Elections used to be decided on the night of election day. Calls for one candidate or the other were rarely disputed and the simplest reason for that was that margins were never this tight and people had confidence in the election process and tabulation results. Not so today.Though you could say the popular vote is the proper gauge, it really is like a 50/50 nation and likely to remain so for the foreseeable future..
I've voiced some opinions on policy preferences especially against drunken sailor spending that will in time destroy the value of the USD. Unfortunately, no matter which candidate wins in the end, the spending will continue and the ultimate outcome similar enough to say it doesn't make much of a difference. I realize that could be offensive to the various sides involved, but history proves the point. Bush spent big, Obama/Biden spent big and Trump spent big. In this way, we really have one political party. the SPENDERS PARTY. Now there's a big tent if ever there was one.
On the plus side, some restraint might enter into the future if the GOP keeps the Senate and creates a split governance in Congress. The stock market likes that so we're seeing some rallying today. I think that will be short lived if Biden wins out because he is very likely to roll back regulation changes made by Trump using Executive Orders and maybe even add more new regulations that are costly to business. He also campaigned on raising taxes, a good way to slow the recovery. Executive Orders bypass Congress and more regulation means more money spent to fulfill their requirements and that means less money to expand and/or hire. Generally, my observation is that though some regulations are needful, many are just a drag on business, bureaucracy flexing its muscle wresting centralized control and used to favor one way of governing or another. A double dip recession becomes more likely if business is slowed and the covid recovery balked again by closures etc.
Should you worry? I am not a fan of fear as a motivation in business. There may be some nasty results for business going forward but those that survived covid should be able to return to a healthy pace soon and schools reopen fully and some sense of normalcy return. Trump's policies were pro-business but Biden will have some favored businesses too and maybe it shakes out less horrid than some expect. My assessment is to not be particularly afraid of who wins the Presidency, but who controls the Senate. That may take some time to get the final numbers so hang in there but not with fear. Both the GOP and the Democrats, love spending so that is virtually assured to continue and my admonitions about the value of the USD gradually or suddenly become important observations. Grid lock gets a bad rap, but a slowed Congress spends slower. A House run by the Democrats and a Senate controlled by the Republicans offers some guarantee that nothing too outrageous happens. If the run offs in Georgia give the Senate to the Democrats, there is little other than Constitutional challenges in the Supreme Court that can slow things down and it is my belief that we could see the biggest spending spree ever. The Democrats lean heavily toward social programs and that of itself is not a bad thing. It is the degree or size of the program in terms of dollars and how it gets paid for that concerns fiscally responsible folks. Unfortunately, how something gets paid for is no longer a big subject because everyone in Congress drank the kool aid and is on board to letting the Federal Reserve print at liberty. Eventually the USD becomes so inflated in supply that real inflation in the price of things we all must buy hits back. Fiat currencies are subject to this kind of manipulation and it's actually a rather popular approach worldwide so the USA is not the lone bad actor. This won't end well and the election is merely a blip that might change what exactly the printed money is spent on but be assured it will get printed and spent. The big picture still is drifting toward insolvency.
Buy some Gold and/or Silver and invest in foreign markets if you are in the market. These will benefit from the US spending and USD fall and hedge your spending power. This is not unpatriotic rancor but rather pragmatic advice in turbulent times. In the world where i do my work, insolvency is to be avoided. An insolvent business can't print money and no one wants their bonds and certainly banks won't lend to them. Insolvency means you go bye bye and cease to exist. That can and does happen to sovereign nations. It almost goes unreported in the normal circles, but wonks like me and others watch it with concern. When a country defaults on its debt the people living within its borders suffer. Just this year of 2020 Ecuador, Lebanon and Argentina defaulted. Life is a miserable mess in these countries and more are likely to come exacerbated by Covid-19. The world is on a collision course with more countries defaulting, more countries credit ratings getting downgraded and more suffering populations as a result.
Nations used to hold gold and silver and it might be news to many that the USD and other currencies were once backed by gold and silver. This precious metal backing was called the Gold Standard and in whatever wisdom he saw, President Nixon took us off of the Gold Standard in 1971 and in doing so, opened the door to Fiat Currency printing by the Federal Reserve. Money is no longer sound as a result and is almost totally valued by the confidence of the people using it. When confidence goes, so goes the currency. In the business world, one monthly payment missed is OK, two a little problematic, three a warning flag and this tightens and eventually a company will either seek protection under Bankruptcy Laws for reorganization which always means someone takes a haircut on what they're owed, or they proactively close and liquidate to satisfy debtors. In the world of Nations, bankruptcy is a serious event because it has rippling effects into society and that means people's lives get upended. Sure, there are caring Nations that might send aid, the IMF might make some loans to help out, some enterprising entrepreneurs and charity groups might even try helping ...but it is the people of these bankrupt countries that pay in misery. Financial failure for an individual or even a company isn't necessarily complete and utter failure. Some come back and regain solvency. But countries have a spiral that is time sensitive because a financially failed country can quickly become a a FAILED NATION where law and order and anything one can call good governance are absent. These are dangerous places.
I am not predicting that the USA will become a failed nation but I am pointing out that the confidence is the USD can change due to all the fiat currency printing and a refusal or inability for Congress to reign in the spending. Eventually, the bonds are deemed worthless, no one wants to lend, taxes must be raised beyond any sensible and sustainable rate and the economy of real people and businesses gets whacked. This surely is the stuff that Depressions are made of but also the stuff that failed nations are made of. Civil unrest can get very ugly when people are hungry, can't pay their rent, are out of work. Take a look at Argentina with open eyes. Please don't say it can't happen here. It can. It gets more likely as the USA gets more insolvent and confidence drops. The elixir I'd like to see concocted is a return to the Gold Standard which would put confidence in the currency back in order, constraints on the spending with a balanced budget amendment to the Constitution and a return of the line item veto and realistic plans/laws put into action to put a damper on free money social spending. Placing emphasis on real help that gets people gainfully employed and out of the vicious victim hood cycle. Sure some will need safety nets and I'm for that. I'm also for charitable acts by groups and individuals/businesses. But the accent should be on good real world education, sound money, excellent fiscal controls and gradual debt reduction. Production and the money it garners cures a lot of the ills in society. Help make people able and productive and they'll take care of the rest. I'll support any administration that does these things. Here's hoping.
Best of Luck to you!
Donn Marier
Dm-Your Own CFO