How Ukraine War may have helped avert US financial crisis

In recent years, U.S. banks invested billions of American dollars into China, taking advantage of the world’s second-largest economy as it continued to open up its $50 trillion financial market. Now, as the relationship between the U.S. and China has deteriorated, banks are considering reducing their involvement in a country that appears to be increasingly risky.

Straight Arrow News contributor Peter Zeihan examines American banking investments in China and explains how the conflict in Ukraine may have potentially prevented another financial crisis in the United States.

Excerpted from Peter’s Sept. 7 “Zeihan on Geopolitics” newsletter:

The Ukraine War has negatively impacted almost every area of life, but perhaps there’s a silver lining beneath all the global disruptions and adverse effects…It may sound like a stretch, but this war may have helped to prevent a financial crisis in the U.S.

One of the leading causes of a banking crisis is loan defaults, but with personal incomes on the rise and unemployment rates falling, banks aren’t facing their typical roster of issues. However, anytime a bank is overexposed to risk, a crisis isn’t often far behind.

As the Ukraine War started, financial institutions of all sizes knew they had to limit their exposure to Russia. This indirectly resulted in many of these firms reducing exposure to Chinese financial institutions.

As Russia and China continue to cut themselves off from the rest of the world, it appears that many of the U.S. banks may have dodged a bullet. There’s always the risk of a break, but the U.S. financial sector looks pretty good, with low international exposure, a low unemployment rate, and high growth.