Sunday, March 2, 2014

On the Brink of War?

Obviously the biggest news story today is the worsening situation involving the Ukraine. Right now this story is a regional one and not likely to cause major monetary system changes (which is what we watch for here). 

However, this is clearly a situation that everyone should be watching. What we can know from news reports is limited because when war is imminent or breaks out, different sides with different agendas try to shape the news reporting. Chaos can overwhelm the situation very quickly at any time. Intelligence agencies can feed disinformation to the news media.

In this case, we have what seems to be an internal revolt in the Ukraine that has ousted the sitting government. But who was really behind the revolt is still an unknown and who is really in charge in the Ukraine is an unknown. What is obvious is that Russia is not going to sit by and see its military bases in the area threatened. It is also unknown how they will respond to all this even as there are widespread reports of large Russian troop movements into the Crimea. We know that US President Obama and Russian Leader Putin have talked, but seem to be in disagreement. The IMF stands on the sidelines saying they will offer a loan to the Ukraine.

This is a very complex situation (the Ukraine appears to have a population split in loyalty between Russia and the EU somewhat geographically). We cannot pretend to have enough knowledge to know what is really going on here. So we won't try to offer any opinions on who is right or wrong. We do hope the situation is resolved peacefully for the good of all parties involved.

This situation could escalate (a worst case scenario) and become a confrontation (proxy war) between Russia and the West (the EU and the US). Since there are nuclear powers involved this would be a terrible result. Former Assistant US Treasurer Paul Craig Roberts did this audio interview yesterday with King World News. I hope his analysis is wrong because he does say it is possible this situation can escalate into the worst case. 

Hopefully, that won't happen. But even a prolonged tense standoff could start to impact world markets. Because the global economy is so connected it is possible that this situation could lead to a crisis that could lead to major monetary system changes. It will be interesting to see how world markets react Monday to this situation.

So, we will continue to keep an eye on it of course.

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