Many countries build up reserves of gold and foreign exchange to hedge against sudden adverse events. As the currencies such as the US dollar and the Euro are not linked to any physical asset (as e.g., gold), their value is based on trust (called fiat money). However, the increasing politicization of the international financial system is eroding this trust. This may have far-reaching repercussions as some countries are now looking for alternatives.

It looks as if sanctions haven’t had the expected disastrous consequences for Russia compared to say Iran, Venezuela and Cuba, at least in the short term. But what about the longer perspective? Will the Russian economy implode or stagnate? Or will it be able to survive and perhaps even prosper? History tells us that both scenarios are possible and that the outcome to a high degree depends on how well the situation is managed and the legitimacy of the political leadership.

Sometimes you wish you were wrong. In an article on this website around two months before Russia invaded Ukraine, I predicted that war was the most likely outcome, as US and NATO had clearly stated they didn’t accept Russia’s “red line”: the demand that NATO stop its eastward expansion. I asked whether NATO believed the Russians were bluffing, or whether they had decided to throw Ukraine under the bus. Unfortunately, it seems the decision was to sacrifice Ukraine.

Sanctions are increasingly being used by Western countries. This is so despite that most studies show that they fail to achieve their stated goals, cause enormous human suffering in the targeted countries and create problems for the Western Countries themselves. The wave of refugees from Syria is an example. The sanctions against Afghanistan will no doubt create a new wave. Welcome to Foreign Policy 2.0.

Crisis in a capitalist economy is often the result of a bubble bursting. The last time a bubble burst was in 2008, in what was called the Global Financial Crisis, when the whole financial system was on the brink of implosion. Despite slow economic growth since, new bubbles have been building up, particularly in the housing and stock markets. When will they burst?