China’s Big Hack has big implications

[Bloomberg]( New to Bloomberg Opinion Today? [Sign up here](. Today’s Agenda - China’s [Big Hack](. - Brett Kavanaugh’s [big day](. - The economy’s [big question](. - The market’s [big delusion](. - Theresa May’s [big flop](. Putting China’s Chip Attack in Context Another day, another monumental piece of journalism. Today it’s Bloomberg Businessweek’s story on how [China snuck tiny, spying microchips into servers]( used by Apple Inc., Amazon.com Inc. and many other U.S. companies, along with the U.S. military and CIA. Once you get over the audacity and scope of this attack (which everybody involved denies happened), it’s worth thinking about the big problems it highlights. First is the growing conflict between the U.S. and China. President Donald Trump has made China Public Enemy Number One in a growing trade war, partly because of its cyber shenanigans. And, more ominously, China and the U.S. have recently stepped on each other’s toes in the South China Sea – which Noah Smith writes could be Ground Zero of [an actual shooting war between the two superpowers](. It’s been so long since we had one of those that it’s easy to dismiss the possibility, especially given the still-strong trade and financial ties between the two countries. But Noah points out Germany and the UK had strong ties too, right up until they [started shooting at each other]( in World War II. What a comforting reference!  The second huge issue the Big Hack raises is that the modern global supply chain for technology is [hopelessly vulnerable](, writes Shira Ovide: “Perhaps the only surefire prevention is for Google, Apple, the U.S. government and others to build every circuit and computer chip by hand and make sure the parts and equipment never leave the sight of people they trust. [This seems impossible](.” As Matt Levine puts it, “[vulnerability is the price of modernity](.” Just brace for more confrontations and nasty surprises. The (Now Probably Pointless) Case Against Kavanaugh The FBI has finished its [probe of sexual-assault allegations]( against Brett Kavanaugh, and key GOP senators say they’re satisfied the investigation was thorough enough, dismissing the objections of Democrats and accusers. Those same senators may also have just enough political cover now to vote for his confirmation. That means he’ll soon join the Supreme Court, despite not only the misconduct claims but also his apparent lies under oath and the raw partisanship and fury he displayed in the process. Bloomberg’s editors argued yesterday [Kavanaugh’s temperament alone disqualifies]( him from the court. But Noah Feldman writes today that [many past justices were pretty cranky too](, and some of them went on to do great things. Kavanaugh’s partisanship, though, is an even bigger knock against him. He was a GOP operative for decades before becoming a judge, and his threats of retribution for his treatment during the nomination process suggest [he probably won’t become more centrist with age](, writes Jonathan Bernstein. This partisanship should disqualify him from the court, Jonathan writes. Of course, it all may soon be moot. Schrödinger’s Economy You have probably heard, maybe in the car on the way to [your second job](, that the economy is booming. But Danielle DiMartino Booth warns this [isn’t a real boom but a sugar high](, which is itself a perverse reaction to Trump’s trade war: Companies are scrambling to buy whatever they need before tariffs take full effect. It could last until year-end, when tariffs on Chinese goods are scheduled to jump to 25 percent. At that point, look out below. Read the [whole thing](. For the glass-half-full view, Karl Smith argues the economy’s real problem right now is high oil prices, which are eating away at wage gains. But he says the tax cuts Trump passed this year will have longer-term positive effects that will resurface after oil prices fade – [right in time for the 2020 election](. Bonus economy reading: What the [September jobs report]( (out tomorrow) will tell us. – Mohamed El-Erian Bonus trade-war reading: - The trade war is making [America’s grain glut]( even worse. – David Fickling - Renaming Nafta might just [make Americans like free trade](. – Tyler Cowen It’s Not Different This Time With the bull market nearly a decade old and no end to it in sight, it’s tempting to think the very idea of a “market cycle” is now an historical relic. What’s to stop stocks from just rising forever uninterrupted? You [wouldn’t be the first person]( to think such a thing, writes Howard Marks, who says this hope was false in 1929 and 1999 and 2007 and is [still false today](. Bonus markets reading: Bond-market bears are having a field day; [if only they could explain why](. – Brian Chappatta Theresa May Missed Her Shot UK Prime Minister Theresa May has a tough job, steering her country out of the EU without causing an economic disaster along the way. Still, that’s no excuse for her [lame address to the Conservative Party conference]( earlier this week, write Bloomberg’s editors. She could have laid out a bold domestic vision and maybe even acknowledged the majority of her country that wants a Brexit re-think. Instead, she was too meek about good ideas (ending austerity), too aggressive with terrible ideas (curbing immigration) and too dismissive of Brexit worries. The editors write: “May is effectively promising to impede investment, erode competitiveness, increase consumer costs, worsen regional inequalities, and generally make Britain poorer.” Read the [whole thing](. Chart Attack A lot of people are ready to say Greece has turned a corner. [That may be premature](, writes Lionel Laurent. The bad times just [don’t seem to end for homebuilders and automakers](, but that doesn’t mean we’re about to have a recession, writes Conor Sen. Devin Nunes isn’t alone; [California dairy farmers are increasingly fleeing]( for the Midwest, writes Justin Fox. Quick Hits Amazon isn’t giving all its workers a raise; [many in Europe have been asking]( for a long time. – Leonid Bershidsky Burning mountains of cash is one way [Japan’s automakers can catch up]( in self-driving cars, but it may not be the best way. – Anjani Trivedi DO NOT CONGRATULATE Facebook Inc. for being the [first tech company to possibly run afoul]( of Europe’s new data privacy rules. – Alex Webb A new study suggests [wind power has a dark side](. – Mark Buchanan When drugmakers shower doctors with gifts, [it affects doctors’ choices](, whether they realize it or not. – Faye Flam This year’s Nobel for chemistry is a [triumph of evolution]( over intelligent design. – Faye Flam ICYMI ELON MUSK [WILL NOT STOP TWEETING](. Time to build [a “Doomsday” vault]( for good germs. The Knicks may be terrible, but at least [James Dolan will make $50 million]( this year. Kickers Modern humans might have [inherited disease-fighting genes]( from Neanderthals. Nobody [puts Shetland in a box](! (h/t Alex Teytelboym) Scrabble has some [new, dumb words](. China’s favorite new game show: "[Studying Xi in the New Era](.” Area [birds have a drinking problem](. So do [area rats](. (h/t for this and the three previous kickers to Scott Duke Kominers) In honor of yesterday’s plastic penguin kicker, here’s a [rubber elephant story](. (h/t Tracy Walsh) Eight-year-old girl [pulls ancient sword from lake](, is our ruler now. Do we [really need a Dick Cheney biopic](? Note: Please send ancient swords, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net. Also: Sign up [here for John Authers’ daily newsletter]( on global markets and investment, starting mid-October. *** New subscribers can [sign up here](. [FOLLOW US [Facebook Share]]( [Twitter Share]( SEND TO A FRIEND [Share with a friend] You received this message because you are subscribed to Bloomberg's Bloomberg Opinion Today newsletter. 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