Relevant and even prescient commentary on news, politics and the economy.

If a Default, Who Gets Paid First?

China.

When the tax payer bailed out Freddie Mac and Fannie Mae in 2008, foreign central banks never lost a dime. At that time China had $376 billion in bond holdings. China was paid in full.

According to Bloomberg, China is the largest foreign owner of Treasuries: $1.28 trillion. Japan is second with $1.14 trillion.

The U.S. has run a sizable trade deficit with China; a much smaller one with Japan. Altogether, the U.S. Trade Deficit has been mind boggling. China used its trade surplus money to buy Treasuries from the U.S. In short, every month we owe our trading partners a great deal of cash.

Via multinationals like Apple, IBM, Nike (you name the company), we outsourced our production to third world countries. We then bought those goods, making a handsome profit for the companies and China. China took its share and bought bonds and T-Bills.

Yes, China will get paid first. Japan will get paid second. Other foreign banks will be paid. Social Security will be paid after bond payments. The rest of us will have to stand in line. And hope.

trade percentage gdp 1960-2012

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Balkanization of the Internet: Brazil’s Response to the NSA

“To extricate” Brazil from the reach of the NSA and American technology giants, Dilma Rousseff, President of Brazil, has proposed doing the following:

constructing submarine cables that do not route through the US, building internet exchange points in Brazil, creating an encrypted email service through the state postal service and having Facebook, Google and other companies store data by Brazilians on servers in Brazil.

To protect its population and its government, all countries may have no choice but to follow Brazil’s lead: control all points of Internet entry and exit, as well as insist that any data stored by any foreign company be under its control.

What Brazil is doing makes perfect sense.  But how can Brazil protect its inter-country communications, if those communications must, of necessity, pass through NSA hands? A giant Brazilian company runs a mine in Sudbury, ONT.  (Sometimes, the relationship between Canadians and Vale, the Brazilian company, are a bit…rocky.  If that relationship becomes too dicey, Canada, which is very cozy with the NSA, may well take a peek at any Vale communications leaving Canada for Brazil. Or maybe a competitor with NSA connections wants to take a peak.)

If the answer is a Brazilian mail carrier, say goodbye to any global mailing system. Microsoft Outlook? Gone.  Google’s Gmail? Gone. Every country will have its own mail carrier.  China will have its mail server.  Russia will have its mail server.  We will have to work out how those hundreds of mail servers communicate. 

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Trade and the Great Recession

The Trade Deficit is among the rarely discussed causes of the Great Recession; yet, to this observer, it is the primary cause.  The Deficit plummeted further as deregulated banks peddled bad debt and allowed homeowners to use homes as ATM machines.  Everything was done to keep the consumer on a buying spree, buying more and more imports, while manufacturing shrank and exports dwindled. These imports, ironically enough, were products of American and Western multinationals now exporting goods from third world countries.

No wonder income inequality soared; the real winners of trade policy and the subsequent buying spree were the top echelons of the multinationals.  Those who insist that CEO billionaires share the wealth with American workers should understand that American workers often had little to do with making the products the multinationals were peddling.

A plummeting trade deficit revealed the profound flaws in a poorly conceived and foolishly implemented plan to globalize the world economy.  Globalization failed.   The proponents of globalization are now strangely silent, preferring to discuss other topics.

The question is: What went wrong with American Trade Policy?

Trade Data 1960-2012X

 

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Backdoors all over the Internet–Goodbye Fourth Amendment

Nothing is safe: Your medical records, trade secrets, bank accounts, credit card passwords, presumably private email–anything that goes over the Internet or through a computer connected to the Internet, any and everything is now open to prying eyes. According to NSA documents examine by the Guardian,The New York Times, and ProPublica, the NSA

has circumvented or cracked much of the encryption, or digital scrambling, that guards global commerce and banking systems, protects sensitive data like trade secrets and medical records, and automatically secures the e-mails, Web searches, Internet chats and phone calls of Americans and others around the world, the documents show.

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Another Mail Provider Shuts Its Doors

Following the lead of Lavabits, Silent Circle is closing down its business. Unlike Lavabits, it has not been told to provide access to customer data; but, Silent Circle sees the handwriting on the wall. It can no longer provide secure and private.

As an article within Silent Circle points out, metadata cannot be encrypted or protected. The header of all email includes such unprotected data as the name of the host that connected, the IP address of the sender as well as the IP address of the receiver, the encryption status of the message, the type of cipher and its size, date and time sent, etc…. Assuming the actual message was not viewed–a perhaps unwarranted assumption–, the problem is that the size and scope of the snooping is so enormous that a great deal of information can now be inferred by simply knowing, for example, the number of times you emailed specific persons, the size of the emails….and so forth.

With the tapping of backbone internet providers, interested parties can now see all traffic on the internet

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Groklaw closes: Another Victim of the Surveillance State

Like the owner of Lavabit, the founder of Groklaw, Pamela Jones, will close the Groklaw site, a site that has won numerous awards for legal analysis, covering such topics as the EU Microsoft anti-trust case, the SCO-Linux Lawsuits….The problem: Email privacy is now simply a fantasy. Open source, Groklaw depends on reader information. In short, Groklaw depends on email. For its work, Groklaw has received awards from the American Bar Association, the Electronic Frontier Association…. The Library of Congress selected it for its Web Archival Project, in the category of legal blogs.

An open-source legal website, Groklaw is now defunct.

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An Email Company Decides to Go Out of Business Rather than Play Ball with the NSA: A Company with Principles

Lavabit has decided to stop its business rather than violate the Constitution.

My Fellow Users,

I have been forced to make a difficult decision: to become complicit in crimes against the American people or walk away from nearly ten years of hard work by shutting down Lavabit. After significant soul searching, I have decided to suspend operations. I wish that I could legally share with you the events that led to my decision. I cannot. I feel you deserve to know what’s going on–the first amendment is supposed to guarantee me the freedom to speak out in situations like this. Unfortunately, Congress has passed laws that say otherwise. As things currently stand, I cannot share my experiences over the last six weeks, even though I have twice made the appropriate requests.

What’s going to happen now? We’ve already started preparing the paperwork needed to continue to fight for the Constitution in the Fourth Circuit Court of Appeals. A favorable decision would allow me resurrect Lavabit as an American company.

This experience has taught me one very important lesson: without congressional action or a strong judicial precedent, I would _strongly_ recommend against anyone trusting their private data to a company with physical ties to the United States.

Sincerely,
Ladar Levison
Owner and Operator, Lavabit LLC

Defending the constitution is expensive! Help us by donating to the Lavabit Legal Defense Fund.

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Extradition and US refusals

Glenn Greenwald in The Guardian  pointedly reminds us that the “US frequently refuses extradition requests even if it involves a serious crime and there is an extradition treaty.”  The entire piece  is below.

On Obama’s cancellation of summit with Putin and extradition

The US frequently refuses extradition requests where, unlike with Snowden, it involves serious crimes and there is an extradition treaty.

(updated below)

President Obama today canceled a long-scheduled summit with Russian President Vladimir Putin in part because the US president is upset that Russia defied his personal directive to hand over Edward Snowdendespite the lack of an extradition treaty between the two nations. That means that US media outlets will spend the next 24 hours or so channeling the government’s views (excuse the redundancy) by denouncing the Russian evil of refusing extradition. When doing so, very few, if any, establishment media accounts will mention any of these cases:

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National Security at Any Cost

We do have Fourth Amendment Rights. Fourth Amendment Rights are for everyone: Tea Partiers, Republicans, Democrats, Independents…. The Obama administration is moving us step by step towards a totalitarian regime, where the interests of the few over-ride the democracy of the many. Read the Fourth Amendment carefully:

The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, or the things to be seized.

Those who plead National Security at all costs are no different and no less dangerous that Joseph McCarthy. He, too, pleaded National Security, as he destroyed countless lives and reputations. Nor are those who plead National Security at all costs any different from J. Edgar Hoover who spied on Martin Luther King in the name of National Security.

Do you really think that the kind of free hand the NSA is asking will protect us from the likes of McCarthy and J. Edgar Hoover? I do not think so.

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