(Part Two) Behind the Scenes: China’s Currency War

-- Tianjin exploded. Shandong exploded. Then a U.S. base in Japan exploded.

Are they connected?

That’s the question we ask today. And that’s all we’re doing… asking questions.

And one military insider, Nathanael Greene, is here to answer them — and explain why he believes there’s much more to the story of China’s recent devaluation.

If you missed Part One of our conversation, you can find it here.

We scoured China’s version of Facebook — called Weibo — last night, digging for potential leads and more information.

We didn’t find much by way of anything useful.

But we did find a few interesting pictures…

Here’s the result of the explosion. An enormous crater.

Tianjin crater

And after the first rain since the blast, the streets are covered in a white foam.

White foam on the streets after the Tianjin blast

Though the government insists that Tianjin is safe, many residents are reporting burning sensations after coming into contact with the foam.

And the fish in the area… dead.

Dead fish in Tianjin after the blast

So what has happened here, retaliation or not, is a crisis nonetheless. And worthy of attention.

-- Yesterday, we asked for your questions or comments based on what Nathanael told us.

Before we jump to Part Two of our discussion with Mr. Greene, he’s agreed to answer a couple questions from your fellow LFT readers first.

Question #1: “Would the ‘warehouse’ in Tianjin (or Shandong, for that matter) have been of any strategic (economic or military) importance in any type of covert warfare? What did they store or produce?

“I could understand the “retaliatory attack” on a US military base in Japan if we are constructing a conspiracy theory, but wondering about the Chinese entities involved in this story.”

Nathanael: The Chemical plants in Tianjin and Shandong have strategic military and economic importance because they represent targets which can cause civil unrest and long lasting collateral damage amongst the populace.

These are incredibly advantageous variables in warfare because they offer the ability to inflict large-scale psychological stress on your enemy’s civilian population, while greatly diminishing the region’s ability to collectively respond to military action.

In this case, it has offered the ability to capitalize on already growing social tensions between civilians and local government in the region, disrupted production and industry, and has caused the Chinese government to do the cover up work for the Americans, so as to not further lose face with the populace.

As for the retaliatory attack, Sagami General Depot is located on the southwestern edge of the Tokyo mega-sprawl, in Kanagawa Prefecture. It is one of a very few U.S. Army posts still active on any of the Japanese home islands. It is also a satellite of the larger post, Camp Zama, 10 or so clicks south.

Zama, also located in Kanagawa-ken, houses some very important units, such as USAR/J (U.S. Army Japan) and 441st MI BN (a forward collection unit tied to USARPAC, or U.S. Army Pacific, but belonging to INSCOM).

Zama also houses a large number of J-SOF personnel and C2. The significance of the facility which was attacked lies in the fact that it supplies all those units in Zama, and is the primary supply depot for US/NATO pacific command in the event of a breakout of war in the region.

I’ll talk more about that in a moment.

Question #3: “Are you just stringing us along to read more of your emails?

“I know I am naive but I hate to be duped!

“Dr. Dan.”

Chris: I’ll take this one. No stringing along here, Dan. Just reporting what we’re hearing.

As we mentioned yesterday, we only contacted Nathanael about the story after the explosion in the U.S. base in Japan.

Also, all of this comes at a time when things were already heating up between China and the U.S.

For example, Nathanael, can you briefly talk about the Spratly Islands and the cyberattacks in the past, for those who aren’t aware?

Nathanael: Sure. Glad you asked. The Spratly Islands are a set of islands in the South China Sea which China, and what the U.S protectorate, the Philippines, have been in a long contention over.

In May, the Chinese accelerated construction of military bases on the Spratly archipelago, which poses a direct threat to all the surrounding nations shipping lanes and land sovereignty.

As for cyber attacks, the Chinese hacked the Department of Defense’s OPM database in July, and downloaded the personal information of 22 million active and inactive government employees.

The most egregious compromise was the disclosure of every single SF 86, which is a meticulous reference and data form used for all government security clearances.

Chris: Right. Byron King, our in-house military insider and editor of the Military-Tech Alert, has written extensively about the OPM attacks.

You can see his take on the attacks here.

Also, John Robb wrote an interesting article about it too here.

What’s also interesting, if we’re entertaining this narrative from a cyber war perspective, is what the Wall Street Journal reported three days after the Tianjin explosion on August 14.

“The National Supercomputing Center in Tianjin has shut down the Tianhe-1A, once the world’s fastest supercomputer, as a precaution after the building housing it was damaged by the blast, China’s official Xinhua news agency said Thursday.”

Here’s where it is housed…

National Supercomputer Center in Tianjin

“Google maps,” WSJ goes on, “showed the Tianjin supercomputing center as less than a mile northwest of the blast site.

“The Tianhe-1A is used by China’s military, as well as other areas such as space exploration, exploitation of new energy sources, weather forecasting and animation design.”

Now… before we get into the attack on the U.S. base in Japan, let’s talk a bit about the second explosion.

The one in Shandong.

We spoke much about what’s going on in Tianjin, but not much about the second one in Shandong.

Go ahead, Nathanael.

Nathanael Greene: On the 22nd of August around 21:00, a chemical plant exploded in Zibo county of Shandong province.

Chris: All three explosions, I’m noticing, happened at night.

Nathanael Greene: That’s true.

And though intel from the Shandong blast has been scarce, media outlets have been able to surmise that one person died in the blast and 7 others were injured.

The facility is owned by Shandong Runxing Chemical Technology Co. and produces adiponitrile (ADN), which is used to make nylon.

One particular concern is the fact that when adiponitrile reacts with fire, it goes from being a harmless colorless liquid to a pungent poisonous gas.

The fires from the plant were so monstrous that it took seven separate fire brigades consisting of 150 firefighters and 20 fire engines to bring the flames under control.

And to put the sheer power of the explosion into a better perspective, windows across town were shattered, and tremors were felt one mile from the site.

One note of significance for this plant was it was China’s first ADN production facility, and was scheduled to produce 100,000 metric tonnes of ADN a year.

Chris: All right. So there’s a big production aspect.

Now, let’s get into what I’m personally most interested in…

Which is the reason why I contacted Nathanael for this interview…

The explosion on the U.S. army base in Japan.

Go ahead, Nathanael.

Nathanael Greene: OK. So… initially, the media reports coming out of Sagamihara City mentioned only logistical supplies and repair shops being located on the U.S army-controlled Sagami General Depot.

But as the story developed reporters from the region began mentioning possible petroleum, ammo, and food stores being held inside the 197 hectare facility, which served as a Tank manufacturing plant for the Japanese Imperial army during WWII.

If these reports are true, then this facility was indeed incredibly valuable to NATO/US forces in the region, and could have served as a sufficient target of retaliation from the Chinese, against America, for the chemical plant attacks earlier in the week.

Only evidence which has surfaced so far of repute and note has been from the Kanagawa Prefecture who stated that two steel pipes were found planted in the ground, with electric cables in the camps.

This means that the saboteurs likely used a pre-manufactured military version of a pipe bomb, successfully infiltrated the facility & targeted building, and pre-placed the devices used to cause the explosion, all while being undetected.

Similar to the analysis on the attacks in China, this also may have been far too advanced for “local dissidents” to pull off.

Chris: You said something about Chinese war doctrine to me a couple days back. Can you tell me what you meant by that?

And how does that tie into China’s stated goals for the Pacific theater?

Nathanael Greene: China wants to become the next economic superpower. Plain and simple.

They have been bidding and playing the international community for the last four years to have but a chance at achieving the one thing which will give them the opportunity to seize that status, that being reserve currency status of the Renminbi.

China is also very interested in securing resource rights across the globe. They have been avidly gobbling up nation’s debts, like what they did in Ecuador.

And they are offering nothing more than simply priority access status of Chinese companies to the natural resources of the region if the nation fails to meet their interest payments. These companies are, of course, essentially just puppet arms of the central communist government.

China knows well the turmoil that’s gathering, and wants to know they will have direct access to the resources to replace the United States dominance on high-tech manufacturing and modern military grade weaponry.

And be able to fuel their domestic industry in the event of an economic slowdown in consumption.

Chris: OK. So what are they willing to do to get it? What’s at stake here?

Nathanael Greene: In the big picture, China doesn’t want open war, it is bad for business, and is especially bad for their bid for reserve currency status with the IMF.

However, the only thing the Chinese despise more than war, is appearing weak to their populace.

And herein lies the wild card in these dangerous games being played geopolitically.

China has a million man army for more than simply defending its interests in the Pacific, but more so, as a direct deterrent to civil unrest in their general populace.

To keep order, they may be willing to take this exchange to very extreme ends.

Chris: OK. Last question.

Let’s say, hypothetically speaking, all of this is true.

How do you see it playing out in the next year… and what should the average American do to prepare him or herself from the fallout?

Nathanael Greene: Right. My suggestion is simple. Start a garden, store 200 gallons of water on site, begin holding cash on hand and get and keep yourself in good physical shape.

And if you have the resources, relocate away from the epicenters of commerce inside our country, for they surely will become potential targets if this game of roulette continues.

But it’s not all doom and gloom. From a spiritual perspective, you will need to build and strengthen the relationships you have with your family and friends, for these REALLY are the folks who will get you through rough times.

Constantly be seeking wisdom and remain vigilant, and you’ll be as ready for turmoil as it gets.

Chris: All right. You heard the man. Get to know your neighbors. That’s a good idea, pending WWIII or no.

Thanks, Nathanael for a very interesting discussion. Only time will tell if this is true, of course, but the chain of events is definitely interesting.

That’s all the time we have today.

Thanks for reading, dear LFT reader.

-- Wait. This just in: “China has likely sold somewhere on the order of $100 billion in U.S. Treasurys in the past two weeks alone,” Zero Hedge reports.

“Put simply, as part of China’s devaluation and subsequent attempts to contain said devaluation, China has been purging an epic amount of Treasurys.”

Unfortunately, we’re throwing this in last minute and there’s no time to confirm. Keep that in mind.

But if this… and everything Nathanael is saying… is true, we should see another mysterious explosion or some kind of retaliation.

No matter what, though, the currency wars will rage on. And, more than anyone we know, Jim Rickards has his finger on the pulse of the markets worldwide.

If you have any money in the markets… right now is the time to pay heed.

Stay safe. Stay vigilant. Stay curious.

I’ll talk to you tomorrow,

Chris Campbell
Managing editor, Laissez Faire Today


Chris Campbell

Written By Chris Campbell

Chris Campbell is the Managing editor of Laissez Faire Today. Before joining Agora Financial, he was a researcher and contributor to SilverDoctors.com.