National Intelligence Bulletin for 01 June 2018

The National Intelligence Bulletin is a weekly look at national security, domestic systems disruption, the risk of failing critical infrastructure, and threats to social, political, economic, and financial stability in the United States. This report is available each week for Intelligence subscribers.


In this National Intelligence Bulletin… (4,803 words)

  • FBI: Russian hackers penetrate scores of home and office routers
  • Critical U.S. military installations cannot function for more than a few days in grid-down situation 
  • Majority of U.S. industrial systems vulnerable to cyber attack even as they are targeted 
  • Chinese hackers find more than a dozen vulnerabilities in BMW vehicles 
  • U.S. demographics are rapidly changing which could lead to destabilization 
  • U.S. Army will begin using simulators to train for urban combat 
  • Harvard professor claims ‘White fear being weaponized’ under Trump
  • And more…

InFocus: I went to see a Dr. Jordan Peterson lecture last night. As expected, it was great. Dr. Peterson is the Toronto-based psychology professor who, for the past couple years, has protested a Canadian compelled speech law. He’s since written a book, 12 Rules for Life: An Antidote to Chaos, which for weeks was a worldwide #1 best seller. (And it’s a great book.) He stopped in Austin on his speaking tour in promotion of the book.

Some background: Canada passed a law in 2017 that mandated its citizens refer to individuals by their preferred personal pronoun. For instance, if a male wanted to be referred to as she or her, Dr. Peterson could be found in violation of the law if he didn’t use the she/her pronouns for the male student. It’s compelled speech, which violates free speech. And after a series of combative television interviews and protests against him, Dr. Peterson was reluctantly thrust into the spotlight as a champion for free speech at any cost.

He’s an individualist and anti-collectivist who points out that the end result of radical Leftist ideology has led to the killing hundreds of millions of human beings. Nazism, socialism, and communism are all collectivist ideologies in which individuals are punished and subjects are compelled at risk of death or imprisonment into conformity. And so this has become, essentially, his crusade: to fight back against collectivism because it invariably leads to disaster.

In a Q&A session that followed the lecture, Dr. Peterson said that what’s going on now is a cultural war, but it’s much more than just politics. He pointed that out underneath the political and ideological layer of society exists the theological layer, and what we’re fighting is really a theological battle. And it’s not even about Christianity or atheism; radical Leftists worship at the altar of the State, which reduces freedom for everyone else.

Dr. Peterson previously pointed out why white privilege is a myth, why social justice is unjust, and why science disproves the multiple gender theory. It’s not an entire race or ethnicity who wakes up and goes to work to provide for their families; it’s the individual. It’s not an entire race or ethnicity that accomplishes some feat or invents a world changing technology; it’s the individual. And it’s not an entire race or ethnicity who reaps the benefits of the actions of an individual, so why should an entire race or ethnicity bear the burdens of the actions of an individual? He completely destructs the post-modern, social justice movement.

My take away is this: I don’t know that we’re winning this theological battle in the culture war. I don’t know that we’re winning the culture war. Just like many physical wars, these things are very complex, they take years and sometimes decades to play out, and they’re more likely to end in stalemates than decisive victories.

Two out of the three outcomes (we lose or we tie) are unfavorable. Both of those outcomes lead to losing a lot more than just the culture of America; they will lead to a lot of death and destruction just like every collectivist ideology does. With the rise of Jordan Peterson and the Intellectual Dark Web, which includes some mainstream liberals who call out radical collectivist ideologies, we are gaining some intellectual firepower for things we innately know to be true but previously couldn’t explain very well. Dr. Peterson spoke to a sold out show in Austin last night, he was in Houston and Dallas earlier this week, a dozen events previously in the month, and he’ll continue to on with his nationwide speaking tour. He’s making a difference, absolutely. But, just facing facts, we’re at a huge deficit. For all the talk of Trump’s shoo-in re-election in 2020, I can’t be that optimistic yet. Maybe there’s a way forward to winning the culture war — and President Donald J. Trump is absolutely America’s most powerful culture warrior — without organized political violence, but my concern remains that the radical Left won’t allow the tides to turn that greatly against them. The Democrats are actually looking pretty weak heading into the mid-terms. (Although the Democratic Socialists of America are coming off their most successful election season in 2016.) Previously, we’ve been battered by talk of the “Blue Wave” but generic ballot polling right now is not pointing to that outcome. At the first of the year, generic ballot polling had Democrats up by 17 points (according to FiveThirtyEight) and up by 12 points (according to Real Clear Politics), which spurred a lot of Blue Wave talk. Now that lead is down to just three to five points and Rasmussen has the Democrats by one point, basically by the margin of error. These are just polls and lot of things change, but the Democrats might not take the House in 2018 and probably not the Senate, as it’s looking right now. This could change, but that’s big news.

There’s an absolute difference between the success, or lack thereof, of the Democratic Party in 2018 and the growing influence of radical Leftist groups. Defections, for lack of a better term, from the Democrat Party to far left parties could be contributing to the overall weakness going into 2018 elections. My question, as always, is what will radical Leftist movements do if the Democrats can’t make President Trump a lame duck for the next two years, and what will they do if President Trump wins re-election in 2020? Much of that answer depends on the economy and whether or not 2020-2024 is as economically good as it is now. In this week’s PIR 4, I’ll lay out my thoughts on why I remain pessimistic.  – SC


Priority Intelligence Requirements

PIR1: What are the new indicators of systems disruption and threats to critical infrastructure?

PIR2: What are the new indicators of potentially disruptive social, cultural or political conditions or events?

PIR3: How are state and federal agencies preparing for domestic conflict, emergencies, or other instability?

PIR4: What are the new indicators of systems disruption and threats to the economic or financial industry?


PIR1: What are the new indicators of systems disruption and threats to critical infrastructure?

FBI: Russian hackers penetrate scores of home and office routers

The FBI says Russian hackers have penetrated hundreds of thousands of personal home and office Internet routers, exposing users to theft of personal data and putting network traffic at risk of being shut down. The bureau is advising owners of many router brands to reboot and download security updates from manufacturers. The FBI’s warning came after a court order last week allowing the bureau to take control of a website that the hackers were planning to use to send instructions to routers. Although that action cut off malicious communication, routers were still infected with malicious code. The advisory to turn machines off and on and/or to download a security patch from manufacturers was meant to help clean up routers. Infections were found in at least 50 countries. Also known as APT28 and Fancy Bear, the group has been blamed for many Russian hacks, including the alleged hack of the Democratic National Committee during the 2016 election cycle. [source] Analyst comment: The warning is valid, but we feel it necessary to include a caveat about the alleged DNC hack. The party has never allowed the FBI’s very competent cyber forensics division to examine the alleged hack; the DNC said it gave its email server to cyber security firm Crowdstrike, which then ‘confirmed’ the hack. But others believe that the emails and other data taken from the DNC and leaked to WikiLeaks were downloaded locally from the server, not hacked by Russia or anyone else. So this claim remains unverified as far as we’re concerned. Still, Russian hackers — like other state-sponsored teams — are always active and always probing for weaknesses.  

Critical U.S. military installations cannot function for more than a few days in grid-down situation

The U.S. spends upwards of $2 billion per day on its military, but little on the ability for its military bases to sustain themselves should they lose power for long periods of time. A decade ago, the Pentagon’s Defense Science Board issued a report that warned “military installations are almost completely dependent on a fragile and vulnerable commercial power grid, placing critical military and homeland defense missions at unacceptable risk of extended outage.” The report went on to assert that “backup power at military installations is based on assumptions of a more resilient grid than exists and much shorter outages than may occur.” In the intervening years little has been done to mitigate that problem and, in fact, the risk has only grown as the world became much more dangerous and volatile over the last decade as revisionist powers China, Russia, and Iran rise. Currently 99 percent of electricity used by military installations comes from off-base sources. What’s more, cyber security experts have long understood that the U.S. power grid lacks resiliency. [source]

Majority of U.S. industrial systems vulnerable to cyber attack even as they are targeted

Critical infrastructure and industrial systems remain extremely vulnerable to cyber attack even as threats from nation-states and non-state actors grow. A recent study found that 73 percent of industrial systems could be penetrated by hackers and 82 percent of those successful penetrations led to the possibility that broader access could be gained to network and internal control systems (ICS) equipment. ICS includes technologies that manage power, water, oil and gas, among other industrial systems, making these major targets. “Cyber attacks are faster to execute; far less expensive, both financially and in terms of human life; are lower-risk from a political standpoint; and are orders of magnitude easier to obfuscate, said Carson Sweet, CTO and co-founder of CloudPassage, a cybersecurity firm. He adds that ‘cyber mercenaries’ are becoming increasingly common, in addition to nation-state hackers, many of whom operate in the shadows so sponsoring countries can retain plausible deniability. “This means that even nation states without particularly well-developed cyberwar capabilities can launch effective cyber attacks with relative ease,” said Sweet. [source]

Chinese hackers find more than a dozen vulnerabilities in BMW vehicles

Chinese security researchers have discovered more than a dozen vulnerabilities in the onboard computer units of BMW cars, some of which can be exploited remotely to compromise a vehicle. The security flaws have been discovered during a year-long security audit conducted by researchers from Keen Security Lab, a cybersecurity research unit of Chinese firm Tencent, between January 2017 and February 2018. In March 2018, the team responsibly disclosed 14 different vulnerabilities directly to the BMW Group, which affects its vehicles since at least 2012. This same group of cyber researchers recently found several vulnerabilities in various in-car modules that are used by Tesla and which could have been exploited to remotely take over vehicles. [source] Analyst comment: BMW is rolling out patches for the vulnerabilities, but suffice to say as vehicles incorporate more “Internet of Things” technology, they will continue to be vulnerable to hackers.


PIR2: What are the new indicators of potentially disruptive social, cultural or political conditions or events?

U.S. demographics are rapidly changing which could lead to destabilization

A recent study by the Pew Research Center found that major demographic shifts are occurring that are essentially “reshaping America.” For instance, in urban counties, nonwhites now comprise a clear majority of the population, while whites retain a solid majority in suburban and rural areas. The problem for rural counties, however, is that they’re only growing by a small amount as more people move to urban or suburban areas. In addition, urban and suburban regions are gaining population due to an influx of immigrants. The population is aging in all three — urban, suburban, and rural counties — but mostly in the suburbs. “At the same time, urban and rural communities are becoming increasingly different from each other politically. Adults in urban counties, long aligned with the Democratic Party, have moved even more to the left in recent years, and today twice as many urban voters identify as Democrats or lean Democratic as affiliated with the Republican Party. For their part, rural adults have moved more firmly into the Republican camp. More than half (54%) of rural voters now identify with or lean to the GOP, while 38% are Democrats or lean Democratic.” [source] [source] Analyst comment: As urban centers become larger and more politically liberal, more political consternation and friction is a certainty. Think about what happened in the 2000 and 2016 presidential elections; the winners won on electoral majorities, not actual majorities, and these disparities happened primarily because the losers (both Democrats) won majorities in heavy urban areas. For example, in 2016, Hillary Clinton received nearly 3 million more votes than President Trump, but virtually all of that majority came from heavily Democratic urban centers in California, the country’s most populous state. As these demographic shifts continue, we expect there will be additional electoral college victories over majority-vote victories in the years ahead. And those losses will continue to be exploited by the losing party to foment unrest and uncertainty about our political system that might drive an earnest attempt to modify the electoral college.

Mexico’s Leftist-populist, Trump-opposing presidential candidate leading in polls

A bonafide Leftist who has been compared to Bernie Sanders, Andres Manuel Lopez Obrador has been gaining in popularity for weeks and has now surpassed the 50 percent mark for the first time ahead of Mexico’s 01 July elections. Obrador has been ‘winning hearts and minds’ by rattling business leaders with talk of the “mafia of the powerful,” and the conditions are ripe for a major victory. Mexicans are tired of the same “politics as usual” that Americans rejected. “López Obrador will be focused on Mexico first,” said Andrew Selee, president of the Washington-based Migration Policy Institute, and author of “Vanishing Frontiers,” a book about the Mexican-U.S. relationship. “Unlike recent Mexican governments, who saw the U.S. as a big force in Mexico’s economic future, he doesn’t see a major role for the U.S. in Mexico’s economy in years ahead.” [source]

Harvard professor claims ‘White fear being weaponized’ under Trump

Harvard Prof. Khalil Muhammad said that President Trump’s focus on law and order is adding to “the longest story of America, which is a story that essentially said that this is a white European’s country, and everyone else has to play by our rules.” The comments came as part of a discussion on National Public Radio about ways that “white fear” is allegedly being “weaponized” during the Trump administration and what to do about it. Both mentioned isolated incidents involving blacks and whites at a Starbucks coffee shop in Philadelphia and on a golf course to make their points. “Our current president ran as a law-and-order candidate, in a country with a long history where the notion of using the police as the foot soldiers of controlling African-Americans — limiting their freedom, deciding that they are indeed second-class citizens, and enforcing those laws when they were legal in this country — is a really big part of the problem,” he said. “And to evoke that mantra — to run on that mantra; to elicit the support of the entire community of professional police agencies — means that we’ve now got citizens who are playing out this policy choice — this set of politics. And that’s a big, big deal.” Muhammad went onto admit that it’s difficult to measure the veracity of his claims. “What I’m trying to suggest here is that we’ve got to come up with some policies that raise the costs of bad behavior — of treating people differently than you would want to be treated,” he added. “And that is a problem of white fear being weaponized; and that is a problem of police officers being a little too prickly when people are upset about having been judged harshly or inappropriately.” [source] Analyst comment: This kind of rhetoric is increasing to the point of being mainstream thought — which means it will be difficult, if not impossible, to change minds and ‘reach’ people. This kind of claim, which the speaker admits he cannot even prove, is polarizing, and it’s dangerous to the social fabric of a country that, on the one hand, prides itself for its ‘diversity,’ while on the other uses that diversity as a social weapon to attack political opponents.

ICE raids net 127, most of whom are illegal alien criminals

Immigration and Customs Enforcement raids in Philadelphia and the Midwestern states of Iowa, Nebraska, Minnesota, South Dakota, and North Dakota netted 127 arrests, the vast majority (93) of whom had prior criminal convictions or pending criminal charges. Iowa, Nebraska, and Minnesota all have counties or cities with anti-enforcement sanctuary policies. The crimes associated with those arrested in the Midwest are particularly heinous, including rape, sexual assault of a child, and prostitution-hiring of a child under the age of 16. Thirty-one of these individuals had been previously deported and subsequently re-entered the United States, demonstrating the relative ease with which deported aliens can return to the interior of the United States following deportation. In a separate operation, ICE agents arrested 49 individuals in Philadelphia, which the Department of Justice identified in 2016 as one of the worst sanctuary cities in the entire country. Of those, 31 had criminal convictions or pending charges and six had re-entered the country after a previous deportation. [source]


PIR3: How are state and federal agencies preparing for domestic conflict, emergencies, or other instability?

U.S. Army will begin using simulators to train for urban combat

Pentagon commanders believe that war of the future will involve fighting in an urban environment, which is extremely dangerous because enemies have much more cover and there is far more risk of collateral damage. That said, while this training is not expressly for domestic use, urban warfare could also come to the U.S. someday as our political discourse increases the likelihood of violence and regional uprisings. As such, the U.S. Army is going to rely increasingly on high-tech simulators to train troops for “megacity warfare.” “Our military doctrine used to tell commanders to avoid cities altogether — bypass cities if you can do it,” TRADOC (Training and Doctrine) Commander Gen. Stephen Townsend told an audience Tuesday at the Association of the United States Army LANPAC Symposium and Exposition in Hawaii. “That’s been impossible for a number of years; the enemy will dig into cities and force you to root him out.” The Army has, over the years, built small-scale urban training centers but they in no way come close to portraying the complexity of megacity warfare. “We cannot expand all of our little urban warfare training centers to the degree necessary,” Townsend said. “We are going to have to do that in simulations. We are going to have to portray megacities in simulations.” He notes that megacity combat will be far more unique — dangerous — than anything the Army has seen since World War II. “[In one part of a city] you might be doing humanitarian assistance,” he said. “In another part, you might be doing counter-insurgency or wide-area security. And in another part, you might be fighting high-intensity conflict,” said Townsend. [source]

DHS working to improve IOT cybersecurity

The Department of Homeland Security is renewing efforts to protect critical infrastructure as well as adapt defense strategies to the new reality of the “Internet of Things”, or IOT. The department’s new 2018 Cyber Security Strategy report recognizes that more than 20 billion devices will be connected to the Internet by 2020, and that explosion of connectivity will bring substantial new risks for disruption. The risk is elevated by the growing availability of low-cost, capable cyber tools that are being used by a greater number of more diverse adversaries. “More than ever, cybersecurity is a matter of homeland security and one of the core missions of the U.S. Department of Homeland Security,” the report says, noting further that DHS has established a five-year framework for cyber defense that calls for “more effective cyber risk management … to make the cyber ecosystem more fundamentally secure and resilient.” [source] Analyst comment: DHS understands that ‘critical infrastructure’ as property defined now extends beyond the traditional areas — power grids, financial industry, water purification, nuclear plants, aviation, transportation, etc. — to new areas of cyber risks including financial fraud, and theft of intellectual property and technology. In other words, as the Internet of Things expands, so, too, does the cyber threat, making it exceedingly difficult to defend against 24/7/365.

West is not prepared for ‘deep fakes’ coming as a result of artificial intelligence

In today’s over-stimulated world and 24/7 news cycles, it’s already difficult to separate what is real and what isn’t. But coming technologies, especially artificial intelligence, are liable to make determining reality even more difficult, especially when applied by adversarial governments. Russia has been mentioned specifically as a major threat in this area. Moscow is already using disinformation campaigns to destabilize European governments, mostly by spreading false information and fake news aimed at inflaming tensions. The Europeans are responding with legislation and policies aimed at weeding out the misinformation and cracking down on so-called “hate speech” — though some experts argue such measures will always be too little, too late because technology advances too quickly (AI especially). “To get ahead of the problem, policymakers in Europe and the United States should focus on the coming wave of disruptive technologies. Fueled by advances in artificial intelligence and decentralized computing, the next generation of disinformation promises to be even more sophisticated and difficult to detect. To craft effective strategies for the near term, lawmakers should focus on four emerging threats in particular: the democratization of artificial intelligence, the evolution of social networks, the rise of decentralized applications, and the ‘back end’ of disinformation.” [source]

Forecasters see 10 to 16 named storms this year

Forecasters predict a near- or above-normal Atlantic hurricane season this year with a 70-percent likelihood of 10 to 16 named storms with winds of 39 mph or higher. They predict there could be up to four major hurricanes this season with winds of 111 mph or higher. There is a 35 percent chance of an above-normal season, which runs from June 1 to Nov. 30. Gerry Bell, lead hurricane season forecaster with NOAA’s Climate Prediction Center, said they certainly expect storms to strike this year, but it’s too early to predict exactly when and where. “It’s time to start getting ready again,” he said. “In some of these areas, I know they might not be fully recovered, but they need to work with local emergency management and do what they can to get prepared.” Dan Kaniewski, acting deputy administrator of the Federal Emergency Management Agency, urges residents to download the FEMA app, create a communication and evacuation plan for the family and be financially prepared to cover out-of-pocket expenses during an emergency. “And check on your insurance coverage,” he added. [source] SC: Forecasts, as we all know, aren’t always accurate, however, this is a good reminder that, for 80 million Americans who live in areas potentially affected by hurricanes, the season is now upon us.


PIR4: What are the new indicators of systems disruption and threats to the economic or financial industry?

Analyst says threat of contagion ‘now more dangerous than ever’

Financial analyst James Rickards, in noting that “each crisis is bigger than the one before,” notes in a warning this week that “increasing market scale correlates with exponentially larger market collapses.” His point: There is more systemic risk to U.S. financial markets today and it is more dangerous than ever. “Too-big-to-fail banks are bigger than ever, have a larger percentage of the total assets of the banking system and have much larger derivatives books,” he writes. “The next crisis could well begin in the private bank debt market. The specific culprit is a kind of debt called ‘contingent convertible’ debt or CoCos. These bonds start out like ordinary debt, but a bank in distress could convert them to equity to improve its capital ratios. The problem is that bondholders know this and start dumping the bonds before the bank can pull the trigger on the conversion clause.” He notes that for now, it isn’t at all clear where things will break and which way they will go, but “markets are still in a precarious position and volatility has returned.” [source] Analyst comment: Rickards does provide a solution, however: “The solution for investors is to have some assets outside the traditional markets and outside the banking system.”

POTUS Trump puts tariffs on Mexico, Canada, EU, after trade talks stall

Markets fell late in the week after President Trump made the decision to impose new U.S. tariffs on Canadian and Mexican steel and aluminum — tariffs that were also extended to Europe. The tariffs amount to 25 percent on steel and 10 percent on aluminum imports to the U.S. Commerce Secretary Wilbur Ross said that negotiations with Canada and Mexico were not far enough along to extend their exemption from the tariffs, which expired today. Ross and others have been trying to renegotiate the Clinton-era NAFTA arrangement which Trump campaigned on and in which said was one of the worst trade deals the U.S. has ever made. Mexico has said it would retaliate “dollar for dollar,” and it’s likely that other countries will as well. [source] Analyst comment: The country and the world are not ready for a U.S. president who so easily bucks the ‘globalist’ trend of ‘free trade’ deals that have, over the course of three decades, decimated U.S. manufacturing. So there will be complaints, market fluctuations, predictions of doom and disaster and even threats of retaliation (and actual retaliation) over these policies. The bottom line is this: There is no other way to force nations used to taking advantage of the vast, expansive American market via one-sided arrangements into deals that are more equitable to both parties without inflicting some economic pain on both sides. There will be some negative reverberations through U.S. markets and industry, but our economy can handle them and besides, Trump and his crack economic team are playing the long game here. They are betting that other countries will come around eventually because they don’t want to lose access to the now-expanding American economy. I tend to agree with this long view. — JD

Should the U.S. worry about a potential Italian debt crisis?

One can imagine several scenarios in which escalating crisis conditions —rising borrowing costs, accelerating outflows—eventually induce a correction.  Under heavy pressure from businesses and Italians who wish to remain in the euro (perhaps a slim majority, but a majority nonetheless, according to Eurobarometer), the Italian political system will at some point pull the emergency escape trigger. This could come in several forms. In the face of a crisis, the coalition may decide to postpone or heavily water down its signature fiscal plans. Or it may press ahead and trigger a confrontation with the president or lose its majority in the Senate. Or it may collapse because one of the two coalition partners does not want to join the other in jumping off the cliff. Because one of the scenarios in this class is likely to come to pass, Italy’s membership in the euro area may live to see another day. A European catastrophe may be avoided. But the costs of doing so could still be high, both for the political and social cohesion in Italy and for the future of Europe. [source] Analyst comment: The worry here is that an Italian exit from the European Union (Italexit) could trigger further moves to leave the EU, which is already under strain from several factors including mass immigration into the continent from regions of the world considered cultural opposites, stagnant growth, and a decline in Europe’s ability to defend itself from a revisionist Russia. If the EU dissolves at some point, that will cause geopolitical — and economic — reverberations around the globe, which will include the U.S. It should be noted that as of this year, Italy is the world’s 8th largest economy at $2.18 trillion annually.

$100-a-barrel oil could trigger a U.S. financial crisis

Oil prices have broken out of a “sweet spot” for global economic growth and could herald a U.S. recession if they keep rising. The Swiss investment bank USB joined a chorus of financial institutions in pondering the economic impact of oil prices at $100 a barrel. Crude futures are trading near their highest levels in 3½ years, bolstered by strong demand, supply cuts from big producers, and mounting geopolitical tension in the Middle East and Venezuela. Prices have risen above the “sweet spot” of between $50 and $70 a barrel. When oil prices rise sharply, it raises the cost of fuel and shrinks the amount of money consumers have to spend in the broader economy. But when the cost of crude falls too much, it weighs on growth in oil-producing nations. To be sure, those economic impacts would be felt very differently across the globe — UBS assessed the fallout for 15 different nations — but it certainly raises risks in the United States. [source] Analyst comment: Oil price spikes have preceded five of the last six periods of recession in the U.S.

Jon E. Dougherty is a political, foreign policy and national security analyst and reporter with nearly 30 years of experience in both fields. A U.S. Army veteran of Operation Enduring Freedom, he holds BA in Political Science from Ashford University and an MA in National Security Studies/Intelligence Analysis from American Military University.

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