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10.30.14 –  Don’t Be Fooled The Next Crisis Is Upon Us

  • The Federal Reserve has finally ended its quantitative easing programs. Since the financial crisis of 2008, the Fed has pursued what seemed like an endless policy of asset purchases. As recently as September 2008 the monetary base in the US was just a hair over $800 bn. Today this figure is just shy of $4.2 trillion, for a total increase of 425%.
  • For its part Janet Yellen and her gang of Fed economists are probably pretty pleased with themselves. Unemployment is down, headline inflation remains muted, and the word on Wall Street is that a worse crisis has been averted. The stock market is at record highs, and banks (and bankers) are back to their pre-crisis eminence.
  • One of the true marks of a great economist is an ability to see past the obvious outcomes and into the veiled results of policies. Friedrich Bastiat’s great essay on “that which is seen, and that which is not seen” provides a cautionary parable that disastrous analyses result when people don’t bother looking further than the immediate results of an action.
  • Nowhere is this lesson more instructive than with the Fed’s QE policies of the past 6 years.
  • Consider the Austrian business cycle theory. The nub of the theory is that changes in the money market have broader results on the greater economy. In its most succinct form, when a central bank pushes interest rates lower than they should be (by buying assets, for example), the greater economy gets distorted. Some of these distortions are immediately apparent, as consumers buy more goods and everyone takes on more debt as a result of lower interest rates. Some of the distortions are not immediately apparent. The investment decision of firms gets skewed as interest rates no longer reflect savings preferences, and the whole economy becomes fragile over time as erroneous investments add up (what Mises’ coined “malinvestments”).
  • When a financial crisis or economic recession hits, it’s almost never because of some event that apparently happened at the same time. The crisis of 2008 did not occur because of the collapse of Lehman Brothers. It happened because the whole financial system and greater economy were fragile following years of cheap credit at the hands of the Greenspan Fed. If anything, Lehman was a result of this and a great (if unfortunate) example of the type of bad business decisions firms are lured into by loose money. It wasn’t the cause of the troubles but a result of them. And if Lehman didn’t go under to spark the credit crunch, some other fragile financial institution would have.
  • The Great Depression is a similar case in point. It wasn’t the stock market crash in 1929 that “created” the Great Depression. It was a decade of loose money policies by the Fed that created a shaky economy. Again, if anything the stock market crash was the result of stock prices being too buoyant and in need of a repricing to reflect economic fundamentals. Just like today, stocks rose to such storied heights as a result of cheap credit, not because of the seemingly “great” investments funded by it.
  • The Fed has lowered interest rates since July 2006. We have just come off the the period with the most rapid and extreme increase in the money supply ever recorded in American history. The seeds of the next Austrian business cycle have been sown. In fact, they are probably especially fertile seeds when one considers that the monetary policy has been so loose by historical standards. Just as cheap credit of the 1920s beget the Great Depression, that of the 1990s beget the dot-com bust and that of the mid-2000s beget the crisis of 2008, this most recent period will also give birth to a financial crisis.
  • When the next crisis comes there will no doubt be economists and commentators who blame it on some proximal event, like the failure of a large important financial institution. Don’t be fooled. The seeds of the next crisis are already sown. Fed policy under Ben Bernanke and Janet Yellen has distorted the economy in a way that makes it precariously fragile, and susceptible to collapse.


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10.30.14 –  Is It About To Get Worse? Lakeland Hazmat Suit Orders Go Exponential, Surpass 1 Million

  • Almost exactly a month ago, long before the Texas Ebola fiasco, when virtually nobody had heard of a small company out of Ronkonkoma, NY called Lakeland Industries and whose only product is “industrial protective clothing for industry, municipalities, healthcare and to first responders” i.e., Hazmat suits, we asked “i) who will get sick next and ii) how bad could it get?” For the answer we focused on the recently announced order of 160,000 Hazmat suits by the US State Department which had come at a time when the CDC was urging everyone that there is nothing to fear and that Ebola is under control. Not surprisingly, shortly thereafter the Ebola situation promptly escalated and led to not only the first Ebola death and Ebola transmission on US territory, but also the first Ebola infection in New York City.
  • Fast forward to today when shortly after the close, and minutes after it announced the completion of another $11 million follow on offering, Lakeland surprised everyone, and especially those who are short the stock, when it released the following “Update on Business Activity Relating to Ebola Crisis” in which it announced that it has, by now, received a stunning 1 million Hazmat suit orders and rising exponentially.
 Through its direct sales force and numerous distribution partners throughout the world, Lakeland has secured new orders relating to the fight against the spread of Ebola.  Orders have been received from government agencies around the world as well as other public and private sector customers.  Certain of these contracts require weekly delivery guarantees or shipments through the first calendar quarter of 2015.  The aggregate of orders won by Lakeland that are believed to have resulted from the Ebola crisis amount to approximately 1 million suits with additional orders for other products, such as hoods, foot coverings and gloves.  Lakeland started shipping such orders only in October, which is the end of its fiscal 2015 third quarter reporting period.  The main impact from Ebola-related orders received to date will not be realized until the Company’s fiscal 2015 fourth quarter ended January 31, 2015.
  • Additionally:
 Monthly production capacity for sealed seam ChemMAX and MicroMAX protective suit lines has increased by nearly 50% from August 2014, prior to Ebola-related product demand, to October 2014, and is on track for a 100% increase from that level by January 2015, with the ability for additional increases as needed.  Substantially all of the available production capacity in August 2014 had been allocated to purchases by the Company’s industrial customers (for non-Ebola related purposes).  The Company will continue to service its industrial customers who are dependent upon Lakeland to conduct their work safely.  The expanded capacity is necessary in order to meet obligations for both traditional customers as well as for protection against the spread of Ebola.
  • Conveniently enough, we put the 1 million Hazmat suits in context just two weeks agowhen it was revealed that Ebola-stricken Liberia alone needs about 1 million suits for its population.

  • Some additional context: earlier today the World Health Organization said that 4,910 people had died of Ebola and anew record, or 13,676 confirmed, probable or suspected cases, had been reported in the three hardest-hit countries of Guinea, Liberia and Sierra Leone.
  • As we said in the summery when the Ebola cases in those countries were orders of magnitude fewers, “let’s hope these cases do not cross borders and certainly not the Atlanic.”
  • Finally, to remind everyone what the hoopla is all about, and why LAKE stock was up 30% after hours despite the equity dilution, here is what a Lakeland suit looks like… and costs. Something tells us LAKE’s $60 million market cap as of today’s close will be quite a bargin in the coming months. Especially with 44% of the float short.


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10.30.14 –  Australian Anti-Terror Law to Violate Citizens’ Personal Privacy\

  • Australian officials adopted an anti-terror law Thursday prohibiting citizens from traveling to countries where terrorism is prevalent in order to join terrorist groups, the Australian reports.
    “The foreign fighters’ bill that has passed the parliament today will mean, first of all, that it is easier to secure convictions against Australians who have been fighting with terrorist groups overseas,” Australian Prime Minister Tony Abbott claimed, adding that this initiative will help in detecting those involved in terrorist activities.
  • According to recent data, 70 Australian citizens are reported to have joined terrorist groups overseas. An additional 100 Australians are said to have supported and promoted terrorist activities, being responsible for recruitment of foreign fighters and providing financial assistance, according to AFP.
  • Growing numbers of terrorism supporters has raised concerns among Australian officials, drawing their attention to the problem of returning fighters, considered a serious threat to national security.
    “The best way to deal with returning foreign fighters is to stop them leaving in the first place [...] and I’m able to inform the House that some 70 Australian passports have been cancelled to stop terrorists or potential terrorists from travelling,” said Mr. Abbot, stressing that about 20 foreign terrorist fighters have recently come back to their homeland.
  • However, the anti-terror law has been criticized by a number of Australian political parties and legal associations. They claimed that the new bill would violate personal privacy and represent “the breach of faith with the Australian community,” the Australian reports.
  • “Under the legislation, every single phone call, every single text message, email or online communication will available to be accessed by security agencies,” claimed a member of the Australian Lawyers Alliance.
  • The law is also considered controversial as it does not deal with root causes of terrorism and is not aimed at the long-term elimination of radicalization.


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10.30.14 –  From This Day Forward, We Will Watch How The Stock Market Performs Without The Fed’s Monetary Heroin

  • Mark this day on your calendars.  The Dow is at 16974, the S&P 500 is at 1982 and the NASDAQ is at 4549.  From this day forward, we will be looking to see how the stock market performs without the monetary heroin that the Federal Reserve has been providing to it.  Since November 2008, the Fed has created about 3.5 trillion dollars and pumped it into the financial system.  An excellent chart illustrating this in graphic format can be found right here.  Pretty much everyone agrees that this has been a tremendous boon for the financial markets.  As you will see below, even former Fed chairman Alan Greenspan says that quantitative easing was “a terrific success” as far as boosting stock prices.  But he also says that QE has not been very helpful to the real economy at all.  In essence, the entire quantitative easing program was a massive 3.5 trillion dollar gift to Wall Street.  If that sounds unfair to you, that is because it is unfair.
  • So why is the Federal Reserve finally ending quantitative easing?
  • Well, officially the Fed says that it is because there has been so much improvement in the labor market…

The Fed’s language, however, did suggest that they were getting more comfortable with the economy’s improvement. It cited “solid job gains,” citing a “substantial improvement in the outlook for the labor market,” as well as pointing out that “underutilization” of labor resources is “gradually diminishing.”

  • But that is not true at all.
  • The percentage of Americans that are working right now is about the same as it was during the depths of the last recession.  Just check out this chart…

Employment Population Ratio 2014

  • So there has been no “employment recovery” to speak of at all.
  • And as I wrote about yesterday, the percentage of Americans that are homeowners has been steadily falling throughout the quantitative easing era…

Homeownership Rate 2014

  • So let’s put the lie that quantitative easing helped the “real economy” to rest.  It did no such thing.
  • Instead, what QE did do was massively inflate stock prices.
  • The following is an excerpt from a Wall Street Journal report about a speech that former Fed chairman Alan Greenspan made to the Council on Foreign Relations on Wednesday…

Mr. Greenspan’s comments to the Council on Foreign Relations came as Fed officials were meeting in Washington, D.C., and expected to announce within hours an end to the bond purchases.

He said the bond-buying program was ultimately a mixed bag. He said that the purchases of Treasury and mortgage-backed securities did help lift asset prices and lower borrowing costs. But it didn’t do much for the real economy.

Effective demand is dead in the water” and the effort to boost it via bond buying “has not worked,” said Mr. Greenspan. Boosting asset prices, however, has been “a terrific success.”

  • Moving forward, what did Greenspan tell the members of the Council on Foreign Relations that they should do with their money?
  • This might surprise you…

Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.

  • Wow.
  • It almost sounds like Greenspan has been reading the Economic Collapse Blog.
  • Since November 2008, every time there has been an interruption in the Fed’s quantitative easing program, the stock market has gone down substantially.
  • Will that happen again this time?
  • Well, the market is certainly primed for it.  We are repeating so many of the very same patterns that we saw just prior to the last two financial crashes.
  • For example, there have been three dramatic peaks in margin debt in the last twenty years.
  • One of those peaks came early in the year 2000 just before the dotcom bubble burst.
  • The second of those peaks came in the middle of 2007 just before the subprime mortgage meltdown happened.
  • And the third of those peaks happened earlier this year.
  • You can view  a chart that shows these peaks very clearly right here.
  • The Federal Reserve appears to be confident that the stock market will be okay without the monetary heroin that it has been supplying.
  • We shall see.
  • But it should be deeply troubling to all Americans that this unelected, unaccountable body of central bankers has far more power over our economy than anyone else does.  During election season, our politicians get up and give speeches about what they will “do for the economy”, but the truth is that they are essentially powerless compared to the immense power that the Federal Reserve wields.  Just a few choice words from Janet Yellen can cause the financial markets to rise or fall dramatically.  The same cannot be said of any U.S. Senator.
  • We are told that monetary policy is “too important” to be exposed to politics.
  • We are told that the independence of the Federal Reserve is “sacred” and must never be interfered with.
  • I say that is a bunch of nonsense.
  • No organization should have the power to print up trillions of dollars out of thin air and give it to their friends.
  • The Federal Reserve is completely and totally out of control, and Congress needs to start exerting power over it.
  • The first step is to get in there and do a comprehensive audit of the Fed’s books.  This is something that U.S. Senator Ted Cruz called for in a recent editorial for USA Today…

Americans are seeing near-zero interest rates on their savings accounts while median incomes are falling, and millions of people are facing higher gas prices, food prices, electricity prices, health insurance prices. Enough is enough, the Federal Reserve needs to open its books — Americans deserve a sound and stable dollar.

  • Whether you agree with Ted Cruz on other issues or not, this is one issue that all Americans should be able to agree on.
  • If you study any of our major economic problems, usually you will find that the Federal Reserve is at the heart of that problem.
  • So if we ever hope to solve the issues that are plaguing our economy, the Fed is going to need to be dealt with.
  • Hopefully the American people will start to send more representatives to Washington D.C. that understand this.


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10.29.14 –  More Media Foreshadowing of Massive False Flag Attack in U.S.

  • To see the recent mainstream media headlines, one who ponders a little deeply, might rightly think we are on the precipice of something strange. More Ebola funny business, shootings, a rocket explosion, and the Department of Homeland Security’s recent raising of security levels at all federal buildings within the United States.
  • Just like the months leading up to 9/11, the American public is being assaulted with an onslaught of reports suggesting the possibility of another major terror attack inside the United States. Are we being invited into a terror theater? A little predictive programming perhaps? A couple news pieces should offer some pause, if nothing else.
  • In this Fox News report about the DHS raising security levels, favored mouthpiece and former New York mayor, Rudolph Giuliani, speaks about expecting attacks. Certainly, his words were meant to unsettle the public, rather than reassure. According to him, we have to assume a major attack is eminent. His words really need no introduction, but deserve some analysis, which can be left up to the readers:
  • From Fox:
    A former intelligence official also likened Tuesday night’s press release to “terror theater,” though said it is a good thing to keep the public aware of these threats.
    To actually read the report, however, the major bent of the message surrounds domestic terrorist threats. Strangely, it’s the same reconciliation of foreign terrorism juxtaposed with domestic played out in the series Jericho (2006) – a show about the aftermath of nuclear attacks in the states, where factions within U.S. government set off a nuke false flag, blamed on foreign/domestic combined terrorism.
  • Again from Fox:
    “ISIS is waging a campaign of war over the Internet to incite homegrown violent extremism in the United States,” McCaul, R-Texas, said. “We must do everything we can to protect every American abroad and at home.” [emphasis added]
    This “marriage” or mirage was also explored in Brandon Turbeville’s pieces, ”
    FBI Visiting Gun Shops to Investigate “People talking about Big Government” and 11 Signs of a False Flag.
  • Additionally, one of those false flag signs is conducting terror drills before or during an actual event. So, it is all too discomforting that last month, Nebraska scheduled simulated nuclear explosion drills. As Webster Tarpley writes in his book 9/11 Synthetic Terror: Made In USA, at least 46 drills were underway in the months leading up to 9/11 and on the morning of the attack.
  • Like Turbeville, I’m not attempting to predict anything myself or say that it’s certain to occur, but simply pointing out the recent media talking points and imagery could be signaling such a catastrophe to the masses, whether it would occur or not.
  • In July, Turbeville wrote in Media Propaganda Foreshadows Massive False Flag Inside The United States:
    The narrative being inserted into news media reports and government statements no longer revolves around terrorists hijacking planes or blowing up specific buildings. This time, the narrative is that there is the very real possibility that terrorists who have traveled to Syria and Iraq in order to overthrow the governments in those countries are now travelling back to the United States and Europe with the intention of launching terror attacks at home.
  • Of course, ever since 9/11, Americans have been relentlessly bombarded with the prospect of more and greater terrorist attacks taking place at home and abroad, even while the U.S. government openly funds the very terrorists it uses to keep the public frightened into submission.
    What was some of the predictive programming he noticed?
  • The report “Al-Qaeda Training British And European ‘Jihadists’ In Syria To Set Up Terror Cells At Home,” by Ruth Sherlock, Gaziantep, and Tom Whitehead and published by The Telegraph.
    The article written by Andrew G. Doran for the National Review, published on June 16, 2014 entitled “ISIS In The Homeland,” where Doran argues that not only do ISIS and ISIS-style fighters have American and European passports, but that these terrorists are already back home.
    Recent (and eerily specific) advice from former Vice President Dick Cheney: “I think there will be another attack and the next time I think it’s likely to be far deadlier than the last one…You can just imagine what would happen if somebody could smuggle a nuclear device, put it in a shipping container, and drive it down the beltway outside Washington D.C.” (again, it’s hard not to think back to Jericho, especially if you view Cheney’s whole conversation about reconstituting the U.S. government after hypothetical attack)
    Another Cheney gem: “One of the things I worried about 12 years ago and that I worry about today is that there will be another 9/11 attack and that the next time, it’ll be with weapons far deadlier than airline tickets and box cutters.”
    In September, 2013, as the rush to war with Syria was ramping up, South Carolina Senator Lindsey Graham suggested that, if the U.S. did not use military force against Syria, the Iranians would view America as weak and, eventually, nuclear weapons could end up in the hands of terrorists resulting in the bombing of Charleston Harbor.
    Another Graham quote: “I believe that if we get Syria wrong, within six months, and you can quote me on this, there will be a war between Iran and Israel over their nuclear program. My fear is that it won’t come to America on top of a missile, it’ll come in the belly of a ship in the Charleston or New York harbor.”
    Not only is that as eerily specific and similar to Cheney’s quotes, but Giuliani has echoed Graham’s frustration that we just didn’t “get things right” with the handling of propagated security threats stemming from the middle east and then he drives the idea of it being “here at home.” And the news anchor chimes in, in reference to Canadian and U.S. events, that “we have no program, no plan, in place to tip off our intelligence, folks, to that kind of behavior.


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10.29.14 –  Pentagon Approves Mandatory 21-Day Quarantine Of US Troops Returning From Ebola Missions

  • As President Obama explained yesterday, “it’s different this time” for the military. And sure enough, while non-symptomatic civilians can come and go around the world in the hopes that they do not become symptomatic following potential contact with Ebola patients, Chuch Hagel has ordered a 21-day mandatory quarantine for all US troops returning from West Africa. The use of the ‘q’ word is clearly against White House protocols and so The Pentagon refers to it as “controlled monitoring” but, as AFP reports, Hagel calls it a “prudent” measure to prevent the spread of the deadly disease – which just this morning the WHO said had topped 13,000 cases worldwide.
    As AFP reports,
  • Pentagon chief Chuck Hagel on Wednesday ordered a 21-day quarantine for all US troops returning from West Africa, calling it a “prudent” measure to prevent the spread of the Ebola virus.
  • The move means the military is adopting much stricter measures than those in place for civilian health workers sent by the US government to Liberia and Senegal, and the order came amid a debate about how to treat Americans who may have come in contact with those suffering from the deadly disease.
  • “The secretary believes these initial steps are prudent, given the large number of military personnel transiting from their home base and West Africa, and the unique logistical demands and impact this deployment has on the force,” his spokesman Rear Admiral John Kirby said in a statement.
  • The quarantine was being introduced even though officials say the soldiers will be focused on building medical clinics and will have no contact with those infected with the virus.
  • But Hagel said the decision was taken partly because military families urged the quarantine.
  • “This is also a policy that was discussed in great detail by the communities, by the families of our military men and women, and they very much wanted a safety valve on this,” Hagel said at an event in the US capital, the “Washington Ideas Forum.”
    Statement from Pentagon Press Secretary Rear Admiral John Kirby on Controlled Monitoring for Personnel Returning from Operation United Assistance
  • This morning, Secretary Hagel signed an order that validated a recommendation from the Joint Chiefs of Staff to place all U.S. military service members returning from Ebola response efforts in West Africa into a 21-day controlled monitoring regimen. This order will apply to all military services that are contributing personnel to the fight against Ebola at its source.
  • The secretary has also directed that the Joint Chiefs develop, for his review within 15 days, a detailed implementation plan for how this controlled monitoring will be applied across the force that takes into account the size and scope of the logistics required for this effort.
  • In addition, the secretary directed that the Joint Chiefs conduct a review of this new regimen within 45 days from now. This review will offer a recommendation on whether or not such controlled monitoring should continue based on what we learn and observe from the initial waves of personnel returning from Operation United Assistance.
  • The secretary believes these initial steps are prudent given the large number of military personnel transiting from their home base and West Africa and the unique logistical demands and impact this deployment has on the force. The secretary’s highest priority is the safety and security of our men and women in uniform and their families.
    * * *
  • And of course there is this…
  • Medical experts have sharply criticized recent strict quarantine orders adopted in New York and New Jersey as based on politics rather than science.
  • President Barack Obama on Tuesday urged Americans to respond to the virus with “facts” rather than “fear.”
    * * *
  • Over to you Christie and Cuomo…
  • * * *
  • And in an attempt to lightne the mood, The Onion explains an Ebola vaccine is maybe 50 white people away…
  • CONAKRY, GUINEA – With the death toll in West Africa continuing to rise amid a new outbreak of the Ebola virus, leading medical experts announced Wednesday that a vaccine for the deadly disease is still at least 50 white people from being developed.
  • “While all measures are being taken to contain the spread of the contagion, an effective, safe, and reliable Ebola inoculation unfortunately remains roughly 50 to 60 white people away, if not more,” said Tulane University pathologist Gregory Wensmann, adding that while progress has been made over the course of the last two or three white people, a potential Ebola vaccination is still many more white people off.
  • “We are confident, however, that with each passing white person, we’re moving closer to an eventual antigenic that will prevent and possibly even eradicate the disease.”
  • Wensmann said he remained optimistic that the vaccine would not take considerably longer than his prediction, as waiting more than 50 white people for an effective preventative measure was something the world would simply not allow.


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10.29.14 –  Russian army beefs up Artic presence over Western threat

  • By next year Russia will be ready to “meet unwelcome guests” coming from any direction, after completing a network of radar stations in the Arctic, the Russian Defense Minister said.
    The massive buildup of facilities in Russia’s north is part of the country’s strategy to ensure control of the Arctic. The military is currently rebuilding two northern bases in the Novosibirsk Islands and in the Franz Josef Land archipelago, Sergey Shoigu told the defense ministry’s public council on Tuesday. Military airfields at Tiksi, Naryan-mar, Alykel, Vorkuta, Anadyr and Rogachevo have been scheduled for modernization.
    “The plan involves the building of 13 airfields, one land test range for the Air Forces, 10 radar sites and direction centers,” said Lt. Gen. Mikhail Mizintsev, head of the National Defense Control Center, who took part in the session.
    The general heads a recently created body in the ministry, which is tasked with day-to-day monitoring of potential threats to national security and launching a rapid military response, should it be needed.
    Shoigu said the most immediate result of the buildup would be total radar coverage of Russia’s borders. Russia abandoned many of its less-crucial and more costly military installations after the collapse of the Soviet Union, but now wants them operational again.
    “This year we will have total radar coverage and in 2015 we will be almost fully prepared to meet unwelcom guests from east and north,” the minister said.
    Foreign outposts against emerging threats
    The Russian minister said, in addition to domestic military modernization, Russia will continue upgrading its foreign military bases as well.
    “We are continuing to develop our bases in Kyrgyzstan, Tajikistan, and Armenia,” he said, adding that this year Russia had deployed a fighter squadron in Belarus. “We have made ourselves at home there and are doing our jobs in terms of combat readiness and training.”
    Belarus’ role as a key military ally of Russia was in the focus on Wednesday as Shoigu visited the country to meet Belorussian generals. The visit comes days after the two countries finished an exercise for its joint air defense system.
    Speaking in Minsk, Shoigu warned that the military of the two countries must be prepared for new challenges posed by an assertive West as shown by the Ukrainian turmoil.
    “The problem of ‘colored revolutions’ shines anew today. We see the results of the use this instrument of foreign action in Ukraine today,” he said.
    “In essence Western forces are trying to form in that country an advanced front of pressure on the union state of Russia and Belarus, to influence their development.”
    He added such threats require close coordination of efforts between Moscow and Minsk.


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10.29.14 –  White House computer network hit by sustained cyberattack

  • A sustained cyberattack that lasted almost two weeks was detected on the computer network used by officials of the Executive Office of the President, a White House official said.
  • The official said Tuesday that, while the cyber attack was detected, measures have been taken to address the activity on the Executive Office of the President’s (EOP) unclassified computer network. Officials have not disclosed who might be responsible for the attack, Reuters reported.
  • “In the course of assessing recent threats we identified activity of concern on the unclassified EOP network. Any such activity is something that we take very seriously. In this case we took immediate measures to evaluate and mitigate the activity,” the official told the agency.
  • So far, there’s no reason to believe classified networks were also hit, he said.

Wow. More great work from the WH & fed gov’t #incompetence “@ryangrim: Internal WH memo on cyber attack underway”— Jack Brrrrrrrrazen (@jackbrazen) October 29, 2014

  • The White House – or the Executive Office of the President (EOP) – is routinely struck with cyber attacks, but the one revealed Tuesday had a more significant duration, affecting the system’s functionality for nearly two weeks.
  • “Certainly a variety of actors find our networks attractive targets and seek to access to sensitive government information. We are still assessing the activity of concern, and we are not in a position to provide any additional details at this time,” the White House official said in a statement.
  • The White House press pool reports sent by email Tuesday night were “significantly delayed,” pool reporter Steven T. Dennis of CQ Roll Call told Huffington Post. “Some people are getting pool reports significantly before other people.”

White House allegedly hit with a cyber attack, but they have the plan to protect the world from cyber attacks?
— Activist Post (@ActivistPost) October 29, 2014

  • The official said the technical measures to address the activity had led to limited access to some EOP network services, and that some of the issues have been resolved, but the work continues. It was not revealed when the activity took place.
  • An internal White House email, published by the Post, said “Our computers and systems have not been damaged, though some elements of the unclassified network have been affected. The temporary outages and loss of connectivity that users have been experiencing is solely the result of measures we have taken to defend out networks.”
  • During a fundraising tour earlier this month, President Barack Obama said in New York City that cyber terrorism is one of the biggest threats to national security for government and business computer systems.
  • He said the White House is bracing for a possible doomsday scenario in which hackers successfully penetrate government systems or break security walls at major banks, Fox Business Network reported.
  • “The president is worried that cybercriminals could literally wipe out the identities of millions of people through some breach of government systems and that could lead to massive chaos,” an attendee at one of the fundraisers told Fox.
  • President Obama added that he expects cyberterrorism to only grow in the years ahead.
  • “He said 15 years ago, cyberterrorism wasn’t even on the radar screen, but that it will be one the biggest concerns for whoever is president after him,” the attendee said.


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10.28.14 –  Documents Show FBI Impersonated Newspaper’s Website To Deliver Spyware To Suspect’s Computer

  • Spend enough time staring at redacted documents liberated from secretive government agencies and you’re bound to miss a thing or two on the first pass. Chris Soghoian, technologist for the ACLU was browsing through some FBI documents [pdf link] obtained by the EFF and came across this:



In 2007, FBI sent malware via a link intended to look like a Seattle Times/AP story. … at pages 61-62.

FBI agents trying to track the source of e-mailed bomb threats against a Washington high school last month sent the suspect a secret surveillance program designed to surreptitiously monitor him and report back to a government server, according to an FBI affidavit obtained by Wired News…

The software was sent to the owner of an anonymous MySpace profile linked to bomb threats against Timberline High School near Seattle. The code led the FBI to 15-year-old Josh Glazebrook, a student at the school, who on Monday pleaded guilty to making bomb threats, identity theft and felony harassment.

  • The court documents didn’t detail how the FBI managed to install the weaponized payload on Glazebook’s computer. The emails obtained by the EFF, however, expose the electronic paper trail.The CIPAV (Computer and Internet Protocol Address Verifier) made its way to Glazebrook’s system via a Myspace message sent by the FBI… which was impersonating the Seattle Times.


“The ends don’t justify the means. I’m not saying that the FBI shouldn’t be investigating people who threaten to bomb schools. But impersonating the media is a really dangerous line to cross.”

  • The Seattle Times isn’t too happy, either. Editor Kathy Best says the paper is now “seeking answers” from the FBI. Best’s full statement on behalf of the Times is short, but deeply critical of the agency’s actions.

We, like you, just learned of this and are seeking answers ourselves from the FBI and the U.S. Attorney’s office.

But we are outraged that the FBI misappropriated the name of The Seattle Times to secretly install spyware on the computer of a crime suspect. Not only does that cross the line, it erases it.

Our reputation—and our ability to do our job as a government watchdog—is based on trust. And nothing is more fundamental to that trust than our independence from law enforcement, from government, from corporations and from all other special interests. The FBI’s actions, taken without our knowledge, traded on our reputation and put it at peril.

  • The FBI has already responded (somewhat) to Best’s statement, deploying the usual deferrals to public safety and agency investigatory procedures.

“Every effort we made in this investigation had the goal of preventing a tragic event like what happened at Marysville and Seattle Pacific University. We identified a specific subject of an investigation and used a technique that we deemed would be effective in preventing a possible act of violence in a school setting. Use of that type of technique happens in very rare circumstances and only when there is sufficient reason to believe it could be successful in resolving a threat. We were fortunate that information provided by the public gave us the opportunity to step in to a potentially dangerous situation before it was too late.”

  • TL; DR: The public should be counting its blessings rather than examining our questionable methods.Taken at face value, Special Agent Frank Montoya Jr. is basically saying that the FBI will abuse its power (and the reputations of others) whenever it determines such methods to be necessary to achieve its goals. Not really a comforting idea at all, and one that basically confirms Soghoian’s suspicions: the ends will be used to justify the means, no matter how potentially damaging the means are.


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