Daily Dispatches

Get ready for an economic doomsday


Kevin Freeman recommends you buy gold, store bottled water in your basement, and get a generator so you can live off the power grid if the United States ever comes under attack. He sounds like a candidate for the reality television program Doomsday Preppers, but some of America’s top national security officials take him seriously.

The Pentagon has used Freeman as a consultant on the impact of cyberattacks on the American financial system. That consulting work became the basis for his 2012 book Secret Weapon, a New York Times bestseller. His new book is Game Plan: How to Protect Yourself from the Coming Cyber-Economic Attack.

What does it mean that the U.S. dollar is the reserve currency in the world? What does it mean to be a reserve currency? … What would it mean if it was no longer the U.S. currency? The U.S. dollar is the primary currency used for global trade. If Brazilians want to buy oil from Saudi Arabia, they convert their currency to dollars. They buy the oil in dollars, and the Saudis than convert back to their own currency. … Any nation that wants to hold excess capital they have [been] saving, they put it in dollars and buy Treasury bonds. That has allowed us to finance our debt and grow our debt at a trillion dollars a year without, really, the serious consequences other nations face. To be the reserve currency means that when people want to hold extra money, other nations and other individuals outside the country, they hold typically in dollars.

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There are more than 200 nations on the planet, and none of them are the reserve currency, and some of them are doing pretty well. Why should the United States be concerned about no longer being the reserve currency? Imagine if you were an individual, and you were given a credit card with an unlimited spending capability. You used up an enormous amount of it, and you woke up and you realized, “Oh! Wow! I owe all this money.” The other nations are benefited by not having the reserve currency to the degree that means they are not able to go out and spend up their credit card. If we go back 30 years and not do all the outrageous spending that we have done, then, I would say, we would be better off.  … We have been fortunate because we have had the reserve currency. It has allowed us to continue the bad spending without all the consequences, but there is always a day of reckoning. It would be bad if we lost that status. It would be like having our credit line cut off and we still owe all this money.

Let’s talk a little bit more about consequences at some point, if our credit line does get cut off because we are no longer the reserve currency and we do have to pay all this money back. That could create a crisis here at home. What would that look like? If you have money in FDIC-insured accounts, and the banks failed, there is a possibility that you have $250,000 and you used to have $1 million. You lost $750,000. … I’m not saying that any of these are going to happen, but I’m saying that we should have a game plan. We need a game plan, and that is, again, why I wrote the book—to identify what it would look like to explain the consequences to individuals and jobs, 401K, saving accounts, and things like that. 

Let’s talk about Game Plan. What are some of the things that our listeners could do to protect themselves if the worst-case scenario came to pass? I list several worst-case scenarios. One of those would be a cyberattack that would wipe out the electric grid. What you need to do is have access to backup power generators, and you need to have some water, food, and so forth. … If there was a cyberattack on the stock market and you lost access to your online statements, you should have paper copies of the statements so that you can prove that you own what you own. You should have paper copies of your bank statements. If there is a collapse of the stock market, which is possible, you should be broadly diversified. If there is a collapse of the dollar, you don’t want to have all your assets all in dollars. You may want to have some gold or silver. You may want to have some foreign stocks. So, I walk through all of the things, and I also say there is no one-size-fits-all solution. Don’t just put everything you own in gold, sit in your basement with a shotgun, and fear the end of the world. That’s not a good solution either. We walk through and say, if they do this, if this happens, this is what you could consider doing, and this is what you should think about.


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