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Does U.S. Afghanistan Policy Have a Future?

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Crises often define presidential legacies. Jimmy Carter had the Iran hostage crisis, Bill Clinton the Balkans, George W. Bush the September 11 terror attacks, and Donald Trump the pandemic. Across decades, Americans may easily forget Afghanistan, given its small size and relative isolation. Still, the country has nevertheless played an outsized role in shaping American presidential legacies, both before and after the United States’ two-decade direct military involvement in the country.

A Look Into the Past: America and Afghanistan

Carter had to react to the Soviet invasion of Afghanistan less than two months after Iranian students seized the U.S. Embassy in Tehran. Fearing that events in Afghanistan would reinforce the growing perception that he was weak and America humiliated, Carter responded by boycotting the 1980 Moscow Olympics.

President Ronald Reagan’s willingness to arm the Mujahedeen ultimately allowed him to celebrate a second-term victory much needed after the Iran-Contra Affair tarnished his legacy.

President George H.W. Bush appointed Peter Tomsen to be ambassador to Afghanistan, but he did not send him after the country descended into civil war. Bush may have considered that neglect prudent, but history does not treat the American withdrawal from Afghan affairs kindly. While the Mujahedin were not the Taliban, both Reagan and Bush now face criticism for unleashing Islamists, deferring Afghanistan’s future to Pakistan and Saudi Arabia, and being oblivious to or ignoring the consequences of their decisions.

Clinton continued to neglect the country; he believed that he could contain the growing Al Qaeda threat emerging from Afghanistan with an “over-the-horizon” counterterrorism mission best represented by one-off missile strikes on Al Qaeda camps and Taliban facilities in Afghanistan and Sudan following the August 1998 Al Qaeda attacks in Kenya and Tanzania.

9/11 and Afghanistan

The September 11, 2001 terror attacks returned Afghanistan to the forefront of American policy attention, where it would remain for the next 20 years. Each of the four presidents who oversaw U.S. policy made significant blunders. President George W. Bush’s decision to invade Iraq created a distraction that hampered and politicized the war effort.

President Barack Obama leveraged his successful killing of Osama Bin Laden into an excuse to seek closure to the war on terror, failing to recognize that the scourge of extremism in Afghanistan extended beyond a single man. He followed his June 4, 2009, Cairo “New Beginning” speech and pledge to close the Guantanamo Bay prison with secret negotiations that led to the Doha process. Secretary of State Hillary Clinton’s quip, “You don’t make peace with your friends. You have to be willing to engage with your enemies,” reflected an unwillingness to consider how engagement and financial incentives could actually empower the Taliban.

Donald Trump was little better. Ending “the forever war” became a mantra. National Security Adviser H.R. McMaster unsuccessfully tried to tame Trump’s urge to cut and run. Trump appointed Zalmay Khalilzad as special envoy to find a way to withdraw U.S. forces from Afghanistan.

A Turning Point: Joe Biden and Afghanistan

Following his decision to curtail his re-election bid, Biden released a statement highlighting his achievements; he did not mention Afghanistan despite his earlier self-praise about ending America’s longest war.

While it is easy with the benefit hindsight to criticize his predecessors’ approach to Afghanistan, how does Biden compare?

Biden harbored a decades-long disdain for Afghanistan. During a lunch President Hamid Karzai hosted for visiting U.S. senators, then-Senator Biden dismissed Karzai’s assessment of the role of Pakistan in providing sanctuary to the Taliban by boasting, “Pakistan is 50 times more important than Afghanistan to the United States.” Biden left the lunch angrily and abruptly. As vice president, Biden criticized the U.S. mission in Afghanistan. He not only opposed Obama’s troop surge, but he also considered resigning in protest. Upon rising to the presidency, Biden promised to undo almost all of Trump’s agenda but maintained the flawed Doha deal.  Unlike the previous presidents who recognized sacrifices Afghans made on behalf of their own and American security, Biden has repeatedly criticized Afghanistan and its people, declaring, “Afghanistan is not predisposed to unity.”  He was shameless in his inconsistency. In 2001, for example, he voted for the U.S. military intervention but two decades later said he was against “that war in Afghanistan from the very beginning.” Biden then elevated the Taliban as U.S. security partner, by selectively ignoring almost everything the Taliban did or said.

The Afghanistan of 2024

Before the Soviet invasion, Afghanistan was a poor but relatively peaceful, developing nation. The U.S. intervention allowed Afghanistan to resume its trajectory as a developing, modern polity. Millions of Afghan girls and women enrolled and matriculated at schools and universities, rose to public office, served in the military or opened private business. Today, under Taliban control, Afghanistan is a living hell and has once again become a global terror hub.

As the 2024 campaign continues, previous U.S. missteps in Afghanistan and a refusal to acknowledge their own mistakes have deterred both presidential candidates from articulating their own Afghan strategy. This is unfortunate. As with other totalitarian regimes, the Taliban’s rein of terror, misogyny and oppression will give rise to liberation and resistance movements. The new US strategy must be to empower democratic groups, and both women and human rights defenders.

Only a democratic Afghanistan can align Afghans’ needs for a responsible government with the broader demand for a terrorism-free Afghanistan.

The author is Dr. Davood Moradian. He is the founder and the first director-general of the Afghan Institute for Strategic Studies (AISS). He earned a doctorate degree from University of St Andrews (Scotland). His doctorate thesis was on the conception of punishment in ancient Greece, Islam and International Justice.

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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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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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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