New Delhi, May 28
The nature of warfare is changing and the financial system has been weaponised like never before, though this has so far failed to deliver the intended results, investment research firm Gavekal Research said in a report.
At this point, investors can adopt one of two stances — the first might be described as "nothing to see here; move along", and the second is to accept that the world is changing rapidly, and that these changes will have deep and lasting impacts on financial markets.
Russia's invasion of Ukraine may be telling the world that modern history's unipolar age is now well and truly over, it said.
As big as the Russian army is, and as powerful as the US Treasury might be, the current crisis has demonstrated that neither is powerful enough to impose its will on its perceived enemies.
"This includes even relatively weak enemies; Ukraine's army was hardly thought of as formidable, while Russia was supposed to be a financial pygmy," the report said.
In an age of drones and parallel financial arrangements, there is no longer such a thing as absolute power � nor even the perception of absolute power.
"The pot has been called, each player has had to show his cards, and all are sitting with busted flushes! The fact that military and financial dominance may be harder to assert in the future opens the door to a much more multipolar world."
The report went on to say that for 25 years or so, emerging market workers have subsidised consumption in developed markets, as emerging market policymakers kept their currencies undervalued and recycled their current account surpluses into "hard" currencies.
If this arrangement now comes to an end, then the developed market consumer will struggle while the emerging market consumer will thrive, it added.