Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

Why Ukraine Is Not Quite as Dangerous as the Cuban Missile Crisis, But – –

admin by admin
April 26, 2014
in Uncategorized
0
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

Written by Elliott Morss, Morss Global Finance

  • All the ingredients are in place for a major conflagration: two world powers pitted against one another with no apparent face-saving exit for either. It won’t happen. But….
  • Putin will send troops into Ukraine to “safeguard” Russian-speaking citizens.
  • Even if Putin is somehow satisfied, his actions might have launched a civil war in Ukraine.
  • Even if Ukraine gets beyond Putin and civil war dangers, the IMF agreement will cause hardship and again threaten political stability.

What Does Putin Want?

I start by using history to speculate on what Putin’s intentions are and what the West could do to put him at rest. Return to the Cold War: The USSR’s “bloc” included the former members of the USSR: Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Tajikistan, Turkmenistan, and Uzbekistan. It also included: Albania, Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Romania.

Does Putin feel need to re-establish the USSR? He might. But it is out of the question. Certainly Azerbaijan, Bulgaria, Estonia, Georgia, Hungary, Latvia, Lithuania and Poland would have absolutely no interest in such an alliance.

So let’s consider a more realistic proposition: how about allowing Putin to have a sphere of influence/buffer zone on Russia’s borders? As indicated in the following table, there are nine countries bordering Russia. Of the countries listed, all but Finland were “on Russia’s side” during the Cold War, even China. Western pressures have whittled away this Russian “security blanket”: the first three in the Table are NATO members.

Countries Bordering Russia

Source: International Monetary Fund

Western attempts to “recruit” these countries have made Putin uneasy. Why has the West done this? A continuation of Cold War politics? Well, it has spooked Putin. Why not let Russia establish a new sphere of influence, including Ukraine? Sadly, this won’t happen. At this point, Western nations have staked too much on a Ukraine “democracy” to pull back.

So Putin’s intentions will remain a real danger, threatening an armed conflict with the West. But it won’t happen. While Putin’s intentions are not clear, neither the US nor the European nations have the stomach for a direct armed conflict with Russia.

Russia is Satisfied But….

Let us make the unlikely assumption that Russia will be satisfied with the seizure Crimea. It is quite possible that already, Russia’s actions have let “the genie is out of the bottle” and a Ukrainian civil war will ensue. History has many stories of people who dislike one another being kept at peace by a dictator, e.g., Tito – Yugoslavia, Saddam Hussein – Iraq. But once they were gone, civil wars took place. Think of Yanukovych with Russian backing as the “dictator equivalent” that has kept Ukraine at peace. Once the dictator is gone, chaos – a civil war. And the history of civil wars is not good. And an all out civil war is close in Ukraine.

The IMF Agreement

But let us stretch credulity further and suppose that somehow, Russia is satisfied and the citizens agree to decide their future at the polls. We then have the IMF agreement. What would it mean?   

What has happened in Greece is instructive here. In order to get IMF funds, Greece had to reduce its government deficit. So under pressure from the IMF and Germany, the Greek government deficit fell from 15.6% of GDP in 2009 to a projected 3.3% this year. It was understood that this deficit reduction would reduce purchasing power and increase unemployment. In fact, the International Monetary Fund (IMF) did a study of fiscal actions taken to reduce government deficits in 15 advanced countries in the 1980-2009 period. It concluded: a fiscal consolidation equivalent to 1% of GDP led on average to an increase of 0.3 percentage points in the unemployment rate.

What actually happened in Greece? The IMF findings were way off: Greece’s unemployment rate was 9% in 2009. It is now over 27%! The following is taken from the transcript of an IMF press conference:

Questioner: Ms. Lagarde, four years into the program and the citizens of Greece feel that things are going bad and bad and bad and that they have no hope. Sixty percent of the young people are unemployed and they feel that they have no future in Greece. The only thing that we have in our country is austerity, austerity, austerity. Can you give me one reason why the average Greek citizen has to have hope?

Ms. Lagarde: I share your concern and the concern of the Greek people, because I know about those unemployment numbers and I know that it particularly affects young Greek people, those who went to school, went to university, and are just bumping their heads against the wall of unemployment. But we are seeing some improvement. We are finally for the first time seeing positive growth, right?

So how is what happened in Greece applicable to what can be expected in Ukraine? Details of the reforms the IMF will insist on are not yet publicly known. But the leader of the IMF mission to Ukraine highlighted the following at a recent press conference:  

  • The IMF program will require a reduction in the government deficit;
  • The currency peg will have to be removed so the Ukraine currency will weaken;
  • Energy subsidies will be reduced/eliminated. 

Each of these actions will absorb purchasing power causing aggregate demand to fall and unemployment to increase:

  • A government deficit reduction can only happen via lower government expenditures or higher taxes, both of which will reduce aggregate demand and increase unemployment.
  • In recent months, the Hryvnia (Ukraine currency – UAH) has weakened against the US dollar. Ukrainians now have to pay 12 UAH for every US dollar whereas a few months ago, a dollar only cost them 8 UAH. This means Ukrainians have to pay more for imports, thereby reducing available purchasing power for other goods causing unemployment to rise. 
  • Lower energy subsidies will also mean a reduction in purchasing power and higher unemployment.

FocusEconomics estimates that Ukraine’s fiscal deficit now exceeds 5%. It estimates that the country’s unemployment rate is 8%. Implementation of the IMF agreement will cause it to rise substantially.  And keep in mind that Ukraine is effectively “at war” now. That is never good for an economy: FocusEconomics reports on what a number of international banks and other institutions are predicting for Ukraine – one prediction is that investment will fall by 11%. It will probably fall more.

In short, implementation of the IMF program in the context of an already slumping economy will make matters worse. And this will mean serious problems for a new government trying to curry favor from its citizens.  

Conclusions and Investment Implications

There does not appear to be a good outcome for Ukraine: Putin’s intentions are not clear. Even if he is happy with Crimea, a Ukrainian civil war likely. And even if the IMF gets to implement its program, the government will become extremely unpopular, even in the western parts of the country.

The following ETFs have fallen sharply since the beginning of the Ukrainian crisis: iShares MSCI Emerging Markets Eastern Europe Index Fund (ESR), iShares MSCI Russia Capped Index Fund (ERUS), Market Vectors Russia Small-Cap ETF (RSXJ) and SPDR S&P Russia ETF (RBL). More declines are likely.


Previous Post

Infographic of the Day: What Happened to the Middle Class?

Next Post

Trefis: Highlights Week Ending 25 April 2014

Related Posts

US Banks: The Good, The Bad, And The Ugly
Business

US Banks: The Good, The Bad, And The Ugly

by John Wanguba
March 27, 2023
8 Ways AV Technology Helps You Build A Successful Business
Business

8 Ways AV Technology Helps You Build A Successful Business

by John Wanguba
March 27, 2023
How Is Bitcoin Impacting The African Banking Sector?
Business

How Is Bitcoin Impacting The African Banking Sector?

by John Wanguba
March 27, 2023
What Are Bitcoin CME Gaps And How Do You Trade Them?
Business

What Are Bitcoin CME Gaps And How Do You Trade Them?

by John Wanguba
March 27, 2023
Zero-Day Spells Doom For Bitcoin ATMs
Economics

Zero-Day Spells Doom For Bitcoin ATMs

by John Wanguba
March 26, 2023
Next Post

Trefis: Highlights Week Ending 25 April 2014

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins bank banking banks Binance Bitcoin Bitcoin adoption Bitcoin market Bitcoin mining blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe FTX inflation investment market analysis Metaverse mining NFT nonfungible tokens oil market price analysis recession regulation Russia stock market technology Tesla the UK the US Twitter

Archives

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • US Banks: The Good, The Bad, And The Ugly
  • 8 Ways AV Technology Helps You Build A Successful Business
  • How Is Bitcoin Impacting The African Banking Sector?

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish