West has walked in to a trap set in by Putin. The situation has come to such a pass that Europe has ended up actually funding the war against itself. In return, the inflation has gone through the roof. This inflation is partially caused by easy money policies of western central banks and mostly because of supply chains disruption due to actions in Ukraine and sanctions and also because of China/Covid issues. This inflation is a sticky one. Only way to get out of this while still keeping USD dominance is to raise interest rates very high and that too very quickly. Fed will in the process will destroy the demand and the wealth across the world. Tremors have already been felt in last one and half months but this is just the beginning.
Fed and US are hopping that rise in the interest rates will protect USD value and it will still remain the most dominant currency at the world stage even after they would have destroyed the wealth and values. But, there is a catch and it is big one. There is one currency which is getting stronger on its own and simply based on its fundamentals. It is Russian Ruble. They have even pegged it against the Gold. Only currency in the world having this status. Moreover, Russia is coercing Europeans to pay in Ruble and most are agreeing as we can see. By September, when the cold season starts in the west, they all would be forced to do what Russia demands, and that is also just to survive. They can do antics during next 3/4 months but Russia seems to have caught them by their balls.
I have not included Chinese angle here yet as it has not made any moves so far. If it does then it will complicate things further. India is sitting pretty with its solid reserve base and good opportunities to export more and buy cheap oil at the same time. But, the neighbourhood is exploding with Pakistan, Lanka in flames and Nepal, Bangladesh and Myanmar on their way to suffer. Modi govt has created enormous opportunity to dominate the South Asia permanently and we may see unusual deals being struck to help out neighbours. No one else can come their rescue other than India. Even, West will support India in these initiatives as their attention is on bigger issues at home and close to it.
Only respectable way out for US, as I can see is to stop backing Ukraine by stopping funds/arms and let Russia win unconditionally. This will be the first step in the process of reversing other measures it has taken against Russia since start of Ukraine operation. That way US still can remain some what relevant.
Btw, intriguing story of last week when I visited a European city for a couple of days. I met a senior professional who has been an acquaintance since last few years. He lives in an apartment with kids. kids and couple occupy all bedrooms. They decided to give up one bedroom to a Ukranian family who sought refuge in their country. They bear all expenses and have given up space and also their independence to an extent. He was frank in the discussions. He said that earlier when Africans, Middle Eastern or Asians cane running from their countries as refuges, he never felt such anguish. This may be because this always happens. But, when he saw white Christians running away as refuges, his soul could not bear it and decided to adopt one such family. He described in detail the refugee situation where many families are ending up in different parts of Europe and many are now at serious risk of being exploited. The racial bias is clear and apparent and well educated and well placed people feel no shame in admitting it. So, secularism, liberalism are more or less thrown out of the window when your home or some home close to your home is set on fire!!
Lastly, the biggest conundrum out of the current situation is this. Who is more powerful? The resource generator or resource convertor or resource consumer? Our fore fathers always taught us that the one who controls/owns the resources are the most powerful and conventional wisdom too supports this. In last 30 to 40 years or more the resource consumers became more powerful as their governments created free money out of thin air. And because of this even resource convertors also gained and aspired to become as powerful as resource consumers. Now that central banks across the world are forced to stop this money printing business and tighten the belt by increasing interest rates, it will be interesting to see if the conventional balance is restored. Someone correctly said this “Party with borrowed money can last only this long”…………