A landslide victory that shook the country, but not the system

The US midterm elections took place on Tuesday. It was a historic moment, though not unprecedented.

The Democrats have swept both the House and Senate, with massive gains in both chambers.

The Republicans lost several of their strongholds, with the governorship and Senate seats in Iowa, Kansas, South Carolina, and even Texas falling to the Democrats.

It’s widely tipped that the Democrats could have over 250 House seats and 55 Senate seats.

The result shows a clear rejection of the Trump administration’s key policies. The war against Iran was the biggest issue, along with the enforcement against illegal immigrants, the cost of living, and the perceived inability to root out corruption (including those connected to Ghislaine Maxwell and Jeffrey Epstein).

Consistent with history, the opposition party won nearly 90% of the past midterm elections since the 1930’s, often resoundingly.

Some may perceive this as a victory for the Democratic Party. But both parties have negative favourability ratings. Therefore it’s better characterised as a massive protest vote against the Republicans.

Hence, the next two years will see what unfolds, although markets expect gridlock and internal wrangling. None of these benefits the country.

There may be a sense of vindication and relief from those who voted against Orange Man Bad and his party in this election.

Many of you know my stance and political leanings. I’m not afraid to state that this was a disappointing outcome for me. But I’m setting aside my preferences to share my views about what lies ahead. Incidentally, it ties in with what I discussed just two weeks ago about the riots that gripped parts of Europe and the challenges Western civilisation faces today.

A protest ballot against promises
made but not kept

Going into the midterms, the Trump administration was sailing into increasingly hostile territory. President Trump had an average approval rating of 39%, suggesting his party was poised to lose seats.

At the top of the grievances against the administration was the impact on the economy from the Iran war. In various polls, between 60-75% of respondents stated it was the key issue they considered in casting their vote. This conflict was controversial for reasons ranging from fears that it would be a repeat of Afghanistan and Iraq under both Bush presidencies, along with the Balkan wars and the Arab Spring under the Clinton and Obama administrations.

The impact of the war in Iran is well known, as it drove oil prices to levels last seen in 2022. While initially this was due to the Iranians threatening safe passage through the Strait of Hormuz, the resultant US bombardment of coastal installations and a naval blockade partly mitigated that. However, the damage was done. What followed was not so much a lack of oil flowing out of the Middle East, but insufficient refinery capacity worldwide. This was because the world relied heavily on refineries in the Middle East and Russia, as many Western nations had adopted policies to scale down fossil fuel production and usage in the past decade.

High oil prices hit the global economy, spurring inflation and raising living costs for businesses and households. This was not a partisan issue as it affected everyone.

I believe there was also a not-insignificant portion of voters for President Trump and the Republican Party in 2024 who may have sat this election out or cast a protest vote over what they perceived as an inability to root out corruption in Washington. The Trump campaign had run a campaign to ‘Drain the Swamp’, specifically targeting those who were associated with Ghislaine Maxwell, Jeffrey Epstein, along with non-government organisations (Neville Roy Singham and George Soros’ networks, the Clinton Global Initiative, the Southern Poverty Law Centre, etc.), large corporations (Big Pharma, banks that funded the Maxwell-Epstein ring, etc.), and foreign governments.

While there has been progress with arrests and indictments on both sides of the aisle, domestic and foreign operatives, citizens, etc., many felt that this wasn’t enough.

Then there was the issue of immigration and border security. Violent crime has plagued major cities across the US. There have been many incidents that are related to gangs comprising illegal and undocumented foreign citizens, aided by NGOs, district attorneys, judges, and people who sympathised with them. To crack down on crime, the Trump administration and the Federal Bureau of Investigation deployed ICE agents to seek, detain, and deport these people. While crime did decline in some of these cities, this move was controversial and polarised public opinion.

This issue played a role in shifting voter sentiment, with 57% of those polled saying they were concerned about the measures being employed. This may have also contributed to energising a Democratic and progressive voter base to act.

The opportunity presented in the first two years has come and gone. Now comes a change in the script when the next Congress is sworn in on early January 2027.

The venting is loud and clear,
but what changes will this bring?

So what’s in store for the US and the rest of the world from here?

The votes reflect a voice demanding change against what the current administration has led the country to.

What are they seeking and how will this affect the country, and the broader world?

It’s at this point that I want to cast you back to my article from a fortnight ago regarding the riots in parts of Europe.

For several decades, Western civilisation has been the new home to many who migrated from or fled their countries of origin in Asia, the Middle East, Africa, and South America. These people saw the opportunities and better living conditions in the West. And the locals gradually accepted these migrants for various reasons, ranging from goodwill, business opportunities, and compassion.

Society transformed over time, as did culture. The West adapted the traditions and livelihoods of its migrants as their influence increased with the size of their communities. Not only did it accommodate these people within its own countries, but it also intervened in these countries and regions.

In the case of the US, it became the world’s hegemonic power in the 20^th century, taking over from the British Empire. It shifted from its focus on domestic affairs to foreign intervention, involving itself in many major wars last century, such as World War 1, World War 2, the Korean War, Vietnam War, etc.

With each involvement, it bore increasing financial and moral burdens. Domestically, government debt increased, leading to more taxes, regulatory burden, and increased cost of living. As a result of its foreign policies, people who were displaced by these conflicts became refugees, some of whom migrated to the US or were accepted under humanitarian programs. This further increased the welfare spending for its people. As their numbers increased, they became a political bloc, finding allies among those sympathetic to them.

The rising costs borne by the government led to the US economy becoming less productive as taxes and welfare programs redistributed resources from the productive to those who are in need. Coupled with policy changes to increase aged care, welfare spending and lower immigration barriers, the US became a more appealing destination for migrants. And with successive waves of migration from different nations and cultures, existing values transform into a more pluralistic set. In time, this cycle is self-perpetuating.

I may be simplifying the relationship, but hopefully you get the idea of the spiral that the US, along with most Western nations, has found itself in.

And today’s protest vote in the US is simply bringing it into one more iteration of this spiral. Unless the Trump administration and the incoming Democratic controlled Congress find common ground, the next two years will be a tug-of-war that threatens to increase the government deficit, stifle the economy domestically and abroad, and leave more people dependent on government assistance.

A mindset that voting cannot solve

I believe that a democratic voting system has helped Western civilisation advance more rapidly than many other civilisations. Providing people with a voice, rather than resorting to brute force to change leadership, has mitigated widespread damage and destruction that set a society back by decades, if not centuries.

However, I’ve mentioned before that the breaking point for the West isn’t in governance structure, but in its cultural mix.

We’ve seen that not all cultures are compatible with Western values. The West upholds (to varying degrees) equal standing under the law, freedom of speech, basic human rights, and reciprocity of treatment. Instead, some people see their beliefs and nationalities as superseding the host country’s values. When they defer to those at the expense of Western values and society as a whole, this creates conflict. We’ve seen that manifest itself increasingly across the West.

These days, a voter often faces a difficult dilemma: voting for the good or the harm of their own country. This midterm election was particularly evident.

As an example, voters faced this. The first was to repudiate an administration they believed was overreaching and abusing the office, both at home and abroad. The alternative was to approve a party that included a sizable faction that advocated for more radical changes to the country’s traditions. That risks further polarisation of the people.

How did they get to this? I’m not just talking about this specific election; across the West, it stemmed from a cumulative effect of past elections, driven by how people viewed society and government.

They departed from their core values.

They adopted short-term thinking.

They externalised problems for the government to solve.

They let smooth-talking candidates tell them what they want to hear.

Eventually, they are left at the ballot box to hold their noses, either to cast a vote or not vote at all.

Going forward, we could be in for a sobering and uncomfortable lesson we all must live with.

Preparing for what’s ahead in Australia

The US midterm elections may seem detached from us living in Australia. We face bigger problems here. The Reserve Bank of Australia just raised the 24-Hour Cash Rate by 0.25% once again on Melbourne Cup Day. This is the fifth rate rise of the year, bringing the rate to 4.85%.

Unlike the US where the Federal Reserve raised rates in an economy with a relatively strong GDP, our economy is stagnating under weak house prices, a slowing job market, and increasing government bloat.

We had elected the Labor government in a landslide victory similar to the US midterms yesterday. It had promised us that it would address the problems of affordable housing, job creation, fairness for all, and the budget deficit. Yet we saw how the recent Federal Budget may end up dealing a crushing blow to the country’s economic prosperity.

We could take our chances and wish that the next elected government will turn around the economic stagnation and bring us back to prosperity. Except we’ve learned over time that the government’s role is more about redistribution than spurring productivity.

Protecting our wealth and navigating government bureaucracy are indeed key priorities for us.

Despite my seemingly ominous tone in today’s article, I’ve found one glimmer of hope.

As you guessed it, they’re gold and silver. I know I’m talking my book here, but you might have noticed that gold jumped by more than US$100 an ounce (~AU$140) and silver by more than US$2 (~AU$2.80) as the market confirmed the election outcomes.

Investors are expecting the gridlock to stifle the US government’s ability to progress smoothly. A slower growing economy may temper inflation and cause the US Federal Reserve to reverse course on raising interest rates.

Perhaps this is the silver lining in what appears to be storm clouds gathering.

If that’s something you want to investigate further, I’d like to invite you to check out my precious metals investment service, The Australian Gold Report. Here, I guide my readers through the different precious metal assets, their risk-reward profiles, and how to invest in gold and silver stocks to build their wealth.