This analysis doesn't seem to take into account the existence of nuclear weapons. Military escalation has a very definite endpoint. Use of nuclear weapons is not unthinkable if a nation feels genuinely threatened. Wars will remain limited and proxy until there is an effective counter to nuclear weapons.
You underestimate the power of the dark side. While most people think nuclear war is loose-loose, some may think differently, especially when anger is overflowing. From the logical point of view Hitler should have never started the war, yet he did.
