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The Cold Wars (Almost) No One Wants

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by Portfolio Armor
Sunday, Jun 09, 2024 - 7:38
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The Push For A New Cold War

As we mentioned in a post last week ("Stopping The Sleep Walk Into World War III"), Western leaders have been increasingly hawkish toward Russia. To the extent that there's been some pushback from the foreign policy establishment, it hasn't been against continuing a new cold war against Russia, but on fomenting one with China. 

See, for example, this recent post by former Pentagon official Elbridge Colby, 

Or this one, by Vienna-based strategist Velina Tchakarova. 

Ms. Tchakarova didn't answer that question about why the West needs to have a new cold war against Russia and China, probably because there is no good reason for why we should have one, and plenty of good reasons for why we shouldn't, such as: 

  1. Unlike the Soviet Union, neither Russia nor China is trying to spread a hostile ideology like communism, or starting proxy wars against us. In fact, the opposite had been the case until recently, with Russia trying (unsuccessfully) to join NATO and (successfully, for a time) to join the G-7, and China seeking to increase trade with the U.S. and Europe. 
  2. A cold war would be a huge waste of resources, and with our current debt levels, we probably couldn't pay for it without causing even higher inflation. 
  3. Cold wars can turn into hot wars, and we are not in any shape to fight a hot war against Russia or China, let alone both.

In addition to the weaknesses of the U.S. Navy, which hasn't fought a peer competitor since World War II, there is the industrial strength of China, which reportedly has automated factories that can produce a thousand anti-ship missiles per day. 

Even if the Chinese are exaggerating there a bit, they can almost certainly manufacture anti-ship missiles faster than we can manufacture ships. 

And of course, direct conventional war with China or Russia could lead to the ultimate disaster, nuclear war. 

The West's Citizens Don't Want It

The above objections to fomenting cold wars with Russia and China are apparently obvious enough that most citizens of the West favor peace. Mark Ames shared a survey recently by the Institute for Global Affairs that showed most citizens of the U.S. and Western Europe support a negotiated settlement in the Ukraine, rather than keeping that conflict going as part of a proxy/cold war with Russia. 

Ames's implication that the U.S. and the Western European nations in question aren't real democracies is obviously correct though. In addition to the Ukraine War, the other glaring example of this is mass third world migration. No one in America or Western Europe voted for millions of Middle Easterners and Africans to pour across their borders, and yet that's what they've gotten. Even when they elect someone who runs on a platform of stopping the illegal migration, such as Prime Minister Georgia Meloni in Italy, the illegal migrants keep coming, facilitated by unelected NGOs. 

Why The Push For A New Cold War? 

The only answer that makes sense is that think tankers and defense contractors make good livings from it. It's worth remembering that, prior to 9/11, the neocons who later pushed for the Iraq War and now are the biggest cheerleaders for our current proxy war against Russia in the Ukraine were itching for a cold war against China. Here are two familiar names, Robert Kagan and Bill Kristol, in 1998, for example ("Stop Playing by China's Rules"):

The United States must make it clear in both word and deed that we will contain China’s strategic ambitions. We should begin by reversing the decline in our military strength. Chinese leaders interpret America’s shrinking defense budget and our uncertain response to crises in the Persian Gulf and elsewhere as a sign of weakening resolve. Nor could it have escaped the notice of Beijing that when the President sent aircraft carriers to the gulf earlier this year, none were left in the East Asian theater.

Why were they pushing for a cold war against China in 1998? The Soviet Union had collapsed at the beginning of the decade, and Russia was suffering an economic collapse then worse than our Great Depression, so it was no longer a viable bogeyman. 

What put the China push on hold was 9/11. Then the "War on Terror" was the low-hanging fruit. But that effectively ended with the U.S. pullout from Afghanistan, and there's much more money to be made arming for possible wars with Russia or China than there is with a bunch of goatherds with no air force, armor, or navy. The problem is that direct wars against Russia or China (or both) would be disastrous. Hopefully, David Sacks bent Trump's ear about this at his fundraiser last week, and Trump wins in November and is able to steer us in a more peaceful direction. 

We'll end this piece on a positive note by sharing a bit of good news below. 

In Case You Missed It

In our previous post, we updated the performance of our top names. Each week, we post our system's top ten names on our trading Substack, and then we track their returns over the next six months. Our most recent weekly top names cohort to hit the six-month mark returned 51.72% versus SPY’s 17.01%. 

So far, we have 6-month returns for 50 weekly top names cohorts since we started this Substack at the end of December, 2022, and on average, they've returned 23.31% over the next six months, versus SPY’s average of 12.72%. You can see all the details by clicking on the image below. 

A robotic bull analyzing stocks.
Click on the robot bull to go to the post. 

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