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Debates over a civil war in America: ‘The Disunited States of America’

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A fear of an internal conflict is rising in the United States, where almost 2 years are left until the next presidential elections. The divide between the Republicans and the Democrats in the country is moving towards a point of no return, both and among government institutions and among the people themselves. The Economist journal, which carried the issue over the cover of the week’s issue, took its place with the headline “The Disunited States of America”.

The ‘lurking danger of a civil war’ is widely spoken in the US, where the resonations of the bloody raid of Congress building, after the November 2020 presidential elections, are still heard. And the number of Americans who believe the country is facing the threat of a civil war and a nationwide disaccord, is growing by each day. According to poll results published by YouGov and The Economist, two out of every five American citizens think that a civil war is very likely over the next decade, while three out of every five American citizens expect an increase in political distress within the next few years. Also two thirds (66%) of the American population, believe that the political divisions in this country have gotten much worse since the beginning of 2021.

According to the Newsweek report, another poll by Quinnipiac University, the results of which were released last Wednesday, 67 percent of Americans believe that their democracy is in danger of collapsing. There is a 9 percent increase in this when compared to a similar poll also conducted by Quinnipiac University in January.

After the FBI raid on the residence of the former US President Donald Trump in Florida, the FBI and the US Department of Homeland Security issued a joint statement warning of internal threats that are named, such as a bomb attack on the FBI headquarters, or other internal threats such as a “civil war” or an “armed revolution”.

An expert on civil conflicts at the Carnegie Endowment for International Peace Rachel Kleinfeld, told the Guardian: “Countries with democracies and governments as strong as America’s do not fall into civil war. But if our institutions weaken, the story could be different”.

A professor of political sciences at the University of California in San Diego Barbara F. Walter, who is also an expert in political violence, warned that the United States was heading towards a major uprising that could be a form of a civil war, saying all possible symptoms of a civil war are showing up in the country.

A loss of hope, trust and the sense of belonging within the general public

The Washington Post also took the matter of a ‘civil war’ possibility, by publishing an article with the headline “Is the United States headed for civil war?”. Stating that there are very different opinions on this issue, the article also explained that “the pervasive loss of trust, hope and sense of belonging in a severely damaged society”, is more dangerous than the sporadic bursts of violence. And it was emphasized that both sides in the civil war debate, agree on this social crisis.

This stressful atmosphere in the country was also felt in the speech broadcasted on live television, by the US President Joe Biden, who addressed his citizens behind a bulletproof glass protection in Pennsylvania. Blaming the Republicans for the growing political violence and divisions in the country, Biden said that his Republican rivals led by Trump, “pose a threat to this country’s democracy.”

Former President Trump on the other hand, described Joe Biden as an “enemy of the state” in his campaign speech also in Pennsylvania one day earlier. Trump, who accused Biden of using the FBI as a tool against him, called this investigation a “witch hunt” against himself and all Republicans.

‘Two different states of mind’

In the aforementioned article of The Economist magazine, which put the picture shown above on its cover, and is titled ‘The Disunited States Of America’, it is told that there is ” two very different states of mind” in the country, and examples from both Republican and Democrat extremes are given; “On August 25th California banned the sale of petrol-powered cars from 2035, a move that will reshape the car industry, reduce carbon emissions and strain the state’s electricity grid. On the same day in Texas a “trigger” law banned abortion from the moment of conception, without exceptions for rape or incest”.

The Article states that the struggles between the red (Republicans) or blue (Democrats) states are divisive, while these battles “all entrench the notion that red and blue America cannot rub along despite their differences”.

‘The political violence will only get worse’

The Economist article states that the biggest worry is that “partisanship could undermine American democracy itself”. It is also commented that there could be more debates and disagreements over the prosecution of the votes from some states to be overridden in November’s midterm elections, just as it did in 2020, and that the current political violence could be proliferated.

Call for more centralization

Asserting that this dysfunction of America also poses a risk to ‘the world order that depends on it’, the article defends the idea that the US federal government should stop neglecting its responsibilities and be more effective and take important decisions on a national level, rather than local. At the end of the article, voters are urged to “act responsibly” and choose what is already available, on the grounds that “alternative is ever greater disunion, and that does not lead anywhere good”.

Experts share the view that the two-party system in the US, has now become dysfunctional and has caused a tension in both the institutions and the general public, rather creating a competitiveness. And with the socio-economic problems in the country are surfacing, the political divide is increasing more than ever. While the urbanized coastlines are represented by the Democrats, the traditional countryside is represented by the Republicans. Political hostilities are rising towards each other, both on a state level and among the general public.

Polarization, extremism and radicalization…

The Washington-based think tank named Brookings Institution, which is another American institution that has raised the issue, has warned that the political violence issue must be taken seriously.

While the article states that America faces a dangerous polarization, extremism and radicalization today, the people see their political opponent as enemies, and many do not even trust the motives or actions of their opponent political leaders.

Stressing that the political violence has increased significantly, the article calls on the Department of Homeland Security to combat ‘domestic terrorism’, the FBI to ‘increase its enforcement actions’, the intelligence agencies to ‘be alert regarding possible foreign support of extremist groups’ and the social media companies to take their censorship further.

AMERICA

Fed cuts interest rates, dollar surges to two-year high

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The U.S. Federal Reserve reduced interest rates by a quarter percentage point but signaled a slower pace of easing next year. This move drove the U.S. dollar to its highest level in two years and triggered a sell-off in both domestic and international stock markets.

The Federal Open Market Committee (FOMC) voted on Wednesday to lower the benchmark interest rate to 4.25–4.5%, marking the third consecutive cut. The lone dissenting vote came from Cleveland Fed President Beth Hammack, who favored maintaining the current rates.

Officials highlighted concerns about persistent inflation, projecting fewer rate cuts for 2025 than previously expected. Reflecting these worries, policymakers also raised their inflation forecasts for the coming year. Following the announcement, Fed Chair Jay Powell remarked that the current policy settings were “significantly less restrictive,” indicating the Fed’s inclination to adopt a more cautious approach to further easing.

“This decision was a ‘closer call’ than prior meetings,” Powell noted, emphasizing that inflation trends remain “sideways” while risks to the labor market are “diminishing.”

Aditya Bhave, senior U.S. economist at Bank of America, described the Fed’s message as “unabashedly hawkish.” He pointed to the shift in officials’ 2025 forecasts, which now anticipate just two quarter-point rate cuts instead of three, calling it a “wholesale shift.”

JPMorgan Chase, a key player in U.S. bond markets, noted that money markets are pricing in only a 0.31 percentage point rate cut in 2025. This outlook, significantly tighter than the bank’s earlier 0.75-point forecast, underscores the magnitude of the Fed’s policy shift.

The decision triggered a sharp sell-off on Wall Street, with the S&P 500 falling 3% and the tech-heavy Nasdaq Composite dropping 3.6%. High-profile winners of the 2024 rally were hit hard, including: Tesla, down 8.3%; Meta (Facebook’s parent company), down 3.6%; Amazon, down 4.6%.

Smaller companies, often seen as more sensitive to US economic fluctuations, also suffered. The Russell 2000 index declined 4.4%.

In Asia, stocks fell in early Thursday trading. Benchmarks in South Korea and Taiwan dropped 1.8% and 1.6%, respectively. Meanwhile, U.S. government bond prices fell, driving the yield on two-year Treasuries—sensitive to Fed policy—up by 0.11 percentage points to 4.35%.

The U.S. dollar surged 1.2% against a basket of six major currencies, reaching its strongest level since November 2022. According to Wells Fargo senior economist Mike Pugliese, the currency had already been rising on expectations of inflationary pressures following Donald Trump’s election victory last month. However, Wednesday’s Fed decision “poured more petrol on the fire.”

The South Korean won dropped to a 15-year low against the dollar, while the Japanese yen weakened 0.5%.

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AMERICA

Amazon pledges $1 billion to Trump inauguration fund

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Amazon confirmed on Thursday that it will contribute $1 million to Donald Trump’s inauguration fund, a move mirroring similar actions by other major tech companies, including Meta, the parent company of Facebook and Instagram. Amazon also plans to broadcast Trump’s inauguration via its Prime Video service.

This announcement comes as major tech executives seek to establish ties with the incoming U.S. president, despite Trump’s longstanding criticisms of Big Tech. Trump has frequently accused technology companies of censorship and bias against conservative media.

Jeff Bezos, Amazon’s founder and CEO, is reportedly planning to meet Trump at his Mar-a-Lago resort next week, according to The Wall Street Journal, which first reported Amazon’s donation. Similarly, Google CEO Sundar Pichai and Apple CEO Tim Cook have expressed their congratulations to Trump since his election victory in November.

Trump’s relationship with Amazon has been fraught with challenges. During his first term, he accused the company of undercutting competition and criticized its tax policies. In 2018, Trump ordered a review of U.S. Postal Service package pricing, claiming the agency acted as Amazon’s “courier.”

Apple, meanwhile, faces potential risks from Trump’s proposed tariff policies, which could disrupt critical supply chains in China. However, during Trump’s first term, Cook secured exemptions for certain Apple products.

Meta’s CEO, Mark Zuckerberg, and other tech leaders have also engaged with Trump. According to The Information, Zuckerberg dined with Trump after the election. Pichai is also expected to meet Trump this week.

While Trump scrutinized Big Tech during his presidency, Amazon now faces mounting regulatory pressure under President Joe Biden. The U.S. Federal Trade Commission (FTC), led by Lina Khan, has been investigating Amazon for alleged monopoly practices, with several states filing lawsuits last year. The FTC is also examining major cloud service providers, including Amazon, over partnerships in artificial intelligence.

Despite earlier conflicts, Bezos recently praised Trump for his “tremendous grace and courage under real fire” in a post on X (formerly Twitter) following an assassination attempt. Bezos, who also owns The Washington Post, reportedly prevented the newspaper from endorsing Trump’s Democratic opponent Kamala Harris in the 2024 election.

Speculation about a tacit agreement between Bezos and Trump has surfaced, allegedly tied to Blue Origin, Bezos’s rocket company competing with Elon Musk’s SpaceX.

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AMERICA

Investors poured $140 billion into U.S. equities following Trump’s victory

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Nearly $140 billion has flowed into U.S. equity funds since last month’s election, as investors anticipate Donald Trump’s administration will implement sweeping tax cuts and regulatory reforms.

According to the Financial Times (FT), which cites data from EPFR, U.S. equity funds have seen inflows totaling $139.5 billion since Trump’s victory on November 5. This surge in investment made November the busiest month for equity inflows since records began in 2000.

The massive influx of funds has driven major U.S. stock indexes to a series of record highs, as investors appeared to shrug off concerns about potential economic risks, including inflation and its implications for the Federal Reserve’s interest rate policy.

“The growth agenda that Trump has put on the table is being fully embraced,” said Dec Mullarkey, Chief Executive of SLC Management. He added that Trump’s picks for top administration posts have been seen as “very market friendly.”

Trump has promised to fill his administration with financial experts, including Scott Bessent as Treasury Secretary, and Paul Atkins, a cryptocurrency advocate, as Chairman of the Securities and Exchange Commission (SEC).

The president-elect has outlined a pro-growth agenda, emphasizing reduced taxes, deregulation, and economic expansion. These proposals have spurred optimism among investors, fueling a rally in the market.

The S&P 500, Wall Street’s primary stock market indicator, has risen 5.3% since Election Day, bringing its total gains for the year to 28%. Smaller companies, which are often seen as more responsive to changes in the U.S. economy, have outperformed larger firms during this period. The Russell 2000 index recently hit a record high for the first time in three years.

While U.S. equity funds have enjoyed record inflows, other global markets have experienced outflows emerging market funds have seen net withdrawals of $8 billion, with China-focused funds accounting for $4 billion; funds investing in Western Europe have lost $14 billion; and Japan-focused funds have seen outflows of approximately $6 billion.

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