Brief post. Articles about inflation have been coming out, and they’re right, inflation is going to get a lot worse because of the sanctions on Russia, especially when Russia retaliates. If you can afford to stock up now, do. If you want big ticket items other than, perhaps real-estate, you should buy now. If you have a business which needs certain key goods or processed items, buy what you can now.
Russa isn’t really an industrial power, except for arms, but it provides not just energy but an array of minerals that are key to industrial production. While there will be workarounds to sanctions, you should still expect this to hit costs. Russia is also the largest exporter of wheat in the world, with Ukraine as #2, and you can expect food prices in general to keep rising.
Further, it’s hard to say how attempts at enforcing sanctions with China (who will resist), and perhaps with India and other countries, will cause unpredictable inflation spikes in other products.
As for real-estate, the affect is hard to entirely predict. So far, the British have resisted urging to truly sanction Russian money (because it would collapse London real-estate and hurt the City badly), but we’ll see if that continues. Whatever the case, a lot of Europe may be subject to real-estate price reductions due to sanctions, and this might be true in New York. I lack enough expertise to be sure, you should look into it if it concerns you.
Then there is the issue of Chinese money. China won’t be subject to serious sanctions yet, the West can’t afford it. However, the Chinese themselves may be wary of future sanctions, seeing them coming and that may dry up some of their massive foreign investment. Others might increase their investment and seek second passports, so they can flee when the time comes, but I think that’s less likely to be massive than it would have been pre-Covid. Whatever the advantages of living in the West, they are outweighed by, “won’t control the plague” for most, especially older Chinese who control most of the money.
All of this is complicated by the fact that the real-estate market is changing, structurally. Covid was used by private equity and other institutional investors to snap up real-estate, including single family homes and other types that traditionally have not been institutionally controlled. If there is a drop in demand, they will simply hold as much off the market as necessary to adjust supply and demand and allow them to over-charge. Their real risk is financing, but even as the Fed increases interest rates, it will continue special operations to give the rich and large corporations essentially free loans and money, so I don’t think they’ll actually be paying market rates. (We need an article on how this sort of action vastly increases the odds of collapse, and I’ll try to get to it soon.)
Times are going to get worse, not so much because of the Ukraine invasion, but because of its fallout. By itself, it would have changed as much as the Iraq war did (some important things, yes), but because it is being treated as existential and a cause for massive economic war, even centrists have realized that it is the “End of the End of History” (which, of course, never ended).
Welcome back to history and to interesting times.
ptb
Re: “may dry up some of their massive foreign investment” …
Tangential to inflation, but a big question! Gaining attention recently, e.g. via Adam Tooze.
As long as China, or any Yuan-zone economic bloc as a whole, has a trade surplus vs the rest of the world, Chinese owned Dollars or Euros or Rupees or Dinars, which come in to pay for the exported goods, in turn flow back out to be spent (ie “trade”). The question is where?
David
A Chinese student who is considering between staying in North America or going back to China said that he has concerns that the situation for Chinese could evolve as it has for Russians, who now have become stigmatized based on their birthplace and citizenship, and many of whom are asked to publicly repudiate Russia. He fears for his safety, and thinks he would be safer in China than here given the ongoing trends.
anon
I can’t speak for NYC or London where Russian oligarchs own real estate. Additionally, people have been moving from the cities since the pandemic for more space and to get away from rising crime. My guess is that real estate and rents will increase in most places along with everything else from gasoline to food. I bought real estate last year and plan to sell another property this year for much more profit than I would have expected. I’m going to save that money for if/when all of this bursts to buy more real estate.
It’s going to be tough times for most people. Not to say it hasn’t been tough times the last several years. We’re still in a pandemic lest anyone has forgotten about that. The CDC recommendations to lift mask mandates for schools and businesses could be another disaster/Covid wave in the making.
The moratoriums on student loans should not end anytime soon. People will likely need moratoriums on student loans and rent in 2022 more than they did in 2020. Biden is not equipped to handle these various crises and it will be interesting to see how his poor decisions will come to bite the Democrats both in the midterms and in the next presidential elections.
VietnamVet
Having a future to stock up for is the best outcome of the Russia Ukraine war.
Unless there is peace treaty or a regime change in the West or East, Russia has the weapons, manpower and will to wipe Ukraine off the map. They will turn Kiev, Odessa, and Mariupol into another Aleppo or Raqqa. Cities totally destroy by ongoing regime change wars.
The western privatized intelligence fiefdom is incredibly effective at using ethnic conflicts to make profits no matter how dangerous it is in the long term. The Russia Ukraine War is another ethnic war that will continue even when all the cities are destroyed. The war is ethnic Russians verses ethnic Western Ukrainians (labeled Neo-Nazis) who are in fact the old Austro-Hungarian Galicia Province that in the last century has fought off Polish, German and Soviet invaders and all who identify themselves as Ukrainian. Only ethnic cleansing will end this conflict. But, since the opposing super powers, NATO and Russia, are armed with thousands of nuclear weapons, the worst outcome is a nuclear exchange and human extinction. Without a peace treaty today, the best likely outcome is the re-partition of the world and economic depression in the West due to resource depletion, shortages, chronic illness, hyperinflation, and bad government.
KT Chong
My forecast: Russia is gonna nuke some city in Poland.
Mark Pontin
ptb: “As long as China, or any Yuan-zone economic bloc as a whole, has a trade surplus vs the rest of the world, Chinese owned Dollars or Euros or Rupees or Dinars, which come in to pay for the exported goods, in turn flow back out to be spent (ie “trade”). The question is where?”
Whereas China used to simply reinvest in holding more US Treasury bonds, they’ve now accumulated almost $1.7 trillion of dollars and are using it to with host countries in the build-out of their Belt and Road initiative, buying material and infrastructure like ports, roads, power stations, and solar installations.
See forex —
‘How China Beat Out the U.S. to Dominate South America: No province is too small or remote for Beijing’s careful attention’
https://www.bloomberg.com/news/articles/2022-02-17/china-is-south-america-s-top-trading-partner-why-can-t-the-us-keep-up
As the article makes clear, China is far less rapacious and easier to deal with than the US.
Even on a personal finance level, by the way, this is true: banks outside the US hate dealing with the US’s uxorious strong-arming of them to go after US citizens and US nationals for taxes on money earned outside the US, when the taxes assessed are whatever the IRS claims they are. (As you know, the US is the almost the only country to do this.) The UK’s PM, Boris Johnson, happened to be born in a New York hospital , spent no substantial time there after the age of five, but found himself on the hook for $1.5 million in tax assessments by the IRS on the basis of being a US national because of where he was born.
https://www.newsweek.com/boris-johnson-us-citizen-irs-born-new-york-1449974
So if you’re moving out of the US — even if you’re renouncing US citizenship, which the US makes incredibly difficult to do — it really makes sense to find some way to conceal from local banks overseas that you and your money have come from the US. Yes, this may be difficult, but overseas banks now really dislike dealing with US citizens and nationals.
Ché Pasa
Fascinating how thoroughgoing and overwhelming the USandNato propaganda is. It’s well beyond the levels of fantasy-weaving we’ve been accustomed to since 2001.
And yet there seems to be a widespread belief — or is it desire — that Moscow will prevail over Kiev/Kyiv in the end, and that will ensure an insurgency that will debilitate Russia to the point of collapse. And then….? Profit?
Or what? What’s the point of this?
Putin’s litany of grievances have a certain merit. There are Nazis (the real deal) in Ukraine, and they’re part of the government and military. Modern Ukraine was created by the Soviet Union (or Lenin if you prefer). And there is merit to Putin’s “One People” formula as Ukrainians are so Russified and so interbred and interwoven with Russians and Russia that disentangling them through some kind of ethnic cleansing program is all but impossible even if USandNato through Kiev/Kyiv prevails.
So… best to bomb them to smithereens? Whut? No. This is crazy.
I can barely see an underlying “why” — but ultimately it doesn’t make any sense, as I think both the Russian and Ukrainian people recognize. There are other ways — better ways — to deal with the real and important issues raised by both of the “sides” in the conflict. So why do this??
And we understand, too, that this conflict and the responses to it will only make conditions worse in the West as well as in Russia and the Ukraine. We’ve been conditioned to accept worsening conditions. So as our lifespans and living standards continue to deteriorate, we’ll hardly notice, and as our rulers want us to do, we’ll blame ourselves for our inadequacies and lack of preparations.
I’m sure there is something much deeper happening here. Not even our rulers understand it. Nor do they have vision enough to transform it into something “good.”
Mark Pontin
Department of Life Is A Comedy To Those Who Think and A Tragedy To Those Who Feel: –
https://www.ft.com/content/b4e13435-a818-4d80-94a4-4149a702a094‘
‘Ukraine plans to become the first developed country to issue its own collection of non-fungible tokens, as it looks to capitalise on a flood of crypto donations to back its war against Russia. Mykhailo Fedorov, Ukraine’s vice-prime minister, announced the plan in a tweet on Thursday and said Kyiv would reveal details of its NFTs soon.
‘The move is the latest sign of the Ukrainian government embracing digital assets as a way to fund its armed forces in their battle, and comes after it raised more than $270mn in “war bonds”. Since the conflict began, the official Ukraine Twitter account has appealed for donations in cryptocurrency, publicly posting addresses for people to make transfers to in bitcoin, ethereum, solana and polkadot ….’
https://www.bloomberg.com/news/articles/2022-03-03/wall-street-is-already-pouncing-on-russia-s-cheap-corporate-debt?sref=pyiu6SiD
‘As the U.S. and allies tighten sanctions on Russia and choke off investor demand for its assets, parts of Wall Street are jumping on the buying opportunity that it’s creating.
‘Goldman Sachs Group Inc. and JPMorgan Chase & Co. have been purchasing beaten-down company bonds tied to Russia in recent days, as hedge funds that specialize in buying cheap credit look to load up on the assets, according to people with knowledge of the private transactions.’
anon
David – It is a bad time to be Asian in any Western nation, especially for Chinese people. But the average racist won’t be able to differentiate a Chinese from a Korean, Japanese, or light skinned SE Asian. It was bad enough since the pandemic but I expect the hate crimes could increase. I know Asian seniors who don’t want to leave the house alone.
China and other Asian countries should offer something similar to Israel’s birthright. For example, those with at least one Chinese parent should be able to easily receive a certificate of residency or citizenship if they choose. However, China would likely want those people to renounce their US, Canadian, Australian, or EU citizenship.
marku52
I’ve seen this already in my small business repairing (especially old tube ones) guitar amps. Most of the vacuum tubes available today come from from behind the new Iron Curtain. It may say Mullard on it, but it came from Svetlana or Sovtek.
Prices had already going up, now expect a rocket ride. If you can get them at all.
StewartM
All of this is complicated by the fact that the real-estate market is changing structurally. Covid was used by private equity and other institutional investors to snap up real-estate, including single family homes and other types that traditionally have not been institutionally controlled. If there is a drop in demand, they will simply hold as much off the market as necessary to adjust supply and demand and allow them to over-charge.
I can foresee a future Obama seeking to ‘fix’ this problem by a complicated scheme where mortgages and rents are subsidized all or in part by the Federal government, so that these rentier capitalists can keep charging exorbitant rates for housing, well above what most could pay, and still rake in the cash.
different clue
It may be that some people are blanket-calling the Galicians to be “nazis”. But there are also real Nazis in Ukraine. There are the legacy-nazi banderazis and there are the neo-nazi azovazis and lesser groups loosely allied to either of those two basic types. One hopes they can all be destroyed and deleted in total and individual detail.
Astrid
Treatment of Russians in the West is a dress rehearsal for how they will treat people with Chinese heritage (as well as any Asians from countries that ally with the PRC and Russia in the future.)
I hope for their sakes that my Mainlander and Taiwanese friends in this country are listening. There may be a massive brain drain once China lifts its COVID border restrictions and possibly even if it doesn’t.
anon
My recommendation to Asians is to get out of the big cities for now. The crime, homelessness, and mental illness are getting out of control in major cities. Asians are prime targets for crazy and angry racists at the end of their rope.
I’ve noticed in my city that more Asians are establishing successful communities in the suburbs and thrive in smaller cities that are liberal and well educated with a significant professional class. They do better in college towns and surrounding areas, like Boston, Ann Arbor, and Madison.
Asians in these communities will be safer when relations inevitably deteriorate between US and the East.
different clue
@anon,
I have watched a few random cell-phone videos of violent assaults against Asians recorded on bystander cell-phones. I don’t know if these are a “statistically valid scientific sample” or not.
One thing I have noticed from these videos is that often the violent racist assailants are Black racist anti-Asianitic assailants. I can see that from the videos. I see that the Black anti-Asianitic racist nature of the assailants clearly visible on the videos is never mentioned in any MSM reporting on the subject. I notice further that when the issue is raised with Black Community Activist Spokespersons, Leaders, and Wokeness design engineers, their stock response is that ” the White Devil made them do it”. No responsibility is taken and none will be taken.
So White racist antiAsianites in Trump Country are not the only source of personal danger to targetable Asian individuals. Black racist antiAsianites in the big cities are also a source of personal physical danger to targetable Asian people. ( East Asian, not South Asian or West Asian).
So if East Asian appearing people are looking for low-danger zones of safety, the threat from both directions should be considered if genuine reality-based decisions informed by actual facts are to be successfully made.
( It is said that White racist antiAsianites cannot distinguish between the various ethno-linguistic-culture grouploads of people from Greater East Asia. I remember once talking to a Korean-descended person who offered an interesting personal-history anecdote about that. In the Old West of Frontier Days, there were small Korean communities here and there. She heard stories from her Elder Ancestors about how White assaulters did not seem to know the difference between Chinese and Koreans. But after ” bad things happened” enough times to White assailants who attacked Koreans after not knowing the difference between Koreans and Chinese, that the White Assailant Community learned there was in fact a difference between Koreans and Chinese. And when the White Assailants learned the difference and stopped assaulting Koreans, ” bad things” stopped “happening” to members of the White Assailant Community who learned to become clear on the difference between Koreans and Chinese. That was just one family history anecdote, to be sure).
different clue
A further refinement to the memory offered just above came back to mind. I believe this person told me that the frontier town her ancestors were living in was in pioneer-days Wyoming. And some of the local White people attacked these Korean ancestors one way and another. And “mysterious accidents” and bad luck and things kept befalling the White assailants. The “mysterious accidents” were never actually solved but the local White people figured out that when the anti-Korean assaults stopped, the “mysterious accidents” stopped and the bad luck receded.
different clue
One wonders whether personal inflation-preparations belong here or in the Surviving Hard Times thread or maybe in both threads at once.
The technical economic analyst draws a distinction between surplus-money inflation as against genuine scarcity-pricing price rises. The low and lowish class victims of those rising prices feel it the same way regardless.
If there are only a limited number of price-rise scenarios one can actually plan for, then it is best to focus on those and hope the things one can do nothing about anyway don’t actually happen.
What do you need to have for actual physical survival that could get so high-priced as to jeopardize actual survival if you can’t afford it any more? Things like semi-storable nutritious utility food? And what would make life terribly unpleasant by its absence? Toilet paper? Maybe stock up on things like that. Build a stockpile as huge as your dwelling space will accomodate while still accomodating you to. Then use the oldest items in the stockpile as you replace it with newer items. And if prices rise beyond affordability, just keep using down the stockpile till near-zero in hopes prices for those items will come back down to affordability before you have run out. And if prices don’t come down, the money you saved by buying none of those things till the stockpile depleted to zero can be spent buying one survival item at a time until/unless the price comes back down enough to where you can rebuild the stockpile for the next price spike.
I don’t know if that would work for gasoline. I don’t know how safe or possible it is to buy and store several hundred gallons of gas at home. That may be a case where one simply has to learn to use as little gas as possible while still surviving ( getting to work and back because without paid work you will die in our no money = you die society).