Threats continue to be exchanged among world powers over the future of Ukraine. The United States and the European Union (EU) have promised to collapse Russia’s economy if it continues to meddle in Ukraine’s affairs. Russia has responded with promises of its own, even going as far as to say that the Russian government is prepared to seize assets from US and EU companies within their borders.
What we are watching unfold is an entirely new type of warfare; what could become an economic world war.
Russian President Vladimir Putin has shown little response to the threats US and EU leaders have sent, and his military forces continue to build along Ukraine’s borders, suggesting that the conflict may soon take a turn for the worst.
The recent actions by Russia are forcing the hand of the US and the EU to act on their promises to cause economic harm to Russia by way of seizing trade, banning visas and cancelling exports to Russia.
Although Russia faces the most economic damage if further sanctions take place, no market is safe from the turmoil that is sure to follow. In today’s global economy, all nations are so economically intertwined that if one should fall, the rest will be dragged down along with it.
Russia is the single biggest supplier of energy to the EU, providing a significant amount of its mineral energy, such as natural gas, as well as lubricants and related materials. Russia is the EU’s third biggest trading partner after the U.S. and China. Given Europe’s already fragile economy, a drop in trade production with Russia would likely sink Europe into another recession.
How will the United States fare in these quarrels?
A recent statement from the White House reads, “The U.S.-EU Economy accounts for about half of global GDP and a third of global trade, with $1 trillion in annual two-way trade. The United States and the EU have the world’s largest investment relationship, with nearly $4 trillion in total transatlantic investments.” Click here to read the full statement- FACT SHEET: U.S.-EU Economic Ties That Bind
In other words, if the European Union goes into a recession, so will the United States.
Because the overwhelming majority of retirement savings in America is invested into the financial markets through 401ks and IRAs, the retirement dream itself is essentially invested on Wall Street. The promise of being able to retire with a sizable nest egg is directly linked to the health of the stock market, which is directly linked to the national economy, which is directly linked to the health of Europe’s economy, which is directly linked to… well, you get the idea.
Should this conflict in Ukraine escalate and force economic sanctions, it could bring down this house of cards, leaving the baby-boomer generation in the workforce feeling the pain; literally and figuratively.