The mainstream media is abuzz over President Trump’s prime time address to Congress last night. Everyone has been eager for details about his tax, spending and other domestic policy proposals.
But in reality, it’s Trump’s foreign policies that will have the biggest impact on markets over the next four years.
If you have been following my analysis for some time, then you know I’ve warned repeatedly about the war cycles ramping up at the same time many other social, political and economic cycles are converging for the first time in more than 80 years.
Outside of my extensive writings and warnings however, you don’t hear much about this issue in the mainstream media, at least not yet. But that’s about to change in a big way.
Mark my words, the rising tide of the war cycles will be a hot-button issue in 2017 and beyond. And you need to be prepared now for the big impact this issue will have on financial markets. Here’s why …
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For hard evidence of the rising war cycles, look no further than President Trump’s plans this week to boost U.S. defense spending by 10%, an additional $54 billion in his very first budget proposal.
Just last month Trump went on the record saying: “We will be substantially upgrading all of our military … offensive, defensive, everything, bigger and better and stronger than ever before … nobody’s gonna mess with us, folks, nobody.”
In response to Trump’s plan, Senator John McCain, Chairman of the Senate Armed Services Committee, argued the spending increase isn’t nearly enough to cope with “a world on fire.”
Welcome to a brand-new arms race folks, only this time it’s not so much Moscow that Washington is taking aim at … it’s China!
Make no mistake, Trump’s defense spending proposal is a direct challenge to Beijing’s own military buildup. In fact, China’s military is likely to receive a significant funding increase of its own next month when Beijing’s next defense budget is unveiled.
China has consistently boosted its military spending year after year with double-digit increases over nearly two decades. Its navy has been the biggest beneficiary as potential conflicts loom in the East and South China Seas.
|Trump’s defense spending proposal is a direct challenge to Beijing’s own military buildup.|
In fact, Beijing has pledged to boost the size of its naval fleet aggressively to 350 ships by 2020, including new missile destroyers, submarines, guided missile frigates and aircraft carriers.
In short, China is dead set on checking U.S. dominance of the high seas in the Western Pacific, which Beijing considers its own sovereign territory. And this isn’t just a U.S.-China arms race, either. Washington is encouraging our allies in the Pacific to join us in the buildup.
Japan just approved a $43.5 billion defense spending plan in December, in part to boost maritime surveillance around the waters of the Japanese-controlled Senkaku islands, also claimed by China.
However, the bigger flashpoint of them all is in the South China Sea: the disputed Spratly Islands, where China claims sovereignty, a claim disputed by Taiwan, Vietnam, Malaysia, Brunei and the Philippines.
Not surprisingly, Vietnam and the Philippines have likewise increased their military spending dramatically in recent years amid the ongoing territorial dispute with China.
Vietnam is likely to further increase military spending to $5 billion this year and up to $6.2 billion by 2020, according to analysts.
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And the Philippines upped its defense spending this year to $2.76 billion, an increase of about 18%.
A new arms race is underway, the likes of which has not been seen since the darkest days of the Cold War. Last month I briefed members of my Real Wealth Report with all the details, including ways to profit from the new arms race.
Bottom line: If you’re a student of history, as I am, you’ll realize a confrontation is inevitable.
Five hundred years ago, the Spanish ruled the sea lanes to the riches of the New World.
Two hundred years ago, Britain’s Royal Navy ruled the waves … and the key trade routes around Africa to India and East Asia.
Since WWII, it’s been the United States Navy that has ruled the seven seas, but in the 21st century, inevitably China will not only become the world’s biggest economy, but will be a dominant force to be reckoned with in the Western Pacific and around the world.