HS 201 - Cyber-Economic Attacks with Kevin Freeman

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It's my pleasure to welcome Kevin Freeman to the show. He is the author of Game Plan how to Protect Yourself from the Coming Cyber Economic Attack, and he is a leading expert in economic warfare and financial terrorism. He's CEO of Freeman Global holdings and former chairman of of Separate Solutions Incorporated. And he comes to us today from the Dallas Fort Worth area. Kevin, welcome. How are you?

I'm very well, thank you.

Good, good. I'm fascinated by the area you cover, especially as we just talked for a few minutes off air about money market funds, the threat of various forms of financial malaise and especially terrorism. And I guess you were commissioned by the Pentagon to do some work, is that correct?

That's right. In 2008, late 2008, early 2009, I began a dialogue with a number of representatives from the Joint Chiefs of Staff and a senior counterterrorism official with the FBI. And they followed up with a request for me to do a formal study starting in early 2009. And looking at what the crash was about, were there any financial terror causes to it, hypothetically, how would that work? And did I find any evidence that that was the.

Okay, so tell us. The big question is then, were we hit by financial terrorists in 2008?

You know, when I started, I was a little bit skeptical, but the amount of information that suggests that that was the case is enormous. And not only did I make that observation, but three separate studies, all of which have been classified, came back, looked at my work or looked at the topic separately, and all confirmed the notion that there were terrorist economic warfare elements at work in the 2008 collapse and were suffering from that today.

Okay, so this is over five years ago now. Just remind everybody what happened and how quickly it occurred. And then let's talk about the terrorism possibility and how they did it.

Okay, well, let's back up to October 2007. The Dow Jones Industrial Average was something similar to what we see today every day. It was going up and it hit a peak of 14,100 in October 19.

Then in 2008, in February, there was a notion that Bear Stearns was in trouble. The market had a sell off. It bounced back in the summer and in September, starting on September 11, Lehman Brothers began to go down. And when Lehman Brothers went down, it went down with a thud. And the Dow, which had been 14,100, fell to as low as 6,500 by March of 2009. It was the Dow biggest market collapse since the Great Depression. The amount of wealth wiped out was enormous. Globally, $50 trillion was wiped out during that period.

Amazing. That is a huge number and a scary thing. So what do you suspect happened?

Well, what I suspect at the time happened is that we had a bear raid. That's what George Soros said in an op ed in March in the Wall Street Journal. He said it was a bear raid where speculators were attacking Lehman Brothers and AIG and Citigroup and so forth. Factually, that was the case. Soros was right. We went back and looked. The New England Complex Systems Institute actually did a review of the trading activity and they concluded that the odds were something like one in a trillion that that happened on its own. It was instead, if it didn't happen on its own, it was a targeted planned bear raid. Which raises the question, was it done by speculators for profit or. Or was it done with the intention of harming the global economic system?

Explain a little before you go on, Kevin. Explain what a bear rate is to the listeners.

Yeah. A bear rate dates back to the 1920s when speculators would bet against a stock hoping the stock would go down. And the old fashioned way that you would do it is you would sell short the stock, which is a means of profiting from the decline in the value of shares. It's like we're the opposite of what most people do with a stock. Most people buy a stock, they hope it goes up, and if it goes up, they sell it and they make a profit. Short selling is you borrow shares, you sell them. If the stock goes down, you buy back the shares and you return the loan and you make the profit of the decline in terms of the amount the stock goes down times the number of shares you borrowed and sold. And then what you do in a bear rate is you do that and then you spread rumors about the company so that it will force the stock price down. And that's been going on Wall street denies it happens. It happens a lot and it's happened since the 1920s.

The version that we saw in 2008 was a little more sophisticated. Instead of borrowing shares, they just sold them. And you stop and you say, I can see how you can sell shares if you own them, and I can see how you can sell shares if you borrow them. But it's hard to imagine how you can sell shares that you don't own and haven't borrowed. But that's in fact what happened. And the amount of shares that went through Lehman Brothers, for example, in September 11th, and remember that day, the amount of shares that were sold short of Lehman Brothers total about 100 million shares over the next week. And if you create 100 million shares out of thin air and you sell them without borrowing them or owning them, you're in essence, that's a bear rate. And they did that at the same time that they bid up the default insurance, credit default swap insurance on Lehman to where it became so expensive that Lehman couldn't borrow money and they couldn't sell stock. Now, I'm not suggesting Lehman wasn't in bad financial shape. They had problems. But what I am telling you is someone specifically targeted them. They did it using naked short selling that I just described, which is illegal. And they did it in a bare raid capacity. And that's what George Soros says happened, that's what the data says happened, and that's what simple mathematical probability says happened.

So who do you suspect might have done this?

Well, we found evidence coming out of the Middle east sovereign wealth funds that were going short Lehman in a major way and they profited from the decline of Lehman. And I wrapped tie all this up. All of that is explained in my first book, which was Secret Weapon that came out in the year 2000. You can learn about it@secret weapon.org. we, we have that evidence, but we also have evidence that in 1999, the Chinese PLA published a book on the new form of warfare. And they said crashing the stock market is a type of warfare. And they called it a new concept weapon. Now, I don't believe the Chinese were involved in 2008, but I believe they.

Wrote the playbook on how PLA, Palestine.

PLA, People's Liberation Army.

Okay, all right. Okay. All right.

And then we also have evidence that the Russians were involved. In fact, one of the classified Pentagon studies said there's no question the Russians were involved. And we know in 2008, in the summer, that the Russian government dumped their holdings of Fannie Mae and Freddie Mac onto the market in the midst of the panic. And they tried to Get China to join them in a nefarious scheme, I think is how the Treasury Secretary Paulson described it in his memoirs. A nefarious scheme that was really intended to bring down our economy. So we know that there were multiple bad actions that took place in 2008, and we know that they, at a minimum, worsened the situation. And one could even argue that they triggered the situation. We were at the edge of the cliff and they gave us the last shove. And so that's financial terrorism.

Okay, well, let's talk a little bit about. Well, first of all, before we move on to the money market thing a little bit more, how would financial terrorism like this affect the daily person? Jobs, real estate, your 401k, your bank account, your money market account, which I know we're going to delve into, the money market thing, because I think. I think money markets are quite misunderstood, and I want to explain that to the listeners. But what does this mean? Is this just a big sort of institutional thing, or does it affect the average Joe on the Street?

It affects everyone. And in fact, the recovery, by every measure and statistic, while Wall street has recovered nicely, the average person is still suffering, the economy is slower. We've enacted more regulations. We've done so many things that make it harder for the average person to succeed financially than it was even five years ago. But if you had $100,000 saved up and you invested it in the average stock, that $100,000 would, in a matter of months have turned into $50,000. And so you cut half of people's life savings and investment.

Yeah, your 401 becomes a 201, as the joke goes.

Yeah, exactly. And the value of your house went down, and the value of everything went down. Unless you happen to own at the time U.S. treasury bonds, which held up nicely, or gold, which initially took a hit, but obviously in subsequent years went up rather dramatically.

The problem is that when you average those gold and silver returns out, they're just really not that great. And they don't produce any income or cash flow either. I don't know that the metals are the answer.

They're.

They're an insurance policy, but that's about it, at least in my eyes. But what do you mean that we've enacted so many regulations that make it harder for the average person to do well and get ahead financially?

Well, historically, job growth coming out of recession has been done by small business. Unfortunately, there were something like 40,000 new regulations that hit January 1st. And we've added to the laws so substantially that when you start a small business, let's say you got laid off from your company. First off, your 401 is a 201k, so you have half the money to invest to start your business. And then you face this pile of new regulations, including the new health care laws and everything that create all this uncertainty. So nobody. The money velocity has been the lowest it's been in many years. In other words, people get ahold of cash and they've stuck it in the bank, they don't want to move it. And when they finally do move it, they'll put it in the stock market, but they're not investing in property, plant equipment or new hires. So we've seen very slow, sluggish growth coming out of a very serious recession. Unlike in 1982-1987, we saw very robust growth. We saw unemployment drop sharply and we saw participation in the labor force jump. This past five years unemployment has gone down, but it's come mostly at the expense of labor participation. And we've seen new business formations very low, very sluggish and GDP growth very low and sluggish. It's not a good environment for entrepreneurs right now.

Yeah, well I would agree with that. With the one exception really being that on the tech oriented businesses, the cost of starting a business and every business nowadays is a tech oriented business because we're all doing business online. You know, it's not like I remember in the, the first.com boom and bubble, you know, it was like, oh, you're an Internet company. No, nowadays everybody better be an Internet company. So you know, that distinction has gone away. But I mean the cost of starting a business has dropped dramatically. I just remember back when I bought my first company back in 1997, how difficult it was to do such basic things. Like back then if we had free email that actually filtered spam really well like Gmail does and free Google Docs, that would have been a miracle in those days, you know, I mean they're just the simplest thing that we take for granted nowadays that's, that's free, you know, so a lot of these things have gotten a lot less expensive. Back in those days, the concept of CRM or customer relationship management which every business from a one man solopreneur needs to, you know, a medium sized business with 30, 50 employees to a big giant business. Back then that was the, that was the domain of people that wanted to buy Siebel Systems and pay 12 to $20,000 per seat and have a massive training and adoption curve and multimillion dollar Consulting contracts. Now you can use infusionsoft like my company does, and I think it starts at about 150 bucks a month. You know, I mean, you gotta admit, in a lot of ways, I mean, government has screwed it all up. I'll agree with you there, if that's what you're saying. But the entrepreneur and technology has made it great too.

At the same time, I think you're exactly right. But that just shows you how much it's been screwed up. Because given all of that beneficial capability, the fact that we're not producing small business jobs at all is indicative of just. And the reason is we've gone so far on the protection side because we saw this near death experience and that happened also in the Great Depression. The near death experience of the financial markets and the economy caused people to be unwilling to move money, save, invest, you know, they would save or store up unwilling to really robustly address growth until after World War II. And we're suffering that malaise. And instead of reducing regulations, we've increased regulations. We've added all sorts of things. Whether you like or don't like the idea of Obamacare or the Affordable Care act, it is so complex and difficult for people to get on the website, let alone to navigate it. And that complexity happened at the very time that we should be focusing on job growth. So the net result of it is that we've really been stifled coming out of this recession. And I think that was part of the intention. We've spent trillions and trillions of dollars.

So much money is available in the system now. But the average small business guy has it really difficult just getting a loan, just getting a little bit of money.

What people just do not understand, understand, Kevin, is that you'll see all of the people on the left who are just largely clueless, if you ask me who, who will say, well, the financial crisis happened because we weren't regulating enough. Government should have been there and they should have regulated more. And there's certainly instances of that that you can point to. I mean, you know, look at someone came to the SEC long before Madoff, the Madoff scandal blew up and reported Madoff and nobody did anything about it. Okay, but, but the reality of what happens with regulations in actual practice in the real world is this, they just become a monopoly creator and they allow the big companies with the big lobbyists and the people who are paying off the scumbag politicians and keeping them in power, they allow them to go to become larger and larger because the little guy can never play in those big regulatory hurdles. I mean, just look at. Can any small business afford to take their company public? Heck no, of course not. That opportunity is not available for the little guy. And so by heaping all these regulations on and making it really hard to do that, you only let the big players and then wealth consolidates instead of being nicely dispersed in a large, stable middle class.

That's exactly right. That's what's happened. That's why we're not growing. And it's a consequence of fallout of the problems that we had. Instead of the simple. And I laid out simple regulations, you could have added. We did, Dodd Frank. The simple regulation is that you ought not be able to bet that your neighbors and profit from your neighbor's house burning down. If you don't own the house, you shouldn't be able to buy insurance that pays you money if it burns down. Because they found.

You're talking about collateralized debt obligations, right?

No, I'm talking about here. Credit default swaps.

Oh, credit default swaps. Sorry.

Yeah, yeah, exactly. And they were complete by an act of Congress. They were completely unregulated. Yet in the same city that they completely left those unregulated. A kid couldn't open up a lemonade stand.

That's absurd, isn't it? It's just.

It is total absurdity. And that is the favoring of large versus small. You know, when I see the head of the Chamber of Commerce and I'll get in trouble for saying this, but I was at Lou Dobbs studio and they played the head of the Chamber of Commerce basically declaring war against the Tea Party and saying new Tea Party. What he was saying is the interests of big business are all that should matter. The interests of the small guy don't matter to me. Well, I'm sorry, I think that's bad for America. It's bad politics. It's bad for our country. And yet that is what Dodd Frank and all of the regulations that have come out after the crash, they've been geared to favor large business and they impeded small business. And I believe that that was part of the intended effect of the malaise and so forth. That was intended. If you go back to bin Laden in 2001, he said, I'm going to do to America what I did to the Soviet Union. And what he did to the Soviet Union is he caused them enormous financial headaches and their expenditures on the war and the effort slowed down and scuttled their economy. And I believe our expenditures on two wars since 911 have helped to scuttle our economy. I'm not saying it was the wrong thing or the right thing. I'm just saying factually, the amount of money that we've spent, spent on the wars and taking our shoes off at airports and the increased homeland security and so forth, was intended to harm our economy. A death of a thousand cuts. It's been effective and that's a part of economic financial terrorism. The next stage of that, which is what I wrote in my book Game Plan, is a cyber economic attack where instead of target customers being hacked and having their identity stolen, a keystroke has the potential to hit the right situation in the New York Stock Exchange or in high speed algorithmic trading codes and cause a flash crash. And you wake up and the dow is down 10,000 points or 6,000 points and it happens in a flash of an eye. And the panic that ensues literally rips our country apart. That's the risk we face.

That's amazing. So talk to us a little bit about money market funds, if you would. And the reason I want to touch on this with you, Kevin, is because I think that a lot of people are playing a rather dangerous game with money market funds. They sort of treat them like their bank accounts, as if they have FDIC insurance. And you know, I just want to first of all say that I would be very weary of FDIC insurance at all. I wouldn't consider that any kind of panacea either because there are all sorts of provisions in there and the FDIC could never afford to pay out. You know what, it might have to pay out in a bad situation and they can take a long time to pay it out. And if the government has to bail out the fdic, which by the way, is not the government, as you so clearly point out, what they're going to do to do that is create a bunch of fake money out of thin air and that's going to cause inflation. So maybe you will get your money back in nominal dollars. You're up to $250,000, but nobody knows what that money will actually be worth when it comes back to you. So there are quite a few things to consider there and just your comments on anything, but especially the danger of money market funds.

Well, on page 167 in the book Game Plan, the title of the section is what About Money Market Funds? And so let's stop here. And I agree with you. The average person says, I've got money at my brokerage account, it's in cash. Well, it's probably not in cash. It's probably in a money market fund and a money market fund. Here's a quote. Money market funds, thought to be one of the safest investments, are actually some of the most dangerous. The money market funds are smaller than they were in 2008, but if anything they are riskier. Current US law prohibits the kind of federal guarantee that in 2008 stop the bank run before it could bring down the financial system. The next run on these shadowy bank like institutions could be fatal. Why? Because money market funds promise that people will have their capital return just like banks do. Except there's no real guarantee of the promise. Bottom line is you put your money in and investment mutual fund company or manager takes that money and invests it in hopefully short term quality paper, bonds, notes, and they get paid back interest on that and it pays a little bit more interest than you get in an FDIC insured bank deposit or certificate of deposit. So people like them and they're very liquid and when they work, they work beautifully. You buy a stock, it comes out of the money market fund automatically goes into the stock. When you sell the stock, it goes out of the stock and go back into the money market fund. It's a beautiful sweeping mechanism and it's very convenient. But if something happens and the manager invested in the long short term paper and it fails in some way, what will happen is the value of that money market fund will diminish. And you could have all the interest that you've earned in a year wiped out. You could have part of the principal wiped out. If you had part of the principal wiped out. And it's called breaking the buck because money market funds trade at $1 and they break the buck and it goes to 98 cents. Then you have panic, people rush out of the money market funds. What happens then is the manager has to sell the securities he owns and dump them in the market that's already panicked and they keep going down in value. And the next thing you know you have 90 cents on the dollar. This hasn't happened hardly ever. But if it happens now in the wrong way, it would cause a bank run and it would cause real panic in the system. That's money market funds. And as you point out, you put your money in the bank. The problem with banks is although they're insured and they're insured up to a certain dollar amount, if you're over that amount and the bank fails, you may not get your money back. If they're under that amount and the bank fails and the fdic runs out of money, you may not get your money back. In the best case, if you do get your money back, the federal government comes up with the money. They will, as you said, print the money and then the value of the dollar, it may hold the buck and you may get the exact dollar amount back, but its purchasing power will be sharply diminished. So the bottom line is that what do you do? Keep cash at your house? Well, no, that's a bad idea. And I talk about that in the book too. Money in the mattress is a bad idea. There's a role for banks, there's a benefit to FDIC insurance, there's a role of money market funds. But don't think of these riskless investments. They all. Every investment has a risk, every investment has a risk. And they all have a place and a use. And the question is, you know, that's why the title is game Plan. The question is, is the offense going to be throwing a pass or are they going to be running? You've got to have your defense geared for the type of attack that's coming.

Yeah, yeah, absolutely. They all have a risk and they all have a use. That's a good way to put it. But don't think money market accounts are safe and certainly don't think the stock market. Do you have any comments on the stock market in general? I always like to call Wall street the modern version of organized crime.

It's just crazy what goes on there. It's like scandal after scandal.

Yes, I agree with that. And I think that scandal after scandal, if you're a short term time horizon investor, it's a very dangerous place. I believe if you're an opportune investor and you look at the stock market as investing and not speculation and you step back like John Templeton did, who was my mentor, who was one of the greatest investors ever.

He is great. I did a show on John Templeton and a representative from the Templeton foundation joined us and wow, what an amazing guy. He sounds like.

Yeah. And he made money in markets without the transparency that ours has. He made money in Russian markets and Korean markets. He made money in Latin America in hyperinflation. He made money in deflation. And he taught me. I worked for his company for 10 years. He personally hired me. He was a subscriber to a newsletter I wrote. I knew him pretty well and learned a great deal from him. The point is, if you take that kind of long term value bottom up, diversify, take advantage of crisis instead of panicking, buy when others are despondently. Sell, sell when others are greedily buying. The stock market is great. You can pick any industry. You can invest in just about any type of investment. It's usually very liquid. The opportunities are just enormous.

Here's the problem. Let me just take issue with you for a moment. And we don't have to belabor this because my listeners know what I think about stocks, but it's basically, we always have the choice whether we want to be a direct investor or a non direct investor. And I always say, you know, when you're a non direct investor, when you hand your money over to somebody else like your broker and then the whole chain, there, there's such a big food chain, the, the C level executives at the company, you're, you're likely to fall victim of one of three problems. Number one, you might be investing with a crook. So that goes to all the scandals. WorldCom, Enron, Bernie Madoff, whatever you want, right? And then there's, there's just so many. I mean, you know, we can't even list them. Right? But say we get past that. Next problem is you might be investing with an idiot, with someone who's just incompetent and you lose their money because they're incompetent. Assume they're honest, assume they're competent. Third problem, they take a giant management fee off the top for managing the deals and, and they just, they just take all the returns away from the investors. I mean, we've all seen these absurdly high bonuses and salary and comp packages and you know, all the other perks that you don't even know about the business expense accounts and so forth. And, and that's the investor's return going down the drain. In. I'm a huge fan of Lou Dobbs, by the way, and his book War on the Middle Class was a big influence to me. You mentioned him a few minutes ago.

Two nights ago.

Yeah, he's great. He's awesome. And in chapter two of his book War in the Middle Class, he, he talks about how these, these CEOs, their pay is so out of proportion with employee pay and also investor returns. He gives an example of Larry Ellison, the founder of Oracle. Okay. In two years, took almost a billion dollars out of Oracle. $781 million I believe the number was, in two short years. Not bad. And at the time, same very same time, shareholders lost 61%. I mean, how can that possibly. And that's legal? That's completely legal. It's crazy that it's legal.

Yeah. And you make great points There. And I agree with all of them. That's why you have to buy. If you could buy in March 2009 and you could buy, you know, Apple, I think around that time was $80 a share. And you look at it and you say, I've looked at this company and I see the company can be earnings, $50 a share in cash, and the price is 80. And I think in the next three or five years, they can earn $50 a share. You don't have to be right 100% of the time. If you're right, just even a decent amount of time, you can still make money. But you're right about how much money is taken. On page 183 of my book, I talk about hedge funds in particular, which charge 2% of the investment per year and 20% of the profits. From 1998 to 2010, the managers of hedge funds were earned $379 billion, while their investors earned $70 billion. The managers took 84% of the investment profits and the investors kept 16%. And yet the investors had all the risks, all of it. So you're right. You're absolutely right. That's why I go back to a John Templeton approach. And I believe that stock market is great from that perspective, but you've got to be aware and very knowledgeable and not just throw in your mind, oh, he looks like a good manager. I'll throw money. You're exactly right. And you can't just watch Jim Cramer and say, I'm going to buy this stock.

Jim Cramer's got, given some of the worst advice going, but he's got a great marketing program.

Yes, he does. You got to be very intelligent about it. You got to know what you're doing and so forth. Again, it comes back to a game plan. Stocks have their place. They are not the be all and end all, but the one investment that I am the most concerned about, it's not money market funds, it's not the stock market. It's not FDIC insured bank deposits. The one that concerns me the absolute most are U.S. treasury bonds.

Okay, tell us about that. But just to dovetail on your stock market before you go into the treasury bonds. And Kevin, by the way, very interesting conversation. You're a great guest. Is I say just buy a few rental properties or a few apartment complexes, depending on how wealthy you are. It is just so simple. And you get such great tax benefits, cash flow, capital appreciation. It's just, God, it's the most historically proven asset class.

And I actually talk about that in the book too, very favorably. Because especially with the kind of attacks that we're going to have, hard assets are going to be if we have a dollar collapse. Hard assets at first they may suffer because it's hard to get renters, but. But ultimately over time they will prove to be very successful investments, particularly hard assets with cash flow potential.

Yeah, everybody's got to live somewhere. It's just a basic human need.

Well, and food agriculture has great potential too. But you can't just go on the commodities exchange. I'm going to buy frozen concentrated orange juice and watch trading places. Mess with your investments. But yes, so I cover actually go through all of these and say where they work best, where they work the worst. Here are the upsides, here are the downsides, including real estate, including commodities and so forth.

Yeah. Okay, so tell us about your. The thing you're most worried about is U.S. treasury bonds.

That's correct. Because the treasury of the United states government owes $17.4 trillion now and the total government receipts are a little over $2 trillion. And we're spending about two and a half trillion. We're spending about 3.5 trillion in spending. So we're running a trillion up to a trillion dollar deficit. That's averaged out. It's a little less than sequestration and so forth. But we're spending almost a trillion dollars more than we're taking in. The current interest rate on the $2.5 trillion. By the way, the interest rate on the $2.5 trillion was in the 1.5% range for 10 year bonds just not very long ago, less than a year ago. It's now in the 3% range. What if the interest rate demanded from the US treasury were to go back to 10%? People thought that's not going to happen. Well, it's happened in my lifetime and it certainly is possible. If we got inflation back into the system. What if it were rates ever went to 10%? Well at that point we'll likely have close to $20 trillion in debt. That's $2 trillion in interest and we have $2 trillion in tax revenues approximately. It would wipe out the government's ability to pay for it. Well, when that happens in any other nation of the world, if that happens, their currency collapses the bonds, the threat of default happens and it's just really bad news in the United States. Up till this point we've been okay because we have the reserve currency of the world and we can just print some more money and issue that currency and pay and Things are fine. But if that happened and we were not the reserve currency of the world, then you would see foreigners not wanting to hold onto their Treasuries. The market for them would be very liquid. People would put them away and call these Treasuries, that's our reserve currency, that's our bank account. They'd start to say, I don't trust this anymore. They panic, there's a run on the treasury, they start dumping those bonds. That's what we saw happen in Greece. And when they start dumping those bonds, you don't want to be a holder of those bonds because you take a massive haircut. And I think that is not only one of the more likely disaster scenarios in economics, it is one that is purposely being planned by some of our enemies. And if the Chinese, which to date have not seen fit to do that for a whole lot of good economic reasons, but people sometimes make irrational decisions or they sometimes make calculated decisions, both ends of the spectrum. And if they chose to do as an act of warfare, which they've talked about extensively, or they chose to do it in a panic, either one, a US treasury bondholder runs serious risk of pushing the government. They won't default, they'll print money to pay it back. But if they do that, the value of the money that's returned will be so much less than it was the value invested. So that is what concerns me most. I think we're going from 3% on the 10 year to potentially, if the economy were going and the Fed wasn't buying treasury securities to the tune of.

30, $40 billion a month, I would think that we might be at 5% now interest rates. And at 7% is where Italy and Spain started to get in trouble.

And so do you have a prediction on what we can look forward to in terms of inflation rates?

It depends. And again, that's why we wrote Game Plan. But inflation rates of 5 to 10% would not be abnormal given the amount of excess money printing we've done. Now, the money printing to date has been stopped. It's not gone into the real economy. So we haven't seen a great, great boom in economic terms. And on the other hand, we haven't seen a move in inflation because the money's not real. We have inflation more than the government's reporting, but not this massive increase. And the reason is because it's gone mostly into, as Lou Dobbs would point out, the pockets of some very wealthy people. And stock market capitalization, Our stock market capitalization is now 115% of our gross domestic product, which means that essentially that is danger territory when it gets there. And what that means is basically the real economy is not growing, but the market's been going up dramatically. And that's exactly what's happened. If there's a panic in the stock market, we're going to have serious problems.

So does that mean because the value of the market, the market cap of US stocks, I assume you're talking about, and then versus the US GDP is the stock market is higher than the US GDP. So that's danger territories you're saying, because it's about 15% higher. Is that correct? Did I hear you correctly?

Yes.

Okay.

Yeah. And you could see normal bargain territory. We had a $12 trillion economy in early 2009. 12 and a half trillion. And the market cap of the stock market was roughly 6 to 7 trillion.

Okay, so the stock market was only 50% of the economy size and versus now it's 115% of the economy's size. So it's a massive difference.

That's right. Because the stock market's gone up 150% in the past five years. And I can tell you the economy has not. So. Yeah, and that, and that puts us at risk now. That's where all the money's gone. That's where all of the massive Fed printing has gone. It's not shown up in price inflation of consumer goods to the same degree. It's shown up in inflation in financial assets, paper assets. So at some point that does show up in the real economy. And when it does show up in the real economy, you see inflation. And the inflation could be 5 to 10% easily. And in a currency collapse crisis, you know, Zimbabwe I have on my desk is in Bob way hundred dollar bill that in the year 1998 you could exchange for a $20 US bill.

Well, I'll tell you, I'm gonna, I'm gonna top you there because I got like in Zimbabwe dollars, I've got like a couple hundred trillion dollars. I think I got about $8 U.S. yeah.

Well, I have on one side of my thing a hundred dollar Zimbabwe bill that was worth 20 in.

On the other side I have $100 trillion Zimbabwe bill that was worth not a penny. That's what happens when you print money and you're not the reserve currency of the world and you have inflation. The inflation rates that they were talking about were in the thousands of a percent. And is that possible in the United States? Well, it's happened in Germany, it's happened in Latin America, it happened in Zimbabwe under the right circumstances. It. If we weren't the reserve currency of the world, it could happen in the United States. I'm not predicting it. I'm desperately hoping we can avoid anything close to going that direction. But is it theoretically possible? Yes.

Okay. Do you see inflation being at 25% annually?

The consumer price index always understates inflation. I think if you want to get the accurate inflation numbers, you just take the CPI and multiply it by two or three and you're probably right about there. But you know, that's a shadow stats John Williams discussion and I'm sure you know about his work. But I mean, where do you see, I mean 25% compared to all those historical examples is like nothing. That's no big deal at all.

If we had 25%, yes, it's possible the British suffered inflation rates close to that in the late 70s, early 80s. But if we ever had that kind of inflation stop and think what would the government have to pay to borrow money? If the inflation rate is 25%, the government has to pay 20%. 20% on $17 trillion is above all our. It's the end of the government. I mean, it is a bankruptcy. The IMF comes in, so the International Monetary Fund does. A report comes out last week. It says Western governments are so indebted that they're going to have to confiscate assets. What does that look like? Looks like Cyprus. If you've got more than a certain dollar amount in Cyprus or a certain euro amount in their case in Cyprus, that excess over that is not yours anymore. It belongs to the government. In our case, what they do is they say the banking system is insolvent and we only cover the first $250,000. So everything above that is confiscated by the government. These are the kind of things that happen in a really bad scenario. I don't think we have to suffer them. I think we can avoid it if we're smart. And I give a prescription for that in the book. But we need to be prepared because our enemies know these facts and are working right now to force us into that untenable situation. Because that's how you beat the American military. You beat them by defunding them. And that's exactly what Bin Laden said he would do to the Russians. And that's exactly what he intended when he attacked on 9 11. And his protege Zawahiri said the exact same thing on 9 11, 2013.

So what has to happen in order for this collapse to happen is we have to lose reserve currency status to have that kind of massive inflation. Right. Is that correct in your eyes?

Yes.

If we don't lose the reserve currency status and people continue to value dollars. It is exporting. It is exporting our inflation. We don't suffer it. It gets exported. Because the rest of the world craves dollars.

Yeah. And it's not fair at all to the rest of the world. But I say we're going to continue to kick that can down the road and do it because we've got the military might and we've got the biggest economy, even though it's built on a house of cards and smoke and mirrors. And we've also got the. And don't underestimate this part of it. The biggest brand name, the American brand name. I mean, listen, I think the government's doing, like, everything wrong. However, I think we're gonna get away with it because of those reasons, especially the military. Especially because we can throw our weight around with our military.

We might. And I, you know, we might and it would be wrong. But China recently called for a de. Americanized world and the removal of the dollar as the reserve currency. The IMF has called for that. The Russians have called for it. We may get away with it, but it is being resented. And so when you do a poll of citizens around the world, what is the greatest threat to world peace? America shows up as number one in virtually every nation. Three times as risky to world peace as Pakistan, Russia, China or anyone else. More than three times. And so the rest of the world's getting fed up with us. And yes, our military, we spend more on their military than the next 10 nations combined spend on their military. But we're doing it with borrowed money. And if we have. It becomes. We have sequestration and we have budget problems. Cut the military. So it becomes this negative downward spiral. Once it starts, there is the potential that we have to cut our military, we have to withdraw. Al Qaeda now controls more territory in the Middle east than they ever have in history, despite the fact that we poured our blood and treasure into that sand.

Yeah, it's really a strange time in history. I mean, we are in.

Who the heck knows what's going to happen. But I think we can be pretty confident we're going to see some real inflation in the future. Significant. Whether it's disastrous hyperinflation, loss of reserve currency, status collapse, the dollar, I do not know. But we gotta inflate our way out of this because there's just really no other way out of it.

And if the rest of the world inflates with us, and that's a great possibility, then we may survive as a major power of the world. On the other hand, we could watch as Britain did. There was a time in which the British Navy guaranteed peace around the world, but the British Navy also guaranteed the pound sterling and the sun never sets on the British Empire. And the same statement you made is what we're saying today. And now look where Britain is.

I am completely aware of that and that's a very good point. So we shall see how it plays out. Kevin, give out your website. Tell people where they can get the book. Really very knowledgeable and this has just been a great discussion.

Well, thank you. And the book is titled Game how to Protect Yourself from the Coming Cyber Economic Attack. It's available at bookstores and Amazon. And I have a website which is secret weapon.org and the beauty of that website is you can go there, you can watch a video which I think we talked about offline and watch a little video. You can go to the newsroom and you can see my interviews on Lou Dobbs and Glenn Beck and Maria Bartiromo when she was on CNBC and Megyn Kelly and so forth. But you can also go to my blog and you can read the blog post where I document the evidence that these things are happening. And the last thing you can do is you can do there's reviews for Game Plan and there's reviews for Secret Weapon. And these are not just your normal reviews. I put the book in front of Jim Woolsey, former Director of Central Intelligence, or Jerry Boykin, who is the three star general head of all Special Forces, or Frank Keating, the head of the American Bankers association, or Kevin Hassett who was the senior economist at the Federal Reserve Board of Governors. And I put the book in front of them and said, all right, all right, what do you think? Give me your opinions on this book. And obviously I put the most favorable ones that I got back, but I've not gotten any really negative responses. In fact, every one of them has said, you've opened our eyes. This is amazing things. We need to know this. And we've got to warn the American people so they can do something about it. And there's probably 40 reviews on each book. So secretweapon.org is the best source of information on my research and what I'm thinking.

Fantastic. Well, Kevin Freeman, thank you so much for joining us today.

Thank you. God bless you.

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