Headlines From the Economic War Room

By Kevin Freeman
March 16, 2018Mar 16, 2018

We just posted last night with a recap of the Winds of War as the opening to part two of the Looming Debt and Pension Crisis. In less than 24 hours, however, there were multiple additional reports that came into the Economic War Room that we feel should be brought to your attention. We will keep it short by just providing the link to an article and a brief commentary. The main point is that the winds of war are increasing in frequency as well as intensity.

News Flash #1:  Reuters (March 15, 2018)

In a first, U.S. blames Russia for cyber attacks on energy grid

We pretty much knew that Russia had been behind an assault on our power grid and had reported on this. Our grid has long been vulnerable to hacking. What is extraordinary is that our government admitted this publicly. This is almost unprecedented according to the Reuter's report:

The decision by the United States to publicly attribute hacking attempts of American critical infrastructure was "unprecedented and extraordinary," said Amit Yoran, a former U.S. official who founded DHS's Computer Emergency Response Team.

"I have never seen anything like this," said Yoran, now chief executive of the cyber firm Tenable, said.

News Flash #2:  Bloomberg (March 16, 2018)

Russian Hack Penetrated U.S. Aviation

While officials did not provide in-depth details, the reality that Russia has been willing to hack into our aviation systems deserves serious attention. This is a war-time capability that could disrupt both logistics and the overall economy.

From the Bloomberg report:

Russian hackers penetrated the U.S. civilian aviation system early in 2017 as part of the broad assault on the nation's sensitive infrastructure, according to a consortium designed to protect the industry….

A disruption of the airline and private-aircraft systems could have enormous economic and psychological effects. In recent years, several airlines have had to halt operations and suffered millions of dollars of lost revenue when their computer reservation systems crashed, for example. Terrorists have long targeted aviation because of its out-sized impact on society.

News Flash #3:  Bloomberg (March 16, 2018)

Chinese Hackers Hit U.S. Firms Linked to South China Sea Dispute

China has repeatedly demonstrated a willingness to interfere in our private companies for their benefit. They have mastered cyber-economic warfare and cyber-espionage. The issue is how aggressive they have become recently. Excerpts from the Bloomberg report:

Chinese hackers have launched a wave of attacks on mainly U.S. engineering and defense companies linked to the disputed South China Sea, the cybersecurity firm FireEye Inc. said….

The hackers have focused on U.S. maritime entities that were either linked to — or have clients operating in — the South China Sea, said Fred Plan, senior analyst at FireEye in Los Angeles.

"They are going after data that can be used strategically, so it is line with state espionage," said Plan, whose firm has tracked the group since 2013. "A private entity probably wouldn't benefit from the sort of data that is being stolen."

Data sought in the latest incidents could be used, for instance, to determine how closely a vessel could sail to a geographical feature, Plan said. "It is definitely the case that they can use this information for strategic decision-making," he said.

China has been involved in other attacks related to the South China Sea. In 2015, during a week-long hearing on a territorial dispute in the water, Chinese malware attacked the website of the Permanent Court of Arbitration in the Hague, taking it offline.

News Flash #4:  Financial Times (March 14, 2018)

More countries are learning from Russia's cyber tactics

Technically, this article is not from the past 24 hours. But it is from the past two days. I'm sharing it because it shows the dramatic increase in attacks all over the world with Russia and China leading the way. The reality is that the genie is out of this bottle and that is not good.

News Flash #5:  CNBC (March 16, 2018)

Only 13 percent of government employees take personal responsibility for cybersecurity

Maybe this isn't a news flash because it is not really that surprising. But it is VERY frightening. The bottom line is that we are, by all accounts, already engaged in a global cyber-economic war. Yet, those charged to serve us in government are totally unprepared. We are not on a war footing by any stretch of the imagination. From the CNBC report:

Public sector employees in the U.S. have little concern about their personal cybersecurity responsibilities, according to a survey. Just 13 percent of government employees believe they have complete personal responsibility for the security of their work devices or information, the report carried out by analytics firm YouGov and published by security firm Dtex Systems said.

Forty-eight percent of those surveyed said they had no responsibility at all, believing the securing of data to be squarely the remit of IT professionals. Roughly half of respondents believed that being hacked was inevitable no matter what protective measures they took, while 43 percent simply didn't believe they could be hacked. Few people surveyed seemed to take seriously the likelihood and frequency of cyber threats — one in three employees believed they were more likely to be struck by lightning than have their work data compromised.

News Flash #6:  NY Times (March 15, 2018)

A Cyberattack in Saudi Arabia Had a Deadly Goal. Experts Fear Another Try.

This story is important because it shows cyber capability beyond stealing information or shutting down operations. It demonstrates the capability of turning a basic industrial plant into a weapon of mass destruction with a few clicks of a mouse. Excerpts from the New York Times story:

In August, a petrochemical company with a plant in Saudi Arabia was hit by a new kind of cyberassault. The attack was not designed to simply destroy data or shut down the plant, investigators believe. It was meant to sabotage the firm's operations and trigger an explosion.

The attack was a dangerous escalation in international hacking, as faceless enemies demonstrated both the drive and the ability to inflict serious physical damage. And United States government officials, their allies and cybersecurity researchers worry that the culprits could replicate it in other countries, since thousands of industrial plants all over the world rely on the same American-engineered computer systems that were compromised….

The only thing that prevented an explosion was a mistake in the attackers' computer code, the investigators said….

"If attackers developed a technique against Schneider equipment in Saudi Arabia, they could very well deploy the same technique here in the United States," said James A. Lewis, a cybersecurity expert at the Center for Strategic and International Studies, a Washington think tank.

News Flash #7:  The Wall Street Journal (March 15, 2018)

Author Alleges China Used Business Deals to Influence Families of Mitch McConnell, Joe Biden

Peter Schweizer has a nose for corruption and details it in best-selling books. His latest tracks Chinese efforts to influence politicians by enticing family members with business deals and investments. That might seem obvious. But when you couple this desire with the fact that the Office of Personnel Management and Equifax have both been hacked, you recognize how sophisticated such an influence operation could be. Just imagine targeting a key politician by knowing how much debt he or she carries or how much their relatives carry. Add in knowledge of all business dealings and points of vulnerability. Here are excerpts from the WSJ article:

In a new book, "Secret Empires: How the American Political Class Hides Corruption and Enriches Family and Friends," conservative author Peter Schweizer argues that China has worked to gain leverage over powerful American politicians by targeting their families with investment opportunities and business deals, providing hundreds of millions of dollars in business to companies run by the families of Messrs. Biden and McConnell.

Aides to both men strongly disputed the accuracy of Mr. Schweizer's findings, calling them "wild accusations" without "credible sourcing" and "politically motivated hit pieces." Lawmakers and government officials are required to disclose information about their financial dealings but not those of their extended families, and Mr. Schweizer argues China has tried to exploit that provision….

Counterintelligence officials have worried for years about China's efforts to cultivate relationships with family members of those in power through business dealings, and they have warned senior officials to be mindful of such relationships, according to people familiar with the briefings.

News Flash #8:  Reuters (March 16, 2018)

Russia to expel UK diplomats as crisis over nerve toxin attack deepens

The expulsion of diplomats is something that happens right at the start of a war. With the use of a chemical weapon on British soil, clearly premeditated and provoked by Putin, it was obvious that a new Cold War at a minimum was intended. Coming on the heels of a display of missile technology, the signal could not have been more obvious. Here is the introduction to the Reuters report:

ASTANA/LONDON (Reuters) – Russia is set to expel British diplomats in retaliation for Prime Minister Theresa May's decision to kick out 23 Russians as relations with London crashed to a post-Cold War low over an attack involving a military-grade nerve agent on English soil. After the first known offensive use of a nerve agent in Europe since World War Two, Britain has pointed the finger at President Vladimir Putin and on Thursday May gave the 23 Russians who she said were spies working under diplomatic cover at the embassy in London a week to leave. 

Moscow has denied any involvement in the attempted murder of former Russian double agent Sergei Skripal and his daughter. It has cast Britain as a post-colonial power unsettled by its impending exit from the European Union, and even suggested London fabricated the attack to whip up anti-Russian hysteria. The diplomats are due to leave London on March 20, RIA news agency quoted Russia's ambassador to Britain as saying.

News Flash #9:  Washington Examiner (March 16, 2018)

National debt hits $21 trillion

While this headline speaks more to our vulnerability than foreign attacks, it is nonetheless significant. It has been barely six months since our national debt topped $20 trillion and we've already added another $1 trillion since last September. And this is happening in a good economy with low interest rates and without open and direct economic attacks. Here are a few tidbits from the Examiner article:

The national debt exceeded $21 trillion for the first time on Thursday, a little more than six months after it hit first $20 trillion on Sept. 8. The national debt was $21.031 trillion on Thursday. The government releases total debt figures each business day, but it lags by one day.

Federal borrowing has been on the rise again since February, when Congress passed legislation to suspend the debt ceiling. That move allowed the government to borrow as much as it needs to fund the activities approved by Congress.

KEY POINT:  We are already in a Global Cyber-Economic War. The headlines from the past day demonstrate that overwhelmingly. And, our national debt is higher than ever, making us very vulnerable. We will continue to address this and we do have hope. But we would be remiss if we did not share the flood of headlines that recently came out. You may now resume your normal programming.