Yet Another Exponential Chart... And A Different Spin On "Keynesianism"

Tyler Durden's picture

In our daily scouring of the markets we run across a plethora of charts, many of them boring, some interesting, and a few select ones, exponential, and thus completely unsustainable. The US debt load is of course one of them, global central bank assets is another, as is pretty much everything associated with Europe these days. However, the following exponential chart is one we had never encountered before: it shows the number of major "disturbances", read power outages, in America's power grid in the last decade. The chart is, well, disturbing.

So with fiscal stimulus to fund social projects as one of the core tenets of neo-classical economics, or at least such being its interpretation in Washington, D.C., and New York Times newsroom of course, one wonders if perhaps this is not one of those occasions where it would make sense to incur the social cost to fund infrastructure developments upgrading America's dilapidated power system.

We would be merrily on our way with such blasphemous thoughts until we looked at another chart, this time one showing the "real victims" of power outages, where to our absolute lack of surprise, we find that by far the biggest beneficiary of an operating power system are US Brokerage operations, for whom every hour in power grid downtime results in a cost of a whopping $6.5 million.

Which then begs the question: since brokers, read High Frequency Traders, investment banks, and other operations that require copious amounts of electricity to run "arbitrage" and other "sensitive" information driven profitability schemes on a millisecond basis, are the ones benefitting the most from a well-greased power grid, should it be the onus of Joe Sixpack, in the form of yet more indebtedness, to fund a system whose benefits are so disproportionately skewed to the benefit of one specific class of consumers.

Perhaps it is the banks, who are so very reliant on an up to date electrical utility system, that should be the ones funding on a pro-rata basis in terms of benefits, or well over half, the modernization of such facilities. After all, following the mass bailout of all banks, these entities are already, pardon the pan, utilities themsleves... or at least would be if the bailouts had been executed properly, and any excess profits were solely to the benefit of those who provided the bailout cash in the first place: those who are now asked to fund infrastructure overhauls as well.

Naturally the same logic could be applied to all other aspects of the aging US infrastructure: perhaps instead of everyone paying for something which benefits abrnomally a select few, it is those who extract the most externalities out of these societal programs should be the ones paying for their upkeep?

Just a thought.

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Real Estate Geek's picture

" but I can't seem to find the reference."

The Ministry of Truth loves cloud computing, e-books, etc.!

bugs_'s picture

power is supplied by the state

money is supplied by the state

perhaps a money outage is coming

NOTfromSanFrancisco's picture



"...perhaps instead of everyone paying for something which benefits abrnomally a select few, it is those who extract the most externalities out of these societal programs should be the ones paying for their upkeep?"

Amen to that...But then, may I be excused from paying school taxes if I have no children?...

Paul451's picture

Smart Grid? How about OLD Grid?

Simple explanation: demand is up, capacity is flat, the grid doesnt get maintenance or replacement, and utilities are run by MBAs instead of engineers. The power industry was 'financialized' a long time ago. Stick a fork in it, it's done. Good luck trying to have a modern society when the frikkin' lights go out.

In the meantime, we're sitting on enough coal for the next 300 years and enough natural gas that we could tell OPEC, Venezuela, Russia, Mexico, and Canada to kiss our ass...but of corse we dont do that because our government thinks 'alternative energy' is the way to go.

If it werent so sad, it might actually be funny.

Caviar Emptor's picture

Look, there's an obvious explanation: power outages are happening because so many Cool Cramerikans are enthusiastically trading stocks electronically with Hi-Freakwen_C (Registered Trademark) !! !! !!

Are we living in a Freakin' Utopia yet or whaat????

It's not HFT bots from Mars (don't be radicchio!) it's average well-adjusted Cramerikans (yes, with a small dose of the ole Cramerikan Exceptionalism!) trading over pancakes in the morning, burgers in the afternoon (made from the finest "pink, lean fine-ground beef", ya know)  and California Roll in the evening! (crab stick(R) made from slurried Pollock and FDA red dye #3 for that "plausible look") !

It's called Livin the Dream....!

(-Dream(R) is a registered trademark of the BernankeBuffet Corporation)

boiltherich's picture

Horseshit!  I live in a town of over 50k and our power goes out three times a week.  That would make Medford responsible for most of the outages in that graph all by itself unless they are seriously undercounting them.  And of course that is something of an exageration, but it did go out 4 times in one day two weeks ago.  Since 2005 I guess the power has been off here at least 40 times.  I no longer set any of the clocks on the stove, microwave, coffee maker, etc. I jut let them blink because if I do correct them it is the surest way to make the power blink off again.  So much for the smart grid.  It might be smart but it has the attention span of a goldfish.

yogibear's picture

And Bernanke and Obama want to raise the bar higher next year. Print and create more debt. The Ponzi-thon continues until it can't.

Loss of failth in the US dollar at the end on Bernanke and the Fed's game.


engineertheeconomy's picture

Ponzi-thon lol. Jerry Lewis for central banker 2012

adr's picture

Hmmm the government paying for millions of welfare bitches power bills. All of them with government bought air conditioners, 50" Plasma TVs, XBOXs, and computers probably has something to do with it.

Not building any new power plants in years and taking hundreds of coal plants offline has something to do with it as well.

Millions of McMansions pulling an average of 1600kWh per month puts quite a strain on the grid. If we get over a week of 100 degree plus days in June the east coast grid is going down, maybe for good this time. It's been about ten years since the great blackout. Nothing was ever really fixed.

I had fun during the blackout. My apartment building had a backup generator for the whole building, since there was a restaurant on the first floor and the owner was sick of losing thousands of dollars every time there was a power outage. Living in the only buildin with power for 40 miles was pretty frickin cool.

Maybe we can blame facebook since everyone is on their computers 24/7 updating their status.Think of the power that takes.

Heroic Couplet's picture

Now that Occupy Wall Street has a counterpart, Protect Wall Street, how many current finance sector problems can be traced directly to Phil Gramm, the repeal of Glass-Steagall, and the creation of derivative products? Anyone who got their ass handed to them on Phil Gramm's plate can take their complaint to Phil Gramm.

Then anyone who actually was dumb enough to think mortgage payments could reset to higher payments during the time US jobs were sent offshore can go hang themselves. Save the former middle class the trouble and the rope.

curly's picture

Thank you HC.  Couldn't agree more.

Start with sleazeballs like WJ Clinton, Bobby Rubin, mix in retards like Phill Gramm, and what do you get?  we're living it.

And Tyler.  Stop being so mean on energy.  George W's posts say the world is ending, the Gulf of Mexi is dying, Prince Willi Sound is dead after the evil Exxon Valdez, and we're all going to grow 3rd heads, or something, from Fukushima radiation.  So we *have* to sacrifice.

But GW's enviro-weenie posts aren't real posts are they?  You're really just trying out an imitation of The Onion?  (MSNBC, NYTimes, Al Jazeera, etc. as credible, unbiased sources?)

virgilcaine's picture

OT but Levon Helm passed today.. a great musician and a good man.

 His roots in country, blues and gospel can be seen  here which became Americana.. a genre of Music that he inspired and created.




samsara's picture

My first concert 1970 The Band

Rest in peace Levon.

Cynthia's picture

I thought I'd also pay tribute to Levon Helm by posting two of his most memorable performances of ”The Weight” and “The Night They Drove Old Dixie Down”:

Both performances were part of a documentary film about The Band's legendary concert entitled “The Last Waltz” which took place at Winterland Ballroom in San Francisco back in 1976. Levon Helm was one of the few drummers in the history of rock who could double as a lead singer. He was also one of the few rockers of his era that went on to become a well-known film actor.

Take a load off, Levon. RIP

alohasteve's picture

Today on Common Cents we are blogging about the 70th anniversary of the Doolittle Raid over Japan and the four surviving members who attended the reunion

geekgrrl's picture

I've been expecting a sharp increase in power outages for a few years now, as per Duncan's Olduvai Gorge theory. Figure 4 in that paper shows that we have been on a slow slide downward, but he has 2012 as when the cliff starts. I think the actual outage data would seem to indicate the knee of the curve was in 2011, but it will probably take a few years before it becomes obvious. He estimates that by 2030, energy consumption per capita will be the same as it was in 1930, meaning we have a long way down to go.

It will be interesting to see how the nuclear power plants hold up when regional grids go down for extended periods.

jimmyjames's picture

It will be interesting to see how the nuclear power plants hold up when regional grids go down for extended periods.


It will also be interesting to see when the lights stop shining-how long it will take to shift the mass anti nuclear mind 180 degrees to embracing it-

I'm long uranium miners-so maybe a bit biased-

TheMerryPrankster's picture

The irony of course being that a nuclear plant is one of the most sensitive locations for a power failure to occur.

Witness Fukushima, it wasn't the quake, or the tidal wave per se that destroyed the reactors. It was the failure of the diesel backup electricity generators that made the craptastic mess that is Fukushima today.

No power, no cooling, no control. If we do have more blackouts, its just a matter of time before we have more Fukushimas.

Mothers of radioactive babies will likely not embrace more nuclear power.

geekgrrl's picture

Yes, that is the irony. I'm so glad someone picked that up. :-)

Cast Iron Skillet's picture

I think they should mine all of the uranium & other radioactive substances out of the spent fuel ponds around the country until they're empty before they dig up new uranium.

samsara's picture

I've been watching this and waiting since I first read Duncan around 2002ish.  

Yes, Fig. #4  has got to be one of the most copied graphs in all Peak Oil-dom .  Matt Simmons even had it in some of his slide shows."gorge"

2012 was the year when the blackouts started according to the graph.  Amazing since Richard did that work in the late 90's




DaveyJones's picture

thanks I had that same image in my head with this article but couldn't dredge it up

samsara's picture

GeekGrrl's link is the original and mine was the PDF version.

Dr. Engali's picture

That was a good article. Thanks for the link.

Dr. Sandi's picture

I think it's fair to say that the guys with the most to lose in a power outrage will take precautions without prodding from big mother.

It's certainly a hell of a lot cheaper to equip all the buildings on the campus with aux generators than to chip in to repair the infrastructure.

Not only will it make the workplace a nicer place to be during a power outrage, but it's just another reason to not go home, where it's all dark and cold and nasty.

orez65's picture

The "rule of thumb" for electrical power grids in the US is to have 20% overcapacity.

This reserve provides standby electrical power for unscheduled breakdowns and for maintenance of power plants.

What's been happening is that a good part of the 20% overcapacity has been used to backup intermittent power from wind mills and solar power installations.

Therefore the 20% overcapacity can not provide enough power for unscheduled breakdowns and maintenance.

Look at the chart 1 and notice that the increased power outages coincide with the incorporation of wind and solar power into the US electrical grids.

Electricity from intermittent wind mills and solar installations for an on demand electrical power grid is another "liberal lunacy".

TheMerryPrankster's picture

I'm underwhelmed by your partisan analysis. Do you analyze everything through a lens bent by the suppositions of the only two possile political beleifs allowed by your "free" government and the "free press"?

Is your intellectual capital squandered in a false dichotomy meant to constrain your thoughts within a paradigm of failure?

First you must reducate yourself, then reducate others. The knowledge you were given was a trap, a cage to keep you from noticing the bars that surround you.

Yen Cross's picture

 Speaking of exponential charts. Look @ the ( H-4) chart on £-¥ !  That parabolic 400 pip move, looks ripe for a squeeze (on the longs) during the Europe session!

 Friday risk off? Just before the G-7 Meat Puppets/ Muppets get together in fantasy land! Hell anything £ ? short looks good!

Rock on Tyler!

  Anyone have the / July options chart on [ GBP/AAPL ]  ?   /sarc

sitenine's picture

When is the last time you heard of ANY brokerage firm going down due to lack of power?  Use your head.  Seriously, why would any brokerage firm want to pay to fix the crumbling infrastructure when they are all on UPS and diesel generator backups.  They don't give a shit if the electricity goes out for a few hours or even days.


I've spent my entire life "keeping the lights on" BH 



new sitenine: I agree!


mark mchugh's picture

Someone predicted "Power outages like US citizens have never seen before" for 2011 in December 2010.


lead salad's picture

So in other words....we're fucked.

Yen Cross's picture

 It's amazing how feeble we Humans are, ehh?  All the bring it forward " Good Will" this winter, suddenly becomes a run on " Nat Gas" this summer...  Coal doesn't work that great during the summer.

 Once again Tyler was right. Q-1 energysaving { front loaded}... Don't forget most manufacturing happens during the spring/summer months in the Northern Hemisphere. China is hating that one!

chump666's picture

Yen did you catch the Spanish 10yr trade flop?  So many bulls got caught with that wishing for yields to tank.  The sell off last session was not profit taking but a risk averse sell that could (could being maybe, maybe being f*ck sell this market) the start to the end April/May correction and the fabled 10% coming sell off.

Whats your thoughts.  Asia topped?  Korea blowing up?  Japan fiscal meltdown mid end yr?

Yen Cross's picture

 I read Tylers article the night before. Spain has 42B of roll over the next 3-4 months. Christine La Guarde has been running around like the " Mad Hatter". Sarkozy is toast, Greece went AWAL on their schedule with TROIKA ect...

 I couldn't even begin to tell you what to do Chump. I'm keeping my trades technical and powerful at tops and bottom of S/T ranges.

 I'm going to short the hell out of GBP going into the W/E with the G-7 meetings. I figure we can get the 38.2 retrace on that gbp/jpy move from 127.09 to 131.17 before any rise continues. Same with all the crosses except aud/jpy. That is a choppy trade!

 Japan is talking weak yen because their MoF is in the U.S. this week. Japan is the bullshit master! Once again, I'm targeting that area just above 80 in usd/jpy.

  Hope you had a good week Chump. I'll be logged in and running charts.

chump666's picture

Yeah I am doing good. Just looking for the chaos/liquidation trade which I think is very close, i.e no new highs equities/commodities etc.  So i am looking at short top ranges (indexes), as everyone still wants to go long.  One guy, UK analyst, talked up the Spanish yield spike saying it was a good thing that the take up was covered by Spanish banks that borrowed from the ECB at 1% etc.  Then the market tanked!!! haha what an idiot.  It's a long market dying to unwind, which will be across the board.  USD is holding up, so that would be the arb trade sell everything, bid USD.  We will shall see.

I agree France is problem, IMF is f*cking clueless and should shut up, they ramped the market with the global growth bs story, rumor was to get Asian bonds bid so that Asia can throw a ton of cash into the IMF.  The coming bailout is Spain...obviously. That country has gone bust like 40times in the last 100 yrs or something.

Big unwind is up, when?  I dunno, but the dow fails 1000+ times (HFTs) breaks over

fingers crossed

Yen Cross's picture

Draw a uptrend  and  down trend line on your favorite charts Chump!

 I suspect you will see the same thing I am. Decending wedges.?  Just place your bids and offers accordingly.

Don't expect much from earnings. Guidance was low. Compare YoY and MoM!

  I'm tired of these ass clowns Chump! I get back from Indonesia  and these little pricks are junking me on Z/H?

 WTF?  Tyler and Sacrilege should look into this.  These kids are Basement Babies!

  I just went diving and got to fly the clients plane. He want's my old 612 scagletti & my 575mm for a 458 spyder.

Is that a good trade?


samsara's picture

I read somewhere that many of the transformers in the country are about at their max age.  About 40 years in some cases.  Which would mean that we would just be starting the trend of failure in increasing numbers. 

We put so many of them out in the 60's and 70's that the aging fleet of power transformers and other equipment probably is starting to show it's age.

DaveyJones's picture


Power Transformer Failure: The Background

Let's describe the origin of typical power transformer failure based on some USA statistics.

According to William Bartley from Hartford Steam Boiler - Inspection and Insurance Company - the overall load on power transformers has been increasing for several decades.

Significant industrial growth after the World War II caused a large increase in the number of transformers in electric utilities. Most of the power transformers from this era are now in or approaching the end-of-life stage of their life cycle.

Based on U.S. Commerce Department data, the power transformer installations reached a peak in the USA in 1974. That equipment is now over 30 years old. Capital spending on power transformer installations is now very low, which is why the average age of installed power transformers continues to rise.

Along with declining installations of power transformers, power consumption grows at a rate of 2% per year. A decrease in capital spending has led to an increased overall power transformer load.

Power transformers are expected to last 30 to 40 years. However in the 1975 study, it was found that the average age at the time of power transformer failure was 9.4 years.

In a 1985 study by Hartford Steam Boiler, the average age of a failed power transformer was 11.4 years.

Significant expenses on aging power transformer replacements justify the investment in power transformer monitoring and diagnostics.

Power Transformer Failure: The Moisture

According to William Bartley, the increase in moisture in power transformers can be caused by floods, leaky pipes, leaking roofs and water entering the tanks through leaking bushings or fittings.

Power Transformer Failure: Deterioration of Insulation

Insulation deterioration is another cause of failure over the past 10 years. The average age of the transformers that failed due to insulation deterioration was 17.8 years - a far cry from the expected life of 35 to 40 years! In 1983, the average age of failed power transformers was 20 years.



Yen Cross's picture

That was a nice piece of info, Davey Jones!  Thanks for taking the time to put that together. +1

falak pema's picture

The Reaganomics mantra was : "Henceforth in this NEW age, we move into the post industrial- high value added service-FIRE-supply side, winner-takes-all economy", from 1981 onwards. Smoke stack industry and power grid infrastructure were not SEXY anymore. It was more sexy to asset strip companies and junk their infrastructure components. Greed is good meant, "I want it NOW and I want it all and I want it fast". That set the investment mindset of 15% ROI of shareholder's equity and the quartely report syndrome. So who gives a rat's ass when private sector "optimises" investment along those lines to make decrepid : refineries, power grids and infrastructure in general. F*** that! No fast return on investment. Let it rot, we'll replace it when we have to...

Thirty years later, we are up to our shoulders submerged in debt mountain, both private and public in first world, not just in USA, and the infrastrucutre is so decrepid and the size of renewal required so awesome, one wonders why those who only prayed every day to the FIRE economy God, have had their heads up their asses for so long! But then Allah ho Akbar is a song that the Private Sector Oligarchy have loved to sing all along; only it was in the name of so called "free market" that was as free as a roman slave woman sacrificed on the alter of Mammom; "Mr ALMIGHTY Greenback" of the FED. 

Its nice to be a monday morning quarterback ! 

The Navigator's picture

A little off topic - here are 10 mylar Emergency Mylar Thermal Blankets (Pack of 10) at Amazon for $8 and are 64 x 74 inches.

1- good for your BOB

2- for wrapping any EMP sensitive electronics (computers, walkie/talkies, BU generators, solar generators).

If you're prepping for electric outages with either invertor generators or solar generators, this $8 pack of 10 could ensure that your electronics make it to the other side (see/google farady cage on how to wrap electronics).

Disclosure - not my product, not my store - but wish is was.

mark mchugh's picture

The last three paragraphs are tremendous, Tyler.

ebworthen's picture


Unfortunately, it is the mammon lusters who have caused the death of infrastructure.

Maintaining infrustructure requires investment, most importantly in people.

People are THE LAST investment the Kelptoligarchy wants to invest in.

Delay, decay, milking the old cow, feeding less and less, to hell with the animals on the farm and it's all about slaughtering the fatted calf and living for the moment; peasants and orphans be damned.

I have ZERO surprise that the electrical grid is collapsing; along with water, gas, sewage, roads, bridges, and everything else.

The collapse of Rome must have been eerily similar, but our aqueducts and roads won't last 200 years past our demise.

Zero Govt's picture

Too true

as Govt gets bigger, everything around it deteriotes

as Laws, regulations and rules mushroom cloud it suffocates everything and everyone to a dumb-stupid grinding halt

We are reaching a peak in Govt and a peak in Laws/regulations ..we'll get an assured peak in socio-economic vandalism to go with it

kurt's picture

Does anyone remember the recent national grid modification having to do with regionalization and some crazy implementation of differing currents to prevent redundancy that we previously enjoyed with a national grid? Someone is gaming the system. What does EPRI say? Is this the warm up for the next ENRONesqe milkfest.

nonplused's picture

You are worried about bank profits in the event of a major power outage????? Even amongst the wise, foolishness prevails.


Here is the real black swan, although it isn’t, yet, very likely.  But it’s possible.  And anything possible happens eventually.


When Fukushima lost power, how long was it until it melted down???  Some say it started melting down within 24 hours.  3 reactors melted down, blew up, and destroyed containment of both the reactor and the spent fuel storage pools.


Now, granted, they lost their diesel backup due to the tsunami.  I’ll give you that, total power loss at full reaction for 3 reactors.  That’s not likely here in a power outage situation.


Our diesel generators will run… so long as they have fuel.


But how long will they have fuel?  If the grid is down, the trucks that haul diesel can’t load, as the refineries and loading pumps are also down, and the trucks can’t get through traffic.  Until the grid is back, no new fuel for the backup generators.


Do they have enough fuel on site to go to cold shutdown and maintain it indefinitely?  No, they don’t.


They cannot even maintain what they call cold shutdown without either the grid or fresh diesel for long.  Reactors overheating and storage pools boiling off are all but certain without fresh diesel within a week or 2.


If there is a large power grid failure happens, and there have been 2 recently, and the grid is down for an extended period of time, there will be a Fukushima somewhere.  Maybe not as bad, but bad enough.


The “solar storm” some people talk about, if it did occur and did take down the grid for weeks, would kill us all as 400 nuclear reactors around the world ran out of diesel to fuel their backup systems, assuming those systems still worked.


I’m not totally opposed to nuclear, but we need a fail safe design that goes to cold shutdown on it’s own when it looses human intervention, like some propose Thorium-Sodium designs.  What we’re running now we have to shut down and clean up.