How Does War Affect the American Economy?


Q: How does war impact the economy and how can I protect my money during wartime?

A: While we all hope the war between Russia and Ukraine won’t spread, when major countries are at war it does impact the global economy. Here’s how it’s influencing the U.S, economy and American banking, additional fallout that may be coming and steps you can take to protect your assets. 

How does war affect American banking? 

The U.S. Treasury Department has placed severe sanctions on Russian banks and many Russian entities. All assets held by the blacklisted companies and institutions are now frozen, and U.S.-based individuals and companies can only conduct business with them if they receive exclusive permission from the U.S. Treasury Department. 

However, despite these sanctions, most U.S. banks and credit unions will continue to operate in a regular capacity throughout this time. Financial institutions have compliance officers on staff to ensure that all federal laws, including wartime sanctions like these, are followed completely and without interrupting ongoing service. In addition, the financial service industry has experience dealing with similar sanctions from Russia’s annexation of Crimea in 2014, and more recently, sanctions related to China and Venezuela. [At Health Care Family we will continue to provide the high level of personalized and professional service you’ve come to expect despite an ongoing wave of sanctions.]

How does war affect the economy? 

Unfortunately, we have already begun feeling the effects of war on a challenged economy. You have undoubtedly experienced a spike in prices at the pump. This increase is a direct result of the many severe sanctions that have been placed on Russia by the U.S. and the European Union, which impact Russia’s ability to sell crude oil. The price for this substance from which gasoline is made has skyrocketed as a result. 

Beyond the pump, prices on goods like grains and metals are rising, too, due to the increase in fuel costs, as well as worries about possible shortages in the near future. 

Yet another factor causing prices to soar is air transport. As of March 7, 2022, Russia has closed its airspace to 36 countries. This means each of these countries must divert shipping planes to routes that are lengthier and more expensive. The extra cost of shipping, of course, gets passed on to consumers in the form of higher prices. 

How can consumers protect their money in case of war?

Here’s what you can do to protect your assets during the war:

  • Diversify your portfolio.
  • Take advantage of Treasury Inflation-Protected Securities (TIPS).
  • Follow the news, but DO NOT make hasty decisions involving your investments. 
  • Diversify your currency holdings. 

It’s important to learn all about the ways war can impact the economy and how you can protect your assets during wartime. This brief overview of wartime impacts on the economy, along with some actions you can take, is a great start. We at [credit union] encourage you to learn more from other sources and if you’d like to discuss more, feel free to call, click or stop in.