Month: September 2021

What will the Taliban do with U.S. Military weapons left behind?

Posted on by j.giglio

With the war in Afghanistan having officially ended on Aug. 31, the world’s thoughts have turned to how the Taliban will govern the country and what equipment left behind by coalition forces they now have at their disposal.

The calamity in Afghanistan raises questions not just about what the American mission was but about how much of the U.S. military budget seems to provide little in the way of benefits. The U.S. dumped over $2 trillion into nation building in Afghanistan over a 20-year period, including $85 billion in technically advanced equipment and training for Afghan security forces.

Say what you will about the decision to withdraw, it should be obvious by now that the boneheaded, hasty, and chaotic U.S. exit from Afghanistan cost the lives of 13 brave servicemen and women, and left behind hundreds of Americans and thousands of Afghan allies the U.S. repeatedly promised to get out.

If that sounds like one of the less significant charges one might level against the American government, consider how, after a war that lasted 20 years, the U.S. has nothing to show for it but a fully equipped Taliban parading around in U.S. Army fatigues, cradling American M16 rifles and other weapons. The Taliban staged victory parades showing off the U.S. military hardware they have seized, replacing sandals with American military boots they could never have imagined.

A rough estimate of the total amount of equipment sent to Afghanistan during the 20-year occupation includes up to 22,000 Humvee vehicles, nearly 1,000 armored vehicles, 64,000 machine guns, and 42,000 pick-up trucks and SUVs. Other weapons included up to 358,000 assault rifles, 126,000 pistols, and 200 artillery units.

Oh, and the Taliban will likely inherit state-of-the-art military helicopters, warplanes, late-model drones and other air aircraft from the U.S. as well. Thanks to the largesse of the American taxpayer, the Taliban now has more Black Hawk helicopters than 85 percent of the countries in the world, according to Congressman Jim Banks, who is also a veteran.

While it is always frustrating to read about the many ways the federal government wastes taxpayer money, it pales in comparison to the appalling reality that the U.S. left an estimated $85 billion in taxpayer purchased military equipment in the hands of the Taliban. This was just part of the American taxpayer money that evaporated as the Taliban marched toward Kabul. There was also the opportunity cost of what these funds could have done to improve the quality of life in the U.S.

Even if the equipment is not used by the Taliban, it may end up going to the highest bidder, or to hostile states that can reverse engineer the technology.

But there are other dangers as well. For example, the Taliban has seized biometric devices from the U.S. military that might allow them to identify and capture Afghans who worked with the U.S. and the NATO allies that were part of the Afghan enterprise. These devices have the fingerprints, eye scans, and biological information of all the Afghans who were with the coalition forces over the last 20 years.

There is no sugar coating the American defeat in Afghanistan. But trying to get the straight skinny from the Pentagon and the White House on why all the U.S. weaponry was abandoned is like trying to put out a bush fire.

Having closed the chapter on Afghanistan, Americans who pride themselves on having notoriously short memories will move on to other issues, such as the still-raging COVID-19 pandemic and things that affect them and their families more directly. Politicians have made careers betting on the public’s historical amnesia and short memory.

And unlike the 1979 kidnapping of 53 Americans at the U.S. Embassy in Teheran, the media will not report on the fiasco in Afghanistan for 444 days and nights, as they did throughout the Iranian hostage crisis.

The ripple effect of the Volcker Shock for the economy

Posted on by j.giglio

President Jimmy Carter nominated New York Federal Reserve Bank President Paul Volcker to chair the Federal Reserve Bank in July 1979 to deal with the immediate issue of hyper-inflation. He was confirmed by the Senate in August and served as chair until 1987.

The no-nonsense, independent-minded Volcker oversaw a program of financial austerity that left a deep imprint on the U.S. economy and financial system. Unlike elected officials, he understood that there are times when you must incur short-term costs to achieve long-term benefits. Volcker is widely regarded as one of the best Fed chairpersons in history.

When he took the reins of the central bank, the U.S. was mired in a decade-long period of rapidly rising prices and weak economic growth that had come to be known in the1970s as “stagflation.” The month Volcker took office, unemployment was 6 percent and inflation was barreling towards 15 percent.

One advantage he enjoyed was that the nation was far less in debt than in the current environment. Unlike today, Volcker did not have to be concerned that raising interest rates to fight inflation would risk triggering a debt crisis. Conversely, if the current Fed maintains a loose monetary policy, it risks double-digit inflation.

In a moment market watchers will never forget, Volcker opted to cleave to his monetarist teaching by attempting to control interest rates by contracting the money supply rather than the fed funds rate. The Fed had historically targeted an interest rate in the short-term money market to loosen or tighten the money supply.

Then as now, the Fed set a target for short-term interest rates, then bought and sold securities to ensure that rates actually settled at that level. Volcker concluded that the Fed needed to change strategies and start targeting the actual amount of money floating in the economy. As he said, “it was time to act—to send a convincing message to markets and to the public.”

So just two months after taking office in August 1979, Volcker attacked inflation by using the Fed’s powers to directly target the growth in the quantity of money. He would leave interest rates alone to set themselves freely in the market.

It was shock therapy. By April 1980, interest rates had spiked above 17 percent and in the second quarter of 1980, the gross domestic product contracted by 7.9 percent. The extreme rise in interest rates was called the Volcker Shock.

The action indeed triggered what was then the deepest economic downturn since the Great Depression and drove thousands of businesses and farms to bankruptcy. Unemployment peaked at 10.8 percent.

But by the mid-1980s Volcker’s medicine was working. The reduced money supply and high cost of credit finally vanquished inflation and inflationary expectations.

Volcker’s steadfast commitment to his shock therapy and willingness to take unpopular policy actions made him the target of opprobrium by politicians of all ideological stripes. He believed central bankers needed to steer the economy free of political considerations. Protesting his policies, home builders sent the Fed unused two-by-fours, auto dealers mailed keys to the cars for which there were no buyers, and farmers drove their tractors around the white marble Fed building.

But the double-digit interest rates and sharp double-dip recession that followed the tightening of credit finally slayed the inflation dragon. It plunged below 4 percent in 1983, and by 1986 it was down to around 2 percent.

Interest rates eventually followed. Once the out-of-control inflation ended, he cut rates. This restored faith in the dollar, the Coca Cola of money, and laid the groundwork for a quarter century of low inflation, steady growth, and rare and mild recessions.

It can be said of Volcker as Hamlet said of his father: “He was a man, take him for all in all. I shall not look upon his like again.”