Suspected State-Backed Hackers Transformed Telecoms Giant Into ‘Global Spy System’

On what has been an otherwise relatively slow news day as President Trump heads to Japan for this weekend’s G-20 summit, the Associated Press has joined Reuters in publishing an expose about a cyberespionage campaign that just might have its origins in Beijing.


According to the AP, which sourced its story from a presentation given by the head of Cybereason, a global cybersecurity contractor brought in by telecoms firms to trace the source of another potentially major breach, a group of possibly state-backed hackers infiltrated the system of an unnamed telecoms giant to spy on a group of unnamed “VIPs” call records, location data and other information. The hack essentially allowed the hackers to track the movements and activities of the targets. And because the hack occurred at the service-provider level, it would be virtually impossible for the 20 or so end-user targets to discover the breach on their own. In essence, the hackers were able to transform the targeted firm into a “global surveillance system.”

Cybereason Chief Executive Lior Div said because customers weren’t directly targeted, they might never discover that their every movement was being monitored by a hostile power.

The hackers have turned the affected telecoms into “a global surveillance system,” Div said in a telephone interview. “Those individuals don’t know they were hacked – because they weren’t.”

Div, who presented his findings at the Cyber Week conference in Tel Aviv, provided scant details about who was targeted in the hack. He said Cybereason had been called in to help an unidentified cellular provider last year and discovered that the hackers had broken into the firm’s billing server, where call records are logged.

The hackers were using their access to extract the data of “around 20” customers, Div said.

And here’s some food for thought: Cybereason cautioned that even though all signs of who the culprit might be pointed to APT10, the MSS-backed hacker crew that orchestrated China’s ‘Operation Cloud Hopper’, the campaign that reportedly infiltrated eight of the world’s largest enterprise tech companies, they were reluctant to conclusively blame APT10 for the intrusions.

Why? Because these signs could have been manufactured to point to APT10, even though the real culprit could have been another government, or a criminal organization, or maybe even the infamous ‘400-pound basement dweller’ that Trump once joked about.

Who might be behind such hacking campaigns is often a fraught question in a world full of digital false flags. Cybereason said all the signs pointed to APT10 – the nickname often applied to a notorious cyberespionage group that U.S. authorities and digital security experts have tied to the Chinese government.

But Div said the clues they found were so obvious that he and his team sometimes wondered whether they might have been left on purpose.

“I thought: ‘Hey, just a second, maybe it’s somebody who wants to blame APT10,'”  he said.

Since Cybereason was contracted by a large telecoms firm to carry out its investigation, it couldn’t say for sure whether the targets of the hacking campaign had been alerted to the intrusion. Whether to notify the targets, they said, had been left to their client to decide. The firm said it had been in contact with a ‘handful’ of law enforcement agencies about the intrusions, but again they refused to reveal who exactly had been brought in the loop.

Whoever hired Cybereason would be remiss if they didn’t disclose the intrusion, since failing to alert their investors could be construed as securities fraud. But if the recent past is any guide (remember Equifax?), companies that have been the victim of large-scale hacks are often reluctant to disclose it for fear of the market backlash.

But if China is behind the hacks, that would give the Trump Administration one more reason to hold off on striking a trade deal on the grounds that Beijing simply can’t be trusted to end its sweeping cyberespionage campaign.

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Author: Tyler Durden


Trump: War President Or Anti-Interventionist?

Authored by Patrick Buchanan via,

Visualizing 150 Iranian dead from a missile strike that he had ordered, President Donald Trump recoiled and canceled the strike, a brave decision and defining moment for his presidency.

Secretary of State Mike Pompeo, John Bolton and Vice President Mike Pence had signed off on the strike on Iran as the right response to Tehran’s shootdown of a U.S. Global Hawk spy plane over the Gulf of Oman.

The U.S. claims the drone was over international waters. Tehran says it was in Iranian territory. But while the loss of a $100 million drone is no small matter, no American pilot was lost, and retaliating by killing 150 Iranians would appear to be a disproportionate response.

Good for Trump. Yet, all weekend, he was berated for chickening out and imitating President Barack Obama. U.S. credibility, it was said, has taken a big hit and must be restored with military action.

By canceling the strike, the president also sent a message to Iran: We’re ready to negotiate. Yet, given the irreconcilable character of our clashing demands, it is hard to see how the U.S. and Iran get off this road we are on, at the end of which a military collision seems almost certain.

Consider the respective demands.

Monday, the president tweeted:

“The U.S. request for Iran is very simple — No Nuclear Weapons and No Further Sponsoring of Terror!”

But Iran has no nuclear weapons, has never had nuclear weapons, and has never even produced bomb-grade uranium.

According to our own intelligence agencies in 2007 and 2011, Tehran did not even have a nuclear weapons program.

Under the 2015 nuclear deal, the JCPOA, the only way Iran could have a nuclear weapons program would be in secret, outside its known nuclear facilities, all of which are under constant U.N. inspection.

Where is the evidence that any such secret program exists?

And if it does, why does America not tell the world where Iran’s secret nuclear facilities are located and demand immediate inspections?

“No further sponsoring of terror,” Trump says.

But what does that mean?

As the major Shiite power in a Middle East divided between Sunni and Shiite, Iran backs the Houthi rebels in Yemen’s civil war, Shiite Hezbollah in Lebanon, Alawite Bashar Assad in Syria, and the Shiite militias in Iraq who helped us stop ISIS’s drive to Baghdad.

In his 12 demands, Pompeo virtually insisted that Iran abandon these allies and capitulate to their Sunni adversaries and rivals.

Not going to happen. Yet, if these demands are nonnegotiable, to be backed up by sanctions severe enough to choke Iran’s economy to death, we will be headed for war.

No more than North Korea is Iran going to yield to U.S. demands that it abandon what Iran sees as vital national interests.

As for the U.S. charge that Iran is “destabilizing” the Middle East, it was not Iran that invaded Afghanistan and Iraq, overthrew the Gadhafi regime in Libya, armed rebels to overthrow Assad in Syria, or aided and abetted the Saudis’ intervention in Yemen’s civil war.

Iran, pushed to the wall, its economy shrinking as inflation and unemployment are rising, is approaching the limits of its tolerance.

And as Iran suffers pain, it is saying, other nations in the Gulf will endure similar pain, as will the USA. At some point, collisions will produce casualties and we will be on the up escalator to war.

Yet, what vital interest of ours does Iran today threaten?

Trump, with his order to stand down on the missile strike on Iran, signaled that he wanted a pause in the confrontation.

Still, it needs to be said: The president himself authorized the steps that have brought us to this peril point.

Trump pulled out of and trashed Obama’s nuclear deal. He imposed the sanctions that are now inflicting something close to unacceptable if not intolerable pain on Iran. He had the Islamic Revolutionary Guard declared a terrorist organization. He sent the Abraham Lincoln carrier task force and B-52s to the Gulf region.

If war is to be avoided, either Iran is going to have to capitulate, or the U.S. is going to have to walk back its maximalist position.

And who would Trump name to negotiate with Tehran for the United States?

The longer the sanctions remain in place and the deeper they bite, the greater the likelihood Iran will respond to our economic warfare with its own asymmetric warfare. Has the president decided to take that risk?

We appear to be at a turning point in the Trump presidency.

Does he want to run in 2020 as the president who led us into war with Iran, or as the anti-interventionist president who began to bring U.S. troops home from that region that has produced so many wars?

Perhaps Congress, the branch of government designated by the Constitution to decide on war, should instruct President Trump as to the conditions under which he is authorized to take us to war with Iran.

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Author: Tyler Durden

Stunning Exposé Offers New Details About China’s Infiltration Of 8 Tech Giants

Over the past year, Western media organizations have published a non-stop stream of reports about “Operation Cloudhopper”: The Chinese government’s clandestine program to spy on and siphon economic secrets from some of the world’s largest tech companies.


We have shared some details of the program before: China’s Ministry of State Security has worked with a shadowy group of hackers called ‘Advanced Persistent Threat’ 10 to infiltrate American and European enterprise tech firms using a very consistent MO: Hackers would infiltrate the cloud computing networks of ‘managed service providers’, then ‘hop’ from network to network’, gaining entree to the networks of these firms’ clients. Back in December, the US named some of the hackers suspected of working with APT10, and was backed up by Germany, New Zealand, Canada, Britain, Australia and other allies all issued statements.


Notably, the Chinese cyberespionage campaign continued even after Beijing and the Obama Administration agreed to a pact to cease all cyberespionage activities.

But as devastating as these attacks have been, the details have been kept under wraps, as corporate victims have pushed for their privacy to be protected. But for the first time since the US indicted the two suspected APT members, a sweeping Reuters investigation has laid out details of attacks, many of which have been previously reported, but not in quite as much depth.


An investigation by Reuters found that “Cloud Hopper” impacted six additional firms aside from IBM and HPE, which it had previously reported. These included at least five of the world’s 10 largest tech service firms. In addition to HPE and IBM, the hacks emanated out to those firms’ clients, including Swedish telecoms firm Ericsson, and a handful of Japanese fims. Ultimately, industrial and commercial secrets were stolen.

The hacking campaign, known as “Cloud Hopper,” was the subject of a U.S. indictment in December that accused two Chinese nationals of identity theft and fraud. Prosecutors described an elaborate operation that victimized multiple Western companies but stopped short of naming them. A Reuters report at the time identified two: Hewlett Packard Enterprise and IBM.

Yet the campaign ensnared at least six more major technology firms, touching five of the world’s 10 biggest tech service providers.

Also compromised by Cloud Hopper, Reuters has found: Fujitsu, Tata Consultancy Services, NTT Data, Dimension Data, Computer Sciences Corporation and DXC Technology. HPE spun-off its services arm in a merger with Computer Sciences Corporation in 2017 to create DXC.

Waves of hacking victims emanate from those six plus HPE and IBM: their clients. Ericsson, which competes with Chinese firms in the strategically critical mobile telecoms business, is one. Others include travel reservation system Sabre, the American leader in managing plane bookings, and the largest shipbuilder for the U.S. Navy, Huntington Ingalls Industries, which builds America’s nuclear submarines at a Virginia shipyard.

“This was the theft of industrial or commercial secrets for the purpose of advancing an economy,” said former Australian National Cyber Security Adviser Alastair MacGibbon. “The lifeblood of a company.”

Over the course of its reporting, Reuters interviewed 30 people involved in the “Cloud Hopper” investigations, including government officials, company insiders and private security contractors. One of the most stunning aspects of the investigation was how persistent the hackers were. Even after their code was purged from the network, APT managed to find its way back in. 

Also incredible: How the security breaches went unnoticed, sometimes for years.

For security staff at Hewlett Packard Enterprise, the Ericsson situation was just one dark cloud in a gathering storm, according to internal documents and 10 people with knowledge of the matter.

For years, the company’s predecessor, technology giant Hewlett Packard, didn’t even know it had been hacked. It first found malicious code stored on a company server in 2012. The company called in outside experts, who found infections dating to at least January 2010.

Hewlett Packard security staff fought back, tracking the intruders, shoring up defenses and executing a carefully planned expulsion to simultaneously knock out all of the hackers’ known footholds.

But the attackers returned, beginning a cycle that continued for at least five years.

Throughout the investigation, the Chinese hackers showed their American peers how woefully ill-equipped they were. Not only did the hackers stay one step ahead of the investigators tracking them, but they littered their code with expletives and taunts.

The intruders stayed a step ahead. They would grab reams of data before planned eviction efforts by HP engineers. Repeatedly, they took whole directories of credentials, a brazen act netting them the ability to impersonate hundreds of employees.

The hackers knew exactly where to retrieve the most sensitive data and littered their code with expletives and taunts. One hacking tool contained the message “FUCK ANY AV” – referencing their victims’ reliance on anti-virus software. The name of a malicious domain used in the wider campaign appeared to mock U.S. intelligence: “”

Ultimately, it’s impossible to say how many of HP’s customers were impacted by “Cloud Hopper”. Though investigators were able to envision at least one “nightmare scenario” involving an HP client: Sabre Corp., a travel-reservation company and HP client, might become vulnerable to Chinese infiltration. If APT and the MSS could gain access to Sabre’s systems, they could easily track the travel patterns of American corporate executives and other VIPs, exposing them to in-person surveillance and bugging.

The HPE operation had hundreds of customers. Armed with stolen corporate credentials, the attackers could do almost anything the service providers could. Many of the compromised machines served multiple HPE customers, documents show.

One nightmare situation involved client Sabre Corp, which provides reservation systems for tens of thousands of hotels around the world. It also has a comprehensive system for booking air travel, working with hundreds of airlines and 1,500 airports.

A thorough penetration at Sabre could have exposed a goldmine of information, investigators said, if China was able to track where corporate executives or U.S. government officials were traveling. That would open the door to in-person approaches, physical surveillance or attempts at installing digital tracking tools on their devices.

In 2015, investigators found that at least four HP machines dedicated to Sabre were tunneling large amounts of data to an external server. The Sabre breach was long-running and intractable, said two former HPE employees.

Via the breach at HP, APT and the MSS also gained entree to the American defense industry by accessing the server of Huntington Ingalls, a company that builds nuclear powered submarines.

In early 2017, HPE analysts saw evidence that Huntington Ingalls Industries, a significant client and the largest U.S. military shipbuilder, had been penetrated by the Chinese hackers, two sources said.

Computer systems owned by a subsidiary of Huntington Ingalls were connecting to a foreign server controlled by APT10.

In Sweden, Huawei rival Ericcson was a persistent target of MSS, though the company often couldn’t tell what, exactly, the hackers were after.

Like many Cloud Hopper victims, Ericsson could not always tell what data was being targeted. Sometimes, the attackers appeared to seek out project management information, such as schedules and timeframes. Another time they went after product manuals, some of which were already publicly available.

In what has become a pattern for reports about China’s cyberespionage, the Reuters expose was published as President Trump prepares to depart for Osaka for the G-20 summit, where he’s scheduled to meet with President Xi. Under Trump, the DoJ has stepped up its efforts to punish China and individuals spies for their cyberespionage activity. Whether Trump stands his ground on cyberespionage is only one factor here. Even if Beijing grants assurances that it will stop, how can the US be sure that it’s not simply lip service like that paid to the Obama administration?

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Author: Tyler Durden

‘God, Guns and Freedom’: Alabama Dealership Offers Bible, Shotgun, And US Flag With Every Purchase 

Chatom Ford, a car dealership in Chatom, Alabama, has gone viral on Facebook for offering customers “a Bible, 12 gauge, and flag” with any purchase between now and July 31.

The dealership published a Facebook video last Wednseday that had Koby Palmer, a general sales manager, talking about the promotion in a 30-second video. As of Wednesday morning, the video has more than 19k views.

“I guess it went viral, as the kids say,” Palmer, 29, told USA TODAY.

He added, “We live in a small town of 1,200 people. It’s a very small, rural area. They lean on their religious beliefs, their pride in America and they love to hunt.”

When a customer purchases a vehicle from Chatom, they will get the Bible and the flag. However, the dealership isn’t directly handing out shotgun; they provide customers over the age of 18 a certificate that can be taken to a certified local firearms dealer that is redeemable for the 12 guage.

Palmer said the dealership had sold five cars since the promotion launched last Friday.

“It’s been running for three business days, and we sold five cars. In a small town, business is booming,” Palmer said

He said the promotion had exceeded his wildest expectations because of how viral it went on social media.

Palmer added that not every customer had to leave Chatom Ford with a flag, a Bible, and a gun after purchasing a car.

“This is just showing support for our local community,” he said. “Anyone that doesn’t 100% agree with what we’re portraying, we’re not trying to force our beliefs on anybody. We respect anybody that disagrees, no matter how vehemently they do.

Who would have ever of thought that it only took a Bible, 12 gauge, and flag to entice a customer in rural America to buy a truck that they don’t need nor can afford as the overall economy starts cycling down.

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Author: Tyler Durden

Lessons For Today From The Three Times The Price Of Gold Collapsed

Authored by Brendan Brown via The Mises Institute,

What can we learn from the three big collapses in the gold price since 1934?

The causes have always included some combination of economic miracle, respite from grave fiat money disorder most of all in the US hegemon, anti-gold regulations, and global detente.

Prudent analysts should never ignore these potential factors, even when the gold price seems to have embarked on a new journey to the summits as has most likely been the case since winter 2015 and 2016.

The gold price had sunk at that time to almost $1,000 per ounce from its multiple peaks in 2011–12 ($1,900 in summer 2011). That collapse reflected primarily the non-emergence of high inflation in the US despite the vast “money printing” and long-term rate manipulation under the first Obama administration.

Scared investors who had feared runaway inflation had not reckoned with the strong downward influence on prices (of goods and services) from globalization and digitalization. Nor had they fully digested the extent to which monetary radicalism had held back business spending in the US and other advanced economies given widespread concerns that another bubble-bust cycle was under way.

Fanning the gold price collapse of 2013–15 was continuous chatter from the Fed about normalization ahead. The oil and wider commodity market slump from late 2014 slotted into the growing narrative of no imminent goods and inflation danger.

Normalization never came. The Yellen Fed aborted all rate rises planned for 2016 in response to the growth cycle downturn and passing global asset market setback. The ECB and BoJ embarked on monetary radicalism even starker than in the US. Briefly in 2018, excitement in the media that Fed Chief Powell, convinced big business tax cuts meant boom ahead, was at last bringing monetary “accommodation” to an end, triggered a faltering of the incipient gold price recovery. Events this year have re-fuelled gold’s rising trend from its end-2015 trough.

Meanwhile news of continued “low inflation” does not impress many gold holders who worry about colossal budget deficits in the US and likely waning downward influences on prices from globalization and digitalization. Vast accumulated mal-investment and the weakness of the invisible hand in the context of unsound money — and strengthened monopoly capitalism — does not encourage optimism for economic miracles. This optimism was a key element in the epic gold price collapse from January 1980 to end 2002.

In terms of 2018 dollars, the gold price fell from $2,010 to $480 over those twenty-two years.

In fact, there were two sub-collapses.

The first was the plunge to $750 (2018 dollars) in 1984. This reflected Paul Volcker’s monetarist assault on “the greatest peacetime inflation” coupled with an extraordinarily high level of real US interest rates. The height was in line with widespread speculation on the miracle of “Reaganomics.” The devaluation of the dollar at Plaza (autumn 1985) and beyond accompanied by the Volcker/Greenspan monetary inflation of 1985–88 as directed by top White House official James Baker led to a brief spring for gold.

Then the disintegration of the Soviet Empire followed by the emergence of US economic miracle (the IT boom of 1995–99) helped bring a second collapse, with 10-year real interest rates (as quoted in the 10-year US TIPS market) rising above 4 percent.

Aggressive monetary ease from 2003–04 (the Greenspan/Bernanke Fed breathing in inflation because it had fallen “too low”) as an accompaniment to the Bush administration’s dollar devaluation policy ahead of the November 2004 election set gold on its second journey to the summits (from 2003 to 2011–12). The first such journey had been from 1968 when the US ceased intervening in the free market to hold down the price of gold at $35 per ounce.

The free market was then (mid-1960s) just returning to life, having long been choked by regulation — starting with Roosevelt’s criminalization of private gold holdings within the US (1934) and then widespread exchange controls throughout the globe. The dismantling of these accelerated from the late 1960s (US gold ban lifted in December 1974, European and Japanese exchange controls abolished through 1970s).

These restrictions had doubtless played a role in the long collapse of the gold price from 1934 to 1968 (during which time the gold price in 2018 US purchasing power had fallen from $650 to $250 per ounce). Economic miracles also played an important role.

The mid-1950s to the mid-1960s were years of great economic miracles, not just the famed ones in Japan and Germany, but also in the US. Accordingly, rates of return to capital were extraordinarily high, dampening the appeal of gold. Even real interest rates were substantially positive, albeit held well below the level which would have been in line with the miracles.

Central bankers led by the Martin Fed sought to hold nominal rates down employing Depression Era-regulations on credit and deposit interest rates for that purpose. Rapid productivity growth camouflaged underlying conditions of monetary inflation from showing up in goods and services markets.

The widely told story about how the gold link of the dollar under Bretton Woods acted as bulwark against monetary inflation is myth. As soon as private gold markets came back to life, the anchor role snapped (March 1968). The remaining three years during which the official gold window remained open prolonged the opportunity for European governments to obtain the yellow metal from the US Treasury at the bargain prices still available.

In looking at the gold price beyond the next summit we should be concerned about restrictions which could imperil the free market in gold.

The lone serious non-fiat money is still in fragile condition due to government restraints. There is virtually no scope for banks or other financial institutions to develop “bullion banking” in which gold deposits could be used as a medium of payment (where clearing between the institutions would take place at a central gold “depot”) whether nationally or internationally. Regulators defend their veto here in terms of the wider war against cash — highlighting concerns that gold hoards include a criminal element whose money-laundering operations could flourish in bullion banks.

The Bundesbanker’s advice that outlawing large denomination notes due to their use by criminals is akin to banning Mercedes-Benz autos because the mafia like driving them does not go down well with the regulators. The gold bulls might be right that gold is safe against new regulation so long as the Republicans hold the White House.

The likelihood is not trivial, however, that Washington will eventually join in imposing new regulations on gold trading and international shipments, perhaps in time for the next price collapse, albeit from a new record high summit.

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Author: Tyler Durden

India Rushes To Lure Businesses Fleeing China With Generous Tax Breaks

India has begun offering financial incentives to entice businesses that could move from China as a result of its trade war with the United States, RT reports. Preferential tax rates and tax holidays appear to be two of the financial incentives that are being considered in India. According to an Indian Trade Ministry document, the industries it is seeking out include electronics, consumer appliances, electric vehicles, footwear and toys.

It is all part of a larger plan by the Indian Trade Ministry to cut the country’s reliance on imports, while at the same time boosting exports. The goal is to grow India’s manufacturing base and facilitate Prime Minister Narendra Modi’s flagship ‘Make in India’ initiative, especially after the country’s top economic advisor admitted that a change in the method used to calculate India’s GDP led to “a significant overestimation of growth,” and estimating that India’s economy grew at an average of 4.5% a year between March 2011 and March 2017 — far weaker than the 7% average rate reported by the government over that period.

The goal of the program is to boost the country’s manufacturing to 25% of the economy by 2020.

Due to their geographical adjacency, China is India’s largest commercial partner, although that could soon transform to competitor. The plan could help India narrow its massive trade deficit with the world’s second largest economy.

Investments by Chinese companies could be diversified across various sectors of the Indian market, including smartphones and components manufacturing, consumer appliances and day-to-day use items, 95% of which are already imported from China.

There have also already been 150 items identified by the Indian government where exporters could increase business with China. They include “prepared or preserved potatoes, synthetic staple fibers of polyesters and t-shirts, hydraulic power engines, and superchargers for motors.”

A plan similar to India’s – to attract foreign countries by providing financial incentives – has already been successfully implemented by countries like Vietnam and Malaysia.

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Author: Tyler Durden

All The Candidates’ Bad Ideas

Authored by John Stossel, op-ed via,

So many people want to be president. Unfortunately, many have terrible ideas.

Sen. Kamala Harris wants companies to prove they pay men and women equally. “Penalties if they don’t!” she shouts. But there are lots of reasons, other than sexism, why companies pay some men more than women.

Harris also wants government to “hold social media platforms accountable for the hate infiltrating their platforms.” But “holding them accountable” means censorship. If politicians get to censor media, they’ll censor anyone who criticizes them.

Sen. Bernie Sanders wants the post office to offer banking services. The post office? It already loses billions of dollars despite its monopoly on delivering mail. Sanders also wants to increase our national debt by forgiving $1.6 trillion in student loan debt.

He wants to ban for-profit charter schools and freeze funding for nonprofit charters. That’s great news for some government-school bureaucrats and teachers unions that don’t want to compete but bad news for kids who flourish in charters when government schools fail.

Sen. Cory Booker once sounded better about charters, saying, “When people tell me they’re against school choice … or charter schools, I say, ‘As soon as you’re willing to send your kid to a failing school in my city … then I’ll be with you.'”

Unfortunately, now that Booker is a presidential candidate, he says little about school choice. He also wants government to guarantee people’s jobs and to pay more Americans’ rent.

Sen. Kirsten Gillibrand wants to force everyone to buy fertility treatment insurance.

Sen. Elizabeth Warren wants to impose a wealth tax on very rich people. That would certainly benefit accountants and tax lawyers while inspiring rich people to hide more assets instead of putting them to work.

Warren also wants to ban all oil and gas drilling on federal land, have government decide who sits on corporate boards and make college free.

The Democrat who leads the betting odds, former Vice President Joe Biden, also says, “College should be free!”

Free? Colleges have already jacked up their prices much faster than inflation because taxpayers subsidize too much of college. Biden and Warren would make that problem worse.

The Republican incumbent has bad ideas, too: President Donald Trump imposes tariffs that are really new taxes that American consumers must pay. Trump says tariffs are needed because our “trade deficit in goods with the world last year was nearly $800 billion dollars. (That means) we lost $800 billion!”

But it doesn’t mean that, Mr. President. A “trade deficit” just means foreigners sent us $800 billion more goods than we sent them.

We got their products, and in return they only got American currency, which they’ll end up investing in the U.S. That’s good for us. It’s not a problem.

Luckily, the president has good ideas, too. He says he wants to shrink the code of federal regulations back to its 1960 size. It would be great if he actually did it. Trump slowing the growth of regulation is one of the best parts of his presidency.

Some Democratic candidates have sensible ideas, too.

Cory Booker proposed legalizing marijuana.

Mayor Pete Buttigieg criticizes his opponents for their “college for all” freebie, saying:

“I have a hard time getting my head around the idea that a majority who earn less because they didn’t go to college would subsidize a minority who earn more.”

And all candidates could learn from Hawaii’s Rep. Tulsi Gabbard, who served in Iraq.

“I know the cost of war!” she says. “I will end the regime change wars — taking the money that we’ve been wasting on these wars and weapons and investing it in serving the needs of our people.”

Sadly, she wouldn’t give that money back to the people. She’d spend it on other big-government programs.

Politicians always have ideas other than letting you keep your money.

I bet we’ll hear other bad ideas this week when 20 of the Democratic candidates debate.

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Author: Tyler Durden

Watch China’s Propaganda In Action: Foreign Ministry Claims Massive HK Protests Were “Pro-Extradition”

Earlier this week the internet went crazy over just how bold the communist People’s Republic of China government’s lies are becoming. A viral video showed a press briefing in which a foreign ministry spokesman coolly presented the still raging Hong Kong protests as the complete opposite of the reality: 

“As far as I know, over 800,000 Hong Kong citizens participated in the pro-extradition bill demonstration,” the Chinese government official said. 

He continued to present what are in reality popular anti-Beijing protests in condemnation of the controversial China-backed extradition bill as actual confirmation of Beijing’s line. “I think this amply demonstrated that the mainstream public opinion of Hong Kong supports this legislative work,” the official stated in his brazen lie: 

The ultimate in communist Orwellian trolling perhaps? Maybe the talking head functionary himself doesn’t understand what’s going on?

Or just Beijing’s par for the course propaganda packaged for domestic consumption. Regardless, it’s among the most brazen of many whoppers for the history books.

If you can’t beat’em… well then just make shit up and hijack a mass protest movement as if it’s yours.

The continuing anti-extradition protests, which had witnessed an estimated 2 million hit Hong Kong’s streets two Sundays ago, fast became a lightning rod for those angry about growing Chinese presence in the semi-autonomous city, and potential diminishing freedoms.

Protests earlier this month against the extradition bill, via South China Morning Post

Meanwhile, protesters this week are appealing for international support, per Reuters:

Holding placards with messages such as “Please liberate Hong Kong”, the demonstrators, some wearing masks, marched to consulates of nations represented at the Japan summit of the Group of 20 major economies.

These included Argentina, Australia, Britain, Canada, Italy, Japan, South Africa, South Korea, Russia, Turkey, the United States and the European Union.

The “one country, two systems” policy that’s long governed Hong Kong is seen as under threat by the extradition bill, which critics worry will be used to unjustly deport political activists and dissidents to mainland China and its more oppressive laws. 

Last week Chinese Foreign Minister Wang Yi slammed the protests as a “foreign plot”, saying the “black hand” of Western forces were trying to the mass demonstrations to “stir up trouble” in the city. So given the above viral clip, it appears Beijing can’t get its own messaging straight.

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Author: Tyler Durden

New Study Finds A Modest Carbon Tax Would Hurt All Humanity For Two Generations

Authored by Robert Murphy via The Mises Institute,

One of the main themes of my writings on climate change at IER has been warning the public that the “consensus science” they are hearing from the media, pundits, and certain political figures is utterly divorced from the actual published literature, especially when it comes to the economic analysis of government policy. A new, cutting edge working paper from some big-name economists — including Laurence Kotlikoff and Jeffrey Sachs — confirms my point.

In this case, here is the shocking fact that their paper tries to grapple with: Even with a relatively modest carbon tax, the rise in energy prices is so painful that it swamps the benefits of slower climate change, and this is true for our kids and grandkids.

It is only when we get to our great-grandchildren that humanity on net would start to actually benefit from even a modest carbon tax introduced today. So the next time you hear someone say, “We need to take vigorous action on the climate for future generations!” you can clarify, “Actually, your proposals would hurt the next two future generations. You want to hurt us, our kids, and our grandkids, in order to help our great-grandkids and beyond — who will all be fantastically rich compared to us, by the way.”

The Kotlikoff et al. paper is quite technical, so I’ll just summarize the take-away points for a lay audience. I will also spend time at the end of the article explaining what their proposed solution is, for this thorny problem. To avoid confusion, I want to be clear: The authors of this new paper are for a (modest) carbon tax. But they are warning that the current discussion, even among economists, tends to look at “what’s best for humanity from now until the end of time,” rather than checking to make sure each generation gains from a new climate policy. As we’ll see, Kotlikoff et al. suggest a massive fiscal transfer that allows present generations to run up a huge (additional) government debt that our descendants must then effectively pay back with higher taxes, in order to compensate their forebears for suffering through higher energy prices due to a carbon tax.

The point of my article isn’t to endorse the overall recommendation of Kotlikoff et al.; along with climate scientists at Cato, I’ve published a comprehensive critique of the usual economist’s case for a carbon tax. Rather, by shining a spotlight on the cutting edge in the development of the literature on carbon taxation, I want readers to see just how detached the actual discussion among experts is from the breezy claims about “we have 12 years left to save our children” that we hear from pundits and political officials.

How An “Optimal” Carbon Tax Can Punish Into the Third Generation

To set the stage for my interpretation, let’s first quote from the authors’ own description of their results. (Note, readers who don’t have access through the NBER link above can also see a version of the paper posted at Kotlikoff’s website.) The title of the paper is, “MAKING CARBON TAXATION A GENERATIONAL WIN WIN.” Here’s an excerpt from the Abstract:

Carbon taxation has been studied primarily in social planner or infinitely lived agent models, which trade off the welfare of future and current generations.Such frameworks obscure the potential for carbon taxation to produce a generational win-win. This paper develops a large-scale, dynamic 55-period, OLG [Overlapping Generations — rpm] model to calculate the carbon tax policy delivering the highest uniform welfare gain to all generations. The OLG framework, with its selfish generations, seems far more natural for studying climate damage. Our model features coal, oil, and gas, each extracted subject to increasing costs, a clean energy sector, technical and demographic change, and Nordhaus (2017)’s temperature/damage functions. Our model’s optimal uniform welfare increasing (UWI) carbon tax starts at $30 tax, rises annually at 1.5 percent and raises the welfare of all current and future generations by 0.73 percent on a consumption-equivalent basis. Sharing efficiency gains evenly requires, however, taxing future generations by as much as 8.1 percent and subsidizing early generations by as much as 1.2 percent of lifetime consumption. Without such redistribution (the Nordhaus “optimum”), the carbon tax constitutes a win-lose policy with current generations experiencing an up to 0.84 percent welfare loss and future generations experiencing an up to 7.54 percent welfare gain. [Kotlikoff et al., bold added.]

Although I realize this is difficult technical language for the layperson to parse, here’s what the authors are saying: If we take the “gold standard” (their term later on) in this literature and use Nordhaus’s 2017 model calibration, it will recommend an “optimal carbon tax” that correctly — according to standard economic theory and the best estimates from the climate science research — balances the tradeoff between reducing emissions and harming economic growth.

However — and this is a huge caveat — Nordhaus’s approach assumes there is a benevolent, overarching “social planner” who lumps all of humanity together, and only makes a technical allowance for a (modest) discount on the happiness of future generations in accordance with standard economic theory.

In practice, the authors point out, Nordhaus’s “optimal carbon tax” would actually mean that people living or born today and in the near future will be harmed on net by the policy, because they will suffer worse economic harm from higher energy prices, than they will be spared in climate change damages from reduced emissions. It’s only when we get several generations into the future, that Nordhaus’s “optimal carbon tax” actually starts making human beings better off, compared to the status quo.

This is a critical point for Americans to realize. They are constantly being hectored that if they “cared for their children” they would support a large carbon tax and other aggressive interventions. But we see that this isn’t true: If we even adopt a modest carbon tax — one that still allows 4 degrees Celsius warming (over twice the 1.5 degree currently touted by climate activists as the necessary target), according to the authors (p. 22)1  — then we are harming ourselves, our children, and our grandchildren, relative to the “do nothing” baseline. It’s only our great-grandchildren, who (on average) are going to be fantastically wealthy compared to us, who will actually start reaping net benefits from even this modest reduction in the path of emissions.

The Specifics

The general point of this new paper has been made before; I myself have frequently pointed out to audiences that the entire climate change approach involves making relatively poor people (i.e., us) even poorer, in order to shower benefits on relatively rich people (i.e. future generations). However, the benefit of the Kotlikoff et al. paper is that they quantify exactly how much each generation wins or loses under the latest Nordhaus calibration, by taking his (Nobel-Prize winning) model and changing as little as possible to make their calculations. Furthermore, since Jeffrey Sachs (one of the co-authors) is a prominent proponent of “action against climate change,” the skeptical outsider can be reassured that these results are genuine and not the result of bias or disinformation.

Here are some specific results of their model, which I have adapted from one of their tables:

Source: Kotlikoff et al., Table 3 (p. 27).

In the table, I’ve highlighted the rows pertaining to people who are born 15 years before the year the Nordhaus carbon tax is implemented, all the way up through people born 35 years afterwards. This group of humans can roughly be summarized as the “children and grandchildren” of the adults who make the decision to go ahead and install the carbon tax.

As the right side of the table indicates, this entire segment of the humanity, spanning the next two generations, is hurt on net by the carbon tax. That is, the economic damage resulting from the penalty on fossil fuels hurts the kids and grandkids more than they gain from mitigated climate change during their lifetimes, relative to what would have happened under “business as usual.”

According to the simulations of the authors, it is only when you get to people born 45 years after implementing the carbon tax — many of whom would be the great-grandkids of adults who supported the tax decades earlier — that humanity actually starts reaping net benefits from the whole scheme. It’s only from this point forward that the accumulated difference in climate change is large enough to compensate for the higher energy prices created by the carbon tax.

In the bottom two rows of the table, I’ve shown what happens 100 years and 200 years out: We see that people born at these times experience a net gain of 4.56% and 7.50% in “welfare” (the technical economic term in the paper), respectively.

(A parenthetical note for purists, so that no one accuses me of skullduggery: I’ve also included at the top of the table the results for people who are born decades before the carbon tax. The authors report that these people gain too, because they own reserves of coal, oil, and natural gas, and hence benefit from higher energy prices. However, this seems to be a mistake in economic reasoning. Yes, a tax on emissions will drive up the price of energy, but that hardly helps the owners of coal; that’s why people accuse certain energy companies of lobbying against carbon taxes. I have emailed the authors of the paper for clarification.)

Making Sense of the Results

Here’s some intuition (from me, not the authors) to help the reader understand the big picture: Suppose the Nordhaus model of the damages from emissions and climate change were basically correct, and the environmental economists recommended a carbon tax of around $30/ton that would steadily rise over time.

But then engineers discover a new technique that will eventually allow them to very easily and cheaply remove carbon dioxide from the atmosphere, beginning in the year 2060. In other words, suppose we suddenly realize that only climate change damages that occur between now and the year 2060 will matter, because afterwards scientists will be able to very easily calibrate atmospheric concentrations of CO2, much like setting the thermostat in a household.

In this thought experiment, what would happen to the “optimal carbon tax”? It would obviously collapse to about $0/ton (with Nordhaus’ other parameter choices for his model). The main point of humanity slamming the brakes on emissions was the flow of avoided climate change damages that would accrue to humanity after 2060. The human race would effectively be making a large upfront investment for several decades, in order to eventually start reaping the payoff.

This intuition is what the authors of the new NBER study have quantified, shown in the table above. They are showing that when you take the leading model in the literature (i.e., Nordhaus’ with its 2017 calibration), and then decompose “humanity” into discrete groups who are born in different years, it turns out that the costly investment project doesn’t begin reaping net dividends until 45 years after it’s begun.

The odd fact about climate change policy is that the current generation, the next generation, and the third generation are being asked to reduce their standard of living, in order to shower benefits on our great-grandkids and their descendants. Incidentally, this is why the seemingly arcane debate over the proper “discount rate” to use in climate change analysis is so crucial — the costs of a carbon tax are concentrated in the first few decades, while the ostensible benefits are spread out into the far distant future.

“But What About the (Great-Grand-) Children?!”

The obvious response to my above reasoning is to say, “Okay sure, the present generation — and I guess, the next two as well — are being asked to make sacrifices for our distant descendants. But isn’t that the responsible thing to do? We don’t want to saddle our great-grandchildren and beyond with an unlivable world!”

But again, this type of language is not supported by the “gold standard” (the term used by Jeffrey Sachs et al. in their paper) modeling of climate change damages. Look again at the bottom two rows in the table above. The “optimal carbon tax” boosts the welfare (it’s fine to think of it in terms of “real lifetime income”) of the people born 100 years later by 4.56%, and the people born 200 years later by 7.50%.

But hang on a second. If we didn’t have to worry about climate change, there would presumably be standard economic growth on average, over the next two centuries. Let’s be conservative and say real income per capita would grow 1% per year, without worrying about climate change. That means people in 100 years would have a standard of living 170% higher than ours, while people in 200 years would have a standard of living 630% higher. Then if they got ravaged by unchecked climate change — because we selfishly refused to harm our own narrow self-interest by restricting emissions — the people in 100 years would “only” have a lifestyle about 160% richer than ours, while the people in 200 years would “only” have a lifestyle 580% richer than ours.

Kotlikoff Et Al.’s Proposed Debt Solution

This post is already long, so let me very briefly explain the actual proposal in the Kotlikoff et al. paper. Since Nordhaus’ “optimal carbon tax” would — as shown above — hurt early generations in order to benefit distant generations, the authors propose to use fiscal policy to effectively transfer wealth from future generations to present ones.

In other words, they propose to flip the standard fiscal debates on their head: When people usually talk about our need to “stop running deficits at the expense of our children and grandchildren,” Kotlikoff et al. say that’s exactly what we should do, to compensate ourselves for the pain we are suffering by implementing a new carbon tax. (Incidentally, this discussion has nothing to do with the use of carbon tax receipts to offset other taxes, as the authors make clear on page 7.)

This twist in their paper is another reason I was so fascinated by the article, as I happened to have taken part in a big debate among economists over whether it even makes sense to say government debt could “burden future generations.” (My allies and I said “yes,” while Paul Krugman and Dean Baker said “no.” See my article here or a PowerPoint lecture here.) So it was interesting to see Jeffrey Sachs et al. implicitly throw Krugman under the bus, in a double way: (1) We can make future generations poorer by running up the government debt, thank you very much, and maybe we should do so, because (2) a carbon tax will impose large net damages on humanity for the next few decades. (In case readers miss my joke, Krugman also denies that a carbon tax will be painful.)

“Ah,” the clever reader may now say, “you had been leading us to believe that a carbon tax was a bad idea. But Kotlikoff et al. have found a way to salvage it! Win-win for everybody!”

But hang on a second. Do you know how big a “fiscal transfer” is necessary, in order for early generations to compensate themselves for the cooler planet they’re handing off to the future? According to the study: “The size of the debt to GDP ratio required to effect the win-win is significant [for Nordhaus’ default parameters]. The…debt to GDP ratio [from the compensatory transfer program] is 0.52 in year 50, 0.78 in year 100, 0.82 in year 200, 0.70 in the year 1000, stabilizing at 0.48 in the long run…” (p. 25).

This is shocking. And to be clear, this is putting aside the other government debt. What the authors are saying is that we, our kids, and our grandkids should give ourselves a big tax cut, letting the government debt mushroom to an additional 52 percent of GDP a half-century after the tax, and hand that off to our heirs, who will be saddled with a large tax hike to service this extra burden of Treasury debt.

To borrow a line from Al Gore, this strikes me as a “risky scheme.”


The public is being grossly misled about the economics of climate change policy. It’s true that many prestigious economists endorse a modest carbon tax, but their recommendations would still allow vastly more warming than the UN’s popular goals, which have become the norm in policy discussions with little explanation.

Moreover, even using fairly pessimistic projections, future generations will be far richer than we are, with or without any government actions on climate change. And as a clever new working paper from Laurence Kotlikoff and Jeffrey Sachs (among others) reveals, even a modest carbon tax will cause net damages to us, our kids, and our grandkids. It’s only when we get to the fourth generation that the “optimal carbon tax” from the literature starts yielding more climate change benefits than it causes in economic harm.

Those who have the training to actually read and parse the economics of climate change literature can appreciate just how awful the reporting and typical “policy wonk” discussion is. It’s almost as if the self-anointed experts are science deniers.

In any event, opponents of a carbon tax can now adopt the slogan: “Do it for the children!”

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Author: Tyler Durden

Teen Vogue Promotes “The Legacy Of Karl Marx” To Its 3.3 Million Twitter Followers

Calling him the “famed German that co-authored The Communist Manifesto”as if the work should be celebrated, the historical scholars over at Teen Vogue are now indoctrinating their young readers as to why they should be reading Karl Marx.

A recent article in Teen Vogue celebrates Marx’s 200th birthday and says Marx’s ideas “can still teach us about the past and present.”

Yeah, here’s what didn’t work – any why we should never attempt it again. 

And perhaps in an attempt to align themselves with the 2020 Democratic Presidential candidates (we’re only half joking), Teen Vogue tweeted out “The legacy of Karl Marx’s ideas” to its 3.3 million Twitter followers just days ago. 

First, the article goes on to celebrate Marx’s resume:

The Communist Manifesto is most usually the work of Marx taught in schools, and he is one of the most assigned economists in United States college classes. Many may not know that he also studied law in university. He authored three volumes of Das Kapital, which outlined the fundamentals of Marxist theory of capitalism and also organized workersthrough the International Working Men’s Association, otherwise known as the First International.

He was an editor of a newspaper that was eventually censored by the Prussian government for speaking out against censorship and challenging the government. His writings have inspired social movements in Soviet RussiaChinaCubaArgentinaGhanaBurkina Faso, and more. Many political writers and artists like Angela DavisFrida KahloMalcolm XClaudia JonesHelen Keller, and Walter Rodney integrated Marxist theory into their work decades after his death.

Then, the article goes on to cite high school English teacher Mark Brunt, who encourages his students to “learn the legacy of Marx’s ideas”.

Brunt said: “I do a little role-playing with [my class]. [I tell them,] I’m the boss, you’re my workers, and you want to try to take me down. I have the money. I own the factory. I control the police. I control the military. I control the government. What do you guys have?”

He continued: “It’s always just one student, whose hand shoots up and goes, ‘We outnumber you!’”

Brunt then ostensibly uses that line of logic to try and empower students to rebel, teaching them about the tension between the proletariat and bourgeoisie, and reminding students that workers in factories “had very little control over their work, including their working conditions, compared to the profiteering factory owners.”

But then, almost comically, the article dryly notes: “…if such a revolution occured in Brunt’s classroom, his students would overthrow him as a teacher — and the principal, the superintendent, and so on.”

But the indoctrination doesn’t stop there, with Brunt working to convince his students that they are being tricked, and could be playing into false consciousness. Brunt tells his students: “False consciousness is when you think that the social conditions are different than they actually are. You’re tricked into thinking your allies are different and your enemies are different than they actually are.”

And it’s not just Brunt the article cites. Teen Vogue also pointed out former Drexel professor George Ciccariello-Maher, who reminds his students that capitalism emerged through a “state of violence”: 

“When I teach Marx, it’s got a lot to do with questions of how to think critically about history. Marx says we live under capitalism [but] capitalism has not always existed,” Ciccariello-Maher tells Teen Vogue.

“It’s something that came into being and something that, as a result, just on a logical level, could disappear, could be overthrown, could be abolished, could be irrelevant. There’s this myth of the free market, but Marx shows very clearly that capitalism emerged through a state of violence.”

Maher continues: “Dialectics means that the history moves forward not slowly or gradually or bit by bit, but it moves forward through the sort of crushing blows of struggles between generally two opposing ideas or groups or concepts or people.”

And of course, even if you don’t “identify” as a Marxist, the article notes, “…you can still use Karl Marx’s ideas to use history and class struggles to better understand how the current sociopolitical climate in America came to be.”

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Author: Tyler Durden