The First Global Nuclear Depression?

It’s going to be a wild ride which probably won’t end well.

A Nice Little Recession

We’re seeing a number of signs which predict a US and probably a world recession. The bank runs are part of the story. The collapse of crypto currencies is another. Add to that the layoffs, of which I rate Disney’s as the most important and the most symbolic.

We can all understand the techs and even the banks having problems, but Disney is the pure consumer market. Disney contradicts the story of the consumer being spared. Bottom line: we have a recession coming over the next year or so. Will it be like the Great Recession or even worse?

Surprise! It’s going to be a short-lived recession. That’s because of our good friend Russia which has blessed us with a likely world war that really resembles what happened with Germany and the Allies in the late 30s.

But although the recession will be short because of the coming rearmament, it might be much deeper than we were contemplating. That’s because of two factors. The first is ChatGPT and AI. Usually recessions fall hardest on blue collar workers. This time it’s going to be much harder on white collar workers, the ones that AI will displace most quickly.

And second, we haven’t yet factored in the deflation caused by the crypto-currency collapse. Once rearmament kicks in, this deflation will depart for a while but in the next few months it’s going to be a bear, so to speak.

Everyone is rapidly running out of ammunition and arms just at the time they all need them, urgently. So, the big meme is global rearmament.

Re-Arming is So Much Gun

China is preparing for its invasion of Taiwan and expanding manufacturing for war materiel. Russia is trying its best on a feeble commercial base but is putting the pressure on Iran and North Korea which badly need the business. Germany and the Europeans are belatedly getting serious about beefing up their military assets.

Every other country out there is suddenly expanding its military, from Poland, to the Asian countries such as Indonesia, India and especially Japan. Uncle Sam is pulling out as many stops as it can to expand munitions for its Allies and to backstop every other country petrified of being invaded by Russia, China, North Korea and Iran or, just possibly, all of the above.

This time around the world war will also be fought in space with satellites, airborne weapons and so on so it will be far more encompassing than ever before. So, industry will be even busier than before manufacturing new types of space weapons. Lot’s more fun than ever before!

This sounds like a good old fashioned pump priming that’s going to massively inflate every economy out there. While everyone will be pulverizing everyone else, we’ll need more workers, manufacturing plants, more diversion to the military sector and so on. So, after the short but deep recession we will get huge inflation – again. What does the Fed do then for an encore?

So, we’ll all have forgotten about that recession while the good economic times roll – temporarily - courtesy of Russia and the Chinese, and everyone else who will assuredly get dragged into the slugfest.

Payback is a BXXX

Now for the bad news. This world war will almost certainly go nuclear, either in a “controlled” way, as in using “tactical” nuclear weapons, or using the Big Bertha approach which all the major powers are best prepared for anyway, so it’s the default option. Either way it’s not good.

The ensuing massive global economic disruption from nuclear warfare means one of two outcomes. The “good” outcome is a world depression where everyone gets hit. Instead of just one country like Ukraines having been obliterated almost all countries will be leveled. And that’s with just the “minimal” global depression outcome.

The really bad outcome is the world being blasted back into the Stone Age. I won’t even try to analyze that because it’s so scary. In any case, once we get there, we’re in a different universe. Try to read Nevil Shute’s apocalyptic and vividly realistic novel about the aftermath of a global nuclear war “On the Beach” if you want to bathe in the dystopia.

When you look at things from this perspective, issues such as how tight should the Fed squeeze fade into meaninglessness. It doesn’t really matter. Same with whether the US government is spending too much or too little. Even whether everyone has gone too woke or too transgender.

In the coming global depression and the high potential for human mass extinction, private guns and weapons are going to be valuable to the few remaining survivalists. So along with the government-fueled explosion in weapons production and distribution, Citizen Kane is going to be arming too, to the teeth. What hope will there be otherwise?