By Mitch Green
Biden has decided to
steal raid $7 billion of Da Afghanistan Bank reserves currently frozen by US financial institutions. The motivation for this guileless heist is two fold:
- Set aside $3.5 billion for humanitarian aid in Afghanistan
- Make available $3.5 billion for claimants in ongoing 9/11 survivor’s lawsuits
The grotesqueness of this Executive Order has layers that I’d like to unpack. I’m tempted to use the Matryoshka Doll as a metaphor here, but the layers of horror are not cleanly nested so much as they are woven in and out of the policy situation. Let’s examine some of them in turn.
Horror #1: Raiding Da Afghanistan Bank’s reserves undermines the entire Afghan economy
Despite the title, Executive Order on Protecting Certain Property of Da Afghanistan Bank for the Benefit of the People of Afghanistan, dispossessing the central bank of these reserves is a direct threat to Afghan welfare. As Dr. Shah Mohammad Mehrabi, economist and former central banker for Afghanistan explains, freezing these reserves has undermined the payments system in Afghanistan as well as the very ability for the central bank to fulfill its institutional obligations of providing liquidity and price stability.
I have emphasized key parts of the transcript above to drive home the effects of removing significant sums of reserves from the central bank’s toolkit. This interview was recorded last December, before Biden decided to loot these funds, thereby permanently removing them from play. So, it follows that the conditions will only deteriorate further. Hunger and starvation has come into being, but not spontaneously. No, this was caused by the policy of freezing those assets and the new move threatens to turn the screws further.
Whither the women and children?
Last summer when the withdrawal was underway, most narratives went something like this: “Sure, the war was long and costly, but we told the woman and children of Afghanistan we had their backs. Now we’re leaving them to die.” The implication was that to withdraw was to abandon them, and so if we want to honor that promise we need to stay in perpetuity. In one sense, there’s some truth to this: the withdrawal did leave a gaping whole of demand in the economy and the desire to kneecap the central bank was not on the table while present in occupation. This fact reveals an aspect of this horror: the threat of permanent occupation as the only means by which vulnerable Afghans, of which woman and children serve as an evocative proxy, can have a meaningful chance at life. Not life and liberty. Just life, partly.
Now, rather than take measures to aid in the viability of the Afghan economy to function, the Biden Administration is decided to harm it further. Again, here is Dr. Mehrabi capturing this hypocrisy.
This hypocrisy should be brought to the fore in any serious policy discussion on Afghan welfare. Modern human practices no longer recommend holding a dog’s snout in their own excrement to show them how they’ve misbehaved, but the jury is still out on how to train The Blob. NB: Dogs are lovable and incapable of cold malice.
But, the Executive Order aims to use half of the loot for humanitarian aid for the benefit of the people. It says so right in the name!
This would be funny were it not so disastrous and misguided. You cannot address the immiseration of Afghans resulting from, in part, the temporary restraint of its central bank, by hobbling it to do a one-shot aid package. This is absurd and anyone advising the President on the economic soundness of this concept should be stripped of their credentials and floated out to sea. $3.5 billion is a tiny number for an aid package appropriate for the need. And anyway, what is of crucial importance is the swift return of the central bank’s ability to manage its banking system, exchange rate and afghani liquidity. That’s the plumbing, folks. Imagine ripping the plumbing out of a thirsty person’s house, then handing them a length of the resultant copper scrap and saying, “Drink up! There’s some water left in this pipe. And you’re welcome ;)” That’s what this is like. Or if you prefer less hyperbole, here again is Dr. Mehrabi:
Horror #2: Robbing Afghans to compensate 9/11 Survivor Claimants with suits outstanding
I’m not a legal expert and will not opine on the standing or other circumstances of the 9/11 Survivors lawsuits. And this one might make a lot people very angry with me. But, I will say that it’s grotesque political theater to seize reserves of a central bank in one country to use as a basis for paying people in another country under the pretense of compensating them for damages caused by individuals from a third country. Even if you could establish a direct connection to some Afghans for that crime, it would not follow that you should punish an entire society of people who have no causal relationship to the event as a mechanism for making financial restitution to a restricted class of beneficiaries in another society. I leave the legality of the whole proposition to the lawyers, which seems to this lay person rather dubious.
And you don’t need to pilfer the central bank reserves of Afghanistan to make 9/11 Survivors whole! A fact that brings me to the last horror I’d like address.
Horror #3: We see once again the deleterious effects of treating money as a quantum of value that needs to be shuffled around
I know what you’re thinking. And you’re right. I did put MMT into this reaction piece. Here’s why: this Executive Order, top to bottom and side to side, represents the sound money scarcity logics that prevail consensus policy views. It’s right there in the notion that you can seize some treasure to move from the plumbing of the Afghanistan banking system to the “humanitarian aid” sector of the Afghanistan economy. Elsewhere, you have the notion that you can seize some of the treasure and push it across the playing board to third parties who are hoping for payments to originate from the legal – economic apparatus of the US system. And yet you still see it in the foolish notion that you can do any part of this in such a way that sanitizes the operations from hitting Taliban balance sheets. Only a sound finance mind can dream up such a fantasy.
It’s the opposite case that draws this last horror out. The idea that economic endeavors may proceed on their own terms (by envisioning the outcome you want and then legislating for the funds to finance it), in non zero sum fashion, illustrates the needless cruelty, waste and punitive character of this Executive Order. It is volitional to destroy the Afghan financial system. It is volitional to starve Afghans so that you may clear a path for resolution for the 9/11 Survivors. It is grotesque and horrific and will be Biden’s legacy.