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 National Intelligence subscribers.
In this National Intelligence Bulletin… (2,031 words)
- Ohio and Iowa join other states taking aim at pipeline protestors
- Lawmakers crack down on sale of critical infrastructure to foreign buyers
- Lack of earthquake early warning systems could pose risk to U.S.
- ICE awards contract to license plate reader databases
- ICE raids 77 businesses in northern California
- DHS to roll out financial infrastructure cybersecurity project
- Dalio: Not concerned with immediate downturn, but it may be two years out
- Personal savings rate falls to multi-year low
- NAFTA collapse threatens U.S. jobs
- And more…
In Focus: To be honest, I was quite concerned when I heard Ray Dalio warn that underlying societal issues in America could make the next recession more difficult. (See PIR4 for additional information.) He didn’t explicitly say it during the interview I watched, but he and others have previously warned about a social revolution. In fact, several billionaires have warned that income inequality would eventually lead to societal unrest in the United States.
And although it may be difficult to see a recession right now, I do believe Dalio is on the right track when he warns about why it could be just a couple of years away. The Federal Reserve requirement to raise interest rates while simultaneously reeling in their quantitative easing, he says, could very well result in a recession. And he specifically pegs the presidential election of 2020 as the possible time frame. On average, we’ve had recessions every six to eight years, and that means that we’re overdue. Add on the political and cultural animus that exists — specifically among mainstream, Far Right, and Far Left groups — and the recession could be ripe for one of those social revolutions. (And also consider that the memo declassified and released today shows endemic corruption at the highest levels of the FBI. The result is a further loss of faith and distrust in public institutions and could lead to further instability.)
So if our key assumption is that Dalio is in the right ballpark, then we have about two years to study and develop some intelligence and security skills. And that’s why I’ve started a new blog. I’m going to be writing a series of posts on some seriously valuable skills like Human Intelligence, Signals Intelligence, Battle Tracking, and some other handy skills to develop before the next emergency. You can read the first post here: The ACE Blog: Introduction to the ACE.
We’ll continue to keep an eye on other indicators and report on the factors that could make the future more complex and dangerous. If you have any specific questions or concerns that we can help address, please let us know. – M.S.
Priority Intelligence Requirements
PIR1: What are new the 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 and/or instability?
PIR4: What are the new indicators of systems disruption and threats to the economic or financial industry?
PIR1: What are new the indicators of systems disruption and threats to critical infrastructure?
Industrial Control Systems (ICS) and Supervisory Control and Data Acquisition (SCADA) systems continue to post the greatest risk to critical infrastructure. Cyber attacks, whether by criminal or nation-state actors, are unpredictable. While cyber attacks are more uncommon than cases of cyber exploitation, these events do pose a significant risk to critical infrastructure and national security.
Ohio and Iowa join other states taking aim at pipeline protestors
According to bills being considered at their state capitols, Ohio and Iowa are the latest to join a group of states that could outlaw protests against critical infrastructure projects. North Dakota, South Dakota, and Oklahoma already have laws on the books aimed at deterring pipeline protestors. Colorado, Pennsylvania, and Washington State have previously defeated bills that would specifically target protestors trying to disrupt critical infrastructure projects or operations. In all, some 30 states have considered similar bills. [source]
Lawmakers crack down on sale of critical infrastructure to foreign buyers
Lawmakers in the United Kingdom, Australia, and Canada have been tightening restrictions on foreign investment into their critical infrastructure, amid concerns that China and other nations could pose threats to national security through ownership of power plants, farmland, and other infrastructure deemed critical. In the United States, the Committee on Foreign Investment has also implemented some restrictions, most recently exercising a mandate to review business transactions that could threaten the U.S. defense industrial base. In a new report to Congress, the Committee on Foreign Investment provides an overview of their activities — including the rejection of an attempted acquisition in 2017 of a U.S. semiconductor company to a Chinese company. [source] (Analyst Comment: Chinese companies and private investors have been on a shopping spree around the world, buying up stakes in mines, farmland, real estate, power plants, and other potentially critical infrastructure. This absolutely represents a national security threat because in a time of war, this infrastructure could be exploited against the United States. After cyber attacks, this is another reason why we should be particularly cautious of domestic systems disruption, especially if we get into a war with peer or near-peer adversaries.)
Lack of earthquake early warning systems could pose risk to U.S.
According to one report, the lack of earthquake early warning systems — especially in California and the Pacific Northwest. While countries like Mexico, Japan, and China have invested heavily into these systems, the U.S. lags behind. [source] (Analyst Comment: I’m somewhat wary of industry outlets pushing for infrastructure projects, especially ones tied to monetary interests. The article does point out, however, that Washington State — home of the Cascadia Subduction Zone and a greatly feared future earthquake that seismologists say will be catastrophic — has contributed nothing to early warning systems, which could provide the state up to four minutes of warning.)
PIR2: What are the new indicators of potentially disruptive social, cultural or political conditions or events?
ICE awards contract to license plate reader databases
According to a FedBizOps post last month, Immigration and Customs Enforcement (ICE) is getting pretty serious about immigration enforcement. ICE awarded a contract to an automatic license plate reader (LPR) company, enabling access to the companies databases. The company collects and stores images of license plates as their readers are collecting the data, potentially enabling real-time location of vehicles, and ICE can use the information in the databases to determine the last know whereabouts of vehicles of interest. [source] (Analyst Comment: Some state and federal agencies have previously awarded commercial LPR contracts in order to circumvent restrictions that prevent the agencies from storing the license plate data, themselves. Instead, law enforcement agencies, tow trucks, and toll companies report license plate data into one of the several existing databases, and law enforcement agencies — like ICE — are able to retrieve a vehicle’s location history. This could just as easily be used to find any vehicle, although ICE plans on using the data to track down illegal immigrants.)
It happened: ICE raids 77 businesses in northern California
ICE officers raided 77 businesses in San Francisco and Sacramento this week in their search for illegal immigrants. ICE made no arrests. One immigration attorney called the raids “unprecedented”, as ICE’s acting director has called for a 400 percent increase in workplace enforcement actions. According to a spokesperson, the ICE raids are “focused on protecting jobs for U.S. citizens and others who are lawfully employed, eliminating unfair competitive advantages for companies that hire an illegal workforce, and strengthening public safety and national security.” [source] (Analyst Comment: As we reported last week, news of the planned raids leaked through SF Gate, which presumably provided some warning for many businesses; therefore it’s not surprising that ICE made no arrests in the latest sweep.)
Other Notable Indicators
Six progressive candidates out-raise establishment Democrat opponents
PIR3: How are state and federal agencies preparing for domestic conflict and/or instability?
DHS to roll out financial infrastructure cybersecurity project
After millions of online banking customers were denied access through distributed denial of service (DDOS) attacks against banking websites in recent years, the Department of Homeland Security is set to introduce the Next Generation Cyber Infrastructure Apex cybersecurity system to financial networks and infrastructure this year. According to one official, “The big banks that you can name on your two hands have a lot of money they can put toward this [cybersecurity] problem, and they’re a little better situated than some of the others. When you start going down to some of the regional and localized banks, they don’t have quite the same budgets.” [source] (Analyst Comment: To be fair, DHS does not have a great track record when it comes to developing cyber security tools. In a 2016 failure of epic proportions, an audit found that the DHS Einstein firewall failed to detect 94% of threats on the network. The system was first deployed in 2004 — 12 years before — so I’m a little skeptical of DHS cybersecurity programs. Still, this is a positive indicator that the financial system is still susceptible to systems disruption, and it’s something that should be considered going forward.)
PIR4: What are the new indicators of systems disruption and threats to the economic or financial industry?
Ray Dalio: Not concerned with immediate downturn, but it may be two years out
Speaking at Davos last week, the CEO of the world’s largest hedge fund said that he’s not concerned about an immediate downturn. In fact, he sees “a jolt of stimulation” pushing the stock market higher and spurring economic growth. But, he says, the U.S. economy will eventually have another down turn, and foresees a recession just before the 2020 general election.
“[W]hat I’m concerned about is what would the next downturn be like? I’m not worried about an immediate downturn. But I would say if we were to look two years forward, okay, probably right before the next presidential election, there is a good chance that you will have a downturn and if you have a downturn for that segment, I’m worried about how we will be with each other in that element of cohesiveness. I mean, basically the formula for having problems, social with political problems, is have a difference between, a lot of difference between rich and poor people…”
And how the Federal Reserve handles interest rates will have a large effect on when the next recession hits:
“I think it’s a very difficult thing to get monetary policy precise. That’s why we have recessions because you never can get it exactly right. I think it’s particularly difficult to get it right now because of the fact that interest rates are so low… because the duration of bonds and debt has lengthened, it just takes a little change in interest rates to have a bear market.”
(Analyst Comment: This is by far the most concerning thing I’ve read about regarding the U.S. economy and the future of this country. We know that despite the economic optimism of today, the fundamentals are not beneficial to the country in the long term. We’ve lived with the Jim Rogerses and Peter Schiffs and Marc Fabers and Jim Rickardses, who for years have been predicting financial catastrophe. We’ll keep looking at this from different angles, however, Ray Dalio’s opinion carries a lot of weight and we should seriously consider what he’s saying. Two years to the next recession: how bad will it be?)
Personal savings rate falls to multi-year low
One longer term trend we’re following is a lack of emergency and retirement savings among Americans. Updated information coming out of Federal Reserve Economic Data (at the Fed in St. Louis) shows that the personal savings rate has fallen to a low not seen since late 2007. A period between 2005 and 2006 represents the lowest personal savings rate since the data started being collected in 1959. [source] (Analyst Comment: In addition to the increased standard of living and a focus on pushing the consumer economy, it’s now wonder that Americans, in general, aren’t saving. And if the current key assumption is that a recession will hit the U.S. in the next two years, this is one indicator that doesn’t give us hope of a soft landing.)
AEI: NAFTA collapse threatens U.S. jobs
According to a study released by the American Enterprise Institute (AEI), the failure of the U.S. to re-negotiate the North American Free Trade Agreement (NAFTA) would result in nearly two million jobs lost in the United States. California, Texas, New York, and Florida would lose the most number of jobs. [source] 
