Common Cents & the Draft on January 10, 2019

January 10, 2020, by John Norris

“Science fiction is any idea that occurs in the head and doesn’t exist yet, but soon will, and will change everything for everybody, and nothing will ever be the same again.”

Ray Bradbury

Last Friday, January 3rd, my 18-year old son spent virtually the entire day texting his friends. While that might see commonplace for today’s teenager, this was a little different. You see, he was extremely concerned about the events in the Middle East, namely the assassination of Qasem Soleimani. What if this turned into a larger conflict? What if the Russians and the Chinese got involved? What if the military reinstituted the draft? What if? I remember being 22 in 1990, and feeling the same apprehension about the Gulf War.

Without going into too much detail about the mess which is the current state of affairs in Iraq, suffice it to say Iran and Iran-backed militias exert a large amount of influence on the domestic affairs of their former adversary. As for Soleimani, here is what Reuters wrote in a column on January 9th entitled: “Exclusive: Informants in Iraq, Syria helped U.S. Kill Iran’s Soleimani – source.”

“As commander of the [Iranian] Revolutionary Guards’ elite Quds force, Soleimani ran clandestine operations in foreign countries and was a key figure in Iran’s long-standing campaign to drive U.S. forces out of Iraq. He spent years running covert operations and cultivating militia leaders in Iraq to extend Iran’s influence and fight the interests of the United States. Reuters reported on Saturday that, starting in October, Soleimani had secretly launched stepped-up attacks on U.S. forces stationed in Iraq and equipped Iraqi militias with sophisticated weaponry to carry them out.”

Given what I knew of the man prior to his death and what I know now, it is understandable why the U.S. Department of Defense might have wanted him, shall we say, out of the picture. The question, I would imagine, was: how would Tehran respond if the US killed one of the most powerful men in Iran, if not the entire Middle East? Certainly, my son and his friends wanted to know.

One week on, the Iranians lobbed some missiles at a few US targets. Russia and China have made the usual condemnations, perhaps with slightly less gusto than normal, and don’t appear willing to ‘draw their sabers’ over the issue. The domestic stock markets are up. Crude oil prices have settled down. Technology stocks are rocking & rolling. The Bureau of Labor Statistics (BLS) has announced the US economy created 145K net new jobs in December, and the official Unemployment Rate is a miserly 3.5%. Political dysfunction still reigns in Washington, and I haven’t heard a peep about Iran from anyone in a couple of days. Folks seem to be more interested in just how much higher Apple will go.

Even so, I have this uneasy feeling we haven’t ‘heard the last’ of this situation yet.

As scary as that is, almost as frightening is the technology which made this possible. While we have become somewhat immune to drones, consider this snippet from an article by Bloomberg’s Tony Capaccio which I found on the Bismarck Tribune’s website (although I am sure I could have found it elsewhere):

Even before Iranian General Qassem Soleimani got off a commercial airliner in Baghdad last week, his fate was already sealed.

The sequence of events that led to the killing of the Quds Force commander — and sent Mideast tensions soaring — began hours earlier in Beirut. It was in the Lebanese capital that the U.S., aware of Soleimani’s travel plans, watched him board the plane headed to Baghdad International Airport, according to a U.S. official familiar with the strike.

His departure from the plane in Iraq was monitored by drones circling above, including one built by closely held General Atomics armed with laser-guided Hellfire air-to-surface missiles regularly used in attacks on high-value terrorists.

The Reaper, a $64 million long-endurance aircraft with a 66-foot wingspan, had Soleimani in its sights for about 10 minutes before firing on two cars carrying the Iranian commander and other senior leaders and aides, including the head of an Iraqi-based militia group that has been in conflict with U.S. forces.

The cameras on the Reaper likely would have made it possible to identify Soleimani, determine his location in a vehicle and even what kind of clothing he wore, according to Brett Velicovich, a former Army special operations soldier who directed drone operations during missions in Iraq and Afghanistan.”

That really is so much science fiction, and it brings home a pretty powerful point: if the US military wants you dead, and the US President okays it, there really isn’t much you can do about it once ‘they’ know where you are. After all, a Hellfire II missile has an effective range of up to 8 km and the MQ-9 Reaper drone has an operational altitude of up to 50,000 feet. When you ‘put the two together,’ the MQ-9 Reaper operator can track ‘you’ and eliminate your position ‘with extreme prejudice’ with a Hellfire II missile from a height of 25,000 feet…all from a safe distance and location, literally miles away. Call it what you want, but I call it frightening. However, the US isn’t necessarily alone in this ability.

According to what I have read on the Internet in a variety of places, dozens of countries are rumored to have armed drones in their arsenal, including Iran and even Iraq. However, there is debate, even speculation, some of these countries use their drones primarily for propaganda or target practice, as opposed to fighting their enemies. Even so, an ‘unmanned aerial vehicle capable of remotely controlled or autonomous flight’ is something out of Buck Rogers or Flash Gordon, or at least would have been to my grandparents.

…but it isn’t to 18-year old boys who worry when they are on a family vacation about being drafted to go to war over the death of an Iranian outside of an Iraqi airport. I mean, if the death of an Austrian Archduke in Bosnia can lead to war, and; if Robert Jenkins can lose his ear and a war ensue, surely the killing of a dude like Soleimani would/could/should lead to something sinister.

Perhaps…and, again, I certainly don’t think we have heard the last of this one; however, our friends at the Arkansas Democrat-Gazette, and we do have friends there, wrote it best in an editorial in its January 7, 2019 print edition. Here are the pertinent parts:

Maybe Tom Cotton put it best when he told the Democrat-Gazette this for Monday’s issue: “Iran, although oftentimes portrayed as 10 feet tall, is in fact a weak and feeble power. The United States is infinitely more powerful than Iran. They fear us; we should not fear them.”

Let’s all take a breath.

As Sgt. Hulka once noted: Son, there ain’t no draft no more. And before one could be implemented, this Congress would have to pass what the Selective Service called “official legislation”–is there another kind?–before young people would begin receiving induction notices. Can you imagine Nancy Pelosi’s pals in Congress passing such legislation just now?

Some of us think that compulsory national service of some sort would be good for the country, and good for all those who serve. But that’s just not going to happen anytime soon. There isn’t a Nazi or Soviet state in the world today that poses any kind of existential threat to the United States. The kinds of wars we have with big powerful countries today are mostly trade wars. As bad as those kinds of skirmishes can be, they don’t require a military draft.

What would bring back the draft?

A war. With a big country. One that has a large modern military. And that war would have to have enough popular support here at home to make Congress pass legislation to make it all happen.

For now, stand down, rumor-mongers. There are 1.2 million people in the United States military. And it’s an all-volunteer, professional force. Emphasis on force. Americans can safely leave the mission to the pros.

In other words, at ease.”

 

With that said, IF things do escalate more than they have this week, as awful as that will be, we will likely respond by doing the following: 1) buying more gold; 2) buying more energy; 3) upping our Treasury allocation, and; 4) taking down a meaningful position in some defense contractor stocks, namely those that make missiles and militarized drones. Hey, I am not as cold-hearted as all that sounds. We simply have clients who are paying us to protect their financial future…and those would be good steps to that end.

It is kind of weird, really. My son responds to international imbroglios like this by agonizing over the draft and worrying about going to war. Me? Thanks to the passage of time and the necessity of a paycheck, I worry about how much gold and how many Treasuries we should buy, if any at all, and I marvel at the technology which will probably keep my son safe and not having to worry.

 

Have a great weekend!

John Norris

John Norris

Managing Director / Chief Economist

 

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