Last week we discussed how the Biden/ Harris ticket is actually the establishment proposition, a kind of ‘Blue Pill’ offered to the American people so that they can pretend that the world that Donald Trump has revealed doesn’t really exist. For fans of the Matrix – itself a take on Plato’s early philosophical concept of ‘the Cave‘ – this is the equivalent of the character Stryker telling Agent Smith that even though he knows the previous state wasn’t true, he wants to go back there as ‘ignorance is bliss’. He also tells agent Smith that he wants to be rich, someone important, like an actor which even back in 1999 when the film was made demonstrated the perceived media dominated hierarchy in the US.
To date, the main tactic of the Democrats has been to say little about the economy and certainly offer little insight into future policy, but rather to focus on identity politics and to drag their feet on Covid in the belief that Trump will be blamed for the economic consequences of the shut down. “Vote for us and it will all go away” seems to be the idea. However, this approach may not work as well as they might think. On Covid for example, should Trump make the obvious correlation between the relative success of Blue, Democrat controlled, States which imposed strict lockdowns and removals of civil liberties and Republican Controlled Red States, which generally were less authoritarian and yet have lower deaths, then the Democrats come off looking considerably worse. Indeed, eight traditionally Red States did not lock down at all and have not seen anything like the deaths of those that did. Trump certainly has the ability to shift blame from Federal Government – and by extension himself – onto local and state politicians.
An article published in June attempted to look at this phenomenon, puzzling why this should be the case, seemingly missing the point learned from Sweden that blanket lockdown may make things worse rather than better. The graphics however are instructive.
This is not to get dragged into the arguments over Covid policy, rather to say that should the Democrats think that Covid deaths could work in their favour politically in terms of ‘blaming Trump’, they may find in fact that it could be turned against them as voters blame local and state government instead.
The reality remains, however, that the base has hardly shifted for either party and the US Election is always determined by a relatively small number of so called battleground states. The second factor that may help Trump is the fact that several of them, like Wisconsin and Minnesota (Minneapolis), have in many senses already become literal battlegrounds and this is something we think should not be underestimated. The FT reports that background checks for gun registration reached record levels in June, with polls in other swing states like Michigan citing concerns about violence and demands by BLM to defund the police. The fear may be exaggerated, but we should not forget that, if Covid has demonstrated nothing else, it has shown how powerful a behavioral influence fear can be.
The relative silence by Joe Biden on the subject (not even mentioned in his nomination acceptance speech for example) is starting to sway Law and Order voters and make Democrat strategists nervous. Markets are starting to get a little twitchy as well. Undoubtedly this has been used to fuel some dollar selling in recent days as the narrative driven FX market seizes upon ‘ a reason’ for a trade and we should not under-estimate the feedback loop that comes from markets into wider perceptions, especially in the US. Op-Eds are also an important indicator and there were two very interesting and important articles in the UK last few days that were essentially making the same point; that the escalation of urban violence is giving Donald Trump has a very realistic chance of winning the US Election. The first, by Andrew Sullivan in the Sunday Times, made the crucial point that without law and order, nothing else can happen and that the violence and disorder on American streets can and will increasingly be blamed on the Democrats, not least because they are in charge at the city and state level in most of the regions where it is most extreme. The article is also available here with no paywall. The second article, by historian Andrew Roberts in the Telegraph, makes a similar point about the law of unintended consequences and how the fact that the Democrats have so far seen the violent Antifa and BLM protests as some form of useful provisional wing of the Democrat party with only minor reproaching may come back to haunt them. “Vote for us and we will put these people back in their box” is a risky strategy as voters may well see you as the problem rather than the solution. The irony is that the very people that hate Donald Trump the most may actually be his biggest recruiters. Moreover, the fact is that while the ‘Never Trumpers’ may be many and vocal, a silent majority that last time were deemed to ‘vote with their pocket book’ and thus imply it was all about the economy will likely this time be more concerned about law and order and vote simply to keep hold of that same pocket book.
Equity investors may feel that with the NASDAQ and S&P500 hitting new highs that everything is fine, but the Dollar and the long Bond are suggesting that international investors are taking down their dollar positions and standing on the sidelines. Pass the popcorn as they say.
