I always thought that the people who worked at the KGB were supposed to be smart. But the ageing Russian leader has shown that just because someone who is powerful does not necessarily mean that they have brains, too.
Putin’s insane decision to invade Ukraine will condemn him, if not the entire country, to pariah state for a long time to come.
The condemnation has already started. The ruble has plunged to a record low against the US dollar. If it falls any further, it should be renamed the rubble. Laughably, the Russian central bank has doubled interest rates to 20%, as if it would somehow stem the fall.
The demise of the ruble is quite extraordinary for a country that is one of the world’s leading producers of oil and gas. It is also a top exporter of metals such as steel and aluminium.
But all that matters little because of Putin’s reprehensible action to invade a neighbouring country. Some of country’s banks have already been excluded from the global payments network, SWIFT. Others could be excluded, too.
Sanctions have also been imposed on some of the country’s leaders and oligarchs, and its flag carrier, Aeroflot, has been banned from some airspace. The financial and economic noose is tightening around Russia.
But it may take time before Russia capitulates. In the meantime, elevate energy prices could become even more expensive. And if high oil and gas prices wasn’t enough for us to worry about, wheat exports from Russia and Ukraine could be badly interrupted by the conflict.
It means that inflation, which is already a problem, could be a real headache for central bankers. Question now is whether they have the resolve to raise interest rates. Chances are they won’t, or at least not as aggressively as we thought.
The upshot is that inflation could rage higher for longer. That is going to be a problem for many of us….
…. Whilst it is not easy to talk about money when thousands of lives have been disrupted in Eastern Europe, we also have to be realistic about our own futures. We need to ensure that we can cope with inflated prices as a result of Putin’s actions.
And that means investing in a sensible portfolio of inflation-beating assets that can continue to deliver rising income whatever happens. And that is precisely what I am doing.
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