National Sovereignty & International Security …
The three current international crises have always seemed related: economics, employment, education. Given the complex maze of connections within the Global Economy … today, the three crises pose an inseparable, triple-header-threat to national sovereignty and international security for countries, worldwide: EconomicsEmploymentEducation.
Look below the surface of each of the three crises and there is the same core truth: A strong educational infrastructure is the backbone of a country’s national sovereignty and international security. And, the backbone of a strong educational infrastructure for countries, worldwide, is Global Education Transformation that is systemic, scalable and sustainable for all public schools, K-12→College→Career …
Long-term, sustainable solutions to the current global crises depend upon strong leaders of well-educated populations with the fortitude to respond to the challenges of the Global Economy and the training to understand the complexities and to analyze, synthesize and evaluate proposed solutions. For countries, worldwide, the solutions ultimately depend upon … Global Education Transformation that is systemic, scalable and sustainable for all public schools, K-12→College→Career …
1.2 Billion Youth join the Global Economy by 2015 … 90% of them are not prepared with the 21st Century Skills needed by the Global Economy Workforce …
Part 2: [GET] … Backbone Of National Sovereignty & International Security …
National sovereignty should be a relatively easy concept to explain. In theory, it is the right of an individual nation to self-government and to operate independently of either foreign rule or control.
However, the ever shrinking world that forms the Global Economy has delivered a new set of complex economic realities that shape both national sovereignty and international security for all countries. No nation can escape these realities and their impact on both national sovereignty and international security: energy independence, debt finance … and the ever-growing aging and new digital infrastructures.
How our leaders respond to these complex realities will long influence the Global Economy. And because of the maze of economic and financial connections that have gripped the Global Economy … the policies and actions of world leaders will have far-reaching ramifications for national sovereignty and international security that extend well beyond the borders of any individual home country.
How countries develop capable leaders who can shape competent policies is directly dependent upon populations who have the education to understand the complexities and analyze and evaluate the challenges involved. For countries, worldwide, their long-term national sovereignty and international security ultimately depend upon having a strong educational infrastructure. And, the backbone of a strong educational infrastructure for countries, worldwide, is … Global Education Transformation that is systemic, scalable and sustainable for all public schools, K-12→College→Career …
A). Energy Independence … National Sovereignty & International Security
Countries around the world face a number of interrelated economic, defense and security issues. Chief among such issues are energy production, usage and storage.
For most countries, the health and security of their economy depend upon having an energy supply that will be available, affordable and plentiful. But, the world population of 7 billion is growing at the rate of more than 75 million a year with increasing energy usage and demands from both developed and industrialized countries. Given the political uncertainty, pressures and restrictions faced by energy markets throughout the world, the goal of energy security through energy independence is one of the main attractions and challenges of the Global Economy.
The focus on energy Independence began nearly 40 years ago during the 1973 Arab oil embargo. Today, 69% of the world’s oil reserves are found in the Middle East. Most of this amount is controlled by the Organization of Petroleum Exporting Countries [OPEC]. Experts have predicted that 83% of global oil will be state-owned and controlled by the OPEC countries … if current trends continue. And with such ownership and control come the power to manipulate both the supply and price of energy.
Growing energy demands, limited supplies and volatile oil prices breed unrest and challenge the national sovereignty and internationally security of global economies. And, we know that with a country’s increase in imported oil and outflow of oil monies comes an ebbing of the country’s GNP-GDP.
The complexities and competing challenges of energy supply versus energy independence require development of appropriate energy policies with security strategies that achieve balance, stability, and robust economies. Here, too, countries need strong leaders of a well-educated population with vision and fortitude. Given the complexities of energy markets, such vision and fortitude require transformative economic and energy programs. And such transformative programs require a strong educational infrastructure. For countries, worldwide, the backbone of a strong educational infrastructure is now … Global Education Transformation that is systemic, scalable and sustainable for all public schools, K-12→College→Career …
How many public schools of the world will teach students the basic inter-relationships that connect 21st Century energy … national sovereignty and interactional security?
B). Global Debt Crisis … National Sovereignty & International Security
Since August 9, 2007, with the seizure of hedge funds that specialized in U.S. mortgage debt, countries of the world have been searching for ways to survive the present and prevent future international debt crises. As 2011 came to a close, the severity of the global financial crisis showed no signs of permanent resolution.
Greece: Greece’s sovereign debt crisis was ready to receive yet another massive Eurozone and IMF bailout. Greece has relied on international bailout loans since May 2010, when its borrowing rates dramatically increased. It soon became apparent that Greece needed a second rescue package with larger loans from European leaders, in efforts to try to stop a debt crisis that was spreading to larger national economies.
In the proposed second rescue package, banks and other private bond holders would write off 50% of their Greek debt holdings. This would reduce Greece’s debt by Euro, 100 billion and reduce the Greek debt-to-GDP ratio from the expected 161.7% in 2011, to 120% by 2020. As discussed, below, it could also worsen the global financial crisis that may be flooded with Credit Debt Swaps.
Ireland: The banking crisis in Ireland also remained far from over, even after Ireland received a large bailout from the EU and IMF to cover the country’s insolvency. Ireland’s financial crisis resulted from guaranteeing the obligations of the Anglo Irish Bank and other banking institutions in Ireland.
Euro Zone Financial Crisis & Top-Rated Nations: In 2011, Europe’s debt crises included not only Greece and Ireland, but also the countries of Italy, Spain and Portugal. The Euro financial crises additionally threatened to spread to and engulf the top-rated nations of Austria, the Netherlands, Finland, France and Germany.
The underlying reason for the expanded debt crisis seems all too familiar. Many banks from the top-rated nations hold tens of billions of bonds, EUR, issued by the financially troubled countries. These same banks hold even hundreds of billions more in loans to customers in the financially troubled countries. The loans could go bad at an alarming rate if Europe’s economy continues to struggle. The biggest holders of such risky loans are banks in Germany, France, and the U.K., despite efforts to minimize their exposures.
Compounding such exposure is the fact that European banks hold massive amounts of exotic mortgage products and other risky assets that predate the current financial crisis. This large amount of risky structured-credit assets on the books of European banks increases concerns about another global recession.
China: The one international ray of optimism in the global economy was China. The Chinese government had injected massive amounts of liquidity into its economy, which was credited with producing high levels of economic growth during the global financial crisis. Then, in 2011, China raised interest rates in a concerted effort to stop the growing levels of price inflation.
Equally important was China’s widely reported intention to slow down heavy investment in seven new, strategic industries, which included: high-end equipment manufacturing, as well as alternative energy, biotechnology, new generation information technology, high speed rail, alternative fuel cars, and energy saving – environmentally friendly technologies. The amount of China’s financial curtailment was still unknown at the end of 2011.
United States: The United States remained landlocked by five interrelated events: a staggering national debt of USD $15,055,077,088,791.42 and rising at the rate of about $3.99 billion each day; the upcoming 2012 nationalelections; the on-going balanced budget – political tensions; high unemployment and underemployment rates; and increasing fears of being caught up in what may be a resurgent global recession.
… Enter the credit-default swaps …
Credit Default Swaps
Credit default swaps [CDS] are financial instruments that are supposed to protect against a default of a particular security or bond. They were invented during the late 1990s, by the U.S. Wall Street, as a form of insurance. Between 2000 and 2008, the CDS market grew from a $900 billion-to-more than $30 trillion industry. Because they are unregulated, CDS played a critical role in the global financial meltdown in late 2008. Swaps were the subject of antitrust investigations in both the EU and United States. Now, there are growing concerns that the CDS market may once again play a very significant role … this time in the current international financial crisis.
… How They’re Supposed To Work: CDS are similar to a private credit insurance contract. One party [the insured buyer] pays another party [the insurer] to protect the buyer from the risk of default on a particular debt instrument. The debt instrument could be a bond, security, bank loan, or mortgage. If the debt instrument defaults, the insurer is supposed to compensate the insured buyer for the amount of the loss.
… Why They May Not Work: The insurer could be a bank, an investment bank or a hedge fund. The insurer is required to post collateral to support its payment obligation. Unfortunately, the collateral deposit has often been too small to compensate the buyer fully. As a result, the CDS market has been described as an undercapitalized insurance market.
… How They Differ From Insurance: CDS are used by asset managers, banks and hedge funds as a way to manage their risks and mitigate their vast exposures of risky loans and bonds. But swaps differ significantly from insurance contracts in three important respects: First, the users [insured buyers] do not have to own the underlying bonds that are the subject of [ “referenced by”] the CDS. Second, the CDS derivatives industry is essentially unregulated. And third, the CDS industry may be significantly undercapitalized.
Because they’re contracts rather than securities or insurance, CDS are not only unregulated, they are also far too easy to create: CDS deals are often made via a short phone conversation or an instant message. Thus, the swaps can also be used to make outright bets on a company or country’s creditworthiness with just a quick phone call or message.
… Uncertain Valuation … Back To Greece: During the first half of 2011, the reported amount of CDS contracts exceeded USD, $32 trillion. However, the actual value of CDS contracts now on the global market has become a serious issue. As part of an October 27, 2011, agreement to resolve the EU region’s sovereign debt crisis, politicians and central bankers “invited” Greece, private investors and all other concerned parties to develop a “voluntary bond exchange” into new securities. Customers that bought CDS protection on Greece have discovered that a 50% discount on Greek debt strong>may be deemed “voluntary” and therefore not an event that would trigger a credit default swap payment. This raises serious questions about the true value of CDS contracts for … multinational customers in the global credit market.
So, as the New Year 2012 dawns, the resurging global financial crises underscore the fundamental need for strong government and private sector leaders who can formulate sound policies for well-educated populations with the training to understand the complexities and assess the soundness of the policies that are supposed to serve their country. For countries, worldwide, such leadership and well-educated populations depend upon strong educational infrastructures. And, the backbone of strong education infrastructures in today’s Global Economy is … Global Education Transformation that is systemic, scalable and sustainable for all public schools, K-12→College→Career …
How many schools, worldwide, will provide students with education needed by their country to develop strong leaders … and develop populations with the skills required to analyze, synthesize and evaluate compex relationships that exist among financial policies … national sovereignty and international security?
C). Smart Grids, Cyber Vulnerability … National Sovereignty & International Security
Energy production, transmission and distribution are important, related issues confronting nations in the Global Economy. Countries, worldwide, are facing inefficient energy [power] generation and aging infrastructures for transmitting and distributing energy to end-user consumers and businesses. Development of appropriate energy infrastructure strategiesfor the efficient generation, usage and storage of energy are important to national sovereignty and international security.
Electric Power Grids
Electric power systems [grids] are fundamental energy infrastructures for urban societies. Electric power grids with their transmission and distribution networks can reach across a country to connect power generating plants to homes, businesses, factories and other institutions.
In effect, the electric grid performs the central energy delivery for a region or country. The grid consists of the many networks that transport electricity from the power generation stations to consumers’ homes, businesses, factories and educational institutions. The “networks” include many wires, substations, transformers, switches and other equipment. The grid’s high-voltage wires and substations that transport power over long distances are collectively referred to as the transmission system. The medium-voltage wires and substations that transmit power locally are known as the grid’s distribution system.
The electric power grid has two great advantages. First, power can be bought and sold across vast areas of land. Because it is very difficult to store electricity, power grids provide an optimal distribution of electricity that enables a more balanced supply-and-demand relationship. Second, if minor transmission failures occur in one area of the grid, available electricity from another part of the grid can be used to compensate.
However, today’s high-voltage transmission systems are frequently older infrastructures that are not equipped to handle 21st Century bulk power transfers and large scale integrations of renewable energy resources. Both the generation and delivery of electric power that travels from large power plants over high voltage power lines has certain energy losses [energy inefficiencies], which increase the need for more energy and raise energy costs.
Energy Efficiency And Inefficiency
Energy efficiency is the amount of useful energy produced [useful energy output] by a power system compared to the energy input. In terms of energy principles, efficiency refers to a given amount of energy that can be converted from one form to another useful form. In other words, how much of the original amount of energy [coal, solar power, etc.] can actually be used to do what is intended [generate electricity, produce light] compared to how much energy is lost or “wasted” as unusable heat.
Unfortunately, much of the content of energy sources is wasted by inefficiencies during the energy conversion and distribution processes. The efficiency of energy generation varies widely with the technology used. In a traditional coal power plant, barely 30%-35% of the energy in the coal is actually converted to usable electricity by the power generator. The “supercritical” coal plants that operate at higher temperatures and pressure can reach efficiency levels in the mid-40%. The most efficient gas-fired generators achieve about a 60% efficiency level. The more advanced coal technology known as integrated gasification combined cycle, or IGCC, can reach efficiency levels above 60%.
Thus, 40%-50%+ energy losses remain, even with the more advanced energy generation technologies. By analogy, this would be the equivalent of paying for a dozen eggs and receiving, at best, only 4-to-6 eggs that are usable … .
The challenges presented by aging grid infrastructures, increasing energy demands, high fuel costs, pollution and other environmental-related issues … and energy inefficiencies have led to the recent efforts to develop electrical grids that are more robust, efficient and cost-effective. To address the energy challenges, power grids around the world are undergoing transformation from aging 20th Century infrastructures to the digitally intelligent, more flexible, reliable and efficient processes and technologies of the 21st Century.
… Enter, the Smart Grid … and SCADA …
For over a century, utility companies have provided electricity by sending workers out into the field to obtain much of the needed data. The workers read power meters, measure voltage, and look for broken equipment. For most power grids, the devices used to deliver electricity are not automated and computerized. Yet, companies today are producing many digital products and options to help modernize the electric grid industry.
At the beginning of the 21st Century, a new model known as the “smart grid” emerged to manage electricity. Under this model, the grid is less of a one-way highway and more of an integrated, interactive network for the production, transmission and distribution of electricity. The smart grid connects many smaller power plants distributed throughout the network, including renewable energy generation. And significantly, the smart grid acquires digital “intelligence” through two-way communications that use computer-based remote control and automation … and operate much like a “smart phone”.
The basic goal of the Smart Grid is to maximize the energy output while reducing the energy consumption of the system by adding digital monitoring, analysis, control and communication capabilities to the power grid. Because all systems are automated and metered, Smart Grids can track when and how much electricity is used. They are able to help system engineers manage energy loads better and meet power demands more effectively by analyzing and reporting all critical usage and other statistics.
Smart Grid technologies have the potential to offer four broad benefits: Reduce up to 30o% of electricity consumption; significantly reduce the need for the construction of new power plants; and reduce the operations of environmentally harmful power plants. And, not insignificantly, the technologies also offer the potential for new and expanded employment industries, worldwide.
However, the very advances in technologies that enable Smart Grids to monitor, analyze, increase and control communication capabilities throughout electric power systems also expose grid systems to vulnerabilities from cyber attacks.
SCADA And Cyber Vulnerabilities
As power and data infrastructures like smart grids become more widespread and complex, their operations and control have also become more complicated. Automated control systems, called SCADA [supervisory control and data acquisition systems] are computer-based control systems that can be used for many modern utility industries. Networked across the internet, SCADA systems have been widely deployed to operate power and data infrastructures. The primary purpose of SCADA is to monitor, control and alarm plant or regional operating systems … all from a central location.
… How SCADA Works: A SCADA system collects data from various sensors at a factory, plant, or other remote locations and sends this data to a central computer, which then manages and controls the data. SCADA frequently changes control set points. While override control is possible, it is infrequently utilized.
The major attractions of SCADA to a municipality are the ability to reduce operating labor costs significantly and at the same time actually improve the performance and reliability of plant or regional systems. As the result of SCADA, gathering information within a plant no longer requires personnel to spend time wandering all over a site or out in the field. Thus, the frequency of required field site inspections can be minimized for regional systems and operation costs can be reduced.
Industries that use SCADA include:
- Electric Power Systems;
- Environmental Control Systems
- Manufacturing Systems;
- Mass Transit Systems;
- Traffic Signals; and
- Water Management Systems.
SCADA technology, the data they collect and the internet over which they transmit information are the linchpins of modern industrial societies. SCADA has also been identified as a vulnerability and security risk for the very systems that they control.
… Cyber Vulnerability: A cyber vulnerability is any aspect or defect of a cyber [internet] system that an adversary can use to compromise the system. A defect may be introduced into the cyber system either accidentally or intentionally. Accidental defects are often the result of either a design or implementation flaw. Yet, until a patch is disseminated and installed, an attacker can exploit the defect [bug], whether it is accidental or intentional.
Exploiting vulnerabilities in SCADA and other electronic systems can have very negative effects. Such vulnerabilities can result in lost productivity, lost data availability, data compromise, identity theft and even financial, property and other losses. While classic computer crime and exploitation can result in remote manipulation or theft of data, attacks on industrial cyber control [SCADA] systems can have devastating physical world results that affect the environment, health, and even life.
… Cyber Attack: A cyber attack is a much more serious issue than a vulnerability. A cyber attack consists of three components: a vulnerability; an access path to the vulnerability’ and an executed payload. The payload can take many forms, but most notable are the deliberate actions to disrupt, degrade, alter and destroy computer networks or systems, and the programs and/or data that reside in or move through the cyber networks or systems.
SCADA vulnerabilities and attacks represent real, emerging threats of immense importance to regional, national and international cyber security systems. Reported cases date back to 1982. Fortunately, to date, there have been remarkably few documented intentional cyber attacks on critical infrastructure networks.
The British Columbia Institute of Technology [BCIT] is a group that tracks incidents of industrial cyber security. Their data base, the Industrial Security Incident Database (ISID), tracks and stores information about each security attack on industrial network systems. The stored information includes the type of attack, the vector, and the equipment used for each cyber attack.
Before 2001, the majority of cyber attacks reported in the ISID were from company insiders. After 2001, the majority of the reported cyber attacks were from external sources. This shift from insider-to-external attacker has been attributed to the increased use of more common operating systems and applications, larger interconnected networks and automated “worm” attacks.
Recent cyber attacks reported include:
- March 2011, Italian security researcher Luigi Auriemma released details on 34 SCADA vulnerabilities.
- September 2011, Luigi Auriemma released details and proof of concept code for 6 vulnerabilities affecting popular SCADA systems.
- November 2011, foreign hackers were alleged to have destroyed a pump used to pipe water to thousands of homes in a U.S. city in Illinois. A municipal water employee in the state capital of Springfield noticed problems with the city’s water pump control system, and a technician determined the system had been remotely hacked into from a computer located in Russia. Authorities believe the hackers had access to the utility’s network and broke the pump by turning it on and off quickly … and remotely.
Research into the area of cyber attacks is just beginning. Highly trained personnel are required for the present and certainly for the foreseeable future.
How many students … our Next Generation Leaders … in countries, worldwide, will acquire important, basic knowledge about energy efficiency, Smart Grids, and cyber vulnerabilities … to analyze, synthesize and evaluate the interconnections and impacts on their home country and the Global Economy?
The sustainability of the economy, sovereignty and security of every country depends upon strong, qualified leaders of well-educated populations with the training and the skills of employment needed by the multi-faceted Global Economy. Given the complex maze of financial, energy, and cyber connections that bind countries, today, the backbone of such sustainability … and the Global Economy … is strong educational infrastructures. And for countries, worldwide, strong educational infrastructures depend upon … Global Education Transformation that is systemic, scalable and sustainable for all public schools, K-12→College→Career …
“A Nation at Risk: The Imperative for Educational Reform, A Report to the Nation and the Secretary of Education United States Department of Education by The National Commission on Excellence in Education”, April 1983.
Council On Foreign Relations, “U.S. Education Reform and National Security”, Independent Task Force Report No.68, March 2012.
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