Three Critical Lessons From the CrowdStrike Outage

A simple IT mistake (not even an act of cyberterrorism!) took down the world’s computers on July 19, costing over $5 billion and disrupting countless lives. Here’s how to be ready next time…

Bullion.Directory precious metals analysis 24 July, 2024
By Peter Reagan
Financial Market Strategist at Birch Gold Group

This simple mistake (not even an act of cyberterrorism!) will cost U.S. companies $5.4 billion in direct losses.

The idea that one simple software update could wreak so much havoc on the world is a rather alarming prospect.

In this piece, we’ll take a look at what happened, and then see how the chaos it created could relate to retirement accounts the next time a similar outage occurs.

What happened?

CrowdStrike, a widely-used security service, released a flawed update (here’s the official report) which broke computers worldwide.

According to the AP Newswire, the CrowdStrike event had an immediate and shattering impact:

A faulty software update caused technological havoc worldwide on Friday, grounding flights, knocking down some financial companies and news outlets, and disrupting hospitals, small businesses and government offices.

The breadth of the outages highlighted the fragility of a digitized world dependent on just a few providers for key computing services.

The trouble was sparked by an update issued by cybersecurity firm CrowdStrike and only affected its customers running Microsoft Windows, the world’s most popular operating system for personal computers.

But perhaps even more concerning was the major impact on banks and financial services companies like Charles Schwab.

A recent CNBC article shed more light on the major disruption that probably impacted millions of Americans:

Amid a widespread global IT outage, some investors were experiencing disruptions on Friday at financial services companies, including Charles Schwab, one of the country’s largest brokerage firms.

The issues stem from a faulty software update from cybersecurity company CrowdStrike, which affected businesses worldwide, including airlines, banks and media outlets.

Just the thought of waking up one day and having a software update upend the entire U.S. financial system (including your retirement account) is terrifying, to say the least.

At minimum, an outage of this scale should make officials rethink how they might be using digital technologies to conduct everyday operations.

How might such an incident impact a digital dollar?

The Federal Reserve has been quietly moving closer to transitioning from the physical dollar to a digital dollar (known as “FedCoin” in some specific cases).

But the CrowdStrike outage poses some obvious implications for the digital dollar transition. The most obvious one is the possibility for your “digital money” to be subject to a future outage.

With the obvious in mind, here are some less obvious but still important reasons why the United States should stay a “physical cash society.”

First, the government hates cash because it affords you privacy, and might even attempt to hold your Social Security benefits or pensions hostage in order to speed up the transition, as Lance Wallnau described:

Why does the federal bureaucracy hate cash? It’s private and it’s untraceable. Essentially, cash is one of the few remaining bastions of financial privacy. I say “privacy” rather than “secrecy” on purpose – “privacy” means enforcing your personal boundaries and what you’re comfortable sharing. “Secrecy” means intentionally hidden [likely damaging] information.

The federal government is powerful, though – and insidious. Maybe nobody wants to use FedCoin at first. Until all welfare checks and tax refunds become FedCoin transfers. Social Security and military pensions get deposited into your FedCoin account instead of your bank account.

Will the U.S. government actually go to such lengths in order to transition out of physical cash? Possibly. A number of nations already have, Norway, Sweden, Finland, China, New Zealand and Hong Kong among them.

So we know it’s possible. Will it happen here? If you look at that list of nations above, you’ll note that ALL (with the arguable exception of New Zealand) are socialist countries. Now, I don’t want to get too political here, though it’s important to point out a few key characteristics of socialist and socialist-leaning governments:

• Larger, more invasive government bureaucracy (and of course higher taxes to pay for it)
• Priority on the wellbeing of the state over that of individual citizens (which leads to)
• Increased emphasis on monitoring and controlling citizens

In my mind, at least, the main difference between socialist and capitalist governments comes down to its priorities. Are the rights of individuals more or less important than the rights of “the public,” enforced by the government?

Some would argue that greater government involvement in and control of our daily lives are necessary. That our modern world is just too complex and interdependent for freedom.

For example, former Chairman Alan Greenspan didn’t like the idea of answering to the American public about the Fed’s activities:

For example, former Federal Reserve chairman Alan Greenspan once openly admitted that the central bank “answers to no one” and does not follow orders from the government. They do what they want when they want. Specifically, he said:

“Well, first of all the Federal Reserve is an independent agency and that means basically that there is no other agency of government which can overrule actions that we take. So long as that is in place, and there is no evidence that the [presidential] administration or the Congress or anybody else is requesting that we do things other than what we think is the appropriate thing.”

Now, this is a small example, but it’s economically relevant. The Fed’s actions don’t just perpetuate malinvestment and speculative boom-and-bust cycles – they directly rob you of your purchasing power.

It’s not considered robbery, though. It’s framed as a necessary evil. For the “public” good, at the expense of the individual.

“I’m from the government, and I’m here to help…”

Whenever lawmakers in Congress find a way to meddle in your life, it usually ends with making your life much harder, not easier.

To give three examples of how your life has been made more challenging, from another past article:

1. They’ve all but bankrupted Social Security. This left the trust fund so empty that some Americans will get a 33% cut in their monthly benefit payments.
2. They’ve wrecked the purchasing power of your dollars. Remember, every dollar in deficit spending not only increases inflation, it leaves you footing the tax bill too! That leaves us with higher costs in the future and a weaker currency to pay for them.
3. They legislated sign-up for the Affordable Care Act insurance, then mishandled the sign-up process for months. No one could sign up for ACA, leading to serious tax penalties for not enrolling even while enrollment was impossible.

Imagine, just for a moment, online banking as developed by a federal contractor.

What would the FedCoin’s mobile app look like? (How often would it work?)

And when it did work as designed, what if it was intended to compromise your financial privacy and economic freedom?

And how much more vulnerable to something like the CrowdStrike catastrophe would we be?

Who controls your money?

The world has never been more technologically advanced. That progress comes at a cost.

Part of that cost is greater complexity and interdependence. Just about everything has computers in it today! My refrigerator has a computer. There are web-enabled lightbulbs and toothbrushes. And that’s on top of all the things that spring to mind when we think “computer” – airlines and hospitals, police departments and utilities.

This means the next major outage could have a disastrous impact on your life, and without warning.

Another part of that cost is the compromise of our financial privacy and our economic freedom. “Economic freedom” doesn’t just mean what you can buy and when – it also means the purchasing power of your money.

The dollar’s purchasing power is already out of your hands. Would you voluntarily give up even more of your financial independence?

There are a few steps we can take for added peace-of-mind:

1. Have physical copies of your retirement accounts mailed to you, and secure them in a locked, fire-proof file cabinet or safe in your home.
2. Store a digital backup of your retirement account on a thumb drive or external hard drive (just in case – remember the old saying, “Two is one and one is none”).
3. Diversify your savings with physical precious metals. The Fed can’t devalue them, the government can’t “improve” them and no IT outrage can take them away from you. Physical precious metals like gold and silver are stubbornly analog assets that don’t need Wi-Fi to work, can’t be hacked and still exist even when the lights go out.

You can learn more about the retirement benefits of precious metals in our free information kit (updated for this year).

This article was originally published here

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