What the Pentagon budget cuts really mean

Chuck Hagel's proposed budget cuts at the Pentagon have unleashed a carnival of hand-wringing and teeth-gnashing.

Relax. It's all window dressing.

First of all, Hagel isn't actually pitching hard numbers. He's proposing very modest reductions of troop numbers and the mothballing of some hardware that is reaching the outer margins of its useful life anyway.

The very idea of large standing armies is so 19th century. In the modern era, if the US government needs boots on the ground, the company formerly known as Blackwater or one of its many rivals can provide them quickly and cost-effectively. You'll also notice that quick-reaction special forces numbers are scheduled to go up rather than down, for those special occasions where "America's strategic interests" just can't be farmed out to the private sector or local proxies.

For routine invasions and occupations, "local proxies" like the armed forces of Kenya or Uganda or Ethiopia are a much more cost-effective way of pacifying restless locals than sending the US Army into some African backwater that happens to sit astride vast mineral or oil wealth.

What Hagel is really signalling is this; American military spending going forward will be much more focussed on buying the latest hardware. Not necessarily last-century hardware like ships and planes and tanks, but new-age "intelligent" hardware, that special niche of technology where Silicon valley meets the Valley of Death.

So rather than mourn lost Pentagon funding, patriotic investors need to do their homework and sniff out those high-tech start-ups whose products can thrive in that niche.

There's a new high-tech boom on the horizon!