The return of the Taliban. What went wrong in Afghanistan?

Writing about recent events is always hazardous. It can be difficult to establish precisely what has happened and why. There is also a lack of clarity about the relative significance of events.

Americans don’t yet know where the collapse of Afghanistan ranks in the list of American military and foreign policy disasters such as the debacle in Iraq, the fall of Saigon, the failed “Bay of Pigs” invasion in Cuba, and the 1979 Iran hostage crisis.

But three points are surely certain, first, the shambolic exit from Afghanistan is a major setback that will undermine U.S. credibility for years to come. As Henry Kissinger said, “To be an enemy of the US is dangerous, to be a friend is fatal”.

Second, Afghanistan fell because America forgot the lessons of history. It does not understand the world beyond its borders, which is very different than the U.S.

Finally, given how the atrocious implementation of the pullout. of U.S. troops from Afghanistan was, Joe Biden will have to wait a bit before he receives his Nobel Peace Prize. Another black eye for the U.S.

There will be lots of talk in the coming days about the harsh lessons to be learned from America’s retreat from Afghanistan. In April, Biden announced the U.S. would withdraw our military from the country without conditions on the 20th anniversary of the 9/11 attacks. What an awful historical irony that the Taliban will once again be in control on Sept. 11.

Looking back, there are some indisputable facts about what went wrong in Afghanistan, and responsibility is certainly divisible by more than one president.

On Oct. 7, 2001, the first of these presidents, George W. Bush, launched Operation Enduring Freedom—the invasion of Afghanistan. The operation sought to bring the architects of 9/11 to justice and reduce the threat of terrorism. Then the Afghan mission, which often lacked strategic clarity, morphed from counter insurgency to counter-narcotics and then into capacity building to remake Afghanistan as an award-winning liberal democracy.

The result is a painful lesson of what can happen when immense military might is put in the hands of politicians and their minions who lack the understanding to employ it properly. Equally culpable are politicized American military leaders who consistently lied about the strength of the Afghan security forces.

The result is that the Taliban, a UN-designated terrorist group, defeated the world’s greatest military power. Another self-inflicted blow to America’s reputation that will complicate Biden administration goals to check China’s rise by building coalitions in the Asia Pacific.

According to the Costs of War project at Brown University, the U.S. has spent more than $2 trillion in Afghanistan since 9/11. That’s $300 million per day for two decades.

And the human costs are even greater. There have been 2,448 service members killed and over 21,000 American soldiers injured in action, along with 3,846 contractors killed. That pales beside the estimated 66,000 Afghan national military and police and over 47,000 Afghan civilians who were killed.

And because the U.S. borrowed most of the money to pay for the war, generations of Americans will be burdened by the cost of paying for it. The Costs of War researchers estimate that by 2050, interest payments alone on the Afghan war debt could reach $6.5 trillion. That amounts to $20,000 for each and every U.S. citizen.

You do not need to support a continued presence in that arid, stone-age country to recognize that things have gone badly. The execution of the U.S. withdrawal has been disastrous, deadly, and humiliating, handing power back to the Taliban in a matter of days. The dramatic unravelling of the situation in Afghanistan puts President Biden’s reputation for foreign policy expertise at risk.

It is worth bearing in mind what former Bush and Obama Defense Secretary Robert Gates wrote in his memoirs: Biden has “been wrong on nearly every major foreign policy and national security issue over the past four decades”.

But not to worry, this is not your father’s Taliban. They are smarter and tougher.

A look at how the ‘Nixon Shock’ changed the global economy

If you asked scholars to name the most important happenings in the last 50 years of American history, they would likely list events ranging from the Vietnam war, the Civil Rights Movement, invention of the computer chip, the Sept. 11 terrorist attacks, the Great Recession that officially lasted from 2007 to 2009, and the COVID-19 pandemic.

Missing from this list would be the so-called Nixon Shock, the 50th anniversary of which is upon us.

In a televised address on Aug. 15, 1971, President Nixon (America’s very own Richard III) announced that he was “closing the gold window,” ending the dollar’s convertibility into gold. Unilaterally ending the last vestiges of the gold standard and eliminating the final link between gold and the dollar was a consequential moment in U.S. financial history.

In this photo made from a television screen broadcasting an NBC Special Report, President Richard M. Nixon appears on national television on Aug. 8, 1974, to announce his resignation.

The Nixon Shock had profound implications for the U.S. and the global economy. The U.S. unleashed an era of floating exchange rates, which created a much less stable world economy, since currency values fluctuated due to the disconnect between them and something that was tangible. Many contend it was the beginning of an inflationist era of fiat money and created decades of turbulence in currency markets.

The president announced the end of the American commitment to redeem other countries’ dollars for gold at $35 an ounce, a bedrock of the Bretton Woods system of mostly fixed exchange rates that had been in place since 1944 and established the dollar as the world’s reserve currency.

Closing the gold window marked the end of a commodity-based monetary system and the beginning of a new world of fiat currencies backed entirely by the full faith and trust in the government that issued it. This gave the government and the Federal Reserve greater control over the economy because they can control how much money is printed.

The president’s main concern in 1971 was avoiding a recession that might cost him the 1972 election. He strong-armed Federal Reserve Chair Arthur Burns into keeping interest rates low in the face of rising consumer prices. President Nixon allegedly told the Burns, “we can take inflation if necessary, but we can’t take unemployment”, setting the stage for the birth of the Great Inflation of the 1970s, the Age of Aquarius.

In fairness to President Nixon, he inherited an economy from President Johnson that was under serious strain.  Federal spending to simultaneously fight the Vietnam War and build the Great Society created budget deficits that fueled inflation along with the growing U.S. trade deficit.

The U.S. had printed more dollars than it could back with gold. Inflation had started to rise in the second half of the 1960s, soaring from a mere 1.4 percent in 1960 to 13.5 percent in 1980.

Put plainly, too many dollars were abroad. By 1971, the pledge that an ounce of gold was worth $35 became void. The feds could not make it happen. So, they severed the link. The value of the dollar in foreign exchange markets suddenly plummeted, which caused increases in import prices as well as in the prices of most commodities priced in dollars.

For sure, the Nixon Shock was not the only reason for the accelerating inflation of the 1970s. For example, the Organization of the Petroleum Exporting Counties announced an oil embargo against the U.S. during the October 1973 Yom Kippur War in Israel. Oil prices surged by 400 percent and U.S. economic activity instantly dropped.  In 1973 the U.S. entered into the deepest recession since the Great Depression, but this time it was coupled with price inflation, not the deflation of the 1930s.

The Nixon Shock was another painful example of the politicization of the economy. Sound familiar? A key lesson for today is that price stability is paramount for a strong and growing economy. Tolerating high inflation in an effort to stimulate the economy is a dangerous game to play.