The War Was Imminent, Now Here’s What’s Next for the World Economy

Are we about to see WW3?

Image by Victoria_Borodinova from Pixabay

If you’re like me, you were glued to your screen yesterday, watching the news of war breaking out between Ukraine and Russia.

It’s the largest military attack since WWII. And the situation is getting much worse:

There’s fighting in the Chernobyl Exclusion Zone
No one knows how much of Ukraine Russia now controls
Massive explosions and fighting are being reported, including in Kyiv, Mariupol, Odesa, Kharkiv, and too many to list right now

Martial law has been declared in Ukraine and Ukrainian president Volodymyr Zelensky has now called on the West to close the airspace amid the Russian operation.

Now, as was the case with the pandemic, there are going to be massive repercussions in many facets of every human life after this. One of them includes the world economy — which may be permanently destabilized.

Why Would Putin Tank the Russian Economy?

Before we get into this, there are a lot of people dying right now. I heard someone say on Twitter, “so many undervalued assets, seems like discount season is fully underway.”

People's lives are at a discount right now — ok?

With that being said, in terms of the global economy, there will be many lives destroyed from this. So — why would Russian President Vladimir Putin tank his own economy, risk sanctions, and disrupt the global economy as a whole?

It isn’t because Russia doesn’t have anything to lose.

In fact, they have all the leverage right now, not America or NATO.

Putin is Holding the World Hostage

We can’t sanction Russia like we did Cuba during the Cold War.

It wouldn’t work.

Unlike Cuba whose main resource is small amounts of oil and Cuban cigars, Russia is economically independent. They are the third-largest oil producer churning out 11.5 million barrels per day.

While many Americans might find this concept hard to understand, Russia has a real economy. A real economy compromises of factories and farms and doesn’t blow up just because the stock market crashes.

If liquidity dries up, the factories are still there, and although the efficiency of production is lowered, a state can, in principle, just take command of them.

Now here’s what makes all of this even more complicated:

Russia is close allies with China, the second-largest, and perhaps soon, the largest economy in the world.

“I think strategically China is moving closer to Russia, and China-U.S. relations are deteriorating, but it could be a crucial moment for the three countries to readjust their relationship with each other,” Wang Jisi, president of the Institute of International and Strategic Studies at Peking University told CNBC.

I’m not anti-China, but this situation has put the entire global economy in a blender. We can only sit back and watch.

How I’m Playing This as an Investor

The Dow Jones fell nearly 700 points as investors fled to safer assets including oil, gold and government bonds. Unfortunately, things aren’t boding well for crypto either.

Bitcoin is 100% correlated to the stock market. In short, investors aren’t going long on volatile stuff right now, with Bitcoin being the king of volatility.

This isn’t even mentioning all the inflationary, supply chain, and overall corporate greed that is already affecting the American economy.

“Who wants to be dealing with high inflation, prospects of interest rates hikes and war in Europe?” said Fiona Cincotta, senior financial markets analyst at City Index in an interview with WSJ. “It just seems like it’s too much for investors to be able to swallow right now.”

That said, speaking as a crypto investor, I’m waiting for blue-chip cryptocurrencies to tank a bit more before buying them on the cheap. I’m staying away from anything risky.

My message to investors: You will be pushed at every turn to sell at a huge loss. Good luck.

Final Thoughts

The Russians learned an important lesson from their own occupation of Afghanistan. They don’t try to occupy hostile populations. Russia isn’t losing anything by attacking Ukraine besides friendly relations with NATO and Europe — which don’t mean shit to them.

I do remain sanguine, after all, Hard times create strong men. Strong men create good times. Good times create weak men. And, weak men create hard times.

But unfortunately, the rich will get richer and poor people will die or suffer.

A story as old as time.