I was wrong!  When Putin took Crimea, I expected it would only be a week or so before he invaded Ukraine.  After all, why wouldn’t he?  Sure, it would be slightly more difficult than taking Crimea, but the Ukraine didn’t have a chance against the superior Russian forces.  And, the West was merely being bellicose and nothing more.  But, he hesitated.  Then, it turned into a trade war – a trade war that has spooked markets worldwide, especially their own in Russia.

The Russian stock market is down 20%.  Their currency has lost 10% of its value against the dollar, contributing to an outbreak of inflation.  That inflation is easily visible in food costs, as Russian nonsensically announced trade sanctions against importing food.  To combat inflation, the Russian central bank has sharply increased interest rates.  Retail spending growth has dropped 50% since the Crimea annexation.  Investment spending has actually turned negative.  GDP growth was 7% from 2003-2007 but has already dropped to less than 1%.  It is hard to describe the Russian economic prospects as anything other than a train wreck!

There could have been a brief hot war when Russia took the Ukraine, with no American lives at risk.  Instead, we have a trade war, with the Russian people paying the price.  Sure, there would probably have been minor trade sanctions if he had invaded earlier but not a full blown trade war.  While this has spooked our market, the U.S. will be fine.  Sooner or later, our stock market will realize that.