To many people, the relationship between finance and war is obvious: banks finance the military-industrial complex. In my opinion, however, that misses the point. Banks finance everything (in our society); so why, in particular is it so desirable to have all these ongoing wars?
The answer, it seems to me, is that war is desirable for all those who profit from instability. Many people in business talk endlessly about the desirability of having "predictability," but there is one part of the business community that thrives on change and volatility -- the financial trading community. Dealing with risk and profiting from volatility (the "vol") is their bread and butter. The more "vol," the more profit.
How does war contribute to financial volatility? Just consider a few headlines:
RAW MATERIALS PRICES: Canadian firms guide Afghan efforts to unlock mining ‘treasure trove’
U.S. GOVERNMENT INDEBTEDNESS: Charting the American Debt Crisis ($6.1 out of a total of $14.3 trillion was accumulated under George W. Bush, in large part due to Iraq and Afghanistan wars.What's more, these fundamentals -- oil, natural resources, inflation -- are nothing compared to the "vol" that can be generated by hazy, futuristic wars with exotic enemies:
I was struggling to find a way to convey this latter point, and then the investment firm BlackRock did me a huge favor: they published a 4-page, full-color insert in the New York Times on February 29, 2012, to sell their services to wealthy investors. Their marketing language says it all:
"Markets are volatile. Confidence is scarce."
"the ground has shifted under your feet"
"No matter how tumultuous change is ...."
"Volatile markets have fueled fear...."
"a world of risk...."Note that nowhere does the word "war" actually appear. But does it need to? (The closest it comes is in the obligatory fine print, where BlackRock reminds potential investors that all this risk -- particularly from "economic or political instability in other nations" -- might be something that even BlackRock can't protect them from!)
In case anyone needed reminding that these financial firms are promising to work their magic in the face of the mystifying disruptions that follow unceasingly from U.S. wars in the Mideast, BlackRock has named their "sophisticated financial technology tools for pricing risk" -- in a nice Orientalist twist -- after that hero of the Thousand and One Nights, Aladdin.
Once you become aware of the interest of those who "play the vol" in permawar, and start to look through this lens, you see it everywhere. For instance, BNY Mellon Wealth Management spells "opportunity" from letters in several key phrases, starting with the "op" in "geopolitical turbulence."
If my belief about financial firms is correct -- if, in fact, they profit from the very same policy of permawar that drives the political elite (the President and associated federal branch players) -- there should be clear confirmation in the amount of money that those financial firms contribute to the political elite. What do you think? If we bother to look, will we find the money trail?
(PS - Some people may wonder how I can possibly write about investment firm profiteering from permawar without discussing Goldman Sachs. Fear not! Goldman will be getting a closer look all to themselves!)
* * * * *George Grosz drawing: Praeterita
"War room traders": FX Global
Image from the Thousand and One Nights: Wikipedia
(See J'ACCUSE: The Beneficiaries of Permawar )
(See Finance's Unholy Trinity of Permawar: Goldman, Bloomberg, and the CME )