While the weather looks better and we can hope for the balmy days of summer bringing relief from Covid, the Ukraine nightmare drags on. Russia seems to have resolved to destroy Ukraine and its infrastructure by targeting the civilian population, housing, factories, and supply chains.
It’s difficult to underestimate the crisis we are heading towards. Years of prosperity and Western complacency have left us in a bad position to deal with the next few years.
Economic models and, in particular, central bank models are wonderful constructs built by trying to fit historic information into a model which can then be played with. From a central bank point of view, it enables them to project an aura of certainty based on their special knowledge.
The 24th of February’s announcement by Mr Putin that he was going to mount a ‘special military operation’ in Eastern Ukraine changed the world order. He also completely wrong-footed President Zi who he had assured he was not going to invade Ukraine.
There are various economic theories and assumptions about the extent to which pouring liquidity into the economy creates inflation. Over the last ten years, the close correlation between the two has diverged.
For many people Christmas was chaotic as the Omicron variant ripped up plans for parties and Christmas family get-togethers, which in the UK was followed by the implementation of Plan B, i.e., a mild increase in restrictions much to the disappointment of health service and academic forecasters.