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The surveillance by the National Security Agency, the government’s chief eavesdropping agency, would rely on a set of sensors deployed in computer networks for critical infrastructure that would be triggered by unusual activity suggesting an impending cyber attack, though it wouldn’t persistently monitor the whole system, these people said.

Defense contractor Raytheon Corp. recently won a classified contract for the initial phase of the surveillance effort valued at up to $100 million, said a person familiar with the project.

An NSA spokeswoman said the agency had no information to provide on the program. A Raytheon spokesman declined to comment.

Some industry and government officials familiar with the program see Perfect Citizen as an intrusion by the NSA into domestic affairs, while others say it is an important program to combat an emerging security threat that only the NSA is equipped to provide.

“The overall purpose of the [program] is our Government…feel[s] that they need to insure the Public Sector is doing all they can to secure Infrastructure critical to our National Security,” said one internal Raytheon email, the text of which was seen by The Wall Street Journal. “Perfect Citizen is Big Brother.”

Raytheon declined to comment on this email.

A U.S. military official called the program long overdue and said any intrusion into privacy is no greater than what the public already endures from traffic cameras. It’s a logical extension of the work federal agencies have done in the past to protect physical attacks on critical infrastructure that could sabotage the government or key parts of the country, the official said.

U.S. intelligence officials have grown increasingly alarmed about what they believe to be Chinese and Russian surveillance of computer systems that control the electric grid and other U.S. infrastructure. Officials are unable to describe the full scope of the problem, however, because they have had limited ability to pull together all the private data.

Perfect Citizen will look at large, typically older computer control systems that were often designed without Internet connectivity or security in mind. Many of those systems—which run everything from subway systems to air-traffic control networks—have since been linked to the Internet, making them more efficient but also exposing them to cyber attack.

The goal is to close the “big, glaring holes” in the U.S.’s understanding of the nature of the cyber threat against its infrastructure, said one industry specialist familiar with the program. “We don’t have a dedicated way to understand the problem.”

The information gathered by Perfect Citizen could also have applications beyond the critical infrastructure sector, officials said, serving as a data bank that would also help companies and agencies who call upon NSA for help with investigations of cyber attacks, as Google did when it sustained a major attack late last year.

The U.S. government has for more than a decade claimed a national-security interest in privately owned critical infrastructure that, if attacked, could cause significant damage to the government or the economy. Initially, it established relationships with utility companies so it could, for instance, request that a power company seal a manhole that provides access to a key power line for a government agency.

With the growth in concern about cyber attacks, these relationships began to extend into the electronic arena, and the only U.S. agency equipped to manage electronic assessments of critical-infrastructure vulnerabilities is the NSA, government and industry officials said.

The NSA years ago began a small-scale effort to address this problem code-named April Strawberry, the military official said. The program researched vulnerabilities in computer networks running critical infrastructure and sought ways to close security holes.

That led to initial work on Perfect Citizen, which was a piecemeal effort to forge relationships with some companies, particularly energy companies, whose infrastructure is widely used across the country.

The classified program is now being expanded with funding from the multibillion-dollar Comprehensive National Cybersecurity Initiative, which started at the end of the Bush administration and has been continued by the Obama administration, officials said. With that infusion of money, the NSA is now seeking to map out intrusions into critical infrastructure across the country.

Because the program is still in the early stages, much remains to be worked out, such as which computer control systems will be monitored and how the data will be collected. NSA would likely start with the systems that have the most important security implications if attacked, such as electric, nuclear, and air-traffic-control systems, they said.

Intelligence officials have met with utilities’ CEOs and those discussions convinced them of the gravity of the threat against U.S. infrastructure, an industry specialist said, but the CEOs concluded they needed better threat information and guidance on what to do in the event of a major cyber attack.

Some companies may agree to have the NSA put its own sensors on and others may ask for direction on what sensors to buy and come to an agreement about what data they will then share with the government, industry and government officials said.

While the government can’t force companies to work with it, it can provide incentives to urge them to cooperate, particularly if the government already buys services from that company, officials said.

Brigadier General Mohammed Asif Jabarkhel sits with folded arms in his office, just a few steps away from the security checkpoint at Kabul International Airport. “Of course I know what’s going on here,” the 59-year-old head of the airport’s customs police grumbles from beneath his thick moustache as a fan whirs in the background. “But, in this country, who’s allowed to speak the truth?”

Jabarkhel is referring to the huge amounts of money regularly being secreted out of Afghanistan by plane in boxes and suitcases. According to some estimates, since 2007, at least $3 billion (€2.4 billion) in cash has left the country in this way. The preferred destination for these funds is Dubai, the tax haven in the Persian Gulf. And, given the fact that Afghanistan’s total GDP amounts to the equivalent of $13.5 billion, there is no way that the funds involved in this exodus are merely the proceeds of legal business transactions.

Jabarkhel complains that all of his many attempts to stop this hemorrhaging have failed. “The central bank has reached an agreement with the government that makes these kinds of transfers supposedly legal,” he says. “And whenever we try to look into where the money is coming from, pressure comes from the very top.”

Since invading Afghanistan in 2001, the United States alone has invested almost $300 billion in military and reconstruction efforts there. But far less progress has been made than what was either hoped for or expected. One major reason for this could be the fact that a significant portion of the millions meant for reconstructive efforts continue to be siphoned off. The people benefiting are often those who enjoy extremely close business ties with the donor countries.

The Bank of Canada said Tuesday that Timothy Hodgson will advise central bank head Mark Carney, a former Goldman Sachs executive, on financial reform. Carney says Hodgson is one of Canada’s top investment bankers.

Hodgson is leaving Goldman Sachs. The company has come under sharp criticism over civil fraud charges brought by the U.S. Securities and Exchange Commission and because of the high pay its executives and traders received during the financial crisis.

…

nearly ten years on from Nato’s invasion of Afghanistan, there are increasing signs that Britain’s fourth war in the country could end with as few political gains as the first three and, like them, terminate in an embarrassing withdrawal after a humiliating defeat, with Afghanistan yet again left in tribal chaos and quite possibly ruled by the same government that the war was launched to overthrow.

Certainly it is becoming clearer than ever that the once-hated Taliban, far from being swept away by General Stanley McChrystal’s surge, are instead regrouping, ready for the final act in the history of Hamid Karzai’s western-installed puppet government. The Taliban have now advanced out of their borderland safe havens to the very gates of Kabul and are surrounding the capital, much as the US-backed mujahedin once did to the Soviet-installed regime in the late 1980s. Like a rerun of an old movie, all journeys by non-Afghans out of the capital are once again confined largely to tanks, military convoys and helicopters. The Taliban already control more than 70 per cent of the country, where they collect taxes, enforce the sharia and dispense their usual rough justice. Every month, their sphere of influence increases. According to a recent Pentagon report, Karzai’s government has control of only 29 out of 121 key strategic districts.

…

“Afghanistan is like the crossroads for every nation that comes to power,” agreed Anwar Khan Jegdalek. “But we do not have the strength to control our own destiny – our fate is always determined by our neighbours. Next, it will be China. This is the last days of the Americans.”

…

After the jirga was over, one of the tribal elders came over and we chatted for a while over a glass of green tea. “Last month,” he said, “some American officers called us to a hotel in Jalalabad for a meeting. One of them asked me, ‘Why do you hate us?’ I replied, ‘Because you blow down our doors, enter our houses, pull our women by the hair and kick our children. We cannot accept this. We will fight back, and we will break your teeth, and when your teeth are broken you will leave, just as the British left before you. It is just a matter of time.'”

What did he say to that? “He turned to his friend and said, ‘If the old men are like this, what will the younger ones be like?’ In truth, all the Americans here know that their game is over. It is just their politicians who deny this.”

…

There has always been an absolute refusal by the Afghans to be ruled by foreigners, or to accept any government perceived as being imposed on the country from abroad. Now as then, the puppet ruler installed by the west has proved inadequate to the job. Too weak, unpopular and corrupt to provide security or development, he has been forced to turn on his puppeteers in order to retain even a vestige of legitimacy in the eyes of his people. Recently, Karzai has accused the US, the UK and the UN of orchestrating a fraud in last year’s elections, described Nato forces as “an army of occupation”, and even threatened to join the Taliban if Washington kept putting pressure on him. Shah Shuja did much the same thing in 1842, towards the end of his rule, and was known to have offered his allegiance and assistance to the insurgents who eventually toppled and beheaded him.

Now as then, there have been few tangible signs of improvement under the western-backed regime. Despite the US pouring approximately $80bn into Afghanistan, the roads in Kabul are still more rutted than those in the smallest provincial towns of Pakistan. There is little health care; for any severe medical condition, patients still have to fly to India. A quarter of all teachers in Afghanistan are themselves illiterate. In many areas, district governance is almost non-existent: half the governors do not have an office, more than half have no electricity, and most receive only $6 a month in expenses. Civil servants lack the most basic education and skills.

This is largely because $76.5bn of the $80bn committed to the country has been spent on military and security, and most of the remaining $3.5bn on international consultants, some of whom are paid in excess of $1,000 a day, according to an Afghan government report. This, in turn, has had other negative effects. As in 1842, the presence of large numbers of well-paid foreign troops has caused the cost of food and provisions to rise, and living standards to fall. The Afghans feel they are getting poorer, not richer.

There are other similarities. Then as now, the war effort was partially privatised: it was not so much the British army as a corp­oration, the East India Company, that provided most of the troops who fought the war for Britain in 1842, just as today both the British and the Americans have subcontracted much of their security work to private companies. When I visited the British embassy, I found that many of the security guards at the gatehouse were not army or military police, but from Group 4 Security. The US security contracts offered to Blackwater/Xe and other private security forces under Dick Cheney’s ideologically driven policy of privatising war are worth many millions of dollars.

Mr. Prechter is convinced that we have entered a market decline of staggering proportions — perhaps the biggest of the last 300 years.

In a series of phone conversations and e-mail exchanges last week, he said that no other forecaster was likely to accept his reasoning, which is based on his version of the Elliott Wave theory — a technical approach to market analysis that he embraces with evangelical fervor.

Originating in the writings of Ralph Nelson Elliott, an obscure accountant who found repetitive patterns, or “fractals,” in the stock market of the 1930s and ’40s, the theory suggests that an epic downswing is under way, Mr. Prechter said. But he argued that even skeptical investors should take his advice seriously.

“I’m saying: ‘Winter is coming. Buy a coat,’ ” he said. “Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while.”

His advice: individual investors should move completely out of the market and hold cash and cash equivalents, like Treasury bills, for years to come. (For traders with a fair amount of skill and willingness to embrace risk, he suggests other alternatives, like shorting the market or making bets on volatility.) But ultimately, “the decline will lead to one of the best investment opportunities ever,” he said.

Buy-and-hold stock investors will be devastated in a crash much worse than the declines of 2008 and early 2009 or the worst years of the Great Depression or the Panic of 1873, he predicted.

For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ”

It’s a move that outraged observers have decried as an attack on First Amendment rights. And CNN’s Anderson Cooper describes the new rules as making it “very easy to hide incompetence or failure.”

The Coast Guard order states that “vessels must not come within 20 meters [65 feet] of booming operations, boom, or oil spill response operations under penalty of law.”

But since “oil spill response operations” apparently covers much of the clean-up effort on the beaches, CNN’s Anderson Cooper describes the rule as banning reporters from “anywhere we need to be.”

The yield attached to some forms of infrastructure municipal bonds has risen relative to US Treasury bonds because of fears that cash-strapped local governments will struggle to repay these loans.

Absolute borrowing costs for regional governments remain relatively low in historical terms because of the Federal Reserve’s ultra-loose monetary policy. But any swings in municipal yields will be watched closely by investors, since they suggest that the fiscal anxieties about the eurozone could now infect the US.

“The risk in the second half of the year is that investor attention switches from Europe to the US,” said Robert Parker, senior adviser at Credit Suisse Securities, who singled out parts of California, as well as towns and cities in Illinois, Michigan and New York state as among the most vulnerable.

“You will see investor concern about the viability of those cities and therefore you will see, inevitably, further spread widening in the municipal bond market.”

“Those who don’t remember history are doomed to repeat it…there was a head and shoulders pattern that developed before the Depression in 1929, then with the recovery in 1930 we had another head and shoulders pattern that preceded a fall in the market, and in the current Dow situation we see an exact repeat of that environment,” Guppy said.

The Dow retreated 457.33 points, or 4.5 percent last week, to close at 9,686 Friday. Guppy said a Dow fall below 9,800 confirmed the head and shoulders pattern.

The Shanghai Composite is seeing a very rapid collapse, falling below 2,500, which suggests the major fall in the Dow, he added.

In the European markets, Guppy says Frankfurt’s Dax is witnessing a different pattern to London’s FTSE.

“The economy is still in the gravitational pull of the Great Recession,” said Robert Reich, former US labour secretary. “All the booster rockets for getting us beyond it are failing.”

“Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year. So what are we doing about it? Less than nothing,” he said.

California is tightening faster than Greece. State workers have seen a 14pc fall in earnings this year due to forced furloughs. Governor Arnold Schwarzenegger is cutting pay for 200,000 state workers to the minimum wage of $7.25 an hour to cover his $19bn (£15bn) deficit.

Can Illinois be far behind? The state has a deficit of $12bn and is $5bn in arrears to schools, nursing homes, child care centres, and prisons. “It is getting worse every single day,” said state comptroller Daniel Hynes. “We are not paying bills for absolutely essential services. That is obscene.”

Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high.

Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.

The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc. This is the real stress indicator. The ratio was 63pc three years ago. Eight million jobs have been lost.

The average time needed to find a job has risen to a record 35.2 weeks. Nothing like this has been seen before in the post-war era. Jeff Weninger, of Harris Private Bank, said this compares with a peak of 21.2 weeks in the Volcker recession of the early 1980s.

“Legions of individuals have been left with stale skills, and little prospect of finding meaningful work, and benefits that are being exhausted. By our math the crop of people who are unemployed but not receiving a check amounts to 9.2m.”