Over the past few weeks I received numerous requests from readers to publish my predictions on the outcome of the midterm elections, but I did not do so for a couple of reasons. First and foremost, I view the election process very differently from many people. I do not see it as legitimate in the slightest, therefore my predictions of the past have been based not on voter turnouts, polls or any other such nonsense. Elections are molded events, framed under the false pretense that the Left/Right paradigm in politics is real. As far as the upper echelons of politics are concerned, the paradigm is completely theatrical.
To be sure, the average American does lean either “left” or “right” on the political spectrum. Such divisions are a natural part of social discourse. However, political theater is designed in most cases to drive citizens away from centrally shared principles of freedom and equal opportunity (not equal outcome) and push them to the far ends of the spectrum toward extremism and zealotry. And to be clear, there is no “good” form of zealotry.
Zealots are not self-aware, and they never subject their own positions to scrutiny. They operate on pure assumption that they are divinely correct in everything they do, and anyone who disagrees with them, even in the slightest, is an enemy that must be destroyed by any means necessary. Zealotry is the root of human atrocity. Zealots are a tidal wave of war and genocide. They are a cancer on the soul of mankind.
Certain groups of people within the establishment, namely globalists that desire total centralized control of every aspect of economy and society, prefer that the public remain as radicalized and divided as possible. For them, zealotry is an asset.
To pursue this goal, they purchase allegiance from politicians through various means, including financial favors, media favors and campaign contributions. There are very few people left in politics that are not part of “the club.” Both Democrat and Republican leaders are essentially on the same side — the globalist side. They attack each other with rhetoric, but when it comes down to actual policy and action, they are all very similar.
The outcome of elections is therefore erroneous in the long term. Their only purpose is to manipulate public psychology to a certain reactionary end game.
When I predicted the election of Donald Trump in 2016 many months before voting commenced, I did so based on which election outcome better served the interests of globalists. I concluded with the highest certainty that Donald Trump would “win” based on the same premise that drove me to predict the success of the Brexit vote in the U.K.; that premise being that the globalists would allow “populists” (conservatives) to gain an illusory foothold on political power, only to then collapse the global economy on their heads and blame them for the disaster.
At the time it was unclear whether Trump would play along with the globalist narrative of conservatives as “selfish bumbling villains.” Today, with his consistent relationships with banking elites and globalist think-tank members, it is obvious that Trump intends to play the role he has been given. Trump’s policy actions the past two years indicate that he is following a model very similar to the one Republican President Herbert Hoover used just before the crash of 1929. Trump was a perfect choice for the globalists.
So, the question I had to ask in terms of the midterm elections is, what outcome best serves globalist interests this time? The only conclusion I could come to in this instance was — it didn't matter who wins the midterms. The globalists will get their economic crash regardless and conservatives will still be blamed.
The ultimate outcome turned out to be mixed, with Democrats taking the House and Republicans holding the Senate. The assertion in the mainstream being that this will result in "political gridlock". In terms of stock markets, the reaction is not surprisingly euphoric, as it has been not long after almost every election event. But there are many that assume this is a euphoria that will last. This is a very short-term view of the situation that ignores economic reality.
It is certainly possible that equities will sustain a jump on the news of a Republican win, but I see this as a very limited event, lasting perhaps one or two weeks. In the long run as December approaches, stocks and every other sector of the economy will continue accelerated declines seen in October.
Here are the facts:
New home sales, an indicator highly valued by mainstream economists, has been in decline for the past year, hitting two-year lows in September.
This has come as a surprise to many mainstream analysts because the story thus far has been that the U.S. is in advanced recovery which should continue the supposed rejuvenation of the housing market. Alternative economists will give you the real story on home sales, though.
The housing “boom” hailed in the mainstream over the past few years was a farce driven primarily by corporate behemoths like Blackstone. Companies buying up distressed properties across the U.S. using cheap loans and bailouts through the Federal Reserve and turning them into rentals hardly constitutes a “recovery” in housing.
Regular homebuyers have also enjoyed artificially low mortgage rates for many years. But now, mortgage costs are spiking as the Fed raises interest rates, and corporate debt is becoming more expensive, making it less profitable for companies to continue vacuuming up properties. Add to this the fact that the Fed is now dumping Mortgage Backed Securities (MBS) from its balance sheet. These are the same securities that constituted a “toxic” influence that led to the mortgage and derivatives bubble. It is hard to say exactly what the effects will be as they add to existing ARM-style mortgages and derivatives already on the market, but I suspect the result will be destabilizing.
Auto sales, another fundamental indicator used in the mainstream as a signal for economic health, is also failing recently. U.S. auto sales plunged in September from 11 percent to 25 percent depending on the company and make of vehicle. While the mainstream media argues this massive year-over-year decline was due to destructive hurricanes in 2017 creating overt demand, the truth is that the average monthly payment on new vehicles has rocketed to over $525 and interest rates rise due to the Federal Reserve.
Car sales, new and used, have thrived in recent years in most part because of artificially low rates and ARM-like loans to people who cannot afford them. Much like the mortgage bubble in 2008, the auto bubble is set to implode as car payments become too expensive for the average buyer and defaults increase.
The US budget deficit climbed to six year highs under Donald Trump's watch in 2018 as fiscal spending skyrockets. Conservatives hoping for budget responsibility and reduced government spending are given a rude awakening once again, as Republicans and Democrats and Trump ALL seek bigger government. This is hardly gridlock. In fact, there has been resounding unity in Washington for ever increasing power, and ever increasing costs.
The trade deficit, which was supposed to decline aggressively in the face of Trump's trade war, has actually climbed to record highs with China (among other nations). I have heard claims that the outcome of the midterms will force Trump to end the trade war because he is no longer receiving backing from the Federal Reserve or Congress. The trade war will not stop. It provides perfect cover for central banks as they continue to remove artificial support from the overall economy.
Perhaps the biggest factor in economic decline in the U.S. will be corporate debt, as mentioned earlier. Corporate debt has jumped to record highs not seen since 2008, with debt-to-cash levels in 2017 hitting lows of 12 percent. Meaning, on average for every $1 of cash a company has in reserve it owes $8 in debt.
How is all this debt being generated? It’s all about stock buybacks. In 2018, U.S. corporations increased spending on stock buybacks by 48%, while only increasing spending on development by 19%. Meaning, corporations are spending far more capital, and borrowing far more money, just to keep their stock prices artificially propped up than they are spending money to invest in future growth.
For almost a decade stock markets have been dependent on two pillars: near zero interest rates and asset purchases by the Fed. Stock buybacks are reliant on low rates and the corporate ability to borrow essentially free money, which they then cycle into equities to buy up shares, reducing the amount of existing shares on the market and thereby increasing the value of the remaining shares through a form of legal manipulation.
But as the Fed raises rates and stops acting as the buyer of last resort, corporate borrowing becomes more expensive and buybacks will decline. In fact, the last half of 2018 shows a marked drop in announced buybacks, as the apparent peak in July fades. As December approaches, the Fed is set to match interest rates with their official inflation rate, or the "neutral rate". This is something that has not been done for decades.
I believe stock buybacks will falter at this time, as the cost of the exorbitant debt needed to continue propping up stocks will become too high.
In 2016, globalists needed a “conservative” president to sit in the Oval Office as the Federal Reserve pulled the plug on artificial economic life support by raising interest rates into the greatest corporate debt crisis since 2008. At this point, that program seems to be in full swing.
The midterms are now over, but it is important to understand that where economic consequences are concerned, the result would have been the same no matter who came out on top. It makes sense for the globalists to desire a dominant Republican party, for when they crash markets the blame would fall entirely on the heads of conservatives. On the other hand, it also makes sense for globalists to introduce a Democratic takeover of Congress, for they can continue to push citizens to further political extremes as the Left blames the Right for the financial crisis while the Right blames the Left for political interference.
In the meantime, the banking elites can simply blame the extreme political divide, wait until the crash runs its course and then sweep in after the dust settles to admonish the “capitalist structure,” barbaric nationalism, populism, etc. They will shake their fingers at all of us as if we should be ashamed and then offer their own solution to the disaster, which will surely include even more centralization and more power for the banking class.
The Fed will continue to raise rates and cut assets. The trade war will escalate. The housing market will continue to falter, auto markets will implode, and corporate debt will become a millstone on the neck of stock markets.
Economic function and repair are far beyond the scope of any political body to fix when the dysfunction reaches the point we are at today. To believe otherwise is foolhardy. To believe that the political elites actually want to fix the economy is even more foolhardy. The answer is not replacing one set of political puppets with another set of political puppets, but for regular people to begin localizing their own production and trade — to decouple from dependency on the existing system and start their own system. Only through this, and the removal of the globalist tumor from its position of power and influence, will anything ever change for the better.
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