By every conventional measurement - by the unanimous verdict of the polls, by the unanimous outlook of US political pundits with proven track records and by the "popularity" ratings of the candidates - the US mid term elections next Tuesday are an almost foregone conclusion. There is absolutely no doubt about the House of Representatives, the Republicans will lose that. The only remaining doubt is whether they will also lose control of the Senate, where only one-third of the seats are up for grabs.
The "stature" of the Republican party incumbents clinging so desperately to power is best illustrated by the gutter nature of their advertising. The "stature" of the opposing Democrats is best illustrated by the now limp rubber stamp which they have used to endorse almost every political outrage committed by the Republicans over the past six years. Indeed, the most encouraging development of the campaign so far is the large number of voters who are going to vote AGAINST the incumbent regardless of party.
Of course, if this were to become a defining attribute of the vote, the Republicans would lose power simply because they now have the majority of the incumbents in the Congress.
Please note that at the top of this piece, we talked about "conventional" measurements. This election is going to be different. It will certainly not be the first time that various "tricks" have been used to "sway" the vote in one direction or the other. There has never been any shortage of that in any "democratic" election, in the US or elsewhere. There is abundant evidence that Mr Bush owes both his election triumphs to such machinations. And he is certainly not the first President so favored. There is equally abundant evidence that Mr Kennedy owed his 1960 victory to similar doings as did several Presidents before him.
The difference this time is that the outcome of these previous elections was always seen as being uncertain and the polls were too close to call. That is NOT the case this time. If the Republicans retain control of both Houses in 2006 in the face of such overwhelming evidence that the voters are ready, eager and willing to toss them out, then the legitimacy of the entire voting/political process in the US will inevitably come into grave question.
As we said in the current issue of The Privateer (Number 564 - Late October 2006 - Published on October 29) - "This Is A US Election About POWER - Not Party". On the one side, there are the candidates from BOTH major parties. Their goal is either to retain or gain political POWER. On the other side is the American citizen. Their goal is, or should be, to wrest political power from the hands of those that hold it at EVERY opportunity. That is the only peaceful manner in which they can emerge from under the power structure which Washington DC has become. Ignore party, they're both the same. Just vote the incumbent OUT - every chance you get. And as an American, you get the chance every two years.
If the Democrats gain control of the House, they gain control of the "Committees" and can then, if they so choose, make life very nasty indeed for Mr Bush and his Executive. If the Democrats gain control of the Senate too, they can still do all that. But they will have a problem. They will no longer be able to get away with wielding their rubber stamp because they will be the Legisletive power in the land.
This is not a palatable position for the Democrats, who have long much preferred to run against something than to stand for anything, as witness their spineless performance in Congress and during the 2004 Presidential elections. Remember what happened to the last Republican President (Nixon) who took over a failed war from his Democratic predecessors (Kennedy and Johnson)? The Democrats remember it well, and they do not want to be in the same position after November 2006, let alone after November 2008.
Suffice it to say that whatever the outcome of next week's mid term US elections, political uncertainty and the potential for political upheaval is going to increase dramatically in the US. On the financial front, Gold is already registering that inevitable fact with its BIG price jump this week. Financial markets in the US positively thrive on war and they can get along well enough even in times of economic malaise - as witness their performance since the turn of the century. But what financial markets - particularly the markets in financial paper of all descriptions - don't like is POLITICAL uncertainty.
Modern paper financial markets thrive on economic and monetary manipulation by the "powers that be". Political uncertainty and/or growing political chaos puts in danger the continuing ability of those powers that be to continue to manipulate money, interest rates, credit etc in the way to which the markets have become accustomed. Hence their aversion to such a prospect. And hence the observation that a rising Gold price is an advance indicator of future rising politican uncertainty.
Nothing is certain about the outcome on Tuesday, November 7. It is certain that the vast majority of American voters strongly disapprove of the Bush Administration and both the Republican majority and Democratic minority in the Congress. They have ample and abundant reason to do so. But the prospect for the US and global economy and financial system is much clearer. The longer and more tenaciously those in power in the US cling to their empire, the closer grows the collapse of their internal economy.
An external empire always means internal impoverishment. The two are proportionally direct, the bigger the empire the greater the impoverishment. The US has been disguising this state of affairs by means of rampant credit creation for decades. The result is a debt burden totally out of control and impossible to repay. At the foundation of it all stands a currency called the US Dollar, the reserve currency of the world, backed by nothing but political promises and the taxpaying ability of future generations of Americans. The promises were never worth the paper they were printed on and the productive infrastructure of the US is dwindling as fast as is the productive portion of the population.
The great danger for the global financial system is that after November 7 in the US, the old standby of "politics as usual" will no longer suffice. One can legislate to destroy wealth, or to consume it, but one cannot legislate to create wealth. Without REAL wealth, the US cannot repay its debts. Without a credible future of debt repayment, those debts cannot stand. Without confidence in the debts, the currency which is based on them cannot stand either. The prospects are becoming more real as the election approaches. And this week they were reflected in the Gold price - beyond the ability of any amount of political power to contain.