First pandemic. Then recession. Now, Russia invades Ukraine. Anything Else, World?

Western countries have imposed severe sanctions on Russia in an effort to cripple its economy and weaken its military effort. But the economic fallout could also have a major financial impact on people around the world — from the availability of food to the cost of energy and petrol.

A Grain of Salt | ElbyJames

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The civilian-soldiers of the Territorial Defence all equip themselves at their own expenses. The old Kalashnikovs used for their training always remain at the base.

Russia’s invasion of Ukraine carries huge risks for a world economy that’s yet to fully recover from the pandemic shock. The pandemic has left the global economy with two key points of vulnerability — high inflation and jittery financial markets Which is why the headline for the Los Angeles Times is ssooo approprite, “First pandemic. Then recession. Now, Russia invades Ukraine. Anything Else, World?” The Russian-Ukraine conflict left the world economy vulnerable, a conflict that accelerates inflation, rattles markets, and portends trouble for everyone from Europe to the Americas to Asia.

Aftershocks from the invasion could easily worsen both inflation and the financial markets. Just how big a blow the conflict ends up delivering to the global economy will depend on its length and scope, the severity of Western sanctions, and the possibility that Russia might retaliate.

Still, the Fed would probably look beyond the temporary price shock and go ahead with its plans to start raising interest rates in March — though not by 50 basis points. This scenario might push headline inflation to 9% in March and keep it close to 6% by year-end.

“Barring an unexpected turn in the economy, I believe it will be appropriate to move the funds rate up in March and follow with further increases in the coming months,’’ Cleveland Fed President Loretta Mester said Thursday.

Krishna Guha, vice-chair of Evercore ISI, said the invasion “complicates the ability of central banks on both…

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A Grain of Salt | ElbyJames

ElbyJames is an American disabled combat vet exiled in the UK & a free speech absolutist. He’s an occasional Top Writer