World War Three
World War I started with the assassination of Archduke Franz Ferdinand of Austria by a Bosnian Serbian nationalist in 1918. World War II started with the invasion of Poland by Germany in 1939, following annexation of the Sudetenland in Czechoslovakia by Germany in 1938.
Similarly, the invasion of Ukraine by Russia has implications far beyond Eastern Europe, particularly when President Putin threatens the West with ‘consequences greater than you have faced in history’ if we interfere with his invasion of Ukraine. I take that to mean the use of nuclear weapons by Russia. It is no coincidence that Russia conducted nuclear weapons exercises prior to the invasion. The use of nuclear weapons is an integral part of Russian military planning. So, let’s not underestimate the potential impact of today’s events. The Russian stock market certainly did not, down 45% at one point this morning.
No doubt some would argue that Putin’s actions must be seen in the context of Western foreign policy, our antagonistic stance towards Russia, the illegal wars that we have waged in the past and the immoral countries we continue to support. There will be a time for self-examination. Now is not the time. Now is the time to respond to Putin’s aggression and respond the only way that Russia respects – forcefully.
The West will not send troops to Ukraine. However, it is probable that the US and UK will send more weapons to Ukraine to support the resistance against Russia. Let’s hope that the Europeans send more than second hand helmets! Severe sanctions that go far beyond those announced earlier this week are possible and likely. For now, Western financial markets dominate the world. It is possible to make it illegal to trade in any Russian asset and to seize, not just freeze, every Russian-oligarch owned asset in the West. The invasion of Ukraine needs to fail and be seen to fail in order to send a very clear message to other nations around the world contemplating violating the sovereignty of other countries.
But there is a great deal more at stake than national sovereignty. Our values and way of life are also under attack. Democracy is under attack. The right of people to live their lives freely and to choose who governs them has been steadily losing ground around the world over the past twenty years or more. Capitalism is also under attack. For all its faults, capitalism has delivered more economic prosperity more consistently than any other form of economy in human history. It needs reform and renewal not revolution.
So, today’s events are existential. We should expect escalation in the war of words, economic warfare and military warfare. The stock markets are only just waking up to this reality. I expect much more volatility ahead in currency, commodity, cryptocurrency and equity markets. Inflation is likely to accelerate not decelerate. The possibility of stagflation – higher prices and a depressed economy – has increased.
The lesson from this conflict will be the need for us to invest. When we invest we make ourselves stronger in the future. We need to strengthen our values, our way of life, our political and economic freedoms, our respect for other human beings and strengthen our resolve to oppose all who threaten them whether at home or abroad. At Invstr we stand for individual empowerment, diversity and collaboration. Our mission is to help everyone learn to invest smarter to build a sustainable world for our children and grandchildren. Today’s events make us more resolved in our mission than ever.
Kerim Derhalli – Invstr CEO
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
