Back when I was in university — at the tail end of the Cold War — I turned into a “power politics diplomacy nerd.” Although I could probably write lengthy pieces on the invasion of Ukraine, I think that would be a mistake. I just want to stick to my knitting, and make some observations that do not fit the news flow that I am seeing.
Although I am working with obviously incomplete and biased information, I view the possibility of the cessation of hostilities within a few weeks to be unlikely. Military and economic developments could easily mean that a peace agreement is reached within months, but that lengthy a process will likely have far-reaching economic effects.
I will first offer some relatively obvious comments on financial market implications, before offering some observations on the diplomatic situation....
While I agree with Brian about the irrelevance of gold and reserve currency status with respect to the monetary system, reserve currency status and gold remain "barbarous relics," to extend a phrase of Keynes.
While the real significance of gold and reserve currency may be be not as believed, beliefs are key factors determining perception of reality, and from the pragmatic standpoint, "perception is reality," since this is the is the basis of decision making and action. That is to say, a great deal of what people take to be is "reality" is based on their subjective perception about reality in terms of a frame of reference, the broadest aspect of which is "world view." Beliefs are boundary conditions of point of views that are the basis for decision making and action.
The first effect of beliefs even though erroneous is on analysis and decision making, which is obvious from conventional economics and finance, that is, economics and finance not informed by MMT.
The second is geopolitics and perception of power. The most important factor geopolitically is power. While actual power is the decisive factor, the perception of power is also crucial in the historical dynamic.
While power "grows out of the barrel of a gun," to quote Chairman Mao, and guns are the product of an industrial base, there is also the matter of perception of power, mainly how others perceive it.
The amount of gold a country holds has always been a key factor historically and that perception remains in place. Secondly, reserve currency status is also believed to be an important signifier of geopolitical power. So these are still factors to take into account, at least until the paradigm of understanding shifts to MMT.
This also applies to disconnect from SWIFT (as Jamie Dimon observed). The real effect is refusal to do business with a counter party but when this refusal is based on principle rather than reality, principle usually bends to reality if reality bites.
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