Fiat World: Uprising and Downfalling

By James West

MidasLetter.com
February 11, 2011

Certain characteristics of crumbling empires are historically recurring, and pattern recognition practitioners are thus informed and so forewarned. Their discourse is labeled contrarian, hysterical, strident or radical, depending on the source of criticism, who seldom survive the subsequent reality to be told “I told you so”. Thats not the point anyway.

Napoleon in Russia, Rommel in North Africa, the Japanese at Pearl Harbour. The Romans, the Incas, Vikings, Mongols – all representative of empires whose downfall was precluded by geographic overextension of the armed forces, one of the aforementioned ubiquitous characteristics of regimes whose days are irrevocably numbered. And then currencies: the German Mark, the Italian Lira, the Zimbabwean dollar – diluted and inflated to astronomic excess – another sign of a civilization on the brink of decline, and perhaps, collapse.

Literature assures us that a nation who refuses to learn from the mistakes of previous generations is bound to repeat them. That legacy is now before us.

The surest symptom of a country who has lost the ability to objectively and correctly assess its position in the global pecking order and thus act appropriately is when they begin to abandon allies because the allegiance is no longer convenient.

Does this sound like anyone we know?

In the news from Egypt, an American-originated declaration of Mubarek’s impending resignation and departure is resoundingly refuted by that embattled leader. The United States Federal Reserve announces it will buy “back” $97 billion in debt, according to MarketWatch, who goes on to state the Fed has bought “$397 billion in U.S. debt since August”. The world’s most powerful nation in the 20th century has in the 21st passed its prime and is suffering horribly from dementia. Its like watching a faded starlet in Hollywood try to strut down Rodeo Drive, a laughingstock to passers by, but she convinces herself that she’s still ‘got it’.

How does the central bank of a nation $14 trillion in debt keep coming up with money to buy its own money? Is it not supremely revealing of the extreme depths of delusion to which this so-called bank and its governors have now descended? The fraud inherent in this perpetual shell game is obvious to all except the hucksters moving the shells around and the dupes naively trying to follow the pea shell in the hopes of winning a prize. The audience knows there is nothing under any of the shells.

The concentrated ownership of mainstream financial media among six major U.S. corporations is evident in the perpetual fact-warping that now passes for news. Any measly percentile of fabricated statistic is seized upon as rosy evidence of a return to robust economic health, while the plethora of legitimate indications to the contrary are completely ignored.

The defacto collapse of American influence over the Middle East is ominous for Israel, gathering frigates and aircraft carriers of the U.K./American allied forces notwithstanding. If the solution in Egypt is to be democratic and moderate, it will be under the impetus of the Egyptian people forthwith, and no American proxy will be legitimized. Bu continuing to meddle in the politics of the region, the United States galvanizes new enemies among those formerly who only harboured a distaste.

Authoritarianism has come to an end in Egypt for the time being. The outcome of what looks like will be free and fair elections will determine who is in charge of the very large and entrenched system of violent domestic control. Mubarek might be gone, but the secret police apparatus is intact, and will pass in one form or another to the next government. Should fundamental Islam prevail, the might just be a step into darkness, as opposed to towards light.

Russia has an authoritarian regime and no democracy. The wall came down but state control is now back in force, stronger than ever, as evidenced by that nation’s propensity for violence towards journalists and dissenters.

And what is the difference between the clashes with students in Beijing in Tiananmen Square and the protests in Tahir Square in Cairo? The main one is that whereas in Cairo, the army sided with the people, in Beijing the army is fanatically aligned with the leadership.

Gold Doesn’t Care
The fact that gold’s price performance in the last 40 days or so digresses thoroughly from its normal course during times of mid-east instability amid severe monetary and price inflation is pure evidence that either the price of gold is directly manipulated by banks, or that the coordinated campaign of disinformation by the Big 6 media division of the U.S. Treasury has finally become so fine tuned as to hypnotize recipients of its message. In either case, $2 billion in redemptions of Gold ETF GLD makes one wonder what has changed fundamentally to justify such a sell-off in a month where global instability and inflation are robust?

Or have those with a vested interest in the appearance of a stable dollar realized that they could use the billions of dollars in quantitative easing to directly influence demand for and thereby price of gold by incrementally building large holdings in gold ETF’s and then dumping them in compressed timelines to help generate severe price swings?

How very ingenuous to use the strength of gold’s demand and price metrics to undermine those very same dynamics! Buy up ETF shares with dollars fabricated out of thin air, then dump the built-up position in a single month to drive superficial dollar demand and coincident gold aversion. Whoever dreamed that up should get the congressional medal of honour and go straight to jail

These short term machinations aren’t relevant in the long run however, and only provide buying opportunities for those building a store of value in precious metals. Pundits speculate on an impending day of default for the U.S. dollar, when to sovereign bond holders, that day has come and gone, and the big players are tip-toeing to the exits accumulating gold as they go. When we finally shine the light on them an acknowledge the default has already occurred, the gold and silver price explosion to the upside beyond $2,000 will begin in earnest.

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Web 2.0 FBI backdoors are bad for you and for national security too

From Slight Paranoia, WEDNESDAY, FEBRUARY 09, 2011
by Christopher Soghoian, security and privacy researcher. 

Charlie Savage broke the news yesterday that the House will be holding a hearing in two weeks on the subject of CALEA – the 1994 law that forced telecommunications companies to purchase and deploy intercept capable network hardware. As Savage described in a series ofarticles last fall, the FBI is no longer happy with these intercept capabilities – it now wants modern technology firms like Skype, RIM, Google and Facebook to provide similar backdoors in their own services.

Public interest groups like EFF, the ACLU and CDT will of course do their best to argue that such backdoors would totally violate the privacy of millions of Americans. Unfortunately, this criticism will largely fall on deaf ears.

Those members of Congress who are strong believers in privacy will not need convincing. However, those members who are willing to grant any and all additional powers requested by those investigating pedophiles and terrorists have already made up their mind – in their eyes, individual privacy is a small price to pay.

As such, I am not going to waste my time explaining why CALEA II is a horrible idea on privacy grounds. Instead, I will now explain why, for non-privacy reasons, it is a bad idea to give the FBI what it wants -- and why doing so threatens national security.

Surveillance backdoors, like all other software, will have security flaws

Abusable flaws are routinely found in commercial software products (which is not too surprising, since software engineers are rarely trained in software security or the appropriate use of cryptography). To make a product 100% secure, engineers have to get everything right – protecting against all known attacks, as well as attack techniques not yet invented.

Now, consider this question – if the government is going to force Google, Facebook, Skype and RIM to create surveillance backdoors in their own products, how are these companies going to protect the backdoors to make sure they are not accessed by evildoers? If Google knew how to develop software that is 100% secure, surely it would already be applying these software engineering techniques to its products.

Of course, this is an impossible task, which is why the software products we all regularly use seem to constantly bug us to install security updates.

As such, we need to accept the fact that any surveillance backdoors that these firms are required to build will have security flaws, and that they will be abused by people who care even less about privacy than the FBI.

Governments around the world acquire and exploit security flaws in commercial software

More often than not, commercial software vendors do not discover their own flaws. They learn about them because “white hat” security researchers discover them and notify the company, or because “black hat” hackers discover the flaws, and either exploit them directly, or sell them to others who use them to steal users’ data, or use infected computers to deliver spam.

There is now a thriving economy for those wishing to sell “zero day” security flaws and exploits (that is, those not known to the community). While criminal gangs certainly seem to be interested in buying these exploits, they are not the only customers – governments around the world are on the market for this information.

Charlie Miller, a security researcher famous for discovering exploitable software flaws in Apple’s iPhone, also has a bit of experience selling security flaws. In an academic research paper a few years ago, he described how after discovering a flaw in the Linux operating system, he sold the information to a US government agency (presumably, the NSA, his former employer) for a cool $50,000.

Mr Miller’s experience is not unique – security researchers that have spoken with me confirm that US defense contractors (such as SAIC and Booz Allen Hamilton) purchase exploitable security flaws on behalf of their government clients. One researcher told me that bonuses are built into the contracts – that is, the longer the flaw remains useful and unpatched by the operating system or application provider, the higher the payment.

It would be foolish to assume that the US government is the only one doing this – foreign governments are probably buying any exploits they can get their hands on, as well as spending significant resources to discover these through in-house R&D.

Consider the following example - the recent Stuxnet worm that was used to penetrate Iran’s nuclear facilities used a number of zero day exploits in Microsoft Windows.

While no government has claimed credit for the worm, what is clear, is that whoever did it has quite a bit of security expertise. What this also means, at least as long as the US government claims that it had no role in stuxnet, is that there are other governments out there with the ability to discover (or purchase) and exploit flaws in US made software.

By requiring law enforcement backdoors, we open ourselves to surveillance by hackers and foreign intelligence agencies

In 2004, a still unknown entity somehow gained access to the the CALEA-compliant intercept system of Vodafone Greece, the country's largest cellular service provider.

Those customers whose calls were intercepted included the prime minister of Greece, the mayor of Athens and at least 100 other high-ranking dignitaries, including an employee of the U.S. embassy.

The story of the "Athens Affair", as it is commonly known in security circles, is perhaps the best example of the privacy risks associated with lawful interception capabilities in communications infrastructure. I'm not going to go into all the details here, but there is an absolutely fantastic, multi-page writeup of the incident in IEEE's Spectrum magazine.

While Greek investigators still have not been able to conclusively determine who penetrated their network, all signs (including the mysterious "suicide" of a Vodafone employee in 2005) indicate that it was the work of a foreign intelligence service.

Similarly, in 2010, soon after Google disclosed that Chinese hackers had broken into the company's network, news reports surfaced indicating that the hackers had gained access to Google's lawful surveillance systems.

[Google's Chief Legal Officer David] Drummond said that the hackers never got into Gmail accounts via the Google hack, but they did manage to get some "account information (such as the date the account was created) and subject line."

That's because they apparently were able to access a system used to help Google comply with search warrants by providing data on Google users, said a source familiar with the situation, who spoke on condition of anonymity because he was not authorized to speak with the press.

"Right before Christmas, it was, 'Holy s***, this malware is accessing the internal intercept [systems],'" he said.

In April 2010, at a public event at Google's Washington DC office, I asked the Pablo Chavez, the company's director of public policy if the reports were true. His response, while evasive, still seemed to suggest that there was more to this story:

I'm not familiar with the details. But I do know that there is this contining, ongoing investigation of the matter. Hopefully, Over the course of time, we can talk a little bit more about precisely what happened. I am familar with the report, I am just not a in a position to answer any details.

It has now been a year since the company first disclosed that the hack occurred, yet it still has not revealed if its intercept systems were in fact breached.

It is time for Google to fess up - its customers have a right to know, and members of Congress similarly need to be aware of the risks of adding further backdoors to our communications networks.