While market volatility seems to have calmed since the collapse of SVB and other banks, we would be foolish to say we have avoided another financial crisis. As you will read in our first segment, financial and market analysts warn that underlying financial and economic factors may still yet lead to broader financial instability. Also this week, we read that Russia’s war in Ukraine continues to disrupt trade and exacerbate Europe’s inflation problems, but sanctions are proving to be more painful for Russia as time goes on. Meanwhile, Putin’s ally Xi is pushing forward his “dare to fight” strategy to reshape the global world order and put China on top.

Is the Banking Crisis Over?

A Rapid-Finance World Must Ready for a Slow-Motion Banking Crisis

Greg Ip, The Wall Street Journal

Wild Quarter for Markets Might Foretell Further Turbulence

Akane Otani, The Wall Street Journal

Is the danger from turmoil in the banking world over? In the recent past, financial crises have tended to be extremely fast-moving, but that hasn’t always been the case and may not be the case today. It appears that Silicon Valley Bank collapsed due to factors that affect many other financial institutions – the collapse of SVB, Signature, and Credit Suisse could be a prelude to a broader bank failure.



This recent banking crisis was the biggest shock to the market in March, but the market has been remarkably resistant to the turbulence. This is in large part because the worst has not yet come to pass – a recession has yet to appear, the job market is strong, and inflation appears to be slowly cooling. However, this may prove to be a false sense of security; the market’s prediction of when the Fed will begin cutting rates differs from what Fed analysts predict. If the markets are proved wrong, there may be cause for greater concern.

Russia’s War Machine is Coming Undone

War, peace, and the international system after Ukraine

Jeffrey Feltman, Brookings

Russia’s Economy Is Starting to Come Undone

Georgi Kantchev & Evan Gershkovich, The Wall Street Journal

Russia is paying dearly for its near-unprecedented breach of post-WWII norms.

Sanctions are growing more painful for Russia. Revenue is tightening as energy prices fall and there is trouble across the country’s economy. Long-term growth projections have fallen as sanctions have exacerbated structural weaknesses, such as the government’s reliance on oil and natural gas to raise living standards. There is a massive worker shortage due to labor fleeing the country or being conscripted. Russia has been isolated from global financial markets and its access to advanced technology has sent many firms scrambling back in time to less sophisticated technology. While Russia is able to continue selling to countries aligned against the US like China, it has also found buyers in India. New Delhi hasn’t seen the use of participating in sanctioning Russia and has posited that the war in Ukraine is a European problem, not a global problem. However, even with new buyers, Russia’s war machine is coming undone.

Europe’s Inflation Outlook Looks Gloomy

Inflation Crisis Pulls European Countries Into a Food Fight

Agnieszka de Sousa & Alessandra Migliaccio, Bloomberg

China’s ports dominance undermines western aims to loosen trade ties

Oliver Telling, Martin Stabe, Chan Ho-him, & Andrew Edgecliffe-Johnson, Financial Times

Europe’s cost of living crisis is far from over, as food price inflation remains high in various parts of the Eurozone. From France to Portugal and Italy to Hungary, every day Europeans are suffering from increased prices, which are stoking protests and strikes in response. European leaders are engaging in various emergency measures to combat the issue, such as a tax holiday on essential items in Portugal and price caps in Hungary. An array of factors have contributed to food price inflation in addition to trade disruption from the war in Ukraine, such as droughts, rising fertilizer costs, and diseases (like bird flu).

Threatening to contribute to this trend in the near future are further trade disruptions with China, as nearly one-quarter of European businesses surveyed are seeking to reroute manufacturing from China to India and to other South East Asian countries. The stark reality is that to do so requires a significant investment in port capacity, with Chinese infrastructure significantly out-competing the rest of South and South East Asia by more than two-to-one in terms of available ports. As companies bake geopolitical risk into their SEC filings, trade with China may become more expensive, while shifting trade away from China may likewise prove more expensive as goods are harder to come by. As markets reroute and crises mount, the customer may ultimately be the loser in the short-medium term.

China’s Rise

‘Dare to fight’: Xi Jinping unveils China’s new world order

Joe Leahy, Kathrin Hille, Andy Lin & Michael Pooler

Why China Is Not a Superpower

Jo Inge Bekkevold, Foreign Policy

Xi Jinping Says He Is Preparing China for War

John Pomfret & Matt Pottinger, Foreign Affairs

While China is not yet a superpower, it is an increasingly active and aggressive power that is increasing its military spending, economic ties, and diplomatic weight the world over. Chinese President Xi Jinping recently came out with the catchphrase “dare to fight,” which appropriately sums up the current trends in Chinese policy. As the clouds of war grow darker over Taiwan, the Chinese defense budget is set to increase by 7.2%, with an array of laws and initiatives having been put into place to improve China’s capacity to wage a war, should one break out. Additionally, various initiatives such as the Belt and Road Initiative are ongoing, while new ones such as Global Security Initiative, which seeks to replace the Western “rules-based order” with “China-style modernization,” are being received well in parts of the developing world, such as in South and Central America. Finally, Chinese mediation between Saudi Arabia and Iran and President Xi Jinping’s visit to Moscow earlier this year signal an active China that is expanding the scope of its political influence in various parts of the world. While Chinese military power projection is limited primarily to Far East and South East Asia, the country is nonetheless expanding its presence globally, challenging the United States’ influence abroad.