Russia-Georgia War was caused by the global credit crunch

Posted August 12, 2008

"The end of the easy money era and the war in Georgia don’t, at first glance, seem to have an obvious connection. But they are linked." — John Stepek

Blogger’s note: Want to know who caused Russia’s war against Georgia? Well, you could say Allan Greenspan started it. Or you could blame Jim O’Neill of Goldman Sachs. Or you could place responsibility on various and sundry fund managers and Wall Street traders who drove up valuations on everything from stocks to real estate to an unsupportable level.

Of course the real blame goes to Putin and his Moscow thugs, but according to John Stepek of the UK’s MoneyWeek it was the global credit crunch that made the fight with Georgia not only possible, but necessary (at least in Putin’s eyes) to support Russia’s reemergence as a world power. Don’t believe me? Learn the connection between Russian tanks rolling into Georgia and the clamp down on the world’s money supplies below.

by John Stepek

Baltimore — (TFN): The end of the easy money era and the war in Georgia don’t, at first glance, seem to have an obvious connection. But they are linked. Bear with me, and I’ll explain why.

Cheap money gave us many things, including a global property bubble, and a £1.4 trillion debt mountain for UK consumers. Another noticeable trend was a taste for exotic new investment classes, from Iraqi government bonds to obscure derivatives.

**** Oil prices are breaking record highs. So why is this Federal Reserve Chairman betting $509,000 of his own money on falling prices? Find out where the smart money is moving right now! ****

All of these trends were the result of falling risk aversion. Investors believed that central bankers, lead by Alan Greenspan, now had complete control of the global economy. Globalisation would ensure economic growth went on forever. And if it didn’t, a soft landing could be engineered by judicious use of the emergency interest-rate cut button on Greenspan’s miraculous economic control panel.

As investors became bolder, and focused entirely on returns, rather than risks, one brave new investment class, invented entirely by a man working at Goldman Sachs, benefited more than most.

It was called the BRICs… Read on to learn more.

****Make sure you sign up for our FREE TFN News Feed for breaking news, special reports and new financial videos. You can pick your favorite reader. Or if you prefer, you can have the feed delivered to your email.