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The Central Bank Dilemma

The Buzz

Referring to gold and all physical money as a “barbarous relic” (a phrase “coined” … please excuse the misuse of the term … by Lord Keynes, see Monetary Reform (1924), p. 172) is the favorite pastime of gold-bashers and fiat currency worshippers everywhere. In attempting to convince the public that real, hard money should be an object of derision, fiat fanatics, some wittingly and some unwittingly, are advancing the cause of “statism” (socialism and fascism) and its American analogue “cronyism”.

There is, indeed, a barbarous relic, but it is NOT gold.  The real barbarous relic is central banking, and it is central banking, especially as practiced by the U.S. Federal Reserve (“Fed”), the European Central Bank (“ECB”), the Bank of Japan (“BOJ”) and the Peoples Bank of China (“PBOC”), that deserves the public’s derision. Sooner rather than later, the practices of central bankers are sure to incur the public’s wrath.

Money (gold and silver used as currency) was conceived to be both a “battery” and a “time machine”.  As a battery, real money stored an individual’s labor and allowed that individual to trade that stored labor for a good or service provided by an individual who neither needed nor desired the laborer’s specific output.  A man who built barrels and who wanted fish did not have to seek out a fisherman who wanted a barrel.  As a time machine, money preserved the value of the individual’s labor over his lifetime, so that it could be “spent” when that laborer was no longer able to produce (either efficiently or at all). Because of its function as both a short term and long term labor storage device, real money was a fundamental building block of a free society.  (This is not to suggest that real money was a sufficient condition for a free society, but real money is necessary to preserve the freedom of a society.)

Real money performed its dual function perfectly for thousands of years, whenever governments and central banks did not control it. Now, under the complete control of central banks, money, i.e., its modern analogue, fiat money, no longer is an efficient battery. Given the loss of fiat currency’s purchasing power (96% loss since 1913 - see this) since the advent of the Fed, money no longer is a time machine.

Money has been transformed from an object with no counterparty risk, the value of which was determined by the market process of free exchange, into a tool of central economic (and thereby societal) command.  Worse, that command is implemented with neither democratic check nor balance, but by autocratic force and decree. The force employed by, and on behalf of, central banks (by governments), and the decrees of central banks are disruptive to the market process, and, ultimately, are ruinous to the freedom of society.

Before central banking, physical gold or physical silver was exchanged for goods and services.  The Bank of England altered this exchange process in 1694 by creating a money substitute called the “banknote”.

But banknotes were merely paper representations of gold or silver; they were not tangible assets. They were not “money” itself.

Why is a banknote not “money”?  Because a banknote is merely the liability of the bank issuing that paper currency. It is an “account receivable” in the hands of its holder and an “account payable” by the bank.  Sure, if there is gold or silver backing up each and every banknote issued (i.e., a “100% reserve”), then the risk of non-payment, i.e., the risk of non-conversion to “real money”, is nearly zero.  But there’s the rub.  Banks issuing banknotes began employing “fractional reserve banking”.  They issued more banknotes than the gold or silver they held in their vaults. That introduced payment risk, the risk that there might be no “real money” when the recipient of the banknote attempted to exchange the banknote for real money (the gold or silver “backing” the banknote). This “money failure risk” did not exist when tangible assets (e.g., gold and silver coins) were used as currency. Of course, since August 15, 1971, with the closure of the “gold convertibility window”, forced on President Nixon by LBJ’s abandoning all reserve requirements for gold backing of the U.S. Dollar in March of 1968, the “money failure risk” became substantial, and even likely over time.

Central banks’ control over the fiat money supply has transformed market economies into top down, command economies. It is laughable when TV commentators, media columnists and “Occupy Wall Street” protesters blame free market capitalism for the serial economic “busts” experienced in 1987 (“Black Monday” market crash by 22.6%), 1999-2000 (the “dot-com” bubble) and 2008 (the “housing bubble”). In fact, there has been no free market in the United States since 1913, when the Fed was established. Indeed, the Fed’s power of command over the economy increased exponentially with the enshrinement of 100% fiat money in August of 1971.

Perhaps the most insidious result of central banks’ operations is that central banks have freed politicians from having to propose tax increases to finance increased government spending. Central banks acquire government-issued debt with fiat money created by the central banks “out of thin air” (by the mere clicking of a computer mouse as the computer adds “cash” to the Fed’s balance sheet). The funds received by the government from the central bank in exchange for the government’s IOUs are then spent by politicians to satisfy the special interests that keep the politicians in office with their campaign contributions and armies of “paid volunteers”.

Even worse, the central bank’s digital money creation, not backed by real assets, creates inflation, best described not as “rising prices” but as the reduction in value of all pre-existing money. By this inflationary process, central banks enable governments to steal from their citizens. Central bank-induced inflation is a silent tax for which no citizen voted.

Adding insult to injury, central banks arrogantly deny that their money creation causes inflation. The Fed routinely points to a “CPI” that has not even averaged 2% per year since 2008, even as stock prices have tripled, as wave after wave of QE dollars have poured into the equity markets. But market participants outside the Fed are completely oblivious to the deliberations of the Fed. As a result, honest price discovery in an open securities market is impossible. Instead of looking to the actual supply of and demand for money and actual profits and losses of corporations, investors must be fixated on what the Fed might do in order to divine the direction of markets. There is no longer a “stock market”; there is only a “Fed market”.  Market participants are not investors; they have been reduced to casino gamblers wondering “WWJD” (“What will Janet Do?”).

The mountain of debt that exists in the United States today and the mal-investment (e.g., stratospheric stock prices beginning to falter, defaulting fracking company junk bonds, student loan debt that cannot be serviced by jobless graduates and escalating subprime auto loans) emanating therefrom are the direct result of the Fed’s money printing and bond buying (QE) activity. That mountain of debt is like a plate spinning on the top of a stick.  Even more debt must be incurred to keep the plate spinning. It is the only way to (try to) avoid the inevitable bust that would follow, if debt expansion were to stop. It was exactly this inflate or die policy which resulted in former Fed Chairman Ben Bernanke’s infamous quip that he would drop Federal Reserve Notes from helicopters if necessary to re-inflate the economy.

But, ultimately, the credit-based money system run by the central banks has no exit …other than collapse.  There is no conceivable way that the taxpayers and borrowers of the world ever will be able to pay off the hundreds of trillions of dollars (and dollar equivalents) in accumulated government debt (more than $56 Trillion in direct government debt) and personal and corporate debt.  There is no way even to service those debts (i.e., pay current interest due to bondholders), if interest rates increase to even half of their average historic levels.

There are only two options, both of which see horrendous. The first is “honest” default.  Governments admit that their debts cannot be repaid, and the governments default.  (This is what has happened in Puerto Rico, which cannot print up its own money.)  Debt holders (including individuals, pension plans, banks and insurance companies) then lose their investments in government debt. Worldwide hyper-deflation and deep depression follow. Office holders lose their positions, government employees are fired and entitlement programs collapse.  Rioting and lawlessness result.

The second is a “stealth” default by even more aggressive money printing. Debts are repaid in worthless money. Bondholders lose all of their investments’ purchasing power. Hyperinflation, Weimar-style, follows, and efficient production is curtailed as people spend all of their time trying to exchange increasingly worthless fiat currency for tangible goods. Economies fail, unemployment skyrockets and there is worldwide depression.  Rioting and lawlessness result.

In either case, the world’s love affair with central banking and fiat money is over.  Lord Keynes’ “barbarous relic”, gold, will become money again.  In fact, there is a private sector system already in place for just that.  It is called “bitgold”, which is an internet-based payments system that facilitates instant payment for any good or service in grams of gold.

Jay Zawatsky is CEO of havePower, LLC, a Maryland-based energy infrastructure developer, and Adjunct Professor of Business and Business Law at Montgomery College in Rockville, MD.

Image: Creative Commons/Flickr. 

Topicsundefined RegionsUnited States

Europe's Arms Sales 'Pivot' To Asia: Subs, Fighters and More

The Buzz

Washington worries increasingly about developments in the Asia-Pacific region. The Pentagon has done more than publish a maritime strategy for that part of the world—it has begun to shift military assets that way. Yet it is often said that this is a region in which Washington will not be able to count on its traditional allies in Europe. This is notwithstanding France and the United Kingdom joining the most recent Rim of the Pacific (RIMPAC) exercise, and even smaller Norway coming along with its frigate Fridtjof Nansen, as a tip of the hat to the importance of American security interests in Asia. With few exceptions, Europe consists of smaller nations that may have considerable economic interests in Asia, but they can hardly be expected to join the United States in keeping the peace and managing crisis in the vast Asia-Pacific region. Indeed, many US allies in Europe believe that Afghanistan was a bridge too far for them. In any case, turbulence around the Mediterranean rim, the rise of ISIS, and an increasingly aggressive Russia under Putin will keep European militaries focused closer to home for the foreseeable future. While Washington should hardly expect European deployments of hard power to Asia, European nations have other linkages that could help shape the security environment and military behavior in the region.

The booming Asian market provides strong, enduring, and valuable—if perhaps underused—connections to the military and political leadership in Asia. That market is growing rapidly, as most of the states are rapidly building modern militaries not only to protect territory, but project force, and signal their arrival as significant powers. European companies have done well. Take submarines, for example. Australia and Singapore have bought new or refurbished Swedish boats, and Pakistan acquired French submarines in the early 2000s. South Korea and Indonesia each operate the best-selling submarine of all times, the German Type 209. India operates 209s too, and along with Malaysia, French Scorpene boats as well. South Korea has bought into the German follow-on class, the Type 212. Little suggests that this buying spree has reduced hunger for more sophisticated submarines in Asia. Singapore just signed on to a new class of German boats, while the purchase of a new class of Australian submarines is turning into a nail-biter for European submarine builders. Will there be a Japanese sale, or a domestic build? Indonesia too is eyeing an upgraded version of its 209s.

But submarines constitute just one example of where European firms have made real connections in the Asia-Pacific defense market. Similar examples can be found in aviation: India has bought French Rafales from Dassault, Thailand has bought Swedish Gripens from Saab, and Australia has bought French tankers from Airbus. Much the same is true for surface warships. Defense deals of this size are not merely commercial transactions, as they usually come with technical assistance, technology transfer, supply chains in the receiving countries, and sophisticated training and education for technicians and operators with the armed forces of the country in which the company is headquartered. This creates deep and lasting linkages between buying and selling governments, industries, and militaries. These linkages are of real consequence when countries decide from whom to buy major systems. The United States itself has benefitted greatly from the links created by US defense sales, as these draw allies closer and create connections between current and emerging political and military leaders. Think about the F-16 as the “sale of the century,” and the effort to duplicate that dominance with the F-35.

While not through direct and visible deployments, alliances, and security cooperation, European nations do have real reach into the Asia-Pacific defense community through defense sales. Beyond technical training and skills transfer, these linkages can also be used to help inform the views, perspectives, and behavior of the current and emerging political and military leadership in many of the rising military powers of Asia. These linkages can be a real contribution to global security, as Asian nations are playing more prominent roles in security regionally and globally, while operating in an Asia-Pacific strategic environment that is increasingly testy and competitive, not least in the South China Sea. Simple geography explains why Europe will never care as much about Asian security as the United States does. But even smaller European nations have influence on the direction of the defense communities in the region through their defense companies. Using those links to help them grow into responsible security players in an increasingly contested strategic environment would be a real contribution to a peaceful and stable 21st century.

Magnus Nordenman is deputy director of the Brent Scowcroft Center on International Security where this piece first appeared

Image: Creative Commons 2.0. 

TopicsSecurity RegionsAsia

Revealed: This Is How China Plans to Modernize Its Military

The Buzz

Chinese military muscle was on full display in Beijing this week, with hundreds of new weapons platforms, fly-bys, 12,000 troops, and foreign dignitaries all in the global spotlight of Tiananmen Square. Yet, it wasn’t just the land-based anti-ship ballistic missiles and ground assault units that stole the show. Simmering behind the scenes, and underpinning Chinese President Xi Jinping’s evolving political-military agenda, were the renewed discussions of imminent plans for an overhaul to the operating structure of the People’s Liberation Army (PLA).

Beginning with Xi’s announcement of a 300,000 reduction in Chinese troops from the Tiananmen Square rostrum, subsequent plans will include a comprehensive upending to the military’s existing structure, a vision of U.S.-style joint command structure adapted to the Chinese forces. This is no small undertaking for the Chinese, akin to the introduction of the U.S. National Security Act in 1947, with a similarly large scale of ripple effects throughout the political system.

Chinese military expert Dennis Blasko notes the PLA is presently structured into approximately ten major organizations, at three levels, with headquarters located predominantly in Beijing. The Central Military Commission (CMC), chaired by Xi, was established by both the Chinese and Communist Party constitutions to command the Chinese armed forces and determine national defense policies. Aside from Xi, it is made up of civilians and senior uniformed military officers, all of whom must necessarily be party members.

Blasko compares the CMC to the work of the U.S. commander-in-chief and secretary of defense, but divided between far more employees. Beneath the CMC, policy directives are executed by four General Departments that act as a joint staff for all of the Chinese armed forces. Lines of command and responsibility are further divided geographically, with China presently split into seven military regions.

As Xi looks to make his visions for restructuring a reality, sources suggest he is aiming to adapt the existing structure by unifying the Chinese army, navy, air force, and strategic missile corps under one command. PLA numbers will first be cut down to around two million troops even as the navy and air force continue to expand. Other probable reforms will have the armed police shifting to a national guard role with a focus on domestic security.

Military regions will likely be consolidated to as few as four; the ranks of local commanders will be downgraded to reduce their political influence. The Ministry of National Defense will assume a greater role in defense policy and military affairs, in addition to taking on oversight of military ideology, officer promotions, and the departments of logistics and armaments.

While this transformation marks a seismic shift in Chinese military organization, it does not come as a total surprise: headlines of proposed reforms have appeared on and off over the last two years. Perhaps what has changed is Xi’s commitment to the structural overhaul and desire to lead a military capable of the same networked warfare demonstrated by the United States and its allies.

For Xi, China’s dream of a strong military is supported by cutting-edge technology but requires a reshaping of the PLA’s daily operations in order to be effective. Cutting 300,000 personnel is one such step in the right direction, as shifting from investments in traditional land forces to the navy and air force requires fewer, but better-trained, military personnel.

Initial efforts to pave the way for Xi’s reforms were seen in the far-reaching anti-corruption campaign in the PLA ranks. Those that have already been weeded out from within the PLA– including CMC vice-chairmen Xu Caihou and Guo Boxiong, and over 4,000 officers–are those that were in staunch opposition to Xi’s proposed reforms. Now, those that remain in positions of power, may still be corrupt, but at least they will implement the structural changes Beijing wishes to see.

For those less enthusiastic at the prospect of a new change of command and operations in the PLA, a recent op-ed in the PLA Daily has aimed to capture their attention, encouraging military leaders “[To] strengthen their study of Xi’s important expositions on deepening defense and military reform.” Immediately following the surge of nationalism from Thursday’s parade, the op-ed further urges Xi to “seize the high ground” in implementing leadership and command adjustments, enacting systemic and policy reforms, and overseeing increased civil-military integration.

While Xi touted China’s commitment to peaceful development and promises to “never seek hegemony or expansion,” the V-day cavalcade painted an entirely different picture. China now possesses much of the hardware and capabilities of any other modern military power. Without Xi’s planned restructuring, however, this cutting-edge hardware will be wielded by a bureaucracy stuck in the 1950s. The stakes are high for President Xi: with domestic challenges increasingly prominent, the military component of Xi’s “Chinese dream” needs to be realized in order for Xi to continue to maintain credibility, party legitimacy, and leadership of the Chinese armed forces.

Lauren Dickey is a research associate for U.S. foreign policy at the Council on Foreign Relations and a PhD candidate in the War Studies department of King’s College London.

This piece appears courtesy of CFR, where it was first posted

TopicsSecurity RegionsAsia

The Saudi Problem

Paul Pillar

Saudi King Salman visits Washington this week amid disagreement between the United States and Saudi Arabia on a broad range of issues. Moreover, the disagreements are rooted in fundamental characteristics of the anachronistic Saudi regime. Many regimes around the world, and the political and social systems of which they are a part, are markedly different from what is found in the United States, but the Saudi polity is one of the most different. The anachronism that is Saudi Arabia represents a major problem for U.S. foreign policy, both because of the impact Saudi-related matters have on the Middle East and beyond and because of the close association between Saudi Arabia and the United States that has come to be taken for granted.

Little of this has anything to do with the just-completed agreement to restrict Iran's nuclear program, despite the attention that subject has been receiving. Riyadh is more likely to accept the agreement as a done deal—and already has publicly indicated its formal acceptance—than the accord's opponents in the United States and Israel. The Saudis will continue to look for ways to discourage others, including the United States, from developing warm relations with their rival across the Persian Gulf, but this will not preclude the Saudis themselves, along with the other Gulf Arabs, from undertaking their own rapprochement with Tehran, just as they have done in the past.

In hot spot after hot spot in the Middle East, U.S. and Saudi objectives and priorities diverge, even if in some loose sense they are considered to be on the same side. In war-torn Syria, the United States and Saudi Arabia have never agreed on whether the ouster of the Assad regime or the containment of ISIS should be the main objective. Saudi priorities are based on a variety of considerations that are specific to it and not to the United States, including hatred of the Assads for whatever role they may have played in the assassination of Lebanese prime minister Rafic Hariri, a special friend of the Saudis. Reflecting the different priorities and objectives is disagreement over selection and vetting of Syrian rebels to be deemed worthy of support.

In Iraq, Saudi priorities are influenced by some of the same sectarian motives that shape Saudi policy toward Syria. And again, such motives are quite different from U.S. interests. Desired overthrow of the regime is not the factor that it is in Syria, but distrust of the Shiite-dominated government in Baghdad is a major part of the Saudi approach toward Iraq.

In Yemen, the United States has allowed itself to become associated with a destructive and misguided Saudi military expedition, and thus also with the humanitarian tragedy that the operation has entailed. The main Saudi objective is to show who's boss on the Arabian Peninsula, another objective not shared with the United States. Saudi Arabia's operation has shown itself, more so than Iran, to be a destabilizing force intent on throwing its weight around in the neighborhood.

In his most recent column Tom Friedman identifies what may be the most worrisome thing about Saudi Arabia for U.S. interests: “the billions and billions of dollars the Saudis have invested since the 1970s into wiping out the pluralism of Islam — the Sufi, moderate Sunni and Shiite versions — and imposing in its place the puritanical, anti-modern, anti-women, anti-Western, anti-pluralistic Wahhabi Salafist brand of Islam promoted by the Saudi religious establishment.” Friedman notes that Islamist extremist groups that the United States has come to consider preeminent security concerns, including Al Qaeda and now ISIS, “are the ideological offspring of the Wahhabism injected by Saudi Arabia into mosques and madrasas from Morocco to Pakistan to Indonesia.”

The specific terrorist consequences of what the Saudis have done is justifiably an immediate concern for U.S. policy-makers. But the underlying bargain that Ibn Saud, the founder of the current Saudi kingdom, reached years ago with the Wahhabis also underlies much else that makes Saudi Arabia what it is today, and makes it the problem that it is. The kingdom's troublesome characteristics are inextricably linked to how Ibn Saud's offspring are trying to claim legitimacy and thus to cling to power.

Consider some of the chief characteristics of the kingdom. Saudi Arabia is a family-run enterprise in which the distribution and exercise of political power are every bit as medieval as they ever were in any country ruled by the Plantagenets. There is no religious freedom. Human rights in many other respects are sorely lacking. Women are still subordinated. It was considered a big deal when they recently were told they could vote and run as candidates—in elections to local councils with scant power and in which the king will still appoint half the members—but women still cannot function as independent persons in many aspects of daily life. They still are not allowed to drive.

It ought to be astounding that a place this far removed from the liberal democratic values with which the United States likes to be associated, even without considering the aforementioned divergence of objectives elsewhere in the region, still is considered a close partner of the United States. The usual, and to a large degree valid, explanation is that, as Friedman puts it, “we’re addicted to their oil and addicts never tell the truth to their pushers.” But there is another American attitude involved, which persists even in the shale-fracking era. Once a nation is considered a partner or ally in a region that is perceptually divided into allies and adversaries, the perceived line-up tends to stay fixed until and unless there is a political alteration sufficiently great to be labeled regime change.

And regime change would be the most troubling chapter of all in the Saudi story. Some Saudi leaders, including the late King Abdullah, seem to have recognized the need to move in the direction of modernization and liberalization, even if only at the glacial pace that is possible in a Wahhabi-committed family enterprise. It is an open question whether the regime will be able to keep this kind of change ahead of demands for change of a more drastic and radical sort. If it fails to do so, and the revolution comes, then the association of the United States with the ancien régime will an even greater problem for U.S. policy-makers than what they face now.        

TopicsSecurity RegionsMiddle East

Is China's "Carrier-Killer" Really a Threat to the U.S. Navy?

The Buzz

It seems tomorrow will be a big day for China-military watchers around the world: the mighty DF-21D, or “carrier-killer” anti-ship ballistic missile (ASBM) will likely be one of the features of Beijing’s end of World War II celebrations. But how much should America or anyone else in Asia fear this supposed killer of carriers?

The “carrier-killer” has been a favorite topic of mine for some time now. The weapons are launched from a mobile truck-mounted launcher into the atmosphere, with most likely over-the-horizon radar, satellite tracking and possibly unmanned aerial vehicles each providing guidance to a target in the open oceans. It also incorporates a maneuverable warhead, or MaRV, to help find its target.

The DF-21D would be instrumental in striking a vessel in the open ocean or denying access to a potential opponent in transiting to a conflict zone, like in the East or South China Seas. An August 2011 report by Taiwan’s Ministry of National Defense warned that: “A small quantity of the missiles [was] produced and deployed in 2010.”

When looking at this weapon, there are really two basic questions I have been asking for years: How capable is it? And if capable, can U.S. Navy vessels defend against it?

Capabilities:

First, to its capabilities. According to the most-recent and up-to-date open-source materials I can find, the weapon indeed has been tested, however, never against an ocean-going, noncooperative target. As frequent TNI contributor Andrew Erickson pointed out in his 2013 study of the DF-21D (the best open-source resource on the “carrier-killer”  to date):

“Additional challenges and tests remain before the DF-21D reaches its full potential; however, senior U.S. and Taiwan officials in the last two years have confirmed separately that the ASBM is in the field. Additionally, the basic support infrastructure is already sufficient to provide basic targeting capabilities against U.S. aircraft carriers operating in the Western Pacific (if countermeasures are not considered).”

As Erickson also noted, from the same text:

“The ASBM’s physical threat to U.S. Navy ships will be determined by the development of associated information processing systems and capabilities. This is part of a larger analytical challenge in which Chinese “hardware” continues to improve dramatically, but the caliber of the “software” supporting and connecting it remains uncertain and untested in war. The missile components of the DF-21D already are proven through multiple tests, but China’s ability to use the missile against a moving target operating in the open ocean remains unproven. The supporting command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) technologies probably still lag behind the requirement to identify and track a U.S. aircraft carrier in real time under wartime conditions. Improving C4ISR capabilities, however, is a high priority in China’s military modernization program. U.S. countermeasures are another matter entirely: there is every reason to believe that they are already formidable.”

With the above analysis done in 2013, we have every reason to assume that China has worked hard to perfect this weapon. In multiple conversations I have had with U.S. defense officials over the last year, most are working under the assumption that the DF-21D would in wartime conditions be able to at least initially target an ocean-going vessel and track such a vessel through its course to the target. Keeping in mind that Beijing would not fire just one of these missiles in combat—​and would likely attack its target with other types of missiles in a saturation-style strike—​there is certainly reason for concern. 

Can America Defend Against the DF-21D?

Assuming the DF-21D is ready for battle, can America defend against China’s mighty missile?

While opinions are clearly mixed—in speaking to many sources over the last several years on this topic—it seems clear there is great nervousness in U.S. defense circles. However, as time has passed, initial fears have turned towards a more optimistic assessment.

Back in 2012 when I spoke to noted defense expert Roger Cliff, he explained that:

“[O]ver-the-horizon radars used to detect ships can be jammed, spoofed, or destroyed; smoke and other obscurants can be deployed when an imagery satellite, which follows a predictable orbit, is passing over a formation of ships; the mid-course updates can be jammed; and when the missile locks on to the target its seeker can be jammed or spoofed.”

He continues, noting an actual kinetic strike on the missile in flight might be the hardest part:

“The SM-3 has an exoatmospheric kill vehicle, meaning that it can only intercept the missile during mid-course, when it’s traveling through space, so an Aegis ship escorting the target would have to fire its SM-3 almost immediately in order to intercept the missile before it reentered the atmosphere, or else there would have to be an Aegis ship positioned right under the flight path of the missile. The DF-21D may be equipped with decoys that are deployed in mid-course, making the SM-3’s job harder. U.S. Aegis ships are also equipped with the SM-2 Block 4 missile, which is capable of intercepting missiles within the atmosphere, but the DF-21D warhead will be performing some high-G maneuvers, which may make it impossible for the SM-2 Block 4 to successfully intercept it.

How all this would work in reality is impossible to know in advance. Even after China has tested its missile against an actual ship, it won’t have tested it against one employing the full range of countermeasures that a U.S. ship would throw at it and, as you say, the U.S. Navy will never have tested its defenses against such an attack. Somebody is likely to be surprised and disappointed, but there is no way of knowing who.”

Indeed, as Cliff points out, U.S. carriers do have defenses, albeit against more traditional threats. However, it is important that we keep in mind that American carriers have been a target going back decades, and their defense has been something U.S. naval planners have been working on for many years.

Perhaps my favorite response to the DF-21D challenge is from the widely read blog Information Dissemination, that explains:

“Warships will continue to face new and challenging threats. If the past 125 years is a guide, naval weapon designers, and operational and tactical theorists will be ready to develop systems and operational and tactical measures to counter them. The DF-21D is a new threat, but it is not likely to be an operational and tactical surprise as were the Japanese A6M Zero fighter and the 24 cm Type 93 Long Lance surface torpedo to the U.S. Navy at the outset of World War 2. Open source reporting to date indicate the DF-21D has been tested against fixed land targets but not against a large moving target at sea. The U.S. Navy on the other hand has been working to counter the ballistic missile threat for over 20 years. There is certainly time to develop an effective counter to the DF-21D.”  

China’s “carrier-killer,” just like many of Beijing’s weapons systems must be thought of as part of a larger anti-access strategy. If a conflict with Washington or another great power ever occurred, China is betting on using such weapons platforms to make any sort of intervention in the Taiwan strait, East or South China Seas as painful as possible. With that said, there is much we don’t know about the DF-21D, or how well it would work in an actual shooting war.

In the end, the weapon might not be the great “game-changer” that many point it out to be, but a great complicator. Let’s just hope the only times we see this missile are on a parade route.  

Harry J. Kazianis serves as Executive Editor of The National Interest and a Senior Fellow for Defense Policy at the Center for the National Interest. He is the co-author and editor of the recent Center for the National Interest report: Tackling Asia’s Greatest Challenges - A U.S. Japan-Vietnam Trilateral Report. You can follow him on Twitter: @grecianformula and on Linkedin.

TopicsSecurity RegionsAsia

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