Jim Rickards walked into a top-secret weapons lab in the Maryland countryside in 2009, sat down with Pentagon officials, CIA analysts, and hedge fund traders, and told them the dollar was about to get a challenger. The full career arc behind this simulation sits in the Jim Rickards dossier.

The people in the room had built aircraft carriers. They had planned invasions. They had run war games on nuclear escalation, counterinsurgency, and cyber warfare. But none of them had ever run a war game on money.

Rickards had been asked to help change that. The Office of the Secretary of Defense — under Robert Gates — wanted to know what financial warfare looked like: currencies, bonds, derivatives, and payment systems used as weapons.

The lab was called WALRUS - the Warfare Analysis Laboratory of the United States - run by the Applied Physics Laboratory about halfway between Washington and Baltimore. It is where the military tests its most sensitive scenarios behind closed doors. Rickards walked in and proposed a scenario so far-fetched that the academics in the room laughed at him.

Seventeen years later, it is playing out in real time.

Playing Risk for Adults

The war game had six teams: the United States, China, Russia, Europe, East Asia, and a combined Banks and Hedge Funds team. About 40 players across the six teams, plus another 60 participants from the Treasury, the Federal Reserve, the CIA, think tanks, universities, and Wall Street.

The rules of engagement banned kinetic weapons entirely. No bombs, no missiles, no drones. The only weapons allowed were financial instruments - stocks, bonds, currencies, commodities, and derivatives. The Pentagon wanted to know if an enemy could cripple the United States without firing a shot.

Rickards was one of the architects of the exercise. He had already spent years thinking about how financial systems break. He had watched LTCM collapse from inside the rescue - the LTCM rescue made Jim Rickards the forecaster he became, and what he learned about the leverage structure behind LTCM shaped every simulation after it. He had built a predictive analytics system for the CIA that caught signals the rest of the world missed. When the Pentagon asked for help designing a war game that simulated financial attacks, he was the obvious person to call.

The scenario he proposed was specific. Russia and China would accumulate large gold reserves, pool them, and launch a new digital currency backed by gold. They would then insist that any purchases of Russian energy or Chinese manufactured goods be paid for in the new currency. It was a clear effort to get out from under dollar hegemony.

The setup is worth repeating because of what happened next. The academics and think tank participants told Rickards he was wasting their time. Gold was not money anymore, it played no role in the modern financial system, the dollar was unassailable - the whole scenario was fantasy to them.

Rickards and his team asked them to play it out anyway.

The Simulation That Became Strategy

The game ran for two days inside the classified lab. The participants played through the scenario and the results were uncomfortable. When Russia and China pooled gold and demanded payment in a new gold-backed currency, global trade realigned, allies questioned whether their dollar reserves were still safe, and the whole system destabilized. Secretary Gates reviewed the results and did not laugh - he took them seriously.

But here is the part that matters. The war game was designed to look five to ten years ahead. Nobody expected the scenario to play out immediately. What Rickards and his team told the Pentagon was: if the incentives line up this way, this is where rational actors will go.

Russia and China did not announce a gold-backed currency the next day. That was never the point. But they started accumulating gold at a pace that matched the simulation’s assumptions almost exactly.

In 2009, the year of the war game, Russia held about 600 metric tons of gold. Today, Russia holds roughly 2,800 metric tons - a 365 percent increase. China held about 600 metric tons in 2009. Today it holds somewhere between 3,000 and 4,000 metric tons, possibly more that it has not disclosed.

The numbers are not theoretical. Russia’s central bank, led by Elvira Nabiullina, put 25 percent of the country’s reserves into physical gold bullion stored inside Russia. When the United States and its allies froze Russian dollar reserves in 2022, they could not touch that gold. You cannot freeze physical bullion sitting in a vault in Moscow.

Russia made more money on the mark-to-market appreciation of its gold reserves than it lost on the frozen Treasury holdings. The very mechanism Rickards simulated in 2009 - gold accumulation as a hedge against dollar weaponization - had become state policy.

Return to the Pentagon

In May 2015, Rickards was invited back. This time the war game was held inside the Pentagon itself, in a secure meeting facility. Smaller group, about 20 participants. The scenario was narrower: a confrontation between China and the United States in the South China Sea.

The financial weapons this time were more specific than gold. The teams studied disruption of payment systems, cyber attacks on stock exchanges, and trade sanctions designed to cut off supply chains and energy imports. One of the central topics was SWIFT - the system that connects the world’s banks. Could an enemy use it as a weapon? Could China de-SWIFT Taiwan or the Philippines? What happens when the financial weapons developed by the United States are turned around and used against it?

Rickards was one of three people from the investment community in the room. Everyone else was from the diplomatic corps, military intelligence, the CIA, or the National Security Council. He watched them work through the implications of a scenario where China attacks Taiwan’s access to the global payment system rather than mounting a conventional invasion.

The question became: if your enemy can disrupt your banks without firing a shot, what do you hold that cannot be disrupted?

The Market Drone

The most disturbing concept to come out of these war games was something Rickards calls the “market drone.” The idea is that an attacker does not need to disable a stock exchange. It is more effective to penetrate the order entry system and turn the exchange into a weapon.

Imagine someone gets into the NYSE’s order matching engine and places massive sell orders on the most liquid stocks - Amazon, Microsoft, Apple - using spoofed identities. The sells trigger algorithms, which trigger margin calls, and those margin calls trigger forced liquidations. In minutes, the market drops 20 percent and tens of millions of Americans lose wealth as their retirement accounts and brokerage portfolios get vaporized.

No bombs. No bullets. A digital attack on a financial system that was not designed to defend itself.

Rickards’ proposed countermeasure is so low-tech it almost sounds like a joke. He recommended the SEC and the New York Stock Exchange buy a warehouse in New York, equip it with copper-wire hardline phones, handheld battery-powered calculators, and designate specialists who would handle trades manually. A non-digital stock exchange that could be activated when the digital one was compromised. The idea was not to run the exchange this way permanently but to create a deterrent - if the attackers knew a backup existed, they might not bother attacking the primary system in the first place.

The Pentagon did not implement the suggestion. Whether it was too expensive, too impractical, or simply too embarrassing to admit the system needed a 1970s backup is unclear. But the question it raises has not gone away.

What the War Games Reveal

Rickards mentions the Pentagon war games only when the topic comes up, usually as an aside. But it tells you more about his method than any of his books do.

Most financial commentators analyze markets while Rickards simulates them, and the difference is not academic - analysis looks at what happened and asks why, while simulation looks at what could happen and asks how.

The 2009 war game predicted that rational state actors would accumulate gold to insulate themselves from dollar-based sanctions. That prediction has been validated more precisely than almost any macroeconomic forecast of the last twenty years. The 2015 war game predicted that payment systems and exchange infrastructure would become battlegrounds. That prediction has been validated by the weaponization of SWIFT and the rise of ransomware attacks on financial institutions.

War games are not predictions. They are maps of possibility. But a good map tells you where the terrain is dangerous, even if you do not know exactly when you will arrive.

Rickards has been reading the map for two decades. He has been early on most of his calls, including this one. But being early is not the same as being wrong. The question, as he asks himself at the end of every scenario, is whether the people who laughed at the 2009 war game will still be laughing when the map becomes the territory. He later extended the same framework to AI in MoneyGPT. More from Rickards in the Guru Files.