Podcast Summary: The Jordan Harbinger Show | Episode 1189: Edward Fishman | Why the Dollar Is America's Most Potent Weapon

Introduction In this episode of The Jordan Harbinger Show, host Jordan Harbinger engages in a compelling discussion with Eddie Fishman, a former State Department sanctions architect and author of American Power in the Age of Economic Warfare. Fishman delves into the intricate world of economic warfare, emphasizing the strategic advantage the United States holds through the global dominance of the dollar and other economic choke points.

Understanding Economic Warfare and Choke Points Eddie Fishman opens the conversation by comparing traditional geographic choke points, like the Strait of Hormuz, to modern "invisible" economic choke points created by hyperglobalization. He explains how the integration of financial markets, supply chains, and industries has birthed new forms of leverage without the need for physical blockades.

“Without having to go out and blockade the Strait of Hormuz, the US Government can actually just cut off countries from access to the dollar or maritime insurance and impose just as much economic harm on them.” ([05:22])

The Dollar as the Primary Choke Point Fishman highlights the unparalleled dominance of the US dollar in global commerce. With 60% of all foreign exchange reserves held in dollars and 90% of all foreign exchange transactions conducted using the dollar, the currency serves as the backbone of international trade.

“The dollar is more than twice that baseline of 25% of global GDP... It gives the US Government the ability to interdict transactions that seemingly have nothing to do with the United States.” ([12:48])

This dominance allows the US to enforce sanctions effectively, as seen in the case of Iran, where unilateral sanctions drove the country into a severe recession and eventually led to the 2015 nuclear deal.

Semiconductors and Oil Services as Strategic Leverage Shifting focus, Fishman discusses other critical industries where the US maintains significant leverage:

1. Semiconductors:

   • The US controls 40% of the semiconductor value chain, including key designs and manufacturing tools.
   • This dominance creates an incentive for China to invest heavily in developing its own semiconductor industry, although catching up poses significant challenges.

   “Over the next five to 10 years, this will be a significant source of leverage the US has over China.” ([18:15])

2. Oil and Petroleum Services:

   • Extraction and transportation of oil require specialized services and insurance predominantly provided by Western companies.
   • Control over these services acts as a choke point, limiting adversaries' abilities to exploit their own oil reserves effectively.

   “If you actually want to get that oil out of the ground into the market, you need Western companies. And that does wind up being a choke point.” ([22:38])

The Emerging Threat of Artificial Intelligence Fishman anticipates Artificial Intelligence (AI) becoming a new economic choke point. With US companies like OpenAI and Nvidia leading the way, controlling AI technologies and computing power could grant significant geopolitical advantages.

“There will be new choke points in the AI space... It may be hard to foresee exactly where they'll be, but computing power will continue to be one.” ([29:04])

Economic Warfare and Its Implications The discussion transitions to the effectiveness and limitations of sanctions:

• Case Studies:

  • Iran: Sanctions effectively pressured Iran but ultimately led to heightened tensions and potential military confrontations.

  • Russia: Similar sanctions have impacted Russia, yet challenges remain in fully crippling its wartime economy.

    “Sanctions and economic warfare, they're just a form of coercive statecraft... it's challenging when you're up against a foreign leader who's got control of a very powerful state.” ([09:57])

Fishman argues that while economic warfare is potent, it often requires persistent effort and can have unintended consequences if not aligned with broader strategic goals.

Friend-Shoring vs. Autarky Introducing the concept of "friend-shoring," Fishman explains the strategy of sourcing from allied nations to reduce dependence on adversaries like China and Russia. This approach contrasts with autarky, which advocates for complete economic self-sufficiency.

“Friend shoring would be okay. We're comfortable having other countries involved in our supply chain, but only if they're our friends.” ([42:35])

He warns that moving towards autarky could incentivize imperialistic tendencies, drawing parallels with historical examples like Hitler’s pursuit of Lebensraum.

Impact of Tariffs and Trade Policies The conversation addresses the role of tariffs in economic warfare:

• Short-Term vs. Long-Term Effects:

  • While tariffs can protect strategic industries, they often lead to higher consumer prices and economic uncertainty.

  • Persistent use of tariffs without clear, long-term strategies can result in slower economic growth and strained international relationships.

    “Tariffs are inherently temporary... the biggest downside is the uncertainty they cause for businesses, leading to slower growth and less investment.” ([68:25])

China’s Economic Arsenal Fishman outlines the tools China has developed to counter US economic strategies:

• Rare Earth Minerals: China controls 99% of the supply, making it a critical choke point for industries reliant on these materials.

• Clean Energy Supply Chains: Dominance in batteries and electric vehicles provides China significant leverage.

• Legal Mechanisms: Systems like the "Unreliable Entity List" mirror US sanctions tools, allowing China to impose economic restrictions on foreign companies.

  “The Chinese have realized that they have this sort of Damocles that hangs over big parts of American industry... And they can shut down industries in the US.” ([57:47])

BRICS and Alternative Economic Blocs Discussing the potential of the BRICS nations (Brazil, Russia, India, China, South Africa) to form an alternative economic bloc, Fishman expresses skepticism about their cohesion and effectiveness. However, he acknowledges their collective desire to reduce dependence on the US dollar, particularly through initiatives like China’s central bank digital currencies.

“They do not want America to have this choke point, which is the financial system that it can weaponize against them.” ([63:08])

Future Outlook and Hope Despite the challenges, Fishman offers a perspective of cautious optimism. He emphasizes the importance of understanding and mastering economic warfare to prevent escalation into military conflicts.

“Economic warfare, when done correctly, is an alternative to military force... we are living in an age of economic warfare... it's essential for us to up our game.” ([72:18])

He advocates for informed and strategic use of economic tools to navigate the complexities of global power dynamics, ultimately aiming to maintain peace and stability.

Conclusion The episode provides a comprehensive exploration of how economic tools, particularly the dominance of the US dollar and control over critical industries, serve as modern weapons in global power struggles. Eddie Fishman articulates the delicate balance required to wield these tools effectively while mitigating the risks of unintended consequences and fostering international cooperation.

Notable Quotes

• “The dollar is more than twice that baseline of 25% of global GDP... It gives the US Government the ability to interdict transactions that seemingly have nothing to do with the United States.” – Eddie Fishman ([12:48])
• “We should be willing to risk quite a bit to make economic warfare succeed against the likes of Russia and Iran, because the alternative is worse.” – Eddie Fishman ([56:32])
• “Economic warfare, when done correctly, is an alternative to military force... it's essential for us to up our game.” – Eddie Fishman ([72:18])

Key Takeaways

• The US leverages economic choke points, especially the dominance of the dollar, to exert global influence without military intervention.
• Critical industries like semiconductors and oil services are strategic assets that provide additional layers of economic leverage.
• Emerging technologies, particularly AI, may become future choke points, further shaping international power dynamics.
• Strategies like friend-shoring offer alternatives to complete economic self-sufficiency, promoting alliances and reducing vulnerabilities.
• Persistent and strategic use of economic tools is essential to maintain global stability and prevent escalation into armed conflicts.

For a deeper understanding of economic warfare and the strategic role of the US dollar, listeners are encouraged to read Eddie Fishman's book, American Power in the Age of Economic Warfare.