Secret Weapon

It stands on the brink because of government overspending and our colossal national debt. It stands on the brink because of manipulation, failed regulations, and predatory trading on our financial markets. It stands on the brink because of terrorism threats and covert moves against us by hostile foreign powers.

But to take down our economy and eliminate the United States as a superpower—as many of our enemies seek to do—all these things will have to come together in a perfect storm. Something close to that occurred in September 2008, when our enemies hammered the U.S. economy in a stealth financial attack.

That attack—and the likelihood that we’ll be hit again in the near future—is the story of Secret Weapon.

For too long, the warning signs have been clear. On September 11, 2001, our enemies hit the American homeland—and some evidence suggests they preceded that attack by short selling U.S. airlines and other financial stocks. This was merely the latest and most obvious attack on the economic infrastructure of the United States. After all, Osama bin Laden had been vowing for years to take down the American economy—and he targeted the World Trade Center buildings precisely because of their importance, both actual and symbolic, in the financial world.

This strategy was nothing new. For hundreds of years, nations as well as terrorist groups have understood the importance of attacking their enemies’ economies. The United States is no exception—we engaged in economic warfare against the Soviet Union during the Cold War, against the British during the Suez Canal crisis in 1956, against the Germans and the Japanese during World War II, and against the South during the Civil War. Our enemies did the same. Economic warfare is as real—and can be just as devastating to a nation’s security—as a shooting war.

Our enemies’ attempts to wage economic warfare against us, however, never met with much success. Certainly, financial terrorism never did—at least not until September 2008, when America’s financial infrastructure took a major hit and then crumbled. Over the course of the next few months, an estimated $50 trillion of global wealth simply evaporated, with more than a quarter of that sum disappearing from the United States. The media rushed to assign blame for the resulting economic crisis. Liberals pointed the finger at Wall Street fat cats, while conservatives faulted federal regulations that pressured financial companies to undertake risky loans. Democrats blamed Republicans; Republicans blamed Democrats.

Nobody blamed the true culprits: America’s foreign enemies.

Many Americans believe that our physical infrastructure may be vulnerable to terrorism, but that our economy is somehow immune from attack. We like to think our stock market is just that—our stock market—and that our banks are American-made, American-funded, and American-run. No foreign enemy could sabotage our entire economy—that’s the conventional wisdom.

Not only is that perspective dangerously naïve, it’s downright wrong. Today’s global economy is deeply interconnected, and like all interconnected industries and modes of technology—airlines, trains, the Internet—it can be exploited by terrorists and other malevolent actors. History is filled with examples of financial attacks on companies, industries, and nations for both economic and non-economic ends.

In the coming pages, we will pull the curtain back on the greatest untold scandal of the twenty-first century—the September 2008 financial attack on America. We begin by discussing the 9/11 atrocity and the little-known financial and economic aspects of the attacks. As authors Phillip J. Cooper and Claudia Maria Vargas observe, al Qaeda envisioned 9/11 as “a serious attack intended to produce massive casualties and serious damage to the economy, but it was also very much designed to be a symbolic assault—one that would strike the symbols of U.S. economic, political, and military power.”¹

We then recount my involvement with the issue of economic warfare and financial terrorism, and how I was recruited by the Pentagon to author a report on the possibility of such action being taken against the United States. As a longtime financial industry insider, my interest in this topic was virtually nil—until I discovered signs that short selling was being used as a market weapon prior to the financial collapse of September 2008.

From there, we proceed to the biggest question of the last decade: Who was behind that collapse? In any crime, prosecutors look for three elements: motive, means, and opportunity. We will examine each in turn. America has many enemies, both foreign and domestic, and all have motive to take down the economy. Our enemies range from Islamic terrorist groups to Muslim state actors to China and Russia and Venezuela. They also include “piggybackers” like George Soros—people who profited from the collapse, but whose role in the affair remains murky. All may have been involved in the bear raids that destroyed the economy in September 2008. As we will demonstrate, some certainly were.

Then we will look at the means our enemies used to assault the economy, including oil manipulation, bear raids, credit default swaps, naked short selling, currency and debt manipulation, double- and triple-short ETFs, machinations by sovereign wealth funds, algorithmic trading, rogue trading, dark markets, dark pools, sponsored access, and Islamic-compliant arboons. We will explain why understanding all these terms is crucial for protecting your wealth and for recognizing the hidden hands operating within our markets.

Next, we will look at opportunity. Our government has provided ample opportunity for our enemies to exploit these tools. Regulatory authorities have looked the other way, assuming that all participants in our financial markets are rational actors who want the market to succeed, and that the last thing any participant wants to do is to destroy the market itself. This is eminently false—some players are happy to exploit the freedom and openness of our markets to take down those very markets. We will also explain the dire consequences of our failure of imagination in the lead-up to September 2008, and how U.S. authorities were blind to the signs that our enemies were changing and improving their methods of attack.

We will trace the full-scale meltdown of the U.S. economy step by step: Phase One was the rapid rise in oil prices that squeezed our economy; Phase Two was led by the mysterious bear raids that took down Bear Stearns, Lehman Brothers, and other once-great financial institutions. We now face Phase Three. Because we have done almost nothing to rectify the vulnerabilities that existed prior to September 2008—through policies such as inflating our currency and raising our debt, we have actually worsened them—we are susceptible to another use of the secret weapon. That possibility is becoming a probability as the warnings you read here are ignored day after day by the federal government. Although we are making some breakthroughs in acknowledging what really happened in September 2008 and in defending ourselves from another financial attack, they are far too slow in coming—and some powerful players have an interest in stifling the story completely.

Finally, we will explore what the next attack will look like. How will it go down? Who will be behind it? And how can you protect yourself?

Our enemies are using a secret weapon—the weapon of economic warfare and financial terrorism—designed to take the United States down once and for all. Knowledge is the first step in fighting back. That is our secret weapon.