How will Ukrainian warfare affect the U.S. Macro economy?

The military has an immense presence in the U.S. Macro economy. In 2020, 10% of the U.S. government budget was spent on defense. This is a combination of goods (weapons, etc.) and services (military personnel, contractors, etc.) that are requisitioned by the Department of Defense. In FY 2023, the Department of Defense (DOD) had $2.01 Trillion distributed among its 6 sub-components.

https://www.usaspending.gov/agency/department-of-defense?fy=2023

Many of the weapons are extremely expensive. Many were designed and built before recent advances in robotics and A.I.

The war in Ukraine, which is being fought by a small country against a superpower, has stimulated the ingenuity to use inexpensive weapons.

This article in The Wall Street Journal shows how the Ukrainians are using inexpensive drones developed for taking wedding video to kill Russian troops in trenches. The article shows how a 30-year-old Russian draftee, desperate to survive after his comrades were killed by small bombs dropped into the trenches by drones, surrendered to a drone by cleverly using hand signals to communicate with the operator of the drone. The drone operator said afterward that he felt sorry for the Russian and wrote that he should follow the drone to surrender on a paper which he had the drone deliver. The WSJ has photos and video. Really amazing detail. I felt sorry for this poor Russian who only wants to get back to his wife and 4 year old daughter even if it means being imprisoned in Russia.

While the massive (and massively expensive) military hardware of the past will probably be needed in future conflicts, won’t they be vulnerable to inexpensive defensive weapons? Think about how the Ukrainians destroyed an entire column of Russian tanks in 2022.

The U.S. military-industrial complex will push back hard against any attempt to trim DOD spending. But I hope that somebody is redesigning the future of warfare to take this into account.

There is no sign that military budgets will be trimmed in the near future. But significant changes would impact the Macro economy.

Wendy

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Don’t worry. If Ukraine suffers any big setbacks in the war with Russia, there will be tremendous pressure from the Military Industrial Complex to send in US troops and keep the money pumping.

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There is neither the political will (from either party) nor the legal authority to do so. There is already significant pushback on additional funding without it risking US lives.

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We’ve been lied into war before. All it takes is for some nut job to wave around an aluminum tube (as in the case of Dick Cheney) or shoot down an airliner.

intercst

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The Afghan and Iraqi ops were about revenge killing Muslims, with an undercurrent of juicing oil industry profits (Rant #1) (recall the phony story about the “Prague meeting” that a “though leader” continued to propagate, long after it had been discredited?)

There is a significant, Shiny, portion of the US that is pro-Putin. Recall that moment when a “thought leader” rejected the analysis of every US intelligence agency and embraced Putin?

Steve

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