Russian-Ukrainian War and The Impact on Savings

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We are in 2022. Who thought is possible, after a huge pandemic crisis, that will start a war in Europe, a war against western civilization? War in Ukraine will definitely shape the face of the global economy no matter how will end. We analyzed the market trends during the pandemic with SARS COVID-19 and during the Ukraine War and here is what we observed at the global level, but with higher impact on countries near Ukraine. If the pandemic did not trigger an immediate economic crisis, the war definitely will do it. It is imperative to stop the war in Ukraine, because sooner or later will affect all our lifestyle and our savings. Here are the main effects of Russo-Ukrainian war: company stocks decreased world-wide, price of petrol increased, interest rates will rise and real estate will stagnate, the food price will increase, crypto currencies are volatile, tourism temporary decrease and emigration raised, pandemic ended, European currencies fell, Disinformation and Fake News will increase. We will analyze all the effects one by one and we will provide some advice to save your money.

Stocks value decreased temporarly world wide

Those who had an investment in shares already observed a decrease in their value during COVID-19 crisis. Now is interesting to observe what will happen with stocks during the Russian-Ukraine War crisis. Numbers show a temporary decrease immediately after Russia declared war on Ukraine approximately on February 23.

Source: Google Finance and NASDAQ.

There are many causes of shares value drop because now the Ukraine War will exponentially increase the pandemic effect (by the way, many experts expected already a crisis after the pandemic). Now the war will deepen the crisis because war will only bring what is worst in people: distrust and fear; investors and normal people will shift their focus from investment and healthy economy toward fear of losing their fortune and speculation. As a result either they will start selling their shares hysterically or they keep an eye on the war and will stop investment. Black clouds are rising from the East (Putin as Saruman in Lord of the Rigs decided to start a war against humanity).

After economic sanctions, most of the companies already pulled out from Russia. This means a temporary loss on the workforce and market for Western companies. All major companies from all industries are shifting their workforces (IT: Google, Apple, Amazon, IBM, etc), Food (Burger King, Mars, Little Caesars, Carlsberg, McDonald’s, Starbucks, Pepsico, etc), Energy (Shell, BP, Exon Mobile), Finance (Western Union, Goldman Sachs, Visa, Mastercard, American Express, Deloitte, etc), Manufacturing (Stellantis, Caterpillar, Hitachi, etc). Russia will shift markets toward China. Shifting the markets will involve a cost in the short term or on the long term for both West and East.

I don’t want to be a Russian these days. Russian companies’ stocks will fall down and the economy is doomed no matter what they shift or trade, no matter if they stop the attack now. The cost of restarting the Russian economy after sanctions won’t be cheap. People from Russia will lose high-paid jobs, even Russia has made efforts to be a self-sustainable country, all the talents and professionals from Russia will start emigrating (if they can) because they no longer can maintain the same lifestyle. It is unfortunate for the Russian people to pay this high price because of one man who decided to change their life. In terms of shares, there is also the possibility that Russians will start buying stocks from Wester companies in the effort of saving their fortune (a risky decision if you think the Russian regime can anytime take over their bank accounts).

Attention: Ukraine war is a hybrid war, where the fatal arm won’t be the nuclear nuke but the information! Keep in mind during the war there are also winners, so not all the companies will be affected by this war. It is possible some companies will even double profits. It is hard to say which company will make a profit in 2022, but good candidates are the ones with online exposure. So don’t panic easily, study the numbers, study the facts and you can still invest. Buying stocks is a viable method of savings if you have the right information.

Petrol price increased

The price of the oil barrels increased from an average of $70 in 2021 to a record of $130 on 8th March 2022.

Source: https://markets.businessinsider.com/commodities/oil-price

The price of gasoline has also increased by 12% on average in just a few days after the beginning of the Ukraine war. You can double-check the gasoline or diesel price evolution of any country in the world here: https://www.globalpetrolprices.com/countries/

Increase of gasoline price worldwide during Russian-Ukraine War
Gasoline price in US and EU on March 7th, 2022

Countries with natural resources and exports will be richer and will dictate oil prices for other countries (when we say oil price we can include also the price of goods and services). If the Russia-Ukraine war continues, all exports from Russia will be banned (due to economic sanctions) and the entire EU continent will depend on imports from the US or middle Asia at a higher price than they got from Russia. Not sure if the United States will become the main EU provider for gas and oil, but if it does they will dictate the prices in the world (AN: logic says during the Russian-Ukrainian war United States will consolidate their economic power).

Cons: Food, Travel, Services costs will increase.

Pro: Carbon emission will decrease. Remember, during pandemic 2020-2021, people were not able to travel and CO2 emissions have decreased by 17% according to the source: https://www.nature.com/articles/s41558-020-0797-x; now in 2022 people won’t have enough money or they will be reluctant to travel too far due to uncertainties of geo-political and economical changes.

Interest rates will increase and real estate will stagnate

Interest means the expense of borrowing money or the money you make from your savings are both referred to as interest. To put it another way, if you borrow money from a bank, the interest is the cost of the loan, but if you deposit your money to a bank the Interest is the amount of money you get back from the bank in a savings account.

Interest rates forecast resulting from Russian-Ukraine War

The short-term or long-term forecast shows you will save more if you deposit your money on the bank or invest in something rather than have cash in the house. Russian Banks increased desperately interest rates to attract Russian who withdrew the money from banks and start exchanging rubles in dollars or gold or anything they could. But also means, Ukraine War will increase the loans because banks also are cautious with their investments. Increasing interest rates during the Ukraine war is normal because it will help reduce inflation. When interest rates will get lower again is a sign of high inflation.

Higher interest rates mean also an increase in mortgage rates and also a decrease in real estate properties values. If you want to buy a house with cash and if you can wait a little bit longer it is expected the prices to decrease (however if you want to get a loan for a new house is expected the rates to get higher). Because is a tough decision to invest or not in real estate, I would take a leap of faith prediction: wait to see how the Ukraine war will evolve because if a crisis will come certainly an investment you make now is risky.

The food price will increase

Russia and Ukraine are major cereals exporters in the EU. In 2020, Ukraine produced 4% of the world’s wheat production and Russia 10%. Together, they produce almost as much wheat as the entire EU. Did you know what Ukraine flag color means?

ukraine war
Ukraine flag representing wheat fields

The Ukraine flag blue color represents the wide blue skies and the yellow represents the wheat fields that characterize the country.

Do you know what the German flag color means? Nothing… at least related to wheat, corn, and gas. If you have ever been to Germany, you observe everywhere breathtaking scenery with meadows and grass, mountains, lakes and beautiful houses. This means they import a lot of cereals. Germany is the strongest economy in Europe but they depend massively on natural resources from other countries from Eastern Europe, especially from Russia. Was a risky and careless politics they did to depend so much on Russia. That’s why Germany was initially neutral when Russia invaded Ukraine and was against the SWIFT ban.

Because of the war, Ukraine will be no longer able to produce and/or export cereals to Europe or to Asia. Egypt, Turkey, Bangladesh, and Iran buy 60% of their wheat from Russia and Ukraine. Guess what will happen if Ukraine won’t produce cereals? The entire food chain in Europe and middle Asia will be depleted rapidly and the food prices will explode. Russia will still be able to produce cereals for Europe, and Europe will be in Zugzwang because the EU might not be able to ban cereals imports from Russia. The only move Putin has now is to condition food exports in Europe. If Europe doesn’t find an alternative to import cereals, the economic crisis from 2008 will be a joke for what will come. Again, countries with natural resources will dictate the lives of others.

Putin seems to direct attacks towards strategic zones in Ukraine where production of wheat is higher, probably to hit them also economically. The map shows an overlap between strategic attacks and the zones near the richest wheat harvest.

Russia strategic attacks towards richest wheat harvest

Inflation continue to increase

Inflation represents the purchasing power of a country’s currency. When inflation rises you can buy less with the same amount of money, if inflation decreases you can buy more with the same amount of money. Inflation is usually determined by production cost, supply-demand chain, and fiscal policy. Due to war in Ukraine, as explained in this article, costs for food, gas will rise which will pull also other costs for raw materials and production costs so will follow major inflation on a global level.

Inflation rate will continue to increase during Russia-Ukraine war

Cryptocurrency extremely volatile

When Russia invaded Ukraine all cryptocurrencies continue to fall. The fall was not only caused by the war, the decrease can be observed even 5 months before. This doesn’t mean all the currency will depreciate, as you can see during the Russian-Ukraine war is extremely volatile (up/down trend). When sanctions were announced for Russia, people start buying cryptocurrency as rubles were falling down rapidly and crypto currency increases a little bit, but overall they have more ups and downs versus any preceding period. Nowadays investing in crypto currency is a game of gambling (NA: as always was, but no one cared).

Some get richer, but most poorer

If you didn’t hear about War Profiteering now is time to learn it. During all the wars in history, there were a small number of people getting insanely rich either by controlling armaments or natural resources. For those reading a little bit of history, there were times, especially during or post-war when you have to give all your fortune just to buy food. The chaos produced by the Russia-Ukraine war is a time for speculation. It’s logical there are rich and influential people trying to influence the prices of natural resources because they can impose any price they want for countries that depend on them. (NA: and it is likely who will control the price for food will also control the war.)

Tourism temporary decreased, but emigration will increase

During COVID crisis global exports revenue from international tourism decreased from $1.7B to $700M during 2019-2020, a decrease of more than 40%. In 2021 there was a slight increase of a few percent, but in 2022 World Travel & Tourism Council (WTTC) was predicting tourism will recover. We are in March 2022, during the Russian-Ukraine war, and here are the facts:

  1. Ukrainians were starting emigrating toward Western European countries or countries near by.
  2. When migration started from Ukraine and from Russia we observed an increase of flight price from the airlines. If demand is high, prices will get higher. Keep in mind Pandemic is over as of March 2022 (even not officially), so people will start making plans for vacation. If you wait until that last moment to book your flight or the hotel there is a high probability to obtain a higher price. Start searching for offers now.

End of Pandemic

The Russian-Ukraine war coincided with lifting COVID-19 restrictions almost everywhere. The cost of COVID was already too high to worth continue imposing restrictions. Many companies turn bankrupt during the COVID crisis. Now, we can travel free without a vaccine passport, we don’t have to wear a mask outside and inside. We are finally free we could say, but we don’t say it because we have still to wear a war.

European Currencies fell

Countries involved directly or nearby the Russia-Ukraine war were suffering a major currency devaluation in relation to currencies far away from conflict. On March 7th there was a near parity between EUR and USD, which means European currencies become weaker during the war. For an American investor is cheaper now to invest in a European country. USD will be one of the top global currencies in the years to come. Rubles has fallen down by 30%, but Russian banks are trying to increase the interest rates to encourage Russian to keep their money in banks (NA: Putin was not prepared for this and the decision is just a desperate act to raise interest rate). While inflation rises in the United States, no currency is safe because the entire economy will follow the US pattern.

European currencies fall down after Russian invasion in Ukraine

Disinformation and Fake News will increase

Misinformation was the most used weapon used by secret services in Communism regime, but nowadays with all the media and endless web information is even more used. An interesting book we recommend reading is called Disinformation written by former chief of security who defected during communist regime in the United States and who explains tactics used by soviets to manipulate reality.

While Russians believe their brave army will free Ukraine from Nazism thanks to their propaganda, people around the globe are a target of fake news or news with partial truths: “Putin declared nuclear war to the entire world” (there is no fact supporting this), “in 48h until the situation becomes critical at Chernobyl nuclear plant” (even electrical power was cut there are several backups that keep cool water temperature for months so the nuclear explosion is not a real danger; as a result, some people started to buy iodine because they were preparing for a nuclear disaster; iodine disappeared overnight from some drug stores), “Petrol price will rise, buy now or never” (people were scammed with social media news to buy gasoline and diesel at a 30% price higher than normal; gas companies speculated the moment with Russian oil ban and produced the feeling of scarcity. However for who doesn’t know, that gasoline was produced several months ago at ~60$/barrel, all the oil&gas stocks are full and there is no depletion; furthermore in order for price to get 30% higher at gas station needs probably needs to reach ~$180/barrel which won’t happen in the near future even Putin threatened the barrel will cost $300; Russian oil can be supplied and will be supplied certainly below $180 no matter where will come from).

Disinformation is the most powerful weapon to create fear and panic. We hope all governments in the world will take punitive actions against everyone who will manipulate information for their profit.

Conclusions and Recommendation

There is also a worldwide war panic all around because West-East war, but the logic dictates nobody wants to start World War III because nobody is prepared for the total extinction of the human race, not even Putin. So, the real threat here is not the war, but the fear of war. Fear is the only enemy.

During inflation, to keep the value of your money is not enough to keep them into a bank deposit in USD, even interest rate will be higher, but search to exchange them into something more valuable: gold or real estate or companies stocks or goods.

Try to start planning your vacation now until prices get higher on flights or hotels. You can start searching here several stores with deals or directly exploring categories: hotels, vacation rentals, travel agents or travel.

If you have enough money to make food stocks you can start the following categories: pet food, baby food, medical supplies, pet meds, medicine, electronics.

Stay out of fake news, verify the same information with multiple sources because you might get into a scarcity trap or get into panic which will create a snowball effect: everybody will buy without a real need, the prices will get higher “artificially” (and the prices will never get lower at the same level too soon). With your help, promocodes4me.com is verifying prices and discounts with automatic systems on thousands of stores, daily deals, and coupons to guarantee their availability and validity.

We encourage anyone who has the power and influence to stop the Russo-Ukrainian war. Fight for your freedom, fight for your peace! As past generations said, “Make Love not War“. War is costly, love is the cheapest!

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