In the thick of U.S. / Singaporean tax season, Accountants like myself can be forgiven for not paying attention to the daily news. The only story that I cannot seem to ignore is the situation in Ukraine. On the surface, I can understand the concern about the potentially disastrous economic consequences –
1. The EU is dependant on Russian gas supplies. The map below says it all.
2. Russia holds an incredible amount of US paper. In fact yesterday, it was reported that over US$100 billion in Treasurys had been sold or simply reallocated (which for political reasons is the same thing) from the Fed’s custody accounts.
US Tax Singapore
3. China has come out in support of Russia and we know how much US debt they hold.
So is this a case of MADness? As in Mutually Assured (Economic?) Destruction! Some observers seem pretty sure that it is but I have my doubts. After doing undergraduate and then post graduate economics courses, I quickly realized that theory is quite different from reality. The amount of market manipulation by powerful forces ensures that precious little is easy to predict.
Consider that we live in a moment in history where more money is printed than ever before with so little obvious consumer inflation. We live in a time where there is so much debt being accumulated yet interest rates remain so low. There are too many unknowns to make predictions easy.
Let’s see how long this stand off continues in the Ukraine, before someone backs down…..