Blain’s Morning Porridge November 3rd 2021 – USA: MAGA and BBB on the road to nowhere!
“They can tell you what to do, but they’ll make a fool of you… ”
This morning: Last night’s US local elections threw out some interesting signals as to where gridlock, polarisation and the apparent decay of American Democracy are headed next. Its maybe not all as bad as we fear, but the outlook remains risky!
I’m afraid it’s one of these days I dread.
It’s time to write about US politics and what they might mean for the path of global markets, the mighty dollar and geopolitical stability. Whatever I say, I will receive lots of spectacularly ignorant emails telling me I have no right to comment on ‘Merica, and that I’m a god-damn communist for even hinting Trump might not be God incarnate.. but hey-ho and on we go…
So, let’s start with some facts:
It’s just short of a year since Joe Biden won the US Presidency with a majority of 74 of the 538 electoral college billets and 81.3 million votes versus Trump’s 74.2 million votes. Yet, last night, the Democrats lost a 10-point lead and the Governorship of the Commonwealth of Virginia to political newbie, former Carlyle hedge fund boss; Republican Glenn Youngkin. The Dems nearly lost New Jersey. These were not the only Republican improvements across mayoral, governor and state functionary elections across the USA.
What’s important is how global perceptions of the USA influence trade and markets – and how these change over time. For those of us brought up believing in the legacy of the US as the “Arsenal of Democracy”, post-Camelot, and America’s undisputed primacy among nations, the last few years of confrontation demonstrate the USA is no less venal and as likely to disappoint as any other nation.
I don’t give a hoot about what the trolls will say, but the Republicans lost the 2020 election because the people preferred the hope of Biden to the reality of Trump. 4 years of Trump darkened illusions about US democracy and shifted expectations America will always “Do the Right Thing”. The subsequent Trump denial of the ballot and the events of Jan 6th stunned the world. The World was collectively shocked.
No nation is perfect. Some show their imperfections more than others. Memories and the consequences of the Trump era will take years to be resolved. That said… if there is a global crisis tomorrow, I’m pretty darn sure everyone will pile into US Treasuries as the flight to safety trade, and US stocks will remain the ones to follow.. For now..
The Biden presidency is in deep trouble. Generally, the charge against him is he promised competency and failed to deliver. From Vice President Harris, the border, the bungled Afghan exit, rising inflation, and the failure to execute promised policies – everything he does seems to go against it.
The mud has stuck because Republicans have run one of the most successful political deflection campaigns of all time, reversing the “actualitie” by claiming credit for their reasonable approach to infrastructure and R&D spending, while negating the Dem majority by buttering up Democrat Senators Joe Manchin and Kyrsten Sinema and convincing them to stand against Biden’s “Build Back Better” spending plans. These two democrats (deliberate small “d”) have gifted the Republicans a win, and effectively destroyed the Biden presidency. Such self-serving grandstanding makes no sense to political observers outside the US.
The question this morning – might US politics be stabilising and showing signs it can move forward? If so… that’s a good thing.
My Republican chums are ecstatic about last night’s gains. They point to the Virginia election as proof voters reject the hard-left agenda of the Squad and Bernie Sanders – into whose malicious control they say the Democrats have stumbled into. They say last night was a rejection of hyper-woke sensitivities and ideologies being rammed down the throat of the educational system (such as it is). The point to voters increasing disappointment with Biden on crime, and especially higher taxes.
I had a message this morning from one chum, albeit a foaming-at-the-mouth college republican reptile, who equates the loss of the Virginia governorship as proof positive the American people utterly reject Biden’s reengagement with the Paris Accords and Climate Change legislative proposals that will “destroy the American way of life.” Whateva…
All bollchocks. What happened last night in Richmond was a just a local election won by the candidate who focused better on local issues. Fact.
BUT! The critical takeaway is Governor Youngkin won without mentioning Donald Trump.
Youngkin did accept Trump’s endorsement and then riled the former president by not mentioning him in speeches or campaigning with him. Rather than paying court to Trump, it’s the election-denying ex-president that’s been forced to try and associate himself with the candidate’s win. Trump has been forced to roll back earlier comments about Youngkin not being pro MAGA enough.
The Democrat strategy was to connect any strong Republican candidate to Trump. They argue how Republicans who voted against Trump are being forced out the party. That backfired this week. Youngkin won on local issues and education while letting the Dems whitter on about Trump, Trump and Trump.
Both US political parties suffer from similar perceptional problems: The Democrats are suffering from the charge they’ve been hijacked by the Hard-Left. The Republicans look like the political tool of Hard-Trump. These are the points defining US politics at present – and the source of the apparently unresolvable gridlock and political polarisation.
Every serious US politician knows the US needs to build better infrastructure, rebuild its education system, address inequalities, and healthcare if it is ever going to convince the World it is great again. But their political system has become adversarial and divisive it cant deliver – and won’t in the immediate future. Be prepared to write off the next 3 years. To move forward one party has to clearly win the next election cycle with a functional majorities (as opposed to the Dem’s current dysfunctional one).
My guess is the next election will be won by whichever party addresses its electability issues and moves back to the centre most effectively. It is probably already be too late for Biden to cement his 4 year term with a scaled back BBB programme. It looks likely he will lose his apparent majorities in Congress and the Senate at the mid-terms next year.
Last night’s success should be a wake-up to Republicans. The smart ones know Trump is too divisive, too old and likely to face increasing legal pressure. (Great story yesterday on Bloomberg about the recent SPAC of Trump’s pie-in-the-sky media empire broke every single SEC rule: Trump SPAC had a head start.) The Red Leadership watched Youngkin steal Democratic heartland by not playing the Trump card. The smart move would be to try and diminish the noise around their discredited former leader by quietly ignoring him in the hope he fades away.
It’s a risky strategy – the more noise Trump makes, the more the critical swing voters will be put off. But the longer they don’t act, the more Trump will be able to remove Republican leaders he perceives to be disloyal.
Where does that leave us? The possibility of US political sanity at the next election? Or larger risks through the next 3 years? China and the rest are watching.
Watch that space…
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Out of time, and back to the day-job
Strategist – Shard Capital