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00:00The number one risk that we were really vulnerable to is thesustainability of the global payment system. And I choose the word sustainability over the word vulnerability because the realkey here is keeping the global payments system running. And you know we've had so many hacks terrorist attacks the ColonialPipeline incident it would appear to me that we are extremely vulnerable to havingan attack against the payments system of the financial markets and not just here in the United States but in Europe. And so youknow what I'm really talking about is things like the Fed wire where all all the banks money you know clears through. But thenalso something like the Depository Trust Corporation the DCC Swift Euro clear. I mean I can just keep going on and on and on.And if there was a synchronized attack we would essentially bring the global financial markets to its knees. And probablythe first response would be that that securities prices would crash. And the second issue would be that we would probably haveto close all the exchanges and in the in the world potentially in order to figure out how we restore the global payment system.The thing that bothers me about something like the global payment system is I don't think anyone's focused on it. And thisreally takes a high degree of international cooperation. It takes a real macro look meaning there needs to be somebody orsome group of people who who are looking at how everything interconnects and and where the potential vulnerabilities are. Ithink at this stage this is in the world of the unthinkable. And so therefore youknow I've used this phrase before. There's a cognitive dissonance around it which is to talk about this idea. Theconsequences are so dire that immediately people just sort of move on to say well that'll never happen. Right. And so it's Ithink there's there's a real vulnerability to the markets in general but even to the existence of capitalismif the payments system were to be suddenly disrupted now what likelihood do you see of some sort of damaging attack on theglobal payment system in the U.S. payment system in particular. Right. Well I think that I would put the probability at veryhigh. I mean certainly well over 50 percent. And the reason that I may put it so high is one is nobody seemsfocused. And to it for someone who's sitting out there thinking that they want to disrupt our economy. This is the most logicalchoke point in the economy. So you know I got accused when talking about this once that I'm actually alerting terroristsand other governments on how to attack us. But you know I think that the likelihood is they're already thinking about it.INTERRUPTING this flow of capital you know would just cascade through the system because people you know if they sell asecurity or they s they're looking to raise cash for some reason whether it's a business or an investor they've usually doingthat because they've committed the cash on the other side. And so you can just see how it can just become a chain. We need aninternational cooperation to to begin to assess the risk and figure out how one in the short run we can harden the systemthat exists and to in the long run modernizing it. You know delivery versus payment which is the standard way that we'vedelivered securities for 100 years is sort of in an age like ours kind of ridiculous. There's noreason why that just can't be instantaneous. And so but that's going to take you know a new generation of technology andwhether that's block chain or whatever that is you know it's it's it needs to be modernized. And you know inthe short run you know I think that that people especially people like centralbanks exchanges so on and so forth need to really take a hard look attheir systems not just their system but the interconnectivity of the system. And how secure is that connection that's being madenot just from the standpoint of having being disrupt. But you know since you're you're sending information through the etherwhat's the chance that that that that can be redirected somewhere. Are you saying that we don't have a system that'sbuilt for our modern era. Exactly. Where we're living off of an antiquated system that was a hodgepodge of things that got puttogether. Do you think that tech companies have a role to play in making this financial system safer. Absolutely. I mean lookwithout the intelligence the sophistication of the tech industry I think it would be virtually impossible. But you know that'sthe history of the United States right. I mean the aircraft companies that developed you know sophisticated newplanes and bombers in the Second World War. It was all done by the private sector. So you know historically the private sectoris always called upon to take a leadership role. It just is that we need to define the problem. And I've defined the I'veidentified the problem. I haven't defined exactly because I don't know what all the pieces of this thing are. And that's alot of work to figure out the pieces. And that's what I think right now. Central banks and governments should be doing acoordinated effort of figuring the whole thing out and then going to people to work on trying to create solutions. I thinkletting government do it themselves will take too long and it'll be too expensive.

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The Global Payment System Is Vulnerable to Attack, Says Minerd

Guggenheim Partners CIO Scott Minerd worries that outdated technologies have led to extreme vulnerabilities in global payment systems. He tells Bloomberg's Sonali Basak he sees a high probability of an attack on these systems that could cause markets to crash. He's on "The Next Big Risk." (Source: Bloomberg)

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