The US Dollar

Why We Stopped Winning in Wars and Finance

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The importance of victory conditions for success 

An army is designed to win battles and wars. Our own Army’s doctrine relating to this design is written in a protocol called ADP 6-0, in which Chapter 2-11 states: “For Army forces, decision making focuses on selecting a course of action that is most favorable to accomplishing the mission.”  

It’s a fairly obvious statement, yet its ramifications are profound. Everything the military does is based upon the accomplishment of the mission. 

For example, our declaration of war against Japan in World War II stated: “…the President is hereby authorized and directed to employ the entire naval and military forces of the United States and the resources of the Government to carry on war against the Imperial Government of Japan; and, to bring the conflict to a successful termination, all the resources of the country are hereby pledged by the Congress of the United States.”  

The victory condition was clear: termination of conflict. This gave military leaders the objective of achieving either the destruction or surrender of the Japanese government, and in this case we have achieved our goals, which were well defined. But what happens when there is no defined victory condition? 

Abstract victory conditions take you nowhere 

A good example for that is the Joint Resolution passed after the attack on September 11, 2001. It was the authorization for use of military force and stated, “That the President is authorized to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organizations or persons.”  

No victory conditions are given, only an authorization to use force as prevention of future acts of terrorism, hence we ended up in a situation of perpetual, unresolved conflict. 

If we turn to our economy, our politicians talk about “improving the economy” but fail to define what that means. Surely, they’d like to “win” by “improving the economy,” but the lack of a clear victory condition gives us nothing concrete to aim for. The goal is political or vote-corralling rather than a clear economic goal. And goals matter, so if you have abstract or nonexistent goals, you’ll get nowhere. 

Change the rules, change the game 

Without properly defined victory conditions, war and military conflicts are often confused with political and strategic competition.  

An actual war demands a declaration of war from Congress. This would hold Congress responsible. By allowing the president to enter a military conflict with no official declarations of war, Congress can insulate itself from conflicts that turn out to be political disasters, all while placing the blame on the president. Ultimately, we can go to war without an official declaration or plan to back up our strategy and the safe return of our troops. We can go to war without having determined the parameters for what constitutes “victory.”  

One only needs to look at our 20 years in Afghanistan for a perfect example of this. I could think of different types of victory conditions our leaders could have included: complete destruction of the Al Qaeda network (not very attainable but still a condition), degradation of their capabilities to attack the US, death of Bin Laden along with his key advisors.  

Instead, we turned from a war (something the military does very well) to nation-building in a country with a culture completely incompatible with our own. In the end, we left without having finished what we started… because we never identified what we truly wanted in the first place. 

Hand-in-hand with the lack of clear victory conditions goes the lack of political will to win: In order to be able to declare victory, you need to define victory. And if you don’t have a clearly defined victory condition, you cannot have a clearly defined plan to achieve that outcome. While this is a failure in itself, it also allows the government to change the rules along the way to serve its own agenda, be it populist or long-term political. 

Changing the rules of the Fed 

The same holds true for the US economy and our dollar. Up until 1971, the dollar was backed by physical gold held by the US government. Our money had value because we backed it with something of value. It held our government accountable — they could not inflate the money supply without buying more gold.  

But when Nixon abandoned the Gold Standard in 1971, he changed the rules of the game. The Fed was practically given the power to print money infinitely, a power they have used to a greater and greater extent. However, the victory conditions have been unclear. Sure, the official goal has been to fight off a crisis — the most recent ones are the Great Recession or the pandemic — but even after the markets recovered, the money printing continued.  

Is the Fed following its mandate? 

The Fed is mandated by Congress to “promote maximum employment, stable prices, and moderate long-term interest rates.” Although vague, these are the Fed’s victory conditions. So, how are they performing? 

  • The official unemployment rate has been improving since the pandemic and sits at 4.2% today, but this doesn’t account for the large number of people who have given up looking for work, those stuck in low-wage, low-hour jobs, or those who want full-time jobs but are stuck working part-time. The real unemployment rate is closer to 23%. 
  • Inflation has been rising steadily since March to a 30-year high of 6.2%. 
  • Interest rates have been hovering just above zero since 2010, apart from a two-year period with rates around 1–2%. That can hardly be considered “long-term moderate rates.” 

The Fed has continued to inject trillions into the economy and kept interest rates low even after we recovered from the Great Recession and made it through the initial shock of the pandemic. That’s despite the negative effect that the excessive money supply and near-zero rates have on inflation — one of the Fed’s victory conditions. If there had been political will, these policies wouldn’t have continued. 

…To infinity 

More troops but for what purpose? 

If we turn our eyes again to the military, the president can effectively send troops wherever in the world he deems American interests is in danger. What has been the outcome? The consequences of the Afghanistan failure for our image and our future diplomatic endeavors are one thing. A much graver consequence is this: Since the beginning of the Global War on Terror, 2,400 military service members gave their lives to serve our country, while 20,000 were injured and an estimated 7,000 committed suicide during the same period. These numbers don’t even include the physical or emotional burden carried by the Gold Star families — those spouses, children, and loved ones of our service members.  

And from 2002 to 2011, the number of troops on the ground in Afghanistan steadily increased. The chart below shows the number of troops deployed in Afghanistan from 2002 to 2014. 

The number of US troops deployed to Afghanistan rose rapidly but then dropped again in 2014.

As you can see, the call for more “Boots of the Ground” rose for an entire decade. The reasons for this were militaristically sound, but at the end of the day did little to accomplish our mission, as there was never a well-defined mission to begin with. This process could have gone on indefinitely had the patience of the American people not waned. Politics ended the conflict, not victory. 

More money printing but…? 

If we look at our economy, the Fed labeled its money printing and rate cuts in 2020 as “QE to infinity.” Not “QE to full employment” or some other more tangible goal. There may not be a lack of “will” in the central bank, but without a clear, defined victory condition all their efforts can be misguided and lead to an undesirable outcome, e.g. rising inflation and a historic stock market bubble they won’t be able to sustain. 

Valuing the short-term “success” over long-term victory 

Both our economic and military strategies only address the short-term problems — what is staring us in the face. They completely ignore the greater question: What is the endgame? Where do we want to go? Who do we want to be? When we don’t know what we are trying to accomplish and when we don’t have a path to victory or a well-thought-out strategy to reach our goals, we are left in the dark.  

In both military and economic strategy, the end state should be articulable, measurable, and possible. Without all three, there can be no successful resolution to any problem. This is why victory conditions are so important. We didn’t have clearly articulated victory conditions in Afghanistan, and we came out it tarred and feathered. And we currently don’t have clearly articulated victory conditions for our economy. Unless we change that, we will see the same outcome. 

About Matthew Wadler

Matthew Wadler joined the US Army immediately after graduating from high school in 1991. Where most 19-year-olds were enjoying their freshman year in college, Matt spent this time in Somalia. He spent 6 years as an enlisted soldier before becoming an officer. He is a graduate from Airborne School, Air Assault School, and the Defense Language Institute. He has completed the Primary Leadership Development Course and the Officer Basic and Advance courses in addition to achieving his master’s degree. Along with his first deployment to Somalia, Matt was deployed twice to Afghanistan. He retired at the rank of Major. 

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