The Brooklyn Bridge in New York. Keith Bedford/Reuters James Rickards is an economist and author. His book, "The Death of Money," was re-released on April 4, 2017, with a new introduction looking back on some of the predictions Rickards made in the book when it was first released.

This post is adapted from the new introduction.

Most authors are pleased when they're contacted with positive reactions to a book. Writing is mostly solitary, and the audience is mostly invisible.

But there was one time I heard from a reader that was unlike any other. It was chilling.

In the early spring of 2014, not long after the publication of “The Death of Money,” one of the most seasoned government securities traders at one of the biggest Wall Street banks got in touch with me.

His specialty was to service the largest customers in the world: central banks, sovereign wealth funds, and huge pension funds managed by states and major banks. We met for coffee at an outdoor café in Darien, Connecticut.

This industry veteran had read the book and reached out to me to relate a story he had never told anyone before.

He said that on September 10, 2001, the day before the terrorist attacks on New York and the Pentagon, he was at a customer outing and received a frantic phone call from his sales assistant who was covering the desk in his absence.

A major sovereign wealth fund had called to place an order to buy $2 billion of 2-year Treasury notes. Even by the standards of large bank dealers, an order for two billion dollars of notes in one transaction is almost unheard of.

The sovereign wealth fund was so large that counterparty credit was not an issue. The $2 billion trade was executed and settled at the end of that business day. The customer was never heard from again. The next day the attack took place and the value of the newly purchased 2-year notes soared in a predictable “flight to quality” in the face of geopolitical uncertainty.

The disappearing sovereign wealth fund made millions. Unlike the stock exchange, which closed after the attack, the U.S. Treasury market remained open, and the sovereign wealth fund was able to collect its winnings without difficulty.

It was a clear-cut case of insider trading in advance of the attack.

In the investigations that followed, attention was directed toward the stock markets, which is where most insider trading takes place based on tips about corporate takeover deals. The SEC’s specific focus was on options trading in American Airlines and United Airlines; the two companies whose planes were hijacked during the 9/11 attacks. No particular attention was paid by the SEC to trading in the U.S. Treasury bond market.

Geopolitical insider trading is different than insider trading based on corporate takeover news. In the latter case, the gains will be limited to the particular stocks affected by the hidden news.

When the inside information relates to momentous geopolitical events, the effects are not limited to stocks but can impact Treasury notes, gold, major indexes, and other asset classes in predictable ways.

Since the SEC has not historically policed these markets in insider trading cases, the sovereign wealth fund with the advance knowledge of the 9/11 attack was able to get away scot-free.

In "The Death of Money," I wrote at length about stock market insider trading ahead of the 9/11 attacks. The fact that such trading occurred is beyond debate. The premise of the CIA’s Project Prophesy was to use such insider behavior in capital markets to identify future terrorist attacks in advance.

Our hypothesis at CIA was that actual terrorists engaged in small trades, while non-terrorist market professionals piggy-backed on those terrorist price signals to produce a much larger volume of trading, a process called “signal amplification.” The difficulty was in tracing backwards through the large, innocent, copycat trades to identify the actual terrorist associates who started the process.

While personally guiltless, the person who contacted me was troubled by the innocent role he had played in helping others profit from the attack. He told me his story in tears.



Adapted from "The Death of Money: The Coming Collapse of the International Monetary System" by James Rickards with permission of Portfolio, an imprint of Penguin Publishing Group, a division of Penguin Random House LLC. Copyright © James Rickards, 2014, 2017.