Hot Topic

With the information war waging it is difficult to tell what is going on in the world.

And with that being the case, I just assume both sides are lying and focus on the finance and economic data instead. Numbers don’t lie after all.

Since this is apparently a hot topic, I need to tread carefully.

I’m sure the readers of this blog can understand.

Are The Sanctions Working?

The Western nations put sanctions on Russia since the start of the conflict.

The Russian Ruble as well as the Russian Stock Market fell under pressure after these events as shown in these charts:

RUB to USD Chart from xe.com
MOEX on Yahoo Finance

On top of this, many nations and companies have now sworn to move away from using Russian exports.

There were also heavy sanctions put on the Russian Central Bank and Russia is facing some difficulties using the SWIFT system now and in the future.

But are these sanctions working?

Well, yes and no. Russia most definitely got hit, hard. That much is clear.

But there’s more to it, as it always is the case.

Neil McCoy-Ward talks about this topic on this video:

He says that while the Russian economy has most certainly been hit hard; it hasn’t affected the upper class of oligarchs in the country all that much. It seems they are still flying about using their private jets, going to expensive hotels and enjoying their luxurious lifestyle as if nothing has happened. This is because they, of course, expected the sanctions and moved their assets elsewhere ahead of time. What a shocker.

While the oligarchs have not suffered, the Russian population has. It will much more difficult to afford food and lodging in the near future. I’m guessing this was the expected result of the sanctions; to hurt the population of Russia so that they would ask for change in the leadership. I have no data to back this up, though.

But, of course, the people who are suffering the most are the Ukrainian people. It is difficult to imagine what they are going through at this moment.

According to mercopress Russia and Ukraine produce 30% of wheat, 19% of corn world exports, 80% of sunflower oil exports. Russia is a major natural gas exporter to Europe, and they also produce much of the oil being exported.

With both of these nations out of the picture for the time being, you can expect products using these materials to go up in price.

And, indeed, this what marketwatch has to offer in terms of crude oil continuous contract data:

This will have further implications on world economy. More on this later.


Russian Stock Market wasn’t the only one that got hit hard.

Here’s marketwatch data on Helsinki, Stockholm and Copenhagen indexes:

3 month data shows a clear drop in all indexes.

DAX isn’t doing much better:

Prudent traders may have enjoyed this rollercoaster ride, but overall it isn’t looking great for European markets.

One can expect volatility to to remain high in case the situation doesn’t calm down.

Systemic Risks

Everything is connected. Everything happens for a reason, and when one thing happens, it is bound to cause something else to happen as well.

Energy, economy and environment are tightly connected together. In the above video by Peak Prosperity, Chris Martenson goes through a few details about the current situation we find ourselves in.

Our current economy is founded on a debt-based system of money that is either expanding exponentially or it is collapsing. Let’s just say the expansion has been exponential so far, but things are about to change.

Money (currency) itself is a claim on real things, like cars, food and housing. Money only has value because you can use it to buy real things or services. This much is clear almost everyone.

Debt is a claim on future money. When an individual or an individual country borrows money, they are borrowing that money from the future. Currently, because the debt has been expanding exponentially for so long, we have many claims on future money. One can only make so many claims on future money until reality hits you in the face.

The problem is that debt must at some point be paid back, with interest. And at some point countries will be faced with the problem that they are taking on more debt simply to cover the interest payments on the debt. It is near-guaranteed problem for many countries, which has no clear answers. Well, realistically, there is an answer, but many (most) are unwilling to face it.

The other problem is that GDP is proportional to oil consumption:

Now, recently there has been a trend around the world that has cut the oil consumption in certain countries. The current world situation and some political decisions have further added to this dumpster fire. Watch the video for more information.

When energy consumption is at a certain level and it is suddenly halted, or at least slowed down, it is going to cripple the economy. The cost of energy determines the price of everything else in the economy. This is because you need energy to produce and transport items in an economy.

Can you catch what I’m trying to say here? The cost of living is about to go up. Though, this was a predictable outcome even before any wars broke out.

As a result, Marc Faber is calling for a stagflationary “lost decade” with shaky markets:

I can only agree with the sentiment.

What Can You Do About This?

Considering the prices goods are about to go up and the availability might questionable, perhaps one could consider stocking up on certain household items.

One could also take another look at commodities in general, such as oil, precious metals and agricultural items.

Coffee, cigarettes and alcohol are going to be in high demand, for obvious reasons.

If you are the trading/investing type, Gregory Mannarino can help you:

According to Gregory certain banks, commodities and defence contractors (if your morals are of the questionable sort. Though, no hating the player; only the game) may be good spots to hide your cash.

Russian stocks have also fallen massively. Many will condemn you for investing in this country at this moment, though. I’d also say there is a roughly 80% chance the investment will not work for you, but in case you don’t have a moral problem with it personally and have balls of steel in terms of risk-taking, it can be an option.

Diversifying to markets outside of Europe might also be something to consider. Asia looks especially promising, but the world situation doesn’t seem too stable there either.

Cryptocurrencies are also an option to keep in mind.

But, in reality, there is no safe haven at this moment. There are only probabilities; no certainties. It is best to focus on yourself and what you can affect directly, if at all possible.

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