March 20, 2014
So where should we look for the next such process? Why in Ukraine of course. Only right now the general population is still in its euphoric Hope and Change phase. Understandable – the evil regime has been toppled and the new and pure (even though in reality they are just as corrupt as the old ones) politicians are in charge, so why not look to the future with rose-colored sunglasses?
Alas, Ukraine’s honeymoon period with its new rulers may end far sooner that most expect, and it will be certainly accelerated with news such as this. A few hours ago, Interfax reported that Ukraine expects to increase domestic gas prices by 40% once discounted import prices from Russia expire, the country’s Energy Minister Yury Prodan told journalists in the European Parliament on Thursday.
Just as we warned a few weeks ago when we were discussing the creeping capital controls gripping the crisis-riddled country with the foundering currency and its rapidly depleting reserves, the first thing that usually happens, with or without foreign aid, is runaway inflation. And a 40% jump in one of the core staples will certainly dent much of the quite brief and tenuous hope and change the population may have had as a result of recent events. Because once the downstream effects of nat gas funnel through the economy, we wouldn’t be surprised if Ukraine ends up with hyperinflation of all goods and services within the year.