THE REAL STATE OF THE ECONOMY

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On edge of something much worse than what we had in 2008 and 2009

By Doug Casey
Doug Casey’s international Man
July 31, 2014

Peter Schiff: Joining our program now is Doug Casey, and if you don’t know Doug, he is a libertarian economist. He is a bestselling financial author. He’s an international investor, entrepreneur, and founder/chairman of Casey Research. They publish a monthly newsletter, Casey International Speculator, and most recently Doug has produced a 30-minute documentary called Meltdown America, which I watched just yesterday on the Internet for free. I would encourage everybody to watch it. It’s a very entertaining half hour.

Doug, welcome to The Peter Schiff Show.

Doug Casey: Thanks, Peter. It’s my pleasure.

Peter: So in particular about your movie, which I thought was well done, the story that was most compelling to me was the interview with the gentlemen from Zimbabwe who had lived there most of his life. He was prosperous, had a business, and then had the foresight to read the writing on the wall, leave everything behind, and flee to Australia. He warned his friends—who made fun of him—and they then ended up having their property seized.

Doug: Yes, it’s an absolutely true story, of course. I’ve spent a lot of time in Zimbabwe and before that in Rhodesia over the years. I think the first time I went there was in 1976. His story is quite accurate about what happened in Zimbabwe, but it’s happened in a number of places in the world, and it’s going to happen in other places in the future. This is because most people don’t realize that as big as their investment risks are today with many markets being overinflated and so forth, their biggest risks are actually political risks. The biggest danger to you is your own government. In his case it was the Zimbabwe government. I guess most of the people listening now are Americans, and actually the US government is like a predator stalking us on the African plains.

Peter: What really is compelling about the story and what people should really take to heart is the attitude that pervades is that, well, it’s not going to happen here. It can’t happen here. People don’t want to think about that worst-case scenario. They want to assume that things are going to be okay, and if somebody is warning about this potential doomsday, that is the person whom they ridicule, who they say, oh, you’re crazy, that’s never going to happen, and, it happens in places like Zimbabwe. But expand on it, because it’s happening in America.

Doug: Well look, I hate to sound like a Cassandra, a gloomy Gus. I hate to say the sky is falling, and I know you do too. But you’ve got to be realistic. I don’t call it America anymore. I call it the US because although America is a fantastic idea, a wonderful idea, America as a concept is rapidly disappearing from the land area called the United States. So yeah, I hate to sound gloomy, because there are lots of reasons for optimism that we can recount. We have more scientists and engineers alive today now than we’ve had in all previous history put together. So that’s cause for optimism. But there is a lot of cause for real pessimism certainly in the short term, in the next decade or so in the US, and it could get worse from there. So you and I are pretty much on the same page economically, and it makes me a little uncomfortable having to be gloomy, but I have to be. I have to assess the facts.

Peter: Yeah, you can’t ignore the facts. So you don’t like to say that the sky is falling, but then if you see it falling, you don’t want to just pretend that you don’t see what you see because that’s worse. I mean, it’s better to warn about the catastrophes. Maybe your warnings could help put into effect policies that might avert the catastrophe, or if you can’t do that, at least help as many people as possible prepare for it in advance so that they don’t get hit by surprise.

Doug: Yes, although I greatly discount the odds of things changing because policies and governments have a momentum of their own. Imagine a village at the bottom of a valley, and that 100 years ago collectivism and statism started out as a small snowball, and now that snowball has turned into a giant avalanche. Now once it gets to the giant avalanche stage, you can’t stop it. So I’m afraid that the village at the bottom of the valley is going to be smashed, so you’ve got to run for high ground. I don’t think we can stop it at this point. The trend is too entrenched, too far in motion, and the fact that 50% of Americans are reliant upon the government for their income alone is a guarantee of bad things to come.

Peter: Yeah, and Doug, you have been an observer, a critic of this trend that has been ongoing in America for a long time. I mean, it’s not like we suddenly find ourselves on the precipice of disaster. We’ve been on that precipice for a long time. It’s kind of amazing that we haven’t fallen over just yet, but it’s been a long time building. Even my dad was in this camp back in the ‘70s, issuing warnings. But what do you see today that might make you think that this is the endgame? I mean there can’t be another couple of decades where you’re going to be sounding the alarm.

Doug: Yeah, that’s a very interesting point, Peter. When do we reach the actual endgame as opposed to just an accelerating downturn? I would say that it started in 2007. I think that’s the endgame because the Fed’s balance sheet—which is the best indicator of how much actual new money they’re creating—has gone from $500 billion to $4.5 trillion just in the last five years, and they’re still creating more. So they’ve shot all their arrows and when the economy turns down again—and I think it is in process of doing that now—there’s nothing they can do. They have already reduced interest rates to near zero, the Chinese and the Japanese aren’t buying any more government debt, and the official number is $500 billion a year of deficit now, so the Federal Reserve is going to be printing up money wholesale. This is a very scary thing, so yeah, I think we actually have reached the actual edge of the precipice.

Peter: And the amazing thing, too, and you point this out is they’re telling us we’ve been in a recovery for five years. This means statistically we’re also getting close to the next recession. Just by the probability, how long the expansion has been, yet we’ve never begun a recession where rates are still at zero. We’ve never begun a recession while they are still stimulating us from the previous recession. And nobody seems to worry about the outcome of entering a recession from the position that we are in right now.

Doug: And the numbers that they crank out to make everybody feel good are almost as phony as the numbers that the Argentine government cranks out. I live in Argentina most of the year and there, the Cristina Fernández government says well, we only have 10% inflation. But everybody knows that it’s 30 to 40%. And here they say we have 1-2% inflation. I would say that inflation is realistically in the 8-10% range here in the US—and it’s going much higher.

Peter: And that makes a lot more sense to me, given what I’m observing in the actual economy. The critics who argue that that’s impossible, that the people who think that inflation is more than 2-3% percent, they say they must be wrong, because that would mean that the economy has not experienced any legitimate economic growth. And to that I would say, absolutely, it hasn’t. The growth is all a fantasy. It’s all a result of the assumption that there is no inflation, when there really is because what we have is inflation masquerading as economic growth. But the bottom line is the economy is really contracting, that’s why the labor force is shrinking, that’s why we’re using less energy, that’s why the people’s standard of living is going down, and real incomes are falling and job opportunities are disappearing. It’s because we’re in a recession and no one wants to admit it.

Doug: You are absolutely right, and from this point it is going to get much more obvious and get much worse. I just wonder what the social consequences are going to be when the economy goes into a free-fall again, maybe by the end of this year. I think certainly next year. I mean it’s an open question whether people will riot.

Peter: You can already see the frustration. I often joke, if this is the Obama recovery, imagine how bad the recession is going to be. And you know, we’re running these deficits. The president is bragging now that the deficit is finally below $1 trillion, that it might be $600-700 billion, but that’s the deficit in the recovery. If we slip into a legitimate or acknowledged recession, where are the deficits going to go, $1.5 trillion, $2 trillion? And how can we possibly finance that when the world is already saturated with the debt that we’ve issued to stimulate us out of prior recessions?

Also, I’ve got to get to gold and silver, something that I know you’ve been advocating for a while. When it comes to gold and silver, I’ve never seen an environment where you have so many central banks embracing inflation as a goal, that they want more inflation, and they somehow think that it’s going to help the economy; and at the same time you have complete complacency on the part of investors to any of the risks associated with inflation that all these central bankers are promising to create.

Doug: As you are well aware, Peter, it was Lenin who said the best way to destroy a country is to debauch its currency. It’s perverse and idiotic what all the central banks around the world are doing at this point. But some are worse than others. The Europeans are out of control. The Japanese are out of control. The Chinese Central Bank and of course the Fed here in the US are out of control. So that’s one reason why I continue accumulating gold. It’s the only financial asset that’s not simultaneously somebody else’s liability.

Peter: Yeah, and you’ve been a buyer for a long time, a regular buyer and holder of metals. What do you think it’s going to take, though, to convince the skeptics who are so in love with paper and who make fun of the gold bugs for their irrational obsession with this obscure obsolete yellow metal? What do you think it is going to take for the mainstream to start buying into gold and silver, and of course the mining stocks?

Doug: I think it’s going to take a financial and economic collapse. I hate to say it, but I think we are on the edge of something that is much worse than what we had in 2008 and 2009. I look around the world at places where you can put your capital, real estate is overpriced, the stock market is greatly overpriced, the bond market is in a historic bubble, that’s about the best short sale I can think of in the world. So what are you left with? Gold is not a giveaway the way it was in 2001 at $250 an ounce, but it is reasonably priced, so I’m going to continue to buy it. I think there’s going to be a panic into gold, quite frankly.

Peter: You know, Doug, I think it could be just as big a giveaway now. If you look at the cost of production of gold today versus what it was 12 years ago, it costs a lot more to produce gold, and if you look at the amount of money that the central banks have created over the past 12 years and the amount of money that they are threatening to create, I think you could make a case that gold is cheaper now at $1,200 than it was at $300.

Doug: Well, when you look at the cost of mining new gold, there are about 80 million ounces produced every year, and there are perhaps six billion in total existence. Most of the mining companies in the world, the big ones like Barrick and Newmont, it’s not profitable for them to produce gold even at $1,300 an ounce when you consider all the costs of mining. So yes, I wouldn’t argue with you.

Peter: You talk about a bubble in assets like stocks and real estate. The irony of it is, the professional investors who are happily paying ridiculous valuations for stocks, the only bubble that they can identify is the one that doesn’t exist—except in their minds—and that is the bubble that they see in gold.

Doug: Yes, that’s right. The real bubble is in the bond market, and the bond market is much bigger than the stock market, so when the bubble in bonds bursts, it’s going to be very ugly. I’ve got to make a distinction, and I think you will agree with this. I’ve bought gold my whole life. I’ve never sold one ounce because I buy it for safety, for savings, prudence, and insurance. But I’ve also been very involved in gold stocks for many years, and gold stocks are a different animal than gold itself, and I treat them as a speculative vehicle because gold stocks are perhaps the most volatile class of securities in the world. The Vancouver Stock Exchange, which trades about 1,500 supposed gold companies, regularly goes up ten for one and then collapses 95%. As we speak at this time, it’s at a cyclical bottom. So I think it’s an extremely high-potential speculation to get into gold stocks at this time.

(Editor’s note: You may want to check out our Casey International Speculator publication which specializes in finding high-potential speculative opportunities in junior mining companies.)

Peter: Yeah, I agree with you. Of the nations that you travel to, which would you consider to be the most stable, maybe the ones that offer the best not only investment opportunity, but opportunity to live if you want to leave the United States?

Doug: Well, the fact of the matter is that all over the world these governments collude with each other in these clubs they belong to like the United Nations, the IMF, and the OECD, and they are all going in the wrong direction, which is to say more state power, more taxes, and more control. I’ve been to most of the countries in the world, and where I spend most of my time is in Argentina. The people there are used to stupidity from their government and despise their government.

Peter: Well, that’s for sure, Doug. They are prepared for stupidity, unlike Americans who are going to be surprised by it.

Editor’s Note: Be sure to check out http://www.SchiffRadio.com for more on Peter’s superb radio show. Also, don’t forget to catch our new free documentary Meltdown America, which discusses how to survive an economic collapse with examples from Zimbabwe, Argentina, and Yugoslavia. You won’t want to miss it.

EU on high alert as Germany agrees to accept Ebola patients

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A German hospital has agreed to treat Ebola patients amid widespread fears of a possible outbreak of the deadly disease in Europe. Over 670 people have already been killed by the disease in West Africa with doctors struggling to control the epidemic.

A German hospital in Hamburg agreed to accept patients following a request from the World Health Organization (WHO), Deutsche Welle reports. Doctors assure that the utmost precautions will be taken to make sure the disease does not spread during treatment. The patients will be kept in an isolation ward behind several airlocks, and doctors and nurses will wear body suits with their own oxygen supplies that will be burned every three hours.

German authorities were expecting the arrival of Sheik Umar Khan, an Ebola expert who caught the disease while treating patients in Sierra Leone, but he died before he could be transported.

“We were actually anticipating the patient’s arrival over the weekend,” Dr. Jonas Schmidt-Chanasit, head of the viral diagnostic unit at Hamburg’s Bernhard-Nocht-Institute, told German public broadcaster NDR.

This latest outbreak of Ebola originated in Guinea in February and quickly spread to Liberia, Sierra Leone and Nigeria where the first case was reported last week. The disease has already claimed over 650 lives and has prompted authorities in Europe to take measures to prevent its spread.

British Foreign Secretary Philip Hammond will chair a meeting of the Cabinet Office Briefing Room (COBRA) on Wednesday to discuss the government’s reaction to the outbreak of the deadly disease. On Monday, a man was tested for the virus at a Birmingham Airport following a flight from Nigeria via Paris. The Department of Health later confirmed that the tests were negative and said the UK authorities were prepared to deal with the threat of Ebola.

“Protecting the public from infectious diseases is a priority and we lead the world in this field. We are well prepared to identify and deal with any potential cases of Ebola,” a Department of Health official told reporters.

In Hong Kong, a woman has been hospitalized with a suspected case of Ebola. According to reports from China Daily, the woman had recently returned home from a trip to Africa.

In an effort to confine the spread of the disease, the International Civil Aviation Organization will consult with the World Health Organization.

“Until now [the virus] had not impacted commercial aviation, but now we’re affected,” WHO Secretary-General Raymond Benjamin told the media, referencing the death of a 40-year-old man who died of Ebola after traveling on Togo-based airline ASKY from Liberia to Nigeria via the Togolese capital of Lome.

“We will have to act quickly,” Benjamin said. “We will consult with the WHO to see what types of measures should be put in place.”

The Ebola virus spreads through direct contact of bodily fluids and is deadly in up to 90 percent of cases. Symptoms include fever, vomiting and internal bleeding.

Chinese hackers obtained info on Israel’s Iron Dome missile defense system – report

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In a raid seeking information related to Israel’s Iron Dome missile defense system, Chinese hackers infiltrated the databases of three Jewish defense contractors.

In addition to taking information on the Iron Dome, the attackers were also able to nab plans regarding other projects – including Unmanned Aerial Vehicles, ballistic rockets, and “detailed schematics and specifications” for the Arrow III missile interceptor.

According to independent journalist Brian Krebs, the intrusion occurred between 2011 and 2012 and was carried out by China’s infamous “Comment Crew” – a group of cyber warriors linked to the Chinese People’s Liberation Army (PLA).

In May, the United States charged five members of this group with cyber espionage against American computer networks. The hackers reportedly infiltrated US systems in order to “steal information that would provide an economic advantage” for Chinese companies, including “Chinese state-owned enterprises.”

Although it’s unclear exactly how much data the hackers were able to obtain, Maryland-based intelligence firm Cyber Engineering Services (Cyber ESI) identified more than 700 documents that were stolen. The real number is believed to be much higher.

Speaking to Business Insider, University of California researcher Jon Lindsay said the intrusion could signal that the Chinese are interested in learning more about missile defense – which is considered notoriously difficult to become proficient in – but it could also be an extension of Beijing’s typical cyber espionage practices.

“The Chinese style of espionage is more like a vacuum cleaner than a closely-directed telescope,” Lindsay said. “They go after a lot of different kinds of targets — the leaders in any particular industry.”

As the news outlet speculated, Chinese interest in the Iron Dome could have been triggered by the missile shield’s success during Israel’s battle with Hamas in 2012. Krebs noted that Israel claims the Iron Dome has intercepted one-fifth of the 2,000-plus rockets fired their way in the most recent outbreak of violence.

An Israeli soldier walks near the launcher of an Iron Dome missile interceptor battery deployed in the southern Israeli coastal city of Ashkelon (Reuters/Amir Cohen)An Israeli soldier walks near the launcher of an Iron Dome missile interceptor battery deployed in the southern Israeli coastal city of Ashkelon (Reuters/Amir Cohen)

Regarding the hack, one of the Israeli defense firms involved declined to say whether any of its partners in the US were alerted to the security breach, which is notable considering that Congress has delivered hundreds of millions of dollars to Tel Aviv in Iron Dome funding.

“At the time, the issue was treated as required by the applicable rules and procedures,” Eliana Fishler, a spokesperson for the defense firm Israel Aerospace Industries, said to Krebs. “The information was reported to the appropriate authorities. IAI undertook corrective actions in order to prevent such incidents in the future.”

Meanwhile, CyberESI CEO Joseph Drissel explained that much of the stolen information was restricted by the US State Department.

“Most of the technology in the Arrow 3 wasn’t designed by Israel, but by Boeing and other U.S. defense contractors,” he told Krebs. “We transferred this technology to them, and they coughed it all up. In the process, they essentially gave up a bunch of stuff that’s probably being used in our systems as well.”

Of course, the US has accused Beijing of this type of espionage before, even outside of the five Chinese officials charged in May. As RT reported in June, American cyber security company CrowdStrike said that one unit within the PLA has been linked to seven years of hacking against the US aerospace industry. This information was shared with US intelligence agencies as well as the Justice Department.

For its part, China has consistently denied allegations of hacking, often claiming that it is subject to numerous cyber attacks from the United States.

NORTH KOREA VOWS TO NUKE WHITE HOUSE

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Dictatorship promises to fire “nuclear-armed rockets” at Washington, DC

by KURT NIMMO | INFOWARS.COM | JULY 28, 2014

A top military official for the North Korean government has vowed to nuke the White House and the Pentagon for increasing tensions on the Korean peninsula.

nk-bombs“If the US imperialists threaten our sovereignty and survival… our troops will fire our nuclear-armed rockets at the White House and the Pentagon – the sources of all evil,” said Hwang Pyong-So, the director of the military’s General Political Bureau, during a military event on the anniversary of the Korean War armistice.

In February, 2013 it was reported North Korea had conducted an underground nuclear test, its third in seven years. It was not determined if the blast was nuclear or a conventional explosion designed to mimic a nuclear test. Chinese, Japanese, and South Korean investigators had failed to detect any radiation.

“The test was to defend our country’s safety and sovereignty against the US’s aggressive behavior that infringed upon our republic’s lawful right to peacefully launch a satellite,” state-run media in North Korea reported.

A satellite launch on the anniversary of the death of Kim Jong-il, the previous North Korea dictator, in December, 2012 was a failure.

Despite a lack of conclusive evidence, South Korea’s defense ministry said the supposed nuclear test was in the 6-7 kilotons range while Korea Institute of Geosciences and Mineral Resources estimated the yield as 7.7–7.8 kilotons.

In response to the alleged test Japan and South Korea raised their military readiness level.

Despite the lack of information on North Korea’s nuclear program and the failure of its aerospace technology, the U.S. Defense Intelligence Agency concluded last April it has “moderate confidence” North Korea has a nuclear weapon small enough to fit on a missile.

In May it was reported North Korea had conducted engine tests for an intercontinental ballistic missile with the ability to deliver a nuclear warhead to the United States, according to 38 North, a think tank affiliated with Johns Hopkins University’s U.S.-Korea Institute.

In March 2003, the Korea Times reported that the U.S. National Assembly included a startling admission in its final report regarding Pyongyang’s missile capabilities – it had supposedly found a North Korean test warhead in Alaska.

“According to a U.S. document, the last piece of a missile warhead fired by North Korea was found in Alaska,’’ former Japanese foreign minister Taro Nakayama was quoted as saying in the report. “Washington, as well as Tokyo, has so far underrated Pyongyang’s missile capabilities.”

ANALYST: GERMANY SECRETLY PLANNING TO JOIN BRICS

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NSA surveillance controversy centered on U.S. fear that Europe’s economic powerhouse will dump the dollar

by PAUL JOSEPH WATSON | JULY 24, 2014

Financial analyst Jim Willie sensationally claims that Germany is preparing to ditch the unipolar system backed by NATO and the U.S. in favor of joining the BRICS nations, and that this is why the NSA was caught spying on Angela Merkel and other German leaders.

In an interview with USA Watchdog’s Greg Hunter, Willie, a statistical analyst who holds a PhD in statistics, asserted that the real reason behind the recent NSA surveillance scandal targeting Germany was centered around the United States’ fear that Europe’s financial powerhouse is looking to escape from an inevitable dollar collapse.

“I think they are looking for details on assisting Russia on dumping the dollar. I think they are looking for details for a secret movement for Germany to get away from the dollar and join the BRICS (Brazil, Russia, India, China and South Africa.) This is exactly what I think they are going to do,” said Willie.

Earlier this month, the BRICS nations (Brazil, Russia, India, China and South Africa), announced the creation of a new $100 billion dollar anti-dollar alternative IMF bank to be based in Shanghai and chaired by Moscow.

Putin launched the new system by saying it was designed to, “help prevent the harassment of countries that do not agree with some foreign policy decisions made by the United States and their allies,” a clear signal that Russia and other BRICS countries are moving to create a new economic system which is adversarial to the IMF and the World Bank.

Offering an insight into the attitude of the western elite towards Russia, comments made by the likes of former US ambassador to Iraq Christopher R. Hill suggest that Moscow is increasingly being viewed as a rogue state. Back in April, Hill said that Russia’s response to the Ukraine crisis meant that Moscow had betrayed the “new world order” it has been a part of for the last 25 years.

In another sign that BRICS nations are moving to create an entirely new multi-polar model adversarial to the west, the five countries are also constructing an alternative Internet backbone which will circumvent the United States in order to avoid NSA spying.

Willie also ties the Germany’s move into last week’s shoot down of Malaysia Airlines Flight 17, which has been exploited by the U.S. and Britain to push for more stringent sanctions on Russia despite the fact that they have had little effect so far and only appear to be harming the trade interests of countries in mainland Europe.

“Here’s the big, big consequence. The U.S. is basically telling Europe you have two choices here. Join us with the war against Russia. Join us with the sanctions against Russia. Join us in constant war and conflicts, isolation and destruction to your economy and denial of your energy supply and removal of contracts. Join us with this war and sanctions because we’d really like you to keep the dollar regime going. They are going to say were tired of the dollar. . . . We are pushing Germany. Don’t worry about France, don’t worry about England, worry about Germany. Germany has 3,000 companies doing active business right now. They are not going to join the sanctions—period.”

Al Qaeda Targeting U.S. Infrastructure for Digital 9/11

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Terrorists, nation states, criminal groups have capability of causing significant damage

BY: Bill Gertz
July 24, 2014 3:45 pm

ASPEN, Colo.—Al Qaeda, nation states, and criminals are preparing for major cyber attacks against U.S. infrastructure that could be comparable to the devastating September 11 attacks on New York and Washington, a senior Justice Department official said on Thursday.

“We’re in a pre-9/11 moment, in some respects, with cyber,” said John Carlin, assistant attorney general for national security in the Justice Department.

Carlin also said during remarks at a security conference that China’s government dared the Obama administration to provide court-level evidence of Chinese military hacking against the United States.

The dare resulted in the May 1 indictment of five members of the People’s Liberation Army (PLA) hacking group known as Unit 63198, he said.

On cyber terrorist attacks, Carlin said: “It’s clear that the terrorists want to use cyber-enabled means to cause the maximum amount of destruction to our infrastructure.”

“It’s clear because they have said it,” he told the Aspen Security Forum, an annual gathering at the mountain resort town of senior, current, and former national security and military officials.

Carlin said al Qaeda leader Ayman al Zawahiri recently issued a videotape statement indicating the group is planning cyber attacks against U.S. infrastructure—such as the electrical grids or financial networks.

Terrorists, nation states Carlin did not specify, and sophisticated criminal groups “have the capability now to cause significant damage” through cyber attacks.

One example of the kind of damaging infrastructure attack that can be expected in the future was the recent cyber attack against Saudi Arabia’s state-run oil company Aramco that destroyed some 30,000 computers used to control key elements of that country’s energy infrastructure.

The recent Justice Department takedown of a cyber crime group code-named Game Over Zeus is another example of the kind of cyber attacks that terrorists could conduct in the future.

In Game Over Zeus, cybercriminals used a botnet—a network of hundreds of thousands of hijacked computers—to steal U.S. corporate data and encrypt the information and then extort payments from the companies that owned the data to release it.

“And I think many of the people and the industries that are in in this room would pay because of the important information we keep and sometimes life-saving information if we think of medical records,” Carlin said, noting that the operation was conducted for profit.

“If a terrorist group gets that same type of access or capability, they’re not going to ask for money and they are not going to wait till they try to destroy the data,” Carlin said.

“So there’s a real urgency I think now and it is going to require private and public sector cooperation given how much of the infrastructure is in private hands.”

Carlin said it would be “a shame” if current debates over national security prevent dealing with the cyber threat to infrastructure “before we’re looking backward at what happened and how we got there.”

On Chinese military hacking, Carlin said the case of the five PLA hackers grew out of Chinese government appeals to prove U.S. charges of military hacking into American companies and other organizations.

Carlin said the Justice Department has begun to approach cyber attacks using methods similar to its efforts to counter terrorism and since the early 2000s the government has learned more about intrusive cyber penetrations in the United States.

“We’ve become much much better at observing what is currently going on in terms of the information that as we speak is being taken from hard working Americans who are looking to create and innovate, and it’s being stolen, day in and day out, and used by their competitors to the disadvantage of the American companies,” he said.

“From our perspective we have to apply the same type of approach that we did to terrorism to the national security cyber threat.”

That approach ultimately led to the indictment of the PLA hackers. China’s government denied its military was involved in the hacking and responded by accusing the United States of hacking Chinese companies.

“We heard directly from the Chinese who said, ‘If you have evidence, hard evidence that we’re committing this type of activity that you can prove in court, show us.’ So we did,” Carlin said.

The indictment revealed that PLA Unit 61398 hacking activity was “cutting across the span of different American businesses—nuclear to solar, to steel to labor,” Carlin said.

The indictment, however, is only a first step in what Carlin called a multi-pronged strategic approach that set up a “red line” for the Chinese that was designed to dissuade future attacks.

“We will continue to increase the cost of committing this type of activity on American soil where it is occurring, where they are taking the information, until it stops,” Carlin said. “And we need to maintain that commitment.”

DOUBLE STANDARD: 298 KILLED ON MH17 WHILE MEDIA IGNORES 478 KILLED IN EASTERN UKRAINE BY REGIME

Warning: Extremely graphic photos of slaughtered Ukrainian civilians

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by KURT NIMMO | INFOWARS.COM | JULY 21, 2014

The establishment media has virtually ignored the carnage in eastern Ukraine while it focuses on the alleged shoot down of NM17.

Vladimir Putin is widely condemned while the indiscriminate killings and ethnic cleansing of the Ukraine Security Service and military are left unmentioned.

Since the regime’s crackdown on “terrorists,” in other words separatists in the eastern part of the country opposed to rule imposed by the Kyiv regime, nearly 500 hundred civilians have died, including seven children. 1,392 civilians have been wounded. 279 remain in the hospital.

The body count is verified by the regime’s own Ministry of Health.

250 of the dead were in the opposition-controlled city of Lugansk, according to the Organization for Security and Co‑operation in Europe.

The OSCE figures did not include civilians killed in close vicinity of combat zones outside the city as well as causalities among those involved in fighting, according to the report.

The OSCE’s Special Monitoring Mission added that “increasingly more people were being killed by booby traps and mines.”

The civilian deaths are not reflected in most corporate media stories because this information conflicts with a narrative designed to single out Russia as the perpetrator of violence in Ukraine.

This is part of a larger agenda to undermine Russian influence in Europe and sabotage BRICS, the emerging economic association of Brazil, Russia, India, China, and South Africa.

BRICS directly challenges the Wall Street and City of London dominated financial order and threatens U.S. dollar hegemony.

Chinese spy ship surveys US-led drills off Hawaii

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China has sent an electronic surveillance vessel to international waters off Hawaii to keep an eye on a US-led Rim of the Pacific Exercise (RIMPAC) involving 22 countries, despite Beijing being one of the countries invited to participate in the drills.

The Chinese Dongdiao-class auxiliary general intelligence (AGI) surveillance ship is stationed outside US territorial seas but within the 200-nautical mile Exclusive Economic Zone, according to Captain Darryn James, chief spokesman for the US Pacific Fleet.

“US naval forces continually monitor all maritime activity in the Pacific, and we expect this ship will remain outside of US territorial seas and not operate in a manner that disrupts the ongoing Rim of the Pacific maritime exercise,” James told Bloomberg, adding that the ship is not part of the RIMPAC that is now under way.

“We’ve taken all necessary precautions to protect our critical information,” James said, adding that “this is the first time a nation has ever sent a surveillance ship near Hawaii while also having invited ships participating in the RIMPAC exercise.”

Chinese Navy near Hawaii: First time participation in US-led RIMPAC drills

Four ships of the People’s Liberation Army Navy with an estimated 1,100 sailors on board are participating in this year’s RIMPAC exercises, normally held every two years since 1971. The Chinese ships include the missile destroyer Haikou, the missile frigate Yueyang, the supply ship Qiandaohu and the hospital ship Peace Ark, making it the second largest force after the US.

Chinese navy sailors stand in formation as they attend a send-off ceremony before departing for the Rim of the Pacific exercise (RIMPAC), at a military port in Sanya, Hainan province June 9, 2014 (Reuters / Stringer)Chinese navy sailors stand in formation as they attend a send-off ceremony before departing for the Rim of the Pacific exercise (RIMPAC), at a military port in Sanya, Hainan province June 9, 2014 (Reuters / Stringer)

RIMPAC is the world’s largest joint naval exercise featuring 22 nations, 48 ships, six submarines, 200 aircraft and 25,000 personnel. In 2014 it is being held from June 26 to August 1.

China first asked to join RIMPAC in 2012 but was not invited, at that time it also deployed a spy ship to monitor the drills.

James refused to speculate on the ship’s assignment, telling USNI News that “any questions about the ship’s intent or capabilities will need to be addressed by the People’s Liberation Army Navy.”

Meanwhile an official in China’s Ministry of Defense told the Wall Street Journal that the PLA’s ships respect international law. “China respects the rights enjoyed by all relevant coastal states under international law, and hopes that relevant countries respect the rights enjoyed by Chinese ships according to the law.”

Nobel Prize winning economist praises $100 bn BRICS bank created to counter Western dominance

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Nobel Prize-winning economist Joseph Stiglitz has praised the new development bank founded this week by the BRICS countries for creating a financial institution that could counter the Western-dominated IMF and World Bank.

Stiglitz, a professor at Columbia University and former chief economist for the World Bank, said the New Development Bank marks a “fundamental change in global economic and political power.” He added that the effort by Brazil, Russia, India, China, and South Africa (BRICS) could revitalize the way funds are distributed to developing nations in a changing global economy that the “old institutions” like the International Monetary Fund and the World Bank have not adequately recognized.

“The existing institutions just don’t have enough resources,” Stiglitz told Democracy Now. “They have enough for 2, 3, 4 percent. So, this is adding to the flow of money that will go to finance infrastructure, adaptation to climate change—all the needs that are so evident in the poorest countries.”

On Tuesday, the group of emerging economies signed the long-anticipated document to create the $100 bn bank and a reserve currency pool worth over another $100 bn.

The new bank will provide money for infrastructure and development projects in BRICS countries, and unlike the IMF or World Bank, each nation has equal say, regardless of GDP size.

Each BRICS member is expected to put an equal share into establishing the startup capital of $50 billion with a goal to reach $100 billion. The BRICS bank will be headquartered in Shanghai, India will preside as president the first year, and Russia will be the chairman of the representatives.

Leaders representing Brazil, Russia, India, China and South Africa attend the VI BRICS Summit in Fortaleza July 15, 2014 (Reuters / Nacho Doce)Leaders representing Brazil, Russia, India, China and South Africa attend the VI BRICS Summit in Fortaleza July 15, 2014 (Reuters / Nacho Doce)

Stiglitz said the BRICS bank has the potential to “get more resources to the developing countries in ways that are consistent with their interests and needs” while forcing American-controlled institutions to recognize monetary and economic contributions of the BRICS nations that deserve a say in global investment decisions now dominated by the West.

“What I hear now is the developing countries, emerging markets, China and the other countries, saying, ‘We’re paying the tune. We’re the big players now. We have the resources. We’re where the reserves are. And yet, you don’t want to let us play even a fair share in the role, reflecting the size of our contributions in the economy, in trade,’” Stiglitz said.

“And so, that’s one of the real grievances—I think valid grievances. And it’s hard for an institution where the governance is so out of tune with current economic and political realities to be as effective as it could be.”

Stiglitz pointed out that governance rules for the IMF and the World Bank have not changed adequately enough since their creation in 1944, as the United States has refused to substantially modify its hold over the institutions’ functions.

“So, this new institution reflects the disparity and the democratic deficiency in the global governance and is trying to restart, to rethink that,” he said.

Despite the potential for the BRICS bank to revitalize the methods in which developing nations receive investment capital, Stiglitz said it’s too early to tell whether the five emerging-market nations’ effort will be considerably different from the older institutions. Nevertheless, the negotiations to this point signal a willingness from the nations to work together, he said.

“What it is really saying is that in spite of all of the differences, the emerging markets can work together, in a way more effectively than some of the advanced countries can work together.”

2,000 bombs a year? Japan’s plan to reopen nuclear reprocessing plant stirs concern

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Reactivating a nuclear fuel reprocessing plant could provide Japan with enough plutonium to produce up to 2,000 atomic bombs a year, a US expert has warned. The “reckless” move could destabilize the region, as Japan’s neighbors rush to compete.

Henry Sokolski, executive director at the Nonproliferation Policy Education Center, urged the House Foreign Affairs committee to hinder the reopening of the nuclear reprocessing facility in Rokkasho, North Japan.

The plant itself was supposed to begin operations in October 2013, but its reactivation was delayed by new safety regulations. The operators of the facility, which, according to the IAEA, has an annual capacity of 800 tons of uranium, or 8 tons of plutonium, say it should be up and running by this October.

Allowing the reactivation of the plant would be “insulting” and “reckless,” especially when South Korea is not allowed to reprocess or enrich nuclear fuel, the US expert said, according to South Korean news agency Yonhap.

“If Japan ever decided to open its large reprocessing plant at Rokkasho, it would be producing roughly 2,000 bombs’ worth of nuclear weapons-usable plutonium a year,” Sokolski told the committee in a hearing last week. “This would almost certainly prompt South Korea to initiate nuclear enrichment or reprocessing of their own as a hedge or weapons option.”

AFP Photo / Kimimasa Mayama AFP Photo / Kimimasa Mayama

Japan abandoned nuclear power following the March 2011 earthquake-triggered tsunami with caused multiple meltdowns at the Fukushima nuclear plant. However, the Japanese government has decided to start reactivated the countries 48 reactors because of an energy shortfall. Sendai nuclear power plant in the southern Kagoshima Prefecture has just cleared an initial safety hurdle, an essential step in the reactivation process.

Washington has banned Seoul from enriching and reprocessing nuclear fuel because of proliferation concerns. The Korean government is currently pushing for a renegotiation to the agreement and wants the right to carry out so-called “pyroprocessing” – a reprocessing technology.

“We say we want South Korea not to enrich or reprocess. Yet we have encouraged Japan to do so,” Sokolski said.
Sokolski warned that China would react to the reactivation of the facility and any action they would take would “likely challenge not only Japan’s and South Korea’s security, but our own treaty commitment to defend our Asian allies.”

For these reasons, Sokolski believes Congress should pressure the US government into encouraging Japan to rethink its nuclear plans by calling for a renegotiation of the US-Japanese nuclear cooperative agreement.

Tensions between Japan and its neighbors have been building recently after the government’s decision to reverse a key article in the constitution effectively allowing the country to go to war. Japan had previously been a pacifist country, meaning that its armed forces are technically domestic self-defense units, and cannot participate even in UN-backed conflicts, other than as peacekeepers.

Prime Minister Shinzo Abe said the changes were necessary as Japan’s previous pacifist approach had emboldened its adversaries.

China reacted immediately to the landmark reinterpretation of the Japanese constitution, demanding that Tokyo respect the security concerns of its Asian neighbors.