Financial topics

[reviresco]

“… In the earlier work of Marx, however, the idea of creative destruction or annihilation (German: Vernichtung) implies not only that capitalism destroys and reconfigures previous economic orders, but also that it must ceaselessly devalue existing wealth (whether through war, dereliction, or regular and periodic economic crises) in order to clear the ground for the creation of new wealth.”
Aadens- Sat Jul 23, 2011 10:17 pm

On the use of deflationary surgical strikes to stabilize the effects of Quantitative Easing.

Deflation, like any other force of nature, cannot be stopped, but what if it could be channeled in a way that may cause less damage than if it were to whirlpool its way through the world, sucking cash out of circulation from one economy to the next. Were the deflationary effects of major institutional failure first noted as a potential tool during the 80’s with the Continental Illinois and other assorted Savings and Loan failures? Or, more likely, were the deflationary corollaries of just such a malfunction discussed for decades beforehand and judged un-useful (or immoral) at the then current levels of U.S. dollar float? The demise of Long Term Capital Management and the highly visible scrambling to keep the public’s confidence by most of the major financial players may have been a good test case. 2008 however, and the unraveling of Bear Stearns, Lehman, AIG, and multiple other leviathan creditors and other entities sopped up a lot of wilty lettuce out there. I’ve read some estimates of 15 trillion dollars removed from the system after that bout of the autumn vapors suffered by the out-of-favor crowd and their weak and ill counterparts, plus the subsequent bank failures that have occurred to date. (Speaking of which, the FDIC money being credited to the balance sheets of the firms taking over the failed banks is no crisis as of yet. Americans for the most part seem content leaving their funds under the new flags of each bank when it’s taken over. This being a testament to the reputation and management of the FDIC. It remains to be seen, however, how many Americans will renege on their mortgage obligations and the extent of the injury that may cause to the takeover firms and the FDIC. I do not think it will be crushing.)

Back in early 2005 I had a chance conversation with an employee of Ambac. Ambac of course being one of the companies that underwrote many subprime mortgage backed securities. This gentleman was deeply concerned about the underwriting standards of the banks providing the mortgages, how low these standards were going, and their possible effect on Ambac should the newly minted mortgagees run into trouble. I’ve since read that the failure of Ambac alone removed over 1 trillion from the pool of dollars. There are at this time over $500 trillion in derivatives active. During the next crisis, as with the previous one, many will cancel each other out, but there will be spillover. Can the spillover be controlled in a “surgical” manner?

I continue to agree with John that there will be deflation, but I think it will be purposefully routed to the extent possible and occur over a brief period as it did in 2008, to be followed by inflation. The trick will be to judge the out of favor, the weak, and the outright marks that are being positioned to take the shot and not have an ownership interest in these entities or have any savings with them unless insured by a government entity. Or, to short them. And I also think that we may see further deflationary surgical strikes used to contain the ensuing inflation to the extent possible. You often hear that a master of the martial arts knows before an opponent strikes him and is able to strike first. What you never hear (probably because they can’t sell many karate school memberships with it!) is that a true master is one that is not even there when the attack happens.
(The Fifth Maxim of Sun Zi: To win without fighting is the highest achievement of a warrior.) Figure out who’s the mark and don’t be there.

[jcsok]

Regarding where we are in this Fourth Turning, I had bookmarked a post from Zero Hedge some time ago, and reviewed it again. The post's premise is that the election of 2012 will be a watershed point. The post reviews the Fourth Turnings of the American Revolution, Civil War, and Great Depression, and compares 2012 to being as pivotal in history as the election of 1860.

http://www.zerohedge.com/article/guest- ... tical-1860

[Higgenbotham]

Some news stories on Fukushima and the hacker group Anonymous. Are these stories significant?

Fukushima - Sick children and dying pets in Tokyo
http://www.examiner.com/civil-rights-in ... dying-pets

Anonymous - Undeterred by arrests, hacks FBI contractor and releases data
http://blogs.forbes.com/andygreenberg/2 ... r-mantech/

Anonymous - These governments and corporations are our enemy
http://mashable.com/2011/07/21/anonymou ... statement/#

[OLD1953]

I presume that chart is in picocuries, I don't read Japanese. I also have no idea what the former level in the Tokyo sewers was, and that's rather important as well.

if it's referring to picocuries, 130 would be higher than expected, and might cause thyroid problems due to uptake of iodine in the thyroid gland. However, sewer water isn't drinking water, and as a plain radiation source, 130 picocuries is nothing. BUT, I don't know what the units are, I'm guessing.

However, I have to presume Tokyo University has radiation measuring equipment, so do a lot of labs in any major city, and there are also the individuals who have purchased radiation monitors. If we had enough radiation in Tokyo to cause radiation sickness, some of these people would be sounding the alarm. Measurement equivalents:

http://www.stevequayle.com/ARAN/rad.conversion.html

Incidentally, the EPA has fixed the level of radioiodine in water at 3 picocuries / liter or less, IIRC. However, they aren't claiming you'll get sick over those levels, that's just what they set as a standard.

The hackers/leakers strike me as being part and parcel of the anti government groups that are growing in influence here and elsewhere. They are anarchistic in belief and intent, and are intent on tearing government down.

J, couple of things about the zerohedge article, one is that the employment rate due to the New Deal was a good bit higher than usually reported, as people working on New Deal programs were not counted as employed, IIRC. So that headline figure of 17% is not generally accurate in terms we'd use today. Another is that so many families now have (had) two wage earners, and one is still working. They are tight, but making do. It's really hard to actually compare the 1930's to today in employment/suffering terms.

[aedens]

http://www.zerohedge.com/contributed/news-matters-3

While the sector is improving -- U.S. July auto sales are expected to hit an annual rate of around 12 million vehicles, an improvement over May and June --
that figure still lags the 17 million-plus number sold in 2000.

Found this: World copper production, million tons/year World in 1960 3.9 million tons/year and 2010 of 15.4 million tons/year
I thought the burn rate was 5x on king copper but 3.948
Still a staggering number IMO, oh well

[Higgenbotham]

I presume that chart is in picocuries, I don't read Japanese.

The report looks to indicate the numbers are in Bequerels per kilogram (Bq/kg). There are 27 picocuries per Bequerel. I've seen some corroborating reports of radiation spikes on the US west coast during the comparable time period but nothing beyond that. It seems safe to say the disruption and contamination is widespread enough to have long range effects on the global economic system, especially given its fragile state.

As far as Anonymous goes, is there anything we can measure in order to estimate the growth of such a group? At some point, the number of members in a group such as Anonymous could pass the "chaos threshold" where such activites are too widepsread to be controlled by the authorities.

Possible indicator of Anonymous membership growth:

The hacker team Anonymous is inviting anyone with a computer and a Web connection to become “hacktivists” by offering a free download of an assault tool called LOIC. All targeted sites are flooded with information with the LOIC attack tool which links a computer to a voluntary botnet. LOIC was downloaded 31,000 times already as of Thursday morning. There was a shut down Wednesday for sites like MasterCard and Visa. The LOIC botnet was responsible for the DDoS attacks.

http://janetkbray.blogspot.com/2010/12/ ... otnet.html

This is a far larger number than I would have thought. Wednesday and Thursday would refer to the early December 2010 days of the attacks.

I found a page that tracks the current LOIC downloads. They are up to about 47,000, but I'd also imagine there are many versions of such a tool.

Anonymous
Estimated Membership: 10,000
Description: Anonymous is the second largest hacker group of this kind in the world, and they have been responsible for some of the most historical cyber actions and battles ever. Anonymous is a trans-national and global organization with members in over 100 countries around the world.

Honker Union of China
Estimated Membership: 25,000
Description: Formed in 1999 in response to the United States bombing of the Chinese embassy in Belgrade, Yugoslavia. HUC is a group known for hacktivism, mainly present in Mainland China. Literally the name means "Red Guest", as compared to the usual Chinese transliteration of hacker (黑客, hēikè, literally Black Guest as in black hat). The Honker Union of China is a nationalistic group bent on defending the Government of China from all enemies both perceived and actual. They are also the largest known Cyber Militia in the world.

http://serpentsembrace.wordpress.com/20 ... derground/

[aedens]

Unix red hat class of 93 here. We decompiled all the query's
popeye, bambam, carrier still work for the good guys.
carrier is still around for dod

[OLD1953]

Depends on how you define "attack" too. Got asked that question by the IASO on a Navy base once, so asked for the DISA definition of "attack". She told me, so I ran the numbers on the router, told her the figure (years ago, 100K plus, daily) and she about died. There are literally millions of people scanning the internet constantly, and every time a scan hits your routers and tries to pass through, that's an "attack".

The solution to all this "attack" nonsense is simple enough and already in place, people just have to be motivated to use it. If everyone, no exceptions, will start using IPSEC, the problem goes away. But it's complicated to use right now, and ISP's have to be motivated to require it. For a time, gateways would still be required to access external sites that didn't use IPSEC, but eventually, when everyone was using it, classic "I'll hack you by sneaking in" just isn't possible any more. There would be no means for an unvalidated connection to attach to any port.

[aedens]

old53
http://ithreats.net/2011/07/26/backdoor-olyx/
Trace is another issue for malice.
Using symmetric cryptography algorithms are past my concern any more
Noise is all they want.
And thank you for your work.

[OLD1953]

Everything is supposed to look like noise after encryption, that's certain. Which has made quite a few wonder if the hash we read as the "cosmic background" actually contains data we don't know how to decrypt. Aliens talking in the static, what a concept!

Business is moving to a mattress economy, because they think the dollar is OK but the government is not. Sensible of them, IMHO.

http://online.wsj.com/article/SB1000142 ... 13062.html

U.S. companies large and small also chose an extraordinary playbook, stashing cash in the corporate equivalent of mattresses—bank accounts that yield no interest but are insured by the federal government (a paradoxical vote of confidence given the shenanigans that were taking place in Washington).
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One executive even suggested that if this "run to the bank" continues, lenders might consider introducing negative interest rates on deposits (savers would have to pay a fee to park the money in the bank) to keep money out.
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