Archive

Posts Tagged ‘biden’

Economic Consequences Of America’s Strategic Defeat In Afghanistan

August 14th, 2021 Comments off

Sheldon Filger-blogger for GlobalEconomicCrisis.com

 

 

 

 

As the world watches  the total and unmitigated defeat of the United States in Afghanistan, pundits will no doubt offer their multitude of post mortems. Historical reflection is a long process, and decades into the future historians and political scientists will still be offering their explanations. However, in this piece  I want to focus on the economic consequences of the Taliban triumph, a topic that has not received much commentary.

1.Instability in South Asia. The renewal of an extremist, uncompromising Islamist emirate will greatly exacerbate external and internal tensions with-and within-the countries bordering Afghanistan. Iran, though also governed by an Islamist theocracy,  is viewed as  a Shiite heresy by the Taliban . China is seen as an oppressor of Sunni Muslims , in particular the Uighurs. Then there is Pakistan, a longtime supporter of the Taliban, especially stemming from its intelligence services, the ISI. It has its own domestic divisions. and the Taliban victory will embolden its Islamist extremist elements. As Pakistan is a nuclear-armed state, this does not bold well for global stability. Instability  in this region will disrupt the already fragile economic recovery from the global impact of the Covid pandemic. Expect to see major price fluctuations in many key commodities and within the global supply chain as a direct consequence of the Taliban victory, further exacerbating already deepening inflationary trends.

  1. Loss of confidence in America’s ruling elites. After the attacks on the United States by Al-Qaeda on September 11, 2001 the U.S. had one legitimate and essential strategic objective in Afghanistan: ensure that this country would never again serve as a launching pad for an attack on the United States by Islamist extremist non-state actors. Not nation-building, or transforming cultural and tribal behaviors in Afghanistan that have existed for a millennium. Yet, that is what America’s ruling elites tried to do. Rather than focus on the one essential goal of protecting American national security, they decided to remake this feudal land into a Westernized, pluralist democracy. What was worse, they made this effort on the cheap. The collective military deployments by the U.S. and its NATO allies were a fraction of the minimum required to achieve this elusive and ill-conceived objective for even a short-term  period. The failure of this ill-defined mission  is a shattering, unmitigated defeat for the elites that rule the United States. It is a staggering reverse, far worse than the Vietnam experience, for America’s defeat in 1975 did not have long-term negative strategic  consequences.  This will be viewed by the world, correctly, as not only a national humiliation, but also a clear indicator of decline, rooted in the ineptitude of America’s ruling class. The loss of global confidence in America’s political leadership will have long-term effects on collective  trust in the United States as a stable economic power. The benefits of previous confidence in American stability-access to cheap loans through foreign purchases of U.S. government debt instruments-will diminish, leading to higher borrowing costs at a time of unprecedented annual government deficits and an overall national debt that is spiraling out of control.
  2. New phase in “War on Terror.” The intellectual bankruptcy that characterizes the political rulers of the U.S. has been on full display as the Afghanistan debacle unfolds. Reacting in stunned fashioned, the American political elites give one the impression of being pathologically disconnected from reality. For example, with the Taliban at the very gates of Kabul, the spokesperson for President Biden and others in his administration have urged this Islamist extremist movement to think of their “international reputation,” and have warned that economic aid to Afghanistan would be “reduced.” Anyone who knows anything about the Taliban understands that this movement does not do international reputation building or economic development. It has one agenda only: to establish the strictest interpretation of Sharia law , not only in Afghanistan but in any other land it can impact. This means that Al-Qaeda will once again  have complete access to Afghanistan to launch its global assault on the infidel powers, especially the United States. Al-Qaeda’s rival in the Islamist radical world, ISIS, may also be permitted safe space in Afghanistan by a resurgent  Taliban. All these forces, operating within  an Islamist mindset, will view  the defeat of the U.S. as a sure sign from divine providence that their global jihad must be renewed and intensified. Inevitably this will result, at some point , in another severe attack on the American homeland. As with 9/11, this will lead to a substantial increase in  defense spending and collateral damage to the American economy. There will  be one important difference this time. Twenty years ago, in relative terms,  the American economy was much stronger, and government finances were vastly healthier, with much lower deficits and an overall national debt far lower than at present, even factoring in the effects of inflation. This means that the anti-American  global jihadists, already invigorated by the U.S. defeat in Afghanistan, will conduct their new attacks on the U.S. at a time of great economic instability. Any new Al-Qaeda or ISIS attack on the American homeland will likely trigger severe negative economic  aftershocks, which, in the context of already deeply negative trends created by the Covid  pandemic, could lead to a long-term recession or even an economic depression. In other words, the next stage of the “War on Terror” must be factored in as a consequential  economic event.

 

Biden Administration Posts Record Deficit of $660 Billion In March

April 13th, 2021 Comments off

 

 

In March 2020 the U.S. Federal Government posted a deficit of $119 billion, reflecting the already profligate spending of Washington pre-pandemic. One year later, with President Biden going literally for broke, Covid related federal spending  pushed government outlays to $927 billion, with receipts of only $268 billion, leaving a record deficit for March 2021 of $ 660 billion.

Not during Franklin Roosevelt’s Great Depression era  New Deal program, or the massive stimulus budget of the Obama administration in the wake of the Global Financial Crisis has there been such dizzying levels of federal spending. The  deficits incurred by Washington are fully matched by state governments, as well as sovereigns throughout the world.

Despite the record  price levels on equity markets and particularly on Wall Street, there are worrying signs of approaching inflation. As this blog has warned before, significantly higher rates of inflation will compel the Federal Reserve to abandon its near-zero interest rate policy. Once interest rates rise to anything approaching normal levels, debt servicing costs for Washington will balloon to an unsustainable level.

Sheldon Filger-blogger for GlobalEconomicCrisis.com

Biden Administration Faced With Looming Sovereign Debt Trap

December 13th, 2020 Comments off

In the 2-year period between 2008 and 2010 something peculiar happened to the U.S. Federal Budget. In 2008 the Federal Government in the United States spent $253 billion on interest  incurred by the national debt, representing  8.5 % of all federal outlays. Over the next two years federal budget deficits skyrocketed due to stimulus  and other fiscal programs undertaken in the wake of the Global Financial Crisis. Obviously, massive deficit spending  greatly increased the national debt. However, instead of the expected increase in annual interest payments, the amount allocated for debt interest payments by the Federal Government actually declined to $196 billion, representing  only 5.7% of the Federal budget, a sharp decline from only two years previously.

How was this seemingly impossible mathematical trick accomplished? The answer is surreal in its simplicity. The Federal Reserve, by monetizing the debt and exercising other monetary levers at  its disposals, sharply reduced interest rates across the board. In the case of short term interest rates, they were in some cases reduced to virtually zero ; in essence, free money.  It is only for that reason that interest paid on the national debt plunged while the overall debt ballooned due to continuous  and massive deficit spending.

Will the incoming Biden administration be so lucky? Unlikely. After massive deficit spending in President Trump’s final year in office, primarily due to a Coronavirus relief bill  that increased borrowing by more than $2 trillion dollars on top of the already large structural deficit, a President Biden is set to add a new and even larger Covid stimulus  relief package during his first year in office. So clearly, the national debt will continue to grow at a rapid rate.

What about interest rates? If it could, the Fed would keep interest rates at zero almost forever. But it  can’t. On the horizon are warning signs of high inflation. In the period after the Global Financial Crisis low inflation enabled central banks worldwide to prime the pump and run the printing presses. This time there is decoupling of major trading relationships: U.S. and China; U.K. and Eurozone. As  supply chains fragment, costs will be driven  upwards. Furthermore, there exist geopolitical tensions that threaten to drive up commodity prices, should they worsen. Political instability within  the United States itself creates elevated risks, which in turn stimulate inflationary pressures.

Any meaningful uptick in the  rate of inflation will compel central banks, including the Federal Reserve, to begin raising interest  rates. Once that happens, the massive deficit spending of the Biden administration that is now projected will unleash a sovereign debt trap, condemning the American and other economies, large and small, to stagflation, meaning higher inflation and a highly depressed economy. The handwriting is on the wall. In a worst case scenario, the U.S. government will default on its national debt, with seismic repercussions. Alternatively, the Biden administration could attempt to reduce the national debt through hyperinflation, which will  induce it s own calamitous impact on the nation’s social stability.

Sheldon Filger-blogger for GlobalEconomicCrisis.com

Incoming Biden Administration: A President Biden Makes Global Economic Depression A Greater Short Term Risk

November 8th, 2020 Comments off

The corporate media and social media complex, America’s new power center, has declared that former Vice President Biden is now President-elect Biden. Though Trump is pursuing a last ditch, scorched-earth policy of legal challenges, with no concession in sight, the odds are virtually certain that Biden will be inaugurated as the 46th president of the United States. What are the global economic implications  of this?

The Covid-19 pandemic has unshed in the worst economic downturn since the Great Depression of the 1930s.The  Q3 uptick is now likely to be followed by a double dip recession, as a second wave of coronavirus ravages a advanced economies, including the United States. Though the Biden policy team is committed to a more aggressive stance on combating Covid-19 and offering large fiscal stimulus packages. the economic prognosis is not bright.

Biden will enter the presidency with a divided electorate, including 70 million Trump voters, who are largely convinced that the election was a fraud, meaning the incoming presidency is illegitimate. Instead of the expected Blue Wave, the Democratic majority in the House of Representatives is reduced, and the GOP may very well retain control of the Senate. Divided government, and a divided people  will create instability in what is still the world’s largest economy,  possessing the strongest military power.  That does not portend well towards an economic recovery.

Continued economic shutdowns due to the pandemic, ineffective fiscal stimulus programs combined with growing sovereign debt along with the political and social instability in the U.S. lead to the conclusion that the trajectory towards an economic depression, already baked into the cake, will accelerate. It is likely to happen during the incoming administration’s four-year term.

 

 

Election 2020 Fallout: Political Disarray in United States Threatens Global Economy

September 21st, 2020 Comments off

A global economy already  in fragile condition  due to  the contraction in  GDP and exploding sovereign debt levels due to the Covid-19 pandemic, is now in  danger of being further weakened by political strife in the United States. With about six-weeks to go before the 2020 presidential election, there are already numerous indicators of looming political and social chaos looming in the USA.

Even before the death of Supreme Court justice Ruth Bader Ginsburg, there were already claims by both the Democratic and Republican parties that their opponent was out to undermine presidential voting. The incumbent, President Donald Trump and his supporters allege that mail-in ballots, favored by Democratic-run states, will unleash massive voter fraud. Trump’s challenger, former vice-president Joe Biden, and his Democratic supporters, have allegations of their own; Russia is supposedly working in tandem with Trump to undermine the true results of the pending election. Either way, both sides have set up voting day, November 3, as not decision-day, but rather the beginning of a bitter fight by armies of lawyers for who will be the legitimate winner of the upcoming presidential election.

Added to the above, there is a ferocious fight looming over the prerogative of the current president to select a replacement for the now-vacant seat on the U.S. Supreme Court. The fact that Trump has the constitutional legality to do this is irrelevant; this all about massively polarizing fault lines within the American body politic, adding to severe social tension and propensity for violence linked to the upcoming election.

All the above factors, occurring in what is still the world’s largest economy (though China is on the verge of overtaking that position) are destabilizing; not only politically but perhaps even more in terms of the global economy. In the post-coronavirus world we all now inhabit, the political storm brewing in the U.S. may be the final element that brings about a total economic depression, thus ensuring that the Global Economic Crisis is deeper and of longer duration than the pundits and analysts are currently predicting.