When I can make it to the central branch of the Toronto Library system, I often read the financial newspapers to get the perspective of that community.
So today, in the weekly Barron’s newspaper (March 14/22 edition) I read the cover story by Matt Peterson – How Putin’s War Will Change the World – and found this remarkable quote:
“Attempting to forecast the Russian economy right now is a bit like taking a snapshot of an egg thrown out a window. You might learn something about how fast it’s falling, but what really matters is where it lands.”
What a journalistic gem that is! But it also appears to accurately reflect what is happening to Russia’s economy. Though the sanctions, etc are creating financial turmoil, there are those in the financial industry who think this may be a good thing.
The West, which has been politically and economically sleep-walking for the past 20 years [allowing nightmarish events like the election of Donald Trump] seems to have woken up, at least momentarily. Things are changing rapidly. British diplomat Edward Price, asks “What does it mean if we take a country like Russia and we’re not just containing it, as in the Cold War, but we’re punishing it?” Peterson answers:
….it means the West has economic power it can use even when military action isn’t available, and that owes partly to the enduring primacy of the U.S. Dollar. The holdings of the world’s central banks are allocated roughly 60% to U.S. Dollars and 20% to Euros, an arrangement that hasn’t changed in decades.
That the West has been able to cut off Russia’s access to US dollars and the Euro (which are potentially rivals but are here working as partners), so effectively, has been a bit of a surprise to many of us. Peterson says of it:
In many ways, Russia’s war isn’t deglobalizing the world so much as revealing how globalization works.
Revealing that they have been secretly debating for years their dependence on Russian gas, the European Union now looks like they are going to do an about turn and push energy efficiency and renewable energy to a degree not seen before. Seeing the danger, it looks like they may permanently cut that tie with Russia. The ace up his sleeve that Putin has long believed the enormous Russian oil and natural gas reserves to be in negotiations with the EU, may turn out to be his nemesis.
Peterson doesn’t think Putin can be removed by anyone in Russia though. Quoting a Russian expert Martin Chorzempa: “Revolutions only succeed when there’s a shadow state in place before the operation happens.” Well….I would say to that that throughout history, when governments have been removed, it has almost always been done by the military. The armed forces are a ‘shadow state’ – a giant one in Russia – a very enigmatic ‘elephant in the room’.
But Peterson ends his essay on a surprisingly optimistic note:
……..solving the world’s Putin problem could unlock a better future for everyone. A financial system that disfavors oligarchs might be one that spreads the benefits of rising wealth more broadly. A global economy that doesn’t rely on a few authoritarian states for energy could pay dividends in climate and health. And a world where tyrants can’t order their troops into a neighbor’s home and hide behind the threat of nuclear war would be safer for all and less disruptive to markets.
But it is his next and last paragraph that has forced me to do this post today:
Putin’s invasion…..may have ended one geopolitical era, and in doing so set the world to work toward establishing another where he and his ilk are no longer relevant. The path to that world isn’t obvious right now, but if Putin has taught the world anything, it’s that far-reaching change can come in the blink of an eye.
Do you see why I read papers like Barron’s?