Fear Of Escalation In Ukraine Roils Markets

by JASmius

Another illustration of the interconnectedness of issues, wherein economic policy is social policy is foreign policy is military policy, and every combination therein:

Fears that the crisis in Ukraine is escalating into a new and dangerous phase roiled financial markets, particularly in Europe, on Wednesday.

Following allegations of a buildup of around 20,000 Russian troops on the border of Ukraine and the prospect of tit-for-tat sanctions between the West and Moscow, investors have grown increasingly vexed by the situation in Ukraine.

A situation that was encouraged and has been bolstered by deliberately weak, feckless, frankly downright embarrassing Obama Regime foreign policy, probably to produce just such a collaterally dislocative economic effect.

[T]he Stoxx 50 index of leading European shares closed down 0.7%. The retreat came in the wake of comments from Polish Prime Minister Donald Tusk that he has information indicating that there is a growing threat of a "direct intervention" by Russia in Ukraine.

Tusk's comments come a day after John Ging, director of U.N. humanitarian operations, warned the Security Council at an emergency meeting requested by Russia that the humanitarian situation in eastern Ukraine is steadily worsening as power and water supplies are scarce, homes are destroyed and health workers flee.

The fear in the markets is that Russia may use these reports of a humanitarian crisis to justify a military incursion, which would clearly ratchet up tensions with the West.

I doubt that would be the case.  Does anybody see Barack Obama responding militarily to such a Russian "incursion"?  Or finally consenting to providing the Ukrainians with direct military assistance?  Or even fast-tracking U.S. natural gas exports to the E.U. to wean them off of Czar Vlad's energy teat?  I certainly don't.  In which case, just exactly what genuine "tension" would there be?

And that, of course, is what truly has markets "vexed," even if they don't realize or understand it: The West has no deterrent against Russian expansionism and aggression.  Or Red Chinese expansionism and aggression.  Or North Korean, or Iranian, or ISIS, or al Qaeda, etc., etc., etc.  A deterrent is a capability detrimental to an aggressor's interests that the aggressor cannot be certain won't be used against it in the event that said aggressor makes a move against your own interests or those of an ally.  It is multifaceted: military, economic, diplomatic.  And its purpose is to reduce the chances of a war.

What deterrent does the U.S. have against Russia overrunning and conquering Ukraine?  Absolutely none, because Mr. Putin knows Barack Obama will do nothing to block, hinder, or even discourage his ambitions to rebuild the Soviet Union, and then the Warsaw Pact, and then....well, the sky's the limit, really.  Consequently, Vlad's ambitions will continue to escalate, Western options will continue to shrink, and the chances of eventual war between East and West on Russia's terms and initiative will continue to burgeon.  Investors instinctively know this, even if they are incapable - or fearful - of articulating it.

The fruits of the Obama Doctrine are producing so many bumper crops that that's about the only market that isn't unstable.