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Off the Cuff: A European Perspective On The Conflict With Russia

Playing with fire
Friday, August 1, 2014, 10:55 AM

In this week's Off the Cuff podcast, Chris and Alasdair discuss:

  • Europe's Quizzical Acquiescence
    • Acting like the junior partner to the US agenda
  • The Significance of Russian Energy
    • Europe has no real Plan B if Putin turns off the gas
  • The Role of Gold
    • Russia has been dramatically increasing its gold reserves. To what end?
  • The Vulnerability of the Global Economy To Russian Hardball
    • Russian defaults would ripple through the banking system
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How The Coming Confrontation Will Unfold

How bad could things get?
Thursday, July 31, 2014, 10:52 AM

Executive Summary

  • The 4 most likely scenarios of Russian response
  • Europe is more vulnerable, and will feel more pain sooner than the US (though the US is still at risk)
  • The risk to the world economy and financial markets
  • What you should be doing now, in case things worsen

If you have not yet read Part I: The West's Reckless Rush Towards War with Russia available free to all readers, please click here to read it first.

Europe Will Pay the Price First

Europe is already on the edge of slipping back into outright economic contraction and can ill afford any sort of protracted sanction warfare with Russia, a major trading partner in both directions.

While the sanctions levied by Europe were very carefully crafted to cause the least amount of pain for itself as a fist order of business, while imposing maximum pressure on Russia second, they will still bite.

‘EU sanctions on Russia will hit UK economy’ – Foreign Secretary

Jul 30, 2014

EU sanctions aimed at ‘imposing economic pain’ on Russia following the MH17 crash will hit the UK economy, Foreign Secretary Philip Hammond has warned, saying ‘you can't make an omelette without breaking eggs’.

Hammond said the measures had been “designed to maximize the impact on Russia and minimize the impact on EU economies.”

“It will affect our economy... but you can't make an omelet without breaking eggs, and if we want to impose economic pain on Russia in order to try to encourage it to behave properly in eastern Ukraine and to give access to the crash site, then we have to be prepared to take these measures,” he told Sky.

On Wednesday, The Russian Foreign Ministry criticized the new package of EU sanctions, saying it was disappointed Europe was unable to act independently from Washington in the International arena. 

“We feel ashamed for the European Union who, after long searching for a unified voice is now speaking with Washington’s voice, having practically abandoned basic European values, including the presumption of innocence,” the Foreign Ministry said in a statement.

(Source)

Indeed, it's easy to imagine how disappointed Russia might be to have so many unresolved questions about MH-17 lingering yet having Europe rush forward with punishment despite a long and warming history of economic ties.

Of course, the main consideration for Europe now that autumn is just a couple of months away is... » Read more

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Darkening Skies

Market threats are multiplying
Wednesday, July 30, 2014, 7:31 PM

Chris is busy finishing up a meaty report on the accelerating friction between the West and Russia, so I'm stepping in to make some quick notes on today's meaningful developments.

As PP.com readers know, we've been cautioning about a serious market correction for a long time. Valuations have been so far divorced from fundamentals for so long that we are frighteningly overdue for a drop -- likely a large one -- in asset prices. » Read more

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Something's Fishy With The US 'Data' on Ukraine, Russia

The 'evidence' is surprisingly weak
Monday, July 28, 2014, 11:51 AM

For weeks now I've been patiently waiting for the US to release some (any!) definitive data about the Ukraine situation, including the MH17 shoot-down.  After all, as everybody knows, the US has intensive satellite and electronic scanning technologies in place around the globe, and therefore should be able to provide some serious intelligence to make its case.

Frankly, the US needs to provide much harder evidence for its current claims to be credible. » Read more

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Off the Cuff: Do Geopolitics Matter Anymore?

Because the markets sure don't seem to care
Thursday, July 24, 2014, 4:37 PM

In this week's Off the Cuff podcast, Chris and Charles discuss:

  • Do Geopolitics Matter Anymore?
    • No conflict is seemingly too great for the markets to ignore
  • The Marginal Value of A Barrel of Oil
    • Even the loss of a few % of total supply could vastly impact the US
  • Zombie Markets
    • No weapon seems to be able to stop this bull market
  • Bass-Ackward Foreign Policy
    • The West is pursuing a strategy that makes no sense
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How The Nature of Work Is Changing

And how to (re)position your career for it
Wednesday, July 23, 2014, 11:48 AM

Executive Summary

  • The Matrix of Work & the 5 Forms of Value Creation
  • The essential elements of the future's ideal work environment
  • How mobility creates career security
  • How to start switching from "work" to "work that matters"

If you have not yet read Part I: Escaping the Rat-Race available free to all readers, please click here to read it first.

In Part 1, we reviewed the forces of structural change in the economy and the nature of work.  In Part 2, we’ll cover the matrix of work (how to create value in the age of automation) and discuss specific strategies for building a resilient career you control.

The Matrix of Work

In the traditional capital/labor model, labor is paid by the hour to perform routine work.  In the emerging economy, routine work is increasingly performed by machines or outsourced.  In this environment, the premium for human labor arises from creating value and solving problems.

The tool I use to understand this premium is the matrix of work, which is the overlay of the five forms of value creation: non-process-based work, high touch, non-tradable work, sensitivity of the output to mastery and flexibility.

Let’s start with commodification:  when goods or services can be traded interchangeably across the globe, these become commodities, as opposed to one-of-a-kind goods and services unique to one small-scale producer. A Fuji apple from Washington State is the same as a Fuji apple from overseas in terms of its tradability and retail value.

Labor can also be commoditized:  if human labor is being sold as time performing basic skills, then the time and basic skills can be bought and sold interchangeably around the world.

Work that is process-based is easily automated or commoditized, meaning that it can be performed anywhere by interchangeable laborers.  Process-based work can be broken down into tasks that take a specifiable input and yield a specifiable output.

One way to avoid being commoditized out of a job is... » Read more

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Humans Making Bad Choices Is Why I Garden

Behold, the era of Peak Soil
Monday, July 21, 2014, 8:35 PM

As long as you're curious and read somewhat widely, if you're one of those readers who digs a bit further now and then, it's pretty much impossible to avoid the conclusion that humans are living unsustainably.

We're using up energy sources that took approximately 350 million years to accrete in a single 350-year-long orgy of consumption. » Read more

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Off the Cuff: The Fed Is Very, Very Scared

Confidence in its omnipotence is waning
Friday, July 18, 2014, 2:16 PM
  • The Fed's Nightmare
    • Bedlam will ensure if/when the market loses confidence
  • Age of Anomalies
    • Fed-induced market distortions are shaking that confidence
  • Pump & Pray
    • Does the Fed have any better game plan?
  • Central Planning Fault Lines
    • Rifts among allies are increasing the risks
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Reducing Your Risk To A Grid-Down Event

Small steps today can make a huge difference tomorrow
Wednesday, July 16, 2014, 11:38 PM

Executive Summary

  • The most likely forms of cyber attack the national grid is vulnerable to
  • The evidence that shows malicious attacks on the US grid have been attempted multiple times
  • The low level of integrity in the current grid's defenses
  • A checklist of backup systems at the home level every concerned citizen should work to have in place

If you have not yet read Part 1: The Electrical Grid May Well Be The Next War's Battlefield available free to all readers, please click here to read it first.

Cyber Attacks, Hacking, and Malware

The other main threat we should concern ourselves with centers on the highly automated nature of the electricity grid combined with the human propensity for mischief. As with everything these days, computer-controlled devices are at the heart of the entire electrical generation and distribution system.

Again from the same Peak Prosperity member quoted earlier:

Combine this with the known vulnerabilities of the SCADA [Supervisory Control And Data Acquisition] systems controlling the power grid and you have the recipe for a real coordinated and manufactured disaster.

US researchers have identified 25 zero-day vulnerabilities in industrial control SCADA software from 20 suppliers that are used to control critical infrastructure systems. Attackers could exploit some of these vulnerabilities to gain control of electrical power and water systems, according to Wired.com.

Nine of these potential exploits have so far been reported to the suppliers concerned and the US Department of Homeland Security.

In theory, an intruder could exploit the vulnerabilities simply by breaching the wireless radio network over which the communication passes to the server.

Unlike the "heartbleed" zero-day bug that could be more or less addressed by software server patches, the SCADA systems are hardware boxes sitting out in the field. It's quite possible they are not upgradeable, or they were made by companies no longer in business, or whose programmers no longer support the system any more. "Uh, you want me to come up with a patch for THAT old system? Really? The guy who knew that code retired 10 years ago. I'm not even sure we have the source code anymore - or if it compiles - or if our build system can even compile for that CPU-type. And then we have to test it. We don't have any of those boxes to test it on anymore. And once tested, how exactly do we deploy this patch?"

If you've ever worked in a software organization, you'll know what I'm talking about.

No need to launch any supersonic missiles. If the US power grid is down, the US Navy won't be projecting power anywhere, since we'll be so busy trying to keep our people alive (and/or deploying what forces we have available into our own cities to prevent all those people who can't use their EBT cards anymore from tearing the place apart) to worry about what Russia is doing in their own backyard.

So - yes, asymmetric warfare. A coordinated cyber-assault supported with a kinetic attack on a select group of substations will...

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On Creating a World Worth Inheriting

Our current actions will define our future
Monday, July 14, 2014, 3:52 PM

We all know that the current paradigm is unsustainable over longer time frames. Here are a few of the ways in which we can express that concept more specifically: » Read more