While stock markets started the year off well, equities have slumped as fears of entrenched inflation and the risk of a US default mount. As we have witnessed this week, every time the Fed opens its mouth, market volatility rises, and the political debate over the US debt ceiling is far from over. Moreover, Martin Wolf warns us that decades-old economic trends are threatening not just the US economy but democracy. On the geopolitical front, a nuclear crisis has emerged as the US’ four primary adversaries have all made moves to increase their nuclear threat. Meanwhile, Russia continues to drag on the war in Ukraine despite setbacks thanks in part to support from its autocratic allies.

Market Risks: The Fed & US default

Powell’s Comments Unleash Unsettling Volatility

Mohamed A. El-Erian, Bloomberg

The Debt Ceiling Is the Risk Wall Street Doesn’t Want to Think About

Liz McCormick, Erik Wasson, Josh Wingrove, & Mike Dorning, Bloomberg



The risks that face the US economy this year are far too understated for their potential consequences. The ability of comments from the Fed to upend market stability and create volatility, for instance, is a problem that isn’t given enough attention. The Fed isn’t taking this issue seriously, which increases the risk of a market accident occurring. Another issue that has gotten more attention but isn’t taken seriously enough by policymakers is the risk of the US defaulting if its debt ceiling isn’t raised. The debt ceiling is currently a hostage crisis between a Democratic president and a Republican House of Representatives – a crisis that has the potential to wreak havoc on the US economy if it isn’t solved. A US payment default would be catastrophic and would potentially have worse consequences than the Financial Crisis. 

Nuclear Crisis Mounts

Israel’s Window to Strike Iran Narrows as Putin Enters Equation

Ethan Bronner, Bloomberg

Four Nuclear States Can Ruin Your Whole Strategy

Matthew Kroenig, The Wall Street Journal



The United States is facing an unparalleled nuclear crisis: one even more complex and fraught with risk than the Cold War. All of the US’s nuclear adversaries – Russia, Iran, North Korea, and China – are presenting a threat at the same time. Putin announced Russia’s suspension of its participation in New START, the last remaining arms control treaty between the US and Russia. Iran is potentially months away from having enough enriched uranium to produce a nuclear weapon. North Korea demonstrated its ability to target the continental US with an ICBM. China has decided to increase its nuclear stockpile and now has more ICBM launchers than the US. The problem is further complicated by the desire from a key US ally, Israel, to strike against Iran before it achieves nuclear capability, as a conflict with Iran (which has deepened military ties with Russia over the course of the invasion of Ukraine) would certainly drag in the United States.

When markets fail, according to Martin Wolf

Tom Clark, Prospect Magazine

Read the full article here 

Martin Wolf, the Financial Times commentator, has recently released his newest book, The Crisis of Democratic Capitalism, which takes a sweeping view of the political economy since the times of ancient Athens and explores modern democratic ideas and development through the present time. The tone of the book is overall a nervous one, as Mr. Wolf fears modern forces in democratic societies are undermining democracy overall. In Mr. Wolf’s view, the marriage of wealth and power is a threat to democracy, and policies put forward by the modern-day Republican party favoring the .1% represent a plutocratic threat, as embodied in Donald Trump. In order to combat the threat, he calls for a rebalancing of the market as housed in the democratic polity, by creating accountability from corporate insiders and building stronger shelters for those most vulnerable in society. To garner revenue and reduce wealth unevenness, distortionary loopholes for the ultra-wealthy need to be closed, Wolf argues. Doing so will safeguard democracy and the moral values therein in the long run.

Autocratic Collaborative Destruction

Putin Has Assembled an Axis of Autocrats Against Ukraine

Justin Daniels, Foreign Policy

Why Vladimir Putin’s Luck Ran Out

Michael McFaul, Journal of Democracy

Russia’s autocrat Vladimir Putin has created a nexus of autocracies that are assisting him in his war in Ukraine. Actors from China to Iran have supplied aid to Russia, whether military, such as Iranian drones, or economic, through increasing purchases of oil. Such trends look only to strengthen. Russia’s nexus, however, did not appear out of nowhere. Prior to the war, Russia supplied military support via the Wagner group to prop up multiple regimes in Africa, like in Sudan and the Central African Republic, in exchange for mineral rights in those countries. Relationships developed with both Turkey and the UAE prior to the war have afforded Russia a means to maintain international money flows and trade, in subversion of sanctions. Such relationships are mutually beneficial and reinforcing. The lesson learned for autocratic regimes, then, is that in order to fend off democracy in their countries, they need to band together and assist one another.

Still, the path has risks and the war in Ukraine is greatly weakening Russia. With democratic safeguards rolled back, Putin has no check to reign in his aggression in Ukraine, and the consequences are mounting. For instance, Russia’s military has been weakened as a result of its inability to achieve its objectives in Ukraine as it has become bogged down, similar to the USSR in Afghanistan. Moreover, sanctions continue to damage the Russian economy, with growth negative and inflation at 14% in 2022. Further, many of Russia’s best and brightest have fled the country, avoiding increased repression at home and reducing its human capital and outlook for recovery moving forwards, with isolation from democratic markets set to exacerbate that trend. Finally, cracks have appeared within the ruling elite, as the blame game picks up steam for the Russian misadventure in Ukraine. Ultimately, time will tell if Russia’s autocratic collaboration will succeed in the long run or lead to its own destruction.