What a war between Russia and the West can do to the world economy

What a war between Russia and the West can do to the world economy

In today's blog article I wanted to cover a topic I thought had big implementations for everyone around the world. But more importantly for those living in the West and Russia. I'm sure as everyone has seen on the news lately or on social media that the Russians are building up an army on Ukrainian borders from the east in Russia to the north in Belarus and the south in the black sea and Moldova. Now as of writing this article (2/15/21) we don't know the extent of what the Russian military operation could be. It could come in the form of a small incursion as we saw in 2014 when Russia initially tried to conduct operations within eastern Ukraine in the Donbas region or it could come in the form of a full-scale invasion comparable to the American invasion of Iraq. However, it comes through there are sure to be some changes in the world economy which is what we are going to cover in today's blog article. With all that being said we can now dive into today's special article.   

The effects of the war on the Russian economy

Today Russia has been in a downturn in terms of demographics and its economy since the fall of the soviet union back in 1991. The nation's birthrates have fallen to negative 0.2 in recent years meaning there are birthrates are below replenishing rates. This means they have a growing aging population that can't give birth to more kids or works to provide for the economy. This is already having effects on the Russian economy and their politics which is why they are getting so aggressive recently. Putin's Russia needs to expand its reach to keep its nation and Putin's reign intact which is they have their sights set on Ukraine. Not only that but Putin knows if Ukraine joins N.A.T.O he won't be able to spread his influence further into the west or expand further into Europe. Which could see the Russian sphere of influence fall to the west.

Now let's get into what exactly this war could do to the Russian economy. First, if a war does happen we can expect several things to happen immediately one is most likely that Russian natural gas and oil will be cut off from the west which will have the biggest effect on the European continent. Second, we can expect an embargo on all Russian goods and services to the west. We could also see Russia get cut off from the financial market by being cut off from SWIFT which is a financial system used by the economies of the world to transfer money and payments between countries. This could essentially cut Russia off from the rest of the world and would drag the Russian economy into something of the likes of the Cuban economy. Where they are self-sufficient and only use resources within the country and produce everything within the country. This could have a drastic effect on the Russian economy. Although to be quite honest the Russian economy is already somewhat self-sufficient since the recent embargos. However, they are still a part of the global economy and still a major exporter and still rely heavily on exports to make up their economy. If a war does break out the Russians are going to have to win this war because if they don't their economy is going to crash and Russia is going to become most likely a third world nation.    

The effects of the war on the U.S economy

Now the effects on the U.S economy are going to be less severe than the Russian economy if this war does happen. But it will still suffer from the effects of the war especially since the energy sector is going to suffer the most from the war. However, the Biden administration has stated that if this happens and becomes the case that they will work to improve and stabilize the energy market. The war could also cause a short-term crash in the asset markets more specifically the stock market is going to suffer the most more likely than not from all the asset markets. However, one market we could see not suffer if war does break out is cryptocurrency. The reason I say that is if Russia gets cut off from the rest of the financial systems of the world it will most likely resort to using cryptocurrencies to conduct payments and to transfer wealth between its people and government internationally. People in the U.S could also start investing more into cryptos potentially to get in on the possible uptrend the Russians could cause using cryptos. But also for the reason that all the other markets are either crashing or cost too much to get into i.e the housing and real estate market.   

However, the U.S economy could also potentially see something to the likes of world war 2 when at the time the economy had a massive boom and uprise causing massive amounts of wealth to grow in nearly all wealth classes. However, this was only due to the fact the U.S had a high demand for military equipment at the time and had converted to a wartime economy. One reason this could also not potentially happen is in the U.S right now there is a labor shortage in every sector of the economy. Another reason why the U.S could also see some economic turmoil from this war is inflation. The U.S inflation rate has recently hit levels not previously seen in the last 40 to 50 years. To prompt up the energy sector and to get more people to work the Federal government might have to resort to printing more money.   

The effects of the war on the European economy

The effects of the war could potentially be more dangerous and bad for the European economy than the U.S economy and there are many reasons for this. One is the energy sector in Europe is mainly dependent on Russian oil and natural gas. So unless Europe finds another way to secure its energy or America helps solve the issue Europe is going to have an energy crisis on a scale we have never seen before in the first world. Second is If war comes to the European continent the European economy more specifically E.U members are going to have to spend less on welfare and start to militarize again. What effects this will have on the European economy is unsure it could bring in more wealth as more factories open and are hired to produce arms and weapon systems. It could also lead to Europe going into debt if they plan on continuing with a welfare state policy and still militarizing. They could also go further into debt if they plan on continuing with the current inflation rate or increasing it. Not to mention if war does happen there will be a lot of destruction on the continent especially on bordering E.U N.A.T.O member states such as Poland and the Baltic states.       

Conclusion

To end the article I believe if war does break out the world economy will come to a halt. Which could put further strain on issues such as the labor shortage the U.S is seeing or the supply chain issues that every nation around the globe is facing. We could see even more strain on the supply chain issue if China decides to support Russia in the war in any way as it's likely embargos would be put in place on china if they did do that. This could also have a positive impact on the west as it would bring back industrialization especially in the United States where industrialization has been replaced by a service economy. If war does break out expect the world economy to come to a halt. 

 

My Final Words     

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