There hasn’t been a major nuclear incident, outside of accidental meltdowns, since World War II. This is no small miracle, and there’s reason to wonder when this string of good luck—because it has included many near-disasters—will end.
The U.S. recently formally announced that it will withdraw from the Intermediate-range Nuclear Forces (INF) Treaty with Russia if Russia doesn’t come into compliance, and at some point we could still face a showdown over nuclear disarmament on the Korean Peninsula. Further adding to the risks are the U.S. President’s authority to launch a first-use nuclear strike, without Congressional approval, and command and control infrastructures that are susceptible to false alarms. There are also the ever-present dangers of a regional Pakistan-India nuclear exchange or a nuclear or dirty bomb terrorist attack somewhere in the world.
Investors may be aware of some of these risks, yet most participants in the capital markets rarely discuss them. Banks, money managers, regulators, and the broader business community should do what they can to help with efforts at preventing a nuclear incident, while simultaneously helping to prepare for the economic shock if prevention efforts fail.
It is simply unrealistic to invest under the assumption that a nuclear incident will never happen during our lifetimes. As to the instinctive response some may have—“Hey, if there is a nuclear attack, my portfolio will be the least of my worries”—well, that may be true if talking about the type of mutual assured destruction that existed between the U.S. and U.S.S.R. for decades. However, that particular risk has receded. Much more likely is some type of limited nuclear incident that, even if it kills a few hundred thousand or a few million, would still leave 99.9% of the global population uninjured.
And any nuclear event, even a “small” one, could potentially instill widespread panic and disrupt the global capital markets. If this happens, most of us are going to care what’s happening to our portfolios, our companies, and the economy.
by David Epstein, Barron's | Read more:
Image: San Diego Air and Space Museum Archive
The U.S. recently formally announced that it will withdraw from the Intermediate-range Nuclear Forces (INF) Treaty with Russia if Russia doesn’t come into compliance, and at some point we could still face a showdown over nuclear disarmament on the Korean Peninsula. Further adding to the risks are the U.S. President’s authority to launch a first-use nuclear strike, without Congressional approval, and command and control infrastructures that are susceptible to false alarms. There are also the ever-present dangers of a regional Pakistan-India nuclear exchange or a nuclear or dirty bomb terrorist attack somewhere in the world.Investors may be aware of some of these risks, yet most participants in the capital markets rarely discuss them. Banks, money managers, regulators, and the broader business community should do what they can to help with efforts at preventing a nuclear incident, while simultaneously helping to prepare for the economic shock if prevention efforts fail.
It is simply unrealistic to invest under the assumption that a nuclear incident will never happen during our lifetimes. As to the instinctive response some may have—“Hey, if there is a nuclear attack, my portfolio will be the least of my worries”—well, that may be true if talking about the type of mutual assured destruction that existed between the U.S. and U.S.S.R. for decades. However, that particular risk has receded. Much more likely is some type of limited nuclear incident that, even if it kills a few hundred thousand or a few million, would still leave 99.9% of the global population uninjured.
And any nuclear event, even a “small” one, could potentially instill widespread panic and disrupt the global capital markets. If this happens, most of us are going to care what’s happening to our portfolios, our companies, and the economy.
by David Epstein, Barron's | Read more:
Image: San Diego Air and Space Museum Archive
[ed. Not the Onion.]
