Current Event: North Korea vs. South Korea's Provocation

North Korea has recently threatened a retaliation to South Korea's military drill on its Yeonpyeong island Monday, December 13th.  While this seems irrelevant to us Americans, it is far from that thanks to the increased interdependence that is globalization.  Heightened security in any region effects stock markets across the globe, as war typically involves a significant budget to be spent in the private and public sectors.  


As fear and potential retaliatory actions progress, so does the defense sector.  The United States alone plans on spending $743 billion on defense in 2015, which is a slow down in the budget when compared to previous years.  This represents 3.2% of GDP, which is a lot.  (http://www.defenseindustrydaily.com/Grant-Thorton-US-Defense-Budget-Outlook-for-2011-and-Beyond-06470/).  To get a better perspective, The United States has promised to dedicate .7% of GDP towards the Millennium Development Goals in order to contribute to the eradication of extreme poverty (those earning less than $1 a day), and has failed to meet that .7% goal literally every single year.  Military budgets in any given country overshadow all other aspects of a budget and are extravagant to say the least, and tend to overcompensate the private sector which results in a major impact in the global economy.

Recently since the tension has risen between North and South Korea, Asian stock markets were mostly lower.  This reflects a hit regarding South Korea's military drill, prompting fears of retaliation from their counterparts, North Korea.  This can pose as an opportunity for the private sector specializing in defense as they see another potential client in their near future via this confrontation.  At the same time when Asian markets dropped, Europe's stock market rose.  Possibly a connection?  Could be.  Only time will tell what this provocation by South Korea will really result in.  In the mean time the money-hungry, private defense sectors will be licking their chops at the opportunity to do business with either side, if not both.