‘Perpetual War for Perpetual Peace’

Today’s Markets and Money leaves the Australian summer behind to begin proceedings in the icy atmosphere of the Arctic. The Financial Times reports that Denmark is now the first country to lay formal claim to the North Pole and is on a ‘diplomatic collision course with Russia and Canada’. Is Santa Claus now Danish?

We can probably add Norway and the US into the mix as interested parties. Alongside the elf factory and reindeer stables, at stake is possibly ‘as much as 30 per cent of the world’s undiscovered gas and 13 per cent of its oil.

This is probably a reasonable enough guide to see what these governments think is happening to the ice sheet up there. Let’s put it this way: It ain’t getting any colder.

And the race, or the ‘great game’ as the FT puts it, is always the same: Who can get and secure access to the natural resource base? Did the Danes decide to move now with Russia financially on the back foot? Hmm.

Speaking of government finances, that brings us to what is now the longest foreign war in US history. The Financial Times also reported on Monday that the bill for the war in Afghanistan will easily surpass 1 trillion US dollars in the final reckoning.

Now we have the terrible news of the Taliban attack on an army public school in Pakistan, killing 140 people, 132 of them school children. Another act of complete barbarism after all these years.

The war began under President Bush, but 80% of the Afghan war spending has been during President Obama’s two terms. And what good can US taxpayers take comfort in? Not much, it seems.

The Financial Times:

John Sopko, the government’s special inspector-general for Afghanistan, whose organisation monitors the more than $100 bn that has been spent on reconstruction projects in the country, said that “billions of dollars” of those funds had been wasted or stolen on projects that often made little sense for the conditions in Afghanistan.

Just as one example of the pointlessness of some it, the paper says $500 million in transport planes were stored for three years before they became $36,000 worth of scrap metal. I won’t go on. The examples of waste are many. So are the examples of how the money could have been spent instead.

We can also add a mighty big interest bill. All of this war spending is borrowed money, of course. The interest paid is already at $260 billion, and growing. Add to that the growing list of military pension and health liabilities and the bill stretches out into another couple of trillion. And all for what again?

Subduing the Taliban is the publically stated aim, but Afghanistan as a country is also one of the last untapped frontiers in terms of natural resources. Invaders have been stomping all over the place for centuries, but nobody’s ever been able to get the wealth out.

Both the British and the Russians identified and surveyed deposits of copper, gold, lithium and rare earths. Back in 2011, Fortune estimated that this wealth is at least a trillion US dollars. I mention this because the FT quotes the following: ‘Under current plans, about 10,000 US troops will remain in the country until 2016.

Personally, I doubt if US troops will ever leave. Go back to the end of the Second World War. The US Army occupied the Japanese home islands. 65 years later, the US military still has bases in Japan. Why should Afghanistan be any different?

Afghanistan is a foothold for America on China’s eastern flank. To the west, the US is in Japan. China is hemmed in on both sides. Afghanistan also provides a base for operations in or against Iran, Iraq and Pakistan.

There was a US writer — dead now — called Gore Vidal who wrote a pamphlet on US military interventions in the twentieth century. He called it Perpetual War for Perpetual Peace.

Truth be told, I haven’t read it for years and don’t remember much more than the title and a long list of conflicts. But the title is all you really need to know really. I don’t see any evidence of why this megatrend should stop now.

Vidal spent a lifetime writing about the destruction of the American republic as big government and the bureaucratic power junkies and vested interests got their grip on the place.

Early America’s tradition of non-intervention, free trade, no income taxes and individual liberty is probably as unrecognisable to US citizens today as is, apparently for a lot of them, the rest of the world on a map.

The US government will continue to act the world over to prevent a major power or alliance rising. Invest with that in mind.


Callum Newman+
For Markets and Money


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Originally graduating with a degree in Communications, Callum decided financial markets were far more fascinating than anything Marshall McLuhan (the ‘medium is the message’) ever came up with. Today Callum spends his day reading and researching why currencies, commodities and stocks move like they do. So far he’s discovered it’s often in a way you least expect.

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