The Big Picture |
- If You Want to Rein In the NSA, HERE’s How to Do It
- Succinct Summations of Week’s Events (12/20/2013)
- How We Spend
- 10 Friday AM Reads
- Random Things I Have Been Thinking About
- Sarkar on Taper, Data
- Rethinking Customer Satisfaction
| If You Want to Rein In the NSA, HERE’s How to Do It Posted: 20 Dec 2013 10:30 PM PST There's An Easy Technical Fix To A Good Chunk of Our Spy ProblemsBill Binney is the high-level NSA executive who created the agency's mass surveillance program for digital information. A 32-year NSA veteran widely regarded as a "legend" within the agency, Binney was the senior technical director within the agency and managed thousands of NSA employees. Binney has been interviewed by virtually all of the mainstream media, including CBS, ABC, CNN, New York Times, USA Today, Fox News, PBS and many others. Binney knows how to rein in NSA spying … Specifically, Binney and his team – including NSA veterans Thomas Drake and Kurt Wiebe – created a system which automatically encrypts all information about Americans. That information can only be read (i.e. decrypted) if a judge orders it to be decrypted after a finding that there is probable cause that the target is a bad guy. In other words, the government had to obtain a search warrant based upon probably cause before a particular suspect's communications could be decrypted. This protected American citizens' constitutional rights. Specifically, no unreasonable search and seizure or violation of our rights of association or speech. Unless a judge issues a search warrant, people's privacy remains intact. Protecting Americans' Constitutional RightsBut the NSA now collects all data in an unencrypted form, so that no probable cause is needed to view any citizen's information. Binney says that it is actually cheaper and easier to store the data in an encrypted format (the government's current system is being done for political – not practical – purposes.) Because the NSA collects all of our raw information in unencrypted form, our constitutional right to avoid unreasonable searches and seizures – and to be able to speak freely and associate with who we wish – are being DESTROYED By reinstating Binney's system of automatic encryption, Americans' privacy rights will be restored. Binney told Washington's Blog:
Background on "closeness" to bad guys. Vital LegislationThere are some good pieces of legislation being proposed by Congress to rein in runaway NSA spying. But it is difficult to draft laws which remove all of the loopholes …and most laws contain loopholes big enough to drive a truck through. In addition, creative but unethical people will always try to find a way around new laws. By requiring automatic encryption of all Americans' data – subject to decryption only with a search warrant issued by a federal judge – a mechanism and procedure will be established which removes a lot of room for mischief. Automatically encrypting the data would place the cookie jar on the top shelf … out of reach of immature hands. NSA Data Vulnerable to Foreign HackersImplementing Binney's system of automatic encryption would solve another giant problem … Specifically, top internet security experts say that the NSA's current spying system makes the Internet less secure, less safe … and more vulnerable to hackers and bad guys. The NSA's big data collection itself creates an easy mark for hackers. And the Pentagon itself sees the collection of "big data" as a "national security threat" … but the NSA is the biggest data collector on the planet, and thus provides a tempting mother lode of information for foreign hackers. Given that Americans' sensitive, confidential information is lying around the NSA's computers unencrypted, China, Russia or other actors can grab it. Indeed, leaving it unencrypted is like waiving a red flag for bad guys to get it. (Sure, the NSA has firewalls and such. But its computer systems are not as bullet-proof as one might assume, and hackers have successfully penetrated Department of Defense, Federal Reserve and many other supposedly secure systems). Binney confirmed to us that automatically encrypting data would also help protect it from being easily hacked by non-U.S. actors:
He also explained that the NSA is overly-confident about the security of its own systems:
Indeed, this is a matter of national security. Automatically encrypting Americans' private data will make it harder for foreigners to access the data. For all of the above reasons, encrypting Americans' data must be central to NSA reform efforts.
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| Succinct Summations of Week’s Events (12/20/2013) Posted: 20 Dec 2013 12:55 PM PST Succinct Summations week ending December 20, 2013. Positives:
Negatives:
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| Posted: 20 Dec 2013 08:30 AM PST Giant BBRG visualization that walks you though the important retail sales data:
Click for interactive graphic slideshow.
Nice job, Matt! |
| Posted: 20 Dec 2013 07:00 AM PST Good morning. This is what I'm reading this morning:
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| Random Things I Have Been Thinking About Posted: 20 Dec 2013 06:00 AM PST The year is winding down, people are getting ready for the holidays, and I am working on my last few columns of the year for Bloomberg view. Since my first column on Nov. 4, you have been very welcoming and encouraging and stimulating. I am thrilled with this platform and its readers; Teaser: I have some pretty wicked things planned for 2014. In the meanwhile, I have a few random thoughts that I like to share every now and again. These are 10 things that have me wondering, thinking and, generally, curious about.
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| Posted: 20 Dec 2013 04:15 AM PST The FED announced that it would reduce its asset purchase programme by US$10bn in January, comprising equally of Treasuries and mortgage backed securities. However, Mr Bernanke was overly dovish, emphasising that the FED's highly accommodative policy would remain in place well after the unemployment rate declined below 6.5%, in particular as inflation was well below its 2.0% long-run goal. He added that further reductions of its asset purchase programme would be data dependent, though suggested that the QE programme could continue through 2014. In effect the FED has substituted a modest taper with a more dovish forward guidance statement. Bernanke’s comments also suggest that the FED will not raise rates until late 2015 (possibly 2016), based on current inflation forecasts. US November industrial production rose by +1.1% M/M in November, the most in a year and far better than the upwardly revised +0.1% in October and the increase of +0.6% expected. The index of industrial production rose to 101.3, which was the 1st time the index has risen above its pre recessionary high. Capacity utilisation rose to 79%, the highest since June 2008. The leading indicator index rose by +0.8% in November. Inflation remains tame, with headline consumer prices unchanged in November (+1.2% Y/Y), though core inflation rose by +0.2% M/M. The FED's preferred inflation gauge (the personal consumption expenditure) rose by just +0.7% Y/Y in October. US housing data was mixed, with housing starts increasing by 22.7% to an annualised rate of 1.09mn in November, well above forecasts, though existing home sales fell by -4.3% in November, to an annual rate of 4.9 million. The preliminary EZ manufacturing PMI came in at 52.7, better than the estimate of 51.9 and Novembers 51.6. However, the data reveals the widening gap between Germany and France. German manufacturing PMI came in higher than expected at 54.2, whilst French PMI declined to 47.1, lower than the 49.0 expected and Novembers 48.4. The data suggests that France may well be in recession this Q, as services PMI was also in contraction territory. The EZ composite PMI came in at 52.1, higher than the 51.7 in November. The important German IFO index was also positive, rising to the highest level in 20 months. Importantly, the expectations component rose to 107.4, up from a revised 106.4. Inspite of the weak EZ, Germany seems to be recovering from its recent run of sluggish data, with the domestic economy improving, in particular. GDP is forecast to rise by +1.7% in 2014. Mr Draghi, the President of the ECB, stated that the current rules proposed by the European finance ministers to deal with failed banks are "overly complex and financing arrangements may not be adequate". He is right on both counts. The current proposals requires the approval of so many authorities that winding up a failed bank will not be achieved as quickly as is so very necessary. A E55bn fund to deal with failed banks, paid for by levies from the banks, is to be built up over a 10 year period. However, the fund can only be fully accessed at the end of the 10 year period. In the interim, access to the fund will be phased in, with national governments responsible to meet their requirements. Countries can request funds from the ESM, which they can use to recapitalise failed banks, though in reality that was already the case. The agreement was heavily influenced by Germany who want to limit their exposure and that of taxpayers. Furthermore, the agreement does not break the link between the sovereign and their national banks, certainly in the interim period. Mr Draghi urged banks to raise capital before the completion of the stress tests in November next year. However, banks are more likely to sell assets and reduce lending, with credit becoming less available – the last thing the EZ needs at this time. Importantly Mr Asmussen, a member of the ECB, will be leaving to become the deputy minister of labour of Germany. He was a key ally of Mr Draghi and, importantly, acted as a bridge between the ECB and Germany. UK inflation is finally heading lower and towards the 2.0% target. CPI increased by +2.1% Y/Y in November, the least in 4 years. The UK's current a/c deficit is widening however – it rose to £20.7bn in Q3 (5.1% of GDP) and the highest since 1989. Unemployment is declining, with the unemployment rate declining to 7.4% in the 3 months to October, down from 7.6% in the Q to September. The Bank of England (BoE) had set a target unemployment rate of 7.0%, as a possible trigger before it started to tighten monetary policy – the faster than expected decline in unemployment will force the BoE to reduce the 7.0% target, as the BoE does not want to raise interest rates. The important Japanese quarterly Tankan survey came in better than expected. However, the forward looking sentiment indicators were weaker, in particular in respect of capex. Furthermore, whilst import prices have risen due to the decline of the Yen, output prices are forecast to forecast to remain stable/decline. Japan's trade deficit rose to a record US$12.6bn in November, though was lower than expected as exports rose. The Chinese Central Bank, the PBoC has been tightening liquidity to reduce lending, contain inflation and limit the rise of property prices. However, the policy seems to have badly affected a number of banks and the PBoC had to provide an emergency cash injection yesterday. So far the cash injection has failed to resolve the credit squeeze, with the 7 day repo rate (which is an indicator of liquidity in the system) rising to 7.6%, over 300 bps higher this week. The fear is that banks will stop lending to each other, triggering a banking crisis. The PBoC will have to act fast and provide further liquidity. The problem is that banks in China are overleveraged with low liquidity levels and sharp increases in interest rates have a material adverse impact. This is certainly an issue which must be watched carefully. Chinese markets declined for the 9th consecutive day today, the longest losing streak in 19 years, according to Bloomberg. The Chinese HSBC preliminary December manufacturing PMI came in at 50.5, below expectations of 50.9 and Novembers 50.8. It was a 3 month low. However, the more important issue is that the data adds to the suspicion that the recent better than expected export data was inflated. China maintained its forecast for 2014 GDP at 7.5% – there was speculation that it would reduce the forecast to 7.0%. Overview. The agreement reached by EU finance ministers on the so called Banking Union is fraught with problems. It simply will not work as currently agreed. As a result, banks will try to raise capital (if they can) ahead of the ECB's stress tests, but more likely will be forced to sell assets and reduce the size of their balance sheets by limiting lending. The ECB will provide liquidity, possibly through a further LTRO and/or a funding for lending scheme as designed by the Bank of England. However, the continued uncertainty makes me particularly cautious of the EZ. S&P downgraded the EU's credit rating by 1 notch to AA+, from AAA previously, citing worsening creditworthiness amongst the 28 member bloc. The risks in the EZ remain elevated in my opinion. Minutes from the recent meeting of the Australian Central Bank (RBA) refer to the A$ as "uncomfortably high and a lower level would likely be needed to achieve balanced growth". However, the RBA is not keen to reduce interest rates, as they are concerned about rising property prices. The governor of the RBA has talked about a rate of US$0.85. The BoE is worried about the rise of Sterling, warning that a further appreciation would hamper the UK's economic recovery. In Japan, the Bank of Japan ("BoJ") current asset purchase programme is buying the equivalent of about 70% of new government debt. Inspite of this massive programme, BoJ officials continue to hint that they may increase the rate of purchases to meet their 2.0% inflation target, though kept their bond buying programme unchanged following todays BoJ meeting. I remain bearish on the Yen, in particular against the US$. The Euro having traded around US$1.38, has slipped to around US$1.3660. I remain bearish on the Euro, especially against the US$. The US$ remains my preferred currency into 2014. May I just take this opportunity to wish you a very merry Christmas and a happy New Year. Kiron Sarkar |
| Rethinking Customer Satisfaction Posted: 20 Dec 2013 03:00 AM PST A study by Bloomberg Businessweek indicates that customer satisfaction might actually be bad for business. The Colbert Report Colbert 03:00 |
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