Sit down and talk it over

Financial warfare: Fly whisks and ear-slicing have been used as the pretext for war. Could aggressive finance join the list? It can't be ruled out. In the 21st century, finance can be a weapon. Its use could ultimately lead to real violence.

Hank Paulson claims that Russia proposed an act of financial aggression in 2008 -- a co-ordinated Chinese-Russian sale of bonds issued by quasi-US government mortgage banks Fannie Mae and Freddie Mac. The former US treasury secretary may be exaggerating. But the thought of financial warfare could well have crossed the mind of leaders unhappy with American foreign policy and whose nations hold US government debt.

The world seems to have taken the global financial meltdown in its stride. But military conflict can be slow to mature. France did not invade Algeria until two years after the Dey of Algiers supposedly swatted the French Consul like he was a fly. There was a longer delay between the auricular insult to Captain Jenkins and the eponymous British-Spanish war.

Indeed, as the immediate financial crisis fades, anti-American sentiment among U.S. creditors seems to be increasing. Many world leaders seem to think that selfish and misguided U.S. policies helped provoke the crisis. China is angry about Taiwan, Japan about Okinawa, and Middle Eastern exporters about Israel, Iran and Iraq.

It is not inconceivable that this ill could one day spread into a politically motivated dumping of U.S. debt. Such financial hostility would be far preferable to trade war, let alone real war, but it might be hard to contain the enmity to the trading floors.

The sharp drop in international trade after the collapse of Lehman Brothers showed that the global economy cannot flourish without financial order. If the dollar suddenly turned toxic, trade would probably crumble. That disruption would quite possibly be followed by a multilateral outburst of protectionism. And then? German officer Carl von Clausewitz said war was the continuation of politics by other means. He wasn’t thinking of financial politics, but they fit uncomfortably well into his formula. The world needs a serious multilateral effort to keep the financial peace.