Tuesday, December 31, 2013

Imagining the Worst on Gold





So let us imagine the worst case scenario.  There exists a finite amount of gold in the world.  It is around 130,000 tons today having risen from 100,000 tons thirty years ago. 
It is possible to produce apparent good delivery gold bars by substituting a tungsten core in newly minted bars.  Google this blog for details. There is some reason to think this was done at Fort Knox during the nineties.  This would at least double the availability of bars for foreign delivery and storage.  Of course, one would simply use good delivery for foreign delivery and the other type for in house storage.  Thus the gold in storage in the USA could well be 80% missing and the balance simply undeliverable.

At the same time, this reserve has been used to earn interest by been used to back debt instruments as collateral and this easily could have been done through the banking system at least several times for every outstanding ounce.

In that circumstance real delivery becomes almost impossible, particularly with the Chinese scooping every available free ounce.  Whoever thought this was all a great idea is so f**ked as any old trader can tell you.  It really was just too easy.

Now you have a clear understanding of just how bad the news could be regarding gold, read this item.

A Year Later, The Bundesbank Has Repatriated Only 37 Tons Of Gold (Of 700 Total)

Submitted by Tyler Durden on 12/24/2013


Procuring physical gold seems to be a rather problematic and time-consuming process, as the Bundesbank is learning.

Recall that it was almost exactly one year ago in mid-January, when the German central bank, in a shocking development expressing the bank's lack of trust in its central banking peers, announced that it would proceed with the repatriation of 700 tons of gold held by its "partners" the New York Fed and the Banque de France, by the end of 2020.

Since we had posted numerous articles on the topic of German official gold just prior to this announcement, many of which speculated about its quality and existence, it seemed like a shocking confirmation that the most hawkish of European central banks was taking its commitment to hard-money so seriously, especially after just weeks prior it swore up and down it has confident about its gold where it currently was.

This is what we said at the time:

There is no need to explain why this is huge news (for those who have not followed our series on the concerns and issue plaguing German gold can catch up hereherehere, here, and certainly here) . At least no need for us to explain. Instead we will let the Bundesbank do the explanation. The following section is the answer provided by the Bundesbank itself in late October in response to the question why it does not move the gold back to Germany:

The reasons for storing gold reserves with foreign partner central banks are historical since, at the time, gold at these trading centres was transferred to the Bundesbank. To be more specific: in October 1951 the Bank deutscher Länder, the Bundesbank’s predecessor, purchased its first gold for DM 2.5 million; that was 529 kilograms at the time. By 1956, the gold reserves had risen to DM 6.2 billion, or 1,328 tonnes; upon its foundation in 1957, the Bundesbank took over these reserves. No further gold was added until the 1970s. During that entire period, we had nothing but the best of experiences with our partners in New York, London and Paris. There was never any doubt about the security of Germany’s gold. In future, we wish to continue to keep gold at international gold trading centres so that, when push comes to shove, we can have it available as a reserve asset as soon as possible. Gold stored in your home safe is not immediately available as collateral in case you need foreign currency. Take, for instance, the key role that the US dollar plays as a reserve currency in the global financial system. The gold held with the New York Fed can, in a crisis, be pledged with the Federal Reserve Bank as collateral against US dollar-denominated liquidity. Similar pound sterling liquidity could be obtained by pledging the gold that is held with the Bank of England.

And in case the above was not clear enough, below is the speech Buba's Andreas Dobret delivered to none other than NY Fed's Bill Dudley in early November:

Please let me also comment on the bizarre public discussion we are currently facing in Germany on the safety of our gold deposits outside Germany – a discussion which is driven by irrational fears.

In this context, I wish to warn against voluntarily adding fuel to the general sense of uncertainty among the German public in times like these by conducting a “phantom debate” on the safety of our gold reserves.

The arguments raised are not really convincing. And I am glad that this is common sense for most Germans. Following the statement by the President of the Federal Court of Auditors in Germany, the discussion is now likely to come to an end – and it should do so before it causes harm to the excellent relationship between the Bundesbank and the US Fed.

Throughout these sixty years, we have never encountered the slightest problem, let alone had any doubts concerning the credibility of the Fed [ZH may, and likely will, soon provide a few historical facts which will cast some serious doubts on this claim. Very serious doubts]. And for this, Bill, I would like to thank you personally. I am also grateful for your uncomplicated cooperation in so many matters. The Bundesbank will remain the Fed’s trusted partner in future, and we will continue to take advantage of the Fed’s services by storing some of our currency reserves as gold in New York.

Incidentally, what Zero Hedge did provide after this article, was factual evidence that the Buba's very much "trusted partner" had been skimming it on physical gold deliveries on at least one occasion, in "Exclusive: Bank Of England To The Fed: "No Indication Should, Of Course, Be Given To The Bundesbank..."

So we wonder: what changed in the three months between November and now, that has caused such a dramatic about face at the Bundesbank....

* * *
The question of Buba's relationship with other central banks still remains open, however one thing we have just learned is the pace at which the German Central Bank has been able to repatriate its gold. It would make a snail proud.

Yesterday Buba head Jens Weidmann told Bild that gold valued at €1.1 billion has been repatriated so far. Putting a weight to this number: to date the Bundesbank has received shipments of a paltry 37 tons of gold from its existing storage place in either New York or Paris to Germany: "The gold reserves of the country will be stored in Frankfurt because it has a special storage with the corresponding equipment,” said Carl-Ludwig Thiele, a Bundesbank board member. 

The repatriated amount over the course of all of 2013 represents just over 5% of the total stated target of 700 tons, and is well below the 87.5 tons that the Bundesbank would need to repatriate each year if it were to collected the 700 tons ratably ever year in the 8 year interval between 2013 and 2020.

So the question begs: since the price of gold has tumbled in 2013 (according to many driven in part by the Buba's own demand, which would make procuring gold in the open market for the US and French central banks that much easier for subsequent dispatch to Frankfurt) and one would assume there would be many more sellers than buyers of physical, why would the Bundesbank not be able to obtain a far greater share of the gold? Unless, of course, neither New York nor Paris actually have free, unencumbered physical gold in their possession -with most of it leased out to various even closer "partners" - and are scrambling to procure as much physical as they can find at the new low, low prices (thank you paper gold ETF dumping).

However, a snag seems to have emerged: unlike in the "west" where momentum is the only driver of "value", buyers out of China (and of course India, especially when one considers the black market attempt to circumvent the Bank of India's capital controls on gold imports) are hoarding as much physical gold as they can get. Could it be that the Bundesbank is unable to repatriate more just because China is already buying up every marginal tons of physical gold in the market, and is making physical gold purchases by the Fed next to impossible?

In other words, is China now holding Germany's gold hostage, and if so when and what price would it release it to the New York Fed and the Banque de France? One look at just the pace of imports by China reveals that if indeed this is the case, then there may be a few snags in this hardly best laid plan of central bankers and men.



Yellowstone Supervolcano 'even more Colossal'





I really do not get any sense that Yellowstone is particularly dangerous.  It is not stacking up a massive cap in the form of a stratovolcano.  I find two cubic miles of rock towering two miles way more scary.  These things can literally vaporize.  When Mount St Helens blew, I found myself the only person concerned that a cubic mile of rock was rising into the sky at the rate of five feet per day.  This sudden expression of potential energy could only be released by kinetic energy and it was.

The massive chamber under Yellowstone is massive thermal energy that is obviously not been fed with too much water.  That will change only when Yellowstone is plunged into an ocean trough and water penetrates the magma chamber to produce a fresh island arc.  Right now we get natural thermal expressions and little else.

Prior venting produced a huge ash cloud whose volume obviously needs to be discovered.  Even then it likely lasted over a long period of time unlike the Mount St Helens eruption which was over quickly.  I would be more impressed by a thousand feet of nearby ash than a thin layer a thousand miles away.

In the meantime we have a huge lava chamber to map to our hearts content forever.  It provides a natural strategic thermal energy reserve if that works for us.

Yellowstone supervolcano 'even more colossal'

By Rebecca MorelleScience reporter, BBC World Service

10 December 2013 Last updated at 20:36 ET


Hot springs are surface evidence of the huge magma chamber that sits beneath Yellowstone
The supervolcano that lies beneath Yellowstone National Park in the US is far larger than was previously thought, scientists report.
A study shows that the magma chamber is about 2.5 times bigger than earlier estimates suggested.
A team found the cavern stretches for more than 90km (55 miles) and contains 200-600 cubic km of molten rock.
The findings are being presented at the American Geophysical Union Fall Meeting in San Francisco.
Prof Bob Smith, from the University of Utah, said: “We’ve been working there for a long time, and we’ve always thought it would be bigger... but this finding is astounding."
If the Yellowstone supervolcano were to blow today, the consequences would be catastrophic.
The last major eruption, which occurred 640,000 years ago, sent ash across the whole of North America, affecting the planet’s climate.
Now researchers believe they have a better idea of what lies beneath the ground.
The team used a network of seismometers that were situated around the park to map the magma chamber.
Dr Jamie Farrell, from the University of Utah, explained: “We record earthquakes in and around Yellowstone, and we measure the seismic waves as they travel through the ground.
“The waves travel slower through hot and partially molten material… with this, we can measure what’s beneath.”
The team found that the magma chamber was colossal. Reaching depths of between 2km and 15km (1 to 9 miles), the cavern was about 90km (55 miles) long and 30km (20 miles) wide.
It pushed further into the north east of the park than other studies had previously shown, holding a mixture of solid and molten rock.
“To our knowledge there has been nothing mapped of that size before,” added Dr Farrell.
The researchers are using the findings to better assess the threat that the volatile giant poses.
“Yes, it is a much larger system… but I don’t think it makes the Yellowstone hazard greater,” explained Prof Bob Smith.
“But what it does tell us is more about the area to the north east of the caldera.”
He added that researchers were unsure when the supervolcano would blow again.
Some believe a massive eruption is overdue, estimating that Yellowstone’s volcano goes off every 700,000 years or so.
But Prof Smith said more data was needed, because there had only been three major eruptions so far. These happened 2.1 million years ago, 1.3 million years ago and 640,000 years ago.
“You can only use the time between eruptions (to work out the frequency), so in a sense you only have two numbers to get to that 700,000 year figure,” he explained.
“How many people would buy something on the stock market on two days of stock data.”
In another study presented at the AGU Fall Meeting, researchers have been looking at other, more ancient volcanic eruptions that happened along the same stretch of continental plate that Yellowstone’s supervolcano sits on.
Dr Marc Reichow, from the University of Leicester, said: “We looked at a time window of between 12.5 to 8 million years ago. We wanted to know how to identify these eruptions and find out how frequently they happened.”
The team found there were fewer volcanic events during this period than had been estimated, but these eruptions were far larger than was previously thought.
Dr Reichow added: “If you look at older volcanoes, it helps to understand what Yellowstone is likely to do.”


Iceland - Example for a new American Revolution




The startling reality is that peaceful revolution has turned out to be far easier than the other kind.  The challenge is to persuade those in possession of guns to not take private advantage.  Once that is held back, it turns into a refusal to cooperate forcing the government to come to terms with the suddenly emergent ad hoc democratic committee.

This quickly evolves into elections.  In Egypt, the army is reducing the fascist Muslim Brotherhood and can then step back to allow elections for the rest that hopefully begins to throw up capable people.   They will too because the people have established bounds.

Most likely though, the USA has not reached a clear and obvious crossroads for a real revolution.  The damage is huge but the economy is deep also.  I do believe that we need a major overhaul of the financial system similar to the first overhaul in 1933.  Unfortunately the enemies of such uses false fears to block that overhaul and no one has the confidence of the electorate or the mob for that matter to effect real change.

Simply down loading the power of the fed to the state and big city level while settling the national debt would be simple and sufficient to turn it all around.   Notice we are already buying back the national debt.

Iceland - Example for a new American Revolution

Sunday, December 15, 2013 - The Gathering Storm by Daniel Martin Gray

WASHINGTON, December 15, 2013 — The throes of revolution in the Muslim Spring played out not just in public squares, but in social media. A Twitter revolt helped topple Egypt’s President Hosni Mubarek. This was followed by the rise to power of the only organized political force there, the Muslim Brotherhood.

Their heavy-handed radical Islamist regime was so unpopular that the military threw them out.

Covered in extensive and excruciating detail by America’s major media, (save the rapes, assaults and murders of women and Christians), we are expected to learn that overthrowing established government is a bad thing. That it’s better to keep the devil we know.

Their message is that only turmoil and tribulation result from removing the heavy hand of oppression; that either anarchy or another even worse tyrant will result.

But let’s “imagine,” for a moment, a peaceful revolution that worked.

Let’s start with a banking crisis like 2008, caused by greedheads in government and breathtaking risktakers in multinational megacorporations. Assume it was entirely intended, in order to cause critical consequences and cement even more power and money in the hands of elites.

Say that nationalizing industry and the banking system is fine, like our media and both major parties did. Play down the essential bankrupting of government by buying our own securities and monetizing the debt. Assume that government passed sweeping bailouts for banks “too big to fail”. Ramped up “benefit” payments to a populace thrown headlong from a workforce that deserted them, in order to drain their power and hook them on government largesse.

Posit a peaceful movement to undo the damage, that called bailouts a failure; called for jailing the ones who caused the mess in the first place. Sounds a lot like our own Occupy and Tea Party movements.

Picture a people so fed up they throw out a large percentage of incumbents, sending new faces pledged to serve freedom and fiscal restraint to the seats of power. America did this, too, spurning Democrats and RINOs in Congress and State governments in 2010.

Allow that this was insufficient to break the grip of entrenched elites. That they instead ratcheted up the forced march “forward.” That in their haughty hubris and secret fear of ordinary folks, they pushed for even more control, at the cost of human freedom. That more and more folks became disaffected with the powers that be, but were ignored and demeaned, instead.

Fine so far, that experience mirrors our own. Now, step into the unknown, at least unknown here at home. What if a mass movement put pressure on, and kept it up? What if their incessant and unyielding demands toppled yet more of the establishment? What if they formed a committee of average citizens, including a large percentage of the unaffiliated, and rewrote their Constitution?

What if they arrested, prosecuted and jailed the bankers whose actions caused the crisis, instead of rewarding them with fat paydays? What if their actions, entirely peaceful, restored liberty and fiscal sanity to their country?

This actually happened, you know. Or most likely, you don’t. Spectacularly unreported in American media, Iceland did all of those things. It was called the “Pots and Pans” revolution, because the protestors used those to make noise. They didn’t have to fire a single shot.

There is a reason the elites don’t want you to know. They would have you ignorant of the example. They like things the way they are. We don’t. And here in America, we have no need to rewrite a new Constitution. Our old one would work fine, if we but followed it.

Rise up, Americans! It’s time to take it all back! Time to regain liberty and the prosperity that ensues!

We can do this peacefully. Just remember, 300 million guns in the hands of 100 million Americans means would-be tyrants don’t dare risk their own necks for a fate far worse than a little jail time. For if they sow the wind, they will reap the whirlwind.



Ice Age Fossil Words Identified




I also notice that place names appear surprisingly resilient also so long as the local population remains largely intact.  Note invasion normally meant that women were automatically absorbed.  Our own history is very much the exception because of the huge difference in practical culture.

There still may be actual obscure remnants out there and I would look closely at the Lapps and even Eskimo and possibly Cree for indications.  It is not likely but we need an open mind here.

There was an Ice Age Language, good enough to easily span Asia and it lasted for thousands of years.  It makes xense to check refugia for survivals and to do creative guessing.

15,000-year-old 'fossil' words reveal ancestral Ice Age language

By Amina Khan
May 7, 2013, 2:09 p.m.


Would Ice Age man understand us? It may depend on the words we choose. Digging through languages in Eurasia for "fossil" words that have escaped erosion over time, researchers say they have identified an ancestral language that existed as far as 15,000 years ago.

This ancient language, described in Proceedings of the National Academy of Sciences, may have given rise to several different language groups — including Indo-European, which boasts roughly 3 billion speakers and contains such far-flung languages as Spanish and Hindi.

The researchers first had to find cognates across the languages – words that come from a common original source and maintain the same meaning and similar sound, or have undergone predictable changes.

Consider the word "fart." Fart, while it did not appear to pass muster in this paper, comes from a highly respectable linguistic lineage — it crops up as furzen in German, frata in Old Icelandic, perdet’ in Russian and pardate in ancient Sanskrit. Overall, speakers of these languages can’t understand one another — and yet, the word "fart" remains in remarkably good shape (if you take into account that Ps frequently turn to Fs in certain language groups).

But reconstructing words for long-dead languages is tricky business. Most words evolve too rapidly, and have a 50-50 chance of being replaced by a noncognate every 2,000 to 4,000 years.

Luckily, some words — like numbers, pronouns and special adverbs that see frequent use — seem to have much longer half-lives of every 10,000 to 20,000 years.

They discovered a number of words — "this," "I," "give," "mother," "hand," "black," "ashes," "old," "man," "fire" — that cropped up in similar form across at least four of the seven language families studied across Eurasia. They traced them back to 15,000 years — right around the time the glaciers would have been melting, allowing humans greater ability to spread out over the globe and for languages to start to diverge.

So if you ever have the unusual opportunity to say this to someone from the Ice Age — "Black ashes? Who is this old man? Mother, I hear fire!" — there’s a fair chance they’d get the gist of things.

"Our results suggest a remarkable fidelity in the transmission of some words and give theoretical justification to the search for features of language that might be preserved across wide spans of time and geography," the authors write. 



Monday, December 30, 2013

Mission Accomplished - Edward Snowdon






Yes it has.  Better yet he has actually been responsible in the handling of the data.  What he did do was force disclosure of a runaway surveillance train lacking any real oversight and even vulnerable to foreign espionage because of just that.  The proof of that is Mr. Snowdon.  If he could do it is obvious that anyone else determined enough could do the same.

The NSA is now getting the oversight that it demands.  Better yet, we now understand real capability and something else changes.  This data stream will continue to be collected.  We have no problem with that.  What must change are the rules for querying that data stream.  This is also very powerful.

An investigating officer needs to be able to go in front of a judge and request a query targeting known perpetrators.  This should not be given too easily nor should it be used for blind fishing trips or every sales office can be characterized as a den of thieves.  It certainly should be used in the case of a known crime having been committed.

What is important is that it immediately strips anyone with criminal intent of access to communications generally.  That is a huge advantage in blocking and deterring crime.  Take it a step further and simply track cell phones as to location.  This all makes impulse criminality actually dangerous.

We are going there and Snowdon has made sure that abuse just became very difficult.  In the process he may make crime itself very difficult and may make our own world that much safer.

Extreme power demands extreme oversight.  


Edward Snowden, after months of NSA revelations, says his mission’s accomplished

By Barton GellmanPublished: December 23 


MOSCOW — The familiar voice on the hotel room phone did not waste words.
He checked the reply against his watch and described a place to meet.
“I’ll see you there,” he said.
Edward Joseph Snowden emerged at the appointed hour, alone, blending into a light crowd of locals and tourists. He cocked his arm for a handshake, then turned his shoulder to indicate a path. Before long he had guided his visitor to a secure space out of public view.
During more than 14 hours of interviews, the first he has conducted in person sincearriving here in June, Snowden did not part the curtains or step outside. Russia granted him temporary asylum on Aug. 1, but Snowden remains a target of surpassing interest to the intelligence services whose secrets he spilled on an epic scale.
Late this spring, Snowden supplied three journalists, including this one, with caches of top-secret documents from the National Security Agency, where he worked as a contractor. Dozens of revelations followed, and then hundreds, as news organizations around the world picked up the story. Congress pressed for explanations, new evidence revived old lawsuits and the Obama administration was obliged to declassify thousands of pages it had fought for years to conceal.
Taken together, the revelations have brought to light a global surveillance system that cast off many of its historical restraints after the attacks of Sept. 11, 2001. Secret legal authorities empowered the NSA to sweep in the telephone, Internet and location records of whole populations. One of the leaked presentation slides described the agency’s “collection philosophy” as “Order one of everything off the menu.”
Six months after the first revelations appeared in The Washington Post and Britain’s Guardian newspaper, Snowden agreed to reflect at length on the roots and repercussions of his choice. He was relaxed and animated over two days of nearly unbroken conversation, fueled by burgers, pasta, ice cream and Russian pastry.
Snowden offered vignettes from his intelligence career and from his recent life as “an indoor cat” in Russia. But he consistently steered the conversation back to surveillance, democracy and the meaning of the documents he exposed.
“For me, in terms of personal satisfaction, the mission’s already accomplished,” he said. “I already won. As soon as the journalists were able to work, everything that I had been trying to do was validated. Because, remember, I didn’t want to change society. I wanted to give society a chance to determine if it should change itself.”
“All I wanted was for the public to be able to have a say in how they are governed,” he said. “That is a milestone we left a long time ago. Right now, all we are looking at are stretch goals.”
‘Going in blind’
Snowden is an orderly thinker, with an engineer’s approach to problem-solving. He had come to believe that a dangerous machine of mass surveillance was growing unchecked. Closed-door oversight by Congress and the Foreign Intelligence Surveillance Court was a “graveyard of judgment,” he said, manipulated by the agency it was supposed to keep in check. Classification rules erected walls to prevent public debate.
Toppling those walls would be a spectacular act of transgression against the norms that prevailed inside them. Someone would have to bypass security, extract the secrets, make undetected contact with journalists and provide them with enough proof to tell the stories.
The NSA’s business is “information dominance,” the use of other people’s secrets to shape events. At 29, Snowden upended the agency on its own turf.
“You recognize that you’re going in blind, that there’s no model,” Snowden said, acknowledging that he had no way to know whether the public would share his views.
“But when you weigh that against the alternative, which is not to act,” he said, “you realize that some analysis is better than no analysis. Because even if your analysis proves to be wrong, the marketplace of ideas will bear that out. If you look at it from an engineering perspective, an iterative perspective, it’s clear that you have to try something rather than do nothing.”
By his own terms, Snowden succeeded beyond plausible ambition. The NSA, accustomed to watching without being watched, faces scrutiny it has not endured since the 1970s, or perhaps ever.
The cascading effects have made themselves felt in Congress, the courts, popular culture, Silicon Valley and world capitals. The basic structure of the Internet itself is now in question, as Brazil and members of the European Union consider measures to keep their data away from U.S. territory and U.S. technology giants including Google, Microsoft and Yahoo take extraordinary steps to block the collection of data by their government.
For months, Obama administration officials attacked Snowden’s motives and said the work of the NSA was distorted by selective leaks and misinterpretations.
On Dec. 16, in a lawsuit that could not have gone forward without the disclosures made possible by Snowden, U.S. District Judge Richard J. Leon described the NSA’s capabilities as “almost Orwellian” and said its bulk collection of U.S. domestic telephone records was probably unconstitutional.
The next day, in the Roosevelt Room, an unusual delegation of executives from old telephone companies and young Internet firms told President Obama that the NSA’s intrusion into their networks was a threat to the U.S. information economy. The following day, an advisory panel appointed by Obama recommended substantial new restrictions on the NSA, including an end to the domestic call-records program.
“This week is a turning point,” said the Government Accountability Project’s Jesselyn Radack, who is one of Snowden’s legal advisers. “It has been just a cascade.”
‘They elected me’
On June 22, the Justice Department unsealed a criminal complaint charging Snowden with espionage and felony theft of government property. It was a dry enumeration of statutes, without a trace of the anger pulsing through Snowden’s former precincts.
In the intelligence and national security establishments, Snowden is widely viewed as a reckless saboteur, and journalists abetting him little less so.
At the Aspen Security Forum in July, a four-star military officer known for his even keel seethed through one meeting alongside a reporter he knew to be in contact with Snowden. Before walking away, he turned and pointed a finger.
“We didn’t have another 9/11,” he said angrily, because intelligence enabled warfighters to find the enemy first. “Until you’ve got to pull the trigger, until you’ve had to bury your people, you don’t have a clue.”
It is commonly said of Snowden that he broke an oath of secrecy, a turn of phrase that captures a sense of betrayal. NSA Director Keith B. Alexander and Director of National Intelligence James R. Clapper Jr., among many others, have used that formula.
In his interview with The Post, Snowden noted matter-of-factly that Standard Form 312, the ­classified-information nondisclosure agreement, is a civil contract. He signed it, but he pledged his fealty elsewhere.
“The oath of allegiance is not an oath of secrecy,” he said. “That is an oath to the Constitution. That is the oath that I kept that Keith Alexander and James Clapper did not.”
People who accuse him of disloyalty, he said, mistake his purpose.
“I am not trying to bring down the NSA, I am working to improve the NSA,” he said. “I am still working for the NSA right now. They are the only ones who don’t realize it.”
What entitled Snowden, now 30, to take on that responsibility?
“That whole question — who elected you? — inverts the model,” he said. “They elected me. The overseers.”
He named the chairmen of the Senate and House intelligence committees.
Dianne Feinstein elected me when she asked softball questions” in committee hearings, he said. “Mike Rogers elected me when he kept these programs hidden. . . . The FISA court elected me when they decided to legislate from the bench on things that were far beyond the mandate of what that court was ever intended to do. The system failed comprehensively, and each level of oversight, each level of responsibility that should have addressed this, abdicated their responsibility.”
“It wasn’t that they put it on me as an individual — that I’m uniquely qualified, an angel descending from the heavens — as that they put it on someone, somewhere,” he said. “You have the capability, and you realize every other [person] sitting around the table has the same capability but they don’t do it. So somebody has to be the first.”
‘Front-page test’
Snowden grants that NSA employees by and large believe in their mission and trust the agency to handle the secrets it takes from ordinary people — deliberately, in the case of bulk records collection, and “incidentally,” when the content of American phone calls and e-mails are swept into NSA systems along with foreign targets.
But Snowden also said acceptance of the agency’s operations was not universal. He began to test that proposition more than a year ago, he said, in periodic conversations with co-workers and superiors that foreshadowed his emerging plan.
Beginning in October 2012, he said, he brought his misgivings to two superiors in the NSA’s Technology Directorate and two more in the NSA Threat Operations Center’s regional base in Hawaii. For each of them, and 15 other co-workers, Snowden said he opened a data query tool called BOUNDLESSINFORMANT, which used color-coded “heat maps” to depict the volume of data ingested by NSA taps.
His colleagues were often “astonished to learn we are collecting more in the United States on Americans than we are on Russians in Russia,” he said. Many of them were troubled, he said, and several said they did not want to know any more.
“I asked these people, ‘What do you think the public would do if this was on the front page?’ ” he said. He noted that critics have accused him of bypassing internal channels of dissent. “How is that not reporting it? How is that not raising it?” he said.
By last December, Snowden was contacting reporters, although he had not yet passed along any classified information. He continued to give his colleagues the “front-page test,” he said, until April.
Asked about those conversations, NSA spokeswoman Vanee Vines sent a prepared statement to The Post: “After extensive investigation, including interviews with his former NSA supervisors and co-workers, we have not found any evidence to support Mr. Snowden’s contention that he brought these matters to anyone’s attention.”
Snowden recounted another set of conversations that he said took place three years earlier, when he was sent by the NSA’s Technology Directorate to support operations at a listening post in Japan. As a system administrator, he had full access to security and auditing controls. He said he saw serious flaws with information security.
“I actually recommended they move to two-man control for administrative access back in 2009,” he said, first to his supervisor in Japan and then to the directorate’s chief of operations in the Pacific. “Sure, a whistleblower could use these things, but so could a spy.”
That precaution, which requires a second set of credentials to perform risky operations such as copying files onto a removable drive, has been among the principal security responses to the Snowden affair.
Vines, the NSA spokeswoman, said there was no record of those conversations, either.
U.S. ‘would cease to exist’
Just before releasing the documents this spring, Snowden made a final review of the risks. He had overcome what he described at the time as a “selfish fear” of the consequences for himself.
“I said to you the only fear [left] is apathy — that people won’t care, that they won’t want change,” he recalled this month.
The documents leaked by Snowden compelled attention because they revealed to Americans a history they did not know they had.
Internal briefing documents reveled in the “Golden Age of Electronic Surveillance.” Brawny cover names such as MUSCULAR, TUMULT and TURMOIL boasted of the agency’s prowess.
With assistance from private communications firms, the NSA had learned to capture enormous flows of data at the speed of light from fiber-optic cables that carried Internet and telephone traffic over continents and under seas. According to one document in Snowden’s cache, the agency’s Special Source Operations group, which as early as 2006 was said to be ingesting “one Library of Congress every 14.4 seconds,” had an official seal that might have been parody: an eagle with all the world’s cables in its grasp.
Each year, NSA systems collected hundreds of millions of e-mail address books, hundreds of billions of cellphone location records and trillions of domestic call logs.
Most of that data, by definition and intent, belonged to ordinary people suspected of nothing. But vast new storage capacity and processing tools enabled the NSA to use the information to map human relationships on a planetary scale. Only this way, its leadership believed, could the NSA reach beyond its universe of known intelligence targets.
In the view of the NSA, signals intelligence, or electronic eavesdropping, was a matter of life and death, “without which America would cease to exist as we know it,” according to an internal presentation in the first week of October 2001 as the agency ramped up its response to the al-Qaeda attacks on the World Trade Center and the Pentagon.
With stakes such as those, there was no capability the NSA believed it should leave on the table. The agency followed orders from President George W. Bush to begin domestic collection without authority from Congress and the courts. When the NSA won those authorities later, some of them under secret interpretations of laws passed by Congress between 2007 and 2012, the Obama administration went further still.
Using PRISM, the cover name for collection of user data from Google, Yahoo, Microsoft, Apple and five other U.S.-based companies, the NSA could obtain all communications to or from any specified target. The companies had no choice but to comply with the government's request for data.
But the NSA could not use PRISM, which was overseen once a year by the surveillance court, for the collection of virtually all data handled by those companies. To widen its access, it teamed up with its British counterpart, Government Communications Headquarters, or GCHQ, to break into the private fiber-optic links that connected Google and Yahoo data centers around the world.
That operation, which used the cover name MUSCULAR, tapped into U.S. company data from outside U.S. territory. The NSA, therefore, believed it did not need permission from Congress or judicial oversight. Data from hundreds of millions of U.S. accounts flowed over those Google and Yahoo links, but classified rules allowed the NSA to presume that data ingested overseas belonged to foreigners.
‘Persistent threat’
Disclosure of the MUSCULAR project enraged and galvanized U.S. technology executives. They believed the NSA had lawful access to their front doors — and had broken down the back doors anyway.
Microsoft general counsel Brad Smith took to his company’s blog and called the NSA an “advanced persistent threat” — the worst of all fighting words in U.S. cybersecurity circles, generally reserved for Chinese state-sponsored hackers and sophisticated criminal enterprises.
“For the industry as a whole, it caused everyone to ask whether we knew as much as we thought,” Smith recalled in an interview. “It underscored the fact that while people were confident that the U.S. government was complying with U.S. laws for activity within U.S. territory, perhaps there were things going on outside the United States . . . that made this bigger and more complicated and more disconcerting than we knew.”
They wondered, he said, whether the NSA was “collecting proprietary information from the companies themselves.”
Led by Google and then Yahoo, one company after another announced expensive plans to encrypt its data traffic over tens of thousands of miles of cable. It was a direct — in some cases, explicit — blow to NSA collection of user data in bulk. If the NSA wanted the information, it would have to request it or circumvent the encryption one target at a time.
As these projects are completed, the Internet will become a less friendly place for the NSA to work. The agency can still collect data from virtually anyone, but collecting from everyone will be harder.
The industry’s response, Smith acknowledged, was driven by a business threat. U.S. companies could not afford to be seen as candy stores for U.S. intelligence. But the principle of the thing, Smith said, “is fundamentally about ensuring that customer data is turned over to governments pursuant to valid legal orders and in accordance with constitutional principles.”
‘Warheads on foreheads’
Snowden has focused on much the same point from the beginning: Individual targeting would cure most of what he believes is wrong with the NSA.
Six months ago, a reporter asked him by encrypted e-mail why Americans would want the NSA to give up bulk data collection if that would limit a useful intelligence tool.
“I believe the cost of frank public debate about the powers of our government is less than the danger posed by allowing these powers to continue growing in secret,” he replied, calling them “a direct threat to democratic governance.”
In the Moscow interview, Snowden said, “What the government wants is something they never had before,” adding: “They want total awareness. The question is, is that something we should be allowing?”
Snowden likened the NSA’s powers to those used by British authorities in Colonial America, when “general warrants” allowed for anyone to be searched. The FISA court, Snowden said, “is authorizing general warrants for the entire country’s metadata.”
“The last time that happened, we fought a war over it,” he said.
Technology, of course, has enabled a great deal of consumer surveillance by private companies, as well. The difference with the NSA’s possession of the data, Snowden said, is that government has the power to take away life or freedom.
At the NSA, he said, “there are people in the office who joke about, ‘We put warheads on foreheads.’ Twitter doesn’t put warheads on foreheads.”
Privacy, as Snowden sees it, is a universal right, applicable to American and foreign surveillance alike.
“I don’t care whether you’re the pope or Osama bin Laden,” he said. “As long as there’s an individualized, articulable, probable cause for targeting these people as legitimate foreign intelligence, that’s fine. I don’t think it’s imposing a ridiculous burden by asking for probable cause. Because, you have to understand, when you have access to the tools the NSA does, probable cause falls out of trees.”
‘Everybody knows’
On June 29, Gilles de Kerchove, the European Union’s counter­terrorism coordinator, awoke to a report in Der Spiegel that U.S. intelligence had broken into E.U. offices, including his, to implant surveillance devices.
The 56-year-old Belgian, whose work is often classified, did not consider himself naive. But he took the news personally, and more so when he heard unofficial explanations from Washington.
“ ‘Everybody knows. Everybody does’ — Keith Alexander said that,” de Kerchove said in an interview. “I don’t like the idea that the NSA will put bugs in my office. No. I don’t like it. No. Between allies? No. I’m surprised that people find that noble.”
Comparable reactions, expressed less politely in private, accompanied revelations that the NSA had tapped the cellphones of German Chancellor Angela Merkel and Brazilian President Dilma Rousseff. The blowback roiled relations with both allies, among others. Rousseff canceled a state dinner with Obama in September.
When it comes to spying on allies, by Snowden’s lights, the news is not always about the target.
“It’s the deception of the government that’s revealed,” Snowden said, noting that the Obama administration offered false public assurances after the initial reports about NSA surveillance in Germany “The U.S. government said: ‘We follow German laws in Germany. We never target German citizens.’ And then the story comes out and it’s: ‘What are you talking about? You’re spying on the chancellor.’ You just lied to the entire country, in front of Congress.”
In private, U.S. intelligence officials still maintain that spying among friends is routine for all concerned, but they are giving greater weight to the risk of getting caught.
“There are many things we do in intelligence that, if revealed, would have the potential for all kinds of blowback,” Clapper told a House panel in October.
‘They will make mistakes’
U.S. officials say it is obvious that Snowden’s disclosures will do grave harm to intelligence gathering, exposing methods that adversaries will learn to avoid.
“We’re seeing al-Qaeda and related groups start to look for ways to adjust how they communicate,” said Matthew Olsen, director of the National Counterterrorism Center and a former general counsel at the NSA.
Other officials, who declined to speak on the record about particulars, said they had watched some of their surveillance targets, in effect, changing channels. That evidence can be read another way, they acknowledged, given that the NSA managed to monitor the shift.
Clapper has said repeatedly in public that the leaks did great damage, but in private he has taken a more nuanced stance. A review of early damage assessments in previous espionage cases, he said in one closed-door briefing this fall, found that dire forecasts of harm were seldom borne out.
“People must communicate,” he said, according to one participant who described the confidential meeting on the condition of anonymity. “They will make mistakes, and we will exploit them.”
According to senior intelligence officials, two uncertainties feed their greatest concerns. One is whether Russia or China managed to take the Snowden archive from his computer, a worst-case assumption for which three officials acknowledged there is no evidence.
In a previous assignment, Snowden taught U.S. intelligence personnel how to operate securely in a “high-threat digital environment,” using a training scenario in which China was the designated threat. He declined to discuss the whereabouts of the files, but he said that he is confident he did not expose them to Chinese intelligence in Hong Kong. And he said he did not bring them to Russia.
“There’s nothing on it,” he said, turning his laptop screen toward his visitor. “My hard drive is completely blank.”
The other big question is how many documents Snowden took. The NSA’s incoming deputy director, Rick Ledgett, said on CBS’s “60 Minutes” recently that the number may approach 1.7 million, a huge and unexplained spike over previous estimates. Ledgett said he would favor trying to negotiate an amnesty with Snowden in exchange for “assurances that the remainder of the data could be secured.”
Obama’s national security adviser, Susan E. Rice, later dismissed the possibility.
“The government knows where to find us if they want to have a productive conversation about resolutions that don’t involve Edward Snowden behind bars,” said the American Civil Liberties Union’s Ben Wizner, the central figure on Snowden’s legal team.
Some news accounts have quoted U.S. government officials as saying Snowden has arranged for the automated release of sensitive documents if he is arrested or harmed. There are strong reasons to doubt that, beginning with Snowden’s insistence, to this reporter and others, that he does not want the documents published in bulk.
If Snowden were fool enough to rig a “dead man’s switch,” confidants said, he would be inviting anyone who wants the documents to kill him.
Asked about such a mechanism in the Moscow interview, Snowden made a face and declined to reply. Later, he sent an encrypted message. “That sounds more like a suicide switch,” he wrote. “It wouldn’t make sense.”
‘It’s not about me’
By temperament and circumstance, Snowden is a reticent man, reluctant to discuss details about his personal life.
Over two days his guard never dropped, but he allowed a few fragments to emerge. He is an “ascetic,” he said. He lives off ramen noodles and chips. He has visitors, and many of them bring books. The books pile up, unread. The Internet is an endless library and a window on the progress of his cause.
“It has always been really difficult to get me to leave the house,” he said. “I just don’t have a lot of needs. . . . Occasionally there’s things to go do, things to go see, people to meet, tasks to accomplish. But it’s really got to be goal-oriented, you know. Otherwise, as long as I can sit down and think and write and talk to somebody, that’s more meaningful to me than going out and looking at landmarks.”
In hope of keeping focus on the NSA, Snowden has ignored attacks on himself.
“Let them say what they want,” he said. “It’s not about me.”
Former NSA and CIA director Michael V. Hayden predicted that Snowden will waste away in Moscow as an alcoholic, like other “defectors.” To this, Snowden shrugged. He does not drink at all. Never has.
But Snowden knows his presence here is easy ammunition for critics. He did not choose refuge in Moscow as a final destination. He said that once the U.S. government voided his passport as he tried to change planes en route to Latin America, he had no other choice.
It would be odd if Russian authorities did not keep an eye on him, but no retinue accompanied Snowden and his visitor saw no one else nearby. Snowden neither tried to communicate furtively nor asked that his visitor do so. He has had continuous Internet access and has talked to his attorneys and to journalists daily, from his first day in the transit lounge at Sheremetyevo airport.
“There is no evidence at all for the claim that I have loyalties to Russia or China or any country other than the United States,” he said. “I have no relationship with the Russian government. I have not entered into any agreements with them.”
“If I defected at all,” Snowden said, “I defected from the government to the public.”
Julie Tate contributed to this report.


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