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Joined: 15 Aug 2016
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PostPosted: Thu 21 Dec 2017, 14:58    Post subject:  


We oldsters are nasty ole' buggers.

Even if we were near death from hunger, starving our brains out, we'd still find it within ourselves to look across the room at the biggest ice-cream sundae with a cherry on to top ever constructed and declare it the most evil thing humankind has ever seen. Then we'd promptly start self-flagellation using our crooked bamboo walking canes, until we fell over in our own graves from exhaustion. Laughing

Go on and forward, our collective youth. Don't mind us old fools and the drool always flying from our way. It's all we have left...the drool that is......and besides, one day, you will too walk in similar shoes. Wink
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PostPosted: Thu 21 Dec 2017, 20:18    Post subject:  

prehistoric wrote:
All this has raised basic questions in my mind about identity, credit and the very nature of money in this brave new world of electronic everything. I'm so appallingly old I can remember dollars that were silver certificates. (If you took one to the right kind of bank, they would give you a baggie of silver powder equal to the current value of a dollar. People snickered.) I can also remember when the price of gold was maintained at $35/oz.

The British Pound is about 1240 years old. Back in Anglo Saxon times silver pennies (sterlings) were the common currency and 240 of them weighed a Saxon Pound. Common maths back then was base 12 (12 pennies to one shilling, 20 shillings to one pound) as that was easier to use in practice, a dozen eggs could be divided equally 1, 2, 3, 4, 6 or 12 ways. From 1717 the UK defined sterling's value in terms of gold rather than its original silver, the then Master of the Royal Mint Issac Newton pegged paper currency value to gold, where it pretty much remained at that level until the earlier part of the 20th century. Broadly there was no inflation, but between times there were severe periods of both inflation and deflation. Money was gold (silver), something tangible. Banks kept your money safe (custodial) ... for a fee. Nowadays a bank deposit is a transfer of that money from your pocket into theirs. They can speculate or whatever with that money as its then theirs to do whatever they like (within reason/regulation) and have you as a liability on their books. In return for your deposit typically they'll pay a fixed amount of interest. Money has become just a figure. Nothing tangible. The EU have recently just printed over 1 trillion more notes and each note printed devalues all other notes in circulation by a little. A form of indirect taxation/confiscation. States now push purely just for inflation, avoiding deflation at all cost, as taxation on what amounts to inflationary uplift otherwise fades away.

My bottom line on all this is that nearly everything we do, and even who we are, is ultimately based on faith that the systems we use are not simply con-games run by insiders. We also need faith that the answers coming out of various machines supporting these systems are valid, and again not subject to malicious manipulation. Scarcely any of us are in a position to check.

Fundamentally the authority to legally counterfeit (print money) is a act based on faith that the counterfeiter wont abuse that position. Actions however have seen faith being lost due to US over-printing, so much so that some regions are looking to revert back to something more tangible such as gold, or having a conglomerate of counterfeiters of equal standing such that if one over-prints its basis of being a primary reserve currency will falter. A concern is that those others are less inclined towards capitalism. The EU, in Putin's words, is like the former USSR, but even worse. And the politics of China, who are looking towards being the third element, are well known.

Interesting (and increasingly unfaithful/untrustworthy) times. Tally sticks would perhaps be more meaningful than money, a form of IOU indicator that can be swapped back again for equal (rather than depreciating currency) value. When a state knows were your money is and how large that pile is, it is no longer your wealth but the states, easily confiscated at any time of the states choosing. In reflection of that rise of state awareness alternatives such as bit coin are on the rise. No doubt as open prison state controls expand further the likes of bit coins will be made illegal. Camera's and monitors (mobile phone provides your present location, cards provide your spending habits etc.) and resistance is futile.
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PostPosted: Fri 22 Dec 2017, 10:16    Post subject:  

It seems I've kicked off a debate on the state of the world, if not the Universe and outlying territories.

Putin's criticism of the EU might have something to do with them catching about $10 billion in money laundering out of Russia that could scarcely take place without his knowledge. That story is not over.

I regret that the book on Putin's Kleptocracy was not written by someone residing in Russia. This may be related to the mortality rate of investigative reporters in Russia. Here's what one journalist who fled Russia says about the subject.

China has not been a good model for democracy either. Here's a random example today.

I'm afraid crony capitalism in Russia looks a lot like crony socialism in China. It also looks like the current U.S. cabinet is filled with U.S. oligarchs who favor cronies.

I don't have solutions for all the world's ills, but I do have advice: don't put all the information and/or control in one place, thereby creating a tempting target for exploitation. Support checks and balances. Do insist on methods to audit information and code. If the example which started this topic were simply another company with a few million customers it wouldn't rise to the level of serious news. The potential there was that billions of people came close to having all their passwords scooped up by a password manager provided for free, and without their choice. They didn't have to use it, or to use a particular browser or search engine, but the pressure for market share is intense, and customer lock-in is a real goal. Providing free software with potential for exploitation has happened before, and often allows companies to dodge responsibility by blaming suppliers.

(Reading my latest crop of terms of service, I'm not sure the companies providing software, services or devices are responsible for anything that goes wrong. After I get through with this post, I will go back to arguing with one that keeps billing my credit card for services I cancelled months ago.)

That subject above reinforces my belief that the password model of authentication is thoroughly obsolete, and should be replaced. I've said this before, and described alternatives.

The last part of my rant was directed at the less technical aspect, and the need for ordinary people to have faith in processes.

People obey laws partly because of coercion, and partly because they have faith in the process of elections, legislation, criminal investigation and enforcement. Take the latter away, and all that is left is coercion. Sadly, the world has been there before.

Money has also become a matter of faith, and the consequences of a loss of faith in normal economic activities would themselves be catastrophic. One way to gauge the public mood is by measuring the level of interest in dystopian literature, cinema, etc. This is quite high.

Another indicator is prepper activity, taking concrete steps to enter the world of Mad Max. This is also high.

I believe that all human civilization is facing a challenge that extends beyond politics and national boundaries. I'm not going to debate that here, but I want to ask people if the response to any imagined challenge is likely to be a fight over lifeboats, given the state of society at present.

It is all too plausible that most people would answer "yes", and some would say the fighting has already started.
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PostPosted: Fri 22 Dec 2017, 12:00    Post subject:  


I'm not needling ya, or giving you a hard time. I am right there beside you saying nearly all of the same stuff.

But, that said, I have tried all my life to remember what true, nearly hard-coded by now, "bias" is. First off, it is not a pejorative term. Though when it comes to us "oldsters", we nearly make it pejorative. Which is a shame.

Let me give you an example. I come from a financial background, a quite deep one. But when I semi-retired in the mid-2000s, I told my self I had seen a lot, no, I had to have seen it all, after 4+ decades in the thick of the world's fin'l markets. But, always, from a young age to now, my love and interest in life has been something prosaic. It has been the bartering systems people, especially local people, will set up, assigning value to something that basically acts as a 'currency' for them, to allow them to conduct business back-and-forth.

In 2009, I got invited to look over something that you know today as the "block-chain". After studying it for months, alternatively excited about it but even more thinking there's no way in hell it would fly because of 'trust' issues, with both people and technology, I had to keep reminding myself to STOP looking at it & the world thru the eyes and experience I had gathered over the previous 4+ decades.

Once I did this, I began to see the inherent beauty in "block-chain", and, of course, the beauty (and outright current craziness) in what we all now know as Bitcoin. I had to cast everything aside from my past to look at what actually blockchain technology and bitcoin might become. I less so saw a common currency for the masses than than opposed to what I saw what it could for the industry I worked in all my life (Finance and world fin'l markets), changing the movement and verification and accounting of the world's gov't-backed monies.

Yes, sure, we all see the craziness of Bitcoin now, but the technology behind it WILL and IS changing the world, in ways you cannot even begin to imagine. The central idea and tenet of blockchain is this: it has the potential to reach out and touch every human on this planet as we go forward. It's that simple. From money, to medical, to social, to finance, to stuff most people can't even understand right now, it will touch these. And I am one of the believers that it will--despite what its visual child of digital coins will and won't do. For me, owning bitcoins was/is just a sideshow game. It is what blockchain has the potential to do.

The over arching point I am trying to make is that, as a person with 'jaded" and 'biased' eyes, it is too easy to see so many problems, to be so pessimistic. It is hard to be the opposite. But not impossible. Ask yourself a simple question: what leads you to believe that everything--EVERY single thing---that will become "centralized" will be nothing but a nasty overall occurrence for humankind? I'll tell you: it's our BIAS, and it's our inability to see that it is entirely possible that what we THINK is going to happen as things move into the cloud is not ACTUALLY what is going to happen.

I could sit here and pull positive stories out to counter every single negative, worrisome thing you, I and others have posted here. The trick is to stop yourself, and ask what do we not see that is coming down the road in the future?

You know what, in the spirit of Mad Max, we've had doomsayers of every nature and kind throughout history. Humanity, collectively, has quietly left every one of these voices in the dust, to be forgotten on the dustbin of history. They all screamed that one day, one day, they would be right. But, in fact, nearly none of them were. Take any and all Malthusian thoughts & tendencies about any discipline and/or occurrence in the world, and make yourself look with a positive eye. Force yourself to do it. It is eye-opening.

I will tell you this: the move to the "cloud" absolutely does not mean the "centralization" (again, something that has turned into a pejorative with us) will happen in a negative way. I, in fact, believe the move to the cloud, while fraught with things that will shock us, will be an absolutely positive thing for the overall human race. Why? I've personally, in the past 4-5 years, have seen a few things, and developments, that will use the "centralization" of the cloud to give humans, for example, more privacy-oriented things they couldn't have ever dreamed in ways most people cannot understand right now. Most people are fighting yesterday's ghosts & demons, they do not fight the future's because they have no way to know what they are. The most deleterious (and hilarious) statement in all of hunmanity is that "we are doomed to repeat the past". Guess what. That is and has been such a "big lie" that it makes Donald Trump look like the Dalai Lama.

I know it is hard for you, for us, to believe right now in the positives, especially when we believe we see only negatives (think about it, malware, hacking, supposed loss of privacy....you actually believe in your soul this all is now a "permanent" societal condition that will never be overcome?) Dang, if you do, prehistoric, I feel for you, because from now until your final days on this planet, you will not see and/or appreciate developments and actual implementations that are currently ongoing that will lead things in the exact opposite direction.

For example, passwords? Do yourself a favor and go read about SQRL, or Trust API, or....the list is long. They are just small examples, from the hundreds out there, that will make future discussions of a current here and now "password crisis" and/or "privacy-crisis" look foolhardy. As Bob D would say: change is a comin, the question is will you? Are there current problems? Yes, of course. But the answers are already out there, and will soon begin to wash over society until--that is--other oldsters (like us now) talk about the supposed new-new "bad" things that will, according to legend, bring humanity down.

I'm hoping & wishing you and yours have a Great, Happy Holidays. Same to everyone in this thread. Don't let the Grinch we all carry inside ourselves come out of the mental mountain in the mind to ruin anything Wink
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PostPosted: Fri 22 Dec 2017, 16:40    Post subject:  

rockedge wrote:
the Cloud means control......I rather have an old obscure OS with a load of programs on a hard drive....barely connected....than trust Apple, Microstuff and Google. Hell I still use some DOS programs which run SO fast these days.

Yup... And my old Win98 laptop... Wink

(which, IIRC, also runs Puppy 528 -- or was it 5.25 Retro... Wink )

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PostPosted: Fri 29 Dec 2017, 12:11    Post subject: a little good news  

For belham2's sake, I'll mention an example of a good thing in technology news. Today Apple did the right thing, after being caught doing something else. Don't expect anything similar if you have a Windows phone, or the vast majority of Android devices.

Note that this slowdown was simply a change to firmware, firmware subject to automatic updates. Even if you could exhaustively test a device at the time you bought it, this would not preclude later changes. You could turn off all such updates, which would expose you to exploitation by known criminals.

The larger problem comes from owning a device you don't actually understand or control. It's value can drop to approximately zero due to decisions in which you do not participate, and these decisions may well benefit those who make them.

I'll have more to say about economics and faith later. I'm still arguing about those automatic charges for a service I cancelled months ago.

Has anyone else experienced this predatory feature of modern marketing?

Meanwhile, I'll leave you with something to think about. All finance is ultimately about instruments of debt. You will naturally think about your mortgage or credit cards, but I'm talking about everything, include those slips of paper or plastic in your wallet. Every form of trading debt is equivalent to a currency, albeit with restrictions.

(If you believe real currency does not have restrictions you might try carrying a suitcase full through customs, not that I would personally recommend this.)

We've had some discussion on-line about new cryptocurrencies. This is only one aspect of many attempts to create currencies independent of any particular government. You may not consider this, but we have just come through a period when alternative currencies typically boom. I'm talking about the estimated $160 billion in gift cards traded each year in the U.S. I think this is about the equivalent of the GDP of New Zealand.
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PostPosted: Fri 29 Dec 2017, 12:28    Post subject:  

Apple did not do the right thing, they admitted trying to rip customers off even more so than normal.
The thing is, if you don't lie, you don't get caught.

"Just think of it as leaving early to avoid the rush" - T Pratchett
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PostPosted: Sat 30 Dec 2017, 10:17    Post subject:  

I'm not alone considering the state of the art in IT and world dire. Here's what cybersecurity experts told the BBC.

For the political angle we have Joe Scarborough recommending that people read The Gathering Storm, Churchill's account of the lead -up to WWII.

I actually read that, about 50 years ago. Details are fuzzy at this remove, but I can see why people are mentioning this. Going further back, I'd recommend The Proud Tower for the build-up to WWI.

I've already mentioned This Time Is Different, concerning financial defaults which caused loss of faith in governments and currencies. One episode that most closely resembles some current finagling was John Law's system.

It even happens that V.V. Putin has a sistema (cистема). There is some problem with this at present as the participants have moved over a trillion dollars worth of value out of the country, and Putin is trying to get it back. One might ask why those with Russian money, including Putin's close associates, have been so determined to invest it elsewhere.

Oh, another Russian word is germane to this discussion, and may even apply to some people in the U.S., bespredel (Беспредел).

Added: the problem of capital flight and repatriation is not unique to Russia. It turns out changes in U.S. tax laws will cause a one-time hit to profits by big U.S. banks as they move money around to exploit the new rules. This would not be happening if they had not put so much money outside the country. In the longer term they can be sure of more profits from changes in tax laws, after they adjust operations.

In one very special case we have to wonder not only where the money is, but even if it exists. One Donald J. Trump declared his net worth to be $10 billion or $11 billion during 2016 in a very public manner. Forbes and Bloomberg estimated $3,7 billion and $2.9 billion, respectively. This is a fairly bizarre situation in financial news, but the absurdity did not stop there.

A writer named Tim O'Brien (not the musician) wrote a book titled Trump Nation in which he argued that Trump may not even be a billionaire. This prompted a predictable libel lawsuit, which did not end at all well for Trump. Note: This publication is not known as a liberal bastion.

Under U.S. law, (which Trump wants to change,) a public figure must prove: 1) that the published statements are false; 2) that the author knew they were false and published them anyway, presumably for malicious purposes. The libel suit did not even get to first base. An uncertainty of about a factor of three, if not ten, in a basic financial fact seems a bit much to me.

This is relevant to a current argument about his personal profit from changes in the tax bill he just signed. In the public propaganda about tax bills we had Trump saying he would not profit from changes. Because he said "believe me, believe me" in one speech, I have assumed he was lying. His tax returns and much of his business remain off limits to investigative journalists, or firms like Forbes and Bloomberg, so we can't check.

There is another possibility: he could have the majority of his wealth outside the reach of the IRS, so he would take a one-time hit like Goldman-Sachs. This would be very interesting for the man shouting "America First!"

I only suggest this as an alternative. Simple lying seems more probable to me.

Multiple sources have indicated his financial empire is only a thin layer on top of assets owned by others. Projects in New York (Soho) and Toronto have paid to remove the name from buildings. The Ocean Club in Panama City is moving to do the same. Projects in Baku and Batumi failed badly. Trump c*a*s*i*n*o*s in Atlantic City are history. (Note: other c*a*s*i*n*o*s continue to operate there, and make more money than typical U.S. businesses.)

With this person reforming U.S. fiscal and monetary policy do you understand why I have doubts?
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PostPosted: Sat 30 Dec 2017, 13:49    Post subject:  

Wow, it never stops.

To ceaselessly look in the rear view mirror, and only see negatives with all of life and all of the human race, it just has to be a terrible way to live, and wake up every day to.

Well, don't dwell on a the poop you step in, as my Dad like to say; move yourself along and clean it off. On to brighter news: The SWIFT worldwide financial system, which has been known for decades to be a lumbering stone around the collective neck of the globe's financial movement of money, is beginning its slow swirl down the drain of obsolescence. Inertia and fear of change (something this overall thread has too much of) has kept SWIFT alive and where it is at.

One of the great, fantastic outcomes of this crypto-currency boom (as I had mentioned about blockchain earlier) is something truly inspiring called: "Ripple".

No it is not the ripple that drunkards imbibe in at their favorite hiding spot and/or before posting to internet forums. It is the Ripple of BC, and its rivalry with the SWIFT that has reach & went past the boiling point. Ripple converts (read: world's biggest financial entities are slowly coming on board, and, worse for SWIFT's sake, testing & kicking Ripple's tires)....converts have moved past the critical mass point.

Make no mistake, SWIFT is rushing as fast as they can to add modern technology to their system, but it is being realized it is way too little, way too late. And SWIFTs vulnerabilities and known weaknesses, say goodbye to them.

If you want your heart to be lifted about technology overall, especially in this day and age when companies are sticking their collective heads in the sand about moving to secure 2FA that isn't based on texts & phones, go read about Ripple. And how Ripple's Interledger Protocol for connecting payment networks and distributed ledgers that financial institutions can use to send and settle international payments among one another has become simply beautiful. Completely bypassing the current SWIFT correspondent banking model in which a payment makes several hops across a network of banks that have direct relationships with each other that has been point-blank of how "not to" do things. Ripple is one the Godsends & greatest developments blockchain will unleash to end this laziness and inertia.

For anyone's monies, big and/or small, there is no reason for any hops to ever occur in the movement of any monies to anywhere in the world, from the huge to the huge, the huge to the small (us), and the small to the small, and small back to the huge. Concerning specifically SWIFT, it is wasteful, wrong, fraught with vulnerabilities, and worst of all, so inefficient & wasteful ($$$) that it isn't even funny. If you've personally ever moved money from one country to another, you'll know what I am talking about here as it tentacles (in a sense) are why it incredibly takes days to move a few dollars/euros/yuan/yen around. It's a disgrace.

Ripple is something financial historians dreamed about 25-30 years ago, and lamented that the human race would never see anything like it. Well, here it is, almost 2018, and it has arrived, and the wait was worth it. Soon, this is one fantastic technology (and its brethen spreading across other sectors) will make the horror and past inefficiency of SWIFT look not only sour-in-the-mouth, but damn near criminal.

Next up if another full of doom & gloom post hits this thread, is how technology has and is completly upended the health care systems around the world for the better. Oh yes, they present problems, but those problems pale in comparison to the mountains of actual proof coming out of hospitals with not only procedures, but patient care, and most incredibly, the targeted treatments ([i]make love to the words "CRISPR, and"TALN" and "ZFN") that have and are completely changing children and adult lives that were otherwise once unthinkable.

It is such an exciting time in history to be alive and witness the next flowering and improving of ideas across humanity. And we are only at the beginning of this next jump. As ole boy W. Churchill once so aptly opined:

To improve is to change, to be perfect is to change often.
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PostPosted: Sun 31 Dec 2017, 12:40    Post subject:  

Well belham2, you might call it "looking in the rearview mirror", or you might call it learning from experience.

Yes, the SWIFT system is a mess, and changes are taking place to make it more secure for large banks. (BTW: I have had experience moving money between countries, and I agree it is a serious problem.) Individuals remain at risk of financial predation. (I am still fighting those recurring charges for services I discontinued. Others are dealing with such charges on magazine subscriptions. This kind of thing is hard to fix because people are making money from problems. Still, these are merely irritating financial flea bites compared to the capers that have stolen life savings, in some cases before people had such savings.)

Ripple does do something useful for banks, but is probably not much use to individuals. In that sense it should not be considered equivalent to Bitcoin.

Of course the fixes don't begin to address the problem of corrupt banks in the system, and there are some real doozies. Nor does it address the real problem of hacking enormous databases used by large institutions. We had some real wake-up calls during 2017, and so far as I can tell nobody has learned much at all.

A long series of serious breaches have taken place for several years, and what they have revealed is that the era of "some 400-lb. guy sitting on his bed" is over. The attackers are sophisticated teams fielded clandestinely by nation states or criminal organizations, where there is any distinction. Nobody has adapted to this new threat landscape, and some important people refuse to recognize that it exists.

One fact that should be abundantly clear is that there is no point in suing Microsoft unless you just like wasting money on attorneys. The guarantees you get from them are exactly the same you get from using a Unix derivative like Linux or BSD, "use at your own risk". That company escaped legal control by any government long ago.

I recall something called a consent decree, which quickly became a dead letter, not to mention an anti-trust case which decided the company selling the OS needed to be separate from the company selling applications to allow competition. M$ didn't find that convenient, so the court ruling went nowhere.

Despite the person above who did not catch my irony about Apple, I'm also skeptical about them. True, they have charged a premium, but that is not a major concern if people have a choice about buying. What I've noticed this year is that Apple has produced repeated blunders up to allowing root logins without password on the latest high-end system. This looks like evidence of the Peter Principle in action. Apple has reached its level of incompetence.

BTW: you might check on how Apple Pay gets into banking.

(Microsoft arrived much earlier, but then their business model was based on selling bugs, then selling fixes, then selling protection, then selling insurance, etc. Legally, this could only work with a complete lack of liability. If you read the licenses and terms of service you will discover that while they may provide you with something of value, this is only done out of the kindness of their hearts. You have no effective recourse if it fails and you are robbed blind. If you are a programmer, they also claim to own what is in your head, if you use one of their systems. For this reason, I do not.)

Google has done a great deal of innovation, and may continue to provide new devices and services many people want. Be that as it may, the vast majority of Android devices out there simply don't have current security updates, and far too many never will get them. This is another powerful incentive to keep buying new equipment. (The same thing applies to your Windows phone, and your XP or Vista system.) Google also seems to be too big to regulate.

This brings me to Amazon, which is a monopoly hidden in plain sight. Bezos seems determined to own or control the Universe and outlying territories. Buying a government could be a minor acquisition for them.

This is not entirely new, as other tech companies have gone on to own media empires. (MSNBC has been around for a while. YouTube is owned by Google, which also runs a news service. Apple and Yahoo! have their own news.) What is astonishing is the scope and vertical integration of Amazon business, plus the scarcity of legal challenges.

Next, I have to mention Facebook and Twitter, powerful social media that are currently part of the debate about "fake news". It should never have surprised anyone that Russia's intelligence services would exploit these, because one of the venture capital angels who financed their start-up was Yuri Milner, who got a significant part of the money to play venture capital games from VTB, a bank with close ties to the siloviki around Putin.

You can read about the interest "the organs of state security" had in getting voice recordings and photographs to identify anonymous telephone callers in Aleksandr Solzhenitsyn's The First Circle (also a new edition, In The First Circle. While the book is fiction, Solzhenitsyn was writing from direct personal experience. Current social media provide a cornucopia for them to exploit, and we are now dealing with the direct successors of Stalin's NKVD, OGPU, MGB or KGB and GRU. This list omits the corresponding Chinese, Korean, etc. organizations, and the CIA, NSA, GCHQ, etc.

I'm not entirely alone in my analysis. Here's a TED talk on the dystopian nature of the systems we are building to catch clicks.

Bitcoin has already been used to pay hit men and buy slaves. (The fellow called "Dread Pirate Roberts" is in prison as a result of the first. You might just ask if some of the functions of a government might be desirable, compared to playing games with all cards wild.) Ripple is tailored for the use of institutions like banks, not ordinary individuals. This raises the question of trusting banks. Besides the surprising banking exploits of people like Paul Manafort currently under investigation, or the multiple charges of massive money laundering by Deutsche Bank, there is considerable evidence still not sifted through that a great deal of international banking has been highly corrupt.

For most people the so-called [url=https://www.nytimes.com/2016/04/05/world/panama-papers-explainer.htmlPanama Papers[/url] were only a blip on their financial radar. These revelations still caused governments to fall. The beat goes on at present with the Paradise Papers. The revelations about a single bank in Cyprus I mentioned are only the tip of an iceberg. Other indications are that this is a hotspot for fraud, money laundering and crimes I probably can't name.

I can't tell you how many times a line of investigation about financial matters has run into a brick wall in some place like Cyprus, Panama, Bermuda, Belize, The Cayman Islands, The British Virgin Islands, The Grenadines, The Seychelles, etc.

Some business in these places must be lawful, but if you go through ten levels of shell companies without finding the ultimate beneficiary, I think it is safe to conclude there is criminal activity hidden behind this smokescreen.

You have touched a nerve, so I'm going to post something I wrote earlier, but held back.

Back in the 1980s, which is now close to the Pleistocene, I found that I couldn't make any sense of how the stock market was valuing companies, and I put all my savings in a fund which traded only in securities backed by the full faith of the U.S. government. I missed out on significant growth, but I also missed out on the 1987 crash which took 22% of share value in one day. I even picked up a boost when other people flooded into that bond market looking for a safe haven.

I didn't become rich, but I didn't have to spend all my time worrying about money. It is hard to do so if you are also trying to earn a PhD.

Some of you already know that I live in Florida, which happens to have played a role in the build-up to the 2008 crisis. It is also a place where you can see expensive real estate that seems to make no sense. This may be miniature palaces that are well-maintained, but seldom used, or it may be large buildings which seem to spring up like mushrooms from subterranean financial sources. These distort the market, and you end up with less valuable properties being traded at unrealistic values. We never came close to getting to the bottom of this surge in real estate investment.

Some of this is due to flight capital from troubled parts of the world. These could be good people trying to flee a corrupt government with some small portion of their savings, or it could be the nominal owners are only stand-ins for crooks and kleptocrats responsible for the corruption driving people to flee. I'll have more to say about real estate and money laundering later.

In the early 2000s I found I couldn't make sense of how people were valuing real estate. My previous safe haven was no longer as easily accessible, so I trusted my bank to manage a trust fund for me, with explicit instructions about avoiding risk. In 2008 I lost about 25% of my life savings in one week. I hadn't even known I was investing in that market.

Pawing through the wreckage of the collapse I learned about several acronyms: CMO, CDO, CDS. The first two are collateralized mortgage obligations and collateralized debt obligations. More recently you can add CLO, collateralized loan obligation. All of these involve slicing and dicing various ordinary mortgages or other debts into tidy packages with more uniform characteristics, and then getting the resulting package rated AAA.

The immediate problem here is that it is much harder for buyers of these instruments to go inside each package and evaluate the potential for failure from the multiple loans the way a local bank could evaluate each of the mortgages they wrote. This situation should always raise warning flags of potential for fraud and "moral hazard".

(The person selling an instrument may profit even if the underlying investment goes bad. At a minimum they misjudge risk, at worst they may cause default after they have made their own money. Buying undervalued instruments after a crash then starts the next cycle.)

Note also here the abuse of financial rating agencies. Large banks had departments gaming the system to get top ratings.

You should always be aware of potential for abuse when traders who have no intention of holding an investment to maturity dominate a market.

The third ominous acronym was CDS, credit default swap. This is where one bank swaps the risk of default on part of its portfolio with another institution. Theory is that this makes it harder for individual institution to fail, and makes the system more robust. Institutions had used these to insulate themselves from risk, which had a definite effect on their willingness to trade risky financial instruments.

Behind these instruments there were things called derivatives, which sound like features of calculus, but are conceptually simpler. These were side bets on the market used to increase leverage on slowly-changing investments to make them more competitive when the market was going up. Leverage also works when markets are going down, but that is less encouraging to tell potential investors, so those selling financial instruments say less about it.

You can get into enormous complexity in trying to make sense of financial instruments, but I'll give you a clue that will make matters simpler: many instruments are simply bilateral contracts between investors and institutions. Stocks and bonds are regulated by the SEC. Futures are regulated somewhat differently, but are still subject to regulation. Prices on exchanges are public information, but contracts typically contain trade secrets revealing business strategies. Only part of these contracts becomes public information in the normal course of business.

In 2008 even the top bankers were unaware of the way these things interacted. It wasn't until Goldman-Sachs came clean at an emergency meeting of New York's Federal Reserve bank that the final piece of the puzzle was in place to show how different institutions were tied together with such firms as Lehman Brothers. People who invested earlier were completely in the dark about how major banks were connected.

(There is a recurrent theme here about practices designed to favor insiders over outsiders or "marks" in criminal jargon. )

It wasn't as if there had been no warning. The old and respected firm of Bear-Stearns had failed in March of 2008.

So, why did the failure of Lehman Brothers come as a stunning surprise? There were plenty of games being played in the run-up to the crash, but I'm going to focus on a single nasty one called repo 105.

It turned out Lehman Brothers was selling toxic assets to other institutions to get these off the books before quarterly reports. Why would anyone buy such things? Because Lehman Brothers was selling them with a repurchase agreement guaranteeing they would buy them back at the same price. This worked to keep investors in the dark for three quarters in 2008, and in the fourth quarter Lehman Brothers were forced into bankruptcy.

Wasn't Lehman Brothers subject to audits? Yes, they were. Ernst and Young, a global accounting powerhouse, had certified these operations as according with GAAP (generally accepted accounting practice). They were aware something was going on, but in testifying to the bankruptcy court they pleaded that Lehman Brothers management had lied to them.

Did anyone at Lehman Brothers go to jail? Did Ernst and Young collapse the way Arthur Anderson did when its audits of Enron were shown to be worse than useless? Nobody went to jail, and Ernst and Young went on to new strengths.

Should we be checking on other institutions they have certified as sound and law-abiding? How about FBME? Ernst & Young audited them.

When I got the credit line mentioned in a post above I joked that I would use it to sell Bitcoin short, (even though I had no real intention of gambling that way.) Had I actually done so, at that time, I could have covered the short within a week while making more in that one transaction than I saved in a working career. What does this tell you about the value of technical education, hard work and sound investments?

What kind of society do you have without those features?

N.B. If you don't have experience with futures, and short sales in particular, I have to warn you that aggressive shorts are extremely risky. Your exposure to loss can be much more than you invest. If you shorted Bitcoin at $1,000, and watched it zoom past $15,000 you could be bankrupt right now.

That's quite enough for now. I'm exhausted.
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PostPosted: Mon 01 Jan 2018, 17:07    Post subject:  

Good God... the MBS market in the early 2000's 18% dividend, and there was a capital gain on top. This after the Long Term Capital collapse. The pieces were ripe.

But by 2005 the meezzanine and tiered structured loans and CDO/CMO/CMS origins led me to think that this is really a dice-game with bettors playing for/against the package offered. It turned out to be true. Aside from trying to achieve a AAA rating, these were complicated OPTIONS, and only certain players were allowed. In plain english the deceit was complete. By June 2005 I was out, and investing in stable things (GWR and CAT for example) with one risky investment in AMX (America Movil ADR's A.K.A. Tracfone USA amongst other things). By June 2007 I was 0% invested, and held my powder dry. The only "bet" I made against myself... as a hedge... was Gold at about $400/oz during 2004/05. It looked under-valued given the MBS paperwork fiasco mentioned above.

edit*** Yes I remember Florida, IIRC there was a judge in Dade (?) County gavelling hundreds if not thousands of mortgages in favor of the mortgagee (home-owner). Why, you ask?, because the Bank that was supposed to hold the paperwoork, did not hold it. They invested in a CDO/CMO/CMS obligation and turned-over the Mortgage as collateral. Thus, the Bank was no longer in possession of the duly authorized Mortgage contract, and therefore not allowed to collect payment upon such mortgage. Now there's a bargain for the home-owner.

Just remeniscing (sp?)

Linux user #498913 "Some people need to reimagine their thinking."
"Zuckerberg: a large city inhabited by mentally challenged people."
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PostPosted: Thu 04 Jan 2018, 10:52    Post subject:  

I think belham2 and I agree about the latest news concerning Intel bugs exposing kernel information to non-kernel processes like browsers running scripts sent over the Internet. AMD probably has similar vulnerabilites to "Meltdown", but these have not been demonstrated. Some ARM chips also have similar memory architecture borrowed from all those "successful" x86 designs. Here's a translation of the Intel response.

I particularly love the CERT recommendation. Question: where do you buy a replacement?

Now, back to the question that we've been debating. Is it a good idea to depend on a single software supplier? Has complexity overwhelmed even the best and brightest? Should you keep all your important data in one place, on a system you don't really control?

One more piece of wisdom: this is not the last huge vulnerability. The resources available to some attackers enable types of attacks previously dismissed as dystopian fantasies.
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PostPosted: Thu 04 Jan 2018, 11:56    Post subject:  


Florida real estate has provided any number of examples of how to run scams, and how not to hold property for long-term gain.

My Florida grandparents had stories about the 1920s boom, plus the 1928 and 1935 hurricanes. The cycle repeated in the 1960s. Florida played a big role in the 2008 crash. Expect more of the same.

Here's one I've been watching in wonder for years, Cape Coral.

A great deal of argument has been about what will happen by 2100, which might indeed be grim. What people overlook is that the 15 foot/5m storm surge that would wipe Cape Coral off the map is quite possible at present. When Irma struck the Keys, it caused an 11 foot storm surge that washed completely over Big Pine Key. That storm never regained full organization after it struck Cuba, (probably because of zonal shear.) A 15 foot surge is entirely possible in South Florida. A category 5 storm approaching from the wrong direction could cause worse.

Record storm surges in the U.S. took place at Pass Christian, Mississippi when Camille and Katrina hit. The worst was 27 feet/8m.

A great many people griped about the massive evacuation of Miami for Irma, when the storm actually hit hundreds of km. away. There was good reason for caution. Miami Beach already has severe "nuisance flooding" with unusually high tides without storms. In addition to wading through salt water, you have the problem of water contamination. People regularly find bacteria from sewage and septic tanks in Biscayne Bay.

When I read that a construction crane had collapsed in Miami, even though the city was spared the worst of the winds, I checked on how much construction was going on there, with the threat of flooding and potential sea level rise. It turns out there is a lot.

Are the developers taking measures to protect from the problem? The main thing they are doing is protecting themselves. They are still building high-rise condominiums with underground parking garages. A 15 foot/5m storm surge would flood them and also wreck power and sewage, and I'm talking about right now, not some distant future. There is also the question of who would be around to service those buildings after flooding wipes out cheap housing. Most people in service jobs live right down on the ground.

The financial consequences would hardly affect developers because they will have sold the building piecemeal to people who don't have a clue. Besides losing their life savings, some could easily lose their lives.
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PostPosted: Mon 22 Jan 2018, 05:46    Post subject:  

A small example of the wonderfulness that is going to come out of Bitcoin/blockchain technology. Open the hatches, folks, for these are exciting times we live in as the baby-early days of technology unfolds:

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