At the Harvard MBA admissions interview, this question was raised. What evidence do I have? Well! Somehow. Let's skip the unnecessary formalities and go right to the subject.
I present to you the United States' military spending. One country spends more than half of all military spending globally, and what is the US afraid of? Why is it spending so much money? Isn't it a superpower already?
In 2012, it was the graph. The United States spends >50% of all military spending in the world. Nothing changed in 2013. The United States was so far ahead of the rest of the world that combining their expenditures would not equal the United States' expenditure. The trend persisted in the following years, particularly in 2014 and 2015.
Why does one country spend so much on its military.? In my opinion, it all boils down to how WWII played out. Because it was the only country that dropped the bomb on people, America was declared the superpower after WWII. Is there any other country that has dropped the bomb since then? No. Except........ As a result, if you detonate the bomb, you become the de-facto judge and the jury; the superpower means you're the only one remaining.
Surprisingly, America has never been close to becoming a superpower before it. Before it, the UK was automatically designated as a superpower. Not because it was a military powerhouse, but it held something more precious. At the time, the pound sterling was the global currency. Clearly, whoever controls the international money controls the whole world.
Coming back to World War II. As a result, in 1945, America pledged Europe 13 billion dollars to reconstruct Europe, known as the Marshall Plan. USD 13 billion would have been unimaginable money at the time. For many countries, it was worth more than their GDP. America took responsibility, stating, "The whole second world war took place in Europe. Europe has been wrecked, and we, as a superpower, bear responsibility for reconstructing it. We will provide Europe with 13 billion dollars to restore itself ". The entire globe was stunned. Why would a country make such a large donation? So there was a purpose to this. The US demanded Europe, mainly the UK, to relinquish or forfeit its currency from global operations in exchange for this small help. To everyone's amazement, the United Kingdom agreed to the deal.
Now, A question for everyone. Which commodity currently determines perhaps 90% of global politics? Oil? Yes, Oil. But you may argue how this relates to the fact that the United States spends so much money on the military? So, allow me to elaborate a bit further.
Israel was established in 1948, and for some strange reason, the United States has always supported Israel. And the Israelites, or "Jews," believe that they fled to Jerusalem because God promised them that land in the Old Testament. They believe that is their lawful residence. Surprisingly, that territory is divided among which countries? Arab. So you have all of the Muslim nations and a Jewish nation all in one spot. The rivalry was supposed to happen. The scope was so vast that Israel was simultaneously fighting battles on five fronts. Imagine waging a battle on five different fronts and winning all of them.
America has been a great supporter of Israel, but only in a quiet way. That implies just UN votes or financial aid, but the US has never backed Israel in a war. The Yom Kippur War was fought between Arabs and Israelis in 1973. For the first time, America actively supported Israel in a conflict that enraged the Arab world, including OPEC members. Outside of the United States, the Arab world 'and a few other countries was the sole source of oil. They became so enraged that they cut off all oil supplies to America and Western Europe. This was the world's most serious oil scarcity or oil shock ever.
The United States of America apologised and stated, "Fine, we apologise." We will not back Israel in a conflict, but there is a catch. The requirement is that all oil trades would be conducted in US dollars. However, we may assist Israel on ideological grounds". OPEC, particularly Saudi Arabia, agreed. As a result of the regulation, all oil trades in the globe will henceforth be conducted solely in Dollars.
As a result, the Dollar became the worldwide reserve currency by default. And it quickly rose to prominence as the world's most widely used money.
With all of the oil trade going on in the country's currency, what is the country's advantage? Control. It has complete control over practically all of the world's resources. Oil payments are conducted at only two oil exchanges. One was in New York, and the other was in London, and both were influenced by the United States.
Things may become a little funny sometimes. One day, Saddam Hussein decided that he was simply too powerful and that the Dollar's rule was a massive farce that had to end. On that day, Saddam Hussein sought to sell his oil in EUR for the first time in human history. What would happen if America had a prized possession for so many years, and one person really lifts his head and tries something to change it? The whole American military was focused on one individual. You already know what happened to him.
In fact, another guy had a similar idea in 2008. Iran's president, Mahmoud Ahmadinejad, inaugurated the third oil market, known as the Iranian oil exchange. And the trading currencies at this exchange included currencies other than the US dollar and gold. For this reason, the United States and Iran became bitter adversaries. The United States was likewise able to put a stop to this. The US and I quote, "we are not allies if anyone buys oil from Iran". In fact, India was explicitly instructed not to purchase oil from Iran.
Having stated that, the United States does not want any other currency to serve as the trade currency, global reserve currency, or oil trading currency.
Today, the question is simple; why does it safeguard the US dollar? What exactly is fear? What is the benefit of safeguarding the US dollar? The advantage is that if we want to import something today, which currency do we need? What does America require to import something? The Dollar!! As a result, we must EARN the Dollars through FDI, FII, or other means. To be able to import something, we need to earn those Dolls. In reality, the US can just PRINT the dollars and import. It has been doing so more than its printing capability. The situation in the United States is so poor that if the Dollar isn't the global reserve currency, the country will default in a single day. That is why the United States spends so much money on its military. Just to keep the Dollar the global currency.
Since the 1970s, every US president has realised that the US will be insolvent when the Dollar is no longer the world's currency. To put things in perspective, if the US imports in its own currency and the Dollar is not a global currency, the Dollar will depreciate to the point where buying the same Dollar, a gallon of oil, or anything in euro will cost 20 times as much. Today, however, there is no issue. They only need to print.
They are free to print as much as they choose. In one sense, the country is nearly insolvent since it has borrowed heavily from China. The Chinese dollar treasury is worth almost two trillion dollars. Allow me to explain how much one trillion dollars is. Had you spent one million dollars each day since the birth of Jesus, you wouldn't be able to spend one trillion dollars to this day.
So why does the US spends on its military so much? To protect the Dollar as the global reserve currency, thereby protecting themselves.
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