After years of central banks propping up the financial system and easing the borrowing conditions of national governments, one analyst has predicted that the next big wave of cash flooding an economy could come from increased military spending.
"Simple idea, what if (the next round of quantitative easing) shows up in the form of defense spending? And, I think we are seeing that," Pippa Malmgren, the founder of consultancy DRPM, told CNBC Wednesday.
Malmgren - who served on President George W Bush's National Economic Council as an adviser on financial market issues - said that NATO, China, the U.S. and Europe had all hiked the budgets for their military. Europe, she added, had done so because of "the perception of (an) increasing threat from Russia."
"It's all occurring in sectors that have other businesses like space, cyberspace and things to do with the high seas. So we should watch those areas, it's a bit of a scary notion I realize but it's a danger that we drift into a new Cold War kind of environment and the spending comes in the form of defense," she said.
The U.S. Federal Reserve started aggressively expanding its balance sheet shortly after the global financial crash of 2008, in a program that became known as QE 1. After a short break, the Fed started a second program in 2010, before launching its third open-ended $85 billion-a-month program in late 2012.
Malmgren didn't specify that increased military spending would be linked to any kind of central bank policy but increased investment by governments is usually facilitated by the issuing of bonds, which have been the asset of choice for many policymakers since the financial crash.
Emphasizing Malmgren's comments, a report at the end of last year by IHS Jane's detailed the extra cash that is being redirected by global governments. The analysis firm said Russia's defense spending had increased at its fastest rate in a decade in 2015. It also said that NATO will likely boost its military budget in 2016 for the first time since 2010.
The U.S. is another superpower keeping a close eye on developments in Russia. Army General Curtis Scaparrotti - who is a nominee for the top U.S. military commander in Europe – spoke last week about the threat the country poses. He told lawmakers that a resurgent Russia is contesting for power with increasingly aggressive behavior that challenges international norms, according to a media statement on the website of the U.S. Department of Defense.
Responding to a question about the recent incident that saw a Russian fighter jet flying within 50 feet of an U.S. Air Force reconnaissance plane, Scaparrotti said that "from a military perspective, we should sail and fly wherever we are allowed to by international law, and we should be strong, clear and consistent in our message in that regard," according to the report.