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War is Good for the Economy: Defense Stocks Soar

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10/01/2014

Well, war is good for certain sectors of the economy. For example: weapons manufacturing. Taxpayers and holders of US dollars won't fare quite as well. Writes Bloomberg:

Led by Lockheed Martin Corp. (LMT), the biggest U.S. defense companies are trading at record prices as shareholders reap rewards from escalating military conflicts around the world. Investors see rising sales for makers of missiles, drones and other weapons as the U.S. hits Islamic State fighters in Syria and Iraq, said Jack Ablin, chief investment officer at Chicago-based BMO Private Bank. President Barack Obama approved open-ended airstrikes this month while ruling out ground combat. “As we ramp up our military muscle in the Mideast, there’s a sense that demand for military equipment and weaponry will likely rise,” said Ablin, who oversees $66 billion including Northrop Grumman Corp. (NOC) and Boeing Co. (BA) shares. “To the extent we can shift away from relying on troops and rely more heavily on equipment -- that could present an opportunity.”

Basically, it's party time at places like Lockheed Martin where highly paid engineers live off the sweat of the taxpayers to develop more efficient ways to kill people 10,000 miles away. The idea of a war with few American casualties, but with incredibly expensive weaponry, is a crony capitalist's dream come true. Politically, there's no down side, from their perspective. Voters don't care about dead Arabs, and with so few American personnel likely to be killed, there's virtually limitless potential for the defense industry in this open-ended conflict. Thousands of bombs, each costing $250,000 will be dropped, with thousands more rolling off the production lines. Thanks to the central bank and American enthusiasm for limitless spending on wars, there's no better business than the war business. In fact, with election season right around the corner, watch for conservatives to be claiming that the administration isn't spending enough on war.  

Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for Mises Wire and The Austrian, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado, and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

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