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Cyber blitzkrieg - A Digital Threat to Physical Infrastructure

Aug 30, 2016

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Quick, how much food and water do you have in your house? Enough for ten days without access to shops and other national infrastructure? No?

What are you waiting for?! Get to the shops!

For the time pressed "prepper", that's the condensed version of a 69-page German Ministry of the Interior report released earlier this week, telling people to ensure they are well supplied enough to survive for ten days in the case of a national emergency.

It sounds like fairly obvious advice to me, although it seems to have caused a bit of a stir in the German media. Ensuring you have enough of the things you need - water, food, energy, medication, some form of ready cash, gin - to survive a crisis seems prudent to me.

Perhaps it's the underlying message that worries people. Because what stories like this really say is: do not put your faith in the state to look after you in an emergency. Again that seems obvious to me. But in the world of the deep state, where we're promised we'll be looked after from cradle to grave if only we put our trust in authority, maybe the idea that sometimes we have to take responsibility for our own lives is unnerving.

It reminded me of the very earliest days of Capital & Conflict, when we discussed different ideas for surviving a bank run - or a total shutdown of the financial system. I seem to remember Dan's ideas focused mostly on whisky and gold.

Anyway, the story got me thinking about disaster. Mostly these stories are in the context of a natural disaster, like a hurricane or flood, or some sort of attack - either invasion or terrorism. But it's worth considering that there's another scenario that could bring the national infrastructure to its knees: a cyber-attack.

That's because cybercrime and cyberwarfare are morphing into a much more dangerous threat. Where once the threat was digital - stealing data and personal information, hacking emails and so on - it is now a digital threat to physical infrastructure.

Take Stuxnet, the cyberweapon reportedly used to attack Iran's nuclear power systems. Stuxnet itself has no physical form - it's virtual. But its effects were decidedly non-virtual - they were real, causing real world damage to nuclear power stations in Iran. That's a big change, and one that's going to become increasingly important as the threat grows.

And it most certainly is growing. Earlier this month, for the very first time, there was a cyber-attack against the electrical grid in Ukraine. As CCN reported:

  • We've heard of hackers targeting emails. It happened last month when thousands of democratic national convention emails were compromised and then leaked. Here's a much scarier scenario. What if hackers could target key infrastructure, like power grids?

    Marty W. Edwards, Director, DHS Cyber Emergency Response Team said, "What happened is one of these large breakers or several of these large breakers were operated remotely by the attacker."

    It was the first known cyber-attack of its kind. Three attacks. Thirty minutes apart. Against three electrical substations serving Ukraine's power grid.

    Suzanne Spaulding, DHS under Secretary, Natl Protection and Programs Directorate said, "This is not theoretical, this has happened. We've now had a cyber-attack on critical infrastructure that was destructive."

The difference between a threat to digital assets and real world infrastructure is obvious. But it's worth outlining nonetheless: one threatens us on the level of data and information, the other threatens to make our lives physically cold, dark and hungry. Both are tremendously dangerous. In that context, stockpiling food, energy and other essentials seems much more prudent.

Think about it. What's more likely in Britain: a hurricane or a large scale cyber-attack?

Discovered: the answer to every problem in the universe

In other news, a Federal Reserve staff working paper released at the weekend outlined current thinking on how to deal with a future recession. According to reports, the Fed is considering a $2-$4 trillion stimulus package in the event of a downturn, depending on its severity. You can read the full report here, if that's your bag.

Of course, here in Britain Mr Carney has already begun... erm... stimulating, after the Bank of England announced its £60 billion post-Brexit QE package earlier in the month.

Which, to me, all begs the question: is there any problem on heaven and earth that can't be solved with more QE? Weight loss? Climate change? Childhood obesity? The answer to every problem seems to be to debase the currency and make money looser. Why not try it with them?

  • "Traffic on Threadneedle Street? Why driver, we must simply stimulate ourselves to the front of the queue with my trusty, one- size-solves-all printing press!"
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Drones + prison = mayhem

Consumer drones seem to be hitting a tipping point. The twin market forces of falling cost and improving technology are helping to propel the industry towards mass adoption.

As you'd expect with an emerging industry, people are experimenting and innovating with what's possible - not always in a good way. Real, free market innovation will always outpace the government's attempts to respond to it - again, not always in a good way.

Case in point: earlier in the week, police caught two drones attempting to deliver drugs to Pentonville prison. Detective Chief Inspector Steve Heatley said: "These recovered drones carried a substantial amount of Class B drugs, legal highs and a large quantity of mobile phones; we are able to intercept them thanks to the vigilance of officers and the public."

It's worth remembering that we only know about this because it failed. How many times has something like this worked without anyone knowing?

Please note: This article was first published in Capital & Conflict on August 24, 2016.

Nick O'Connor is a writer and editor at Moneyweek. He is also the publisher of Exponential Investor.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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