On November 21, 2013, during a Weiss Research investor cruise to the Caribbean, Money and Markets editor Larry Edelson made a dire prediction:
“Starting immediately, global conflicts will continue to ramp up until 2020. World War III is coming.”
Ten months later, on September 13, 2014, Pope Francis issued a similar warning. He announced that, with the current spate of crimes, massacres and destruction, a kind of World War III may have already begun.
And exactly one month later, during the Association of United States Army (AUSA) conference, top brass from the U.S. armed forces made similar predictions, hotly debating America’s declining readiness for such a conflict.
Clearly, this topic is no longer just the domain of biblical prophecies, astrology, or Nostradamus. It’s also a subject that’s seriously discussed by the White House, Pentagon, Kremlin, and People’s Liberation Army.
So today, my mission is to accomplish three things:
First I want to dispel the notion that a future World War III might culminate in a nuclear holocaust. That scenario is far less likely today than it was during the Cold War of the last century.
Second, I want to describe more explicitly how a World War III could begin and what real dangers it does pose.
Finally, I will connect the dots to the economy, your money, and your investments.
Just bear in mind that this is a very big topic. Even encyclopedic volumes of research would not do it justice — let alone the few pages I can write in these early hours between 5 AM in Florida and my publication deadline.
Why a Nuclear Holocaust is Extremely Unlikely
Anything is possible.
Indeed, to the degree that mankind believes a future event “can never happen,” it creates a climate of extreme complacency that ultimately negates the validity of that same belief — a self-negating prophecy.
So, with that danger in mind, you will never catch me categorically promising that “it’s impossible,” that “we can just forget about the threats” and make believe “the risk is zero.”
I hasten to add, however, that a nuclear conflict is far less likely today than at any time since August 6 and August 9, 1945 … when Colonel Paul Tibbets and Major Charles W. Sweeney piloted the Enola Gay and Bockscar, when they loaded the first and last of two atomic bombs ever used in warfare, and when they dropped them on Hiroshima and Nagasaki, Japan.
From that point forward, even during the darkest, most frightening days of the Cold War, no hot buttons were pushed, no missiles launched, no nuclear bombs deployed in battle — for a very obvious reason:
The universal fear of mutual self-destruction and a nuclear winter.
According to Carl Sagan, who coined the term, after any massive nuclear attacks between two superpowers, soot and smoke would create a dark blanket of clouds covering most of the planet. Average temperatures would drop below zero centigrade. And Earth could witness “a mass extinction event,” reminiscent of the “Great Dying” of 252 million years ago, when 70% of land species disappeared.
Anyone who has — or has ever had — decision-making authority over the deployment of nuclear bombs knows these scenarios all too well.
Ultimately, this fear is what prevailed during the Cold War of the 20th Century. And thankfully, it’s the same ubiquitous fear that hangs over every nuke deployment decision likely to be made in the 21st.
In that regard, nothing has changed. Thank God.
What has changed is that the mutual reliance for trade and financial transactions among major nuclear powers is many times greater today than any time during the Cold War. So they have much more to lose from war, even conventional war.
In 1962, the year of the Cuban missile crisis, for example, the total exports and imports between the United States and the Soviet Union were a meager $36 million.
And in 1968, at the height of the massive Vietnam conflict — viewed by historians as a full-scale proxy war between the U.S. and the USSR — the trade between the two countries was still a meager $80 million.
Today, it’s nearly $28 billion. Even after discounting inflation, it’s over $11 billion, or about 141 times more than during the Vietnam War.
Moreover, the flow of investment funds and banking transactions between them are thousands of times greater; they were virtually non-existent during the Cold War.
And precisely the same argument can be made for every nuclear power on the planet:
The leaders of India and Pakistan, for example, know that a nuclear conflict between them would create what their own scientists call “a nuclear autumn” of regional famine and global climate change.
China knows that any use of its nuclear weapons in warfare would merely destroy its vast export markets, which despite its domestic growth, still represent a huge chunk of its economy.
Even North Korea’s leaders, despite their belligerence, depend heavily on the outside world for the hard currency they continually need — to maintain their lifestyles … for perks they award to assure the loyalty of their military brass … for the food they need to keep their people alive … and to do all the things that support the propaganda machine that keeps them in power.
No one dares use nukes. Everyone knows it’s suicidal.
So What Could World War III Look Like?
Larry has done a very good job of spelling it out: All you have to do is look around you, and you will see its many facets — economic wars, proxy wars and cyber wars.
Economic war has already been declared, particularly among three of the world’s largest superpowers — the United States, the European Union and Russia.
Due to Western sanctions, Russia’s embargo on imports from the West and other factors …
- Russian companies already have limited access to foreign markets and capital.
- Global investors have already taken large sums out of Russian markets.
- The Russian ruble has already lost half its value. And …
- The Russian economy has already suffered surging inflation, major job cuts, and a rapid decline in living standards.
Worse, if the current pattern of tit-for-tat retaliation and escalation continues, it could lead to a scenario in which …
- Russian banks are excluded from the global SWIFT system, isolating their economy to the point of strangulation.
- Russia cuts off oil and gas supplies to Europe, fomenting new waves of protests and Russophobia.
- The Russian ruble suffers an even deeper collapse, driving the country into a Depression reminiscent of the early post-Soviet era.
Proxy wars have also been declared — especially in Syria and Ukraine, where the U.S. and Russia are already supporting opposite sides.
The two do everything to avoid confronting each other directly on the battlefield. But they wage a seemingly endless battle by using the opposing sides in local civil wars as their proxies.
This is what happened in the Vietnam War, when the USSR emerged as the largest weapons suppliers for North Vietnam … while, over the course of the 11-year conflict, 2.7 million U.S. troops served on the ground for South Vietnam.
It’s also what happened when the Soviet Union invaded Afghanistan in 1979 — but in reverse. There, it was hundreds of thousands of Soviet troops on the ground, while the U.S. provided weapons and logistic support to the Afghan mujahidin (“one who fights for jihad”), including none other than Osama bin Laden.
And in the years ahead, it’s very possible that we will see similar proxy wars in Eastern Europe, North Africa, the Levant, the Persian Gulf, on the Korean Peninsula, and elsewhere.
Perhaps most concerning of all, cyber wars are already escalating at a rapid pace, with the U.S., UK, China, Russia, Israel, and North Korea first on the cyber-battlefield.
Former spy chief Mike McConnell believes a cyber war might be compared to a nuclear war by the scale of destruction.
And Richard Clarke, Special Advisor to the President for Cyberspace and National Coordinator for Security and Counter-terrorism, writes that, in the wake of all-out cyber-attacks, the world’s infrastructure could collapse within 15 minutes.
|Future wars could be conducted in cyber space (U.S. Air Force photo/ Raymond McCoy).|
In his doomsday scenario, computer bugs destroy national systems for e-mail, air-traffic control, underground transportation, and financial transactions. Cash dries up. Power grids go down. Orbiting satellites lose navigation. Pipelines explode.
To me, and perhaps to you as well, this sometimes sounds like science fiction comedy. But quite a few smart people aren’t laughing.
Perhaps that’s why NATO held the largest-ever cyber war games in Tartu, Estonia in November 2014. The games were supposedly predicated on a scenario pitting NATO against a fictional African country. But according to Financial Times, they simulated real situations that could occur in the wake of a worsening Ukrainian crisis.
And perhaps that’s why governments all over the world are pouring massive resources toward developing both the offensive and defensive cyber-technologies, with, unfortunately, most of the money spent on offense.
Lone wolf hackers-for-hire are another big wild card: One 15-year-old successfully invades NASA, causing a 22-day shutdown of systems that support the international space station.
Others, albeit slightly older, easily penetrate the world’s “most secure” military installations, megabanks and multinational corporations.
And this is not science fiction. It has happened — repeatedly and massively.
Why? Because the entire structure of the Internet was created for fluid access and convenience — not for security.
Mobile phones, GPS, the Cloud, Big Data, drones and driverless cars — everything that we’ve been talking about that powers global techno-economic advancement — also has a soft underbelly: Vulnerability to cyber-attacks.
Connecting the Dots to Your Money
I see two phases:
In Phase I, the reality, and the fear,of these kinds of World War III scenarios drives the Global Money Tsunami — capital flows of scared money to the one economy still perceived to be the safest and least vulnerable, the United States.
Thanks, in great measure, to these massive inflows …
The U.S. dollar, despite setbacks, continues to gain in strength.
The U.S. economy, despite its continuing big debt burden, continues to benefit.
The highest quality U.S. stocks, despite zigzag up-and-down periods like now, make their owners wealthy.
In Phase II, if economic wars, proxy wars and cyber wars become truly destructive, everyone loses: World trade shrinks. Highly indebted governments impose austerity or they default. Global fear and depression replace global investment and growth.
The bottom line for you. Like my good friend Bill Donoghue always says: Invest in the best and drop the rest.
And like my father always used to stress: Better safe than sorry.
A Final Word
For every flood of fear, there’s a fountain of hope. And just as forecasts of bliss can lead to complacency or trouble, each forecast of disaster can be self-negating as well, leading to prudence, prevention, and a better, or less severe, outcome than expected.
Whether they’re among credible ones or not, I pray the same will also be the fate of the increasingly common prophecies of World War III.
Some are bound to come true. But we should also be able to avoid the ugliest of their consequences.
Good luck and God bless!