Wall Street oblivious to cyber-economic warfare

By WND Staff

By Kevin D. Freeman, CFA

The Dow Jones Industrial Average closed out 2013 above 16,500. That’s a full 10,000 points higher than the low of March 2009, less than five years ago, and caps the best five-year run in recent memory. Almost unnoticed in the year-end celebrating, however, was a sobering warning.

On Dec. 15, Gen. Keith Alexander, the head of the National Security Agency, told “60 Minutes,” “A foreign national could impact and destroy a major portion of our financial system … and literally take down the U.S. economy.” That’s a pretty startling statement from a four-star general who is more than qualified to make it.

Another NSA official, Deborah Plunkett, was even more specific. She told CBS, “Don’t be fooled. There are absolutely nation-states who have the capability and the intention” to accomplish the kind of attack Gen. Alexander warned about.

Writing in Forbes, Robert Lenzner fretted, “If this revelation is widely discussed tomorrow morning, it could very well have a serious negative effect on stock prices.” So what was Wall Street’s reaction? Following the broadcast, and over the next two weeks until year end, the Dow rose over 800 points, a gain of more than 5 percent.

Wall Street either doesn’t believe Alexander’s warning or is simply oblivious to these national security issues. The threat, however, is well-documented.

In 2008, during the midst of the financial crisis, the Russians dumped their U.S. bond holdings in Fannie Mae and Freddie Mac and encouraged China to do the same. Former Treasury Secretary Henry Paulson admitted in his memoirs, “On the Brink,” that this was a “disruptive scheme” aimed to take down our economy. Fortunately, China didn’t go along, and our markets have recovered. But there’s no doubt that they considered it carefully. Had China pulled the trigger, the effect would have been devastating. Chinese holdings of U.S. government agency paper were around $450 billion at the time.

Kevin D. Freeman’s book “Game Plan: How to Protect Yourself from the Coming Cyber-Economic Attack” provides prudent advice on preparing for turmoil ahead

Our intelligence agencies have ample indications that parties in Russia, China and elsewhere have plans in place for financial warfare by cyber and other means against our economy. I wrote a report for the Pentagon’s Irregular Warfare Support Group in 2009 outlining this threat and have provided follow-up reports to the Defense Intelligence Agency, the FBI and multiple other agencies. These things are clear:

  • Foreign nations and certain terror groups can and do have the capability of conducting financial warfare against our economy.
  • We do not have a comprehensive deterrent to prevent such attacks.
  • Under the right circumstances, such an attack could destroy our economy and therefore our way of life.

Last year, the Syrians threatened to engage in economic warfare if we intervened in their civil war. In what might have been a shot across the bow, the Syrian Electronic Army hacked the Associated Press Twitter feed and set off a chain reaction that led to a “flash crash” in the stock market. In 2010, the market experienced a larger “flash crash,” dropping 9 percent in minutes. We still don’t understand what triggered it. Terrorism cannot be ruled out as the cause.

In 1999, the Chinese army published “Unrestricted Warfare,” a military study that declared “a single manmade stock market crash” a “new concept weapon.” Market crashes, attacks on currency and cyber attacks, it reported, will be at the heart of warfare in the 21st century. Chinese officials have reiterated the doctrine of financial warfare dozens of times since while publicly denying their willingness to use it. The Chinese, unfortunately, are not alone in appreciating the power of financial warfare.

The United States economy is an incredibly tempting target. No one wants to risk a direct military conflict with us. But a stealthy attack on our stock market could inflict massive harm at far less risk to the perpetrator. Hackers stole 40 million credit and debit card accounts from Target over the holidays. Just imagine what a terrorist bent on destruction rather than theft might accomplish.

No more than a handful of financial advisers have even considered these risks. One of them, David Marotta, mentioned in a recent letter that clients should consider having a contingency plan for financial apocalypse. He didn’t say that a collapse is coming and even expressed doubt that it is. But he does think it’s prudent to prepare. Marotta’s red flag made the Drudge Report, the Washington Examiner and “The Kelly File” at Fox News.

My research for the Pentagon, the comments of Gen. Alexander and most national security experts validate Marotta’s concern. There could well be a devastating attack on our economy. Yet on Wall Street the band plays on.

Kevin D. Freeman, CFA, is the author of “Game Plan: How to Protect Yourself from the Coming Cyber-Economic Attack.” Personally selected by Sir John Templeton to help build the Templeton Private Client Group, he has more than 30 years of experience in financial markets.

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