North Korea versus United States.
The showdown we all have been waiting for. More entertaining than the crowd-pleasing bout between Floyd “Money” Mayweather and “The Notorious” Conor McGregor. Numerous speculators are eagerly hypothesizing about potential war between the totalitarian North Korea and the paragon of democracy United States.
Rumors of wars started surfacing on the Internet and media networks after the Democratic People’s Republic of Korea overwhelmingly increased the rate of nuclear tests, which seem hostile and dangerous to the United States. Tensions between the two opposite nations steamed up after Kim Jong-un, Supreme Leader of North Korea, announced to the country’s state media that his next military objective is to launch a nuclear missile targeted at Guam. Donald Trump, President of the United States, fired back at the Supreme Leader by shouting North Koreans “will be met with fire and fury like the world has never seen before” after hearing threats to the United States island territory.
This overly hyped battle is still a long ways away. However, experts and war fanatics have already begun to discuss the political, cultural, and social implications of a World War III on the international scene. Although those are fascinating topics, the only thing you care about more than sex is M-O-N-E-Y.
MONEY.
A major world war would have tremendous effects on the world’s economy from trade to employment to production. A war on foreign soil would massively impact markets at home and overseas. As self-centered Americans, let’s talk about the American economy first.
During the war, participants’ governments will massively increase spending to finance the war. As a result, belligerents’ production can drastically rise to upwards of forty percent. (Learning Lesson: Production is measured in terms of GDP, gross domestic product. GDP is the monetary value of all finished goods and services produced within a country’s border in a specific time period.” Examples include food, cars, software, foreign trade, and investments). The sectors that benefit the most are defense contractors, energy, and electronics.
However, massive government spending can lead to unforeseen economic consequences. For instance, government debt can skyrocket and lead to a dreaded economic downfall. It’s happened before: during the peak of the Korean War, government defense spending was over four percent of the nation’s GDP. Similarly, the federal government may pay out boatloads of money to accomplish military objectives during the Third World War. A large chunk of the country’s GDP would be allocated to defense spending. Prolonged war in the Korean peninsula would significantly push up the federal budget. The debt is already uncomfortably high at 75% of GDP.
Let’s go global and talk about the markets overseas. War would negatively impact the host nation the most. There would be a serious drop in output economic output in the Korean peninsula. In a similar case, South Korea’s GDP fell by a crushing 80% during the Second World War, the most out of any country.
The diagram below shows the nine economies most affected after the Second World War:
Trade across international waters will be interrupted. The impact of the war would inevitably spread to wider global markets. South Korea accounts for two percent of the world’s economy, a portion large enough to significantly disturb the global economy during bad times. For instance, South Korea is the biggest producer of liquid crystals and second biggest of semiconductors. Consequently, damage in South Korea could cause deadly shortages across the world. Disruptions can seem to last for an eternity, as it takes almost two years to build a semiconductor factory from scratch.
The Third World War is a lose-lose situation for everyone. Copious amounts of resources, money, and time will be unnecessarily spent to a preventable situation. Ultimately, North Korea and United States should improve diplomatic relations rather than intensifying the hostile situation.