What is it that Federal Reserve Chairman Jerome Powell understands, but Vladimir Putin doesn’t? OK, I know this may sound like a tricky question, or a desperate attempt to present an intuitive approach to recent events. We can say that the Fed has declared war on inflation, but that’s just a metaphor. Unfortunately, Russia’s war against Ukraine is completely real, causing thousands of casualties among soldiers and civilians.
However, the Federal Reserve and the Putin regime have it in common: both have taken far-reaching policy action this week. reserve interest rates hiked In an attempt to control inflation. Putin has announced a partial mobilization in an attempt to save his failed offensive. both initiatives They will cause pain.
One key difference, though—besides the fact that Powell, to my knowledge, is not a war criminal—is that the Federal Reserve is taking steps to maintain its credibility, while Putin is trying to ruin what it owes. are determined to.
With regard to the Fed, I am concerned about the consequences of raising rates. There is a serious risk that his actions could push the United States and the world into a serious recession, not least because it’s not just about the Fed, but central banks raising rates around the world, and that’s a global concern. Tightening monetary policy at the level. Can very easily lead to a kind of destructive synergy. Even then, If I were in Powell’s place, I might have done the same. Because the Fed is concerned in every way possible to maintain its credibility with respect to inflation.
Note that I said “protected”. The Federal Reserve—like a server—was unable to predict a rise in inflation. But neither the market nor the public lost faith that prices would actually fall in the near future. This is an important asset. expect inflation Moderate will be the best reason to believe the Fed can engineer a relatively soft landing: an economic downturn, sure, maybe a recession, but not a time of skyrocketing unemployment as the spike in oil took to end. was the prices. 1970s. And the Federal Reserve is working to protect this card by trying to bring down current inflation in a timely manner so that citizens can have confidence that inflation will be lower in the future. I do not like this. I’ll call for a monetary turnaround as soon as we have clear evidence that prices are indeed going down, but I’m afraid Institution Powell is correct in thinking that it’s important to maintain credibility.
Obviously Putin don’t worry the same, His speech on Wednesday was filled with apocalyptic rhetoric that portrayed Russia as a country under attack from across the West. However, he did not announce the full mobilization that might be expected with those words. Instead, he has issued a series of half-hearted measures that defense experts suspect will do little to change Russia’s downward military trajectory. I have no reason to question your opinion.
What surprised me, however, was that the new measure was a betrayal of Russians who believed in Putin’s previous promises. Mercenaries in particular—those who have volunteered to serve for a limited amount of time—have suddenly found themselves trapped in service for an unlimited future. This move may increase the strength of Russia’s army in the coming months, but who would be such a fool in the future? Likes to volunteer for Putin’s army,
The clumsy initiative of the Russian president in the economic war is creating a somewhat similar credibility problem. Russia has massively cut natural gas supplies to Europe to prevent Western democracies from providing military and economic aid to Ukraine. Thus it is causing a lot of economic pain; Energy prices have skyrocketed and there is great potential for a severe recession on the continent.
However, the West is not going to give up on Ukraine, especially given the war successes of the Ukrainians. So Putin’s economic bully attempts, as well as his partial mobilization, are certainly not going to change the course of the war. Instead, what they are achieving is showing how dangerous it is to do business with a precarious and authoritarian regime. This means that even if the Ukraine war ends, Russia’s trade relations will not return to normal. As long as Putin or someone like him remains in power, Europe will never allow itself to be so dependent on Russian energy.
Putin is involved in what we might call the bonfire of credibility. Their desperate short-term attempts to salvage their aggressive war are undermining Russia’s future by making it clear that their president cannot be trusted. Moving forward, Russian civilians would not volunteer to serve in the military, lest they become trapped in a killing zone. And European companies won’t sign contracts with Russian suppliers if their business gets caught up in economic blackmail.
Credibility can seem reprehensible and can be misused to objectively justify poor policies. And being too rigid about following rules that have been overtaken by events can do a lot of damage. But maintaining credibility — showing that you’ll keep your promises — is important. Apparently Putin did not understand this, and his disregard for past promises could be his ruin.
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