There’s Money in Them Thar WARs

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There’s Money in Them Thar WARs

By Peter Chezwick, FutureMoneyTrends.com Contributor

It shouldn’t be news to anyone that is not living under a rock that tensions are heating up in the Middle East and are very likely to lead to a larger conflict sometime in the near future. Just over the weekend munitions have been exchanged between Israel, Gaza and now Egypt reportedly became involved when “terrorists” launched against Israel from the Sinai Peninsula.

Many new regimes have come to power recently and it appears that long standing religious tensions are rearing their ugly head in that region. Some, such as Syria, currently in a civil war, are having a hard time holding their grip on power. Iran is battling fierce inflation on its domestic front while continuing it’s rhetoric against the Western Scourge. It’s not hard to see any one of these flash points leading to widespread conflict possibly dragging the US and other global powers into the fray.

Most Americans are far removed and jaded about the news coming out of the region. War has changed over the last 50 years. It has gone from legions of troops and mechanized fleets of air and sea superiority centered on strategic strikes from drones and smart bombs. It is hard to imagine what a larger clash would look like in the age of the highly sophisticated war machine.

Many countries like China and Russia have been funding large military budgets, but their militaries are nowhere close to the US in terms of technology and superiority. I’m not insinuating that a “world war” event is around the corner, or even likely. There is no benefit in global military super powers going toe to toe in a no holds knock down drag-out.

As a modern super power we, the USA, tend to pick on smaller dictators whose geographic regions they control have either resources or strategic value. I’m not saying Saddam wasn’t a bad guy, but constructing the largest, most expensive embassy in the world in Iraq should raise some eyebrows. It seems our leadership sees a lot resources as being necessary in that region for the decades to come. The problem with taking down dictators and meddling in affairs of less equipped countries is the ally retaliation scenario.

This was a system set up after WW2, modeled on a glorified construct of school yard diplomacy. We have Japan’s and Israel’s back, Russia has Iran and Syria, China has North Korea, etc. This sets up a condition where countries like Iran and North Korea can have decent confidence in not being attacked and talk tough for instance: “An attack on us is an attack on…(insert big brother here.)”  This system creates stability until someone, like a cornered despotic leader (Bashar Al Assad) calls in support from Putin in Russia while we have a strategic interest in Israel.

A few shells fly and it could just be the spark in the powder keg factory that fate has been looking for. If you are envisioning scenes from the movie Red Dawn, I wouldn’t worry about anything like that happening anytime soon. An overstretched “defense” budget is what kills empires, much more likely to do harm to the average citizen funding them. Of course it isn’t all doom and gloom though. I’d imagine whoever made swords and shields for the Romans made out like a bandit.

One thing we know is that a military does no good just sitting around, there’s no money in that. To quote Smedley Butler, “war is a racket.” Corporations like Boeing, Raytheon and Lockheed Martin would not be as profitable if not for the demand from the Military Industrial Complex. There are huge sums of money to be made in blowing stuff up.

The traditional marching army has become obsolete in many modern conflicts where there is no clear uniformed enemy. Man on man combat has a huge political cost to those in power as well, people seem less opposed when it’s robots shooting “suspected militants” halfway around the world.

It’s clear that Obama is not shy about taking our forces to war, yet he prefers more covert, technological operations. Being elected a second term, he also has more flexibility in initiating and responding to “US interests.” We have all heard about the fiscal cliff coming up in a few short months that has markets spooked and defense contractors biting their fingernails.

Interestingly enough Lockheed Martin, Boeing and Northrup Grumman all contributed more to Obama than Romney in the recent election. Keep in mind that republicans would chop welfare recipients off at the knees before one penny cut from our defense budget.

With the Middle East heating up and oil becoming the next global gold rush, the big players are chomping at the bit to carve out what they can before it’s too late. I wouldn’t be too sure that defense contractors are going to take a big hit.

These companies are paying about a 20% higher dividend now than during the market peak in 2007 and priced at about 25% less since then. One could argue that the US military superiority is the reason for past decades of prosperity, why cut back now when the Military Industrial Complex pays for the politicians that make the decisions on how much taxpayer money they make?

 

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