Brief post. Articles about inflation have been coming out, and they’re right, inflation is going to get a lot worse because of the sanctions on Russia, especially when Russia retaliates. If you can afford to stock up now, do. If you want big ticket items other than, perhaps real-estate, you should buy now. If you have a business which needs certain key goods or processed items, buy what you can now.
Russa isn’t really an industrial power, except for arms, but it provides not just energy but an array of minerals that are key to industrial production. While there will be workarounds to sanctions, you should still expect this to hit costs. Russia is also the largest exporter of wheat in the world, with Ukraine as #2, and you can expect food prices in general to keep rising.
Further, it’s hard to say how attempts at enforcing sanctions with China (who will resist), and perhaps with India and other countries, will cause unpredictable inflation spikes in other products.
As for real-estate, the affect is hard to entirely predict. So far, the British have resisted urging to truly sanction Russian money (because it would collapse London real-estate and hurt the City badly), but we’ll see if that continues. Whatever the case, a lot of Europe may be subject to real-estate price reductions due to sanctions, and this might be true in New York. I lack enough expertise to be sure, you should look into it if it concerns you.
Then there is the issue of Chinese money. China won’t be subject to serious sanctions yet, the West can’t afford it. However, the Chinese themselves may be wary of future sanctions, seeing them coming and that may dry up some of their massive foreign investment. Others might increase their investment and seek second passports, so they can flee when the time comes, but I think that’s less likely to be massive than it would have been pre-Covid. Whatever the advantages of living in the West, they are outweighed by, “won’t control the plague” for most, especially older Chinese who control most of the money.
All of this is complicated by the fact that the real-estate market is changing, structurally. Covid was used by private equity and other institutional investors to snap up real-estate, including single family homes and other types that traditionally have not been institutionally controlled. If there is a drop in demand, they will simply hold as much off the market as necessary to adjust supply and demand and allow them to over-charge. Their real risk is financing, but even as the Fed increases interest rates, it will continue special operations to give the rich and large corporations essentially free loans and money, so I don’t think they’ll actually be paying market rates. (We need an article on how this sort of action vastly increases the odds of collapse, and I’ll try to get to it soon.)
Times are going to get worse, not so much because of the Ukraine invasion, but because of its fallout. By itself, it would have changed as much as the Iraq war did (some important things, yes), but because it is being treated as existential and a cause for massive economic war, even centrists have realized that it is the “End of the End of History” (which, of course, never ended).
Welcome back to history and to interesting times.