What A Coalition Of The Willing…

So I’m watching Russia Today and they reported some things that are just fascinating. ( I *think* all of these were from RT, but I was channel hopping a bit… it might have been Fox with the Anonymous story.)

1) Russia now has their long range bombers ‘in play’ in ISIS / ISIL territory. (Nice video of them too ;-)

2) Russia has a fleet off the coast in the Mediterranean Sea in support of their Syria campaign.

3) France has announced they are joining Russia with The Charles De Gaulle carrier fleet in the Med.

and, the one that got me the most;

4) “Anonymous” has announced we’re in and declared war on ISIS / ISIL. (Followed by a list of the thousands of jihadi Twitter accounts and hundreds of some other sites closed / hacked / whatever…)

All while the USA sucks its thumb.

Now my first thought was “this is big, this is really big”. Either France or Russia can obliterate these folks, both together will be very interesting to watch.

This was followed by “The Russian Hackers are pretty darned good. A bit pedantic in style, but effective. Anonymous is better. Less predictable and greater breadth.” But you would expect that from a group that has no fixed membership, is global in scope, and has folks from everywhere who can do everything. This was followed closely by “But WTF?! Here we have a coalition of what is arguably one of the most Strong Central Authority governments in the world, itself run by a ‘strong man’ type; one of, if not the, premier democracies with freedom in the world, and the lead anarchy ‘organization’ of the hacker universe.” What a crazy coalition of the willing…

On what planet could you sell that script to Hollywood? Nobody would believe it…

I worry about the NSA and CIA wanting to break into my equipment and bugger my shop. I fear pissing off Anonymous more…


The original has links in it and a nice video, so please ‘hit the link’ for more:

The hacking group Anonymous on Sunday declared “total war” against the Islamic State, the terror organization that claimed responsibility for the attacks on Friday that killed 132 Parisians.

Anonymous also posted a video, confirming the message was in response to the events in Paris.
According to the same Twitter account, the group began taking down websites associated with ISIS this morning.

Anonymous also retweeted a link to the following message from the hacktivist group Binary Sec:

“We as a collective will bring an end to your reign of terror. We will no longer turn a blind eye to your cruel and inhumane acts of terrorism towards all other religions that are not Islam. We’ve watched you behead innocent people, kidnap and murder children, and then launch terrorist attacks in France. This will NOT BE TOLERATED ANY LONGER. We here at BinarySec live for the sole purpose of bringing down All ISIS Propaganda ONE website and/or person at a time. ISIS… Your Jihad is coming to an abrupt end. We here at BinarySec will be one of the driving forces to your end and that’s a promise. ISIS… The War Is On.”

This is not the first time that Anonymous has taken on ISIS. Foreign Policy Magazine reports that the conflict between hackers that identify with Anonymous and ISIS has waged online for more than a year. A tipping point that forced many hackers to join the cause were the attacks on the Charlie Hebdo newspaper and kosher market in Paris earlier this year.

According to the FP report from last week, hackers have taken 149 Islamic State-linked websites offline and flagged roughly 101,000 Twitter accounts and 5,900 propaganda videos.

The remaining question is whether or not these hackers aiming to achieve social good are helping or harming state-driven attempts to take out the terror group. Technology companies have said in the past that government intelligence agencies ask them not to take down ISIS-related content because, when using the legal avenues at hand, they are able to more effectively track these groups.

Now who knows how much this is just blowing smoke and how much is real. Anonymous has no fixed membership and you can’t really give orders in an anarchy. It’s more of a statement of being unhappy with ISIS, but with a collective set of teeth chewing your ankles… It will not feel very good and can eventually bleed you to death.


The original has some nice videos and pictures. They are so cool in flight!

Long-range bombers to fly anti-ISIS missions from Russia, Putin orders Navy to work with France

Published time: 17 Nov, 2015 14:23
Edited time: 17 Nov, 2015 16:47

Russia has deployed its fleet of strategic bombers to double the volume of airstrikes on Islamist targets in Syria, Defense Minister Sergey Shoigu has announced. Vladimir Putin has ordered a cruiser to coordinate operations with French naval forces in the Mediterranean.

“We are conducting a mass airstrike campaign against Islamic State targets in Syria. We have now doubled the number of sorties, which is allowing us to conduct operations throughout the length and breadth of the country,” Defense Minister Sergey Shoigu said during a Security Council meeting in Moscow chaired by the Russian president.

Shoigu said that Russia’s Tu-95, Tu-22 and Tu-160 strategic bombers have been brought into the operation, while the Air Force command added that the strike group has been bolstered with 37 new planes, including Su-34 bombers and Su-27 fighter jets.

The head of the General Staff reported that the new phase of the anti-ISIS campaign will involve 25 long-range bombers flying out of airfields in Russia.

“By conducting military missions in Syria, you are protecting Russia and her citizens,” Putin told his military chiefs. “Our air campaign in Syria must not only be continued, it must be boosted, in such a way that the criminals are made aware that retribution is inevitable.”

Looks like all their pilots will get some practice and all their equipment will have a good shakedown. After this is over, Russia will have a very well vetted set of equipment with competent experienced pilots, crews, and ground support. (Not that they don’t already, just that it is different when people are shooting back and when you don’t go home after the training run.)

The Russian president has issued orders for Russia’s Moskva cruiser, covering the Russian base in Latakia from the Mediterranean Sea, to work together with a French naval group led by flagship Charles De Gaulle, a 26 fighter-jet aircraft carrier, which is departing for Syria this week.

“The French naval group, led by the air carrier, will soon reach your area of operations. We need to establish direct contact with it, and treat it as an ally,” the Russian president said. “We need to develop of a joint action plan for both sea and air operations.”

The Kremlin said that the parameters for a joint mission had been agreed upon by Putin and French President Francois Hollande, following a personal phone call.

“The two leaders focused their attention on bilateral and multilateral cooperation in combating terrorism,” a Kremlin statement said. “This includes closer ties and joint operations between the military command and intelligence services of Russia and France in Syria.”

Vladimir Putin and Francois Hollande are to meet in Moscow on November 26.

There’s more to the story at that link.

They’ve done 2300 sorties, for example… Makes the US “effort” look like a tantrum by a 2 year old… Lots of noise but not much to worry about. Now with France about to be in a “hot war” flying over Syria, does that mean NATO is “in” too?…

But a combined French / Russian fleet and air campaign? With Anonymous mucking up your ‘command and control’ of remote cells? I suspect someone in ISIS / ISIL has had their “jump the shark” moment and is about to find out what it really means to ‘be a State’ when the world hates you.

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Posted in Political Current Events, Uncategorized | Tagged , , , , | 36 Comments

Why Breaking Encryption Will Not Work

There is a fair amount of “chatter” on news shows today about the use of the Sony PlayStation by Islamic Terrorists for communications and the desire by many to have more “cooperation” from Silicon Valley companies in putting back doors into things like encryption methods.

Many talking heads gravely pronouncing that Edward Snowden is slightly worse than Hitler but not quite as bad as the Devil Himself, at least on some days… /sarc;

Frankly, I find it tedious.

It displays a gross ignorance of the technology of coded messages and encryption.

In short, that horse left the barn a hundred years ago.

Yes, I know the great victory pulled off by British Intelligence in breaking Enigma. I’ve taught it as part of my History Of Computing segment in college classes on computing. And it WAS great. Yet even then the Germans had available to them unbreakable coded messages. That they were so arrogant as to think they had a tech solution was their downfall.

There exists, and has existed for a long time, many secure encoding methods. Fundamentally unbreakable. Well known. You do not need an ‘end to end encrypting app’ to use them. I’ll give just 2 examples. They may in fact be the same example, but we’ve never broken the first one so can’t really say.

Number Codes

I will be using Wiki links as much as possible just to show how well known all of this is.

Anyone who has used a shortwave radio has heard stations that just consist of long sequences of number groups. Sometimes the language changes. Sometimes the length of each group. They were, for decades, suspected of being some kind of spy operations, but nobody who knew was talking. Lately they have.

The technology still works, and as near as I can tell has not been broken. It is most likely a kind of ‘one off pad’ code, but who knows.


A numbers station is a type of shortwave radio station characterized by unusual broadcasts, reading out lists of numbers or incomprehensible coded messages. The voices are often created by speech synthesis and are transmitted in a wide variety of languages. The voices are usually female, although sometimes men’s or children’s voices are used. Some voices are synthesized and created by machines; however, some stations used to have live readers. Many numbers stations went off the air due to the end of the Cold War in 1989, but many still operate and some have even continued operations but changed schedules and operators.

The first known use of numbers stations was during World War I, and the first possible listener was Anton Habsburg of Austria. The numbers were transmitted in Morse. The Czech Ministry of Interior and the Swedish Security Service have both acknowledged the use of numbers stations by Czechoslovakia for espionage, with declassified documents proving the same. With a few exceptions, no QSL responses have been received from numbers stations by shortwave listeners who sent reception reports to said stations, which is the expected behavior of a non-clandestine station.

The best known of the numbers stations was the “Lincolnshire Poacher”, which is thought to have been run by the British Secret Intelligence Service.

In 2001, the United States tried the Cuban Five on the charge of spying for Cuba. That group had received and decoded messages that had been broadcast from Cuban numbers stations. Also in 2001, Ana Belen Montes, a senior US Defense Intelligence Agency analyst, was arrested and charged with espionage. The federal prosecutors alleged that Montes was able to communicate with the Cuban Intelligence Directorate through encoded messages, with instructions being received through “encrypted shortwave transmissions from Cuba”. In 2006, Carlos Alvarez and his wife, Elsa, were arrested and charged with espionage. The U.S. District Court Florida stated that “defendants would receive assignments via shortwave radio transmissions”.

In June 2003, the United States similarly charged Walter Kendall Myers with conspiracy to spy for Cuba and receiving and decoding messages broadcast from a numbers station operated by the Cuban Intelligence Directorate to further that conspiracy.

It has been reported that the United States used numbers stations to communicate encoded information to persons in other countries. There are also claims that State Department operated stations, such as KKN50 and KKN44, used to broadcast similar “numbers” messages or related traffic.

Suspected origins and use

According to the notes of The Conet Project, which has compiled recordings of these transmissions, numbers stations have been reported since World War I. If accurate, this would count numbers stations among the earliest radio broadcasts.

It has long been speculated, and was argued in court in one case, that these stations operate as a simple and foolproof method for government agencies to communicate with spies working undercover. According to this theory, the messages are encrypted with a one-time pad, to avoid any risk of decryption by the enemy. As evidence, numbers stations have changed details of their broadcasts or produced special, nonscheduled broadcasts coincident with extraordinary political events, such as the August Coup of 1991 in the Soviet Union.

The theory is that they use a “one time pad”, but exactly what they do, or if the do different things, is known known to the public… But at least one is known to have used such a system:

The Atención spy case evidence

The “Atención” station of Cuba became the world’s first numbers station to be officially and publicly accused of transmitting to spies. It was the centerpiece of a United States federal court espionage trial following the arrest of the Wasp Network of Cuban spies in 1998. The U.S. prosecutors claimed the accused were writing down number codes received from Atención, using Sony hand-held shortwave receivers, and typing the numbers into laptop computers to decode spying instructions. The FBI testified that they had entered a spy’s apartment in 1995, and copied the computer decryption program for the Atención numbers code. They used it to decode Atención spy messages, which the prosecutors unveiled in court.

United States government evidence included the following three examples of decoded Atención messages. (Not reported whether the original clear texts were in Spanish, although the phrasing of “Day of the Woman” would indicate so.)

“prioritize and continue to strengthen friendship with Joe and Dennis” [68 characters]
“Under no circumstances should [agents] German nor Castor fly with BTTR or another organization on days 24, 25, 26 and 27.” [112 characters] (BTTR is the anti-Castro airborne group Brothers to the Rescue)
“Congratulate all the female comrades for International Day of the Woman.” [71 characters] (Probably a simple greeting for International Women’s Day on 8 March)

At the rate of one spoken number per character per second, each of these sentences takes more than a minute to transmit.

The moderator of an e-mail list for global numbers station hobbyists claimed, “Someone on the Spooks list had already cracked the code for a repeated transmission [from Havana to Miami] if it was received garbled.” Such code-breaking is possible if a one-time pad decoding key is used more than once. If used properly, however, the code cannot be broken.

Notice that the USA had to capture the “decryption program” in the computer in order to decrypt the messages. It is not clear if this was a ‘one time pad’ or not.

The One Time Pad

At its simplest, you could have a pad with matching sentences at each end. As a page is used, it is destroyed.

Going to lunch. Poison the water supply.
I’m tired of this. You are being watched, leave now.
Are you hungry? Call me soon.
See you at Christmas! Attack now!
I hate Thanksgiving. Poison the water supply.
Do you like movies? You are being watched, leave now.


As the plaintext never repeats, you can not know the codetext without capturing the pad.


In cryptography, the one-time pad (OTP) is an encryption technique that cannot be cracked if used correctly. In this technique, a plaintext is paired with a random secret key (also referred to as a one-time pad). Then, each bit or character of the plaintext is encrypted by combining it with the corresponding bit or character from the pad using modular addition. If the key is truly random, is at least as long as the plaintext, is never reused in whole or in part, and is kept completely secret, then the resulting ciphertext will be impossible to decrypt or break. It has also been proven that any cipher with the perfect secrecy property must use keys with effectively the same requirements as OTP keys. However, practical problems have prevented one-time pads from being widely used.

First described by Frank Miller in 1882, the one-time pad was re-invented in 1917. On July 22, 1919, U.S. Patent 1,310,719 was issued to Gilbert S. Vernam for the XOR operation used for the encryption of a one-time pad. It is derived from the Vernam cipher, named after Gilbert Vernam, one of its inventors. Vernam’s system was a cipher that combined a message with a key read from a punched tape. In its original form, Vernam’s system was vulnerable because the key tape was a loop, which was reused whenever the loop made a full cycle. One-time use came later, when Joseph Mauborgne recognized that if the key tape were totally random, then cryptanalysis would be impossible.

The “pad” part of the name comes from early implementations where the key material was distributed as a pad of paper, so that the top sheet could be easily torn off and destroyed after use. For ease of concealment, the pad was sometimes reduced to such a small size that a powerful magnifying glass was required to use it. The KGB used pads of such size that they could fit in the palm of one’s hand, or in a walnut shell. To increase security, one-time pads were sometimes printed onto sheets of highly flammable nitrocellulose, so that they could be quickly burned after use.

There is some ambiguity to the term because some authors use the terms “Vernam cipher” and “one-time pad” synonymously, while others refer to any additive stream cipher as a “Vernam cipher”, including those based on a cryptographically secure pseudorandom number generator (CSPRNG).

Talking Code

But there are many other kinds of cipher and coding. One, used by the USA, was so secure that it was a top secret until fairly recently. The Navaho Code Talkers were showcased in a movie about them. First, it was all in Navaho. A fairly little known language and not very easy to learn to begin with. Yet even when the Japanese captured a native speaker of Navaho, he could not decrypt the messages. They were encoded. Things like “turtle” meant “tank” and a specific kind of bird was a fighter, another a bomber. Unless you know the encoding, you can’t break the code without a very large body of material AND some idea what it is talking about.

We also used other native languages, and other encodings. Nothing at all prevents that system from being used again by others.


Code talkers are people in the 20th century who used obscure languages as a means of secret communication during wartime. The term is now usually associated with the United States soldiers during the world wars who used their knowledge of Native American languages as a basis to transmit coded messages. In particular, there were approximately 400–500 Native Americans in the United States Marine Corps whose primary job was the transmission of secret tactical messages. Code talkers transmitted these messages over military telephone or radio communications nets using formal or informally developed codes built upon their native languages. Their service improved the speed of encryption of communications at both ends in front line operations during World War II.

The name code talkers is strongly associated with bilingual Navajo speakers specially recruited during World War II by the Marines to serve in their standard communications units in the Pacific Theater. Code talking, however, was pioneered by Cherokee and Choctaw Indians during World War I.

Other Native American code talkers were deployed by the United States Army during World War II, including Lakota, Meskwaki, and Comanche soldiers. Soldiers of Basque ancestry were also used for code talking by the U.S. Marines during World War II in areas where other Basque speakers were not expected to be operating.

Of note, that article also mentions use by China and the British with other languages and goes into some depth about how the code layer is added to the language layer.

Many Other Codes and Cyphers

There are many many other kinds of codes and cyphers. The current fad of computer encryption is NOT special. In some ways it is less secure than carefully crafted codes. Their major advantage is that you do not need to control and distribute code books.


In cryptology, a code is a method used to transform a message into an obscured form so it cannot be understood. Special information or a key is required to read the original message. The usual method is to use a codebook with a list of common phrases or words matched with a codeword. Encoded messages are sometimes termed codetext, while the original message is usually referred to as plaintext.

Terms like code and cipher are often used to refer to any form of encryption. However, there is an important distinction between codes and ciphers in technical work; it is, essentially, the scope of the transformation involved. Codes operate at the level of meaning; that is, words or phrases are converted into something else. Ciphers work at the level of individual letters, or small groups of letters, or even, in modern ciphers, with individual bits. While a code might transform “change” into “CVGDK” or “cocktail lounge”, a cipher transforms elements below the semantic level, i.e., below the level of meaning. The “a” in “attack” might be converted to “Q”, the first “t” to “f”, the second “t” to “3”, and so on. Ciphers are more convenient than codes in some situations, there being no need for a codebook, with its inherently limited number of valid messages, and the possibility of fast automatic operation on computers.

Codes were long believed to be more secure than ciphers, since (if the compiler of the codebook did a good job) there is no pattern of transformation which can be discovered, whereas ciphers use a consistent transformation, which can potentially be identified and reversed (except in the case of the one-time pad).

Further down the article, it has another reference to the difficulty in breaking even a simple code:

Idiot code

An idiot code is a code that is created by the parties using it. This type of communication is akin to the hand signals used by armies in the field.

Example: Any sentence where ‘day’ and ‘night’ are used means ‘attack’. The location mentioned in the following sentence specifies the location to be attacked.

Plaintext: Attack X.
Codetext: We walked day and night through the streets but couldn’t find it! Tomorrow we’ll head into X.

An early use of the term appears to be by George Perrault, a character in the science fiction book Friday by Robert A. Heinlein:

The simplest sort [of code] and thereby impossible to break. The first ad told the person or persons concerned to carry out number seven or expect number seven or it said something about something designated as seven. This one says the same with respect to code item number ten. But the meaning of the numbers cannot be deduced through statistical analysis because the code can be changed long before a useful statistical universe can be reached. It’s an idiot code… and an idiot code can never be broken if the user has the good sense not to go too often to the well.

Terrorism expert Magnus Ranstorp said that the men who carried out the September 11, 2001, attacks on the United States used basic e-mail and what he calls “idiot code” to discuss their plans.

Note that last sentence. I’m not “spilling the beans” to point out these codes…

My Own Code

I’ve pondered codes and encryption a great deal. The idea for this system first came to me after watching one too many movies… In one, the key was to find a particular book and use it to decode a message. I’ve since seen the same plot in several other movies and now can’t keep straight which one was the first one ;-) I think it involved a travel guide to a particular city… or that might be the later movie…

Just think if it as an ISBN enhancement of that system.

The basic idea is that you have a set of numbers. (Sound familiar?) Each number is a page, paragraph, sentence, and word. So 12,3,1,5 would be the fifth word of the first sentence of paragraph 3 on page 12. Since common words like “the” are on many pages and in many sentences, it is easy to ‘mix it up’. Since it does NOT encode letters, the frequency count of “e” being the most common in English is of no use in doing a ‘frequency count’ attack; it isn’t a cypher.

What I thought to add to this is some “forward mutation” semantics and an encryption of the ISBN# into the text so that one didn’t have to arrange in advance what book to use. There can be MANY variations on the exact syntax of the mutation, so knowing how to attack it becomes extremely hard.

So, as an example, we could start with the ‘base book’ being something like a particular dictionary or a common translation of the Bible. You use that to encode the first 10 or “whatever” semantic items. They can be coded to mean something like: Distance to start, direction to read, count to read, skip distance, shift amount, stride of additional text, final skip.

5, 23, 43, 98, 2, 8, 11,

So (remember this is the decrypt of the initial top text) 5 tells use to skip the next 5 entries, to 11.
11 is odd, so we read forward.

75, 45, 3, 25, 34

read 75 numbers, after skipping the first 45, shift each number by 3, use the next 25, skip another 34.

Personally, I’d also use the first letter of words as the skip and shift numbers, modulo base 16. So “apple” is “10”, “fast” would be 16, and “go” (rolling past the end of 16…) becomes 0 with “hello” being 1, etc. But I’m a bit masochistic when it comes to numbers ;-) Probably overkill…

Now at any time, you can insert “ISBN#” (or a coded equivalent) and that changes what book is the decrypt pad. “Yodle504923470x” meaning to use “Is God A Mathematician?”. Oh, and I have the ISBN number written backwards just to add another twist to things.

At any time another code word can mean “apply another skip / shift set”. So “Mumble, 24, 3, 1, 8, 14” would mean “Read 24 after skipping the first 3, shift each number by 1, and use the next 8, then skip 14 more”

Remember that this mutation is now encoded with “Is God A Mathematician?”, not with the first book. Or the second if there was a similar directive in that “read 75″… so you can’t just look for “Yodle” to figure out what’s up.

Cumbersome? Yes. But have a computer do it and it is less so. (Though don’t let the computer be copied or stolen…)

Oh, and if you DO have a computer assist, by using “special” copies of the library on it, ones where, for example, some paragraph breaks are changed or some sentences have a word left out like ‘a’ or ‘an’, even if the idea is known and somehow the ISBN is figured out, the code is sporadically ‘wrong’ and it will drive them nuts…

As you can see, too, there are a thousand and one variations on this system possible. Carefully done, it would be impossible to break, IMHO. Capture of the device would be needed, or capture of a person who knew the code.

In Conclusion

So while cyphers make it fast and easy for anyone to have a crypto-message, and encryption is really the only practical solution for things like whole hard disks and images; for simple messaging, it is hardly needed at all.

It will achieve NOTHING to force all of us to have open communications, as the Bad Guys can just shift over to well proven code systems. It WILL provide convenient “back doors” to be found, exploited, and used by all of:

EU ‘Agencies’,
UK ‘Agencies’,
Hackers World Wide,
Your Competitors,
That high school kid next door,
Your Spouse,
That creepy guy next to you at Starbucks…

So please, despite what all the police agencies are asking to be given, do not mistake a cryptographic back door into common applications as providing any security to anyone. All it does is expose all of US to a police state (a few dozen of them, actually…) and let the Bad Guys know they need to use another method, of which there are dozens that are better.

Oh, and ‘by the way’: All the best crypto-code is already public. Nothing at all prevents them from just using it to encrypt a file and send it through your ‘back door broken’ system… A minor inconvenience at most.

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Je suis plus français que d’Amérique

En ce moment, je suis plus Français que l’Amérique.

Il me fait mal de le dire, mais l’Amérique a éloigné de moi. Il est pas la terre de Liberté, Égalité, Fraternité.. Il est la terre de … eh bien, pas grand-chose. Et voilà le problème.

Comme un enfant, mes voisins étaient français. Ils ont couru la «blanchisserie français». Au sujet de l’âge de 4 ou alors je me souviens d’avoir dans leur maison alors qu’ils tentaient d’apprendre l’anglais à partir de moi. La dame de la maison dit quelque chose comme “Lui a dit «il est un ‘fork’»” à son époux. Après un peu de ces échanges, je «renchérit» et dit: «Mon nom est Michael, mais vous pouvez me nommer Louis si vous aimez» … ;-) un peu naïf rétrospectivement. Mais qui est la réalité de celui-ci.

Je pense qu ‘«être avec eux»’, assez souvent, ce qui était d’abord me fit aime français. Même si je ne le savais pas à l’époque. Je appris des mots différents d’eux. (Un enfant de 4 ans ne sait pas où une langue se termine et commence la prochaine. Grande Poisson! Un gros poisson … pendant que je regardais La Mère clouer une carpe d’environ 4 livres pour une planche de bois pour la cuisson … un mon Père avait attrapé et a donné à eux …)

Je ne sais pas ce qui allait devenir d’entre eux. Nous avons déménagé «à travers la ville» (tous 2 miles) quand je étais 5 et je ne les ai jamais encore … Quand je suis 20, je suis retourné à trouver le bâtiment français blanchisserie avec les machines à laver abandonnée grande. Ont-ils à la retraite? Déplacer? Je espère que la vie les a traités ainsi. Mais ne saura jamais.

Ils me laissèrent avec un amour de toutes les choses françaises. Saveurs et cuisine (il n’y en a pas mieux). Langue (je prenais français jusqu’à la littérature française à l’université. Autrement dit, il n’y avait plus la langue à apprendre … Bien que je doute je me suis souvenu tout assez bien pour écrire ce …)

Mais le simple fait est que je suis autant français que l’anglais ou américain. Mes parents britanniques déplacés en Bretagne. Ma langue de naissance est d’au moins ½ française au cœur. Mon père a débarqué d’un navire sur les plages de Normandie pour restaurer France. Le père de ma femme est venue sur un planeur britannique pour la même raison. (Et sa grand-mère, accompagnée des enfants royaux de Belgique sur un bateau pour la Grande-Bretagne comme ils se sont échappés. Une nounou, mais quelle nounou! Nazie et les bombes? Pas de problème!)

En bref: Je suis ici pour vous.

Comme l’ont été mes ancêtres.

Comme ont été ma famille depuis de nombreuses années.

Nous sommes tous français dans un sens, que la France a permis à l’Amérique pour former à son image. Pâle reflet, mais peut-être “assez bon”.

Bonne chance, mes amis! (Et bonne chance, ma famille …)

Si il-a quelque chose, et je ne veux vraiment “quelque chose”, je peux le faire pour la France dans son heure de notre besoin, s’il vous plaît contactez-moi.

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Deny Global Warming, Dishonorable Discharge and Prison – It’s The Law

I was a little bit astounded to watch this clip.

All I can figure is that Obama has no clue what ‘dereliction of duty’ really means.


Article 92 Failure to Obey Order or Regulation

Article 92 deals with the failure to follow orders or regulations and violation of orders/ regulations. Different situations are covered under Article 92 as follows: violating general order or regulation, violating other written regulation or order, failure to obey lawful order and dereliction of duty.

There are several variations of the charge of Article 92, violation of the UCMJ. These changes require slightly different elements of each charge to prove and are discussed as follows:

a) Violating general order or regulation


That a lawful general of order or regulation existed .
That the accused was duty bound to obey this regulation or order .
That the accused disobeyed or violated this order/ regulation by an act, behavior or alleged intent.

Maximum Punishment: The accused faces dishonorable discharge, forfeiture of all allowances and pay and 2 years confinement as maximum punishment.

b) Violating other written regulation or order


That a lawful regulation or order existed
That the accused was fully aware of this order/ regulation
That the accused was bound by duty to obey the regulation/ order
That the accused disobeyed this order/ regulation

Maximum Punishment: The accused faces bad conduct discharge, forfeiture of all allowances and pay and 6 months confinement as maximum punishment.

c) Failure to obey lawful order


That a specific lawful order was issued by a member of the United States armed forces .
That the accused was fully aware of the order .
That the accused was duty bound to obey the order .
That he failed to do so .

Maximum Punishment: The accused could get a bad conduct discharge, forfeiture of all allowances and pay and up to 6 months confinement if found guilty of this offense.

d) Dereliction of duty


That certain duties were assigned to the accused.
In case of willful dereliction, the prosecution must prove that the accused had knowledge of the duties assigned to him.
In case of negligence/ inefficiency leading to dereliction of duty, the prosecution must prove that there are reasonable grounds to show the accused should have known about his assigned duties and that he failed to carry them out.

Maximum Punishment: For deliberate dereliction of duty, the accused shall receive bad conduct discharge, forfeiture of all allowances and pay and 6 months confinement as maximum punishment. For dereliction of duty through inefficiency or neglect, the maximum punishment is 2/3rd of a month’s pay for 3 months and three months confinement.

To learn more about this punitive article refer to the Manual for Courts Martial.

Points to Note about Article 92

Willful dereliction of duty attracts a more serious punishment than negligence leading to dereliction.
Circumstantial evidence can be used to show that the accused had knowledge of his duty and, in cases of willful dereliction, circumstantial evidence can be used to show the accused intended to avoid duty.
The serviceman is not guilty of violating this article if the duty is self- imposed.
The lawfulness of the order is an important aspect to consider in these cases.
When the order carries exceptions, the prosecution has to prove that the accused is not subject to the terms of the exception.

From this article at Iceagenow.info:


During his commencement address to the U.S. Coast Guard Academy, President Barack Obama warned that it’s a “dereliction of duty” to deny the existence of climate change.

Any Service Member that votes to support the Democratic Rush to embrace Global Warming is assuring more of this crap, and dishonorable discharges for anyone not PC enough about it. Any military family member who votes for a Democrat (or Republican Dem-Lite) that supports the Climate Change Mantra is putting their family at risk of a Court Martial.

Think about it, please. With ISIS on their way here (dressed in Refugee Sheep’s Clothing), you can be court-martialed for saying “Seems cold to me, where’s global warming?”… The Commander In Chief has so ordered.

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Posted in AGW and GIStemp Issues, Political Current Events | Tagged , , , | 11 Comments

China, SDRs, World Debt, Unwinds Part 1

This article will be a bit of a mix of economic things. Prompted by a few comments on a “tips” page, it will look briefly at world debt, what is an SDR and what it means if China joins the IMF as an SDR nation; and then explore what a credit ‘unwind’ is, and what happens when they go badly in a ‘part 2’ article.

The Links In Question

Jay Martin has a link to a good article on the ‘rotation’ of the ‘debt crisis’ to the 3rd world:


Normally I would just quote a ‘tease’ section with some good bits in it and let you take the link to the whole thing. The Economist has decided to use aggressive pop-ups (plural) so the quote will be large enough to spare you the experience…

The world economy
The never-ending story
First America, then Europe. Now the debt crisis has reached emerging markets
Nov 14th 2015

IT IS close to ten years since America’s housing bubble burst. It is six since Greece’s insolvency sparked the euro crisis. Linking these episodes was a rapid build-up of debt, followed by a bust. A third instalment in the chronicles of debt is now unfolding. This time the setting is emerging markets. Investors have already dumped assets in the developing world, but the full agony of the slowdown still lies ahead.

Debt crises in poorer countries are nothing new. In some ways this one will be less dramatic than the defaults and broken currency pegs that marked crashes in the 1980s and 1990s. Today’s emerging markets, by and large, have more flexible exchange rates, bigger reserves and a smaller share of their debts in foreign currency. Nonetheless, the bust will hit growth harder than people now expect, weakening the world economy even as the Federal Reserve begins to raise interest rates.
Chronicle of a debt foretold

In all three volumes of this debt trilogy, the cycle began with capital flooding across borders, driving down interest rates and spurring credit growth. In America a glut of global savings, much of it from Asia, washed into subprime housing, with disastrous results. In the euro area, thrifty Germans helped to fund booms in Irish housing and Greek public spending.

As these rich-world bubbles turned to bust, sending interest rates to historic lows, the flow of capital changed direction. Money flowed from rich countries to poorer ones. That was at least the right way around. But this was yet another binge: too much borrowed too fast, and lots of the debt taken on by firms to finance imprudent projects or purchase overpriced assets. Overall, debt in emerging markets has risen from 150% of GDP in 2009 to 195%. Corporate debt has surged from less than 50% of GDP in 2008 to almost 75%. China’s debt-to-GDP ratio has risen by nearly 50 percentage points in the past four years.

IMHO there is a grievous error in this view of things. It lays blame on a ‘glut of savings’. There is NO ‘glut of savings’. Most people have zero in a ‘savings account’. There is a large glut of ‘easy money’ from central banks to “too big to fail money center banks” and under government policy from them into housing creating a housing boom. It doesn’t change the scenario much, but does hide the real responsibility.

Now this boom, too, is coming to an end. Slower Chinese growth and weak commodity prices have darkened prospects even as a stronger dollar and the approach of higher American interest rates dam the flood of cheap capital. Next comes the reckoning. Some debt cycles end in crisis and recession—witness both the subprime debacle and the euro zone’s agonies. Others result merely in slower growth, as borrowers stop spending and lenders scuttle for cover. The scale of the emerging-market credit boom ensures that its aftermath will hurt. In countries where private-sector indebtedness has risen by more than 20% of GDP, the pace of GDP growth slows by an average of almost three percentage points in the three years after the peak of borrowing (see article). But just how much pain lies ahead will also depend on local factors, from the scale of the exchange-rate adjustment that has already taken place to the size of countries’ reserves. Crudely, most emerging economies can be put into one of three groups.

The first group includes those for which the credit boom will be followed by a prolonged hangover, not a heart attack. The likes of South Korea and Singapore belong in this category; so, crucially for the world economy, does China. It still has formidable defences to protect it against an exodus of capital. It has an enormous current-account surplus. Its foreign-exchange reserves stood at $3.5 trillion in October, roughly three times as much as its external debt. Policymakers have the ability to bail out borrowers, and show little sign of being willing to tolerate defaults. Shovelling problems under the carpet does not get rid of them. Firms that ought to go bust stagger on; dud loans pile up on banks’ balance-sheets; excess capacity in sectors like steel leads to dumping elsewhere. All this saps growth, but it also puts off the threat of a severe crisis.

For that risk, look instead to countries in the second category—those that lack the same means to bail out imprudent borrowers or to protect themselves from capital flight. Of the larger economies in this category, three stand out. Brazil’s corporate-bond market has grown 12-fold since 2007. Its current-account deficit means that it relies on foreign capital; its political paralysis and fiscal inflexibility offer nothing to reassure investors. Malaysia’s banks have lots of foreign liabilities, and its households have the highest debt-to-income ratio of any big emerging market; its cushion of foreign-exchange reserves looks thin and its current-account surplus is forecast to shrink. Turkey combines a current-account deficit, high inflation and foreign-currency-denominated debts that have become more onerous as the lira has fallen.

The third group of countries consists of those emerging markets that will either escape serious trouble or have already gone through the worst. Of the big ones, India is in healthier shape than any other big emerging economy and Russia might just surpass expectations. The rouble has already gone through a bigger adjustment than any other major currency, and the economy shows tentative signs of responding. Argentina, a perennial flop but one with little private debt, could also shine if a reformist wins the presidency this month.

Such brighter spots aside, everything else points to another pallid year for the world economy. The IMF has forecast higher growth in emerging markets next year; the lesson of past debt cycles suggests another year of slowdown is more likely. And weakness in the developing world, which accounts for over half of the global economy (in purchasing-power-parity terms), matters far more than it once did. Lower growth in emerging markets hits the profits of multinationals and the cash flows of exporters. Low commodity prices help oil importers but ratchet up the pressure on indebted miners, drillers and traders, which between them owe around $3 trillion.

Volume four?

Europe’s open economy is most exposed to a cooling in emerging-market demand, which is why more monetary easing there looks likely. But America’s policy dilemma is more acute. The divergence in monetary policy between it and the rest of the world will put upward pressure on the dollar, hurting exports and earnings. And waves of capital may again seek out the American consumer as the borrower of choice. If so, the world’s debt crisis may end up right back where it started.

I also take exception with this assertion that it ‘started’ with the USA and the American Consumer. It started with central banks and an embrace of Modern Monetary Theory (that isn’t very modern IMHO) globally:

Modern Monetary Theory (MMT or Modern Money Theory), also known as neochartalism, is an economic theory that details the procedures and consequences of using government-issued tokens as the unit of money, i.e., fiat money. According to modern monetary theory, “governments with the power to issue their own currency are always solvent, and can afford to buy anything for sale in their domestic unit of account even though they may face inflationary and political constraints”. Adherents of the theory tend to see inflation as being caused primarily by resource constraints rather than monetary expansion.

MMT aims to describe and analyze modern economies in which the national currency is fiat money, established and created by the government. In many systems, banks can create money but these horizontal transactions do not increase net financial assets as assets are offset by liabilities. In addition to deficit spending, valuation effects e.g. growth in stock price can increase net financial assets. In MMT, money enters circulation through government spending. Taxation and its legal tender power to discharge debt establish the fiat money as currency, giving it value by creating demand for it in the form of a private tax obligation that must be met. In addition, fines, fees and licenses create demand for the currency. This can be a currency issued by the government, or a foreign currency for example the euro. An ongoing tax obligation, in concert with private confidence and acceptance of the currency, maintains its value. Because the government can issue its own currency at will, MMT maintains that the level of taxation relative to government spending (the government’s deficit spending or budget surplus) is in reality a policy tool that regulates inflation and unemployment, and not a means of funding the government’s activities per se.

The basic notion being that taxation creates value in a fiat money so you can spend as much of it as you want as long as you tax enough. Yeah, that crazy…

The next block of quotes are mostly so that when the Wiki gets re-written I’ve captured the history as it was when I read it. You can skip on down if not that interested… Those who advocate for a Gold Standard need to understand what they are up against.


Modern Monetary Theory synthesises ideas from the State Theory of Money of Georg Friedrich Knapp (also known as Chartalism) and Credit Theory of Money of Alfred Mitchell-Innes, the functional finance proposals of Abba Lerner, Hyman Minsky’s views on the banking system and Wynne Godley’s Sectoral balances approach.

Knapp, writing in 1905, argued that “money is a creature of law” rather than a commodity. At the time of writing the Gold Standard was in existence, and Knapp contrasted his state theory of money with the view of “metallism”, where the value of a unit of currency depended on the quantity of precious metal it contained or could be exchanged for. He argued the state could create pure paper money and make it exchangeable by recognising it as legal tender, with the criterion for the money of a state being “that which is accepted at the public pay offices”.

Yeah… 1905. That’s “modern” for you…

Next we get a ‘slight’ at the folks who actually had some clue, claiming they had some statements (unquoted…) supporting the notion:

The prevailing view of money was that it had evolved from systems of barter to become a medium of exchange because it represented a durable commodity which had some use value, but proponents of MMT such as Randall Wray and Mathew Forstater argue that more general statements appearing to support a chartalist view of tax-driven paper money appear in the earlier writings of many classical economists, including Adam Smith, Jean-Baptiste Say, J.S. Mill, Karl Marx and William Stanley Jevons.

Alfred Mitchell-Innes, writing in 1914, argued that money existed not as a medium of exchange but as a standard of deferred payment, with government money being debt the government could reclaim by taxation. […]
Knapp and “chartalism” were referenced by John Maynard Keynes in the opening pages of his 1930 Treatise on Money and appear to have influenced Keynesian ideas on the role of the state in the economy.

By 1947, when Abba Lerner wrote his article Money as a Creature of the State, economists had largely abandoned the idea that the value of money was closely linked to gold. Lerner argued that responsibility for avoiding inflation and depressions lay with the state because of its ability to create or tax away money.

So a reference to something becomes an endorsement of it?…

Here, too, you can see the rise of the Central Bank as creator of inflation and depressions, so must also be able to prevent them…

Vertical transactions
Further information: Sectoral balances

MMT labels any transactions between the government sector and the non-government sector as a vertical transaction. The government sector is considered to include the treasury and the central bank, whereas the non-government sector includes private individuals and firms (including the private banking system) and the external sector – that is, foreign buyers and sellers.

In any given time period, the government’s budget can be either in deficit or in surplus. A deficit occurs when the government spends more than it taxes; and a surplus occurs when a government taxes more than it spends. MMT states that as a matter of accounting, it follows that government budget deficits add net financial assets to the private sector. This is because a budget deficit means that a government has deposited more money into private bank accounts than it has removed in taxes. A budget surplus means the opposite: in total, the government has removed more money from private bank accounts via taxes than it has put back in via spending.

Therefore, budget deficits add net financial assets to the private sector; whereas budget surpluses remove financial assets from the private sector. This is widely represented in macroeconomic theory by the national income identity:

G − T = S − I − NX

where G is government spending, T is taxes, S is savings, I is investment and NX is net exports.

The conclusion that MMT draws from this is that it is only possible for the non government sector to accumulate a surplus if the government runs budget deficits.
The non government sector can be further split into foreign users of the currency and domestic users.

MMT economists aim to run deficits as much as the private sector wants to save and for real resources to be fully used e.g. full employment. As most private sectors want to net save and globally, external balances must add up to zero, MMT economists usually advocate budget deficits.

Yup, spending all the money you can just increases “private surplus”… Wheee!!! Free Ride!!! Spend Spend Spend Baby!!!!

Now you know why Dimocrats and Republicrims alike are on the Government Spending Binge bandwagon. They believe this crap. Likely since it lets their Cronies accumulate that “private surplus”…

Interaction between government and the banking sector

Modern monetary theory provides a detailed descriptive account of the “operational realities” of interactions between the government and the central bank, and the commercial banking sector, with proponents like Scott Fullwiler arguing that understanding of reserve accounting is critical to understanding monetary policy options.

A sovereign government will typically have a cash operating account with the central bank of the country. From this account, the government can spend and also receive taxes and other inflows. Similarly, all of the commercial banks will also have an account with the central bank. This permits the banks to manage their reserves (that is, the amount of available short-term money that a particular bank holds).

So when the government spends, treasury will debit its cash operating account at the central bank, and deposit this money into private bank accounts (and hence into the commercial banking system). This money adds to the total reserves of the commercial bank sector.
Taxation works exactly in reverse; private bank accounts are debited, and hence reserves in the commercial banking sector fall.

The notion being that money in the Central Bank is different from money in the Commercial Bank. Really. They think that. That is why The Fed does a load of the things it does with reserve requirements and discount rates and why The Government no longer just prints money. (And part, IMHO, of why Kennedy got done in as he was having the Treasury do just that. Those notes have red ink on them, but have largely been pulled from circulation. (An interesting, if somewhat narrow POV, article is here:


“The high office of the President has been used to foment a plot to
destroy the Americans freedom and before I leave office I must inform the
Citizen of his plight.” PRESIDENT JOHN F. KENNEDY(10 days before he was

On June 4, 1963, a virtually unknown Presidential decree, Executive Order
11110, was signed with the authority to basically strip the Federal Reserve
Bank of its power to loan money to the United States Federal Government at
interest. With the stroke of a pen, President Kennedy declared that the
privately owned Federal Reserve Bank would soon be out of business. The
Christian Common Law Institute has exhaustively researched this matter
through the Federal Register and Library of Congress and can now safely
conclude that this Executive Order has never been repealed, amended, or
superceded by any subsequent Executive Order. In simple terms, it is still
When President John Fitzgerald Kennedy – the author of Profiles in
Courage -signed this Order, it returned to the federal government,
specifically the Treasury Department, the Constitutional power to create and
issue currency -money – without going through the privately owned Federal
Reserve Bank.
President Kennedy’s Executive Order 11110 [the full text is displayed
further below] gave the Treasury Department the explicit authority:
“to issue silver certificates against any silver bullion, silver, or
standard silver dollars in the Treasury.”

But MMT doesn’t like that idea, so we still have The Fed and the idea that the USA must only have authority to create money through it…

I’ll skip over the Wiki section on bonds and such. There is also a big section on international transactions that help to explain the whole SDR system. But we will skip down to here:

Foreign sector and commercial banks

Although a net-importing nation will transfer a portion of domestic currency into foreign ownership, the currency will usually remain within the importing nation. The foreign owner of the local currency can either (a) spend them purchasing local assets or (b) deposit them in the local banking system. In each scenario, the money ultimately ends up in the local banking system.

Foreign sector and government

Using the same application of vertical transactions MMT argues that the holder of the bond is irrelevant to the issuing government. As long as there is a demand for the issuer’s currency, whether the bond holder is foreign or not, governments can never be insolvent when the debt obligations are in their own currency; this is because the government is not constrained in creating its own currency (although the bond holder may affect the exchange rate by converting to local currency). Similarly, according to the FX theory outlined above, the currency paid out at maturity cannot leave the country of issuance either.

Just a sidebar on that last assertion. Yes, I left out the theory of it… but just realize what was said. Countries all over the World, including Liberia as one example, use the $US as local currency. Their assertion is that can not happen. So a bond maturing in the USA pays me $1000 and I can’t spend it in Liberia? Or even Mexico for that matter? Never heard of the drug trade I guess…

MMT does point out, however, that debt denominated in a foreign currency certainly is a fiscal risk to governments, since the indebted government cannot create foreign currency. In this case the only way the government can sustainably repay its foreign debt is to ensure that its currency is continually and highly demanded by foreigners over the period that it wishes to repay the debt – an exchange rate collapse would potentially multiply the debt many times over asymptotically, making it impossible to repay. In that case, the government can default, or attempt to shift to an export-led strategy or raise interest rates to attract foreign investment in the currency. Either one has a negative effect on the economy. Euro debt crises in the “PIIGS” countries that began in 2009 reflect this risk, since Greece, Ireland, Spain, Italy, etc. have all issued debts in a quasi-“foreign currency” – the Euro, which they cannot create.
Policy implications

MMT claims that the word “borrowing” is a misnomer when it comes to a sovereign government’s fiscal operations, because what the government is doing is accepting back its own IOUs, and nobody can borrow back their own debt instruments. Sovereign government goes into debt by issuing its own liabilities that are financial wealth to the private sector. “Private debt is debt, but government debt is financial wealth to the private sector.”

In this theory, sovereign government is not financially constrained in its ability to spend; it is argued that the government can afford to buy anything that is for sale in currency that it issues (there may be political constraints, like a debt ceiling law). The only constraint is that excessive spending by any sector of the economy (whether households, firms or public) has the potential to cause inflationary pressures. MMTers argue though that generally inflation is caused by supply-side pressures, rather than demand side.

Some MMT economists advocate a government-funded job guarantee scheme to eliminate involuntary unemployment. Proponents argue that this can be consistent with price stability as it targets unemployment directly rather than attempting to increase private sector job creation indirectly through a much larger economic stimulus, and maintains a “buffer stock” of labor that can readily switch to the private sector when jobs become available.
A job guarantee program could also be considered a powerful automatic stabilizer to the economy, expanding when private sector activity cools down and shrinking in size when private sector activity heats up.

So there you have it. The Economic “justification” for things like ever more bloated government and never firing anyone. “hire them all it’s good for employment” comes straight out of MMT. Similarly the Universal Minimum Income since it is funded out of government spending is seen as free. After all, it isn’t consumption or spending, it is “creating private surplus”…

Enough Of The MMT Wiki

Larry had a few more interesting links here:


China on Saturday welcomed backing from IMF experts that the yuan should be included in its reserve currencies, saying the move would strengthen the world’s financial system.

Now the world’s second-largest economy, China asked last year for the yuan to be added to the elite basket of SDR currencies, but until recently it was considered too tightly controlled to qualify.

It now looks likely the yuan will be formally admitted to the IMF’s “special drawing rights” currency basket at the end of the month, which would mark a milestone in China’s efforts to become a global economic power.

IMF chief Christine Lagarde said the fund now deemed the yuan “meets the requirements to be a ‘freely usable’ currency” — a key hurdle to joining the yen, dollar, pound and euro as a leading unit in international trade.

The yuan hit headlines in August when China’s central bank devalued the currency and said it would use a more market-oriented system to calculate the point around which the currency can trade each day.

The move sent markets into a tailspin as investors took it as a sign of slowing growth in China, a key driver of the world economy, but the central bank on Saturday said such reforms had taken it closer to joining the SDR basket.

“China thinks that the inclusion of the RMB (yuan) into the SDR basket will strengthen the representativeness and the attraction of the SDR (and) that it will improve the existing international monetary system,” the People’s Bank of China (PBoC) added.

“It will have win-win benefits both for China and the world.”

Some Definitions and Descriptions

The IMF:

The International Monetary Fund is sort of a Central Bank for Central Banks. The purpose being to make that international portion of MMT easier to handle.


DEFINITION of ‘International Monetary Fund – IMF’

The International Monetary Fund (IMF) is an international organization created for the purpose of standardizing global financial relations and exchange rates. The IMF generally monitors the global economy, and its core goal is to economically strengthen its member countries. Specifically, the IMF was created with the intention of:

1. Promoting global monetary and exchange stability.

2. Facilitating the expansion and balanced growth of international trade.

3. Assisting in the establishment of a multilateral system of payments for current transactions.

Basically, member countries can deposit a variety of ‘assets’ and then draw other currencies out against them. Gold, $US, £, € are all just fine. Now if you want to buy, say, a few $Billion of oil from Saudi Arabia, you can’t just walk in with Bank Of Smith 100 Zingy Notes and get anywhere. YOUR Central Bank has to hustle up some Saudi Currency, or you have to get a Reserve Currency (traditionally the $US ‘lately’ in history). It goes to The IMF and asks for a few $Billion, please. To get it, they must deposit something of value. That means a reserve currency or gold. Then the $US go to Saudi, who put it in the bank, and collect some Saudi currency in exchange, or buy a nice chunk of downtown New York City… recycling those Petro Dollars.

$US trade must ‘clear’ though a US bank, so the US Government gets to see who is buying what… Some folks don’t like that.


Now all those ‘special’ currencies in the IMF are bundled up into Special Drawing Rights. That means you put in, say, $1 Trillion of your ‘reserve currency’, you can borrow or ‘draw’ out $1 Trillion worth of anything else. (It isn’t quite that simple, but that’s the idea of it. To facilitate balancing the books on currency imbalances by treating a basket of them as more or less fungible.)

Reserve Currency:

There’s a very nice write up of Reserve Currencies here:


I won’t bother to quote it all as it is long and well written.

Benefits of Reserve Currency Status

Why all the hubbub surrounding reserve currency status? Being the country issuing a reserve currency reduces transaction costs, since both sides of the transaction involve the same currency and one is yours. Reserve currency issuing countries are not exposed to the same level of exchange rate risk, especially when it comes to commodities, which are often quoted and settled in dollars. Because other countries want to hold a currency in reserve and use it for transactions, the higher demand means lower borrowing costs through depressed bond yields (most reserves are of government bonds). Issuing countries are also able to borrow in their home currencies and are less worried about propping up their currencies to avoid default.

It also means that a Chinese buying oil can pay in Yuan and NOT have it ‘clear’ through a US bank with the US Government watching, but instead ‘clear’ though a Chinese bank. Similarly, the Saudi Bank can hold it as ‘reserves’ without telling the USA…

Now just change Saudi to Iranian…

As China joins the SDR Club

So what happens as China joins the SDR Club?

They can print international money and spend it for free.

They can have transactions in international markets that never show on US ‘radar’.

They can withdraw $US or £ or € or most any other currency against YUAN deposits at non Chinese banks, including the IMF.

Globally, lots of banks will start holding piles of Yuan as “reserves”. Paper China prints, but that does not get used to demand $US from China to redeem it.

It displaces some $US and € from that use and those DO get redeemed.

Unwinds, Currency Collapses, Defaults, Hyperinflation, Stagnation, and more

As this article is already a bit long, and editing it is slow at this size (the Pi starts to swap memory), I’m going to cover this part in a “Part 2”.

What happens when things go wrong?

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I Like Crazy Uncle Bernie

OK, I watched the Democratic “debate”.

Largely it was “who likes kittens the most”…

But I really like Crazy Uncle Bernie.

He is an honest and unabashed Socialist. You know exactly where he stands.

It didn’t hurt that he “has clue” that giving 6 banks the bulk of all financial markets was not a good solution to ‘too big to fail’, that he thinks maybe if they are too big to fail they ought to be broken up and made smaller, not larger, and that the repeal of Glass-Steagall was a mistake and Democrats ought to ‘put it baaaack’…

Frankly, it was looking at the choice of a pure and honest Socialist vs the Liar In Chief Hillary well versed in bafflegab vs the Pro-Politician All Faux But Progressive Gov. that had me finding I was happiest with the honest Socialist.

Don’t get me wrong, this is only a review of the debate. I’d take any of the Republicans over this dog’s breakfast… but within the field, I found I kinda liked Crazy Uncle Bernie…

He has that same kind of outside the box train wreck attraction as The Donald. Honest, if not quite all in touch with anyone else…

Never mind that ‘free stuff for everyone’ comes with a price tag he can’t see. At least he knows that the system is corrupt and broken and would like to break it up and start over. I’m good with that… in a 3 Stooges Comedy ‘at least it will be fun to watch’ kind of way…

Leaving me with the question of “Beer or Whiskey?”… how long will this process take?…

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153 Dead and Rising in Paris

My condolences to the people of France and Paris.

It is all over the news so I won’t go into details, but for anyone who has not heard, there was a coordinated attack on at least 6 places (per CNN) with a Soccer (Football) stadium being one, and a music concert another. Also 2 restaurants were hit. I don’t know what the other two places were. CNN said that the president of France was at the stadium, but was hustled out safely (partly as the suicide bomber set himself off outside the stadium).

France is essentially going on lockdown with folks told to stay in their homes unless absolutely necessary to go outside. Border was closed. Plane landing at Paris airport were not unloading (per Fox or MSNBC about 4? hours ago).

Perhaps now Mr. Obama and the Democrats will realize how utterly stupid it is to have an amnesty for whoever entered the country in the last couple of decades (includes sleeper cells) and how utterly stupid it would be to bring in a few hundred thousand “angry young men” from Muslim countries while you are bombing Muslim countries. We have no idea how many of the “refugees” are not actually refugees. Until that can be known, ship tents that way, not bodies this way, or we will be burying bodies here after they set up operations.

This will change France, and it will change Paris. Perhaps even all of the EU. Expect more of it too.

I suspect that the big Climate Confab in Paris will not be quite so jolly… And I really wonder if Obama will still be thinking it is a greater threat than nut-jobs with bombs.

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