THE FITZGERALD AND MCCAIN INCIDENTS, APPLE, GOOGLE, & CHINA

October 8, 2018 By Joseph P. Farrell

Before we get to today's blog topic, I want to extend some remarks of thanks to all of you who've been so patient as this never-ending saga of delays never ends. This has played havoc with my ability to schedule anything for almost a year and a half, and hence this month I have not yet scheduled any vidchats nor been able to schedule any interviews. Needless to say, this is not easy to deal with, and I truly appreciate everyone's patience. I am exhausted and dog tired from constantly getting things ready, and then having the schedule collapse once again. So thank you for understanding and for your patience.  This means, also, that blogs and News and Views are up in the air this week as well, but I will try to keep everyone apprised.  Some components have arrived, which now sit uselessly in big boxes in my living room.

In any case, by way of context to introduce today's blog, regular readers here will recall that when the USS Fitzgerald and USS John McCain had their respective collisions off the coasts of Japan and Singapore, I was suspicious. The US Navy wanted us, at the time, to write this all off to incompetence and poor training. Indeed, a few military or former military that I am familiar with, also tried to convince me that this was, indeed, the reason. I remain, however, skeptical of it. At the time, it seemed to me that perhaps some sort of exotic hacking - remote or otherwise - might have occurred, not only to the American ships, but also to the ships which collided with them. My suspicions fell on Russia, even though regular readers here know I'm not a "blame-Russia-for-everything" person. The reason for that was the two suspicious incidents involving Russian aircraft, and the shutdown of electrical systems on the USS Donald Cook, first in the Black Sea, then again in the Baltic. The Russians demonstrated similar electronic warfare capability when they first intervened in Syria, so it was a reasonable guess to make at the time.

But there is another story that has recently come to light that may have some bearing on all of this, and indeed, so many people sent versions of it that I was positively overwhelmed; almost the entire list of people - and then some - who share articles on a regular basis did so here. If I were to make a simple "guesstimate" of the percentage of that list who did so, I'd say it was easily around 80 percent. In any case, it was a record, and thank you to all of you who passed along various versions of the story.

The story is that the Chinese have been planting tiny microchips, in effect, hacking the hardware, and that this hardware has infected major American corporations such as Apple, Google, and even the Central Intelligence Agency. (Gee, go figure! Who would have thought the Chinese would do that after farming out the tech industry to them?) Here are two versions of the story:

The Big Hack: How China Used a Tiny Chip to Infiltrate U.S. Companies

Explosive Report Details Chinese Infiltration Of Apple, Amazon And The CIA

There's something in the Zero Hedge article that caught my eye, as it did the many people who passed it along:

One week ago, President Trump stood up at a meeting of the United Nations Security Council and accused China of attempting to tamper with US elections - mimicking some of the same allegations that had first been levied against Russia nearly two years prior. In his speech, Trump claimed that China was working to undermine Republicans, and even the president himself, warning that "it's not just Russia, it's China and Russia." While the media largely shrugged off this proclamation as more presidential bombast probably inspired by the burgeoning US-China trade beef, the administration continued to insist that it was taking a harder line against Chinese efforts to subvert American companies to aide the Communist Party's sprawling intelligence apparatus. As if to underline Trump's point, the FBI had arrested a Taiwanese national in Chicago the day before Trump's speech, accusing the 27-year-old suspect of trying to help China flip eight defense contractors who could have provided crucial intelligence on sensitive defense-related technology.

But in a game-changing report published Thursday morning, Bloomberg Businessweek exposed a sprawling multi-year investigation into China's infiltration of US corporate and defense infrastructure.Most notably, it confirmed that, in addition to efforts designed to sway US elections, China's intelligence community orchestrated a pervasive infiltration of servers used to power everything from MRI machines to the drones used by the CIA and army. They accomplished this using a tiny microchip no bigger than a grain of rice.

BBG published the report just hours before Vice President Mike Pence was expected to "string together a narrative of Chinese aggression" during a speech at the Hudson Institute in Washington. According to excerpts leaked to the New York Times, his speech was expected to focus on examples of China's "aggressive moves against American warships, of predatory behavior against their neighbors, and of a sophisticated influence campaign to tilt the midterms and 2020 elections against President Trump". His speech is also expected to focus on how China leverages debt and its capital markets to force foreign governments to submit to its will (something that has happened in Bangladesh and the Czech Republic.  (Italicized emphasis added, boldface emphasis in the original)

Let that sink in for a moment: small computer chips hidden in hardware that is used by major American corporations, American intelligence, and military equipment from drones to warships, giving the Chinese the ability to monitor, and one may presume, alter or direct remotely the behavior of American equipment, from warships to voting machines.

Now, anyone with common sense could have predicted (and did predict) that this would be the result of farming out the American technical industry to China. The key here is that this story may be, and I suspect is, the real context for the rapid efforts being made to "reshore" American industry, and particularly its technical industry, to North America, and particular, to the region in and around Silicon Valley. That will not, of course, make American systems one hundred percent secure, but it will at least close a very open door and set of windows. What soldier, pilot, or warship skipper wants to go into battle thinking that at any moment his decisions and equipment can be overridden by Beijing? What broker or banker wants to place orders for trades, again, knowing that the systems which execute them could be overridden by Beijing? The temporary answer is to reshore, but even with reshoring however, the problem is not solved, because America has also been hollowing out its education while awarding "gender studies" degrees at home to create a cadre of truly useless idiots whose only talent seems to be that they can scream well. Reshoring only goes so far to address the problem. The other problem is stepping up information and engineering education, and making both it and the chip industry "native" once again. It is, in short, now a major national security issue. By sheer numbers, China can produce much more engineering and technology graduates than can the USA, and has been investing mightily in its human capital, while the USA has been... well, need I mention the screaming "gender studies" graduates again?

The bottom line here is that while everyone has been focused on Russia as "the big problem," the real "big problem" has been China. As the USA has been pushing ipads and cell phones and Apple trade and so on world wide to shore up the dollar's reserve status, China has been piggybacking on that effort, since the vast majority of those platforms is made in - you guessed it - China.

The story thus puts the USS Fitzgerald and USS John McCain incidents into stark relief, and gives a bit more credence to those of you out there who speculated that they were the result of faulty equipment and Chinese cyber-warfare capability.

But there's another implication here, and it's going to have the midnight oil burning not just in Washington, but in Moscow, Berlin, Rome, Paris, London, New Delhi and Madrid and any other major capital as well, because the implication of this story is that those nation's military equipment, trading markets, and intelligence communities are also infiltrated, and it means, like it or not, that they too will have to massively expand their own independent capability in computer chip production.

The world just changed, because this story has massive and seismic geopolitical implications. And in the long term, it does not benefit China, whom no one really trusts to begin with. The fallout from this story will be with us, and China, for years, if not decades.  And in the midterm, it benefits certain other countries who are a bit "higher" on the trust list...

... Japan, and South Korea, for example...

Already some nations are having second thoughts about China's "one belt, one road initiative," and this story is not going to help China, at least, not as currently configured under Emperor Xi Jinping. Everyone will now have to rethink everything, including China...

See you on the flip side...