]he central paradox of financial crises is that what feels just and fair is the opposite of what’s required for a just and fair outcome.”
— Former U.S. Treasury Secretary Timothy Geithner,
The New York Times, November 5, 2011

Sober analysis of the current stand-off over Ukraine tells us we are in a deep mess, worse than people tend to recognize. The events playing out now are bigger than Ukraine (even though, as we explain elsewhere, Ukraine is important to Russia). Both Russia and the West are deeply committed to broader objectives that seem fundamentally irreconcilable. There are no easy solutions to the crisis. Finding a way out is going to be long, costly, and messy, and the best final outcome is likely to feel unsatisfactory. In this regard, the remarks by Timothy Geithner quoted above are relevant. They are even more appropriate because Russia, through its current actions in Ukraine, has exposed the post-Cold War order in Europe as the geopolitical equivalent of a financial bubble. We have enjoyed two decades of benefits from this order. But we did so under the illusion that it was nearly costless. Now we are finding out that there is a bill to pay. To understand this metaphor, we need to examine how the crisis developed.

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