The Pentagon's decision to deploy advanced aircraft within spitting distance of Cuba is, on the surface, a muscular show of force. But for those of us who track the bottom line, it raises a troubling question: what is the price of this theatre, and who will foot the bill?
Let's start with the facts. US jets and drones are conducting operations near Cuba, ostensibly to monitor Russian naval activity. The Royal Navy, ever the loyal ally, is shadowing the action in the Caribbean. Markets, initially jittery, have since settled, with gilt yields easing as the initial shock subsides. But this is not about immediate market reaction; it is about the long-term cost of empire.
The US defence budget is already stretched thin, with a national debt exceeding $34 trillion. Every dollar spent on patrols near Havana is a dollar not spent on infrastructure, healthcare, or deficit reduction. The Treasury's borrowing costs are already elevated, with the 10-year yield hovering near 4.5 per cent. This kind of military posturing is a luxury the US can ill afford, especially when its fiscal house is in disarray.
Consider the opportunity cost. The US military presence in the Caribbean is a legacy of Cold War thinking, a relic that should have been retired along with the Soviet Union. Instead, we see a return to great-power competition, a game that has no winners only losers. The bond market is sending a clear signal: investors are weary of geopolitical risk. Capital flight from emerging markets, including Latin America, is already underway. The last thing the global economy needs is a new flashpoint in the US backyard.
And what of the UK's role? The Royal Navy's involvement is a reminder of its diminished capacity. A nation that cannot secure its own borders without American cooperation is hardly a credible player on the world stage. The cost of these patrols, borne by the British taxpayer, is another drag on a stagnant economy. With inflation still above the Bank of England's target and gilt yields volatile, this is an unnecessary expense.
The irony is that this show of force may actually undermine stability. Cuba's regime, long isolated, now has a narrative of external aggression to rally around. Russia, meanwhile, sees its gambit paying off: it has drawn US resources away from other theatres, including the South China Sea and Eastern Europe. This is a classic feint, and the Pentagon has fallen for it.
From a fiscal perspective, the prudent move would be to dial down the rhetoric and focus on domestic priorities. But that would require a level of discipline that seems beyond Washington's grasp. The Federal Reserve is already juggling inflation and employment; a new crisis would only complicate its task. The dollar, already under pressure from fickle capital flows, cannot afford further uncertainty.
In the end, this is about credibility. The US must demonstrate that it can protect its interests without bankrupting itself. The Caribbean is not the Fulda Gap; the risks do not justify the expense. Investors should watch for signs of fiscal incontinence. If the defence spending spree continues, expect gilt yields to rise and the pound to weaken.
The bottom line: this is a costly signal that distracts from genuine economic challenges. The markets will not reward posturing; they reward prudence. And right now, prudence is in short supply.
