December 1, 2020
My Dear Reader,
While there is certainly uncertainty around the results of the 2020 election, and there will continue to be uncertainty until at least December, as it stands now Joe Biden will be the next president. As surprised as I am that that sleepy Joe was able to pull off the victory, the questions that his ascendency to the office will create are perhaps more consequential than the ones being asked right now. First and foremost is how long Joe Biden will actually be president. His obvious decline in cognitive ability was shielded by the media during his run, but it will only be a matter of time before the same media turns their guns on him and attempts to force the candidate that the Democratic brass really wanted, Kamala, into office. While this would be perfectly constitutional, think Gerald Ford and Richard Nixon, I believe that at this juncture, a transition into a Harris presidency would be generally unwelcome. This is a nice way of saying that the current societal pressure that the left has put on the right may snap if the right feels that the left pulled a “bait and switch” and that Kamala was unelected. However, without a clear idea of the timeframe of such an event, its all just speculation. More importantly, what does a Biden administration look like in terms of tangible policy?
First and foremost, I believe that Joe will reverse our geopolitical course with regards to the Middle East and with China. Let’s not forget that Joe Biden was part of an administration that preferred supplication to the Iranian regime, the worlds leading sponsor of terrorism, to suppression and action. Similarly, Joe Biden potentially knowingly took money from the Chinese government and allowed them to infiltrate the WHO and the UN during the Obama administration. This is bad news for developing countries that may fall under the sway of Chinese officials looking to expand the Communist nation’s influence. While the Trump administration was able to show how vulnerable the Chinese economy and government structure is by way of the tariff, we know from past history that a Biden administration will seek to enable Chinese aggression.
What matters to all of us though is how this new presidency will affect your wallet. It is quite clear to me that the Biden Harris administration will pass stimulus legislation that was held up by Speaker Pelosi at the end of the Trump administration, in order to score political points with the public left and with the media.
In understanding the potential damage that the stimulus under a Biden administration would cause, it’s important to note one of the seldom-discussed financial mechanic of inflation.
In a Forbes article from August 4th of 2020, Mary Anne Aden and Pamela Aden, who are co-editors of The Aden Forecast gave a detailed history of the rise of precious metals, and in their article, there are a couple of key points that I believe that we should understand,
“Going back a few decades, gold started its current bull market in 1971. That’s when the U.S. dollar went off the gold standard, and gold and the dollar began trading in the free market. Prior to this, the gold price was fixed for several decades. But suddenly gold was set free, by breaking the Bretton Woods agreement and it began to soar. It started out gradually but then the movement gained momentum and in the following 10 years the gold price skyrocketed 2,329%, from $35 an ounce to $850. It then declined for about 20 years, until reaching a major low in 2001. This coincided with the end of the stock market’s tech boom and bust. Interestingly, this also coincided with the early stages of Fed intervention. That is, Fed Chairman Greenspan at the time worked behind the scenes to prop up the stock market. And as Tom Dyson summed up, “that’s when the seeds of massive money printing were sown.” This became openly obvious after the 2007-08 financial crisis. This crisis was so serious, it literally brought the U.S. economy to the brink, which caused government officials to make hard decisions, and fast.”
In essence, the late 2000s financial crisis showed us a hellish reality with regards to the government and the prime rate, where the economy is stimulated by the continuation of low rates, but that those low rates have also hurt traditionally safe positions such as bonds and their long term yields. At least in the late 2000s, we could argue that the bail-outs were buying GDP growth and attempting to soften the fallout from the mortgage crisis. However, in 2020, all of the current stimulus and proposed stimulus has been enacted to simply tread water.
In the immediate ascension of Joe Biden to the presidency, the questions that will have to be answered will have to center on whether or not he will enforce a nationwide lockdown to coincide with the stimulus bill that will inevitably pass through congress. If there is no lockdown, but the vaccine is on the market in early January and the stimulus bill passes through congress around the same time, economic recovery will be swift. However, this will be a mirage in so far that the economic growth would be generated by the Trump-era cuts and economic policy that guided the country from 2016-2020.
The growth potential does not wash away the underlying issues with our current economic situation, however. Following in Europe’s footsteps, I believe that the bond rates will continue to decline in order to accommodate the prolonged rate cut. Naturally, this could force more and more aggressive investment strategies.
In the end, the election will have far greater consequences for the American wallet than the American conscience. With the Senate likely to remain in Republican hands, any sweeping changes, such as the green new deal will not be able to pass in the first two years.
To Your Creation and Potential,