Alaska Might Be Next ?

It’s quite simple.

Starting a war is generally good for the economy of the aggressor. Just think of how World War II mobilised the American economy. Putin needs a war to keep his people occupied and distracted from their ailing economy. Putin and his government have talked of a “New Russia”. I think it’ll be Russia who decides whether to start a war, not the United States.

What is more complicated to understand is how and when countries go to war when you consider their debt position, electoral cycle, policies and the effect on their economies.

Sanctions:

I’m not sure that sanctions will work on a country with a relatively large population, land mass and economy (or in Russia’s case, possessing vast commodity resources). Funnily, I find it interesting that the United States government is much more involved in the Russia, Ukrainian & Crimea story that it was or has been in the Syrian civil war.

Oil & Gas Prices Will Rise:

If America places heavy sanctions on Russia, the price of oil will go up. If Europe is not happy with Russia’s territorial expansion, then the price of gas will rise too.

The U.S. Dollar Will Rise:

Money is leaving Russia and it won’t be converted into Euros, especially with it trading around the 1.38 mark. You may see the Swiss Franc and British Pound rise, but Billions of Rubles will be converted into US Dollars by global money managers. A rising USD will disrupt the currently sweetened competitive position of U.S. products in the global markets. War with Russia won’t help an indebted United States especially given that they have been financing military exercises for the past 12 years.

Please Consider The Neighbours:

Picking a war on Russia will somehow involve China, North Korea & Iran. This will test the various Asian Pacific relationships that the U.S. has been nurturing. Indirectly, it will involve Venezuela too, who will add to the pressure on the oil price. Russia will have little trouble financing a war.

Russia may be pursuing an old imperial model of domination by land acquisition.

As investors, we need to understand the effect on various assets and which ones to own if a scenario of war develops, ’cause China may not choose to buy anymore U.S. government debt and even elect to sell its current holdings.

Imagine if China sold a lot of their Treasuries thus placing pressure on bond prices, which would send U.S. interest rates higher. Consider this in tandem with a rising U.S. Dollar and coupled with rising oil prices. Now that would be interesting.

As a closing tidbit, the U.S. acquired Alaska in 1867 for $7.2 million which is equivalent to 2 cents per acre. Alaska has no naval base and has barely 20,000 U.S. military personnel.

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