No prediction markets on an expanded incursion (remember they already have the Crimea and de facto Donbas) into Ukraine, but here’s the market on how many mentions of “Russia” or “Putin” in the State of the Union address – a proxy for prominence of the Ukraine issue.
A Continued Russian Invasion of Ukraine – Six Scenarios in Three Maps
From Seth Jones/CSIS (mid-January):
1. Redeploy some of its ground forces away from the Ukrainian border—at least temporarily—if negotiations are successful but continue to aid pro-Russian rebels in Eastern Ukraine.
2. Send conventional Russian troops into the breakaway regions of Donetsk and Luhansk as unilateral “peacekeepers” and refuse to withdraw them until peace talks end successfully and Kiev agrees to implement the Minsk Accords.
3. Seize Ukrainian territory as far west as the Dnepr River to use as a bargaining chip or incorporate this new territory fully into the Russian Federation. This option is represented in Figure 2a.
4. Seize Ukrainian territory up to the Dnepr River and seize an additional belt of land (to include Odessa) that connects Russian territory with the breakaway Transdniestria Republic and separates Ukraine from any access to the Black Sea. The Kremlin would incorporate these new lands into Russia and ensure that the rump Ukrainian statelet remains economically unviable.
5. Seize only a belt of land between Russia and Transdniestria (including Mariupol, Kherson, and Odessa) to secure freshwater supplies for Crimea and block Ukraine’s access to the sea, while avoiding major combat over Kiev and Kharkiv. This option is represented in Figure 2b.
6. Seize all of Ukraine and, with Belarus, announce the formation of a new tripartite Slavic union of Great, Little, and White Russians (Russians, Ukrainians, and Belarusians). This option would involve operations represented in Figure 2a as “phase one,” with Figure 2c representing “phase two” of this option.
Here are the relevant maps.
Unanchored or Not? (Inflation Expectations)
Paul Krugman notes research out of NY Fed (analysis here) suggesting sensitivity of household inflation expectations to current actual is lower than in the past. As a reminder, here’re household expectations (Michigan, NY Fed) vs. others (economists) at the 1 year horizon.
Wisconsin Exports in a Post-Trump Trade War, Mid-Pandemic World
Despite the improvement in nominal exports ascribed to Wisconsin after Trump, real exports haven’t really recovered – and may not until global economic recovery. What does this mean for Wisconsin employment?
Business Cycle indicators, mid-February
Retail sales, industrial (but not manufacturing) production far above consensus.
Wells Fargo “Pressure Gauge” for Supply Chain Pressures
Russia, FX Reserves and External Pressures in the Event of War
A recent NY Times article noted that Russia had taken measures to insulate itself from economic sanctions, including building up foreign exchange reserves. It’s true reserves are high, and in relative terms more so once one considers that nominal GDP [in USD terms] is smaller than in 2014.
Inflation Expectations at 1 Year Horizon
Economists’ expectations rise, while household measures trend sideways.
Risk and Policy Uncertainty Measures – Gulf War I and Today
Looking back to one of the last major ground conflicts. In August 1990, Saddam Hussein’s forces invaded Kuwait. Here’re some risk and uncertainty indicators — some developed afterwards — for that period.
Risk and Uncertainty before the Open
VIX jumped on Friday; the Economic Policy Uncertainty index rose on Saturday.