Central Perk: 19 feb. 2015

joi, 19 februarie 2015

Mish's Global Economic Trend Analysis

Survival by Coercion: No-Confidence Vote in France Fails; Rules of the Game Show Wasted Opportunity by Hollande
NSA Hacks Into SIM Card Makers Giving US and UK Criminals Access to Millions of Cell Phones
Debaltsevsky Under Rebel Control, Boiler Remains; What's Next?
Head-On Collision: Germany Rejects Greece "Trojan Horse"; Slovakia Rules Out Further Aid

Survival by Coercion: No-Confidence Vote in France Fails; Rules of the Game Show Wasted Opportunity by Hollande

Posted: 19 Feb 2015 07:40 PM PST

No-Confidence Vote in France Fails

French President Francois Hollande took an unusual step on Tuesday of passing a law by decree, with no parliamentary vote.

Article 49.3 of the French constitution allows that, but doing so runs the risk of a no-confidence vote and dissolution of the government should the vote of confidence fail.

I commented on Article 49.3 in Hollande Risks Vote of No Confidence Over Business-Friendly Legislation; National Debate Over Baguettes.

That headline was a bit inaccurate because there really was little risk. Heads of state don't go out of their way on such measures unless they know full well they will survive.

234 voted to censure Hollande, but 289 votes were necessary. Mainstream media portray this as some sort of victory. I don't. I call it a wasted opportunity. I will explain why in a bit, but first let's dive into the reporting.

Survival by Coercion

Reuters reports French Government Survives No-Confidence Vote.

France's Socialist government survived a parliament no-confidence vote called by opposition conservatives on Thursday after it resorted to a controversial decree to bypass broad opposition to a flagship economic reform bill.

Some 234 lawmakers voted in favor of the motion, according to the official vote tally - well short of the 289 votes needed to secure an absolute majority in the lower house of parliament.

The challenge was made after Prime Minister Manuel Valls on Tuesday resorted to a little-used mechanism to push through a package of economically liberal reforms opposed by the left - a tactic widely denounced as anti-democratic.

However the outcome of the no-confidence vote came as little surprise after Socialist leaders said they would eject from the party any lawmaker who joined the censure motion. A Reuters reporter in parliament said no Socialist did so.

Vote With the Party or Be Ejected

There you have it. Coercion at its finest. Vote for censure and you will be ejected from the party.

That you have to issue such statements is bad enough. And given that many from other parties do not want a collapse of the government at this time, the vote total should be considered an embarrassment, not a victory.

Wasted Opportunity by Hollande

And what does Hollande have to show for this coercion? The reforms include increasing the number of Sundays that shops can stay open from five to twelve and deregulation of notary and legal professions.

This was my comment two days ago "It is absurd to believe allowing shops to stay open an extra 7 Sundays will do anything meaningful for the economy. If you are going to risk a vote of no-confidence, why not make it meaningful?"

Rules of the Game

The rules of game are such that you can only use Article 49.3 once per parliamentary session. I had to look that up.

Wikipedia reports the French Parliament meets for one nine-month session each year: under special circumstances the President can call an additional session.

So, in the sake of reform that is supposed to impress Germany, Hollande put it all the line by letting shops open up an extra 7 days on Sunday and other miscellaneous and essentially meaningless items.

Socialist Revolt in Words Not Actions

Socialists were horrified about the prospect of having to work any extra Sundays a year. Martine Aubry, the daughter of former EU commission president Jacques Delors and an influential Socialist party figure, attacked the plan to increase the number of Sundays shops can open from five a year to 12, calling it "social regression".

In the end, coercion "won". Not a single socialist stood their ground fearing expulsion from the party.

Final Analysis

What was really achieved? Nothing but Embarrassment. Pathetic.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

NSA Hacks Into SIM Card Makers Giving US and UK Criminals Access to Millions of Cell Phones

Posted: 19 Feb 2015 04:49 PM PST

The Great SIM Heist

I have a simple question: Why is it a crime for someone to hack into Sony, Target, weather stations, etc., but not a crime for the NSA to hack into phone SIM card producers then steal every master key?

In my opinion, all of these hacks are illegal, and the NSA officials who authorized the hack I describe below belong in prison.

Please consider The Great SIM Heist

AMERICAN AND BRITISH spies hacked into the internal computer network of the largest manufacturer of SIM cards in the world, stealing encryption keys used to protect the privacy of cellphone communications across the globe, according to top-secret documents provided to The Intercept by National Security Agency whistleblower Edward Snowden.

The hack was perpetrated by a joint unit consisting of operatives from the NSA and its British counterpart Government Communications Headquarters, or GCHQ. The breach, detailed in a secret 2010 GCHQ document, gave the surveillance agencies the potential to secretly monitor a large portion of the world's cellular communications, including both voice and data.

The company targeted by the intelligence agencies, Gemalto, is a multinational firm incorporated in the Netherlands that makes the chips used in mobile phones and next-generation credit cards. Among its clients are AT&T, T-Mobile, Verizon, Sprint and some 450 wireless network providers around the world. The company operates in 85 countries and has more than 40 manufacturing facilities. One of its three global headquarters is in Austin, Texas and it has a large factory in Pennsylvania.

In all, Gemalto produces some 2 billion SIM cards a year. Its motto is "Security to be Free."

With these stolen encryption keys, intelligence agencies can monitor mobile communications without seeking or receiving approval from telecom companies and foreign governments. Possessing the keys also sidesteps the need to get a warrant or a wiretap, while leaving no trace on the wireless provider's network that the communications were intercepted. Bulk key theft additionally enables the intelligence agencies to unlock any previously encrypted communications they had already intercepted, but did not yet have the ability to decrypt.

As part of the covert operations against Gemalto, spies from GCHQ — with support from the NSA — mined the private communications of unwitting engineers and other company employees in multiple countries.

Leading privacy advocates and security experts say that the theft of encryption keys from major wireless network providers is tantamount to a thief obtaining the master ring of a building superintendent who holds the keys to every apartment. "Once you have the keys, decrypting traffic is trivial," says Christopher Soghoian, the principal technologist for the American Civil Liberties Union. "The news of this key theft will send a shock wave through the security community."

According to one secret GCHQ slide, the British intelligence agency penetrated Gemalto's internal networks, planting malware on several computers, giving GCHQ secret access. We "believe we have their entire network," the slide's author boasted about the operation against Gemalto.

"It's unbelievable. Unbelievable," said Gerard Schouw, a member of the Dutch Parliament, when told of the spy agencies' actions. Schouw, the intelligence spokesperson for D66, the largest opposition party in the Netherlands, told The Intercept, "We don't want to have the secret services from other countries doing things like this."

All mobile communications on the phone depend on the SIM, which stores and guards the encryption keys created by companies like Gemalto. SIM cards can be used to store contacts, text messages, and other important data, like one's phone number. In some countries, SIM cards are used to transfer money. As The Intercept reported last year, having the wrong SIM card can make you the target of a drone strike.

SIM cards were not invented to protect individual communications — they were designed to do something much simpler: ensure proper billing and prevent fraud, which was pervasive in the early days of cellphones.

One of the creators of the encryption protocol that is widely used today for securing emails, Adi Shamir, famously asserted: "Cryptography is typically bypassed, not penetrated." In other words, it is much easier (and sneakier) to open a locked door when you have the key than it is to break down the door using brute force. While the NSA and GCHQ have substantial resources dedicated to breaking encryption, it is not the only way — and certainly not always the most efficient — to get at the data they want. "NSA has more mathematicians on its payroll than any other entity in the U.S.," says the ACLU's Soghoian. "But the NSA's hackers are way busier than its mathematicians."

SIM card "personalization" companies like Gemalto ship hundreds of thousands of SIM cards at a time to mobile phone operators across the world. International shipping records obtained by The Intercept show that in 2011, Gemalto shipped 450,000 smart cards from its plant in Mexico to Germany's Deutsche Telekom in just one shipment.

In order for the cards to work and for the phones' communications to be secure, Gemalto also needs to provide the mobile company with a file containing the encryption keys for each of the new SIM cards. These master key files could be shipped via FedEx, DHL, UPS or another snail mail provider. More commonly, they could be sent via email or through File Transfer Protocol, FTP, a method of sending files over the Internet.

The moment the master key set is generated by Gemalto or another personalization company, but before it is sent to the wireless carrier, is the most vulnerable moment for interception. "The value of getting them at the point of manufacture is you can presumably get a lot of keys in one go, since SIM chips get made in big batches," says Green, the cryptographer. "SIM cards get made for lots of different carriers in one facility." In Gemalto's case, GCHQ hit the jackpot, as the company manufactures SIMs for hundreds of wireless network providers, including all of the leading U.S.— and many of the largest European — companies.

In Asia, Gemalto's chips are used by China Unicom, Japan's NTT and Taiwan's Chungwa Telecom, as well as scores of wireless network providers throughout Africa and the Middle East. The company's security technology is used by more than 3,000 financial institutions and 80 government organizations. Among its clients are Visa, Mastercard, American Express, JP Morgan Chase and Barclays. It also provides chips for use in luxury cars, including those made by Audi and BMW.

In 2012, Gemalto won a sizable contract, worth $175 million, from the U.S. government to produce the covers for electronic U.S. passports, which contain chips and antennas that can be used to better authenticate travelers.

PRIVACY ADVOCATES and security experts say it would take billions of dollars, significant political pressure, and several years to fix the fundamental security flaws in the current mobile phone system that NSA, GCHQ and other intelligence agencies regularly exploit.

A current gaping hole in the protection of mobile communications is that cellphones and wireless network providers do not support the use of Perfect Forward Security (PFS), a form of encryption designed to limit the damage caused by theft or disclosure of encryption keys. PFS, which is now built into modern web browsers and used by sites like Google and Twitter, works by generating unique encryption keys for each communication or message, which are then discarded. Rather than using the same encryption key to protect years' worth of data, as the permanent Kis on SIM cards can, a new key might be generated each minute, hour or day, and then promptly destroyed.

The only effective way for individuals to protect themselves from Ki theft-enabled surveillance is to use secure communications software, rather than relying on SIM card-based security. Secure software includes email and other apps that use Transport Layer Security (TLS), the mechanism underlying the secure HTTPS web protocol. The email clients included with Android phones and iPhones support TLS, as do large email providers like Yahoo and Google.

"We need to stop assuming that the phone companies will provide us with a secure method of making calls or exchanging text messages," says Soghoian.

NSA Criminals

That was a long snip, but from a very long article. There's more in the article to see including how the NSA accomplished the hack.

For now, you should assume every conversation you have made since 2010 had been stolen. Nothing you do or say on your phone is private, not even in your own home.

I seem to recall a piece of paper, now meaningless, that supposedly guards against such seizures.

Seventh Article of Bill of Rights

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

Send them to Prison

The only way to stop this sh*t is to press charges, find the NSA guilty and send those responsible to prison.

Since Obama is unwilling to do what's necessary, and given Jeb Bush and Hillary Clinton won't either, if you are outraged by this, I suggest voting for Rand Paul, the one person who has taken a stand on these issues.

In the meantime, act as if someone is listening to every conversation you make.

I go one step further given my outspoken nature on these issues. I act as if my entire house is bugged and the NSA is monitoring everything I do.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Debaltsevsky Under Rebel Control, Boiler Remains; What's Next?

Posted: 19 Feb 2015 03:35 PM PST

More details show the alleged "orderly retreat" of Debaltsevsky by Ukrainian forces was anything but orderly. Now that the city has fallen, Germany and France have again renewed efforts at a ceasefire.

Yahoo!News reports Debaltseve Under Rebel Control, Cossack Fighters Celebrate. My inline comments are in braces.

Rebel fighters, many of them Cossacks roamed the streets of Debaltseve on Thursday, a day after Ukrainian forces began withdrawing from the besieged town. The mood was celebratory, with fighters laughing, hugging each other and posing for photos.

[See Wikipedia for a description of the term Cossacks]

Associated Press journalists drove Thursday around about half of the key rail hub that has been the focus of weeks of fighting in eastern Ukraine between Russia-backed separatists and government troops. They found all its neighborhoods under the control of rebel fighters.

On the road out of town, dozens of Ukrainian military vehicles were retreating to the government-held town of Artemivsk. Many were riddled with bullet holes or had their windshields destroyed. Soldiers in them spoke of enduring weeks of harrowing rebel shelling, barrages designed to annihilate their ranks.

"Starting at night, they would fire at us just to stop us from sleeping," a Ukrainian soldier named Andrei told the AP, sitting in his truck outside Artemivsk. "They did this all night. Then in the morning, they would attack, wave after wave. They did this constantly for three weeks."

[All the while Ukrainian president Petro Poroshenko said his troops were not surrounded. That charade continued even through the Minsk II ceasefire agreement. In fact, refusal to admit the loss of Debaltsevsky, coupled with Kiev reneging on both amnesty promises and on promised constitutional reforms is why the ceasefire had no chance from the beginning.]

As rebels waved separatist flags in Debaltseve, Nikolai Kozitsyn, a Russian Cossack leader and prominent warlord in separatist eastern Ukraine, drove around in a Humvee-like vehicle captured from Ukrainian troops.

Two rebel fighters inspected a tank left behind by Ukrainians, what they called a "gift" from the government troops.

Capturing the town is a significant military victory for the rebels because it's a railway junction that straddles the most direct route between Donetsk and Luhansk, the separatists' two main cities.

France and Germany, which oversaw marathon peace talks between the Ukrainian and Russian leaders last week in Minsk, Belarus, both signaled Thursday that they're determined to salvage the cease-fire deal and keep the two sides talking.

The German government said the four leaders had agreed "to stick to the Minsk agreements despite the serious breach of the cease-fire in Debaltseve."

Debaltsevsky Boiler Remains

Note the separatist flags over Debaltseve and Chornukhyne. Also note the tightening noose around the remaining troops.

Here is a simplified map I created.

Colonel Cassad has comments on what remains of the Debaltsevsky Boiler. My translation follows ...

The total boiler south Loginov is about 4,500, down from the original group of 8-9 thousand. Man. The group is cracked in half. A key success was a surprise attack on Uglegorsk, after which the events went in our favor after an unsuccessful offensive in Svetlodarsk.

Stubborn resistance by a number of parts of the junta was higher than expected. To escape encirclement, parts of the junta's forces left behind heavy weapons including tanks and infantry fighting vehicles. Other forces tried to break free as with Ilovaiskaya and crumbled. Once again some idiots decided that the agreement (safe exit in return for the surrender of equipment) does not apply to them.

Up to 500 were captured and approximately the same number seeped through fields and back roads north of the M-103, partly on foot.

Most of the heavy weapons remain in the boiler so there are really a lot of "trophies". All stories about an organized exit is propaganda bulls**t.

The junta suffered 1200-1500 killed in the battle for Debaltsevsky. Our losses not were not specifically voiced to me, but they were still very significant.

Battle of Ilovaisk

I believe Cassad's comments on Ilovaiskaya refer to the devastating defeat of Ukraine in the Battle of Ilovaisk in which Ukrainain forces refused an offer to exit encirclement by leaving behind equipment. Instead, everything was destroyed including the encircled Ukrainian army.

As the above map shows, the battles for the cities of Debaltseve and Chornukhyne are over, but Ukrainian forces in the area are encircled. They face certain doom unless they agree to abandon "trophies".

What's Next?

A lasting truce is easy. All Ukraine has to do is agree to a federation with Donetsk and Luhansk coupled with universal amnesty and an offer of political independence.

That deal certainly would have prevented a civil war in the first place. Instead we have witnessed the destruction of huge parts of Ukraine with needless lives lost.

Since Poroshenko has proven to be a military dimwit as well as a stubborn fool, I now expect the way forward may eventually involve someone in Kiev getting tired enough of this senseless war to take him out.

Perhaps Poroshenko will finally listen to chancellor Merkel who applied pressure on him to agree to a federation. However, history suggests two things. 1. Fools seldom learn. 2. Fools stay in power longer than most expect.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Head-On Collision: Germany Rejects Greece "Trojan Horse"; Slovakia Rules Out Further Aid

Posted: 19 Feb 2015 12:17 PM PST

Today the eurogroup finance ministers rejected Syriza's request for a bridge loan to work things out.

Germany upped the ante, calling Greece's Letter Requesting Extra Time a "Trojan Horse" and instead demanded a three sentence letter accepting all Trioika demands.

Official request for an extension
Promise to complete the current programme
Commit to negotiating any changes with bailout monitors

I have a simple question: What's left to negotiate other than how big a capital surplus Greece must have and for how long.

And those, Germany wants a Greek capital account surplus of 3.5% this year, and 4.5% next year and the following years.

Athens wants 1.5%. Any room for serious negotiation here?

I rather doubt it.

Head on Collision

Media still clings to hope that a collision can be avoided. For example, the Financial Times headline reads German and Greek Ministers Set to Collide.

Athens' chances of finding itself without an EU financial backstop in one week will come down to a bitter face-off in Brussels on Friday between the Greek and German finance ministers after Berlin rejected Greece's request to extend its €172bn rescue by six months.

The German rebuff came just hours after Yanis Varoufakis, the Greek finance minister, reversed his government's long-held promise to kill the current bailout by submitting a letter to his fellow ministers formally requesting the additional time and vowing to bring the programme to a "successful conclusion".

Berlin told counterparts [the letter] amounted to "a Trojan horse" designed by Athens to change the conditions it must meet to receive €7.2bn in aid available for finishing the bailout.

"The letter from Athens is not a substantive proposal for a solution," said Martin Jäger, spokesman for the German finance ministry. "In truth, it aims at bridge financing without fulfilling the demands of the programme."

Germany took an even harder line in a pre-eurogroup meeting of finance ministry deputies on Thursday, calling on Athens to submit no more than a three-sentence letter requesting the extension, promising to complete the programme, and committing to negotiating any changes with bailout monitors.

In addition, the official said Berlin wanted to take back €10.9bn in bailout funds sitting unused in Greece's bank bailout facility — money some EU officials believe could be needed if its financial institutions further weakened.

One person briefed on the talks said an earlier version of the Greek letter was more in line with German demands to agree to all aspects of the current bailout, with limited "flexibility" to negotiate its terms once an extension deal was signed, before it was hardened in Athens.

But the Greek government said it would not revise its letter, arguing the eurogroup had just two choices: accept or reject the Greek request. "This will show who wants to find a solution and who doesn't," a Greek official said.

In his maiden address to parliament as prime minister two weeks ago, Alexis Tsipras vowed not to accept an extension of the bailout, insisting the new government was elected to end its economic and financial strictures, which already makes Mr Varoufakis's letter a significant U-turn even without further concessions.

A two-thirds majority of the governing council's 21 voting members would be needed to end the ELA — which would in effect force Greece to adopt capital controls or quit the currency area.

Germany's rejection of the Greek request cut short a market rally in Greece that had pushed short-term borrowing costs close to a month-low.

Yields surged back up above 17 per cent while shares on the Athens stock exchange slid 5.5 per cent in early afternoon trading.

However, market commentators say that even if Athens does not meet its obligations and leaves the eurozone, contagion will be limited.

Slovakia Rules Out Further Financial Aid for Greece

Recall that eurozone rule changes require every country to agree. Right now it is 18-1 against Greece, with Germany leading the nay-sayers.

But it's not just Germany. For example, Slovakia rules out further financial aid for Greece.

Slovakia's prime minister [Robert Fico] has vowed to oppose Athens' push to ease the terms of its bailout, and warned that Bratislava was "calm" about a possible Greek exit from the eurozone if the country refused to honour its commitments.

"This is a red line for us. It would be impossible to explain to the public that 'poor' Slovakia . . . should compensate Greece," Mr Fico told the Financial Times in an interview in his office on Thursday. "To explain to people that we have to give money to Greece for their salaries and pensions? Impossible. Impossible."

While Germany is frequently portrayed as the biggest obstacle to Greece's new leftwing government, Slovakia's hard line is a reminder that Berlin is hardly alone. Officials involved in the talks said Slovakia has been one of the toughest opponents of relaxing the rules governing Greece's loans.

"The [previous] Greek government has agreed to the conditions of financial assistance," said Mr Fico. "It is not possible that a new government comes and immediately declares that, er, well, we will not respect this."

Mr Fico, who has strongly criticised austerity measures imposed on his own country, said he would only accept concrete promises from Athens that ensure it "will behave in a way that will guarantee that in 10, 15, 20 years, Greece will be able to pay [back] what they get".

Red Lines and Contagion

Excuse me for pointing out the obvious, but governments change agreements all the time. No law is permanent. Even the constitution can be changed, although it's purposely difficult to do so.

As for Slovakia not wanting to give money to Greece. It's going to happen one way or another, unless Slovakia acts like Greece.

Slovokia's portion of EFSF guarantees is €1.5 billion. It's total exposure to Greece is €2.2 billion. That's not much, but it is a lot to Slovakia.
Spain's exposure to EFSF guarantees is €18.1 billion. Spain's total exposure to Greece is €32.7 billion.
Germany's exposure to EFSF guarantees is €41.3 billion. Germany's total exposure to Greece is €72.7 billion.

For more country-specific details, please see Greece Has Less Than One Week of Cash; Another DOA Proposal Discussed Thursday; Exceptional Game Playing.

The idea that all of this is ring-fenced and will not matter is simply preposterous. One way or another, Germany, Greece, Spain, Italy, and in fact all 18 remaining eurozone states will pick up a portion of Grexit.

All that remains is when will that be recognized. I suggest there is no time better than now.

The Game All Along

It is in the best interest of Greece to let Germany force it out of the eurozone, especially if Germany takes the blame.

I proposed long ago that may have been Syriza's game all along!

No politician wants to take the blame when things go bad. And in that regard, Syriza has played a perfect game, bending a bit, but receiving no meaningful concessions from Germany.

Syriza has the support of its people. Germany, not Alexis Tsipras will take the initial blame should Grexit occur.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Damn Cool Pics

Americans Eat Thousands Of Rattlesnakes in Annual Festival
Funny Facts And Truths You Should Think About Before Getting A Tattoo
These People Are Taking Their Obsession With Selfies Way Too Far

Americans Eat Thousands Of Rattlesnakes in Annual Festival

Posted: 19 Feb 2015 06:24 PM PST

The Festival of Rattlesnakes, is a celebration that takes place every year in Sweetwater, Texas. It's used as a way to control the rattlesnake population and during the festival citizens eat thousands of these snakes.

Funny Facts And Truths You Should Think About Before Getting A Tattoo

Posted: 19 Feb 2015 02:22 PM PST

Getting a tattoo is a life changing event. It's not like writing on yourself with a magic marker because eventually that's going to wash off. Tattoos stay with you forever. If you're thinking about getting a tattoo these are the things you should consider before making your final decision.