The Emergency That Partially
Crashed Australia’s Banking System
(And 8 other systems in the US
that are just as vulnerable…if not more)
Welcome to this week’s Urban Survival Newsletter, sponsored by the SurviveInPlace.com Urban Survival Guide and UrbanSurvivalPlayingCards.com. This week, we’re going to talk about how efficiency partially crashed Australia’s banking system last week, 8 other MAJOR systems/industries in the US that are similarly vulnerable to collapse, and straight forward advice on what you can do to prepare for them.
Over the last 60 years, there has been a big push by almost every company on the planet to become more efficient. Efficiency is great because it leads to lower prices and more of what we want getting to market.
I remember learning about Just In Time inventories in management class and how it was changing the face of manufacturing. Toyota introduced this concept to many companies around the world, but Dell and Wal-Mart, McDonalds, and grocery chains are a few examples of companies that I want to quickly tell you about.
For awhile, Dell prided itself on not having ANY inventory. They would have suppliers pull up to their docks and unload parts as they needed them. This meant that Dell didn’t have a lot of money tied up in inventory and that they didn’t need as much space to run their business.
Wal-Mart developed a system where, if someone bought a bag of chips, another bag was immediately re-ordered to replace it. Again, this meant that Wal-Mart only needed to have a few days of most merchandise on their shelves at any given time.
McDonalds and grocery chains adopted this model as well. In addition to having money tied up in inventory and the additional space that storage requires, food spoils. So restaurants like McDonalds and grocery chains have been incentivized to keep as little food on hand as possible so that they will almost be running out by the time the next delivery comes.
As long as there are no hiccups in the supply chain, this model works great and makes the bottom lines of companies look much better than if they kept extra inventory on hand.
As a result, business schools have been teaching just in time techniques for decades. And, as you have probably already figured out, the “strategy” of running as close to empty as possible is also used with gas tanks and household pantries.
But when a hiccup DOES happen, systems that use just in time inventories become very unstable. Manufacturing facilities shut down, restaurants close, and grocery stores have empty shelves. On a family level, it means walking to get gas and “emergency” trips to the store to get food.
When it’s not a hiccup, but a major event, and you find yourself out of supplies, it means you no longer have a way to make money if you’re a business or you don’t have a way to feed yourself if you’re an individual. In that sense, efficiency can prove to be deadly.
The United States electrical grid provides electricity at some of the lowest rates in the world. In fact, several first world countries pay 2-4 TIMES more per kilowatt hour than we do. A big reason for that is that many of our power plants, transmission lines, substations, and transformers operate at close to full capacity. Since they cost roughly the same to run at 50% or 90% of capacity, running everything at close to full capacity offers consumers energy at the lowest prices.
But this efficiency leads to instability.
As an example, in June, 2010, University of Virginia at Arlington had to enact massive load reduction measures to keep Virginia Dominion Power online and power going to millions of customers.
In April of 2006, the The Electric Reliability Council of Texas forced utility companies across Texas to turn off power to customers on a rotating basis in a “rotating blackout” due to excessive air conditioner use, windmills shutting down due to low winds, and the spring maintenance of a few power plants.
In the early 2000s, hot temperatures and market manipulation caused blackouts across California. In 2005, Southern California had blackouts again because of a faulty sensor on a key transmission line.
The point here is that as electrical transmission has gotten more and more “efficient,” it has become more and more vulnerable.
Our global banking system has vulnerabilities on many levels, including reserve ratios, streamlined underwriting, and more, but one of the biggest increases in efficiency has also caused the biggest increase in instability and vulnerability—electronic banking.
One dramatic example of the vulnerability of electronic banking is the shutdown of the National Australian Bank (NAB) from the 24th-30th of November, 2010 due to a “computer glitch.” (As an aside, National AUSTRALIAN Bank borrowed $4.5 Billion from the Fed during the bailout in 2008.) Millions of NAB customers got charged late fees because neither deposits to their accounts nor auto payments for mortgages or other bills got handled correctly. Besides late fees, ATMs didn’t work, credit cards didn’t work, and businesses stopped taking checks.
Awhile back, Visa had a commercial running where people were in line and everyone was paying with their Visa and things were running quickly and smoothly. Then, someone dared to pay with cash. There was a sound of a record screeching and all of the smoothness stopped. There’s no doubt that credit cards are convenient and efficient, but as people get more and more dependent on them, we get more vulnerable to breakdowns in the system.
Emergency Medical System
The United States emergency medical system is truly incredible. People get ANGRY if they call 911 from their cell phone in a parking lot and a paramedic isn’t on scene in a few short minutes. It’s amazing how everything works so efficiently. In many cities, there’s no reason to transport a heart attack victim to a hospital until they have a good rhythm because the paramedics on scene can do everything that the hospital can do.
But once people know this, many get sloppy. There’s comfort in knowing that the EMS provides an efficient safety net, but it also means that people decide that learning medical skills isn’t all that important. In some cities, there is one first responder for every 10,000 people. Meaning that if any kind of natural or manmade disaster happens that injures more than a handful of people at one time, some people won’t get helped.
You can see where this is going. Officer on duty:population ratios vary across the country from 1:1,000 to as high as 1:7,000 in cities who’s populations double or triple during the workday due to commuters and visitors. It works when there aren’t any problems and everyone has more of an incentive to be good than they do to be bad. While disturbing, these ratios are comforting as well because they are an indication of how much of an impact a small number of people (good or bad) can make in a city.
But when a hiccup happens, you end up with a handful of Dutch boys in blue trying to plug a dike that has a catastrophic leak.
The majority of people assume that electronic banking, EMS, electricity, and the food chain will continue without any major interruption for the rest of their lives. It’s a happy thought. It helps people sleep at night. And it becomes something that helps smooth out all the other rough aspects of life. “Even though X is happening at work, I always know water will come out of the faucet and I can pick up carryout on the way home to feed the family.”
To a large extent, American society is based on this efficiency. From microwaves to convenience stores to all of the above examples. And while many survival experts categorically denounce modern conveniences, they’re really GREAT! They allow us a standard of living that was unimaginable a generation ago.
And the predictability of all of these efficient systems makes preparing a foreign concept for millions of people. “The microwave has worked every time I’ve pushed the button for the last 30 years…except that one time when lightning hit a transformer and it took the darn electrical company 2 hours to get it turned back on! And that wasn’t the worst part–I missed 20 minutes of ‘Dancing With The Stars’.”
But just because these conveniences are great, doesn’t mean we should always expect them to be available.
One way to think of it is that it’s like playing poker when you’re on a lucky streak and assuming that your cards will come up good for the rest of the night. If you don’t have some solid skills, you’re going to get wiped out any time the cards don’t go your way.
But you also want to take full advantage of the good times. Just as you play your good hands for all their worth when you have them, it’s smart to take advantage of every efficient system that you possibly can while it’s available.
This will be a relief to many people who are just getting “switched on” and want to protect themselves and their families but don’t want it to mean that they have to abandon the life that they know, move into a cave, start making clothes from pelts and twine, and start living on grubs and drinking pine needle tea. These are all great skills to know and practice, but unless you and your family get sheer joy out of living that way for an extended period, I wouldn’t live that way unless you have to.
There’s no reason why you can’t continue to enjoy the “good life” while it exists while simultaneously preparing yourself for hard times.
But as these systems have gotten more and more efficient, they’ve become more vulnerable.
You probably know how cities only have an average of 9 meals on the shelves at any given time.
As electrical systems have become more of a “grid” and more interconnected, they’ve become more vulnerable to regional cascading failures. These have happened accidentally, but could easily be targeted as well.
As EMS personnel have benefited from more and more advanced treatments and specialized tools, (and lawsuits have become more prevalent) improvisation and adaptation skills have suffered for when those specialized tools aren’t available.
As banking has become more and more electronic and people have stopped carrying cash, businesses have become incredibly dependant on data traffic networks…which are both efficient AND vulnerable due to how traffic is routed through major trunk lines which, in effect, act like a choke point. If you look at a map of the US internet grid and view the electrons as enemy troops, it only takes a few seconds to identify the choke points where you’d stage ambushes. Both China and Al Quaeda have acknowledged this and talked openly (to a limited extent) about attacking these choke points.
To compound the issue, all of these “efficient systems” are interconnected to one extent or another. When one or more go down catastrophically, others are immediately affected.
So, what is the solution?
First, enjoy life today. If we do have a catastrophic event like an electromagnetic pulse (EMP) or coronal mass ejection/solar flare (CME) then you are going to want to have a “good old days” to think back to. If you stop enjoying life and just prepare and wait for the world to end, then the world may as well have already ended. Besides that, if no catastrophic failure happens between now and the day you die, you want to make darn sure that you actually LIVED during your life rather than just spending all of your time preparing to not die.
Personally, I will be incredibly surprised if there isn’t a catastrophic SHTF disaster that is national or even global during my lifetime. I’m preparing for it, I’m planning for it, but if I happen to get into a car crash and die the day before “it” happens, I want to make sure that I spent the days and weeks I had wisely.
Next, enjoy efficiency, but build stability in your life.
If just in time inventory management gives you dirt cheap groceries, then take advantage of it…but also stock up on as much of the foods as you currently eat as expiration dates, your budget, and your space allow.
If an efficient electrical grid gives you cheap, predictable electricity, then take advantage of it…but also figure out how you’ll stay warm, preserve food, and have light if it goes out.
I live in a major city. We don’t have a big house, a big lot, room for a 500 gallon fuel tank, or a big enough roof for a huge solar array. But we do have a COMPACT system of redundant batteries, inverters, chargers, and generators and enough fuel to run our gas furnace through one entire winter. If gas stops working, we can switch to propane. If that runs out, we have another alternative as well. But in the meantime, we use and enjoy our ordinary gas furnace that gets both gas and electricity from the grid.
If electronic banking lets you live life “at the speed of light” then take full advantage of it. But keep some cash on hand. And try to figure out the businesses in your area who look like they can keep running if the lights go out.
If you get seriously hurt, get professional medical help. But medical training is something that I believe EVERYONE should have. Personally, I really appreciate being able to help people in need, fix myself, and help my family.
With all of the junk being taught in schools these days, I don’t understand why EMT or wilderness EMT classes aren’t mandatory. They teach anatomy, basic physiology of the body (which is useful for fixing and breaking bodies), an appreciation of how fragile and resilient the human body is, and they lead to being more self aware of what’s going on in your body.
So, as you’re going about your business this week, start looking for systems that you use that are efficient, and figure out what they would do if they stopped working. Traffic signals, telephones, water, and sewer are some good places to start.
And, if you want to follow a comprehensive, step-by-step approach to preparing for these vulnerabilities, as well as dozens of others, I want to encourage you to get signed up for the 12 week SurviveInPlace.com Urban Survival Course. To read more about it and get signed up now, head on over to SurviveInPlace.com.
Do you think that you can enjoy labor saving devices while also getting prepared for disasters? Do you think that you need to make life as hard as possible now to survive a future disaster? Or do you sit somewhere in between? Let me know your thoughts on this week’s newsletter by commenting below.
Until next week,