Author Archives: kathrynmckenzie18

Could Trump’s efforts to put America first, put the country further behind?

Image result for usaid cartoon

“Which would make you safer and healthier: Being the neighbourhood hermit, locking and bolting your doors, not helping your neighbour but instead threatening them and allowing trash, sewage, rats and cockroaches to accumulate around your house? Or actually caring about your neighbourhood and neighbours and pitching in to keep your surroundings clean and safe?”    – Bruce Y Lee, “Bill Gates Is Right: USAID Is Not Just Foreign Aid, It Aids The U.S.” Forbes

Trump’s new “budget blueprint” to take place in the fiscal year 2018, following his campaign to “put America first” may actually put America further behind.  Internal budget documents and sources, which came out in March of this year, showed plans for drastic cuts in U.S. assistance to developing countries, as well as began talks of merging the State Department with the United States Agency for International Development, also known as USAID.  Trump’s proposal shows slashes of up to 28 percent to the State Department’s and USAID’s budget, and cuts to general aid to developing countries by over one-third.  These newly available funds would then be transferred to programs tied more closely to the administration’s national security objectives.  Forty-one countries are facing cuts, as global health funding is targeted, with the U.S. government expected to hit overall health program abroad fundings by approximately 25 percent. And despite the immense bipartisan opposition to such cuts in foreign assistance, experts still expect some amount of lowered spending levels on foreign aid to persist nonetheless.  However, many argue that the cuts proposed to lower foreign aid spending will ultimately hurt the United States.  Andrew Natsios explained the cuts as “basically… eviscerating the most important tool of American influence in the developing world, which is our development program … I don’t think they [those in the Trump administration] understand what the role of USAID is, … USAID’s mission directors are among the most influential foreigners in the country.”

USAID began in 1961, under President John F. Kennedy, who saw an obligation of the American people to their neighbours in an increasingly interdependent global community.  And despite the inherently altruistic goals of USAID, there are many selfish reasons for the country to seek the organization’s continued success.  For instance, providing foreign aid to developing countries creates numerous economic opportunities for the United States.  It also works to make the world safer for U.S. business and Americans, as well as generally stabilizing more vulnerable parts of the world through promoting health, economic and security opportunities.

And in general, the huge cuts to Foreign aid being suggested would likely make America less safe.  Cuts to global health funding would put Americans at risk in the case of a major epidemic.  A former USAID employee, and current executive director for the Sustainable Security and Peacebuilding Initiative at the Center for American Progress, John Norris, expressed his concern, “We’re going to see our own country much more vulnerable to the spread of infectious diseases as we saw with the Ebola crisis. Things that start abroad can quickly erupt here.”  The work to prevent epidemics, as well stop emerging diseases, is just one of the many tangible way in which American aid works to benefit Americans.  This was seen through the Ebola outbreak in West Africa.  The epidemic would’ve been much worse had the disease spread more widely into Nigeria; this was prevented in large part because of a group of healthcare workers who had been stationed there for an anti-polio campaign ran by the United States that were immediately reassigned to fight Ebola and help stop the spread from crossing the Atlantic to the United States.

And so, not only does U.S. development money save millions of lives and improve the quality of life for a large portion of the world’s population, it also inadvertently works to provide numerous tangible benefits to the United States.  One can only hope that the current administration keeps this in mind as they work to push forward their initial budget cuts to foreign aid.

Sources:

The End of Foreign Aid As We Know It

https://www.forbes.com/sites/brucelee/2017/03/18/bill-gates-is-right-usaid-is-not-just-foreign-aid-it-aids-the-u-s/#52f6e9ff42d6

http://time.com/4704550/bill-gates-cutting-foreign-aid-makes-america-less-safe/

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The Economic Ramifications of Trump’s Airstrike in Syria

Last Thursday President Donald Trump ordered the first military action of his presidency, an airstrike against a Syrian airfield, in a response to a chemical weapons attack used by the regime of Syrian President Bashar al-Assad.  His tough and quick response to the chemical attack caused a number of immediate chain reactions, including huge hits to global stocks, currencies, and commodities. Additionally, it seriously affecting the U.S.’s international relations and the global community as a whole.

Stock markets around the world were jittery following the news of the missile strikes; “there was a bit of a knee-jerk reaction to the headline,” explained Mark Cabana, the head of U.S. short rates strategy at Bank of America Merrill Lynch in New York.  The initial shock of the U.S. airstrike caused global stocks to decline, however they soon increased once the U.S. issued a statement clarifying that the attack was a one time event and would not cause further escalations.  Japan’s Nikkei for instance had been trading up at more than 1 per cent before news of Trump’s military action broke, and then quickly sank into negative territory before eventually returning to more stable levels.  Similarly, Russian stock markets fell on Friday, after the military strikes diminished hopes of for better relations between the US and Russia; the main Russian stock market index dropped 1.8 per cent.  And U.S. stocks quickly fell directly following the news.

us stocks
In a similar fashion, many emerging-market currencies fell after news broke.  Specifically, Russian currency fell the Friday following the airstrikes; Russian ruble fell 1 per cent against the U.S. dollar.

Russian ruble.png

The missile strikes also increased prices of safe-haven assets that are considered safer bets in times of uncertainty.  For instance, the price of Gold rose more than 1 per cent, reaching a five month high.  Likewise, oil traded at a one-month high on Friday following the airstrikes.  Chief market strategist at AxiTrader, Greg McKenna explained that “Geopolitics are often big drivers in oil markets… The potential reactions from Iran & Russia, both major oil producers will keep oil traders on edge… That uncertainty supports prices in the very immediate term.”  This potential for increased tensioned in the Middle East simulated oil prices, with Brent and West TExas Intermediate crude surging more than 1.4 per cent, and crude closing for the week at about 3 per cent.

crude prices

And lastly, Trump’s airstrikes proved to have immense ramifications on U.S. international relations.  In a statement made following the strikes, Russia claimed that the attack caused ‘considerable damage’ to Russian-US ties, which may prove especially detrimental in its potential to offset the Syria-Russia war against ISIS, as Russian withdrawal from the region would likely help the terrorist organization regain territory.

Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd, said in a statement to Bloomberg News, “Whether the market reaction is temporary or will continue will depend on the reactions from the international community.”

Sources:

https://www.bloomberg.com/news/articles/2017-04-07/here-s-what-trump-s-syria-strike-just-did-to-financial-markets

http://money.cnn.com/2017/04/07/news/economy/russia-us-syria-economy-sanctions/

http://money.cnn.com/2017/04/06/investing/oil-prices-syria-us-military-action/index.html?iid=EL

http://economictimes.indiatimes.com/news/defence/donald-trumps-syrian-strike-may-snowball-into-a-global-conflict-heres-why/articleshow/58063702.cms

http://www.reuters.com/article/us-global-markets-idUSKBN179031