Free The Death of Money by James Rickards

could turn malicious.
     Orders to sell specific stocks such as Apple, Google, or other widely held names could
     come flooding in and overwhelm the market makers and buyers. A price decline could
     start out slowly and gather momentum until it turns into a full-fledged market panic.
     Circuit breakers could be tripped, but the selling pressure would not abate. Business
     TV channels would pick up the story, and the panic would spread.
    For the enemy traders, there is no tomorrow. They are not worried about paying for
     their trades in a few days or in the repercussions of mark-to-market losses. Their
     capital might even be on its way back to banks in Beijing or Moscow, unbeknown to
     the clearing brokers now handling the orders. Capital markets have certain safeguards
     against overnight credit risk, but no effective safeguards have ever been devised
     to insure against losses that arise during the course of a single day. Chinese or
     Russian covert hedge funds could exploit this weakness while abusing trust and credit
     built up over years.
    The malicious attack need not be confined to cash markets. While the attackers are
     selling stocks, they could buy put options or short the stock in a dealer swap to
     add selling pressure. The malicious customer becomes like a virus infecting the dealer’s
     trading desk, forcing it to add to the mayhem.
    Another force multiplier is to begin the attack on a day when markets are already
     crashing for unrelated reasons. Attackers could wait for a day when major stock indexes
     are already down 2 percent, then launch the attack in an effort to push markets down
     20 percent or more. This might produce a crash comparable to the great two-day crash
     of 1929, which marked the beginning of the Great Depression.
    Financial attackers can also utilize psychological operations, psyops, to increase
     the attack’s effectiveness. This involves issuing false news stories and starting
     rumors. Stories that a Fed chairman has been kidnapped or that a prominent financier
     has suffered a heart attack would be effective. Stories that a top-tier bank has closed
     its doors or that a hedge fund manager has committed suicide would suffice. These
     wouldbe followed by stories that major exchanges are having “technical difficulties” and
     sell orders are not being processed, leaving customers with massive losses. For verisimilitude,
     stories would be crafted to mimic events that have actually happened in recent years.
     Mainstream media would echo the stories, and the panic-inducing scenarios would be
     widespread.
    The New York Stock Exchange and the SEC claim they have safeguards designed to prevent
     this kind of runaway trading. But those safeguards are designed to slow down rational
     traders who are trying to make money and may be temporarily irrational. They involve
     time-outs for the markets to allow traders to comprehend the situation and begin to
     see bargains they might buy. They also involve margin calls designed to cover mark-to-market
     losses and give the brokers a cushion against customers who default.
    Those mitigation techniques do not stop the financial warrior, because he is not looking
     for bargains or profits. The attacker can use the time-out to pile on additional sell
     orders in a second wave of attacks. Also, these safety techniques rely heavily on
     actual performance by the affected parties. When a margin call is made, it applies
     the brakes to a legitimate trader due to the need to provide cash. But the malicious
     trader would ignore the margin call and continue trading. For the malicious trader,
     there is no day of reckoning. The fact that the enemy might be discovered later is
     also no deterrent. The United States knew the Japanese bombed Pearl Harbor
after
the attack, but it didn’t see the attack coming until its battleships were sunk or
     in flames.
    A clearing broker could close out the malicious account to prevent more trading, but
     that moves the open