Funny enough, China will surpass the US in military spending in the not-so-far future without having to actually increase the percentage.
American Economics Thread
- Thread starter Bernard
- Start date
bajingan
Senior Member
Exactly, there is a lot of room for China to increase defence spending if necessary, plus most Chinese military hardwares are produced in house therefore cost is lower
2% interest rate on the USA debt would means as big burden increase on the budget as the whole military outlay.
Inflation is an uncharted territory , question is if the demand for USA debt will stay.
2% nominal interest rate, but in real terms you are getting negative returns because inflation is higher. That means that debt is reduced every year the nominal interest rate is lower than inflation.
Demand for US debt will stay because when they raise rates capital will abandon EM for US debt
Sprinkle a bit of "Russia war in Europe! EU doomed!" stories and you can understand why capital would fly towards the US
Its always the same story. Whenever the US needs capital, it will manufacture a crisis somewhere in the world which would make investors to go the "safe heaven", US treasuries.
Although it is correct that there is too much cheap money in the economy, we must also consider the problems of demand and supply. The biggest mistake that many financial analysts who advocate herd immunity make is to think that the economy will function normally if the virus runs its course, the problem is that they forget that the sick do not work, imagine that in a company on the 25 % of employees get sick, the company will not function normally. Products and services will inevitably be affected.
Good point. It will be interesting to see West's data about for the December-January months
Is inflation reducing their purchasing power yet?
Remember that the US military budget quoted in the media is often the base defense department budget and does not include many items that would fall under military budget in most other countries.
1. US foreign wars and military actions (e.g. Afghanistan, Iraq, and Syria) are funded through special appropriations for overseas contingencies and are not included in the defense department's base budget. During the height of Afghanistan and Iraq, these reached as high as $200 billion a year.
2. Veterans benefits are handled by the Veterans Administration, which is outside of the defense department budget. For 2022 fiscal year, the VA's budget is $270 billion.
3. R&D and maintenance of nuclear weapons are under the Department of Energy.
4. Border patrols and coast guards are under the Department of Homeland Security.
5. Numerous intelligence agencies are under various other US government departments.
If all of the above are included, actual US military spending is ~$1 trillion a year and close to 5% of GDP.
Also, the SIPRI consistently state much larger numbers for China's military budget than the official numbers without providing any source for where the additional spending comes from. China's official defense budget for 2021 is actually only 1.3% of GDP.
Last edited:
