia article on the Suez Crisis for thos interested.  I would also suggest this posting on Greenewable's Blog for some additional perspecitve.  

Bottom line, economics matters to national security.  In a very big way.  Don't kid yourself or let elected officials convince you otherwise.   The stimilus package currently under debate in Congress needs to be done but lets not lose sight of the potential long term ramifications.


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