Escalating War In Europe

Posted By Darren Winters on Feb 9, 2023

Escalating War In Europe

The escalating war in Europe could be the most significant concern for investors in the coming weeks and months. It is the world order cycle that has got me worried. 

The First anniversary of the Russian invasion of Ukraine approaches, which has morphed into the worst armed conflict in Europe since WW11 as soldiers fight in bitter freezing conditions for every street, every building, and every staircase in armed and hand-to-hand fighting to the death.

A diplomatic, peaceful solution is now dead in the water, and war-ravaged Ukraine is bracing itself for another Russian onslaught, anytime before the ground thaws. Europe’s war in the east front, known as the meat grinder, has claimed 200,000 military casualties on both sides, according to a top US general.

The escalating war in Europe is the worst-case scenario for the continent with widespread geopolitical and global economic considerations 

Escalating war in Europe

The Eurozone is home to 343 million people with a GDP of 16.6 trillion dollars.

Ukraine is the geographical center of the continent, providing a logistic pipeline from the resource-rich Russia in the east to the rest of western Europe. Ukraine, Europe’s bread basket, vast fertile fields, depicted in its blue and yellow flag, feeds the entire population of Europe. So a global shortage in soft commodities, and grain is likely to worsen in 2023. It will be more expensive to feed livestock, leading to a spike in prices for poultry and meat. Food and energy costs are likely to remain high in 2023. If so, this will be a headwind on discretionary spending, with households already struggling to service payments on their debts as the ECB pushes ahead with rate hikes.  

The escalating war in Europe and a winter of discontent 

The cost of living crisis is particularly acute in Europe due to the war on the east front. 

Protests around the continent are spreading, with industrial action in the UK, France and cost of living protests in Spain and Italy.

Escalating war in Europe with no road map to peace

When big ships go down, that typically marks the beginning of a world war. Brits sinking German ships in Jutland marked the beginning of WW1.

The Japanese sinking of US ships in Pearl Harbor was the beginning of WW2.

The sinking of the Moskva, and blowing up the Nord Stream 2 Russian German pipeline appear to be the beginning of WW3.

So what is likely to happen as the war escalates and the threat of nuclear war becomes closer?

Sixty percent of marriages end in divorce.

When the going gets tough, alliances and unions fold like cheap suits.

Today we see the French, German, British, and US standing shoulder to shoulder, sending a fleet of tanks, and a few planes, which will make little or no difference. 

But WW3 is different from WW2. Nuclear weapons are the ultimate weapon to end all wars. It is a game changer and makes alliances obsolete. 

Maybe the west thinks Putin is bluffing, but what if he is not? 

So until the war in Europe concludes, cash is king.

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