Saturday, May 29, 2010

World War III Continued

Inevitably, difficult financial times lead to more militarism.  Currently, there are more than 50 military conflicts that are active and some, like the Middle East and the Korean Peninsula, are threatening to explode into all-out multi-nation wars.

The continent of Africa has been plagued by no less than 20 civil wars in the last few decades, although these are primarily tribal conflicts which are very localized.  The MAJOR conflicts include the U.S. presence in Afghanistan and Iraq, the threatened nuclear showdown in the Middle East over proposed sanctions against Iran and the recent escalation of tension in North Korea.  Lesser conflicts, tame for now, include the Chechen and Georgian civil wars which have threatened Russia.

Global military spending has grown sharply at a time when few countries can afford it given the massive budget deficits so many of them face.  World military expenditures in 2008 are estimated to have reached $1.464 trillion in current dollars versus just over $1.2 trillion in 2005 adjusted for inflation.

This represents a 4% increase in real terms since 2007 and a 45%  increase over the 10-year period since 1999.  Put differently, worldwide military spending equates to 2.4%  of world Gross Domestic Product (GDP), or $217 for each person in the world.

The U.S., with its massive spending budget, is the principal determinant of the current world trend and its military expenditure now accounts for 41.5% of the world total.

After Washington, the next highest spenders are China (5.8% of world total),  France and Britain (4.5% each) and Russia (4.0%).  The next 10 countries combined represent about 21.1% of the total with the rest of the planet making up the remaining 18.6%.

The total U.S. military budget of approximately $700 billion, if completely wiped out, would not even cut the budget deficit in half!  It represents more than 50% of the entire discretionary portion of the budget.  Of that total, about $200 billion is being spent annually in Iraq and Afghanistan.
Sadly, rising tensions in two key areas of the world, the Middle East and Korea, suggest that a reduction in military spending is very unlikely in the intermediate term.

Korean tensions have resulted from recent revelations that North Korea is responsible for the sinking of  South Korean warship Cheonan in March.  Because nuclear power North Korea shares a border with China, Beijing has been restrained about supporting sanctions against Pyongyang.  That seems to have changed.

During a visit to Seoul yesterday, China’s premier Wen Jiabao said that China would not protect “whoever sank” the South Korean warship, offering Seoul some encouragement that Beijing might not block moves to punish North Korea at the United Nations Security Council for killing 46 sailors.

South Korea has given China the complete technical report on the sinking and has said it would welcome a Chinese delegation should they want to inspect the shattered hull and corroded torpedo retrieved from the seabed.

North Korea has put its oversized army on alert and has threatened to invade South Korea if Seoul breaches any restricted areas.  The last thing China wants is a nuclear civil war on its southern border with millions of Korean refugees seeking asylum.

Russia also has a keen interest in the Korean Peninsula.   Moscow said on Thursday that it would stage large-scale naval exercises off North Korea next month that were planned before the stand-off on the peninsula.  Sailors “will be on a high level of alert and capable of reacting adequately to any threat”, the Russian Navy told Interfax.

Iran sits on the second largest oil reserves on the planet and is vying to join the nuclear club, a policy vehemently opposed by Israel and the United States as well as the United Nations Security Council.  Opposition to Tehran's plans now includes France, China, Russia and Britain - making it virtually certain that sanctions will be imposed.  Iran has responded to the possibility of sanctions by threatening military action in the region and cutting off oil exports which need to go through the Straits of Hormuz.

The criticality of maintaining oil flow virtually assures a multi-nation armed conflict and the possibility of the use of nuclear weapons by Israel or Iran with the inevitable rise in global terrorism.  It is also likely that any regional conflict would draw in nations such as Syria, Pakistan, Turkey, Yemen and Egypt who will oppose any action taken by Israel.

Unfortunately, the militarism witnessed today is only likely to grow worse.  As nations become more determined to "look out for number one", the ability to cooperate diplomatically will be less likely.  Otherwise, passive domestic populations will become more supportive of military actions to protect their countries economic interests.  Defaulting debtor nations will incur the wrath of their creditors.  Protective trade restrictions, which were utter failures during the Great Depression, will become more politically popular.

This is yet another reason to maintain a heavy stake in Gold.  If free trade becomes restricted, currencies will be less useful as a means of exchange and the use of the only globally recognized currency will increase exponentially.

Marko's Take

Our latest video blog which proposes a 7-Step solution to fixing Social Security will be posted in the next day.  If you want to know the important aspects of that fraud and ponzi scheme called Social Security, check out our video entitled "Social In-Security:  The Problem' by clicking here


  1. inflation cures all

  2. Hi Anon:

    it sure does cure a lot of ails.



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