The article, Report Sounds Alarm On China’s Rerouting Of U.S. Internet Traffic, discusses  a report submitted to Congress on Wednesday by the U.S.-China Economic and Security Review Commission.

The report points to two specific incidents earlier this year where actions taken inside China had a direct impact on Internet traffic in the U.S. and other regions of the world.

In one of the incidents, traffic to and from about 15% of all Internet destinations was routed through servers belonging to China Telecom, a state-owned telecommunications company.

In an e-mailed statement Wednesday, China Telecom rejected the claims, but offered no further comment.

The rerouting happened on April 8 and lasted for about 18 minutes. The traffic hijacking affected U.S. government and military networks, including those belonging to the Army, Navy, Air Force, Marine Corps, the Office of the Secretary of Defense, the Department of Commerce, NASA and the U.S. Senate.

Commercial sites including those belonging to Microsoft, Dell and Yahoo were also affected.
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“The takeaway here is that the foundation on which the Internet is built is insecure,” Alperovitch said. “It is based on trust. We trust ISPs to tell us which networks they own. There is no validation [of the information.]”

“Not only can this problem happen again, but it probably will,” he said.

Maybe there are just not enough crooked engineers in the profession so that, when these things are designed, the possibility of dishonesty is taken into account.  If this post weren’t inherently political enough, I’ll connect it to the Friedmanian/Feldsteinian radical free-market economists who don’t factor  dishonesty into their idealistic description about how world economies ought to work.  With the way they fudge the data to prove their points, they should have been aware of the possibility of dishonesty.

John describes and has video and audio recordings of TSA encounter at San Diego International Airport

Because of issues like this that were not even this bad, when we made our flight into retirement in 2006 from Portland, OR to Providence, RI, Sharon and I vowed that it would be our last airplane flight. So far we have been receiving more and more evidence that it was a wise choice.

We decided where our limit was. Is there any limit to the indignities you will suffer in order to fly on an airplane?

Watch the 20 minute video of the interview  Economist Ha-Joon Chang on the G20 Summit, Currency Wars and Why the Free Market is a “Myth” from the website democracynow.org.

Here is an example response to whet your appetitie:

HA-JOON CHANG: Well, you know, it is quite understandable why Americans are kind of frustrated by the slowness in the adjustment of Chinese currency. I mean, let’s get the facts right. I mean, it has been adjusted, only very, very slowly, so it’s not like China is absolutely refusing to move. But, yes, I mean, given the imbalances that U.S.A. is facing, it looks painfully slow. But on the Chinese side, you have to understand this. I mean, first of all, they don’t want the kind of abrupt adjustment that Japan had to make to its own currency in the 1980s in the so-called Plaza Accord, which then created this huge financial bubble, destroyed the Japanese economy. So the Chinese want to do it slowly.

And secondly, you know, it’s not just China who “manipulates” currency value, as you just said. I mean, the Fed flooding the American economy with this money is also currency manipulation. So the Chinese are rightly upset.

But on the other hand, yes, I mean, the problem is that, since the ’70s, we have lived under the kind of notion that only the deficit countries have to make adjustment. You know, surplus countries have to make adjustment, too, but in the last 30 years the reigning orthodoxy has been that, you know, anyone who’s spending beyond his means has to be punished. I mean, this is exactly the logic behind the punishment of third world countries in the debt crisis, and later Asian economies and the Argentinean economy. So, in that sense, it’s that, actually, that the very thing that the U.S. have been trying to impose on the world are coming to haunt itself, you know, because the U.S. has been on the forefront of this logic that it’s only the deficit countries that have to make adjustment, and now other countries are legitimately saying, “Well, why don’t you then do the same?”

Were you even aware of “…1980s in the so-called Plaza Accord, which then created this huge financial bubble, destroyed the Japanese economy.”

In my previous post, China Would Be Crazy To Accede To U.S. Demands, I conjectured that perhaps China won’t do what we tell them to do because they remember what happened to the rest of Asia when those countries followed U.S. advice in 1997.

It seems like the American voters are swinging wildly from right wing to left wing and back again on a two year schedule.  With such short memories about what happened just a few years ago, there is no way this country could stick to a long term plan.

I can just imagine what the people in the Chinese government are thinking when we tell them that they should run their country more democratically and give their dissenters more freedom.  Beside thinking, “Are you nuts?” they must think that if our form of government is an example of what happens with democracy, there is no wonder they want no part of it.  They might even think that the U.S. is a fine one to be lecturing, when the U.S. are the ones that ought to be listening to a lecture.

I do not want to be an apologist for tyrannical forms of government nor for forms that do not recognize the rights of the governed.  I wish our country could be an example of a democracy where good decisions are made and where the voters could stick to the thinking behind a long term plan long enough to see if it is working.

It is one thing to make adjustments as we go along.  I think that is a wonderful idea.  It is quite another thing to go from one extreme to its polar opposite every two years.

Can any of my readers suggest some examples of current democracies that have not lost their way?  Do any of those examples have a radical free-market economy?  What is it about those countries that enables them to have a long term plan?

This post is kind of like a shaggy dog story in that there are a lot of words before I get to the punchline.  I assure you that there is a punchline. I don’t know how else I can  make the case.

Perhaps China has not forgotten the Asian debt crisis that was forming around 1997.

Naomi Klein in her book The Shock Doctrine: The Rise of Disaster Capitalism, describes the roots of the crisis. [Page 336]

Back in the early nineties, whenever advocates of free trade wanted a persuasive success story to invoke in debates, they invariably pointed to the Asian Tigers. These were the miracle economies that were growing by leaps and bounds, supposedly because they had flung open their borders to unrestricted globalization.  It was a useful story – the Tigers were certainly developing with whirlwind speed – but to suggest that their expansion was based on free trade was a fiction. Malaysia, South Korea, and Thailand still had highly protectionist policies that barred foreigners from owning land and from buying out national firms.  They had also maintained a significant role for the state, keeping sectors like energy and transportation in public hands. The Tigers had also blocked many foreign imports from Japan, Europe, and North America, as they built up their own domestic markets.  They were economic success stories unquestionably, but ones that proved mixed, managed economies grew faster and more equitably than those following the Wild West Washington Consensus.

The situation did not please Western and Japanese investment banks and multinational firms; watching Asia’s consumer market explode, they understandably longed for unfettered access to the region to sell their products.  They also wanted the right to buy up the best of the Tigers’ corporations – particularly Korea’s impressive conglomerates like Daewoo, Hyundai, Samsung, and LG. In the mid-nineties, under pressure from the IMF and the newly created World Trade Organization, Asian countries agreed to split the difference: they would maintain laws that protected national firms from foreign ownership and resist pressure to privatize their key state companies, but they would lift barriers to their financial sectors, allowing a surge of paper investing and currency trading.

In 1997, when the flood of hot money suddenly reversed current in Asia, it was a direct result of this kind of speculative investment, which was legalized only because of Western pressure.  Wall Street, or course, didn’t see it that way.  Top investment analysts instantly recognized the crisis as a chance to level the remaining barriers protecting Asia’s markets once and for all. Pelosky, the Morgan Stanley strategist, was particularly forthright about the logic: if the crisis was left to worsen, all foreign currency would be drained from the region and Asian-owned companies would have either to close down or to sell themselves to Western firms – both beneficial outcomes for Morgan Stanley….

I’ll leave out many of the details, but try to cut to the chase.

Fischer had been one of the most vocal advocates of shock therapy in Russia, and despite harrowing human costs there, his attitude was just as unyielding in Asia. Several governments suggested that since the crisis was caused by the ease with which money could gush in and out of their countries with nothing to slow down the flow, perhaps it made sense to put some barriers back up – the dreaded “capital controls.”  China had kept its controls up (ignoring Friedman’s advice in this regard), and it was the only country in the region that was not being ravaged by the crisis. And Malaysia had put controls back up, and they seemed to be working.

The reddening and bolding of the sentence above is not in the original text. Since I promised a punchline, I wanted to make sure you didn’t miss it.

Now that you have read a little bit of the history, can you understand why China doesn’t just jump on the advice from the West on how to run their economy?  If you were in their shoes, would you sacrifice the well being of your country to satisfy the whims of another who clearly doesn’t know beans about how to run a mixed economy?

And George Bush wondered why some countries and people hate us?

November 15, 2010

Potential corroboration is in the article China seeks to learn from mistakes of 1985 Plaza Accord. This article was published in 2006.

In his commentary, The Hijacked Commission, Paul Krugman analyzes what is wrong with the deficit reduction commission and their likely proposals.

It’s no mystery what has happened on the deficit commission: as so often happens in modern Washington, a process meant to deal with real problems has been hijacked on behalf of an ideological agenda. Under the guise of facing our fiscal problems, Mr. Bowles and Mr. Simpson are trying to smuggle in the same old, same old — tax cuts for the rich and erosion of the social safety net.

Can anything be salvaged from this wreck? I doubt it. The deficit commission should be told to fold its tents and go away.

The prescription that the deficit commission seems to be headed toward is remarkably like what the prescription that the IMF recommends to countries that want to borrow from the IMF. In just about every case, those that take the loan and follow the recommendations suffer great damage to their economies and people in those countries die from the results.

The Milton Friedman/Chicago School of Economics disease is about to hit this country full force if we listen to what is about to come out of this commission.