Sanctions Are Going To Devastate Russia Economically, But They Are Going To Devastate Us Economically Too

Sharing is Caring!

by Michael Snyder

The economic sanctions that have been imposed on Russia by western powers are really going to hurt.  But they aren’t just going to hurt the Russians.  The measures that are now being implemented are going to be quite a shock for the entire global economic system, and all of us will be affected.  Energy prices will be going much higher, food prices will be going much higher, and the sanctions are going to cause chaos in the financial world for months to come.  Of course things were already starting to get really crazy even before the war began, but now our problems are really going to start to accelerate.

On Tuesday, Kamala Harris made a guest appearance on a radio show, and during that interview she was asked to explain the crisis in Ukraine.

This is how she responded

Appearing on The Morning Hustle, the vice president was asked to ‘break it down in layman’s terms for people who don’t understand what’s going on and how can this directly affect the people of the United States.’

Harris broke it down: ‘Russia is a bigger country. Russia is a powerful country. Russia decided to invade a smaller country called Ukraine so basically that’s wrong.’

It is frightening to think that Harris may soon be forced to take over for Joe Biden due to his failing health.

The Biden administration and other western powers have decided to punish the Russians by imposing economic sanctions on them.

Some have mocked the sanctions, but the truth is that they are definitely going to hurt the Russians.

For example, the value of the Russian ruble has already fallen so low that one ruble is now worth less than a “Robux”

Due to international sanctions against Russia, the ruble has tumbled in value—so far, in fact, it’s now worth less than a Robux. That’s really bad news for the ruble, because the Robux is a video game currency that’s mostly meaningful only to children.

Roblox, also known as “that game your kids play that looks like Minecraft but isn’t,” has been around for over a decade. But with an explosion of at-home players during the pandemic, it’s gone from fad to phenomenon, now boasting more than 100 million active players. It’s so popular that its virtual currency value, which can in fact be converted back into US dollars, is now worth approximately $.0125, which is more than the Russian Federation’s ruble.

That is crazy.

As the ruble has collapsed, Russians have formed extremely long lines at ATMs all around the country…

Long lines began forming at ATMs on Sunday as Russians braced for the ruble’s collapse by attempting to withdraw foreign currency. The trend occurred amid fears that banks will began limiting cash withdrawals — or that credit and debit cards could stop functioning entirely.

“I’ve stood in lines for an hour, but foreign currency is gone everywhere, just rubles,” Vladimir, a 28-year-old programmer who waited online at an ATM in Moscow, told Bloomberg. “I got a late start because I didn’t think this was possible. I’m in shock.”

We are witnessing a full-blown financial panic in Russia right now, and things aren’t going to get any better any time soon.

See also  Russia stops gas to Finland

And JPMorgan is projecting that the Russian economy as a whole will contract by 20 percent on a quarter over quarter basis

JPMorgan told clients in a research note reviewed by FOX Business on Monday that sanctions announced against Russia could have a “severe” impact on the country’s economy.

“We tentatively assume that Russia’s economy will contract 20% [quarter-over-quarter], saar, in 2Q, and for the year around 3.5%. But the margin of error for any such guesstimate is incredibly high at this point, and risks are skewed heavily to the downside,” the note reads. “

Obviously the western powers want to make things painful enough for the Russian people that they will start to turn against the war.

But these sanctions aren’t just going to hurt the Russians.

Western financial institutions are holding lots of Russian debt.  Now that the Russian government, Russian banks and Russian corporations are being sanctioned, they could very easily decide to fight back by not repaying those debts.

Needless to say, that could cause some rather immense problems.

Meanwhile, energy prices are going to escalate to absolutely frightening levels.  At one point on Tuesday, West Texas Intermediate crude futures were selling for $106.78 per barrel, but that could be a bargain price compared to what is coming.

Because even though the U.S. and western powers explicitly avoided including Russian energy in their sanctions, many in the energy industry are choosing to boycott Russia anyway

While in their unprecedented broadside of sanctions on Russia, the U.S. and Western allies went out of their way to spare Russian energy shipments and keep economies humming and voters warm, the oil market has gone on strike anyway. Acting as if energy were already in the crosshairs of Western sanctions officials, refiners have balked at buying Russian oil and banks are refusing to finance shipments of Russian commodities, the WSJ reports citing traders, oil executives and bankers.

This self-imposed embargo which has effectively halted a majority of Russian oil shipments, threatens to drive up energy prices globally by removing a gusher of oil from a market that was tight even before the Russian invasion of Ukraine.

Unfortunately, energy supplies were already very tight even before the war started.

If Russian oil continues to be rejected, we are being warned that this could shortly result in “much, much higher oil prices”

“The market is starting to fail,” a trader at a major commodities trading house told the WSJ, which is a problem because with Russia exporting roughly 5 mmb/d, the oil market – already extremely tight – could find itself in a historic supply shortage in just a few days, and will need massive demand destruction, read much, much higher oil prices, to stabilize as Goldman wrote over the weekend.

Of course a much higher price for oil will be felt throughout our economy in thousands of different ways.

For example, just about everything that we buy has to be transported, and transporting goods takes energy.

Inflation has already started to spiral out of control in the United States, and it appears that the worst is definitely still to come.

Earlier today, I was stunned to learn that Colgate-Palmolive is warning us to get ready for a “$10 tube of toothpaste”

Get ready for the $10 tube of toothpaste.

Colgate-Palmolive Co (CL.N) CEO Noel Wallace said last week at an industry conference that the household goods maker sees its new Optic White Pro Series toothpaste as the type of premium product “vital” to its ability to raise prices, which will help drive profit growth this year.

Can you imagine paying 10 dollars for a tube of toothpaste?

See also  Jeff Snider on how Russia is using the eurodollar system despite sanctions

I can’t.

The price of food is going to be rising aggressively as well.

Wheat futures shot up more than 5 percent on Tuesday alone, and one industry insider is warning that some wheat farmers in Ukraine may not grow any crops at all this year

“This could not come have come in the worse time,” said Robb MacKie, president and CEO of American Bakers Association.

With wheat prices already on the rise, the conflict abroad is placing even more pressure on a still ailing supply chain. Russia is the top exporter or wheat, while Ukraine is in the top 5. The two counties compete in export markets like Egypt, Turkey, and Bangladesh.

“Depending on how this comes out and how long it goes, wheat farmers [in Ukraine] may not be able to plant spring wheat, corn and other things. So, they might go a year without any crops,” MacKie added.

Collectively, Russia and Ukraine normally account for about 29 percent of all global wheat exports.

And considering the fact that we were already entering a global food crisis even before the war started, we really need that output.

If a solution to this conflict cannot be found soon, one expert is telling us that “wheat will need to be rationed”

“If the conflict is prolonged — three months, four months from now — I feel the consequences could be really serious,” Andree Defois, president of consultant Strategie Grains, told Bloomberg. “Wheat will need to be rationed.”

I truly hope that you grasp the implications of that statement.

This is beyond serious.

We really are facing a global food crisis that is unlike anything that we have seen since World War II, but of course the global population is far larger today than it was back then.

The months ahead are going to be painful for all of us, and our leaders should be very honest about this.

Because our leaders could have avoided this crisis very easily, but now we have crossed a point of no return.

 

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.