Ukraine continues to dominate headlines. As we write, it appears Russia’s initial tactics have failed and a combination of its frustration, incompetence and brutality hallmarks the next stage of this conflict. In 2000, the Chechen capital, Grozny, had suffered a greater degree of destruction than befell Dresden at the end of WWII, so Putin’s current tactics have a template.
Economically, Russia is being pummelled and it will get much worse. However, there will be a price to be paid by the US, Europe and its allies, too. Inflation is raging and due to years of central banks’ incompetence, all are now taking baby steps to tighten monetary policy by quarter points (every month) which is far too little, far too late. But that’s what happens when recessions are prevented artificially for the better part of 15 years and nobody with economic authority had the foresight to ponder how we might cope with genuine emergencies (like pandemics and wars, for example) when all the economic ammunition has been wasted on targets that really weren’t worth pulling the trigger on.
It’s increasingly looking like a re-run of the 1970s. Prior to this decade, economists thought growth could be either too much, thus generating inflation or too little, delivering economic stagnation. Like a lot of mainstream economic theories, this was proven hopelessly wrong by real world conditions that produced the worst of all worlds; stagnation with inflation or ‘stagflation’ for short. We are hardly new converts to the cause but businesses possessing genuine pricing power will, we believe, possess the most effective antidote.