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Given the global march to cyber wars, civil wars, trade wars, regional wars and even possibly world war, I have some critical questions for you. Take a moment to think about the answers, and then read on for mine.
- Which countries in the world today spend the most on defense?
- Which among them are proposing the biggest increases in defense spending?
- Are you aware that one major military power is actually planning to cut back its military spending pretty dramatically? Do you know which one it is?
- Among all major military powers, which would you say poses the greatest immediate threat to the U.S. and its allies?
- Care to pick three defense giants that stand to benefit the most?
Now, for the answers …
- The Biggest Military Spenders on Earth
The United States beats them all by a mile.
According to the International Institute for Strategic Studies, based on 2015 figures, the U.S. military budget was $597 billion.
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That’s four-times larger than China’s $145 billion, seven-times larger than Saudi Arabia’s $82 billion and a whopping nine–times larger than Russia’s $66 billion.
Or think of it this way: The U.S. spends more on its military than all ten of the next largest military powers combined. That’s right. Even if you add up the official military budgets of China, Saudi Arabia, Russia, the U.K., India, France, Japan, Germany, South Korea and Brazil, you still come up with a total that’s smaller than the U.S. defense budget.
- Countries Increasing Military Spending the Most
The United States leads the pack with President Trump’s budget proposal calling for a whopping $54 billion, or 10%, jump in defense spending next year. That increase alone is almost as large as Russia’s entire military budget; and it’s larger than the entire military budgets of India, France or Japan.
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Meanwhile, China has announced a 7% increase, down slightly from last year’s 7.6% growth, and significantly below the 10.1% jump they achieved in 2015. Over the last decade, however, it’s undeniable that U.S. defense spending was on a downward trend, while China’s grew rapidly.
- The One Major Power That’s Cutting Back
Surprise: It’s Russia.
There’s hot debate regarding how much they’re cutting. But no one disagrees that a retrenchment is in the works, mostly due to the economic pressure of lower oil prices and sanctions.
The headline number for Russia’s defense spending cut is a whopping 25%. But the European Council on Foreign Relations points out that the baseline budget was overstated due to a large one-time funding adjustment plus a shortfall in the actual procurements. So the upcoming cutback is really 7% or so, still a pretty big decline.
- The Greatest Immediate Threat to U.S. Interests
Many Europeans, especially in the small, vulnerable, Baltic States, might argue that it’s Russia, and no one can pooh-pooh their concerns. Others argue that, long term, it’s China, especially given the size and rapid growth of its military budget, now the second largest in the world.
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But in the category of immediate threats, the worst is North Korea. Nowhere else in the world are the underlying economic, social and political causes of war more powerful:
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| North Korea: Threat of famine vs. lavish lifestyle. |
North Korea’s income inequality is off the charts. It was extreme poverty that made the country vulnerable to mass famine in the mid-1990s, and, according to the United Nations World Food Program, threatens to do so again in the current era. Meanwhile, reports of the lavish lifestyle of Pyongyang’s ruling elite are equally extreme.
Extreme political divisiveness is hard to pin down statistically. But the regime’s Orwellian measures to prevent, repress and punish dissent are telltale symptoms. A United Nations Commission of Inquiry found that abuses in North Korea are without parallel in the contemporary world.
Corruption is the worst in the entire world. According to Transparency International’s “Corruption Perceptions Index,” North Korea and Somalia share the lowest rank among the 175 nations covered.
Authoritarianism in North Korea is also the most extreme on the planet. Based on the Democracy Index of the Economist Intelligence Unit, North Korea ranks 167th of 167 countries reviewed, worse than the totalitarian regimes of Syria, Chad and the Central African Republic.
Militarism is everywhere. For every 1,000 people, North Korea has 57 in active military service, 11 times more than the United States. It has the fourth-largest army in the world. And it’s the only rogue state with nuclear weapons.
- U.S. Defense Giants that Stand to Benefit
In a recent flash alert, Weiss Ratings analyst Mike Larson has identified the three largest U.S. defense contractors with the best Weiss Stock Ratings:
- Raytheon (with a Weiss Rating of “A-”), which makes the Tomahawk cruise missile, used more than 2,000 times in combat over the past several years.
- Lockheed Martin (with a Weiss Rating of “B”), America’s largest defense company, selling a wide suite of products that the president may call upon if the latest Middle East conflict intensifies.
- Northrop Grumman (rated “A-”), which makes the Global Hawk drone and parts for the F-35 fighter jet.
These defense stocks have already enjoyed a significant run-up in the last year. So price corrections should be expected. But it’s hard to imagine a scenario in which the global march to war is suddenly halted, the push for military spending is reversed, or the profits of defense companies contract.
Good luck and God bless!
Martin
Dr. Weiss founded Weiss Research in 1971 and has dedicated his entire career to helping millions of average investors find truly safe havens and investments. He is Chairman of the Weiss Group, which includes Weiss Research and Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recession and Depression.
{ 21 comments }
That is very Interesting
All will play out, that nut inthe north will do something stupid and there will be an incident. Hopefully the will take the opportunity to take him out, hopefully by his own people.
The defense numbers published for China are bogus. If you divide the published spend by the active duty total you get $63K per man. New carrier killing missile programs, satellite killing programs, new carrier based airplane programs and enough trucks and fuel to haul all of that infantry around. I don’t know about armor, but I would be surprised if they would depend on donations from Russia like they did in 1951.
The Middle Kingdom sees itself as the Rodney Dangerfield of nations. In modern times they have never tried to project power beyond their borders except in 1952 – 1953, when Doug scared it out of them. That adventure was a complete disaster. Casualties are still a state secret, but the PLA has unofficially admitted to 180K killed (almost certainly way low) and our army G2 claimed 440K (almost certainly way too high). In the manner of the unskilled parent who says “keep on crying and I’ll give you something to cry about”, the Cultural Revolution a decade later killed so many people that nobody dared do rigorous historical study of the PLA in Korea. Today, with all of the modern wonder weapons, warehouses full of Benjamin Franklins and Barack Obama kissing their elbow and begging forgiveness, Xi is feeling his oats and just might, in the style of the Russians, keep reaching until he gets his hand slapped.
As far as North Korea, if they actually could make a nuke work, don’t you think they would explode one where the world could see it?
Martin:
I miss Larry Edelson. He had great insight. Thanks for keeping his work alive.
Dear Dr. Weiss,
Of course it’s North Korea the most clear and present danger right now not just for the U.S.A. but unwittingly and ironically enough for China too !
For this second and crucially important reason (China), I predict Kim Jong un‘s mysterious and sudden death in the very near future.
Should that not be the case ,war will be as sure as sunrise to-morrow given the fact that this erratic, Swiss educated North Korean “juvenile†is clearly power-crazy and out of control with nothing to lose!
That said and considered……….. the profits of the U.S. defense giants you mentioned in your article will definitely skyrocket!!
Luciano Salvati
If they have it they will damn sure use it. America is a prize sucker; everyone else is into R&D and stealing all they can in intellectual property. One day America will wake up poor and behind the eight ball and no one will help except to all they can haul away.
Some future for the kids!
https://www.youtube.com/embed/G3bn24qdZ7c
How comparable are the budget numbers ? Are they adjusted for things like differences in troops’ salaries?
Are the same things included by each country? Is weapons R&D budgeted someplace else, like science research? Does China’s number include the cost of creating islands in the South China Sea, or is that “fisheries development” or some such? Does the US number include veterans benefits?
It is very useful to put our military effort into context, but I’m not sure raw budget numbers provide much insight. I also recognize that combing through and adjusting multiple countries’ budgets is beyond the scope of your organization’s resources or mission.
with the vote in Paris, it looks like the EU will the survive for now. How will this effect your asset allocation? IE stocks; precious metals, will the surge of money from other countries still flow to the US stock market?
Can anyone explain to me how a portfolio can be valued at $73,738 with a 5.11% year to date return can in one month drop in value to $71,282 and yet claim the year to date return has more than doubled to 10.88%?
Am I crazy or does the math just not add up? How is one to judge how well the portfolio is really doing from month to month, year to year and long term?
The United States is surrounded by enemies who wish to see America removed from the world. I HOPE we are spending huge amounts on defense!
When a nation (or a company or organization) spends a lot on something, the quality of that something tends to decline – a sort of catch 22 situation. The inverse is not necessarily certain, of course, but I have to wonder about the quality of our military. In World War II, we spent a lot, and won, but the quality of some of our weapons and military units were less than optimum. We won largely by overwhelming the enemy with numbers of men and weapons. Will we have such an option in World War III?
Which country would you say poses the greatest immediate threat to the United States? >> NONE.
No country is foolish enough to take on the massive military industrial complex of the usa. The United States is the greatest threat to peace in the world, and it’s global police arm of Nato.
North Korea is very dangerous but let’s be honest….the biggest threat to the nation’s security and personal liberty are the folks that run the U.S. government. How safe can you be from external threats (like North Korea) if the government is bankrupt and our leaders simply want to keep invading and bombing more and more countries?
Our biggest threats aren’t external, they’re internal.
In response to Annie, from a viewpoint here in Australia. I applaud your honesty, the US is the greatest threat to world peace and has been for quite some time, you are now blessed/cursed with a jingoistic, arrogant, super egotistical would be Mohammed Ali as president, commander in chief and leader of the free world.
There was always a bully in the playground but sooner or later he would get snotted and bought down to size and ultimately peace prevailed.
If your largest national expenditure is the armed services and associated military industrial complex that does not express defense on the contrary that is an ultra aggressive stance.
Earlier during the immediate post WW2 era the US was seen as the friendly big brother, the saviour of the Free World justifiably, it was setting examples of man’s capabilities and positive projections of what was possible to achieve, it was admired globally.
Unfortunately that view of admiration gradually became tarnished as possibly with the best of intentions it appeared to many as developing into a predatory control freak …………a stand over ‘my way or the hiway’ character.
Is it not time for the US to revert that energy internally within in its own borders to repair its own wounds repair its own infrastructure spend at least 50 percent of that defense budget looking after its own physical, psychological, moral and ethical injuries. The US needs to make peace with itself, heal itself and then become part of the team that has the view of a genuine United Nations, a view of what is best for one is best for all. That is not throwing in the white flag it is becoming a genuine member of the global family.
We really miss Mike Larson and his daily update on important topics–We want him back!!!!!!!!!!!!!
China OUTSPENDS everyone in purchasing power. It cost them in us $$’s one – fourth what we do to kit out the average infantry soldier. Ditto for medium mechanized weapons like tanks and artillery. Aircraft creeps up closer to our costs but are still far below the thresholds of economic denial. Be sure to download, “The Great Siberian War of 20130” before it gets yanked off the net by censorship.
For example , this past week the United Arab Emirates decided to buy Russian flankers instead of our F-22’s. The Russian export of weapons systems at lower prices beholden those “friends” of ours to Russia for parts and expertise.
To assert that the USA is dominant in power projection by means of military spending is self delusion due to patriotic hubris. We are faced with each of us pulling a hand-cart full of ammo up a steep hill in additional taxes to keep up with the armament of the entire world.
in jan2009 i bought NOC, LMT, BA, GD, RTN, and UTX . for that very reason , to help our warriors , and mainly because they are the largest federal government contractors . the dividends are now well over $100K and the stock value has tripled . war is profitable
When you quote the $$ amount spent by each country, do you take into account that each dollar buys much more in any of those countries than is does in USA. Perhaps they are growing their capability faster at a lower cost than we have in USA?
You said that N. Korea is the only rogue state with nuclear weapons. You forgot about isreal.
For Jack Daniels:
I am not Jewish, however to consider Israel a rogue state is ridiculous. The people of Israel face the threat of annihilation on a daily basis from its neighbors and the entire region.
Another country that should be considered a rogue state is Pakistan. They have nuclear weapons and are not a stable nation.
The biggest threat to the U.S. is the Democrat Party!!!
Seems like G. Soros $$$ and FAKE NEWS and LIES and LIBERALISM and CORRUPTION is working very well at BRAINWASHING American voters especially Millennials!! (age 18 to 35)
It all adds up to Anti-American……..VIVA EVIL!!!