Tag: Chris Martenson

Perhaps you missed it: We’re at war with Russia

Guest post by Chris Martenson

But nobody has explained what our vital interest is in Ukraine

Reuters

Secretary of State John Kerry has accused Russia of providing heavy arms to Ukrainian separatists, but has offered no proof.

The U.S. has been waging economic, financial, trade, and political war against Russia and even kinetic war-by-proxy in Ukraine. Worryingly, nobody in power in the U.S. or Europe really seems willing to tell us exactly why.

From the Russian point of view, everything from their plunging ruble to bitter sanctions to the falling price of oil are the fault of the U.S., either directly or indirectly. Whether that is fair or not is irrelevant; that’s the view of the Russians right now. So no surprise, it doesn’t dispose them towards goodwill negotiations with the West generally, and the U.S. specifically.

Recently the anti-Russian stance in the U.S. press has quieted down, presumably because the political leadership has moved its attention on to other things, and that means Russia is largely out of the U.S. news cycle. However, there’s plenty of serious action going on in Russia and Ukraine, as well as related activity in the U.S. that deserves our careful attention.

The U.S. (via John Kerry) and NATO have steadily accused Russia of having funneled hundreds of tanks, armored personnel carriers and other heavy equipment to the separatists in eastern Ukraine.

These assertions bring to mind the Sherlock Holmes case of the dog that did not bark where the absence of a piece of evidence leads us to a very different conclusion than the one the U.S. political establishment would like us to believe.

The sorts of weaponry that NATO and the U.S. have charged Russia with providing are virtually impossible to conceal from the air. Snapping high-resolution photos of such war machinery is child’s play for today’s military satellites, and even civilian ones too. If the assertions were true, we should have seen a flood of photographs of Russian heavy equipment every step of the way as it passed into Ukraine.

Continue reading “Perhaps you missed it: We’re at war with Russia”

Plunging oil prices will starve the world of its economic fuel

Guest Post by

Low prices mean no new oil, and no new oil means no growth

Getty Images
If oil prices do not recover and quickly, the U.S. shale miracle will rapidly turn into a shale bust.

The world economy is slowing down and the authorities are worried.

Besides the official gross domestic product statistics, we have further confirmation of this slowdown from the four big commodities associated with growth; oil CLF5, -3.81%   (-40% from June 2014), coal (-52% from peak in 2010), copper (-14.4% in 2014), and iron ore (-41% year-to-date 2014).

Japan, Italy, and Greece are all in recession. China is slowing down according to its official statistics, and even more according to the whispers.

The days of rapid economic growth are behind us because the days of cheap oil are behind us.

Germany, France and the Netherlands are all at stall speed.

The U.S. is, according to the Commerce Department, doing just great at nearly 4% growth, but you wouldn’t know that from either the quality of the new jobs being created (which is low) or consumer spending (also low).

The worry, as always, has nothing to do with the central banks’ concern for you, your job, your children, wealth equality, or the future, and everything to do with the simple fact that the stability of the banking system absolutely depends on a steady stream of new loans being created.

The core of the problem is that we have a monetary system that is either expanding or collapsing. It has no steady state.

In 2008 and 2009, net credit creation was only slightly negative, but that was enough to very nearly cause the entire system of money and banking in the developed world to collapse.

Either money and credit are expanding and the banks are relatively happy or the banks are collapsing and demanding taxpayer bailouts. It’s really that stark.

Now after the most heroic run of interest rates forced to zero (ZIRP) and below (NIRP in Europe) and the grandest experiment with money printing in global history, credit growth is somewhat back on track but not enough to ease the bankers’ worries.

So they continue to pump, and jawbone, and panic at every slight downturn in wildly inflated financial asset prices because those are their only major successes in this drama.

The actual economy, the one that lives on Main Street, never really recovered, at least not compared to past recoveries. Growth, jobs and incomes all were anemic compared to prior recoveries. Capital expenditures by corporations were all but dead in the water throughout the “recovery.”

If oil prices do not recover and quickly, the U.S. shale miracle will rapidly turn into a shale bust.

And this brings us to the collapse in oil prices.

Our view here at Peak Prosperity is that the days of rapid economic growth are behind us because the days of cheap oil are behind us.

Oil fuels the engine of growth and the world has spent $2.5 trillion over the past nine years chasing more oil and yet is producing roughly the same amount of oil as it was before it spent all that money.

As Jeremy Grantham put it in his latest quarterly newsletter:

“As a sign of the immediacy of this problem, we have never spent more money developing new oil supplies than we did last year (nearly $700 billion) nor, despite U.S. fracking, found less — replacing in the last 12 months only 4½ months’ worth of current production! Clearly, the writing is on the wall.”

Unless investment in oil production really accelerates from here, new production will be swamped by existing declines.

But with oil down some 40% since June, new oil drill programs are being scrapped left and right.

New drill permits in the U.S. shale plays were down 40% in November compared to October and for good reason: most of the plays are uneconomical at current prices:

The bottom line, though, is that without growth in oil supplies robust economic growth is impossible to achieve.

What Is the 2015 Economic Outlook?

If oil prices do not recover and quickly, the U.S. shale miracle will rapidly turn into a shale bust. The decline rates on these wells are ferocious. With that loss of production will go the entire narrative that says that peak oil is somewhere off in the distant future and that we can safely ignore it for now.

Worse, global oil projects are now on hold and those potential future supplies have been pushed out further waiting for higher oil prices.

No new oil means no new economic growth. It’s as simple as that.

This calls into question the sky-high valuations we currently see for stocks and bonds. The operative question being, what is the value of these stocks and bonds in a world without growth?

To me the answer is simple; a lot less than they currently are.

So the central banks are worried that their efforts to ignite new borrowing are not working, but I am worried that the bloated asset prices that were a product of this quest are going to run straight into the reality of diminished oil output.

In short, my worry is that we are now well past the point where the next financial correction can be avoided. It’s going to hurt.

The central banks have failed, perhaps honestly and with good intentions, but they have failed nonetheless. All because they were peering out just one of several portholes and thought they understood the world.

Chris Martenson is an economist and futurist who co-founded the PeakProsperity.com blog.

Dmitry Orlov: Russia’s Patience Is Wearing Thin

The lines of communication are shutting down

Guest Post by Chris Martenson

Having lived in the former USSR before immigrating to the US, Dmitry Orlov has an invaluable perspective on both the US and Russian perspectives, as well as Ukraine.

With the western propaganda flying thick and heavy, it’s more important than ever to cut through the chaff and learn what we can about the most important geopolitical realignment (and renewed tensions) in recent memory.

Well, look, Russia is a place that’s extremely dynamic as changing response to challenging environment, to changed environment, very popular throughout the world, at peace with most of the world, even with nations that are at war with each other, both sides will still talk to Russia and have friendly relations. Russia has a splendid relationship with both Israel and Iran for instance.

The United States is a nation that can’t get anything together, can’t get anything on, not education, not healthcare, nothing. It’s basically sinking into a cesspool of its own making it can’t respond at all. And now, it is basically being shown up to be quite incompetent in playing this international game. Now, what happens if you can’t play a game by the rules is you’re penalized and you forfeit the game. So, either the US leadership will learn how to play by the rules or they forfeit. I see those are as the only two real outcomes.

There’s a difference to how the Russians approach the world and how the Americans approach the world. So, for instance, Americans like to threaten. If you don’t do this, then we will do X, Y and Z. That’s a typical American behavior.

That’s not something that the Russians would ever do because they don’t threaten, they just act because if you threaten, then you take away the element of surprise which is very important. The other thing is Americans refuse to talk to their enemies, they won’t negotiate with terrorists, they won’t do X, Y and Z and can’t be reasoned with at all. You can just listen to them and do what they say or they’ll bomb you whereas the Russians always talk to their enemies. Russia keeps the channels of communication open.

And the other thing is that all of this endless trash talking is very detrimental to the business of democracy and there’s been a constant stream of basically garbage emanating from the west, some of it social media, some of it through the old fashioned press. But, just basically all kinds of lies and disinformation and slander, which makes the tedious business of diplomacy establishing various links at various levels very difficult, if not impossible. So there’s just this incredible level of disgust with their, as they say, partners in the west in Moscow and the result is they’re not really eager to talk anymore. They’re not very interested in communicating. They’re far more interested in acting. So, what we’ll probably see is a constant stream of surprises coming from Russia that will be completely unannounced and not predicted by anyone.

Click the play button below to listen to Chris’ interview with Dmitry Orlov (51m:10s):

EBOLA – HOW WORRIED SHOULD YOU BE?

Guest Post by Chris Martenson

 

The current Ebola outbreak, unlike others throughout history, is lasting a very long time; with cases now being reported on a variety of continents well outside of its equatorial African origin.

I’m not especially worried about Ebola striking me or my loved ones, for reasons I’ll explain in a moment. But I’m growing increasingly concerned about government response to the outbreak.

So let’s spend some time understanding the nature of Ebola, specifically, and viral contagion, more generally. At the very least, Ebola can serve as an instructive reminder about how our society’s responses to a viral outbreak could prove to be at least as disruptive and damaging as the virus itself.

Ebola

While very often cited as being 90% fatal once contracted, Ebola is rarely that lethal. In fact it was only that lethal in a single isolated outbreak. A 50% to 70% mortality rate is more common. As of Oct 10 2014, the latest outbreak had afflicted 8,376 and killed 4,024 — a mortality rate of 48%.

This places the Ebola strain responsible for the latest outbreak on the lower end of the Ebola lethality scale. Don’t misunderstand me: this is still a very deadly virus, to be sure. But it’s not a guaranteed death sentence, either.

Viruses come in a wide variety of types and shapes. But the general structure they all share is that they have some form of nuclear material, either DNA itself or RNA, housed inside of a protein capsule. Think of a peanut M&M, where the peanut is the genetic payload and the outer coatings serve both a protective purpose (while the virus is seeking a new host) and as the means of docking with a host’s cell.

That’s really all a virus is. A few proteins and some genetic material. No membranes, no sexual merging of genetic material, and no ability to replicate themselves all on their own. There are debates still ongoing today as to whether a virus should even be considered a living thing.

The life cycle of a virus is very simple. A virus particle will dock with a target host cell (most viruses are highly specific for the precise sorts of cells they will and won’t bind to), insert its genetic payload which hijacks the host’s replicative machinery, replicate the genetic payload wildly which codes for both new genetic material and protein capsule subunits, and then reassemble lots of intact virus particles which then escape the host cell to go and find other cells to infect.

Within a mammalian host, once a virus attack is recognized, an antibody response is mounted and the fight is on. As the virus particles escape the host cell (which is usually damaged or killed as a consequence of having been hijacked) it is vulnerable to being identified by a host antibody, itself a highly-specialized protein that will ‘dock’ with a virus particle more or less permanently (they bind together very tightly) and thereby incapacitate the virus’ ability to dock to a new host cell.

With lethal viruses, something goes wrong with this process. Either the virus replicates too quickly for the host to counter effectively, or the virus tricks the immune response into either too little or too much activity — both conditions which can end poorly for the host.

For example, the Spanish flu epidemic of 1918 preferentially killed those between the ages of 20 and 40. This was unusual because it’s exactly opposite the flu mortality patterns we normally expect, where the very young and the very old are the most susceptible.

The best prevailing explanation for this is that it was the very health and vigor of the patients that did them in. The Spanish flu (and other avian flu strains) cause the host body to unleash a ‘cytokine storm‘ which is a very unhealthy, and sometimes lethal, positive feedback loop between immune cells and a class of attractor signaling molecules called cytokines. As more cytokines are released, say into the lung tissue, immune cells are attracted and can then release more cytokines, which attracts more immune cells, and so on. The place to which they are attracted becomes damaged by this overly-aggressive response of the immune cells and for the Spanish flu victims, this happened in the lungs, critically impairing respiration. Hence, the ‘healthier’ a host was, the more damage the Spanish flu virus caused.

In the case of Ebola, the virus preferentially targets the cells that line the inner walls of blood vessels (a.k.a. endothelial cells) as well as white blood cells, a fact which helps to spread the virus throughout the body fairly rapidly, as white blood cells actively migrate system-wide.

Through a variety of mechanisms, the Ebola virus causes the endothelial cells to detach from the blood vessels and die, which compromises blood vessel integrity. This targeting of the blood vessels is why the Ebola virus is classified as a hemorrhagic fever. The patient’s blood vessels literally break down. That leads to the many visible symptoms of an Ebola victim, not the least of which is various burst blood vessels all throughout the body.

(Source)

Currently, it’s thought that once exposed, an Ebola victim will incubate the virus for a period of up to 21 days before symptoms express. It’s only once the victim is symptomatic that they themselves can transmit the virus and infect others.

This characteristic of Ebola, more than any other, is why I don’t fear it overly much as a pandemic risk. A far more worrisome virus would be one that’s infective during asymptomatic stages of its host cycle, as is the case with HIV.

Early symptoms of Ebola include the sudden onset of fever, intense weakness, muscle pain, headache and sore throat. Unfortunately, that pretty much describes any reasonably intense flu, which complicates screening procedures and causes unnecessary worry among those who merely have the flu but worry about the possibility of Ebola.

Nonetheless, authorities have no choice but to take every traveling passenger with these very ordinary flu symptoms as a possible Ebola case. It’s a safe bet we’ll hear plenty in the coming days and weeks about Hazmat-suited response teams escorting sickly passengers off of planes.

A tip: if you have a fever, don’t travel. You’ll worry a lot of people unnecessarily. And you may end up in quarantine, really throwing your travel plans off the rails.

The Short-Term Risk

While gruesome and heartbreaking, the actual number of deaths by Ebola as well as the total number of people infected is very, very low compared to other hazards out there.

Are you more worried about Ebola than driving to work? If so, you have those risks entirely inverted.

(Source)

In the above chart, there are 27 years worth of data contained in each data point. That means that if the chart reads 2,700 for a given day, then an average of 100 people died on US roads on that day each year out of 27.

For the US, the above chart translates into ~33,000 vehicle deaths per year. Even in Africa where some 4,000 people have died from Ebola so far in 2014, America’s vehicle fatalities dwarf that current statistic.

Other communicable diseases such as HIV, tuberculosis, malaria, and diarrheal disease cause some 9 million deaths worldwide each year.

This is why I’m personally not that worried about Ebola striking me or my family here in the eastern US at this time. Nor would I be overly worried in Dallas, where the first two US-soil cases of Ebola command national attention. The odds of getting infected at this point are very low at the individual level.

The Longer-Term Risk

However, I do think that the reaction to Ebola, which could include ex- and inter-US travel bans and other economically and socially disruptive practices could be another matter altogether at this moment in time. While there is a small, but non-zero, chance that this Ebola strain could morph into something more virulent, there is a very good chance of a more Draconian government response developing.

In Part 2: Prudent Precautions To Take Now, we dive into not only what damage to our civil liberties and livelihood these heavy-handed and poorly executed government responses are likely to be, but we also address the actions that individuals can take today on important questions like:

  • Who is at risk of infection in the current ebola outbreak?
  • What’s the likelihood the current strain will morph into a more virulent form?
  • What are the best steps to take today to reduce your vulnerability to a pandemic?

What Ebola reminds us of is that when a true pandemic arrives it will travel much faster than those in the past (thanks to air travel being an order of magnitude faster than dawning recognition) and that our complex, highly leveraged, just-in-time global economy is utterly unprepared for even a minor glitch in the flow of goods let alone the virtual lockdown that a true pandemic would require.

A small amount of preparing can make you much less vulnerable should (when?) that comes to pass.

Click here to access Part 2 of this report (free executive summary; enrollment required for full access)

Three unsustainable trends are about to collide

Guest Post By

A perfect storm of demographics, debt and energy

The population of the United States is expected to continue growing.

It’s getting more and more difficult to write with interest about the challenges the world economy is currently facing. Not because there’s a shortage of interesting things to write about — wars, sanctions, failed money-printing experiments, the list is long — but rather because most of the negative news and major world events we see around us are symptoms of the disease, not the disease itself.

There are only so many times you can describe the disease, before it becomes too repetitive for both the writer and the reader. Instead, I find it far more interesting to focus on the root causes, because then real solutions can be explored that offer the possibility of actual remedy.

So let’s start here, with a simple grounding in the facts as we know them. No spin, no agenda; just some numbers.

Demographics

There are approximately 7.2 billion humans on the planet, and consensus estimates put that number at 9.6 billion by 2050. Over the same time period in the U.S., people aged 65 and older will increase from 46 million currently to 84 million, a 82% increase, while the entire U.S. population is projected to swell from its current 319 million to 400 million, a 25% increase.

Debts

Next, the net present value of the actual liabilities of the US federal government are somewhere between $69 trillion and more than $200 trillion depending on whether you prefer the Treasury as your source or the CBO.

The real fiscal deficit of the U.S. government, as opposed to what was reported, was just over $1 trillion in FY 2014 (as measured by the actual increase in the federal debt).

When your debts and liabilities are increasing at several multiples of your income growth, you have a math problem that sooner or later will catch up with you.

The only nonpainful way out of such a math bind is to reverse the situation and grow our income faster than our debts and liabilities. The painful way involves either a hard default or a stealth default via inflation. Let’s assume we all wish to avoid the painful route.

This means we have to ask some hard questions. What will be the engines of all that future growth? Why has growth been so difficult to come by of late? What if the hoped-for future growth doesn’t materialize? Even worse, what if we get a sustained period of negative growth? Then what?

Here’s where things get sticky.

Energy production

One of the more solid economic correlations we know of is that between a growing economy and growing energy usage. And oil is one of the main factors in this relationship, if not the key factor. For now, the U.S. is enjoying a resurgent period of oil production thanks to shale (or “tight”) oil. The U.S. can use that energy to grow its economy, or we can export it to other countries so they can grow theirs.

Now, let’s widen our view back out to 2050. Where is the U.S. tight oil story then? Well, according to the Energy Information Administration, it will be 31 years in the rearview mirror, as the EIA projects that U.S. tight oil production will peak in 2019. That’s right, in just five short years from now, the U.S. “shale oil miracle” will start becoming a historical artifact.

On top of that, virtually every single oil reservoir in the world currently in production will be in decline by 2050. Perhaps we’ll find additional oil under the Arctic, or in ultra-deep ocean deposits, or in even tighter rock formations, but it won’t be cheap oil —- the sort that we rely on to drive economic expansion.

These trends in oil, debt and demographics are stark all on their own, but together they are staggering.

And if we then tie them to the obvious ecological strains of meeting the needs of 7.2 billion souls (let alone the 9.6 billion by 2050), any adherence to the status quo seems worse than delusional. For example, since 1970, overall world wildlife populations have been reduced by 40% (land and sea) to 70% (river). Perhaps it’s time plot our course a bit more carefully, before those losses approach 100%.

The disease

The disease then is our blind adherence to growth at any cost. Its symptoms are the limits we are bumping into with increasing frequency along the way. They’re more numerous today than before the world’s central banks began their grand global money printing experiment and yet, like a quack doctor prescribing more Vicodin to mask a serious underlying malady, the central planners and their political overseers refuse to reconsider the situation.

As economist Herb Stein once said, “if something cannot go on forever, it will stop.” Someday, perhaps soon, the inexorable logic of simple math will force wrenching changes upon those who refuse to change on their own.

Which brings me to the title of this piece: Ready or Not. The unsustainable status quo will end, likely sooner than we want, whether we are prepared for it to or not.

Chris Martenson is is an economic researcher and futurist specializing in energy and resource depletion, and co-founder of PeakProsperity.com.

Crippling the US Without Firing a Shot: The Electrical Grid May Well Be The Next War’s Battlefield

Guest Post by Chris Martenson

power-grid-attack

We talk a lot about Peak Cheap Oil as the Achilles’ heel of the exponential monetary model, but the real threat to the quality of our daily lives would be a sustained loss of electrical power. Anything over a week without power for any modern nation would be a serious problem.

When the power goes out, everything just stops. For residential users, even a few hours begins to intrude heavily as melting freezers, dying cell phones, and the awkward realization that we don’t remember how to play board games nudge us out of our comfort zone.

However, those are just small inconveniences.

For industrial and other heavy users, the impact of even a relatively short outage can be expensive or even ghastly. Hospitals and people on life-assisting machinery are especially vulnerable. Without power, aluminum smelters face the prospect of the molten ore solidifying in the channels from which it must be laboriously removed before operations can be restarted.

Many types of nuclear power plants have to switch to back-up diesel generators to keep the cooling pumps running. And if those stop for any reason (like they run out of fuel), well, Fukushima gave us a sense of how bad things can get.

And of course banking stops, ATMs are useless, and gas stations cannot pump gas. Just ask the people of New Jersey in the aftermath of Hurricane Sandy.

A blackout of a few hours results in an inconvenience for everyone and something to talk about.

But one more than a day or two long? Things begin to get a bit tense; especially in cities, and doubly so if it happens in the hot mid-summer months.

Anything over a week and we start facing real, life-threatening issues. National Geographic ran a special presentation, American Blackout, in October 2013 — it presented a very good progression covering exactly what a timeline of serious grid disruption would look and feel like. I recommend the program for those interested.

Grid Threats

We’re exploring this risk because there are a number of developments that could knock out the power grid for a week or more. They include a coronal mass ejection (CME), a nuclear electromagnetic pulse (EMP) device, a cascading grid failure, and malicious hacking or electronic attacks.

It’s the cyber-electronic front that’s especially concerning these days, as we depend so vitally on so many systems that operate completely dependent on computer controls.

Many critical manufacturing and power generation systems are especially vulnerable to such attacks, as the Stuxnet virus showed in Iran where it is believed to have ruined thousands of delicate uranium enrichment centrifuges by overriding their commands and causing them to literally spin themselves to pieces.

As one Peak Prosperity member recently wrote:

My great fear is not supersonic missiles, it’s a combined-arms cyber attack plus (as necessary) kinetic assault on the power grid, with the “calling card” being left pointing to some convenient domestic extremist group scapegoat.

The FERC (Federal Energy Regulatory Commission) released a report that suggested the US power grid could be knocked out for “weeks if not months” by taking out only 9 substations using a coordinated kinetic attack.

Given that one substation was actually assaulted by persons unknown last year:

In last April’s attack at PG&E Corp.’s Metcalf substation, gunmen shot 17 large transformers over 19 minutes before fleeing in advance of police. The state grid operator was able to avoid any blackouts.

The Metcalf substation sits near a freeway outside San Jose, Calif. Some experts worry that substations farther from cities could face longer attacks because of their distance from police. Many sites aren’t staffed and are protected by little more than chain-link fences and cameras.

So this power station assault actually happened. This whole thing isn’t just someone’s crazy dream.

(Source)

You can be certain that such concerns are very high on the list of things that the NSA worries about, and which it feels justify the use of whatever electronic eavesdropping may be necessary to guard against.

A widespread loss of the electrical grid for even one week would be devastating for a number of reasons. First the fuel refining, manufacturing, distribution and delivery systems would cease to function. After emergency generators are used to move and distribute what processed fuel is in the system, are only remaining fuel will be that brought into the country from other regions of the world.

Within a very short time, perhaps just days or hours of what is perceived to be a sustained loss of electrical power, the fuel system will be placed under emergency triage rationing — with hospitals, nuclear generation plants, the military, police and other emergency services consuming 100% of what’s available. Sorry, none for you.

With every additional day that the electricity is out the damage to the afflicted nation mounts.  Food, fuel, and water, become scarce and sanitation problems rapidly  accumulate.

Here’s the thing: cyber penetrations and outright kinetic attacks on US power grid elements have already happened. Given the extreme disruption that would result from any successful future attacks, you should have some personal preparations in place.

Our Woeful Grid

The US power grid, as a whole, is anything but modern and robust. Huge swaths of it were built decades ago. It remains largely a centralized generation and distribution system, one in which the failure of a remarkably few ‘nodes’ would be catastrophic.

It’s millions of miles of lines, utility poles, towers, substations and generating stations. Here’s a good, short description:

Today [2003], the US electric power grid serves about 125 million residential customers, 17.6 million commercial customers, and 775,000 industrial customers. These various categories of customers account, respectively, for about 37%, 36%, and 27% of electricity consumption annually.

Electricity is produced at large power plants typically located in remote areas and delivered into high-voltage transmission lines that transport it across long distances to regional and neighborhood substations, where the voltage is stepped down to a current that can be used in homes and offices and fed into a local distribution grid.

Between 1949 and 1973, electricity use in the United States grew at an average annual rate of 8.3%, and the system was able to meet that demand with only sporadic difficulty. Even with rising prices after 1973, electricity use grew at an average annual rate of 2.5% in the years from 1973 to 2006. The growth rate projected for the next 20 years is comparatively flat.

The electric grid encompasses both transmission and distribution (T&D) power grids. The transmission system spans more than 160,000 miles (257,000) of high-voltage transmission lines and connects over 750 GW of electricity-generating capacity with local and regional demand centers across the nation. In addition, the electricity distribution system, which consists of smaller, lower-voltage distribution lines that deliver power from substations and transformers to customers, encompasses 6 million miles (9.6 million) of wire and cable spread across roughly 500,000 circuits and linked to the national transmission system by about 60,000 substations.

(Source) http://www.brooksidestrategies.com/resources/origins-and-evolution-of-th…

The substations circled in green in the image above are the most vulnerable points in the system.

The alternative to this mass of interconnected wires would be a decentralized, smart grid involving a very large number of small generating ‘stations’ where thousands of failures would be required to cause a sustained loss of power for millions.

But currently?

The loss of just nine critical substations could mean a catastrophic loss of power for up to 18 months. What the country would look like after that, and whether such an insult could be recovered from is an open question.

U.S. Risks National Blackout From Small-Scale Attack

The U.S. could suffer a coast-to-coast blackout if saboteurs knocked out just nine of the country’s 55,000 electric-transmission substations on a scorching summer day, according to a previously unreported federal analysis.

The study by the Federal Energy Regulatory Commission concluded that coordinated attacks in each of the nation’s three separate electric systems could cause the entire power network to collapse, people familiar with the research said.

A small number of the country’s substations play an outsize role in keeping power flowing across large regions. The FERC analysis indicates that knocking out nine of those key substations could plunge the country into darkness for weeks, if not months.

A memo prepared at FERC in late June for Mr. Wellinghoff before he briefed senior officials made several urgent points. “Destroy nine interconnection substations and a transformer manufacturer and the entire United States grid would be down for at least 18 months, probably longer,” said the memo, which was reviewed by the Journal. That lengthy outage is possible for several reasons, including that only a handful of U.S. factoriesbuild transformers.

(Source)

The Us grid consists of three big regions, and is designed in such a way that the failure of just a few critical components would drag the whole thing down.

Again, that insult could be a deliberate attack, an EMP device, a CME, or even a squirrel on the wrong transformer on a hot day that leads to a cascading series of failures.

These vulnerabilities could be addressed, but the main point of this report is to note that over the years since they’ve been identified they mostly have not been addressed.

Does all of this seem too unlikely to worry about? Well, you might want to consider that we only recently learned that a massive CME narrowly missed the earth in 2012, the exact sort of threat we covered in great detail in a past podcast with a NASA scientist:

Carrington-class CME Narrowly Misses Earth

May 2, 2014

The close shave happened almost two years ago. On July 23, 2012, a plasma cloud or “CME” rocketed away from the sun as fast as 3000 km/s, more than four times faster than a typical eruption. The storm tore through Earth orbit, but fortunately Earth wasn’t there. Instead it hit the STEREO-A spacecraft. Researchers have been analyzing the data ever since, and they have concluded that the storm was one of the strongest in recorded history. “It might have been stronger than the Carrington Event itself,” says Baker.

The Carrington Event of Sept. 1859 was a series of powerful CMEs that hit Earth head-on, sparking Northern Lights as far south as Tahiti. Intense geomagnetic storms caused global telegraph lines to spark, setting fire to some telegraph offices and disabling the ‘Victorian Internet.” A similar storm today could have a catastrophic effect on modern power grids and telecommunication networks.

(Source)

How much did this storm miss us by? About one week. If the earth had been just 7/365 (1.9%) further along in its path, an entire hemisphere would have gotten shellacked. And, oh by the way, do any of you recall hearing of any warnings from NASA or other government bodies in 2012 that such a blast was headed our way and how closely it missed us by?

Me neither. So perhaps we shouldn’t count on getting an official warning in the future either.

Conclusion (Part 1)

The main conclusion here is that you should be at least moderately prepared for a sustained electricity outage, at least to the same degree that you carry fire insurance on your property. Both are remote — but catastrophic — events where a little advance preparation can go a long way.

In Part 2: Reducing Your Risk To A Grid-Down Event we reveal the vulnerabilities mostly likely to cause prolonged outages of the national power grid: cyber attacks. The current system in the US has a disconcerting number of failure points that can — and are, the data shows — being targeted by malicious agents.

More important, we lay out the specific steps concerned individuals should take at the home level to have backup support and protection should the grid go down. The cost of such preparation is very low compared to the huge magnitude of this low-probability, but highly disruptive, risk.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)