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Summer Is Over: Back to the Salt Mine.

Summary: Summer is over with little prospect of warm weather in September. The schools are back and the party conference season approaches. What passes for life is returning to the British political system as the UK continues its losing battle with EU negotiators about Brexit. In the UK growth and business confidence are slumping rapidly. Austerity continues unabated and student loan interest rates are now about 24 times the Bank of England base rate. In Northern Ireland disagreements between Sinn Fein and the DUP are starting up again. The Equinox approaches and Christmas is not too far away. Maybe it’s time for a tax on football transfers.

It is less than a month since the last piece was posted on Outsidethebubble.net but it seems an age. What has been happening? The UK government is completely swamped by Brexit. Other business is so marginalised that little is actually happening. Austerity continues to bite and the cuts are having increasingly damaging effects on many individuals. Lowest paid workers are about to face a fourfold increase in their pension contributions from April. Students are now being charged an extortionate 6.1% interest on their loans. Even some Tory MPs think this may be excessive.

The economy continues to falter. Lloyds barometer of business confidence has dropped seven points to 38%, lowest level since 2012. Economic optimism has fallen 10 points to just 18%, The always excellent mainly macro blog (see: https://mainlymacro.blogspot.co.uk/) has a piece on 31 August 2017 pointing out that the worsening exchange rate against the Europe might have been expected to increase exports but in fact they are unchanged.

British companies are maintaining their overseas prices and pocketing their increased profits. Unsurprisingly those new profits are not being passed to the workers. Wage growth continues to stagnate. GDP growth is now way below that of the Eurozone, the US, Japan and many other countries. The British economy is now one of the worst performing of the G 20 nations.

Three months after a disastrous general election Theresa May remains Prime Minister. She has declared she will go on and on in a way so reminiscent of Margaret Thatcher before she was defenestrated. She looks a worrying combination of tired and defiant, but the defiance is that of a naughty schoolgirl being interrogated by the headmistress.

George Osborne continues to crouch on his eagles nest at the top of the London Evening Standard building. At every opportunity he drips acid onto Theresa May. Revenge is sweet against the woman who dismissed him from government so cruelly. He has just written a damning editorial that likened her premiership to the “living dead” in a “second rate horror film”.

The Tory party have no appetite now for a leadership battle. That would make an early general election difficult to resist. However the main problem for the Tory party is that the principal contenders look increasingly unattractive.

Boris Johnson has been widely criticised for his performance as Foreign Secretary and now appears to have the international clout of a second hand cotton bud. Boris has been very quiet over the summer. Yet George Osborne always has a little acid left for Boris. Boris’s only chance of becoming PM is by keeping very quiet and behaving himself but it seems unlikely he can keep quiet enough.

David Davis, the British Brexit Secretary, has been described by Dominic Cummings, the Campaign Director of the successful Vote Leave campaign, as “thick as mince, lazy as a toad and as vain as Narcissus”. As the Brexit negotiations progress (or more precisely don’t progress) that view of Davies looks increasingly apposite. He is no longer seen as a plausible candidate for PM.

The Tory party have always done a good job at producing grey men. Philip Hammond is currently the greyest in the Cabinet. Spreadsheet Phil as he is known continues to show the damaging effects of his charisma bypass operation. Again there is not much support for him from Tory MPs. Difficult to think of him leading the Tories to electoral victory.

One of the problems with the Tory party is that it routinely crucifies the first MP to challenge a Prime Minister (think of Michael Heseltine). Younger Tory MPs are sitting on their thumbs waiting to see what might happen at the Tory party conference which starts on 1 October. Perhaps the party delegates are crazy enough to abandon Theresa May in favour of some completely implausible candidate such as Jacob Rees-Mogg or Andrea Leadsom. That might give the Tory party the jolt to choose someone much younger and less contaminated by the seven years of failed economic policies.

Labour are unsure about their short-term strategy. They feel confident of doing even better at the next election yet the opinion polls suggest there may not be such a big margin after all between them and the Tories. The Labour Party conference starting 24 September may help to focus the minds of the party on the not inconsiderable mountain they still have to climb.

If Labour wanted to force a general election there is a major problem in actually doing it. The Tories are unlikely to vote against their own government and, with the help of the DUP, don’t actually need to resign even if they lose significant votes in the Commons. Forcing a general election would be tricky for Labour therefore.

Brexit is everywhere. Keir Starmer who leads the Labour Brexit team has convinced the shadow cabinet to back a much softer version of Brexit. He wants to keep the UK in the single market and allow substantial mobility for people. If Labour were to be in government the direction of the Brexit negotiations would change radically.

At present the Tory-led Brexit negotiations are running rapidly into the sand. European negotiators are deeply frustrated with the lack of specificity in the British position papers and want to substantially finalise the position of European workers in the UK after Brexit, the Northern Irish border, and the financial settlement with the EU.

There are increasing calls to hold a second referendum. This is resisted strongly by the Leave side who claim that the people have spoken and their will must be respected. Given how vague the original referendum subject was it is difficult to resist a second referendum to establish that their will is indeed to leave the EU on the terms negotiated by the Brexit Secretary. There is a growing feeling in the country that we may not, after all, actually leave the EU at all.

In summary, the next few months look to be very interesting if you happen to be interested in politics in the UK. Should be fun!

A Spot of Serious Collateral Damage?

Summary: The war of words between the US and North Korea could easily spill over into military action. A full global conflagration is relatively unlikely. What is much more possible would be a limited strike by the US against North Korea followed by a tit-for-tat response by North Korea against South Korea. This could seriously damage the supply of computer memory chips which are critical for a vast range of digital equipment. That would have a major effect on the world economy and should not be underestimated in its importance.

The Korean War started in 1950 when North Korea invaded South Korea. The UN with the US as the principal force came to the aid of South Korea while China and the Soviet Union backed North Korea. In 1953 an armistice was signed creating the Korean demilitarised zone (DMZ) to separate North and South Korea but no peace treaty was ever signed and technically the two Koreas are still at war.

With the election of Donald Trump and the increasingly bellicose pronouncements from the leader of North Korea, Kim Jong-un, worldwide concern has increased. There is a worry that this might lead to a global conflagration. I believe that these concerns are exaggerated.

The recent military parade in Pyongyang showed intercontinental ballistic missiles that were subsequently shown to be wooden models. They have, however, demonstrated long-range missiles successfully and so there undoubtedly will be growing concern within the US. The North Korean regime has exploded nuclear devices but so far these have not been particularly powerful or impressive. They are probably some way away from developing viable nuclear weapons rather than experimental explosions.  Although missiles have been launched, many have not performed properly and those that have are limited in range.

Nevertheless, the American Administration is undoubtedly concerned about the prospect of North Korea being able to attack the US. What is much more likely than an all-out war is some much more limited military action by the US intended to hinder substantially North Korean military progress. That in turn would not lead to a nuclear response from North Korea (if only because that response is not something they could give now).

Much more likely would be a more limited attack on South Korea since US assets are largely unreachable by North Korea’s weaponry. Within easy reach of the DMZ is the heartland of South Korea’s technological explosion. Such an attack could have a major effect on the South Korean economy. It would also have a devastating effect on the world.

When viewed from right-wing US perspective that might be dismissed as being too bad. South Korea is a long way away and they should be able to stand up to themselves. Who cares if a number of foreigners in a distant country are killed? The US is able to brush that aside remarkably easily throughout the Middle East. But if there was even limited military action by North Korea against South Korea it could have a devastating effect on a major part of the world economy which depends on South Korea for critical electronic components.

One type of memory semiconductor known as dynamic random-access memory (DRAMs) is critical for cell phones, desktop computers, global positioning systems (GPS), smart phones, tablets as well as a wide range of consumer electronics such as digital cameras, set-top boxes, smart TVs etc. They are also key components in networking devices.

Without these memory chips it would simply stop being possible to manufacture almost any of the above devices that we depend on so much today.  About 75% of the DRAMs manufactured worldwide are made in South Korea and most of those within 100 km of the heavily armed DMZ. The two biggest companies that make these devices are Samsung and  SK Hynix. Both are based near Seoul. South Korea is the second largest global semiconductor manufacturer and, in memory chips completely dominates the supply.

The manufacture of these critical devices is a particularly tricky business requiring extraordinarily expensive fabrication plants. Recent estimates of the typical capital expenditure needed for a new fab facility are in the range of $4 billion-$10 billion depending on the type of memory to be manufactured. Any damage to such a facility would be extremely expensive to repair but above all would take a very long time to undertake as the manufacture of the machines needed is a particularly difficult process in itself. Delivery times on new fab facilities are measured in years.

The conditions needed for the manufacture of state-of-the-art memory components are also very demanding. A single speck of dust can completely destroy a device and any chemical contamination can bring the entire production facility to a halt. An attack by North Korea using conventional weapons even if they do not directly hit a semiconductor manufacturing facility could easily produce enough ground percussion to dislodge dust in the vicinity of the fab line. They would have to be closed immediately and fully checked and, if necessary,  decontaminated before restarting even if they experienced no direct damage.

However, if the memory manufacturing facilities around Seoul are affected in any way then a major part of the world’s supplies of memory devices could be halted for a significant length of time. The manufacture of new mobile phones, computers, Internet storage devices and systems etc. would come to a halt no matter where those units were manufactured. If there are no memory chips then none of them can be made. If the memory supply dries up the effect on our modern economy would be relatively rapid and very severe.

A few years ago semiconductor production in Thailand was affected by flooding and that caused a significant shortage of disk drives used for bulk storage in computer systems. Eventually that got back online. Anything like this happening in South Korea to the DRAM supply would be much harder on the world economy. It would be an easy hit for North Korea, not likely to produce a much more intense reaction from the West and therefore very tempting for the North Korean leader who seems to believe his own extraordinary rhetoric.

Can Jeremy Corbyn Walk Upon the Water?

Summary: There is a big potential danger in the levels of confidence exuded by the Labour Party these days. Labour must be very careful making statements that might alienate their core supporters and particularly the young activists who were so key to the recent electoral success. The poll lead for Labour is not as big as the wildly optimistic feelings of so many of their supporters. Jeremy Corbyn’s ambiguity about Brexit is something that is best to maintain. Labour has done well in being ambiguous and nuanced about its position on Brexit and it really must maintain that.

There is a great deal of optimism and confidence in the Labour Party following their near-win at the last election. The danger is over-confidence. We must remember that the Tories will regroup, they will come up with policies that are much more moderate particularly when they change their leader. That change is likely to come relatively soon.

We can be confident that the right-wing media will continue their overt and intentional distortion of reality to support the Tories as well as an extreme form of Brexit. Only today, Theresa May tried to pour scorn on many Labour policies which in fact are very popular. The days of neoliberalism are gone (see here for a children’s guide: http://outsidethebubble.net/2016/09/22/neoliberalism-a-beginners-guide/).

We should be under no illusions that the next election battle will be tough. Labour made very effective use of the burgeoning younger membership of the party who understood social media so much better than the Tories. Next time round the Tories will no doubt make a better fist of things given the resources they have. In the meantime it is critical that Labour does nothing to alienate their young activists. The younger generations are generally very pro-Europe, pro-Remain.

This means that Labour and Jeremy Corbyn really must avoid unnecessarily rigid, inflexible statements about Labour’s policy on Europe and Brexit. The mood of the country is increasingly turning away from Brexit. It can be left to go further in a short-term without any nudging from Labour. The Tories are managing to do everything that Labour might want to make Brexit the disaster that so many of us think it will be.

Once Labour leads a government it will become responsible for the Brexit negotiations. There will be a great deal of goodwill from the European side given the extraordinarily incompetent way that the Tories have managed the business of negotiating Brexit so far. Many European countries would welcome changes within the EU and a pragmatic and thoughtful Labour-driven Brexit discussions may well be able to help articulating changes that would be more popular than simply providing for an adequate Brexit. Keeping that flexibility alive now will be very important in the future.

Maintaining that flexibility will also undoubtedly improve Labour’s appeal to its many young activists. These activists must be kept energised and enthusiastic right up to beyond the next election. They must not be taken for granted or be marginalised because of the overconfidence that seems to be rampant within the Labour Party today. It seems unlikely that Jeremy Corbyn can, in fact, walk upon the water.

Fallon’s Folly

Operations room in HMS Queen Elizabeth.

Summary: The computer hardware, software and infrastructure on Britain’s latest aircraft carrier, HMS Queen Elizabeth is quite inappropriate and completely out of date already. It is another example of just how wasteful the Ministry of Defence is in purchasing armaments to fight the last war, remaining blissfully unaware that warfare in the 21st-century will be very different. Aircraft carriers and other capital ships will survive for the shortest amount of time given modern anti-ship weapon systems. The fact that our aircraft carriers will be so out of date technically before they even enter service is very concerning.

The pride of the British Navy has just sailed out from Rosyth dockyard in Scotland. Like so many of the MoD procurement programmes , this spanking new aircraft carrier is already greatly flawed and largely inappropriate for the 21st-century. You can read more about this here: http://outsidethebubble.net/2017/03/16/britain-defenceless-in-the-21st-century/. What we really should be doing now to make us safe in the future has been discussed here: http://outsidethebubble.net/2017/04/10/defence-in-the-21st-century/.  However this piece is principally about the on-board computer hardware and software and the way it is worryingly insecure.

Our Defence Secretary, Michael Fallon, is very bullish about his lovely new aircraft carrier but many experts have been surprised to discover that it is using Windows XP as an operating system on some of the on-board computers.

Windows XP was released in 2001 and by the time that HMS Queen Elizabeth is in service Windows XP will be 20 years old. Mr Fallon assures us that it is a very secure system and one might be forgiven for thinking that because it is on board a ship it will be very easy to protect. Sadly that completely misunderstands where cyber insecurity comes from. It is seldom from hardware, much more often a consequence of what has been done by real people.

Windows XP works fine and is even reasonably fast for many operations. Michael Fallon probably understands computer security being that outside cyber attacks will be blocked. It may indeed not be easy to hack into the system from outside but of course there are to be 1600 individuals on board.

Each of them may well have been security vetted but what has happened to them since that vetting? Has any of them got into some kind of trouble, debt or perhaps having an affair outside marriage? Surely these are the sort of things that could lead to an individual being blackmailed into compromising security on board.

All we need is an agent of a potential enemy to find one of the 1600 servicemen on board who can be “persuaded” just pop something into the computer for a moment. No visible damage will be done, no clues will be left.

The worst sort of cyber attacks are not the ones that have brought down the National Health Service in recent weeks (also because they were using Windows XP-based computers). The much more worrying cyber attacks come from the Stuxnet type computer worm. These are injected into a computer and sit quietly, in principle for years, before they are activated. All they do is replace a small piece of operating system code which may be activated on a specific date or when certain events happen such as loading a live guided missile into its launching tube.

All one needs to do is to place into a computer port a simple, apparently innocuous variant on the USB stick that most of us have. The picture above shows computers with their USB ports visible. Anybody with any degree of access to that area could carry this out. Modern operating systems like Windows 10 have very substantial capacity to block unauthorised USB-type hardware and that is why it is so important for most organisations to get rid of Windows XP as a matter of urgency. It would only take a minute for the necessary software to be downloaded into the machine and embed itself invisibly for future use.

At some time in the future that downloaded malicious virus can be activated which could cause the ship simply to stop, or to sail at full speed in a circle or in reverse. Or it could be driven onto the rocks not much can be done about it.

The Ministry of Defence’s claimed that the software systems in HMS Queen Elizabeth are fully protected is simply preposterous. The final worrying statement is that there will be a computer refit within a decade implies that hardware and software will be nearly a quarter of a century old. Does anybody remember just how dreadful and slow computer hardware was 25 years ago? This wouldn’t be Windows XP or Windows 95 but equivalent to us running Windows 3.1 today. The MoD should be planning a computer refit right now to bring the hardware and the software up-to-date. Computer technology is advancing at an ever increasing speed. The difference between Windows XP and the latest software in 10 years time will be like night and day.

Attempting to upgrade systems after such a long period of time is anyway very difficult and likely to be expensive. Hardware becomes incompatible and software very difficult to maintain because old languages and operating system commands are no longer being developed and maintained. The amount of effort will be substantial particularly as the key hardware is that which connects the computers to the various systems on board. Even getting hardware compatibility starts to become a real problem.

Today, 17 July 2017, it is revealed that the data networks within the carrier are also very slow, and are capable of running at only 8 Mb a second. We must remember that modern weapon systems generate very large amounts of data because it takes a lot of data to describe a rapidly changing battle environment. And don’t forget that 8 MB/sec is not available for everyone simultaneously. In reality it is available for one task at one moment and another task has to wait until data bandwidth is available. 8 MB per second is barely fast enough to watch a DVD and yet a £3 billion aircraft carrier has got to make do with that! This is and inadequate speed for a cottage in the Lake District or North Norfolk but not in a state-of-the-art fighting machine for the 21st-century

Domestic bandwidths are these days up to 300 Mb per second. Gigabit bandwidth is now commonplace in commercial environments in the UK and overseas. The report in today’s Times newspaper explains that the obscenely expensive jets that are being purchased for the UK simply cannot communicate data back to other aircraft and to the surface support ships adequately without revealing the position of those jets.

Sadly this is another example of massive procurement incompetence at the Ministry of Defence. Vast sums of money are being wasted on things simply couldn’t survive a 21st-century war and are therefore an extraordinary waste of money.

 

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