“John Charalambakis Ph.D. offers the most astounding and far-reaching commentaries on global reality one can imagine. He reaches back thousands of years in history and makes lessons of history relevant for today…The world would be a better place if global leaders would read John Charalambakis’ commentaries.”

Steve Bartlett, former Texas Congressman, former Mayor of Dallas, retired CEO of Financial Services Roundtable

We invite you to check out John’s new book, The Canon of the Markets: Reflections from the Attic of History, Philosophy, Literature, and Statecraft. This collection of John’s commentaries on financial markets and statecraft is now available for purchase on Amazon.com (see bottom of this message).

Introduction: For this week’s set of Day After summaries, we expand our lens out of Ukraine and into the surrounding area, both spatial and temporal. To begin, we analyze a mounting food crisis exacerbated by the crisis before moving into a discussion of central bank digital currencies. From there, we examine how global economic growth is expected to slow due to the crisis, before concluding with a look at what the EU can do to insulate itself from the worst effects of the crisis.

Food Shortages Spread Across the Globe as Russia’s Invasion of Ukraine Rages On

Ukraine war sparks food shortages in Arab nations as wheat prices soar

Heba Saleh and Emiko Terazono, Financial Times 

War in Ukraine sparks concerns over worldwide food shortages

Cyrielle Cabot, France24 

Over the last few weeks, fears of a global food crisis have heightened. The United Nations is warning of a “hunger hurricane and a meltdown of the global food system” as several countries, particularly in Northern Africa, begin to report on the disastrous effects the war in Ukraine has had on food supplies and prices. As the Russian invasion of Ukraine continues, crop producers in Ukraine and Russia have been cut off from the rest of the world. Nothing is leaving Ukrainian ports and it is impossible to know how much Ukrainian farmers will be able to produce and harvest in the next few months. Russia’s shipping industry has been thrown into disarray as Western sanctions crack down. Wheat prices have spiked and have remained elevated, pushing up overall food prices in countries where Ukraine is the leading supplier, including in Tunisia, Libya, Syria, Egypt (the world’s largest importer of wheat), and Lebanon. In response, the governments of these countries are attempting to procure more food supplies from other producers in Europe, but this has so far been very difficult, forcing them to take other drastic steps like rationing and imposing export bans on food staples. The Ukraine crisis is also undermining food security in Indonesia (the world’s second largest buyer of Ukrainian wheat), Pakistan, Turkey, and several countries in Central Asia and sub-Saharan Africa. The war in Ukraine has compounded the already devastating effects the Covid-19 pandemic has had on inflation and food security. As the pressure mounts on food supplies and prices, the possibility of public unrest also heightens. While on a military level the conflict in Ukraine has been contained, it is obvious that food security has been dangerously threatened in several areas of the world thanks to Russia’s aggression. As long as Russia continues its invasion of Ukraine, things will get worse.

The US Is Setting Its Sights on a Digital Currency

How Biden’s executive order on cryptocurrency may impact the fate of digital currency and assets

Aaron Klien, Brookings

What a U.S. Digital Dollar Means for the Future of Your Wallet

Misyrlena Egkolfopoulou and Claire Ballentine, Bloomberg

As digital assets such as Bitcoin and NFTs have entered the investing space, the US’s central bank has begun to weigh the implications of a central bank digital currency (CBDC). The Federal Reserve has already released two reports on CBDC but has been hesitant to push development further due to concerns over authorization. A recent executive order from the Biden administration emphasizes the need for digital currency in order to prevent illicit finance (for instance, avoiding sanctions). That order comes as some other countries (most notably China) have begun experimenting with CBDCs of their own. With so much of global finance tied to the strength of the dollar, it is little wonder that the Fed wants to ensure its currency remains competitive. Still, the amount of transparency and access required by a CBDC have made it a difficult issue for many Americans. If America is to pave the way forward for digital currencies, it must take care to ensure its CBDC accomplishes all its goals.

The Global Economy’s Growing Risks: Stagflation, Refugees and Lockdowns

Chris Giles and Martin Arnold, Financial Times

Read the full article here 

As we saw with the pandemic, some of the most dangerous fallout of the Russia-Ukraine crisis does not come from the crisis itself, but rather from underlying trends whose workings have now been exposed to the light. Inflation across several commodities has further damaged the supply chain, raising prices all along the line. Between inflation, a resurgent wave of Covid-19 in China and Europe, and a general uncertainty as to the outcome of the Russia-Ukraine war, most analysts agree that economic growth is likely to slow down this year, especially in Europe due to its higher dependence on Russian energy. If Europe decides to cut off its Eastern supplier completely, it could quickly enter a recession. America, on the other hand, faces a different problem – one of red-hot growth threatening a wave of ultra-high inflation. While fiscal tools could go a long way to offset GDP losses on both sides of the Atlantic, it is difficult to say if many of the measures being implemented will have a net positive effect, and if so what that effect will be. In any case, the war in Ukraine has demonstrated the fragility of the global trade system in the face of a bad actor.

Europe’s Economic Response to the Russia-Ukraine War Will Redefine Its Priorities and Future

Jean Pisani-Ferry, PIIE

Read the full article here 

The war in Ukraine has already dramatically shifted the European Union’s (EU) priorities, and it will shape its policies for years to come. So far, the EU has reacted swiftly to the crisis and has responded with a somewhat surprising amount of unity as energy supplies are severely disrupted and refugees pour in from Ukraine. While the primary, near-term risk to the European economy lies in the supply shocks triggered by rising energy prices, there are several other factors that will affect budgetary priorities and macroeconomic policies. In this article, Jean Pisani-Ferry outlines several recommendations for the EU and what he believes should be done to tackle this multifaceted security crisis:

1. It will need to alleviate the price and income consequences of the shock to energy supplies. In doing this, member states will need to coordinate their monetary and fiscal policies. The European Central Bank (ECB) may be faced with the difficult policy choice between tolerating inflation above target for longer or weakening the economy in the midst of a geopolitical crisis.
2. The EU needs to reduce its imports of Russian gas while also rebuilding its inventories for next year. While Russia has leverage, the EU has more capacity to diversify its energy sources than Russia has to diversify its export markets. “The EU must prepare to manage without Russian gas, because not planning for such an occurrence would expose it to Russian blackmail.”
3. Because the energy shock will be unevenly distributed among EU member states, an emergency plan will need to be put in place to enhance existing facilities, distribute immediate supplies, and employ emergency investments.
4. To create energy resilience, the EU should integrate energy systems more strongly and build a collective energy security doctrine. In the medium-term, the EU will have to design and finance a “wholesale rebuilding” of the energy system.
5. To tackle the refugee crisis that has developed from the Russia-Ukraine war, member states should “mutualize” the cost of welcoming refugees from Ukraine. The Central and Eastern European countries taking in the refugees are relatively less developed, so the costs will need to be shared.
6. The EU should coordinate a common defense strategy and increase defense spending.

Pisani-Ferry estimates that the corresponding direct budgetary cost for the EU and its members could come out to be $175 billion, which is about 1.25% of the EU’s GDP in 2022. Prior to Russia’s invasion of Ukraine, decarbonization, digitalization, and resilience investments dominated the medium-term agenda. Now, at the top of this agenda is economic and defense security