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Following up on my detailed analysis of the faux pas of private blockchains using te settlement time endured by Lehman’s counterparties from yesterday, I want to expound upon the extreme likelihood of a bank consortium blockchain being compromised through outright theft!

There are several economic arguments against private blockchains. For instance, and as described in the videos herein, the demand-side network effect allows for much faster and much more secure growth in public networks. More importantly, utility grows exponentially in comparison to close private networks – as does utility. This concept of utility should not be lost, for the most utilitarian aspect of public blockchains is the zero trust attribute. You simply do not have to trust anyone to do completely trusted business with them. The exact opposite is the case with the private blockchain, where you are force to trust the “trusted” parties. Of course, the primary caveat to that model is…. no one is trustworthy. Choose to trust an untrustworthy partner if you so desire, but….

This all boils down to the fact that there is truly no such thing as a “trustworthy” party. Therefore, any system or construct whose operations rely on a “trusted” party is destined to fail. If you need trust for it to work, then it will fail – absolutely guaranteed! Before we go further, let’s define a “trust” for the sake of this discussion. As per Wikipedia:

In a social context, trust has several connotations Definitions of trust typically refer to a situation characterized by the following aspects: One party (trustor) is willing to rely on the actions of another party (trustee); the situation is directed to the future. In addition, the trustor (voluntarily or forcedly) abandons control over the actions performed by the trustee. As a consequence, the trustor is uncertain about the outcome of the other’s actions; they can only develop and evaluate expectations. The uncertainty involves the risk of failure or harm to the trustor if the trustee will not behave as desired. Vladimir Ilych Lenine expresses this idea with the sentence “Trust is good, control is better”.

That risk of failure or harm is not only omnipresent, it is nigh guaranteed to rear its ugly head. Thus, with the guaranteed in mind, if one can transact on  trustless basis, then one can transact on a superior basis. This is the primary and most basic flaw of the concept of private blockchains vs public blockchains. – the false presumption of “Trust”!

 

 

 

As per Kaspersky Labs:

Carbanak 2.0: new targets beyond banks

After our exposure of the Carbanak group exactly a year ago, the group disappeared for about five months, leading us to believe that the operation was disbanded. However, in September last year, our friends at CSIS published a blog detailing a new Carbanak variant affecting one of its customers.

In December 2015, we confirmed that the group was still active. Kaspersky Lab discovered signs of Carbanak in two institutions – a telecommunications company and a financial institution.

Executable files founded in SHIM during Carbanak incident response

One interesting characteristic of Carbanak 2.0 is a different victim profile. The group has moved beyond banks and is now targeting the budgeting and accounting departments in any organization of interest to them, using the same APT-style tools and techniques.

In one remarkable case, the Carbanak 2.0 gang used its access to a financial institution that stores information about shareholders to change the ownership details of a large company. The information was modified to name a money mule as a shareholder of the company, displaying their IDs. It’s unclear how they wanted to make use of this information in future.

I want all to think very carefully about this. A bank or systemic financial institution can be (and has on many occasions) been compromised by malware. Once comrpomised, these institutions are no longer trustworthy – but more importantly they are still trusted! What does this mean in this context?

This could not occur if the blockchain was heterogenous, diverse and large. Think centralized vs. decentralized vs. distributed…

 

In closing, I wish to recap the extreme probability for settlement risk in a consortium blockchain in the event that an entity goes bust – as exemplified in the Lehman bankruptcy example yestereday. While this risk is extant in the legacy system, the nigh irresponsible bandying about of the term “trusted party” lends credence to the premise that one would be led to believe said parties are trustworthy. None can be farther from the truth. A trusted party is one that IS relied upon. A trustworthy party is one that can be unconditionally relied upon. The second party literally does not exist. This concept is further amplified by my 2nd point – there are many, many vectors of compromise in trusted entitiy setup. The primary value drive of the invention of blockchain tech was the elimination of needed trust. By using a trusted network model, you are purposely reintroducing the risks that trustless networks reomved and eliminating the benefits that these networks offer. The vast majority of benefits touted by private blockchain proponents can be offered through Veritaseum over public blockchains with some engineering – while retaining zero trust attributes.

Feel free to contact me at reggie at veritaseum.com to discuss. I can make my team of software and financial engineers, lawyers, macro and fundamental strategists avaialble for consulting engagements if necessary. 

via Zero Hedge http://ift.tt/1pRlpMP Reggie Middleton

In a story that itself seemed like it may be an April fool’s joke, the WSJ writes that China’s official Xinhua News Agency has issued a warning on its viewpoint commentary microblog that antics over April Fool’s Day – a tradition it was first exposed to only in the late 1970s when it gradually opened up to foreign cultural influence – are “inconsistent with core socialist values” and at odds with Chinese cultural tradition.

 

As the WSJ poignantly puts it, “top-down Communist regimes are not known for their rollicking sense of humor. Building a perfect society is hardly a laughing matter, especially when hostile foreign forces are trying to undermine your efforts with lightness and frivolity.” As a result the Xinhua post, seemingly concerned that objective criticism could pass under the guise of humor warned “please don’t believe, spread or create rumors.”

Somewhat predictably, this sparked a hail of interest and commentary by China’s vibrant online community, much of which does appear to have a sense of humor. According to the WSJ, Xinhua’s message was reposted more than 11,000 times as of early Friday evening. As reaction mounted, Xinhua disabled the story’s comments function. But other state media outlets published screenshots of the original posting on their websites, where they continued to accept feedback.

Some examples:

“News released every day makes a fool of ordinary people, so what’s wrong with celebrating April Fool’s Day?” wrote one online commenter named “WuGang” on the website Huanqiu, an online news portal run by the official People’s Daily and its affiliate the Global Times. WuGang apparently is not familiar with US economic data.

“This must be Xinhua’s April Fool’s Day joke,” added another user identified as “Xie Xingsheng_Big Dipper Academy of Finance Research.”

Some, however, took the government’s side, such as a netizen identified as “Wilderness” who wrote: “I strongly agree with Xinhua. Chinese people should have our own cultural confidence”, of which it appears humor is not a part.

One reason why China’s bureacracy is so afraid of humor is due to its unnatural inability to distinguish fact from humorous fiction. Despite efforts to discourage humorous pranks, China’s straight-laced official media has repeatedly found itself caught out on the humor front. In June 2002, the Beijing Evening News picked up a story from The Onion claiming that the U.S. Congress was considering moving out of the Capitol building to newer digs with a retractable roof, better refreshments and more luxury sky boxes.

A decade later, The Onion struck again when the People’s Daily fell victim to another of its spoof stories declaring that North Korean dictator Kim Jong Un had been voted the “sexiest man alive for 2012.” The Chinese Communist Party mouthpiece even included a 55-photo slideshow and an Onion quote that “this Pyongyang-bred heartthrob is every woman’s dream come true.”

TV stations have not been immune either: according to the WSJ, in 2013, state broadcaster China Central Television took an April Fool’s Day story from the British tabloid the Daily Mirror at face value, according to the South China Morning Post. The Daily Mirror story claimed that Virgin Atlantic Airways Ltd. had unveiled a new aircraft featuring a glass floor so passengers could watch the scenery pass by underfoot.

What makes China’s crackdown on humor particularly ironic, is that the media is already so controlled by the government apartus, it is difficult to distinguish where truth begins (or ends), and is replaced with absudrity.  WSJ explains:

While China’s people are as quick to enjoy a good laugh as any, the country’s leadership culture tends to favor the stiff and formal, making it rather unusual for state media to walk on the lighter side. 

 

This is particularly the case lately as President Xi Jinping has championed core Communist Party orthodoxy, said Barry Naughton, a professor at the University of California, San Diego. In a recent widely publicized tour of state-run media outlets, Mr. Xi urged reporters to pledge strict loyalty to the party under his leadership. “Everyone’s supposed to fall in line,” Mr. Naughton said.

 

Xinhua’s admonition against rumormongering — whether amusing or not — echoes a tradition going back centuries, political historians say. Emperors often feared gossip, particularly in times of disaster, which could signal that the leadership no longer enjoyed a “mandate from heaven” to rule, they say.

 

“In the past, many rumors were about plagues, natural disasters or government affairs,” said Renmin University professor Zhang Ming. “In fact, many rumors in China are not rumors, but words the government doesn’t want to hear or information the government doesn’t want released.”

 

Late last year, China amended its criminal law in an effort to quash rumors, especially those leading to “serious disruption of social order.” This followed a crackdown on people accused of spreading unauthorized information regarding a deadly chemical fire in the northeastern city of Tianjin and state intervention in a slumping stock market.

But what is most profound is the following statement by Naughton “Rumors weaken the official message. You suddenly notice that the official narrative isn’t the whole story.”

“Rumors” like “the US economy isn’t doing nearly as well as the official propaganda wants you to believe”, which in turn are met with such derision from none other than the president as “peddling fiction.”

Or even better: “the Fed is a naked emperor” – because nothing would crush the credibility of the Federal Reserve more or send the stock market sliding faster, than one of the privileged reporters at one of Janet Yellen’s pressers bursting into laughter.

And speaking of that, after China made the selling of stocks illegal, it appears that laughter may be the next thing that sends you in jail.

When will the U.S. follow?

via Zero Hedge http://ift.tt/1X3CWfD Tyler Durden

Submitted by Clarice Palmer via TheAntiMedia.org,

As online publications have hailed the major protests overtaking the streets of Brazil at the outset of an apparent political revolution, few discuss the problems that have been brewing for decades in South America’s largest nation.

While Brazilians are angry and tired of their economic hardships, they are also incensed at the country’s history of corruption, which now includes a massive presidential scandal carried out by politicians and lobbyists during the current and previous administrations. This misconduct has given residents of all walks of life enough incentive to take their demands to the streets.

But are the politicians listening?

The History of Brazil is a History of Corruption

Local sociologists often tout Brazil’s corruption problem as a “genetic disposition” to crookedness. But late economist Ludwig von Mises disagreed. In Human Action, the famed economist claimed that corruption is simply a consequence of government’s heavy intervention in all public matters. “Corruption is a regular effect of interventionism,” he wrote — not the root of a country’s woes.

As Brazilian newspapers and talking heads tend to focus on corruption scandals as the root of the political and economic issues the country faces, they are, in fact, some of the consequences of heavy government intervention — not the foundation of the nation’s ongoing problems.

Between 1930 and 1945, the country was under the rule of the populist tyrant Getúlio Vargas, whose rise as a dictator was also tied to a series of corruption scandals, political persecution, and oppression. Nicknamed “the Father of the Poor,” Vargas and his administration used images of hope and harmony to sell the leader as the country’s grassroots hero.

But the individual behind the facade and popular image was the first of many political leaders to promise — though never deliver — peace and prosperity. Vargas also maintained an amicable relationship with Germany prior to World War II, prompting the United States to wonder whether Brazil would enter the Axis orbit. The Vargas administration even aided Nazi Germany by sending Jewish refugees back to their home country, such as the revolutionary militant, Olga Benário Prestes, a German Jew who ultimately died in a concentration camp.

 

Getúlio Vargas is particularly relevant because Brazil’s last president, Luiz Inácio “Lula” Da Silva, who held office between 2003 and 2011, is often remembered by many as the second coming of the 20th century dictator. Lula is currently implicated in the high-level scandals currently plaguing Brazil.

Long before Lula took office, however, the anti-communist “Red Scare” mindset — the culture of fear tied to communism that existed between 1919 the late 1950s in America — finally settled in Brazil. The country began to fear the possibility that communist agitators would take over the country. With the help of democratically-elected president, João Goulart (Brazilian Labour Party), the country’s military leaders took over, replaced Congress with the National Constituent Assembly, deposed opposition members, and drafted a new Constitutional Charter. The 1964 military coup lasted until 1985.

Once Brazilians had the chance to elect a new president, they put young Fernando Collor de Mello in power, a right-wing politician who froze thousands of Brazilian savings accounts and converted them into government bonds, inciting a wave of anger across the nation.

It was only when Collor was accused of having played a role in an influence-peddling scheme that many started paying attention.

Afraid of what Congress could do to his presidency, Collor allegedly paid $2 million for falsified documents, an act that, once discovered, prompted Congress to vote for his impeachment. Only three senators voted in Collor’s favor. Seventy-three voted for his removal.

Whether or not this was a sign of things to come, Brazil’s first democratically-elected president after the military rule became the first to be impeached.

As privatization policies were put in place by President Fernando Henrique Cardoso in the 1990s, the country’s economy picked up steam. People suddenly believed they had a good, competent administration in place, despite issues with the ongoing drug war. The many years of privatization and inflation-taming measures, however, prompted younger Brazilians to become attached to the ideology behind progressive politics. Enter Lula.

In 2003, young Brazilians cheered the the election of the Workers Party’s Lula. After all, they believed a “man of the people” had been picked as the country’s president. He was the same man who would go on to become the country’s “lobbyist in chief.”

After Lula’s two terms, the Workers Party managed to get Dilma Rousseff elected. Her rise to the presidency was mostly due to her proximity to Lula. She has often referred to him as  “[her] president and leader.”

Unemployment, Poverty, Inflation, and High Taxes: Brazilians are Fed Up

Brazilians experienced an economic miracle in the 1990s. But as the Rousseff administration upped sales and consumption taxes while relying on inflation, the increase in the money supply. As the country hosted the World Cup in 2014, businesses and consumers began to suffer. The first ones to feel the consequences were the poor.

Currently, Brazilians pay about 36 percent in sales taxes on most goods and services — a regressive tax that ends up hurting the poor the most. Brazilians give up about 28 percent of their income yearly. With the increase in taxes on large net gains and the country’s protectionist policies, many believe investors will begin to flee the country.

Tension built up due to the economic difficulties consumers face only worsened when the country’s judiciary launched an investigation into Rousseff’s embezzlement and crony capitalist scheme, which has made global headlines.

“Car Wash” Corruption Scheme and Its Investigation: the Beginning of the End for Dilma Rousseff

The “car wash” investigation is the largest probe of its kind in Brazilian history.

Its name comes from the network of laundromats, gas stations, and currency exchange businesses participants in the scheme used to launder money.

From Brazilian writer Alice Salles at FreedomWorks.org:

“Trouble began to brew when authorities launched an investigation into a network of currency exchanging businesses connected to Alberto Youssef. He was accused of forging contracts and moving billions of Brazilian Reais domestically and abroad using front companies and foreign bank accounts.”

 

Once the investigations were deepened, authorities “learned that Youssef had business relationships with Paulo Roberto Costa, the former director of the state-controlled oil giant Petrobras, major contractors and their lobbyists, and other Petrobras servicers. On March 2014, both Costa and Youssef were arrested.” Once Costa agreed to take part in the investigations in August of 2014, “Brazilians learned that he and several other directors of Petrobras received bribes and passed them along to politicians for their campaigns.” In a few weeks time, the authorities convinced Youssef to join Costa, “and revelations about one of the largest embezzlement schemes in the history of the country started flooding the news.”

Soon enough, the authorities learned the names of contractors involved in the scheme, which happened to be the country’s two top construction companies: Odebrecht and Andrade Gutierrez. André Estevez, owner of Latin America’s largest investment bank, BTG, was also involved.

By March of 2015, authorities learned 53 politicians had participated in the scheme. Even José Dirceu, the former prime minister under President Lula, was “accused of receiving payments from Odebrecht and Andrade Gutierrez.” Lula’s close friend, the farmer José Carlos Bumlai, and Senator Delcídio Amaral of the Workers Party, known as PT, were arrested. The President of the Chamber of Deputies, Eduardo Cunha, a member of the Brazilian Democratic Movement Party (PMDB) was also targeted, along with several other PMDB party leaders.

According to what the investigations have unearthed thus far, the embezzlement scheme benefitted political parties in charge of Petrobras’s leadership appointments.

Salles reported that “as federal judge Sérgio Moro showed signs he believed former president Lula had profited from the scheme, prosecutors from the state of São Paulo added insult to injury by accusing Lula of ‘hiding his ownership of a beach-front condominium.’” But the rumors about his future finally hit the news, and Rousseff decided to appoint her predecessor as her chief of staff. The Economist claimed Lula is a “canny political operator,” which may have helped Rousseff make the decision to bring him on board to boost her reputation. However, as Salles noted, “what the cabinet position means to Lula may have served as the sole incentive.”

As the country’s call for impeachment intensifies, a strong opposition movement in Congress is taking shape. The country’s top association of lawyers, Ordem dos Advogados do Brasil, has also announced it will present an impeachment proposal to Congress, making matters worse for Rousseff.

The proposal claims the current president has “authorized … the country to delay its payments,” and it also accuses the president of unilaterally lifting tax obligations tied to the Fédération Internationale de Football Association (FIFA) during the 2014 World Cup. OAB attorneys also claim Rousseff may have “interfered with the ‘car wash’ probe, which includes her appointment of former president Luiz Inácio Lula da Silva as chief of staff.”

Unclear Future: Impeachment Alone is Not the Solution

As the “car wash” probe unveils that billions of taxpayer dollars have been tied to investments abroad that didn’t benefit Brazilians — and that members of most Brazilian political parties were involved — many of the county’s residents are showing signs of fatigue.

Impeaching President Rousseff may offer momentary relief to Brazilians under pressure, but unless a cultural change takes shape, the expulsion of Rousseff from Brasília, the nation’s capital, won’t make a difference.

According to activist Kim Kataguiri, a key figure in the anti-Rousseff protests, “the smokescreens used by the Brazilian government to disperse the population are finally gone.” He believes impeachment will come — no matter what. Even so, Rousseff says she has enough friends in Congress to avoid her downfall. Only time will tell whether Brazilians will find a way to restrict government’s interference in the country, helping to keep corrupt politicians from finding reasons to steal from the taxpayer.

via Zero Hedge http://ift.tt/1N0vRqv Tyler Durden

By EconMatters

The Oil Market focuses on some rather silly stuff at times, and the Production Freeze notion, is one such misdirection play. I would rather Bloomberg provide some market insight given their vast resources by reporting on how much Oil Iran is actually able to bring to market versus the rhetoric.

via Zero Hedge http://ift.tt/1q9U21n EconMatters

“Decoupled”…

 

 

Remember 2043.94 is YTD unchanged for S&P 500 cash.

via Zero Hedge http://ift.tt/1N0vSLb Tyler Durden

One of the truly remarkable things about Donald Trump’s run for the White House is the extent to which he has proven to be immune to criticism. 

In many ways, the GOP frontrunner is a living, breathing negative ad for himself. Whether you hate him or you love him, you hold your breath when he opens his mouth because you understand there’s a decent chance something absolutely off the wall is about to come spilling out and you’re never really sure whether this will be “the one” – the Trumpism that finally pushes too far beyond the sensibilities of even the most ardent supporters. 

Incredibly, Trump still hasn’t met his Waterloo. He’s called Mexicans drug dealing rapists. He suggested that John McCain is a loser for getting himself captured in ‘Nam. He’s theoretically banned the world’s fastest growing religion from North America. He’s promised to tax Chinese imports at 40%. He’s implied he’ll force Mexico to built a giant cage around itself to keep its people from escaping. And now he’s suggested that if abortion were illegal, he’d need to figure out the best way to punish women who break the law. 

But here’s the thing: it works.

Trump is onto something. Apparently, America’s blood is boiling and “The Donald” has tapped right into a vein.

Now, the downtrodden masses – i.e. an electorate that’s sick and tired of the entrenched political aristocracy inside the Beltway and utterly fed up with being told to “eat cake” by the legions of modern day Marie Antoinettes that flit around Capitol Hill and Mahogany Row with their thumbs glued to Blackberry scroll balls that went extinct on Main Street a half decade ago – are mainlining the Trump brand of political heroine. Millions of Americans are nationalists without even knowing it. They’re speaking out against EM mercantilism without the slightest conception of what that means. And most importantly, they’re prepared to bet two-and-a-half centuries of history on a campaign platform built on an appeal to one man’s ad hoc version of Realpolitik.

Would a Trump presidency usher in a new era of American prosperity? Almost certainly not. But note we said “almost.” A Clinton presidency will definitely not change anything. And neither would a Cruz presidency or a Kasich administration. In short, Americans know two things for sure at this point: 1) both Trump and Bernie Sanders would bring real (as opposed to Obama-brand) “change” to America; 2) Trump can win his party’s nomination, while Bernie can’t.

The takeaway: if you want real change, you vote Trump.

In short, by simply saying what a whole lot of people are thinking anyway, Trump has instilled his campaign with a degree of authenticity that’s impossible for other candidates to emulate and that makes him virtually unstoppable save a misstep or two (or three) when someone like Chris Matthews presses him on specifics.

What the billionaire’s detractors have failed to understand is that the only way to beat Trump is essentially to join him. That is, you have to show his support base that the establishment is prepared to address their concerns.

Simply insulting his intelligence and/or making a scene at his rallies will not only not work (there’s a fun double negative), it will invariably backfire, which brings us full circle to what we said at the outset: Trump. Is. Teflon.

Need proof? Take the 15-year-old girl who quite a few people probably thought was set to become the pepper-sprayed face of the “peaceful” Trump protester movement. What was initially billed as an indiscriminate attack on an underage girl who, according to some reports, was being “groped” taharrush gamea-style by a gang of roudy neo-Trump-Nazis, quickly morphed into a far different story wherein a belligerent teenager, unable to tolerate what she perceived as an afront to American democracy, punches an old man in the face and then is pepper sprayed. 

Now, authorities have recommended that someone file a disorderly conduct charge against the girl who insists that she “felt pressure on her breasts.”

“Clearly her punch was illegal,” police chief David Moore told reporters.

So once again, attempts to derail Trump have backfired in dramatic fashion. No longer is the headline “15-Year-Old Girl Pepper Sprayed By Trump Fanatics,” it is now “Police Recommend Charge Against Girl At Trump Rally.”  From the AP:

Investigators said Thursday that they’re recommending a disorderly conduct charge be filed against a 15-year-old girl who was pepper-sprayed after she punched a man at a rally for Republican presidential front-runner Donald Trump in Wisconsin.

 

Video of the altercation shows a crowd of people in a parking lot outside the rally in Janesville on Tuesday. The girl can be seen holding an anti-Trump sign and arguing with a 59-year-old man.

 

The video shows the man turning away with his hands in the air. Seconds later, the girl punches him in the face. Another man wearing a red Trump hat then pepper-sprayed the girl and disappeared into the crowd.

 

The girl told police the first man groped her breast. But Chief David Moore told reporters during a news conference Thursday that additional video doesn’t show any evidence the man groped her and that 12 out of 13 witnesses said they didn’t see him do anything.

 

Moore said the man who was punched didn’t want to press assault charges against the girl, but investigators have recommended juvenile authorities charge her with disorderly conduct for what he called “an act of violence.” He said time passed between the alleged groping and the punching and the man and the girl were several feet apart when she threw the punch.

 

The chief said investigators won’t pursue charges of filing a false police report against the girl. He said she genuinely believes she felt pressure on her breast. However, he said, quarters were tight and people were brushing up against one another throughout the crowd.

 

“Clearly her punch was illegal,” he said.

via Zero Hedge http://ift.tt/1ZQY8r4 Tyler Durden