There is nothing in the technological profile of the latest Chinese attack on Google Mail to indicate the involvement of the Chinese central government. In the flurry of official denials since, though, the Chinese state-controlled media have virtually acknowledged that the central government was a party to the phishing scheme that specifically targeted U.S. government decision-makers. So what was China looking for?
Government officials aren’t legally permitted to carry on government operations using a private email service. It must happen sometimes, but not often; in my many dealings with politicos, bureaucrats, and government data centers, I have never seen it, only heard distant rumors. If you could read everyone’s Gmail accounts you would hardly get a decent picture of what the government is doing and planning.
China, then, isn’t fishing for operational details of government actions. Instead, I believe it must be looking at the people. Who in Congress is frustrated at the end of the day? Are Fed examiners preparing for an imminent banking crisis? Are Treasury officials making contingency plans in case they do not get paid when August rolls around? This is the kind of situational information that would routinely leak out in the wording of casual messages to (and from) family members and friends. It is enough information to give a foreign government, or a hedge fund for that matter, a fair amount of advance warning about the timing of government actions that could lead to a collapse in the U.S. economy.
If anyone would know how to do this, it would be China, which keeps tabs on its own government officials in the same way. If the Chinese central government is involved, though, it is surely not acting alone. More likely the operation is being financed by someone who has more money than China has. But these details scarcely matter. The important question is whether there is any meaning in the timing of the attack. Is there a particular reason why someone with billions of dollars to spend on spying would be particularly concerned about economic policy decisions in the U.S. government right now?
Obviously, there is. Bondholders and speculators stand to gain or lose enormous sums of money, potentially trillions of dollars, from the U.S. government’s looming liquidity crisis. This is a trading model that I believe has already been tested with coordinated behind-the-scenes financial moves on Greece, Ireland, and Portugal. Someone with tens of billions of dollars who hoped to become the world’s first trillionaire would only have to have to create or anticipate the biggest financial crisis ever, then time their trades reasonably well. And if it took tens of millions of dollars to buy off Congress to precipitate the crisis, you would need to know which twenty or thirty representatives to approach.
Of course, the fact that a speculator is looking for something to happen doesn’t mean that it will happen. Speculators bet wrong almost as often as they bet right. Still, with a financial crisis looming, someone out there is spending sums of money most of us can’t even imagine to try to get one step ahead of events in Washington. Even without knowing who that is or what specifically they are thinking, this scenario is, in my opinion, reason enough for caution.