We are slowly realizing the emergence of new paradigms after few days of major shifts and since the start of the war in Ukraine, (Listen here).
These new paradigms are multi-faceted;
New energy paradigm; until now, gas was seen as a transition energy towards a carbon-free economy. This scenario has been shattered for a few days.
New financial and monetary paradigm; The sanctions on Russia herald new adjustments to the financing circuits of the world economy.
New cybernetic paradigm; this type of scenario does not seem to be at work yet, but it is also possible that the authorities will not let us know yet. Risk of cutting internet cables by Russia.
In the more immediate future, we will continue to see more monetary infusion from central banks; however in the meantime, we are already starting to witness difficulties in reorganizing certain circuits of financing. The signals seem worrying. The banking system will be impacted.
What the current turmoil is also showing us is the continued central role of fossil fuels, at a time when a transition to renewable energies are more than urgent. On a daily basis, the cost electricity and gas will continue to rise and show how dependent it is on fossil fuels. We will reach a point where populations will not be able to sustain such a shock in energy costs. There will be, europe-wide, a major government intervention.
Make no mistake, this is a major structural dislocation. It’s a radical shift in the organization of Europe, a radical transformation of Russia itself (whether it’s a winner or a loser of the current conflict), a radical shift about to take place in the financial and monetary circuits. It looks like at this point, even financial markets are not fully incorporating that shift.
Let me know if you have questions, and looking forward to talking to you,