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Despite "smoking gun" U.S. is unlikely to act as it has a long history of tolerating China's abuse

It seemed like just another Chinese propaganda video, designed to promote the fighting spirit of soldiers in China's People's Liberation Army and rouse anti-American sentiments.  The Chinese narrator boldly proclaimed, "America is the first country to propose the concept of a cyberwar, and the first country to implement it in a real war."

I. Proof of Chinese Government Cyber-Attacks

But, as first noted by TheEpochTimes, the Chinese government unwittingly dropped a bomb shell when it used a clip of what it must have thought was stock footage.

Between 12:57 and 13:05 in the video, the B-roll clip rolled, revealing what is most westerners' first glimpse at a live Chinese cyber-attack on the U.S.  Videographic proof that recent cyber-attacks were indeed the work of the Chinese government had never been found -- until now.

At the start of the clip the reflection of a PLA officer in uniform can be seen.  We're not sure what the text up top or below says, but if you speak Chinese please let us know...

The officer quickly leaves that screen, using a keyboard shortcut....

...and fires up an application whose creator is identified in GUI text as the Electrical Engineering University of China's People's Liberation Army.  The GUI panel contains the text "Choose Attack Target" and offers the user a choice of what reportedly are multiple Falun Gong websites (a forbidden Chinese spirtual movement) (feel free to chime in if you can read this...).

...more targets....

The text selected reads "" -- a major Falun Gong homepage -- and the IP address selected is a 138.26.x address, an IP block that belongs to the University of Alabama.  The particular IP in question, according to The Epoch Times has not been used since 2010, with IP staff recalling it may have been used to host the homepage of a Falun Gong practitioner, who hosted meetings on campus.

The "attack" button is pressed in the lower left-hand corner, and the video fades out, as presumably a distributed denial of service attack (possibly botnet assisted) is carried out.

So there it is -- straight from the horse's mouth, as they say, proof that China is indeed attacking entities in the U.S. online.

The video is available here, beware the rewind capability seems to be messed up, so just skip to around 10 minutes if you want to see the good part.

II. U.S. is Too Afraid to Stand up For Itself

We're guessing President Barack Obama's (D) response to this video will fall somewhere between "silence" and  "sweeping it under the rug".  After all, while the U.S. talked tough of physical retaliation for cyberattacks, it continues to let China bully it online.

China controls a great deal of U.S. debt and rare earth metals -- a critical component to high-performance electronic devices.  The U.S. also deeply depends on China for its manufacturing needs, having done away with its own capacity to produce most products decades ago.

Likewise there's a sort of grim complacency in the corporate world.  Google, Inc. (GOOG) claims to have its source code stolen by Chinese hackers, but has been forced into silence by the Chinese government.  The message is clear -- put up with abuse, or get out of the world's biggest market.

Similarly, antivirus firm McAfee last month aired a report on the world's largest series of cyber-attacks dubbed "ShadyRAT", which it said were perpetrated by a nation state.  However, when faced with the overwhelming public assumption that the attacker was China, McAfee equivocated refusing to confirm that the attacks came from China.

What reason would McAfee have for keeping the identity of the attacker in history's most financially damaging cyberattack a secret?  Well, its parent company, Intel Corp. (INTC) has invested much in research and development and production facilities in China -- facilities it doesn't want to lose by alienating the local government.

The few people and organizations who do speak out are largely ignored.  

Recent attacks on American advocacy site, who launched a campaign to free imprisoned Chinese artist Ai Weiwei, led to Secretary of State Hillary Clinton admonishing China.  But at the end of the day no decisive action was taken by the executive branch or Congress.

In short, China is reportedly gaining advanced intelligence on the U.S. military and its technological secrets; is infiltrating U.S. utilities; and stealing hundreds of millions of dollars of corporate secrets, but the U.S. has thus far kept its mouth shut.

For that reason we don't hold much hope that this "smoking gun" will change much of anything in the way U.S. business and the U.S. government bow down to their Chinese abusers.

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RE: Bullying
By torpor on 8/23/2011 2:58:50 PM , Rating: 2
The fed is currently buying bonds with their unlimited checkbook.

So if the fed both holds the bond and pays the interest due, where does the actual money come from?

Before telling someone they don't know what they're talking about, maybe you should read some news somewhere and check your poor assumptions.

RE: Bullying
By Iaiken on 8/23/2011 4:23:36 PM , Rating: 2
So if the fed both holds the bond and pays the interest due, where does the actual money come from?

Uh, that's not what happening.

These are bonds that the federal government sold to banks in exchange for money that was already in the market and has likely since re-entered the market via government spending.

The government still owes both principle + interest on them. The only difference is that now the government now owes those moneys to the Federal Reserve Bank instead of whomever previously owned the bond. The previous bond holder now sits on however so many newly created, interest-free, dollars and the government is still on the hook.

Meanwhile, the money that the federal reserve printed and lent itself, carries no appreciable interest today (0.25%) compared to the anywhere from 2.7-8% interest that the bond itself yields. Not only that, but it hasn't done accomplished anything as from all appearances the banks are simply sitting on the money or investing it themselves. Credit is still restricted, interest rates are going up and the dollar is not devaluing in any appreciable way. Instead, the Fed takes on risk to make more money, the banks make more money and the government still owes what it owed in the first place.

RE: Bullying
By torpor on 8/23/2011 5:20:49 PM , Rating: 2
I understand that the expectation is that the Fed is independent of the federal government/treasury. But, much like with Fannie and Freddie, that's not really the case. I don't find the distincition particularly useful or honest, especially considering the unprecedented level of deficit we've got now. It doesn't matter that the bonds purchased are on the open market; by artifically reducing supply they prop up demand for the next issue.

The market should be spanking US bonds for this kind of spending, but the Fed is preventing it, frankly, by printing money to cover the new debt. I can't consider that the reasonable action of an independent agent.

It's impossible to get around the simple fact that, by buying Federal debt notes with created money, there has been over 1 trillion in new money issued, which would not otherwise be there.

To expect this injection of money supply to have no affect on the value of money is silly. The dollar has not yet devalued much, but it is beginning to do so. (12 month PPI is moving up, but agg. saving is increasing too, sucking some of it up). We're building up enough pressure to create quite a whipsaw if things ever get moving...I know some people have enough faith in Bernanke et. al. to expect them to let off the steam when needed, but then again, all the people who make their living in this racket are pushing gold towards $2000....

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