The fiscal crisis in the United States is near, and it won’t be pretty

By LUIS MIRANDA | THE REAL AGENDA | MARCH 5, 2013

When one hears talks about the collapse of the dollar, it is hard to picture how a currency that is the base of all global transactions can simply disappear. An important point to understand is that such a collapse does not occur at once. It takes a while to happen because that is how it has been arranged. What most people are clueless about is that, not only is the death of the dollar possible, but that it has already started.

Since the dollar became the world’s currency by design, the American currency has lost a great deal of value. According to the U.S. Bureau of Labor and Statistics, one dollar today is worth only about 5% of what the green back was worth back in 1913. More recent signs of the loss of relevance the dollar has had in the global economy is the fact that major commercial power houses –American commercial partners and foes– have officially adopted new ways to conduct commercial transactions. For example, China and Russia are now using their own currencies to deal with the purchase and sale of products. Another case is that of India and Japan. They have also resourced to their own currencies to carry out trade.

The dollar has not only lost value, but also credibility. The origin of the lack of trust on what once was the base currency on which every single product and service was priced –including gold– is the United States’ thirst for debt as a ‘development’ model. Today more than ever before, the American government depends on the issuance of debt as a way to keep up with its spending. For that reason, the country’s central bank, the Federal Reserve, has come up with all kinds of circus moves to slow down an outcome that seems imminent: the complete collapse of the U.S. dollar currency.

The influence of the Fed in the way the U.S. manages its debt to GDP ratio stems from the country’s inability to make payments on the cash it has borrowed from the Fed itself, as well as China and other foreign investors who own much of the American debt. The path chosen by the Fed to temporarily deal with the American inability to make payments on its debt –which continues to grow out of control with every passing day– is to make large purchases of government bonds and to use quantitative easing –the pumping of unlimited amounts of electronic money– in an attempt to make everyone feel good about the state of the economy.

The Fed’s intention is to make clear to the world that the U.S. has meaningful ways to prevent a default, because since all important transactions are carried out in dollars and the dollar is the world’s currency, the private central bank can issue fake money for as long as it wants. The obvious consequence of indefinitely pumping cash into the economy is hyperinflation, which has not happened because banks were ordered not to put the money they were given out into the market in the form of loans.

It seems that the Fed has everything figured out and that the collapse of the dollar will not come as soon as some economists have predicted, but the reality is very different. According to a study conducted by four prominent economists, it is almost crunch time for the Fed and the U.S. government. Right now, the least of the problems for the central bank and the American government is not lack of credibility, but a strong change of a fiscal crisis. The report was prepared by David Greenlaw, Managing Director and Chief U.S. Fixed Income Economist at Morgan Stanley; James D. Hamilton, Professor of Economics at University of California at San Diego and Research Associate of the National Bureau of Economic Research; Peter Hooper, Managing Director and Chief Economist, Deutsche Bank Securities Inc; and Frederic S. Mishkin, Alfred Lerner Professor of Banking and Financial Institutions, a Graduate of the School of Business at Columbia University and former Chairman of the Federal Reserve Bank.

What these four men found, is that the actions of the Federal Reserve caused massive inflation to a level where the dollar’s purchasing power has gone down in free fall . As the very same Federal Reserve policy books say, the goal is to devalue the currency by at least another 30 percent. The 89-page report states that reductions in fiscal revenues and excessive increase in government spending, the close relationship between sovereign debt and the levels of interests to be paid on the debt, a significant relation between debt loans and borrowing costs and the direct effects of the fiscal crises on monetary policy have been combined to render a single outcome: massive losses for countries and institutions such as the U.S. Federal Reserve that will exceed available capital.

What this means is that, if things continue business as usual, even the Fed will become unable to sustain the current fiscal crisis. According to the report, the Fed may enter unknown territory where the amount of debt created will exceed its capital holdings. What will happen when the Fed gets to its limit and can no longer maintain the current debt-based system? According to the authors, the more a country’s debt is held by foreigners the greater the political incentives for the government to default on that debt. This is what has been seen in developing countries. The day of reckoning for the Fed may come as early as 2016. If better fiscal and monetary policies are adopted, the disaster could be put off until 2018.

It is then necessary to remember who are the United States’ investors. As of December of 2012, the Federal Reserve System, which is a branch of the international banking cartel came up as first. In second place is China, with $1202.9 billion. After China, other countries like Japan, Brazil, Switzerland and Russia appear in third, fourth and fifth places. With the U.S. debt reaching and passing 100% of its GDP and the government borrowing and printing money as if it were going out of fashion, the only possible outcome is what we have seen in modern cases of fiscal irresponsibility.

Countries get in debt up to their eye balls to fulfill the promises made at home during by irresponsible politicians during political campaigns. Since the government does not have any money to actually pay for the expenses it creates, it is only ‘normal’ to get in debt to be able to meet demands for more social programs and to pay interests on old debt. But since the governments do not borrow locally, they subject their country, (i.e. the people) to having to work all their lives to make payments on the debt generated on the debt it has gotten into. The ability of a government to make debt payments is finite. Cases in point Argentina in 199o, Greece in 2008 to 2012, Portugal and Spain in 2013 and the looming fiscal crisis the United States will have to face in the near future.

The supposed programs to help nations pay their debt is nothing more than an attempt to slow the collapse of the global economy and the that assures foreign debt holders they will have enough time to loot the countries for all they have gotten. That is the ultimate form of payment used by the international banking cartel uses to recover their so-called investments. Different from Argentina, Greece, Portugal and Spain, it is hard to see how the Americans will allow the bankers to suck every drop of blood for not paying its debt, which is why negotiations have been held to find the least painful way to phase the dollar out. Although the bankers want every single penny back, they prefer to get it in the most peaceful way possible as supposed to having to face street protests as it has happened in Egypt, Libya, Syria, Argentina, Spain and Portugal.

In conclusion, the current system of debt creation as the base for development has reached the end of its life cycle. The consequences to come should the United States continue to print or issue fake money to pay its debt instead of cutting down spending and making big international corporations liable for evading the payment of corporate taxes, will make it impossible for the U.S. government to pay its debt and for the Fed to issue fake money to sustain the current system. The only reason the U.S. has not collapsed as a debtor nation is due to the demand for U.S. Treasuries at home and abroad, which has been maintained due to the dollar’s status as the world currency. That status however, is a subjective and ephimerous concept. The moment more nations decide to trade with their own currencies, or to set up sound monetary systems such as the one Muammar Gaddafi intended to create in Libya –the gold dinar–, the more credibility and trust the dollar will lose. Lack of trust and the impossibility to meet fiscal obligations will end up destroying the dollar.

As the authors put it simply, high debt leads to higher interest rates and higher debt. The high levels of debt reach a tipping point –fiscal crisis– in which the interest rate shoots up. In the case of the U.S. it has many of the possible triggers of that shoot up in interest rates and the only thing that is holding them from going through the roof is an imaginary belief that the U.S. is still that powerful economic entity that it appeared to be many years ago.

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Is the U.S. stepping up Internet control push over unproven hacking allegations?

By BARRY GREY | WSW | FEBRUARY 21, 2013

The Obama administration is utilizing unsubstantiated charges of Chinese government cyber-attacks to escalate its threats against China. The past two days have seen allegations of hacking into US corporate and government web sites, hyped by the US media without any examination of their validity, employed to disorient the American public and justify an expansion of the Obama administration’s drive to isolate China and prepare for an eventual military attack.

The accusations of hacking against China will also be used to justify increased domestic surveillance of computer and Internet communications, as well as an expanded use of cyber warfare methods internationally.

The New York Times, functioning once again as a conduit for the Pentagon and the CIA, has taken the lead in the latest provocation against Beijing. On Tuesday it published a bellicose front-page article headlined “China’s Army Seen as Tied to Hacking Against US,” and carrying the ominous subhead “Power Grid is a Target.”

The article drips with cynicism and hypocrisy. It is well known that the United States is the world’s most ruthless practitioner of cyber warfare. The article itself acknowledged that the US worked with Israel to disrupt the Iranian nuclear program by introducing the Stuxnet virus into Iran’s computer systems. That bit of sabotage—itself an illegal act of aggression—was accompanied by a series of assassinations of Iranian scientists carried out by Israel with Washington’s support.

The sprawling front-page article, which continued on an entire inside page of the newspaper, was based on a 60-page report released that day by a private computer security firm with close ties to the Times, as well as to the US military and intelligence agencies. The report by Mandiant—founded by a retired Air Force officer and based in Alexandria, Virginia—provides no real evidence to substantiate its claim that a unit of China’s People’s Liberation Army based in Shanghai is directing hacking attacks on US corporations, organizations and government institutions.

In its report, Mandiant claims to have tracked 141 cyber attacks by the same Chinese hacker group since 2006, 115 of which targeted US corporations. On the basis of Internet footprints, including Internet provider addresses, Mandiant concludes that 90 percent of the hacking attacks come from the same neighborhood in Shanghai. It then notes that the headquarters of Unit 61398 of the People’s Liberation Army is located in that neighborhood. From this coincidence, Mandiant draws the entirely unwarranted inference that the cyber-attacks are coming from the PLA building.

As the Times admits in its article, “The firm was not able to place the hackers inside the 12-story [PLA Unit 61398 headquarters] building…” The newspaper goes on to report that “Mandiant also discovered an internal China Telecom memo discussing the state-owned telecom company’s decision to install high-speed fiber-optic lines for Unit 61398’s headquarters.” One can only assume that Mandiant “discovered” this memo by carrying out its own hacking of Chinese computers.

Chinese spokesmen have denied any involvement by the government or the military in hacking attacks and dismissed the Mandiant report as lacking any proof of its charges. The Chinese Ministry of Defense released a statement Wednesday pointing out that Internet provider addresses do not provide a reliable indication of the origin of hacking attacks, since hackers routinely usurp IP addresses. A Foreign Ministry spokesman pointed out that China is constantly being targeted by hackers, most of which originate in the US.

The Chinese position was echoed by Dell Secureworks cyber-security expert Joe Stewart, who told the Christian Science Monitor: “We still don’t have any hard proof that [the hacker group] is coming out of that [PLA Unit 61398’s] building, other than a lot of weird coincidence pointing in that direction. To me, it’s not hard evidence.”

The Obama administration followed up the Times article, which sparked a wave of frenzied media reports of Chinese cyber-attacks, by announcing on Wednesday that it would step up diplomatic pressure and consider more punitive laws to counter what it described as a wave of trade secret theft by China and other countries. The Associated Press reported that the administration was discussing “fines, penalties and tougher trade restrictions” directed against China.

The latest propaganda attack points to an escalation of the US offensive against China that went by the name “pivot to Asia” in Obama’s first term. That policy included whipping up territorial disputes in the East China and South China seas between China and a series of countries in East Asia, including Japan, Vietnam and the Philippines.

It has also included the establishment of closer military ties and new US installations in a number of countries, including India and Australia, to militarily encircle China.

The Times concluded its article by reporting that “The mounting evidence of state sponsorship… and the growing threat to American infrastructure are leading officials to conclude that a far stronger response is necessary.” It cited Rep. Mike Rogers, the Republican chairman of the House Intelligence Committee, as saying that Washington must “create a high price” to force the Chinese to back down.

In an editorial published Wednesday, the Times noted that the administration has decided to give US Internet providers and anti-virus vendors information on the signatures of Chinese hacker groups, leading to a denial of access to US networks for these groups. It also reported that President Obama last week signed an executive order authorizing increased sharing of information on cyber threats between the government and private companies that oversee critical infrastructure, such as the electrical grid.

The Wall Street Journal in its editorial called for “targeted sanctions” against Chinese individuals and institutions.

The background to this new salvo of anti-China propaganda underscores that it is part of an aggressive expansion of US military capabilities, both conventional and cyber-based. Obama raised the issue of cyber war in his February 12 State of the Union address, accusing US “enemies” of seeking to “sabotage our power grid, our financial institutions, our air traffic control systems,” and insisting that action be taken against such attacks.

In the same speech, he defended his drone assassination program, which is based on the claim that the president has the unlimited and unilateral power to order the murder of anyone anywhere in the world, including US citizens.

Last October, Obama signed an executive order expanding military authority to carry out cyber-attacks and redefine as “defensive” actions that would previously have been considered acts of aggression—such as the cutting off of computer networks. Around the same time, Defense Secretary Leon Panetta gave a bellicose speech in which he warned of a “cyber Pearl Harbor.” Panetta told Time magazine: “The three potential adversaries out there that are developing the greatest capabilities are Russia, China and Iran.”

At the end of January, the New York Times accused Chinese authorities of hacking into its news operations, a charge that was quickly seconded by the Washington Post and the Wall Street Journal. That same week, the Washington Post reported that the US military had approved a five-fold increase of personnel in its Cyber Command. Days later, the Times reported on its front page that the Obama administration had concluded that the president had the power to authorize pre-emptive cyber war attacks.

This bellicose posture toward China and expansion of cyber warfare methods goes hand in hand with growing threats to democratic rights at home. The cyber war plans include options for military action within the US. The Times reported earlier this month that the military “would become involved in cases of a major cyber-attack within the United States” under certain vaguely defined conditions.

Efforts to increase government control of the Internet and surveillance of Internet communications are being stepped up. Just last week, Rep. Rogers of Michigan and Democratic Senator Dutch Ruppersberger of California reintroduced the Cyber Intelligence Sharing and Protection Act (CISPA). The bill died in the Senate last year in the midst of protests over provisions allowing the government to spy on emails and other Internet-based communications.

U.S. says it’s ready to strike back at Chinese cyber attackers

By LUIS MIRANDA | THE REAL AGENDA | FEBRUARY 20, 2013

As The Real Agenda informed yesterday, a new report issued by internet security company Mandiant has concluded that some of the most visible cyber attacks on U.S. based companies and government entities are coming from China. This wasn’t a secret at all, since much of the equipment used in American companies and institutions are either manufactured in China or have Chinese-made components. According to experts, it is precisely through this components that the Chinese hackers may be entering sensible systems in government and large corporations such as banks and media outlets.

The accusation made by Mandiant established that the Chinese military is responsible for hacking into government and private computer systems to steal data in an attempt to get its hands on trade secrets and information about infrastructure. Today, the Obama administration is said to be weighing a list of fines and commercial punishment to stop the Chinese and any other government-sponsored cyber attack.

Research conducted by Mandiant in the last three years, shows that attacks on American government agencies, and private companies are coming directly from a Chinese-based operation in Shanghai. The existence of this entity and the purpose of its operations are well-known by the Asian government, says Mandiant.

The Associated Press reports today that American officials familiar with the U.S. plans, the White House will present a report with preliminary proposals to address the Chinese threat. It is not clear whether this proposals are real actions that the U.S. government will take, has taken already or if it is only a way to publicly show concern about the attacks while privately maneuvering in a different direction. The U.S. report will speak again about the imminent cyber threat previously described by people like Leon Panetta, who earlier this year and late in 2012 spoke about the possibility of a possible ‘cyber Pearl Harbor’.

Mandiant’s report, which apparently was requested by a group of private companies reveal that more than 140 enterprises were attacked by the People’s Liberation Army’s Unit 61398. The attacks were carried out after the hackers breached security protocols in those companies which supposedly enabled them to steal sensible information about their operations as well as private data about their customers. Along with Mandiant’s report, military experts believe that the hackers are part of China’s cyber command which works directly under orders from the Joint Chiefs of Staff. This would mean that the cyber attacks are authorized by people in important positions who work for China’s military.

“If the Chinese government flew planes into our airspace, our planes would escort them away. If it happened two, three or four times, the president would be on the phone and there would be threats of retaliation,” said former FBI executive assistant director Shawn Henry to AP. Both Mandiant’s report and the U.S. government’s recognition of the alleged Chinese threat, puts even more pressure on the Americans to show firmness in their actions. Simply talking about the threat will not solve anything. The Americans will have to retaliate strongly against the hackers and / or begin direct public talks with the Chinese military in order to sort out the details of the attacks.

According to Mandiant, this division of the Chinese Army employs thousands of people modern programming techniques and network management, which means that it counts with the support of important people and government organizations. The alleged Chinese military unit has stolen hundreds of terabytes of data since its activities were first registered in 2006″.

Although many of the alleged corporate victims are based in the United States, Canadian and British companies have also been attacked. In the case of the Canadians and British, hackers have accessed and stolen information about business transactions, mergers, acquisitions, and emails from senior managers.

“We believe APT1 can continue a campaign of cyber espionage in large part because it receives direct support from the Chinese government,” says Mandiant, identifying APT1 with Unit 61398. The same way that APT1 seems to be conducting cyber espionage activities on American, Canadian and British companies and government agencies, it is clear that American intelligence and spying agencies also conduct operations to learn about what other countries are up to.

“In a state that rigorously monitors Internet use, it is highly unlikely that the Chinese government is unaware of an attack group that operates from the Pudong New Area of Shanghai,” says the Mandiant report. APT1 “systematically stole hundreds of terabytes of data from at least 141 organizations,” Mandiant said.

A report by the U.S. Congress last year said that increasingly dexterous entities backed by the Chinese government are trying to enter the U.S. systems, and called China “the most threatening player in cyberspace.” This means that the U.S. did not learn about the threat by reading Mandiant’s report, so it would be interesting to know why the Americans haven’t publicly demanded answers from the Chinese, if the threat is do evident.

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Mandiant Internet Security accuses Chinese Army unit of cyber attacks on U.S.

By LUIS MIRANDA | THE REAL AGENDA | FEBRUARY 19, 2013

A secret unit of the People’s Liberation Army (PLA) of China is behind a number of attacks suffered by businesses and organizations in the United States, according to a report released by the U.S. company Mandiant Internet security.

The document says that research conducted by Mandiant in the last three years shows that groups that cyber attacked government agencies, companies and American newspapers “are based mainly in China and that the Chinese government is aware of them.”

The report commissioned by The New York Times and other media, that sought to track down and clean up their computer systems, identifies PLA Unit 61398, based in Shanghai, as one of the entities responsible for the attacks. Digital signatures of the so-called ‘virtual raids’, says Mandiant, were traced to a 12-story building in the financial district of Pudong in Shanghai.

According to Mandiant, this division of the Chinese Army is kept up by thousands of employees, and English proficient programming techniques and network management. The unit has stolen “hundreds of terabytes of data from at least 141 organizations in a wide range of industries since 2006”.

Most victims are located in the United States, according to the report. There is also, though in smaller numbers, victims in Canada and the UK. The stolen information ranges from details of business transactions, such as mergers and acquisitions, to emails from senior managers, according to the study released in the U.S. on Monday.

“The nature of the work carried out by Unit 61398 is considered a state secret in China. However, we believe that is involved in harmful Computer Network Operations “, the report said. “It’s time to admit that the threat originated in China, and we wanted to make our contribution to arm and equip security professionals in order to combat this threat effectively.”

The report focuses in particular on a group, which it calls APT1, or Advanced Persistent Threat, which, has removed vast amounts of information and has targeted critical infrastructure. the report alleges.

“We believe APT1 can continue a campaign of cyber espionage in large part because it receives direct support from the Chinese government,” says Mandiant, identifying APT1 with Unit 61398.

In recent weeks cyber attacks on U.S. newspapers like the New York Times and Wall Street Journal, as well as others made to Twitter, have supposedly been linked to Chinese hackers. The New York Times said that hackers stole passwords and accessed the personal computers of 53 employees, after the newspaper published information on the family fortune amassed by the Chinese premier, Wen Jiabao.

A report by the U.S. Congress last year said that increasingly dexterous entities backed by the Chinese government are trying to enter the U.S. systems, and called China “the most threatening player in cyberspace.”

China has repeatedly rejected the allegations and says that the country is also a victim of hackers. “The hacker attacks are transnational and can be hidden. Determining their origin is difficult. We do not know how they can stand support the evidence on that report,” said Hong Lei, a spokesman for the Foreign Ministry of China.

“Arbitrary criticism, based on rudimentary data is irresponsible, unprofessional and does not help solve the problem … China is strongly opposed to piracy,” Lei said, while emphasizing that China “is a major victim of cyber attacks” and that “of all of the attacks that the country suffers, most come from the United States.”

The questions that remains is, if both governments are so sure that their they are mutually responsible for the cyber attacks, why haven’t they sorted out the problem? Instead, China and the U.S. resort to censorship and internet power grabs in order to combat an invisible enemy, they say, which requires that everyone surrenders their ability to freely navigate the world wide web.

Everyone knows that cyber wars are conducted by the strongest players in world affairs in an attempt to exercise dominance against each other. No bread and butter hacker has the capacity to penetrate the kind of security set at Pentagon or the Chinese government. It is clear that the cyber terrorists are the governments themselves, therefore it is absurd that average internet users are obligated to be spied on because of these governments’ cyber terror activities.

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Barack Obama incites the world to declare war on North Korea

By LUIS MIRANDA | THE REAL AGENDA | FEBRUARY 13, 2013

If anyone doubts whether the nuclear test carried out by North Korea is real, simply look at the reaction from Western nuclear powers, such as the United States and several European nations.

The nuclear test that North Korea conducted on Tuesday resulted in many reactions in the international community, which showed its concern by the new challenge of the Pyongyang regime.

U.S. President Barack Obama said on Tuesday that the “provocation” carried out by North Korea needed an immediate international response that was “fast” and “credible” to the North Korean regime. “The United States will continue to take the necessary steps to defend itself and its allies,” he said in a statement. Although this is clear recognition that the test was real and that the United States is worried about it, it is difficult to remember such a weak answer from a U.S. president. Besides inciting conflict, Obama has no idea how to deal with North Korea, Iran or any other non-aligned nation.

China, Pyongyang’s historical ally, expressed its “firm opposition” to the nuclear test. Last week, Beijing warned the regime of Kim Jong-un, through official media, that if it carried out a new test the country would “pay the consequences”, and even managed to utter the taboo word “break” and mentioned a possible reduction in aid to North Korea. The survival of the North Korean nation depends largely on the support of the Asian giant, especially in terms of energy. Strangely enough, the United States and China are commercial partners and many of the goods the U.S. sells to China, end up in the hands of the North Koreans.

Japanese Prime Minister Shinzo Abe, condemned the nuclear test describing it as “very unfortunate”. The defense minister said that Tokyo will review the sanctions imposed on Pyongyang. Besides punitive measures promoted by the UN, Japan, which has no diplomatic relations with North Korea since making its first nuclear test in 2006, applies a full trade embargo on the regime of Kim Jong-un, denying visas to North Koreans and limited financial transfers between his country and its Asian neighbor. As readers may have already noticed, the supposed opposition to North Korea’s tests and the so-called sanctions are simply window-dressing practices.

The United Nations secretary general, Ban Ki-moon has said it is a “clear and serious violation of Security Council resolutions.” He also said he was confident that its 15 members would take “appropriate action” in the meeting convened for Tuesday. But the U.N. has done nothing about the 2053 nuclear explosions conducted by the United States or the continuous leakage of nuclear radiation in Fukushima. Neither does the U.N. say anything about the tons of nuclear waste dumped in Italy or the thousands of tons of electronic waste dumped in Africa.

Russia has also condemned “firmly” the nuclear test, saying it is a violation of U.N. resolutions. “We condemn these actions and, along with the launch of a ballistic missile performed earlier (December), we believe they are in violation of Security Council resolutions,” said a source at the Ministry of Foreign News Agency Interfax. This is the type of hypocrisy that turns any negotiation sour. It is a violation of U.N. resolutions when North Korea does it, but not when China, Russia and the United States do it.

The British Foreign Minister, William Hague, said that the development of nuclear weapons by North Korea “is a threat to regional and international security” and that “it hinders the prospects for lasting peace on the Korean peninsula “.

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