If you have been watching the news it’s no surprise that you are waiting for a political crisis to affect our economy. Right now, the world is watching as the Ukraine and Russia are battling it out and standing by to see how a war could ensue. With Russia moving into Crimea, there is a lot of talk about how this affects the economy and how it trickles over into the United States.
Some say that this move causes a knee-jerk reaction for investors to sell risky assets while others say not so fast. However, isn’t this type of move a ripple effect when it comes to how our allies treat us? Russia sends energy exports into Europe, and then Europe’s economic struggles could bleed into the US as a result.
If you have been watching then you already know that has prices have spiked up a bit and the stock market is a little weak. Could it be that the stock market is only going through its regular cycle of ups and downs? Is it truly the result of what is happening in the Ukraine? There is no doubt that an actual political crisis could in fact damage what is stirring in the economy right now and in the near future.
When Political Crisis Damages the Economy
Think about what a real political crisis really involves. Recently, it doesn’t seem to be much more than disagreements on how and where to spend the money. Other than that it seems like a big difference of opinion is all countries really talk about. Trade is a big issue, and when trade becomes an issue for European countries it filters over into the US.
However, there hasn’t been a lot of fighting just yet in the Ukraine. So far, it sounds more like rioting in the streets and that is all. With no real war yet, risk in trading off anything for any reason isn’t real to anyone. While many say that they fear a cold war, they also know that it’s a pessimistic view of what is really happening in the Ukraine.
Here is the key when it comes to the economy; it’s all about whether or not those that are investors feel safe or not. If they don’t feel safe they won’t take risks. The financial markets are not friendly to risk of any kind, and that is all the more reason that investors just don’t feel the need to take risks. If there isn’t certainty nothing much financial will change. Make sense?
Will a Political Crisis Ensue?
With investors not taking risks, maybe things won’t be so bad economically. After all, if stocks aren’t being sold off there won’t be much activity. This means that no one is squabbling over prices and that investors are keeping their money and not losing any. It depends on what side you are on; the buying or the selling side?
Don’t be fooled into thinking that what happens around the world has nothing to do with what happens in the United States, but by the same token, don’t believe all of the hype about whether you should make a rash financial decision either.
Europe is attempting to overcome its own financial shock, but sanctions to get Russia to withdraw from Crimea could hurt Europe in the long term. Don’t make any rash decisions of your own; however, it would be wise for you to focus on preparing for your own financial future as the United States could very well face its own political crisis in the near future!