A Collapse of the Russian Economy Might Lead to Chinese Aggression

By Richard E. Caroll – Modern Diplomacy

The Russian invasion of Ukraine has placed a strain on the Russian economy, despite an increase in Russia’s GDP.  While Russia’s war-oriented economy has increased its GDP to over $2 trillion, its inflation rate is hovering at 8.6%.  The war in Ukraine is adding to the inflation rate, in that war factories are running day and night, and increasingly compete with other sectors of the Russian economy for labor.  As a result of this, there is upward pressure on wages and in the prices of raw materials.  This is leading to a steady increase in inflation which shows no sign of abating.   Using the Phillips Curve for a short-term analysis of a country’s economy can be useful.   The advent of stagflation interfered with the Phillips Curve, but this interference came about because of exogenous factors.  The wage and price controls imposed by President Nixon, the switch from a hard currency to a Fiat economy, and coupled with end of the Vietnam War led the American economy in 1970 directly into stagflation