National Intelligence Bulletin for 20 July 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… (2,467 words)

  • Trump may bail out coal and nuclear power plant company
  • U.S. set to become more divided
  • Nunes: DOJ and FBI are stonewalling with the hopes that Democrats win back the House
  • Washington State Department of Natural Resources releases new tsunami maps
  • Ocasio-Cortez: Occupy all ICE offices, borders, airports, ‘occupy all of it’
  • Chicago could be home to America’s second universal basic income
  • U.S. military to hold natural disaster exercises in Hawaii
  • FEMA completes AAR on 2017 hurricane season
  • TREND: Veteran investors continue warnings over ‘easy money’
  • Global debt to GDP now over 300 percent
  • Weekly Economic Wrap-Up

ADMIN NOTE: Jon Dougherty has moved on from Forward Observer. We wish him the best of luck in his future endeavors. All reporting and analysis is the product of Samuel Culper.


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?

Trump may bail out coal and nuclear power plant company

According to an internal memo leaked to Bloomberg, the Trump administration may attempt to bail out some unprofitable coal and nuclear power plans by requiring power providers to purchase their electricity under a “Strategic Electric Generation Reserve” plan. [source] Analyst Comment: According to the leaked memo, “regulatory and economic factors” are causing these plants to announce early retirement,  and although these retired facilities are often replaced with new generation plants, the transition poses risks to the “security and resilience” of the national power grid. The memo points out that electrical generation capacity is “increasingly dependent on natural gas pipelines, which represent a major point of vulnerability” in critical infrastructure. It continues: “Growing threats of multi-point attacks, including cyber-attacks, or other disruptions to the energy sector, including the electricity grid and the natural gas pipeline system, are increasing the risk of high-impact events that could result in significant harm to human life, the economy, the environment, and national security.” The memo goes on to justify why these bankrupt coal and nuclear power plants should be sustained through government intervention. [source]


 

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

U.S. set to become more divided

There are two events on my radar that could cause even further polarization in the U.S.: the Mueller investigation and Roe v. Wade. Despite several reports months ago that Mueller was wrapping up his investigation, we got a new round of indictments against Russian intelligence officials last Friday. There was some question as to whether those indictments were meant to derail the Trump-Putin summit, as Congressional Democrats lobbied the president to cancel, or if the indictments were meant to give President Trump some leverage. On Tuesday evening, Bloomberg reported that Trump approved the latest Mueller indictments ahead of the summit. [source]

I have little confidence in saying just how close we might be to the end of the Mueller investigation but, as we’ve known for some time, it could weigh on the mid-term elections. For instance, if Mueller clears Trump before November 2018, the GOP could get a boost at the polls. If Mueller charges the president with anything (obstruction of justice, financial crimes) before November, then the Democrats will likely see higher voter turnout. In a near worst-case scenario, Mueller could say that although they found no hard evidence, there was reason to believe collusion took place, but a lack of hard evidence would prevent referral for prosecution. (Kind of like Comey said that Hillary Clinton broke the law, yet did not refer her for prosecution. That cloud of un-provable collusion would hang on the administration and would likely affect the 2020 election.) Worst case scenario: Trump is charged on real or fake evidence and it sinks his 2020 chances. Regardless of the outcome, I expect the results are going to be heavily politicized. That’s a pressing concern going forward.

As for Roe v. Wade, sixteen states have laws against abortion that were killed by the landmark Supreme Court ruling. Should Supreme Court nominee Brett Kavanaugh be confirmed, we may see the Court take up Roe v. Wade again, risking an even further push towards extremes on the Left. Former House Speaker Nancy Pelosi (D-CA) warned that Kavanaugh’s confirmation would “radically reverse the course of American justice [and] democracy.” Kavanaugh’s confirmation is going to ignite more protests and we could see political violence as a result.

Nunes: DOJ and FBI are stonewalling with the hopes that Democrats win back the House

Chair of the House Permanent Select Committee on Intelligence, Devin Nunes (R-CA), accused senior officials at the Justice Department and FBI of stonewalling his investigations long enough for the Democrats to take back the House. “One-hundred percent, they [the FBI and DOJ] are putting all their chips on the Republicans losing the House and all these investigations will shut down.” Nunes also accused the DOJ and FBI of obstructing his congressional investigation into whether or not senior officials created the Trump collusion scandal in order to tank President Trump’s administration. “After seven or eight months of stonewalling, we realized they [the FBI and DOJ] had no intelligence in the opening of that investigation,” Nunes said, referring to the Trump collusion investigation. Nunes also took aim at biased mainstream media which often reports Democrat talking points with no rebuttal: “[T]his is what’s so bad and so corrupt about the media, and why I’m so worried about the future of our country, because without a free and fair and open media we have a major problem in this country.” Speaking hypothetically on a scenario where George W. Bush had done this to president-elect Barrack Obama, Nunes said: “They would have had the FBI and DOJ surrounded by rioting in the street, everyone would have been fired, there would have been people put in jail, and what’s happening now is, you essentially have obstruction by the Department of Justice and the FBI colluding with the Democrats to ensure that these investigations do not properly take place.” [source]

Ocasio-Cortez: Occupy all ICE offices, borders, airports, ‘occupy all of it’

Democratic Socialists of America candidate for New York’s 14 District is openly calling for mass protests to occupy ICE officers, airports, and border checkpoints nationwide. “We have to have a rapid response. And I think every day that we go on — especially a day when something that heinous happens — we have to occupy all of it. We need to occupy every airport, we need to occupy every border, we need to occupy every ICE office until those kids are back with their parents, period.” [source] Analyst Comment: A series of protests across the country targeted ICE offices this month, and more are scheduled. In Portland, protestors actually shut down an ICE office by blocking the entrance. The protest in Portland is on-going, and protestors are complaining that “ICE has been playing children’s music for 5 hours now” on a loud speaker near the protest camp in an attempt to annoy them into leaving. Previously, the ICE office played the introduction song from the Walking Dead: “It seems to play for a couple minutes and is a continuous loop. It’s been playing for 10+ hours now.” [source] Other protests, like ones in Philadelphia, Brooklyn, San Francisco, St. Louis, Columbus (OH), and Miramar (Miami, FL), have resulted in dozens of arrests. Louisville is the site of another protest, and while there were no arrests, police did break up their protest camp.

Chicago could be home to America’s second universal basic income

Chicago city alderman Ameya Pawar is on a mission to make Chicago the second city in America to offer its residents a universal basic income (UBI). (Stockton, California has approved a pilot program offering 100 families a paycheck for $500 each month, which is set to begin in 2019.) “Nearly 70 percent of Americans don’t have $1,000 in the bank for an emergency. UBI could be an incredible benefit for people who are working and are having a tough time making ends meet or putting food on the table at the end of the month. … It’s time to start thinking about direct cash transfers to people so that they can start making plans about how they’re going to get by.” So far, Pawar has enlisted the help of a majority of lawmakers in the city and needs the help of the city council and mayor to implement the plan. “My response to Amazon, and Tesla, and Ford, and Uber … we need to start having a conversation about automation and a regulatory framework so that if jobs simply go away, what are we going to do with the workforce? … If [those companies are] reticent to pay their fair share in taxes and still want tax incentives and at the same time automate jobs, what do you think is going to happen?” Pawar asked. “These divisions are going to grow and, in many ways, we’re sitting on a powder keg.” On Tuesday, former president Barrack Obama endorsed UBI: “It’s not just money that a job provides. It provides dignity and structure and a sense of place and a sense of purpose. So we’re gonna have to consider new ways of thinking about these problems, like a universal income.” [source] Analyst Comment: The idea of UBI has become more popular and will eventually be a part of a presidential campaign. According to Google Trends, UBI is set to have its second most popular month for search history; that’s a good indicator that more Americans are learning about it. As more Americans are put out of work due to automation in the next three to five years — starting with ride share and truck drivers — UBI is going to be presented as a national policy.


 

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

U.S. military to hold natural disaster exercises in Hawaii

Twenty-seven hospitals and three hundred volunteers are taking part in an exercise designed to simulate an earthquake and tsunami affecting six islands in Hawaii. Members of the Rim of the Pacific (RIMPAC) exercise will take part in this year’s humanitarian assistance and disaster relief drill. In an unrelated exercise, the Hawaiian National Guard is conducting search-and-rescue exercises with members of the Filipino and Indonesian armed forces. [source]

Washington State Department of Natural Resources releases new tsunami maps

Earlier this month, the Washington Department of Natural Resources released updated tsunami maps for coastal areas of the state. The new maps are based off modeling for a 9.0 magnitude earthquake. The DNR estimates that a tsunami resulting from an earthquake in the Cascadia Subduction zone could kill 10,000 and injure 30,000. [source]

FEMA completes AAR on 2017 hurricane season

Just in time for this week’s congressional hearing on 2017’s natural disasters and preparedness for 2018, FEMA completed an after action review on the 2017 hurricane season. “2017 taught us that we need to further strengthen the Nation’s ability to rapidly stabilize critical lifelines. It also underscored the importance of enhancing logistics capabilities across the emergency management community,” a statement from DHS Secretary Kirstjen Nielsen reads. [DOWNLOAD] Analyst Comment: The report credits local citizens with providing rescue and relief efforts in the wake of disasters like Hurricane Harvey. Further, FEMA points out that “building a culture of preparedness within our communities” is key to solving future challenges.


 

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

TREND: Veteran investors continue warnings over ‘easy money’

81-year old investor Mark Mobius recently appeared on Bloomberg warning of a financial crisis in the making. Joining a chorus of unease regarding long-term economic and fiscal conditions, Mobius in April warned of the potential for a 30 percent drop in stock prices in the future. He recently told Bloomberg, “There’s no question we’ll see a financial crisis sooner or later because we must remember we’re coming off from a period of cheap money. There’s going to be a real squeeze for many of these companies that depended upon cheap money to keep on going.” [source]

World economy over 300 percent debt to GDP

New figures show that the world is $247 trillion in debt (not including the derivative market), which represents 318 percent of the world’s gross domestic product (GDP). Global debt increased by $8 trillion in the first quarter of 2018, showing that lessons from the 2008 sovereign debt and financial crisis are going unheeded. [source]

Economic Wrap-Up

– In a speech on Tuesday, Federal Reserve chairman Jerome Powell said that economic growth justifies further rate interest hikes this year. He didn’t elaborate much, but he did mention short-term rates (2-year Treasuries) and long-term rates (10-year Treasuries), acknowledging that it’s weighing on Federal Reserve decision-making.

– This week’s biggest news is that the yield curve on the 10-year Treasury is “flattening”. And by flattening, I mean it continues a 5-week decline. A pretty big shift is happening right now because the 10-year yield is getting closer to dropping below the 2-year yield, which is often an early warning indicator of financial and economic instability. Essentially, investors are saying that the next two years are more unpredictable than what they foresee in the next 10 years. We’re looking at the yield curve of the 2-year Treasury rate, which is at 2.59 percent. The 10-year Treasury rate is at 2.86 percent, which is down from 3.1 percent since mid-May. That’s making headlines. Morgan Stanley strategists have predicted that the yield curve will be inverted by mid-2019.

– According to a Bank of America / Merrill Lynch Global Fund Manager Survey, nearly 35 percent of respondents expect the next U.S. recession to begin in the second half of 2019. Nearly 30 percent of them believe it will hit in the first half of 2020, and about 17 percent of them believe it will arrive in the second half of 2020 or beyond. (10 percent said the first half of 2019!)

– According to the Council of Economic Advisors at the White House, the U.S. has a labor shortage as demand for new workers outpaces what’s available. Keep in mind that there’s an historical correlation between the trough of unemployment and the beginning of the next recession. Conditions are lining up, but the economy remains strong for now.

– “Everything we see about the near-term outlook for the economy is quite strong.” – Former Fed Chairman Ben Bernanke

– President Trump and the European Union are staring down the barrel of a gun where it concerns trade tariffs. President Trump has warned that the EU needs to lower tariffs on U.S. goods or he’ll be forced to respond with U.S. tariffs, namely on automobiles and parts. This morning, an EU policy advisor tweeted: “Either [EU president] Juncker manages to convince Trump to de-escalate when they meet next week or keep your seatbelts fastened”. [source]

– Tariff concerns and the trade war with China are weighing on consumer sentiment, and recent data shows that Republicans have much greater confidence in the economy than do Democrats.

– According to a new survey, some 54 percent of Chinese consumers would “probably” or “definitely” avoid buying U.S. goods due to the Trump tariffs. [source]

– According to University of Michigan data, U.S. consumer sentiment on home buying conditions and home affordability continue to drop to lows not seen since 2008.

// END REPORT

S.C.

Samuel Culper is a former military intelligence NCO and contract Intelligence analyst. He spent three years in Iraq and Afghanistan and is now the intelligence and warfare researcher at Forward Observer.

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