Would a Russia/Ukraine conflict cause even more inflation?

 

Russian tanks on a train. New York Post/Reuters. 

A new analysis says that inflation could increase to as high as 10% if Russia invades Ukraine. New York Post. Such a conflict could cause oil prices to spike over $100 a barrel which would have a ripple effect throughout the economy. Russia is the 2nd largest producer of oil and natural gas and Joe Biden has vowed that he would sanction the country if it invades. Russia would likely retaliate by cutting off its gas and oil supplies to the rest of the world. The inflation would be on top of runaway inflation, the highest level in 40 years, that Americans are already dealing with. Experts disagree with how likely an invasion is, with Russia offering some signals that they are not willing to invade. 

My Comment:

First of all, I have to say that I still don't think there is any evidence that Russia is actually going to invade. This whole crisis is a manufactured one and an example of saber rattling. Russia has very little to gain from an invasion and a lot to lose. Plus it's winter, the time of year where tanks get bogged down in the mud and soldiers freeze in the snow. 

But I do think if a war were to happen, it would obviously cause a huge amount of economic damage, not the least of which would be inflation. The stock markets would take a hit obviously because investors would be scared of a wider war breaking out. I mean, look what happened this week, markets rallied when Putin pulled back troops but crashed today because of some minor shelling. 

Inflation would be the biggest problem because it's already a huge problem. Inflation is at it's worst rate in 40 years and everyone is feeling the effects of it. Indeed, I went to the store today, bought hardly anything and still paid more than $100 for it. There is no indication that the inflation will go down on its own anytime soon. 

If a war were to happen it wouldn't cause inflation alone. Ukraine is not an economic powerhouse and it is only useful because it is a highway that brings Russian goods to Europe. Any Russian war would probably be limited and would not threaten trade on its own. 

But it would be Biden's actions that would cause the inflation. He has vowed that he would bring sanctions against Russia, which Russia would retaliate against. They would do so by cutting off oil and gas supplies to Europe. This economic warfare would be the cause of inflation, not the war itself. 

What worries me about this is that Biden knows a war in Ukraine would cause inflation and he might want to use that as an excuse for his domestic failures in controlling it. That means he has zero incentive to actually stop the war and major incentive to actually start it. He would use Putin as a convenient scapegoat for his own failures. 

That being said, I doubt that Biden would escape the blame if he causes a war to cover up inflation. Everyone knows that the war would be his fault, he's the one that provoked Russia by trying to get Ukraine to join NATO. Plus, making the economy even worse won't help his poll numbers one bit.