Financial & Monetary Warfare
What it is. Using currencies, debt, liquidity, listings, and payment rails to steer behavior. Tools include capital controls, currency pegs/devaluations, shadow banking, sovereign funds, sanctions evasion, and exchange access. The aim is to make compliance the cheapest option—and reprice defiance.
Operating model
- Actors: central banks, finance ministries, SWFs, state banks, exchanges, rating agencies.
- Levers: FX policy, bond access, swap lines, listings, correspondent banking, KYC rules.
- Mechanisms: attract flows → create exposure → vary liquidity → extract concessions.
- Escalation ladder: guidance → regulatory friction → selective exclusion → systemic cutoff.
- Success metrics: spread compression for allies, volatility transfer to rivals, policy shifts.
Paper Tigers, Real Money (VIEs)
Domain: Financial & Monetary · Stratagems: 7, 17, 25
Problem / betrayal. Investors think they own a firm; they own a paper claim.
How it happened. HFCAA forces disclosures and PCAOB inspection access; where inspection can’t happen, trading bans trigger. PCAOB finally got “complete access” (2022), but it’s contingent. SEC.
The men behind it. Issuers using offshore chains; banks and law shops that write the maze.
Consequences. Governance risk, sudden delistings, and stranded capital.
Warning. If you can’t inspect, you don’t own.
Counter-Orders
- Audit: flag issuers subject to HFCAA risk; check PCAOB access status. SEC.
- Inoculate: mandate audit-workpaper access and on-shore cash controls in term sheets.
- Isolate: restrict treasury exposure to non-inspectable issuers/trusts. SEC.
Tactic clusters (curated, non-repetitive)
1) Liquidity Leash
Bind counterparties via access to liquidity and listings.
Stratagems: 1 Fool the Emperor to Cross the Sea, 17 Toss Out a Brick to Attract Jade
Application: Offer premium listings and swap lines; later increase compliance burdens to steer behavior.
Countermeasures: Diversify listings, multi-currency funding, pre-arranged alternative liquidity.
2) Proxy Pressure
Apply pressure through banks, funds, and indices rather than directly.
Stratagems: 3 Kill with a Borrowed Sword, 26 Point at the Mulberry…
Application: Lean on index providers and custodians to downgrade exposures; others fall in line.
Countermeasures: Transparent index governance, parallel benchmarks, regulatory independence.
3) Controlled Whiplash
Use FX moves or guidance shocks to punish or reward.
Stratagems: 27 Feign Madness but Keep Your Balance, 35 Combining Tactics
Application: Time devaluations with rivals’ rollovers; amplify stress on their refinancing calendar.
Countermeasures: Stagger maturities, FX hedges, regional reserve pools.
4) Debt Diplomacy
Extend credit that embeds strategic dependence.
Stratagems: 24 Borrow the Road to Conquer Guo, 30 Exchange Guest for Host
Application: Development loans with collateral-in-kind; defaults convert to influence points.
Countermeasures: Debt transparency, shared creditor clubs, collateral ring-fencing.
5) Masked Prudence
Frame coercive limits as “prudential” or “consumer protection.”
Stratagems: 8 Repair the Walkway…, 14 Borrow a Corpse to Raise the Spirit
Application: Tighten outflows under AML rhetoric; rivals accept constraints as responsible policy.
Countermeasures: Independent audits, international standards alignment, appeal pathways.
6) Capitulation Windows
Brief relaxations encourage behavior that later locks dependence.
Stratagems: 16 First Let It Go, 36 If All Else Fails, Retreat
Application: Temporarily ease controls to entice capital; then re-tighten with conditions attached.
Countermeasures: Treat holidays as temporary; use exits; avoid path dependence.
Failure modes & risks
- Flight: parallel markets and crypto rails dilute leverage.
- Contagion: feedback loops harm domestic credit and growth.
- Reputation: premium listings migrate; rule-of-law discount grows.
Related: Information Warfare, Economic Warfare.