I just finished a thread on twitter. It is from a German source. He is reporting that while sanctions have reduced the Russian economy by 8.5 percent, they have not collapsed it. Additionally, the Russian receipts for exported oil is up 50 percent from prewar levels.
I do believe that even with full crippling sanctions for decades Russia will eventually ship as much or more oil than it did before the war. Additionally, at least for a couple of years, the price of oil will remain high enough that Russia will enjoy additional receipts for the oil it does ship.
Add in the resource grab in southern Ukraine, Russia might do OK with this war and not be as quickly crushed as I suspected even a month ago.
Between COVID and the Ukraine war we are experiencing significant supply chain reordering, it is no longer just a disruption. This reordering is expensive. It leaves a lot of stranded assets and creates the need for large capital outlays for new assets.
This portends significant real wage increases, and capital costs for the foreseeable future. At some point, not policy makers, but the invisible hand will bring these cost into line with demand and both labor and capital will be deployed where it is needed.
“Nature does not have punishments, only consequences”
In other words, hand wringing about labor not keeping up with inflation based on yesterday’s metrics, or the value of the U.S. dollar index, (An ancient and useless metric) is pointless.
It is much more important to try to understand what is happening in response to these new paradigms. Try to think
of it as a murmuration.
Cheers
Qazulight (Note: Brain science is moving in this same direction with the ordering of the brain after physical and/or emotional upsets including brain trauma, PTSD and Psychedelic drug use or therapy.)