by Jim Rickards, Daily Reckoning:
This past month was dominated by domestic and international political issues with volatile headwinds impacting markets. Let’s survey the landscape to see what these key stories are. Some of them are well-known but have hidden twists. Others are not well-known at all but will have equal or greater weight as time goes on.
The Political Affordability War
The largest single political issue continues to be the affordability debate. Democrats claim that prices are too high and still going up and that incomes cannot keep up. This leaves Americans in the position of not being able to afford basics like food, gasoline and electricity. Steep price increases in categories like insurance, healthcare, property taxes and tuition are another burden.
TRUTH LIVES on at https://sgtreport.tv/
In short, Americans can’t afford to live a modest lifestyle, let alone aspire to the American Dream. Even older Baby Boomers who might be better off are distressed that their children can’t afford to buy new houses or cars.
The Republicans answer that the higher prices were caused by Joe Biden’s reckless deficit spending in 2021 through his pandemic relief act and in 2022 with the misnamed Inflation Reduction Act (which was the Green New Scam in disguise). Inflation did peak at 9.1% in June 2022 during Biden’s administration. Republicans say that gas prices are coming down (true) and interest rates are coming down (also true).
The problem for Republicans is that voters always blame the party in power for a bad economy even if another party was to blame. Although price increases are slowing down, they are still increases and come on top of the high inflation from 2021-2023. Lower interest rates are more a sign of recession than stimulus. And unemployment just hit 4.6%, up from 3.3% not long ago.
The Democrats are winning this debate even if Democrat policies are to blame for the problem in the first place. Trump is trying to turn the perception around with a campaign- style series of speeches and rallies, but campaign buzz can’t defeat the everyday experience of a bad economy. It’s too early to forecast the mid-term election results, but the affordability issue does not bode well for Republicans.
Geopolitical Tensions
Ironically, foreign policy has dominated the political news even in the midst of an affordability crisis and rising unemployment.
In global geopolitics, there are only three countries that really matter – the U.S., Russia and China. All others are secondary or even tertiary powers. This means the world is a three-handed poker game.
Poker players have a saying. If you’re in a three-handed poker game and you don’t know who the sucker is, you’re the sucker. In other words, two players in the game will coordinate to defeat the other before they turn on each other.
Nixon knew this in 1971 when he pivoted to China so that the U.S. and China could destroy the Soviet Union. It worked. The Berlin Wall fell in 1989 and the Soviet Union was dissolved in 1991. Today, the main enemy is China. Therefore, the best policy for the U.S. is to align with Russia to defeat China.
If the U.S. does not do this and allows Russia and China to align against the U.S., then we are the sucker. The U.S. seems to have realized this recently. So, I expect the war in Ukraine will end with a Russian victory. Much closer U.S. relations with Russia will be the result. This sets up some excellent investment opportunities in Russia once the dust settles and the current financial sanctions are removed.
Read More @ DailyReckoning.com
