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To counter Russia and China’s growing military power, the U.S. and its allies are contemplating a significant surge in defense spending, which could surpass $10 trillion in the next decade.
What Happened: Despite global defense spending hitting a record $2.2 trillion last year, the European Union nations are beginning to understand the financial implications of 21st-century security. This comes amid escalating tensions with Russia on their eastern borders, instability in the Middle East, and the expansion of the Chinese military, shifting Washington's focus toward the Pacific, reported Bloomberg.
While political leaders have been applauding progress toward NATO's targets for members to allocate 2% of their GDP on defense, security officials suggest that military budgets may need to mirror Cold War spending of up to 4% to fulfill the alliance's plans.
Should the U.S. and its Group of Seven allies reach such levels, it would equate to more than $10 trillion of additional commitments over the next decade, according to Bloomberg Economics’ calculations.
"The post-Cold War ‘peace dividend' is coming to an end," said Jennifer Welch, BE's chief geoeconomics analyst.
"I don't foresee a fiscal crisis triggered by elevated defense spending," Simon Johnson, formerly the chief economist at the International Monetary Fund, remarked. "But I do worry about a national security crisis caused by a failure to defend your country."
Why It Matters: This comes after NATO proposed a $107 billion fund to secure long-term military support for Ukraine earlier this month.
The proposal aimed to safeguard Ukraine's aid from potential disruptions, such as those that might occur if former U.S. President Donald Trump returns to the White House. This was followed by a statement from the Kremlin that Russia and NATO are now in a state of "direct confrontation," as the U.S.-led alliance commemorates its 75th anniversary.
Earlier this year, the U.S. had successfully disrupted financial flows between Russia and countries such as Turkey, the United Arab Emirates, and Kazakhstan through a warning to foreign financial institutions of potential sanctions. This was a significant move amid the ongoing war in Ukraine.
However, a recent study revealed a shift in public concern from traditional security threats like China and Russia to non-traditional risks. The escalating military tensions and the potential surge in defense spending indicate a stark contrast to this shift in public perception.
Read Next: Donald Trump Reportedly Hid Billionaire’s Bond Offer From Court To Save Millions
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27% profits every 20 days?
This is what Nic Chahine averages with his options buys. Not selling covered calls or spreads... BUYING options. Most traders don't even have a winning percentage of 27% buying options. He has an 83% win rate. Here's how he does it.
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