Interpreting Macroeconomically a War Scenario, Graphically

Most of the discussion of the macro implications of an expanded Russian invasion of Ukraine presumes elevated oil prices (e.g., [1]). This makes sense, certainly for the short run. However, if oil prices rise sufficiently (keeping in mind for Brent have already risen from about $70/bbl to $90/bbl), they will kick the economy into a slowdown. Slowdowns tend to push down oil prices. I think in terms of graphs; this is how I see the short term, and (potentially) medium term.

Short term, in an AD-AS framework, a conflict raises uncertainty and risk, depressing domestic aggregate demand both at home and abroad. The AD curve shifts in (exports fall, and model assumes financial frictions so investment falls, dark gray arrow). Oil prices spike (light gray arrow), causing cost-push inflation.  EX is exports, ρ is risk.

Figure 1: Rise in oil prices and decrease in rest-of-world output, and rise in risk.

Output falls to Y2 and prices rise to P2 – stagflation at least in period 2. Red arrows show the path of price level and output.

However, as output falls, presumably that feeds into world demand for oil. With low price elasticity of oil, it doesn’t take much to push oil prices back to where they started.

Figure 2: Fall in oil prices and rest-of-world output remains depressed, and risk elevated.

Output recovers somewhat to Y3, and price level falls to P3 (in the absence of stimulative fiscal and monetary policies).

Would oil prices fall as economic activity fell, and if so, how much? One can take a cue from the extraordinarily mild 2001 recession; by recession end (trough), oil prices fell 28% from recession start (peak).

Figure 3: GDP, bn.Ch.2012$ SAAR (black, left log scale), and price of oil, WTI, $/bbl (brown, right log scale). NBER defined recession dates peak-to-trough shaded gray. Source: IHS-Markit, EIA via FRED, NBER. 

The more likely a big oil price increase, the more likely a central bank response. While expected interest rates (as inferred from yield curve, and elsewhere) are rising, it’s hard to separate the motivations – higher inflation due to persistent cost-push pressures, or due to possibly higher oil prices coming from Russia’s threat to Ukraine.

Figure 3: 1 month Treasury yield, % (blue, left scale), implied average Treasury yield in months 2-3, in % (red, left scale), VIX (green, right scale). Red dashed line at Sec. Blinken’s press conference on 2/11, gray dashed lines at 1/12 and 2/12 CPI releases. Source: Treasury via FRED, CBOE via FRED, and author’s calculations.

Blowback, in the form of lower oil prices, and implications for Russian GDP, is something Russian policymakers should consider.

Figure 4: Russian GDP, in bn.Ch2000Rubles, seasonally adjusted (red, left log scale), IMF forecasted level for 2021Q4 (red triangle, left log scale), and oil price (Brent), $/bbl (chartreuse, right log scale). 2022Q1 is for first half of quarter. Source: OECD via FRED, IMF January WEO update, EIA via FRED, author’s calculations.




85 thoughts on “Interpreting Macroeconomically a War Scenario, Graphically

    1. Barkley Rosser

      Look, d.a. Moses, I think most people here appreciate my telling people what is being told to the Russian people. I have never said that this tells us what will happen. I more than anybody here knows how what they say can change from minute to minute, it reflecting whatever is Putin’s mood at any moment.

      So we have seen a wild oscillation in just the last week and a half on this. A week and a half ago they were spouting war, claiming US troops in Ukraine were exercising with Uktainian troops to attack Russia, completely insane. Then after the phone call with Biden a week ago yesterday when Biden said he would take our advisers out, thje mood completely shifted. The emphasis was on how the troops in Belarus would be withdrawen at the end of the exerecises (today) and peace was at hand. Then things got overwhelmed by all the womens’s figure skating stuff, which really freaked out the whole country. And now we have war whooping again, with them again claiming there are US troops in Ukraine, which is not the case, along with all these accusations the Ukrainian military is attacking the Donbas republics and “committing genocide,” even as the Ukrainian military is just sitting on its arms trying not to give them an excuse. But the lies for the attempted false flag ops are at a peak, with the troops staying in Belarus to protect the poor Donbas republics, pooe things.

      Let me note one more item where you have no idea what you are talking avout and look like a total fool. You somehow claimed I was spouting “state lies,” but you need to understand that there is still an independent media in Russia. It has been drastically reduced, but Ekho Moscow radio is still functioning. Actually something that is extremely interesting to watch is how that still independent radio station manages in the face of whatever is the current state line, which does totally pour out of the state-controlled media, which is indeed the vast majority. As it is, a sign of Putin’s increasing authoritarianism is that indeed E.M. seems to get more and more careful about not getting too out of line from the state story. But they do still remain independent and sometimes actually being critical of official lines.

      But i am not bothering with all the ins and outs of that here when I let people know what is the current line going on over there, which, again, a.d., does not mean either of us accept any of it. I am just letting people here know what the line is, which I think most people here appreciate learning, even if you do not and somehow think you know more than we do. Want to explain to us the real nature of the Rusyns and their links with Putin’s ultimate fantasies? No, I did not think so.

      1. Moses Herzog

        @ Barkley Junior, Foreign Policy Dunce
        Did you want to share with the class what pro-Kremlin oil colossus owns “Echo Moscow” (or Ekho Moskvy if you prefer) ?? I’ll give you 6 hours to reply and then I will be forced to unleash the crowd laughter,

        Have you figured out the troops on Ukraine’s north border in Belarus were not just “doing exercises” yet, [edited – MDC]

        1. Barkley Rosser


          Oh wow, you are really desperate to score some points after having made such a total fool of yourself here. Do you want to explain again how sending an email to me would have revealed your ID as “Moses Herzog” and cost you your precious “privacy”? Want to again tell us how those troops in “south east Romania” were put there as part of the Belarus exercises?\

          Let us see. E.M. has a complicated ownership structure, with a majority of it being Gaszprom Media, a subsidiary of Gasprom, which is indeed state owned. I guess this is your big reveal. Yes, that is probably partly why they have not yet been shut down. But there are several layers between them and the state, and they sharply contrast with other current media, which are directly state owned. They continue to have dissident voices and views and have several of their major people outside Russia, allowing them more freedom. But as I noted they have been hewing closer to state lines more recently as Putin has tightened his grip. But you have not disproven that there remains some diversity of the media there, and, of course, you have no idea at all what they say or report. You are just way in over your head and proving nothing with this, even if you think you are.

          Of course, if Menzie or others do not want me reporting on what I hear is being said on Russian media, well, I can do that. Is that what you actually want, Moses? Just how big of a dumb ass are you?

          On the matter of exercises, as recently as five days ago the Belarus foreign minister was saying all Russian troops and equipment would leave yesterday. I simply reported what Russian media was saying late last week, which was that. I never said that meant that was definitely gong to be what would happen. As I explained above, but you are too bloody dumb ass to remember, or just sickly malicious, I always said Putin could change his mind on a dime, and he did and still can. So now the exercises are continuing because of the “threat” to the eastern Ukraine republics. Oooh.

          As it is, it looks like Putin’s effort to generate a false flag has failed. Even people in the LPR and DPR are openly saying there is no invasion by Ukraine as was proclaimed by Putin’s media. Also, the evacuations have been minimal, maybe 3000 at most, with some of those people from orphanages and nursing homes who were moved without their will, all this despite a reported 10,000 ruble prize for evacuating to Rostov.

          But it looks like something else I have been forecasting is happening: Putin about to recognize the independence of LPR and DPR following the resolution in the Duma and apparently requests from their leaders, if he has not alreadly actually done so. This may allow him to openly move Russian troops into those republics. He can probably get away with that, as I have also long forecast. The question then becomes what next? They have been trying to cook up a false flag excuse to go further, but Ukraine is not providing a justification and basically nobody believes Putin’s lies on this matter.

          I have hoped that such recognition will satisfy him, but he may have to have those republics gobble up some more territory. I do not know and do not have latest word out of Russian media on that, sorry, not that you give a phoo, d.a. Moses. I do note that this recognition, will not be recognized by Ukraine or most of the rest of the world. But it does lay the groundwork for a possible future status quo that looks like what we have in Georgia and Moldova, where Russian-backed and recognized separatist republics exist in peace: South Ossetia, Abkhazia, and Transniestria, without being recognized either by the nations they have been carved out of, much less the rest of the world. But there is a peaceful status quo about them This may be the best we can hope for, and I have been saying that for some time.

          1. Moses Herzog

            You’re lying again, I NEVER said the military installation in the south which I was referring to (which I believe is a military port) was part of the Belarus exercises. Now you are taking a page from Putin’s book. Being the biggest F’king liar on this blog while accusing others of fake news.

            It’s so funny that when Barkley Rosser makes a complete A$$ of himself saying American embassy workers in Kyiv should wait around to get fire-bombed, and Barkley Junior is about the last person on Earth who hasn’t figured out an invasion of Ukraine has and will happen, then similar to pgl, Barkley the doddering fool has to resort to completely making stuff up about what others say. So what does Barkley Junior do after the man married to a Russian woman said at least TWO (more really) completely ASININE statements related to Russia’s aggression on Ukraine?? Barkley Junior then claims his opponent can’t read a Goddamned Google map.

            Of course since Barkley Junior plays the role of senior dolt, at his own moment of convenience, Barkley “can’t” copy links, and Barkley “can’t” provide the link that in fact doesn’t exist, of what Barkley Junior LIES that I wrote. By the way, since once again the biggest a$$-hat on this blog (by miles) can’t show himself up for being the dullard on Russia that he truly is, I will have to tell Econbrowser readers myself that Ekho Moskvy (the media outlet Barkley Junior claims is “independent journalism” is…….. wait for it…….. wait for it…….. wait for it…… wait for it……. is owned by the oil and gas colossus Gazprom.

            Have a nice evening sh*t for brains.

          2. Barkley Rosser


            I am not going to report anything further on this blog about what is on Russian media. My wife totally disapproved of my doing this on Facebook, precisely because idiots would misinterpret and distort what was said. She does not know I have been doing it here, but would super disapprove of it, especially since we have seen a nauseating piece of worthless garbage doing exactly that.

            So, for those of you who would like to have further such reports, blame the disgusting piece of slime that calls itself “Moses Herzog” here.

          3. Menzie Chinn Post author

            Barkley Rosser: I for one think it useful to hear what Russian propaganda is saying. We need to know the extent of the disinformation — as well as what Putin is trying to signal — if we are to understand the extent of support for his adventures abroad. I think adults will understand nothing said is to be taken at face value.

            The Russian apologists will just pay attention to their direct feeds of disinformation coming from Tass, etc.

          4. Barkley Rosser

            Sorry, Mrenzie. I am not going to do so unless you ban Moses Herzog. Which you will not. And Marina does not wish me to anyway.

            I note that this is very personal at this point. She has family still in Moscow, including her mother about to turn 93. She needs to go soon to see her mother to take care of some things all messed up, but if Putin fully invades and full sanctions are implemented, she will probably not be able to go. Her mother will probably die without her being able to see her.

            So, the lying distorter Moses Herzog can go to hell. Get rid or him or hear nothing inside from me again on any of this.

          5. Barkley Rosser

            Mu, Mosrs, you woethless Dumb Ass, did yoiu not see thqt I have already noted E.M.’s partial ownership? That is not all of it. You lie. Fact is, however, that the station nevertheless reports news and views that are not those of full-blown government mouthpieces, including from people who have left Russia precisely to get away from the claws of V.V. Putin. This is not something that is only known to people who listen to it, although they are the source of that knowledge. You would not know, but somehow you have decided to lie about what they report.. Why are you doing that? To prove how utterly and totally disgusting and woethless you are?

          6. Moses Herzog

            Highly highly entertaining thread (I mean that genuinely). While Ukrainians are dying or being seriously injured, a man in Virginia USA has managed to make a war all about himself. A lesson in character fabric.

            For those of you disappointed you’re losing out on “inside information” from Russia and their longstanding legacy of “independent journalism”, someone has taken the extra effort to give you the “executive summary” of what you would have “otherwise missed” here on the blog:

            This whole thread has been hurtful [ giggle giggle ]. Now we’re going to “miss out” in “insider” Russian commentary. Now we know how ALL the teams of the NBA felt, when Russell Westbrook announced he was staying with the Lakers this year.

          7. Barkley Rosser


            On the matter of Ekho Moskvy being partly owned by the Russian government through several layers, let me note that the BBC is owned by the British government and the PBS is owned partly by the US government. Does this mean that they are not at all independent of their governments in their reporting? Of course not.

            Ah, but you might point out that the UK and US have freedom of the press. So big surprise that these government-owned outfits can behave independently. But Russia is not, so Ekho Moskvy must spout state lines all the time.

            But this is precisely tho point I made: that the degree of independence that Ekho Moskvy exhibits in its reporting is rhe sign of the level of freedom of press in Russia. The faxt is that only a few years ago, well into the Putin regime, Ekho Moskvy was operating as almost as indepdendent as the BBC. All the TV stations were directly controlled by the government and spouting the government line, but there was this one radio station operating indepdendently. But the trend has been to tighten on it as Putin has become more authoritarian, and the clearest sign of this is how far from the government line Ekho Moskvy can deviate from the government line. Unfortunately it looks like it is deviating less and less, although it still retains some independence, certainly more that we see from any such stations in China or North Korea.

            So, Moses, your great discovery that Ekno Moskvy is partially owned by Gazprom (you inaccurately said it was totally so owned),, did not establish that it does not exhibit any independence was simply wrong. You thought you were estabishing that somehow I am a “foreign policy dunce” and “sh*t for brains.” Except that it is you that is just plain dead wrong here on both details and implications. All you have done is to reinforce how ignorant and stupid you are on this whole matter.

  1. macroduck

    Completely agree.

    Sadly, a Russia-induced global slow-down would be remembered by some political leaders as reason to tip-toe around Russia in future disputes. I know I am being repetitive, but Russia needs to feel a need to tip-toe around the Western alliance. Russia’s economy is only slightly larger than South Korea’s, smaller than Canada’s, than Brazil’s, than the UK, France, Germany, Italy. Instead of wringing our hands over Russia’s desire for a sphere of influence, we should remind Russia of Western economic power.

    I’m not generally a hawk, but Russia is a street punk in international affairs. You don’t surrender the streets to punks.

    1. Ulenspiegel

      “I’m not generally a hawk, but Russia is a street punk in international affairs. You don’t surrender the streets to punks.”

      I could vote for this without any problem. Helmut Schmidt called in one instance around 1982 the Soviet Union “Angola with nukes”. 🙂

  2. JohnH

    It would also be interesting to look at food prices, since oil and food prices often have moved in tandem.

    To exacerbate the situation, Russia and Belarus produce a third of the world’s potash. Prices of the key fertiliser component already doubled over the last year.

    Food price inflation is bad enough as it is. A war would only make matters worse.

        1. pgl

          The discussion of potash produced in Russia reminded me of some Russian litigation involving a tax cheat multinational called Uralkali. The only discussion of this litigation in the public domain is the usual BS from Deloitte Russia (they actually get paid for this garbage?):

          It is true that sales in Europe went through a Swiss affiliate (tax haven) and the Russian tax authorities thought that the Swiss affiliate was purchasing potash at a transfer pricing far below the arm’s length price. The court’s critiques of the tax authority’s position may have merit but the conclusion that this multinational was properly pricing these exports falls on its face once one takes the multinational’s own preferred approach and analyze the actual financials properly.

          I wish I could lay out the incredibly straight forward case that transfer pricing abuse was occurring but damn it I’m under a non-disclosure agreement. I can say that Putin’s cronies are doing a lot of illegal income shifting to tax havens. It would be ironic if this upcoming invasion led to the rest of the world pulling all of Putin’s money laundering into the open. One can only hope.

      1. pgl

        That graph for phosphates should be taken back to before 2008 as the commodity boom back then dwarfs what we are seeing today. Then again China was buying a lot of commodities including potash back then.

        1. pgl


          Now I hate anything AEI but this chart of potash and other fertilizer prices make me go “like damn” at how much prices have risen. It does turn out that Russia and Belarus produced nearly 15 million tons of potash per year with their combined production being about the same as Canada’s. Which has me thinking this is an easy way of laying out that transfer pricing abuse case.

          Imagine a Russian multinational selling a mere 4 million tons back in the good old days when market prices were a mere $500 a ton. Also imagine a Swiss distribution affiliate that books the $2 billion per year in sales receiving a 4% gross margin (gross profits = $80 million per year). In that case that Deloitte Russia babbled on and on about, Swiss expenses were a mere 2% of sales or $40 million per year so Swiss profits were $40 million per year.

          Now a strong case can be made that the appropriate gross margin should be only 3% at best. Now a 1% difference might seem puny but when the base is $2 billion in sales per year, we are talking about $20 million in income shifting and tax evasion. But I guess the overpaid hacks at Deloitte Russia would tell us that it is “all perfectly legal”.

          Of course potash pales in comparison to oil and Putin owns significant shares in Russia’s oil giants, which is why I doubt he is enforcing their rules against his own interest.

  3. Bruce Hall

    One is presuming that Russia is all that concerned about oil prices or selling to the West. Russia is in the midst of a pivot to the East. Currently Russia is exporting about 18 million barrels of oil per month to the U.S. Coincidentally, the U.S. exports about that same amount of oil and oil products to China.

    Let’s presume the worst happens and Russia takes the eastern half of Ukraine and the U.S. and Europe go to their nuclear (economic) options and start sanctioning everything Russian. Russia could “sanction” the U.S. and, with the cooperation of China, replace U.S. exports of oil to China with Russian exports. Sure, not exactly “turning a spigot”, but pipelines exist between Russia and China and the flow could be increased and addition oil transportation infrastructure built (Russia and China don’t give a rat’s ass about EPA standards).

    Meanwhile, Russia could do a little tap-dance on Europe’s energy needs by slowing natural gas flows in Nordstream 1 and letting 2 just idle.

    Of course, China could seize that upheaval between Russia and the West as the opportunity to play a little havoc with Taiwan. China’s exports of goods and services as a percentage of its total GDP has dropped in half and is increasingly looking inward for economic growth. So a little land grab of territory that is not protected by treaty with the U.S. could happen if Uncle Joe was busy trying to decipher the tea leaves about Russia. Now the U.S. would have to “sanction” both Russia and China. Tariffs anyone? Banning imports anyone? Refusing to pay debts owed to China? Yeah, it would get messy, but the U.S. and the West may not end up on top of the economic Russian roulette.

    And while that is going on, what would Iran be doing? Oh, nothing much. Just doing a little sailing with their friends.

    Yeah, I’m not so sure about “blowback”.

    1. macroduck

      Trillions of dollars of military hardware, long-standing agreements and alliances, existing military doctrine, and you think “woopsie, I was busy doing something else” is a likely scenario? Even more clueless than usual. I guess the more important the issue, the less you know about it.

      1. pgl

        Bruce only knows what Kelly Anne Conway allows him to know. But Bruce does excel and copying and pasting her emails.

        1. Bruce Hall

          Is she your cousin? You seem to have a sexual thing for her.

          Too bad you have nothing better to offer.. Stick to day trading.

      2. Bruce Hall

        Read Biden’s lips. No troops; no direct involvement in Ukraine. Oh, we’re going to stand by the Ukrainian people… maybe way back and to the left. Biden is being outflanked whether or not the Russians invade Ukraine. He has dug himself into an anti-fossil fuel hole and now has no leverage. The Europeans have no stomach for any sort of confrontation with Russia and Biden has demonstrated he has no understanding of economic or military leverage when it comes to Russia. Biden is a toothless lion and NATO are his cubs.

        Biden and the Democratic Party have played the Russian bogeyman card about as many times as BLM has played the race card and both are becoming irrelevant to reality..

        1. Menzie Chinn Post author

          Bruce Hall: “BLM has played the race card”? Are you trying to say that there is George Floyd was just another event that we should just shrug our shoulders and say “he got what he got coming”? I think that’s what you are saying — and count me unsurprised.

          1. Bruce Hall

            Although I answered this in a subsequent post of yours, I will make this comment:

            Four police officers were charged in Floyd’s death. Could it have been that they were outright racists? Sure, that’s a possibility. They were:
            Derek Chauvin, J. Alexander Kueng, Thomas Lane and Tou Thao (evil, racist Asian American). But I draw a distinction between some cops who appeared to act in a way that BLM deems racist and “systemic racism”. I also draw a distinction between a scam by some communists to raise money for their personal expenditures and those who say policing could be improved.

            Would you say that BLM did NOT create massive problems in the name of addressing problems? It won’t surprise me if you do. But then, that would make you a far right winger, right? “Extremism in the defense of liberty is no vice… and moderation in the pursuit of justice is no virtue.” Or maybe a Canadian truck driver sympathizer?

        2. pgl

          Of course you will fight really hard for Ukraine playing video games in your little basement. You are nothing more than a chicken hawk. Leave matters of war for the adults as you hide from the real world.

        3. pgl

          “The Europeans have no stomach for any sort of confrontation with Russia and Biden has demonstrated he has no understanding of economic or military leverage when it comes to Russia. Biden is a toothless lion and NATO are his cubs.”

          Your boy Trump almost broke up NATA because his master Putin wanted him too. Too bad Biden has put NATO back together as we know you heart thugs like Putin and his pet poodle. Now back in your little basement I trust you are scoring lot of points with your little video games.

    2. pgl

      You must be dizzy after writing all that. Now take this a wee step further. Western Europe could also buy up more oil, LNG, etc. from the US. Which would take care of this:

      “Russia could do a little tap-dance on Europe’s energy needs by slowing natural gas flows in Nordstream 1 and letting 2 just idle.”

      Come on Brucie – please tell Kelly Anne Conway to send you more coherent emails to cut and paste.

      1. Bruce Hall

        Sure thing. Your wish is their command. Oh, did you happen to read that Biden is still holding up new natural gas and oil leases? So I guess your Jen Psaki insight is that we’ll just send what we need. Come on, man! The environmentalists will be pounding on your door if you suggest U.S. become more complicit in global “climate change”. Those Europeans are tough. They’ll just wear a couple extra layers of cardigans.

        1. Menzie Chinn Post author

          Bruce Hall: What would a little more oil production do to counter Russian aggression? Are you arguing that limited European LNG capacity is not what is elevating European vulnerabilities, but rather the amount of US natural gas production? If so, why is Henry Hub front month at $4.44 vs. $5.80 late October. Go to EIA’s Henry Hub prices, back to Feb 2021 for yet higher prices relative to latest available (2/15).

          1. baffling

            bruce hall conveniently overlooks that the increase in wind and solar production in germany helps to offset the European dependency on natural gas from russia. one may have a gripe against the “green” energy sources. but one should not have a gripe against alternatives to natural gas sourced from russia. but i will bet bruce hall will never admit, right now, having solar and wind sourced domestically in europe is looking pretty good.

    3. pgl

      “TEHRAN — Iran, Russia and China on Friday began a joint naval drill in the Indian Ocean aimed at boosting marine security, state media reported. Iran’s state TV said 11 of its vessels were joined by three Russian ships including a destroyer, and two Chinese vessels. Iran’s Revolutionary Guard will also participate with smaller ships and helicopters. The report said the maneuvers would cover some 17,000 square kilometers, or 10,600 miles, in the Indian Ocean’s north, and include night fighting, rescue operations and firefighting drills.”

      Naval drills in the Indian Ocean is relevant to Ukraine? How? Hey Brucie – tell your mommy that when she shops for your groceries that she should buy you a map of the world. DAMN!

    4. 2slugbaits

      Bruce Hall pipelines exist between Russia and China and the flow could be increased and addition oil transportation infrastructure built

      Apparently you missed the macroeconomics in Menzie’s post. I’ll refer you to his point about the price elasticity of oil. A global drop in the demand for oil will have an outsized effect on the total revenue Russia will get from oil sales. It does not matter that Russia and China could maintain the capacity for transporting oil. It does not matter that oil is fungible and moves globally. The macroeconomic point is that total oil revenues will fall. Here’s a useful econ truism: the owner of an inelastic resource always enjoys an outsized gain when demand goes up and suffers an outsized loss when demand falls.

      China’s exports of goods and services as a percentage of its total GDP has dropped in half and is increasingly looking inward for economic growth. So a little land grab of territory that is not protected by treaty with the U.S. could happen

      You need to reread this and think it through. It’s economic nonsense. Seriously…just think it through.

      Russia has a relatively large army (of dubious quality) that could probably overwhelm Ukraine if Russia were willing to pay the price. And let’s be clear; it would be a pretty high price. Lots of body bags would be headed back to Moscow. And it’s one thing to invade a country; but it’s quite another thing to keep boots on the ground. Biden and NATO have made it pretty clear that they will provide a Free Ukraine force with the materiel and munitions needed to harangue Russian troops in Ukraine. Russia is a declining conventional military power, which is probably why Putin thinks he needs to act now or never. But invading will only accelerate Russia’s decline. Russia would lose a significant percentage of its army with no real way of reconstituting that army due to its weak economy. To make matters worse, eastern Ukraine would be something of an economic liability. Apparently Putin has failed to remember the lessons of a costly Soviet Empire

      1. Pgl

        Bruce Hall sees a graph of China’s export to GDP falling and fails to recognize that China is exporting more but GDPhas risen faster. No Bruce Hall is incapable of actually thinking

        1. Bruce Hall

          Good catch, pgl… not!

          Your assumption is that because I pointed out China’s exports falling as a percentage of GDP meant I didn’t recognize their GDP growing over time. That’s a massive non sequitur on your part, but to be expected because you can’t get past headlines.

          Keep your day trading job.

      2. Barkley Rosser


        Heck, he is forgetting the cost of conquering Crimea. Reports have it that it is costing billions per year to maintain Crimea. It was supposed to be an economic bonanza, with its nice beaches and resorts and fruit and vegetable production. But water shortages have destroyed its agriculture, and sanctions have led to its resorts having little business, with him also spending lots on various infrastrure.

        The Donbas republics are in much worse shape than Crimea, with much less upside potential. He has taken on a major finanancial burden with this de facto fuller conquest of these republics. Hopefully this will bog him down and he will go no further.

  4. rsm

    How can you measure Aggregate Supply without an error margin so wide, it could actually be going the other way?

    Aren’t spot oil prices determined in practice by options traders buying and selling futures contracts? Can I pay you $90 today, because I bought options on a future contract at $80 and sold at $90?

    Why ignore the mechanics of spot price determination by futures markets?

    1. Barkley Rosser

      Oh, but rsm, just think of the infinitely laege error bounds all of these things have on themselves! No rational person should infer anything about spot prices based on futures markets because the noise involved in all this is just soooooo loud nobody can heae a single thing in any of it. All rational economic decisionmakers should just throw darts at boards. Is this not what you have been preaching to everybody here since you showed up and started shooting off your mouth?

  5. ltr

    January 14, 2022

    2021: China’s foreign trade volume hits record high of $6.05 trillion

    China’s foreign trade volume reached $6.05 trillion in 2021, surpassing the $6 trillion mark for the first time, data from the General Administration of Customs (GAC) showed on Friday.

    GAC spokesperson Li Kuiwen said the resilience of China’s economy and the recovery of the global economy helped the country to maintain strong growth momentum in trade.

    China’s exports and imports respectively hit 29.9 percent and 30.1 percent in the full year of 2021, in U.S. dollar terms.

    Though the country’s exports and imports grew more slowly in December compared to the previous month – as overseas demand for goods eased after the holiday season, and high costs pressured exporters, exports recorded a growth rate of 20.9 percent, slightly beating a Reuters forecast of 20 percent.

    Exports have been China’s growth engine since the COVID-19 outbreak, Chief Economist of Hang Seng Bank China Wang Dan said, attributing this to China’s effective outbreak prevention and control work, which enabled the country to maintain a stable operation of industrial chains.

    Meanwhile, China’s economic structure continued to be optimized, as reflected by decreasing processing trade and increasing general trade, Wang told CGTN. “In the past, foreign capital entered China in the hope of using China’s cheap land and labor for export processing trade, but now the situation has changed. Foreign investment is entering China to gain access to the huge market … paying more attention to long-term returns.”

    “This will also strengthen the construction of R&D centers in China, because China’s domestic market has a large capacity and can easily amortize R&D costs,” she added….

  6. ltr–17psVBDce8E/index.html

    February 5, 2022

    China and Russia ink new deals on energy cooperation

    As China and Russia announced to strengthen cooperation in energy sector, oil and gas giants from two sides signed new deals this week.

    China National Petroleum Corporation (CNPC) and Gazprom signed a long-term sales and purchase agreement for natural gas to be supplied via the Far Eastern route on Thursday, according to a press release by CNPC on Saturday.

    The signing of this document is an important step towards further strengthening the mutually beneficial cooperation between Russia and China in the gas sector, Gazprom said in a press release on Friday.

    As soon as the project reaches full capacity, the volume of Russian pipeline gas supplies to China will grow by 10 billion cubic meters, totaling 48 billion cubic meters per year, according to Gazprom.

    “It is indicative of the exceptionally strong mutual trust and partnership between our countries and companies,” said Alexey Miller, Chairman of the Russian energy giant.

    Meanwhile, Russian oil producer Rosneft also signed a deal with CNPC on Friday to supply a total of 100 million tons of oil through Kazakhstan over 10 years and the crude oil will be processed at factories in northwest China to meet the country’s needs for petroleum products, according to Rosneft’s press release….

    [ While China is and will be importing gas and oil from Russia, I can assure a reader that China cares about and carefully abides by agreed United Nations sustainable environment standards. ]

  7. Anonymous

    Suppose this don’t ‘go small’! I do not see a “bomb Moscow like it was Belgrade” scenario as in Kosovo being cut out from Serbia in 1998-9.

    Andrew Bacevich points to this kerfuffle as similar to 2003, with Putin now Saddam Hussein, and American exceptionalism, pride and hubris that US is the center of all.

    Made me think: suppose this is more like 1990 and Ukraine is now Kuwait and we have an “exceptional” duty to free Ukraine as we freed Kuwait, not for the oil we were told. Would fail St Augustine’s “just war” as did freeing Kuwait.

    In this scenario a large mobilization would be required and a larger order of battle than we could raise in a five months.

    Also, this would imply trip wires where freeing Ukraine may not be as easy as Kuwait. One would be securing and defending lines of communication through Europe to east Poland, second would be clearing the right flank: the Black Sea, a major naval endeavor to look like WW II scale Pacific naval operations….

    Somewhere in here will be defense production act, a draft and war planning board…. rationing and tin foil drives.

    Also in here would be a temptation to go nuclear…

    Will the rest of the EU mobilize? Could break the Atlantic Council’s baby of an alliance

    Xi is opposed to this scenario, why would he want the US to go WW III when in 30 or so years the US would collapse…

    Biden may see it as do it now before we find a Moscow -Beijing axis we cannot beat….

    If all US does is sanctions and succeed in pulling a few million barrels a day off the market yes oil prices will rise….. and Germany lose 30% of its natural gas supply, that is the least worst outcome!

    Heaven help us!

    1. macroduck

      Why are we bothering with crackpot notions? By which I mean “suppose this is more like 1990 and Ukraine is now Kuwait and we have an “exceptional” duty to free Ukraine as we freed Kuwait”.

      Why would we suppose that? The U.S. has not committed to send troops to Ukraine. Western Europe has not committed to send troops. It has been a bit of a lift to create a consensus on economic sanctions – assuming we’ve actually achieved consensus.

      Both Bush presidents lobbied the country and the Congress for their wars in Iraq. That’s how the U.S. goes to war. Biden isn’t doing that. Nobody important is doing that.

      We have routinely been treated to crackpot economics and crackpot epidemiology from Menzie’s clown commenters. Now, the usual suspects think they’re foreign policy experts. Next thing you know, they’ll all pretend to be physicists, pharmers and pharmacologists.

      1. pgl

        “Andrew Bacevich points to this kerfuffle as similar to 2003, with Putin now Saddam Hussein, and American exceptionalism, pride and hubris that US is the center of all.”

        This is the same BS JohnH has been peddling. Now if Ted Cruz was President – Bacevich might have a point. But last I checked Cruz is only the junior Senator from Texas who is generally ignored by the other 99 Senators.

        1. JohnH

          Much of the world sees the United States as a threat to world peace, a belief that most parochial Americans can’t understand. After all, aren’t all of America’s pointless and futile wars (and extensive civilian casualties) about nothing but human rights, freedom and democracy? As we know, Americans are very gullible and heavily influenced by propaganda of the infotainment industry.

          Those of who have lived and worked in developing counties often come back with an entirely different perspective.

          1. pgl

            How much is Putin paying you for this dribble? Get you money now before the war leads to your bank account being cut off.

          2. pgl

            You could not get past the 1st sentence?

            “The U.S. and China are seen as the main threats to world peace in a new survey of international public opinion, but views of the U.S. are improving since President Biden’s election”.

            Yea when the White House was occupied by Putin’s poodle (Trump) the President was a threat to our own democracy. Earth to JohnH – your and Putin’s boy has been kicked out of the White House.

      2. Anonymous


        doing mobilization, etc is deterrence…

        threatening sanctions has not induced a reaction, if you believe approved the press.

        sending stingers, javelins and brit knock offs is provocation

        words….. words, from strutting, stuttering russia-gaters don’t work.

    2. ltr

      February 16, 2022

      Is the Confrontation Over Ukraine Joe Biden’s “Wag the Dog” Moment?
      The people now gunning for a showdown with Putin were gunning for a showdown with Saddam Hussein two decades ago—with the same promises of a happy outcome.
      By Andrew J. Bacevich

      While some wars may be necessary and unavoidable, a war pitting Russia against Ukraine—and potentially involving the United States—doesn’t make the cut. Yet, should such a war occur, some members of the American commentariat will cheer. They have yearned for a showdown with Vladimir Putin. The depth of their animus toward Putin and the hyperbole it inspires is a bit of a puzzle that deserves examination….

      Andrew J. Bacevich Jr. is a Professor Emeritus of International Relations and History at the Boston University Frederick S. Pardee School of Global Studies. [ Graduate US Military Academy, US Army Colonel – Retired ]

      1. Barkley Rosser

        Um, no, ltr. It is Putin who is having a “wag the dog” moment with all this. There has been absolutely nothing happening that justifies this current warmongering by Putin. He is the one facing a stagnant economy, declining popularity, a pandemic out of control that has been badly mismanaged, and an abandonment by nearly all the nations of the world, China being one of the few not doing so. He is also isolated and aging. A sign of his apparent concern about his image is his imitating Trump in hiding getting vaxxed, something that has fed into the disastrous handling of the pandemic.

        It is Putin who is wagging the dog. Biden would really prefer this went away, as would pretty much all the world, I think including the Chinese leadership, even if they are somewhat supporting Putin’s positions on some of this.

    3. Anonymous

      The MB access is being pushed forward by the constant Democratic Party theme of the Russian bogeyman ever since Trump became a presidential candidate. They’ve made it pretty clear that the Democratic Party considered Russia to be an adversary (along with Mitt Romney) and have worked diligently to make it happen. There was no effort made to create a neutral Ukraine or Belarus. There was every effort made to hinder Russian pipelines.

      The need for an external bogeyman for internal political gain has consequences..

      1. Barkley Rosser


        “create a neutral Belarus”? You are out of your mind. Belarus has been overwhelmingly in the Russian pocket since Lukashenka took over back in the 90s, with an occasional flirt to the West. This is just rank nonsense you are spouting here.

  8. rsm

    《I can assure a reader that China cares about and carefully abides by agreed United Nations sustainable environment standards.》

    What about United Nations human rights standards?

    《Independent UN human rights experts have urged companies to closely scrutinize their supply chains following concerns over the alleged detention and forced labour of Muslim Uyghurs in China》

  9. Barkley Rosser

    Yikes, more wacko comments here than usual. Not going to bother with most of them…

    I agree with Menzie that the most likely impact on the world economy of whatever Putin decides to do will mostly be through its impact on oil prices, with that depending on how severe and long whatever it is turns out to be.

    That said this brings up a major reason why we hear so little about all this from ltr and by extension the Chinese leadership more generally aside from fairly mild statements supporting certain demands of Putin while discouraging him from actually invading Ukraine. China is a net oil importer. If Putin follows through on Scenario 5 or 6 with a full blown invasion of Ukraine and a major spike of oil prices, this will hurt the Chinese economy, with no obvious gain for them offsetting that. They will do their best to help offset some of the pain Russia will feel economically from sanctions if he does that, but they would rather not have to do so, and they are really not keen on having to pay a lot more for their imported oil.

    I so remind that I forecast that Putin would do nothing during the Winter Olympics out of trying to keep Xi Jinping happy, and while there was this weird claim an invasion would happen on 2/16, indeed Putin has held back long enough for Xi to have his appearance at the Olympic closing ceremonies without a full-scale war distracting from it in Ukraine, whatever comes to pass now.

  10. ltr

    That said this brings up a major reason why we hear so little about all this from
    That said this brings up a major reason why we hear so little about all this from
    That said this brings up a major reason why we hear so little about all this from

    [ Being repeatedly bullied by this writer, I am uninterested in ever responding to this writer to whom I have never addressed an unkind word. ]

    1. pgl

      Barkley said nothing unreasonable. If you want to spew CCP nonsense all day – expect a little justifiable criticism.

    2. ltr

      Oh my – you have poor little…
      If you want to spew…

      [ Andrew J. Bacevich Jr. is a Professor Emeritus of International Relations and History at the Boston University Frederick S. Pardee School of Global Studies;
      Graduate US Military Academy;
      US Army Colonel – Retired.

      Yes, that will do for credentialing, though there is more. ]

      1. ltr

        This BS column has already been called out. Rehashing this hysterical rant did not make it better.

        [ Professor Emeritus of International Relations and History at the Boston University Frederick S. Pardee School of Global Studies;
        Graduate US Military Academy;
        US Army Colonel – Retired.

        I could have mentioned an officer son killed in Iraq, but the sadness bothers me.

        Andrew Bacevich is a profoundly incisive writer on foreign affairs. ]

      2. pgl

        Trump brought in a few generals who turned out to be wackos. I judge a column by its logic not shiny medals on the writer’s jacket. I stand by my comment.

    3. Barkley Rosser


      Good heavens, I do not see anything in what I wrote that could remotely be called “bullying” or even insulting to you at all. Have you completely lost it? I noted you had not said anything (or very little) about the Ukraine issue. That is “bullying”? How? Now you have posted an old piece by the late Stephen Cohen more clearly siding with the general Russian position against NATO expansion, which I have noted is and has been the position of China in this, along with supporting the territorial integrity of Ukraine. How are any of those statements by me “bullying” or somehow insulting to you personally? I have simply noted what seem to be official Chinese positions that you do not disagree with, near as I can tell.

      Now I did bring up the matter of oil prices and that China might not like higher oil prices that might result from a Russian invasion of Ukraine. China is not saying anything openly about that, and I do not see you saying anything about it either. But it looks accurate, and again, I do not see how pointing out this obviously accurate matter that the Chinese government is not going to be happy about oil prices rising a lot, which is indeed a likely outcome of Russia again violating the territorial integrity of Ukraine, which they did in 2014 with their invasion and annexation of Crimea. Yet again, I fail to see how any of these comments are directed at you personally, and they most certainly were not intended to be.

      Really, ltr, I a m at a loss to see what it is that I wrote that has you so personally offended. I only noted that you had not posted on the issue. That is a personal insult? I speculated that this reflected the somewhat complicated position of the Chinese government. That may have been and may be incorrect, and you have now started posting some things on this. But, again, I do not see how any of my remarks in that post can possibly be construed as a personal insult to you.

      If somehow you feel insulted by me, well, OK, I apologize. I did not intend to personally insult you on this, and i still do not see a single thing I wrote that can be reasonably be construed as such (and, I realize that last remark might be construed as a personal insult, but I am not going to apologize for it unless you can explain how I did personally insult you. You have not. You have just embarrassesd yourself with a totally unjustified accusation.)

      1. Barkley Rosser


        If you read my most recent comment on Moses, you will probably get it that I am in a very bad move. Your completely inaccurate and unacceptable false accusation that I have “bullied” you has added to this. I demand an apology from you. As it is, right now you are in a vomitorium with the woethless and despicable Moses Herzog. You can do better. He will not apologize, but you might.

        Let me point out that all sorts of people have made all kinds of personalistic attacks on you I never have. I shall only mention one. Many here have repeatedly accused you of being a paid agent of the CCP. I have never done that, indeed I have always thought that you defend the CCP out of genuine belief. If indeed you are whart they say you are, then I am a naive fool, but only you know. In any case, while I have often stated disagreements strongly, I have not gone after your personally and have always respected your intellect and consistency. I would hope you recognize this.

        And again, I really do not see why you are so offended by my comments here. I simply noted that while China is supporting Putin on various matters, the matter is complicated by the fact that China is an oil importer, so they will not be happy about a sharp rise in the price of oil. How on earth is making such an observation personally offensive to you? Or is it that I noted you had not commented much on the Ukraine matter? Why is that offensive? Of course you are now.

        Really, you are better than Moses. Please apologize.

      2. Barkley Rosser


        It occurs to me that perhaps you thought I was referring to comments by you when I mentioned “wacko” remarks I had seen here. For the record, that did not refer to anything you had written (until you came out with this false accusation of yours). I shall not go on now about which are those beyond ones I have specifically commented on.

  11. ltr

    February 21, 2022

    China empowers green, digital future with mega data project

    — China has started work on a mega project to build an integrated national big data system to improve overall computing power and resource efficiency, both crucial factors defining the country’s future productivity and development sustainability.
    — The project involves establishing eight national computing hubs in the country’s economic powerhouses and less developed yet resource-rich regions, as well as 10 national data center clusters.
    — By creating a national computing power network, the project will support the less developed regions with abundant renewable energy resources to store and process data transmitted from the economically advanced areas to address the soaring demand and the regional capacity imbalance. …

    [ Yes, I can assure a reader that China cares about and carefully abides by agreed United Nations sustainable environment standards. ]

  12. Ivan

    One good thing that will come, regardless of the military moves, is a push towards green energy. Europe has been jolted awake realizing that they cannot allow themselves to be dependent on an unreliable energy source controlled by unstable and irrational authoritarians. Even at the individual level a lot more people will find the advantage of hyper insulated homes with solar panels worth the cost.

  13. pgl

    It seems Putin has already declared that Donbas is part of Russia. I guess the Tucker Carlson surrender monkeys here will declare problem solved even though it isn’t.

  14. ltr

    A Russia Scholar’s Views

    To the Editor:

    “Russia Experts See Ranks Thin, and an Effect on U.S. Policy”: * I protest the way my views and I were characterized in your article. I am called the “dissenting villain” in today’s media commentary on Ukraine who presents a “perspective closer to that of Mr. Putin.” This may have the effect (intended or not) of stigmatizing me and discrediting my views.

    For more than 40 years, I have taught thousands of undergraduates and trained scores of future Russia specialists at Princeton University and New York University. My many scholarly books, articles and media commentaries have been published in diverse mainstream places, including The New York Times many years ago. And my views are based on my years of study, not on what President Vladimir V. Putin or anyone else thinks.

    Indeed, my current perspective is similar to what Henry A. Kissinger wrote ** in The Washington Post this month: “The demonization of Vladimir Putin is not a policy; it is an alibi for the absence of one.”

    I would go farther: The Ukrainian crisis, the worst and most fateful of the 21st century, is the outcome of Washington’s 20-year bipartisan policy toward post-Soviet Russia, spearheaded by NATO’s eastward expansion. I have been arguing this since the early 1990s, long before Mr. Putin appeared on the scene.

    In this regard, I am a true patriot of American national security — perhaps a heretic, but certainly not the “villain.”



    New York, March 7, 2014

    1. Barkley Rosser


      Kind of sad you bring this up. Cohen was indeed a widely respected scholar of Russia. Reposting this only reminds us that indeed before he died (he is no longer among the living) he had come to be viewed by the vast majority of his colleagues as an embarrassment.

      Here is a bottom line: the “promise” not to expand NATO eastward was a vague verbal promise not written down, not a formal agreement, and made at a time when there was still a Warsaw Pact and a Soviet Union, with that vague verbal promise made to the leader of a nation that no longer exists.

      OTOH, in 1994 the now independent Russia, claiming to the be the successor to agreements made by the former USSR, promised in writing to respect the sovereignty and territorial integrity of the now independent Ukraine, a member of the UN and thus also supposedly to have its borders respected based on the UN Charter as well, at the time that Ukraine gave up its nuclear weapons when it was the third largest nuclear power in the world, far ahead of the PRC I might note.

      There is simply not remotely any comparison between these, despite the righteous carrying on of the late Stephen Cohen or the current lying murderer who leads Russia. Got it?

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