Putin’s war is trashing 80 years of globalisation
A conversation with historian Helen Thompson on how years of US and European miscalculations made the continent dependent on Moscow — and left Ukraine at the mercy of Vladimir Putin
You might hope all this stagflation and war-in-Europe stuff is just a nightmarish interlude before we get back to the globalization and low, low prices we enjoyed as recently as 2019. But Liam Denning warns Russia's war is blowing a lasting hole in the world order that fostered (kinda-sorta) peace and (unequal) prosperity even in the Cold War.
Between the Covid pandemic and Putin's zeal for committing war crimes and terrorizing Europe, nations are scrambling back into old corners and rebuilding old walls. Even Germany is re-arming, shaking off an 80-year fantasy in which it thought it could atone for its sins by floating above history, writes Andreas Kluth.
The West still seems to hope China will come to its senses and preserve a system that served it so well for so long. Xi Jinping apparently told President Joe Biden he didn't want war in Ukraine. Maybe he even meant it. Italian luxury brands have decided they can easily abandon Russia because Chinese consumers will always be available, Rachel Sanderson writes. Maybe they will.
But India and other developing countries that need Russian commodities to survive could end up in Putin's camp simply because the West has once again ignored their needs, warns Mihir Sharma. Crypto is making it easier than ever for bad actors, at-risk people and maybe even whole countries to check out of the global financial system the dollar dominates, writes Andy Mukherjee. This will create all kinds of new headaches for policy makers. If only we'd known in 2019 that those were the good old days.
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Don't Fear the Yield Curve
The Netflix nostalgiaganza "Stranger Things," which features a parallel universe called The Upside Down, last had a new season in 2019. That also happens to be the last time people were freaked out about the Treasury yield curve being upside down. "Stranger Things" is coming back in 2022. We're freaked out about the yield curve again. Coincidence? Perhaps.
For the uninitiated, an "inverted yield curve" is not a rare medical condition but that perverse state when short-term interest rates are higher than long-term ones. Think dogs and cats living together, real wrath of God type stuff. An inversion of 2- and 10-year Treasury yields almost always precedes a recession. (I say "almost" because that curve did dip a pinky toe into inversion territory back in 2019 without a recession happening organically — although Covid caused a recession seven months later anyway, so, shrug.)
Anyway, here's how the curve looks now:
Uh, yikes? Except Bob Burgess points out this is the amateur-hour yield curve when it comes to predicting recessions. The curve the pros watch is between three-month and 10-year Treasuries, and that is strong like bull:
Bob lays out a bunch of reasons for us not to expect a recession, in spite of the meteor shower of badness barraging the economy, from gas prices to Vladimir Putin. It is shielded by a strong job market, a whole bunch of stimulus cash still in consumers' pockets and a Himalayan-sized mountain of home equity.
Some of that economic fuel is also stoking the worst inflation we've seen in decades. The Fed is raising interest rates to deal with that, but Ramesh Ponnuru writes it must be careful to address only the demand side of inflation. Much of our current inflationary nightmare is coming from the supply side — the sudden disappearance of Russia's oil, for example — and the Fed could make matters worse trying to fight that inflation, Ramesh writes. Getting this right feels a little bit like trying to separate the yolk from a half-scrambled egg, but it could determine whether we actually do fall into The Upside Down. No pressure.
Telltale Charts
Commodity traders raked in record profits during the pandemic, and now they want government bailouts as their markets melt down, Javier Blas writes. Maybe they should tap some of that cash they made first.
Mark Gongloff is an editor with Bloomberg Opinion. He previously was a managing editor of Fortune.com, ran the Huffington Post's business and technology coverage, and was a columnist, reporter and editor for the Wall Street Journal. @markgongloff
Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.
