When Donald Trump was reelected in November, many investors declared the so-called Trump Trade would spur US stocks to new highs. But markets are now spooked by fears the world's largest economy is close to recession.
Because russia is not prepared at all for a recession. They have high inflation and stagnation at the moment (because of burning cash for the war, among other things), this is called “stagflation” and is just by itself a hopeless mess; if you up the steering rate to stop the stagnation and you kill the economy (the rate is already at a ridiculous 21%), lower the rate to favor economic growth and the inflation (which is according to the kremlin somewhere at 10%, but at over 70% for food according independent alalysists) will spiral out of control.
It’s already an impossible problem to solve, add a global recession and it just gets way worse.
It’s a problem you encounter because money is just an abstraction for real world conditions and resources. I think people forget that. Printing more money doesn’t make your country magically have more resources. It doesn’t manufacture tanks for you or vanquish your enemies.
I still remember the picture from the history book where in Germany between ww1 and ww2 they were burning bank notes for warmth because inflation made the currency almost completely worthless.
Why
Because russia is not prepared at all for a recession. They have high inflation and stagnation at the moment (because of burning cash for the war, among other things), this is called “stagflation” and is just by itself a hopeless mess; if you up the steering rate to stop the stagnation and you kill the economy (the rate is already at a ridiculous 21%), lower the rate to favor economic growth and the inflation (which is according to the kremlin somewhere at 10%, but at over 70% for food according independent alalysists) will spiral out of control.
It’s already an impossible problem to solve, add a global recession and it just gets way worse.
No, I mean why would US economics affect Russia, a country that’s famously not tied to our financial system?
It’s a problem you encounter because money is just an abstraction for real world conditions and resources. I think people forget that. Printing more money doesn’t make your country magically have more resources. It doesn’t manufacture tanks for you or vanquish your enemies.
I still remember the picture from the history book where in Germany between ww1 and ww2 they were burning bank notes for warmth because inflation made the currency almost completely worthless.