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The Higher Highs of Military Spending

Most countries in the world have defended spending as the largest part of the annual budget. But as always there were exceptions such as Japan and Germany. Last year's events have changed their views as well and resulted in them also participating in defence spending.

Even before 2022, the global military spend crops $2.1 trillion in 2021 according to a report published by the Stockholm organisation. This USA topped the list at $801 Billion with a 1.4% drop compared to 2020 representing 3.5% of GDP. China is the second largest slender at $293 Billion. Compared to them Japan is very small at $54 Billion but it was the highest increase since 1972.

The conflict between Russia and Ukraine has accelerated the loss trends as 2023 might be the largest increase in military spending. The USA has already passed a bill containing $858 Billion of military spending. Germany wants to increase and approve $100 Billion for special arms. Japan has increased its allocation for 2023 by 26.3% compared to 2022.

All these trends point towards the focus on national security whether through policies or the military and this will remain the top priority for the years to come. And in such an environment trying to expect a phase of low uncertainty is next to impossible. This resulted in a period of high-risk premiums on commodities, especially in the category of food and energy. Thus, cool-off in inflation for a few quarters might become a trap for all before the next increase gets triggered.


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