Freedom's new weapon

(Washington, D.C.): At a moment when things are not going particularly well in the War for the Free World - the global conflict with Islamofascism and its aiders and abetters in which, like it or not, we are currently embroiled - there is a bit of very welcome good news: America is employing at last a powerful new "weapon," one that may help turn the tide.

Interestingly, this weapon is not being wielded by our men and women in uniform on the far-flung battlefields of this war. Yet, it has the potential not only to help them prevail there, but to avoid the need to use military force on other, present and future fronts in the War for the Free World.

Instead, a powerful new "force-multiplier" has begun to be brought to bear by government officials at both the federal and state levels, in corporate board rooms and by individual Americans across this country. In various ways but with a common purpose, we are starting to unleash our financial power to hurt freedom's enemies and those who are enabling them.

Consider the following examples of revolutionary developments in this country's practice of financial warfare in recent months:

Nearly two years after the Center for Security Policy first published an analysis showing that roughly 100 U.S. public pension funds had invested some $188 billion in companies doing business with terrorist-sponsoring states, Missouri's formidable State Treasurer, Sarah Steelman, took the first of such funds - the Missouri Investment Trust (MIT) - "terror-free." She did so by divesting the stocks held in portfolio whose issuing companies are involved with countries like Iran, North Korea, Sudan and Syria.

Importantly, Treasurer Steelman took this first-in-the-nation step to divest terror after having conducted a rigorous market analysis. It demonstrated conclusively that MIT's beneficiaries could not only support the war effort by investing terror-free. They could actually make more money in the process. Thanks to her courageous and visionary leadership, a model has been created that should be followed by every public pension fund in the country - starting with the many-billion dollar Federal Thrift Savings Plan for which all executive branch, congressional and other federal government employees are eligible.

The first terror-free mutual fund, Abacus Bull Moose Growth Fund, has been established to offer investors a place to put their 401k, IRA and other savings that will not enrich our enemies or expose them to what the Securities and Exchange Commission calls "global security risk" (GSR). GSR is defined as a material risk arising from investments that involve business dealings with terrorist-sponsoring regimes. To date, unlike other material risks, companies have not generally disclosed such dealings - leaving investors unwittingly exposed to the distinct possibility of not only moral hazard from doing business with terrorists that they may find unacceptable, but also the possibility that they could suffer financially if the investment blows up on them, figuratively if not literally. The Abacus Bull Moose Growth fund - which shows a three-year average annual return of some 14.5 percent - uses a product called the Global Security Risk Monitor to do what financial institutions have done for twenty years, going back to the hey-day of the South Africa divestment campaign. Instead of screening for "socially responsible" investing (for example, avoiding investments in companies involved with tobacco, gambling, gun-manufacturing, alcohol, and environmental degradation), however, the Monitor makes a "security responsible" filter possible. The creation of the brilliant former Reagan NSC senior economist Roger Robinson, it offers institutional and private investors alike a way to ensure that their savings are terror-free.

One of the world's largest international investment banks with trillions of dollars under management (which, for its own reasons, wishes at the moment to remain unacknowledged) has recently adopted a global corporate policy aimed at prevent its activities from funding or otherwise enabling the predations of the Free World's enemies. With a rigorous set of lending and investing procedures in place and aggressively monitored at the highest levels of the corporation, it is setting a gold-standard for good governance and financial responsibility that could - if adopted throughout its industry and others - deny our enemies much of the access to funding they rely upon today and, thereby, transform this war. Last, but hardly least, the U.S. government has begun to wield the financial weapon with considerable effect. Thanks to the leadership of senior officials such as Under Secretary of the Treasury Stuart Levey and one of his State Department counterparts, Robert Joseph, American-led initiatives have been launched in the past year to constrict the cash-flows of nations like North Korea and Iran.

By going after financial institutions that do business with these regimes - for example, in the case of North Korea, the Banco Delta Asia in Macao was sanctioned and effectively electrocuted for laundering Pyongyang's exceedingly high quality counterfeit U.S. dollars and other abuses - the feds have begun applying a tourniquet to our enemies' economic life-blood. With advice from Roger Robinson, President Reagan proved that such counter-cash-flow weapons could take down the Soviet Union; it is high time they be applied systematically to today's totalitarian threats.

Amidst the mood of defeatism and highly publicized war reverses, primarily on the political front at home, it is heartening to see public and private sector efforts that are wielding anew what, arguably, continues to be this nation's most formidable weapon - our financial power. Those leading this effort deserve our profound thanks, and our prayers that their efforts will prove to be but the leading edge of the needed mobilization of this country and its ultimate victory over freedom's foes.

I loved how Reagan starved the USSR by getting the Saudis to pump up production of oil, so that the oil price fell, and the USSR got less revenue as a result, and also how Reagan ordered the CIA to sabotage the new oil and gas pipeline that the USSR was building. Reagan had a simple peace plan: We win. Reagan was the man. Glad to see Bush following in his footsteps.

So she sold the investments to someone else. I fail to see how this makes any difference to who ever issued the bonds/stocks or what-ever.

It is a first step. If enough states will follow suit, foreign companies will have to make a choice between access to US capital markets or doing business with terrorist sponsoring nations.

If large US trusts start divesting themselves of particular investments, other investors will as well, and fewer US investors will purchase them. As more come on the market, the price will drop, sometimes like a rock. And as that happens, more people will sell their investments as their value drops, and that can snowball.

What happens next is really interesting. Foreign buyers will then purchase them, but at that much lower price, and even then, many overseas investors will think two or three times before touching them down the road.

Eventually, some of those companies could have their stock prices crash to the point where they get delisted. Others will change their ways to try to get their stock prices back up.

Economic warfare can get really nasty. If you have no money, it's difficult to wage regular war or even terrorism on a significant scale.

Economic warfare can get really nasty. If you have no money, it's difficult to wage regular war or even terrorism on a significant scale.

One beauty is I think the left wing can see its way to participating. It simply becomes another political correctness for them - terror-free investing.

No, they'd dump all their money into it to show "those people being discriminated against by the evil Bush administration" that "not all Americans are like that".

It's win-win for us, though. Individual investors would just throw their money away, and if most trusts dump something, it's going to lose money even if Soros buys up all the free stock. So, they either lose money (which then can't be employed against America) or they contribute to the economic warfare against our enemies. :)

There are plenty of other investments that these people can find. There is no reason that terrorist states should have access to the worlds economic engine.

"I fail to see how this makes any difference to who ever issued the bonds/stocks or what-ever.
"

you are right in this part. where it may affect the issuer is in 1) rates required to find adequate capital from buyers of any new issue of bonds and 2) the issuer's ability to sell additional shares via whatever placement mechanism, both in the momentary market price of the issue and the buyer's anticipation of liquidity and whatever political risk the country carries.

problem is there are plenty of non-US-based funds that will buy such issues in the primary or third market once a value/price inefficiency gets sufficiently large.

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