All posts by admin46x

No. 955: May 2018 Consumer and Producer Price Indices, Retail Sales, Production, Freight, FOMC

(SGS Subscription required) • Shifting Interest-Rate Perceptions Boosted the Dollar, Intensifying Risks of the Day of Reckoning for the U.S. Currency and Financial Markets
• May 2018 CPI-U and PPI Annual Inflation Rates Jumped to Respective 74- and 76-Month Highs of 2.80% and 3.11%
• Rising Inflation Reflected Surging Gasoline Prices from Global-Political and Oil Supply Disruptions, Not from Booming U.S. Economic Activity; Nonetheless, the FOMC Boosted Interest Rates, Again
• Surging, Non-Demand-Driven Inflation, Combined with Fed Tightenings, Already Are Impairing Real Growth in Consumer and Systemic Liquidity
• Inflation-Adjusted Real Average Weekly Earnings Remained Stalled in May, With Monthly Gains Shy of 0.1%; Quarterly Contractions Held in Place
• Higher Oil Prices Boosted Oil-and-Gas Extraction and Exploration, in U.S. Mining-Sector Production, Although Total Production Declined in May
• Manufacturing Took a Heavy Hit, Even Allowing for a Major Supply Disruption, Still Shy by 6.0% (-6.0%) of Recovering Its Pre-Recession High, Faltering in a Record 125 Months of Economic Non-Expansion
• Real Retail Sales Were Strong in May, Thanks Largely to a Major Distortion in Inflation-Adjustment Consistency
• Consumer Goods Production Fell Sharply, Contravening “Booming” Retail Sales

China Enters The Trade Trap

Via Investing In Chinese Stocks blog,

Perhaps nobody knows what President Trump will do next, including President Trump, but right now it looks like he has successfully maneuvered China into a trade trap.

The goal is to slow China’s economy such that military modernization slows and its economy cannot catch up with the United States. Meanwhile, implementation of this strategy is called “Beijing’s playbook” and the whole time President Trump speaks positively about Xi Jinping and China’s help in other areas.

Bloomberg: Xi to Counter Trump Blow for Blow in Unwanted Trade War

“The Chinese view this as an exercise in self-flagellation, meaning that the country that wins a trade war is the country that can endure most pain,” said Andrew Polk, co-founder of research firm Trivium China in Beijing.

China “thinks it can outlast the U.S. They don’t have to worry about an election in November, let alone two years from now.”

This is the mistake autocrats always make about Western governments and the United States. They view the messy and inefficient political system (intentionally designed that way to protect liberty) as a weakness. They think politicians care more about elections than anything else. They see the difficulty in reaching consensus as a weakness. However, they miss the fact that democratic governments enjoy greater legitimacy. If the U.S. reaches a majority in favor of confronting China on trade, then President Trump has the far stronger political hand.

Confronting China on trade raises President Trump’s popularity. His base and independent voters favor this policy.

Democrats oppose him because he is Trump, but they would lose votes if the only issue in November was “Confront China on trade, yes or no?”

If President Trump makes it through November losing only a few House seats (as is typical of nearly all mid-term elections) and sticks to his China trade policy, he will come out the other side incredibly strengthened on trade heading into 2020. If the public begins to view the trade war more as war than trade, they will want to win the war of attrition.

China’s “ace” remains yuan devaluation.

When I wrote The Logic of Strategy: Yuan Devaluation and the Road to Trade War, I expected economics to lead the way as the yuan devalued. Although the yuan weakened in 2015 and 2016, it was not the substantial depreciation needed to reset the financial system. Still, China created the conditions for a major currency depreciation and U.S. trade policy will soon lean heavily on this pressure point.

Finally, remember that geopolitics is right beneath the surface of the trade war. The U.S. is confronting China in the South China Sea. Pacific nations are turning against China.

ABC: China warns citizens in Vietnam after protests fuel anti-Chinese sentiment

China has warned its citizens in Vietnam after protesters clashed with police over a government plan to create new economic zones for foreign investment that has fuelled anti-Chinese sentiment in the country.

SCMP: China tells Australia to remove its ‘coloured glasses’ to get relations back on track

Relations between the two countries have cooled since late last year when Prime Minister Malcolm Turnbull’s government proposed a bill to limit foreign influence in Australia, including political donations. Beijing saw the move as “anti-China”.

Critics say President Trump’s trade policy is poorly designed and antagonizes allies, but the Logic of Strategy says nations will come around to Trump’s position in the coming months and years.

DOJ Indicts “Vault 7” Leak Suspect; WikiLeaks Release Was Largest Breach In CIA History

A 29-year-old former CIA computer engineer, Joshua Adam Schulte, was indicted Monday by the Department of Justice on charges of masterminding the largest leak of classified information in the spy agency’s history.

Schulte, who created malware for the U.S. Government to break into adversaries computers, has been sitting in jail since his August 24, 2017 arrest on unrelated charges of posessing and transporting child pornography – which was discovered in a search of his New York apartment after Schulte was named as the prime suspect in the cyber-breach one week after WikiLeaks published the “Vault 7” series of classified files. Schulte was arrested and jailed on the child porn charges while the DOJ ostensibly built their case leading to Monday’s additional charges.

[I]nstead of charging Mr. Schulte in the breach, referred to as the Vault 7 leak, prosecutors charged him last August with possessing child pornography, saying agents had found 10,000 illicit images on a server he created as a business in 2009 while studying at the University of Texas at Austin.

Court papers quote messages from Mr. Schulte that suggest he was aware of the encrypted images of children being molested by adults on his computer, though he advised one user, “Just don’t put anything too illegal on there.” –New York Times

Monday’s DOJ announcement adds new charges related to stealing classified national defense information from the Central Intelligence Agency in 2016 and transmitting it to WikiLeaks (“Organization-1”). 

The Vault 7 release – a series of 24 documents which began to publish on March 7, 2017 – reveal that the CIA had a wide variety of tools to use against adversaries, including the ability to “spoof” its malware to appear as though it was created by a foreign intelligence agency, as well as the ability to take control of Samsung Smart TV’s and surveil a target using a “Fake Off” mode in which they appear to be powered down while eavesdropping.

The CIA’s hand crafted hacking techniques pose a problem for the agency. Each technique it has created forms a “fingerprint” that can be used by forensic investigators to attribute multiple different attacks to the same entity.

The CIA’s Remote Devices Branch’s UMBRAGE group collects and maintains a substantial library of attack techniques ‘stolen’ from malware produced in other states including the Russian Federation.

With UMBRAGE and related projects the CIA cannot only increase its total number of attack types but also misdirect attribution by leaving behind the “fingerprints” of the groups that the attack techniques were stolen from.

UMBRAGE components cover keyloggers, password collection, webcam capture, data destruction, persistence, privilege escalation, stealth, anti-virus (PSP) avoidance and survey techniques. –WikiLeaks

Schulte previously worked for the NSA before joining the CIA, then “left the intelligence community in 2016 and took a job in the private sector,” according to a statement reviewed in May by The Washington Post.

Schulte also claimed that he reported “incompetent management and bureaucracy” at the CIA to that agency’s inspector general as well as a congressional oversight committee. That painted him as a disgruntled employee, he said, and when he left the CIA in 2016, suspicion fell upon him as “the only one to have recently departed [the CIA engineering group] on poor terms,” Schulte wrote. –WaPo

Part of that investigation, reported WaPo, has been analyzing whether the Tor network – which allows internet users to hide their location (in theory) “was used in transmitting classified information.” 

In other hearings in Schulte’s case, prosecutors have alleged that he used Tor at his New York apartment, but they have provided no evidence that he did so to disclose classified information. Schulte’s attorneys have said that Tor is used for all kinds of communications and have maintained that he played no role in the Vault 7 leaks. –WaPo

Schulte says he’s innocent: “Due to these unfortunate coincidences the FBI ultimately made the snap judgment that I was guilty of the leaks and targeted me,” Schulte said. He launched Facebook and GoFundMe pages to raise money for his defense, which despite a $50 million goal, has yet to receive a single donation.

As The Post noted in May, the Vault 7 release was one of the most significant leaks in the CIA’s history, “exposing secret cyberweapons and spying techniques that might be used against the United States, according to current and former intelligence officials.”

The CIA’s toy chest includes:

  • Tools code named “Marble” can misdirect forensic investigators from attributing viruses, trojans and hacking attacks to their agency by inserted code fragments in foreign languages.  The tool was in use as recently as 2016.  Per the WikiLeaks release:

“The source code shows that Marble has test examples not just in English but also in Chinese, Russian, Korean, Arabic and Farsi. This would permit a forensic attribution double game, for example by pretending that the spoken language of the malware creator was not American English, but Chinese, but then showing attempts to conceal the use of Chinese, drawing forensic investigators even more strongly to the wrong conclusion, — but there are other possibilities, such as hiding fake error messages.”

CIA’s “Marble Framework” shows its hackers use potential decoy languages https://t.co/Hm3pTPSXIS

Background: https://t.co/GsoN4BuyTz pic.twitter.com/ZT66doCnfY

— WikiLeaks (@wikileaks) March 31, 2017

  • iPads / iPhones / Android devices and Smart TV’s are all susceptible to hacks and malware. The agency’s “Dark Matter” project reveals that the CIA has been bugging “factory fresh” iPhones since at least 2008 through suppliers. Another, “Sonic Screwdriver” allows the CIA to execute code on a Mac laptop or desktop while it’s booting up.

RELEASE: CIA #Vault7 “Dark Matter” https://t.co/pgnfeODXVB pic.twitter.com/vkI16f3vMD

— WikiLeaks (@wikileaks) March 23, 2017

RELEASE: CIA #Vault7 “Sonic Screwdriver” https://t.co/pgnfeODXVB pic.twitter.com/18BcVdqkqd

— WikiLeaks (@wikileaks) March 23, 2017

  • The increasing sophistication of surveillance techniques has drawn comparisons with George Orwell’s 1984, but “Weeping Angel”, developed by the CIA’s Embedded Devices Branch (EDB), which infests smart TVs, transforming them into covert microphones, is surely its most emblematic realization.
  • The Obama administration promised to disclose all serious vulnerabilities they found to Apple, Google, Microsoft, and other US-based manufacturers. The US Government broke that commitment.

“Year Zero” documents show that the CIA breached the Obama administration’s commitments. Many of the vulnerabilities used in the CIA’s cyber arsenal are pervasive and some may already have been found by rival intelligence agencies or cyber criminals.

In addition to its operations in Langley, Virginia the CIA also uses the U.S. consulate in Frankfurt as a covert base for its hackers covering Europe, the Middle East and Africa.

CIA hackers operating out of the Frankfurt consulate ( “Center for Cyber Intelligence Europe” or CCIE) are given diplomatic (“black”) passports and State Department cover. 

  • Instant messaging encryption is a joke.

These techniques permit the CIA to bypass the encryption of WhatsApp, Signal, Telegram, Wiebo, Confide and Cloackman by hacking the “smart” phones that they run on and collecting audio and message traffic before encryption is applied.

  • The CIA laughs at Anti-Virus / Anti-Malware programs.

CIA hackers developed successful attacks against most well known anti-virus programs. These are documented in AV defeatsPersonal Security ProductsDetecting and defeating PSPs and PSP/Debugger/RE Avoidance. For example, Comodo was defeated by CIA malware placing itself in the Window’s “Recycle Bin”. While Comodo 6.x has a “Gaping Hole of DOOM”.

You can see the entire Vault7 release here.

A DOJ statement involving the Vault7 charges reads: 

“Joshua Schulte, a former employee of the CIA, allegedly used his access at the agency to transmit classified material to an outside organization.  During the course of this investigation, federal agents also discovered alleged child pornography in Schulte’s New York City residence,” said Manhattan U.S. Attorney Geoffrey S. Berman. 

On March 7, 2017, Organization-1 released on the Internet classified national defense material belonging to the CIA (the “Classified Information”).  In 2016, SCHULTE, who was then employed by the CIA, stole the Classified Information from a computer network at the CIA and later transmitted it to Organization-1.  SCHULTE also intentionally caused damage without authorization to a CIA computer system by granting himself unauthorized access to the system, deleting records of his activities, and denying others access to the system.  SCHULTE subsequently made material false statements to FBI agents concerning his conduct at the CIA.         

Schulte faces 135 years in prison if convicted on all 13 charges: 

  1. Illegal Gathering of National Defense Information, 18 U.S.C. §§ 793(b) and 2
  2. Illegal Transmission of Lawfully Possessed National Defense Information, 18 U.S.C. §§ 793(d) and 2
  3. Illegal Transmission of Unlawfully Possessed National Defense Information, 18 U.S.C. §§ 793(e) and 2 
  4. Unauthorized Access to a Computer To Obtain Classified Information, 18 U.S.C. §§ 1030(a)(1) and 2
  5. Theft of Government Property, 18 U.S.C. §§ 641 and 2
  6. Unauthorized Access of a Computer to Obtain Information from a Department or Agency of the United States, 18 U.S.C. §§ 1030(a)(2) and 2
  7. Causing Transmission of a Harmful Computer Program, Information, Code, or Command, 18 U.S.C. §§ 1030(a)(5) and 2
  8. Making False Statements, 18 U.S.C. §§ 1001 and 2
  9. Obstruction of Justice, 18 U.S.C. §§ 1503 and 2
  10. Receipt of Child Pornography, 18 U.S.C. §§ 2252A(a)(2)(B), (b)(1), and 2
  11. Possession of Child Pornography, 18 U.S.C. §§ 2252A(a)(5)(B), (b)(2), and 2
  12. Transportation of Child Pornography, 18 U.S.C. § 2252A(a)(1)
  13. Criminal Copyright Infringement, 17 U.S.C. § 506(a)(1)(A) and 18 U.S.C. § 2319(b)(1)

Horowitz Reveals That Comey Is Under DOJ Investigation Over Mishandling Classified Info

DOJ Inspector General Michael Horowitz made a stunning admission during Monday Congressional Testimony that former FBI Director James Comey is under a separate and ongoing investigation over mishandling of classified information – when asked by Senate Judiciary Committee Chairman Chuck Grassley (R-IA) about 

Grassley: “Comey said he did not expect a report on his handling of classified information because, “That’s frivolous.” I don’t happen to think that it is frivolous. Question number one, Mr. Horowitz, are you investigating the handling of his memo and does that include the classification issues, and should Mr. Comey expect a report when it’s complete?” 

Horowitz: “We received a referral on that from the FBI,” We are handling that referral and we will issue a report when the matter is complete, consistent with the law and rules that are–a report that’s consistent and takes those into account.”

Grassley: “Is the IG investigating Comey’s handling of his memos about Trump?”
Horowitz: “Yes, we’re investigating it and will produce a report on it.”

— Sean Davis (@seanmdav) June 18, 2018

Earlier Monday, Grassley demanded in a letter to FBI Director Christopher Wray that the agency provide information regarding revelations from last week’s Inspector General report that former FBI Director James Comey used personal email accounts to conduct official business – which neither the FBI or the Inspector General independently verified during an internal investigations.

On June 14, the Committee received the Department of Justice Office of Inspector General report entitled, “A Review of Various Actions by the Federal Bureau of Investigation and Department of Justice in Advance of the 2016 Election.” The report found that FBI employees Peter Strzok, Lisa Page, and even former Director James Comey used personal e-mail accounts and devices to conduct official government business in violation of FBI policy. The revelation about Mr. Comey’s use of personal email for work was new. Thus, it is important to understand what steps the FBI has taken, if any, to retrieve work-related communications from former Director Comey’s personal email account -Chuck Grassley

Grassley’s letter then states that “there appears to have been no independent verification by the Inspector General or the FBI. Without access to his private account, independent verification is impossible. The Justice Department should apply at least as much scrutiny to its own former Director as it applied to the former Secretary of State.”

As a reminder, the disclosure in last week’s OIG report that Comey was also abusing his personal email account, prompted the following brutal troll from Hillary Clinton, who has repeatedly accused Comey (together with everyone and everything else) of costing her the election.

But my emails. https://t.co/G7TIWDEG0p

— Hillary Clinton (@HillaryClinton) June 14, 2018

To that end – Grassley’s letter reads “It is disturbing that FBI employees tasked with investigating Secretary Clinton, including the former Director, appear to have engaged in strikingly similar conduct.”

Grassley notes that “When the OIG asked former Director Comey if he was concerned about his decision to conduct FBI business on his personal laptop or email, he admitted he was unsure whether he acted in accordance with FBI regulations. He stated, “I don’t know. I think so, but I don’t know. I remember talking to Jim [Rybicki] about it at one time, and I had the sense that it was okay.”

The Committee Chairman then brings up “serious questions about Director Comey’s transmission of his memos about conversations with President Trump, some of which contained classified information, to Daniel Richman, Patrick Fitzgerald, and David Kelley.”

Secretary Clinton alienated thousands of federal records when she used a nongovernment server and email for official work. Many of those records were deleted rather than returned to the State Department when the Department requested them. Some of those records contained classified information. Here, it is appears as if the FBI has not even sought the return of those records. -Chuck Grassley

The letter then asks four questions of the DOJ, requesting a response by next Friday, June 29:

  1. Has the FBI requested that former Director Comey provide any official work-related material from his personal devices and email accounts or access to those accounts? If not, why not? If so, did he cooperate?
  2. Has the FBI conducted or attempted to conduct searches of non-FBI-issued communications devices or non-FBI email accounts associated with former Director Comey for official work-related material? If not, why not?
  3. Do you agree with former Director Comey that the question of whether he transmitted classified information on unclassified systems is “frivolous”?
  4. Has the FBI taken any steps to secure, retrieve, or clean any classified information transmitted by former Director Comey off of any unclassified computer systems? If so, please explain in detail what steps were taken and when. a. If the answer is yes, then please describe how that answer is consistent with the FBI’s claim that there was no “indication” that classified information “ever” transited Director Comey’s personal email.

Read below:

What It’s All About: Coercion!

Authored by James Howard Kunstler via Kunstler.com,

It’s worth checking out the YouTube video of this year’s semi-annual Munk Debate held in Toronto this spring. The proposition at hand: Be it resolved, what you call political correctness, I call progress….

For the pro position: Michael Eric Dyson, sociology prof from Georgetown U, and New York Times columnist Michelle Goldberg;

on the con side, Jordan Peterson, psychologist and U of Toronto prof, and Stephen Fry, British actor and screenwriter.

The debate quickly beat a path to identity politics, which make up the actual substance of PC, itself only a method of conveying the substance.

PC acts as a filter for sifting out thought that doesn’t conform to orthodox ideology, and for punishing those who dare to express the filtered-out ideas. So, PC only allows for a narrow range of expressed opinion on identity politics. PC is literally thought-policing. It’s hard to imagine anyone being in favor of that, which is exactly why PC behavior so odious to those of us who value free speech.

The orthodox view in identity politics these days is that “white male cis-heterosexual patriarchal privilege” is responsible for the discontents of women and “people-of-color” – a squishy, mischievous category which obviously doesn’t count Chinese grad students at Harvard or the Asian-Indians in the Silicon Valley C-suites — and demands reparations of one kind or another.

Mr. Peterson laid it out nicely: identity politics assigns everyone to ethnic, racial, and sexual groups, and all the human relations among them amount to never-ending battles for political power. Nothing else matters. Individuals especially don’t matter, only the group. And no group has abused its power more than European white men.

This animating idea comes out of the mid-20th century “post-structural critical theorists” Jacques Derrida and Michel Foucault, whose Marxian views emerged conveniently at a time when women and non-white people were vying for departmental chairs in the college humanities and social science programs, and thus have two generations been indoctrinated.

Well, if human relations are solely about power, than exercising power over others is all that matters. Hence, the key to identity politics: it’s all about coercion, making others do your will by threat of force and force itself. These days, the main threat is depriving heretics and apostates of their livelihood. That’s what happened to Brett Weinstein at Evergreen U in Washington State last year, and to Jordan Peterson himself at the U of Toronto, when he objected loudly and publicly to a new Canadian federal law that sought to punish citizens who refused to use the new menu of personal pronouns for the rapidly multiplying new gender categories (e.g. ze, zir, they, xem, nem, hir, nir….)

Both Weinstein and Peterson refused to be coerced and found themselves inadvertently leading a movement against the pervasive, creeping coercion of our time – which has now spread from the campuses into corporate life, with the HR departments working overtime to enforce thought among employees, because company profits are at stake (e.g. Starbucks day-off for “diversity and inclusion training”).

Most of the sparks in the debate came off the friction between Dyson and Peterson. Dyson, who was ordained as a Baptist minister at age nineteen, relies on the tropes of the pulpit to entertain his audience (or his classes at Georgetown). That theatricality is well-suited to putting across dubious ideas with false authority. In the end, he resorted to plain old name-calling, branding Peterson as “an angry white man.” Peterson did appear deeply annoyed. I could certainly understand why. He’s been suffering the enmity of morons for a couple of years now. But he has them on the run. He’s onto their game and he’s unmasking their mendacious intentions. And offering a framework for understanding human relations that actually comports with reality. In what has been lately a reality-optional culture, that really hurts.