Geopolitical Update : US elections outcome too close to call, but one side counts it a setback

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By Christian Takushi, Macro Economist & Geopolitical Strategist. 4 Nov 2020 (adapted release to the public delayed by 6 hours)
The much expected Blue Landslide of Democrats taking the White House, Senate, House and governor seats has not materialized. Having followed the polls almost blindly once more, Democrats are hurting and many of their thought leaders confess this publicly.
CNN’s political commentator Mr. Van Jones said it most succinctly last night „the Democrats failed to obtain the moral victory – this hurts“. Looking at the way the Democrats played the year 2020, a moral victory was indeed as important as the political one at these elections. Despite a devastated economy, racial violence and Covid19 they could not carry a massive moral and political victory. 

First Analysis

The massive sweep the experts and polls were predicting for the Democrats simply didn’t materialise. This is what we have been predicting for the past four weeks. In the most important race of 2020, the U.S. Senate, the Republicans are poised to hold on to a majority. In the House of Representatives and among governors the Republicans are even gaining ground. In the race for U.S. President, Mr. Trump holds a lead in the biggest two to three open races. In the crucial state of Pennsylvania, the most contested battleground of 2020, Mr. Trump holds a 12% lead with 75% of the votes counted already – these are 600’000 votes.
Although the three races are officially still open, Elections 2020 started with a setback for the Democrats. Maybe also, because they exceedingly relied on the polls and experts – with those polls and experts feeding each other and predicting victories for Mr. Biden with 10% and even 16% margins. Now people see Mr. Trump leading in the most contested battleground with a 12% lead. How could this be? To some extent it is 2016 and Brexit all over again – there is something flawed with consensus among experts and polls. Democrats are now hoping for late counting of mailed ballots to help close the gap. Regardless of how this now ends,  the 2020 race turned out to be a moral and psychological Waterloo for the Democrats. This was supposed to be a thundering verdict against President Trump and the Republican party, but it seems that swaths of the American electorate are willing to differentiate between the policies of Mr. Trump and his personal behaviour.
Even moderate Democrats are beginning to ask – how could we fail to capitalise on a devastated economy, Covid 19 and the race-related violence of 2020? Here the preliminary results.
Looking at where America was just 4 or 2 weeks ago, Republicans can be reasonably happy. Four weeks ago with President Trump at a hospital conservative strategists feared a disaster. They have made a tremendous comeback and defended the Senate. With a conservative Senate and a conservative Supreme Court, a potential President Biden cannot simply do all he wants, more importantly he cannot “pack” the Supreme Court with liberal-activist judges until he has a liberal Supreme Court. This “packing the Court” slogan of his Progressive Left Wing was among the several mistakes that cost Mr. Biden many votes over the past 4 weeks. Yes, the Democratic party risks a break up soon or later.

More than 80 million early voters and a paddled illusion 

The big numbers of people voting by mail early made Democrats glad, although the ballots that were being returned did not confirm the 2 to 1 margin (Democrats to Republicans) they had championed – this, without journalists and experts sounding an alarm. The press spread the notion again and again that two Democrats would vote early for every one Republican that would vote early. Looking at the massive early turnout ahead of Election Day the Democrats felt this was confirming their massive lead in the polls. Hence the Blue Wave expectation. I kind of feel for the Democrats, but good intentions, genius and money can still end up fatally if one ignores truly independent expertise & external corroboration. The pollsters, the media, the experts and the DNC have some amazing people on staff, but they feed each other and are to some extent in the same boat. They ended up feeding and paddling the same illusion – and this ultimately hurts their credibility among their sympathisers on the fringes. Without this self-fed deception, they would have taken corrective action earlier.
Under the smokescreen of the polls and media many Republicans quietly joined the early voting, turning the 2:1 Democratic advantage to a rather slim 55 to 45 or 60 to 40 proportion in several regions. In states like Michigan Republicans returned 400’000 more ballots before Election Day than Democrats. This was followed by a massive turnout by Republicans for President Trump on Election Day itself. I believe this averted Biden’s landslide and Trump’s disaster. In the following days we will know more details, but one thing is clear, Latinos and probably Blacks as well didn’t turn out in the massive way for Biden as the polls had suggested.

Could Biden pull a victory? Yes

I expect late vote counting to be in favour of Mr. Biden, except for Michigan and to a lesser extent in Wisconsin. In Michigan many Republican voters decided to send in their ballots early. Thus, with the rules as they are at this hour – if unchallenged in the courts – Mr. Biden could win the Presidency.
Many liberal minds are afraid of the conservative judges in the Supreme Court. But they don’t need to be really. Unlike some of their liberal counterparts, most conservative judges don’t see themselves as activists, rather the opposite, they may often even shrink from even looking like favouring a like-minded person. I see the current conservative US Supreme Court judges as following the letter of the law and their moral values, rather than a conservative political agenda. This may ironically favour the Democrats in the potential litigation to settle the 2020 presidential race.

All the three races are open – but the Senate matters most

The only race where I currently see a clear path for a party is the one for the U.S. Senate. There the Republicans seem poised to avert a Democratic majority. The Senate race is crucial in 2020. Without control of the Senate and with a conservative leaning Supreme Court, a future President Biden will be somewhat limited. He would have to rule via executive orders. Even if conservative judges are less aggressive than their liberal counterparts, conservative federal judges (applying law as it was written) would put some limits to a Democratic executive branch. The Senate would also put a limit on what the House could legislate.
The House race is open, but here too, it seems the Republicans are holding their ground.

Mailed ballots and softened criteria could decide the White House race

Some state races today are likely to be decided by the mailed ballots and possibly by the adjusted (softened) criteria that validate them. Here I also find the media coverage of the matter selective in the details it leaves out.

Ballots with faulty signatures and voters without proper documentation are a contentious issue and the kind of controversies that could lead to a Civil War in the United States in a not too distant future. Packing your electorate with lax immigration & lax validation criteria is as contentious as packing the Supreme Court.

Long term I see the Democrats overcoming the 2016 and 2020 setbacks and being successful as their strategy plays out with a certain delay. Nevertheless, the Civil Violence (Civil War?) that will accompany their advance could cripple the US economy and allow other powers to gain significant control over the United States. Conservative voters are sometimes upset I say something like this, but I tell them my analysis as it is, liberal forces are far better organised and more selflessly dedicated to their cause than conservatives – the latter have no overriding vision, are underfunded and they fight each other on every minor difference. These external powers already have significant support from within the USA.

What’s next?

President Trump already has said he believes certain states are not calling the race for him as they wait for more mailed ballots until they can call the state for Mr. Biden. As a result he said this may go to the Supreme Court.
Worthwhile knowing: Democrats are demanding that judge Amy Barrett recuses herself from ruling over state vote-validity, thus indirectly on who the next US President will be. But a Supreme Court judge can only recuse himself or herself on his or her own accord. No one from the outside can impose this on them.

Financial Markets


The biggest problem – rescinding one’s duty for ideology or gain

Regardless of who wins the White House these two issues remain among the biggest structural moral problems for Western society – and they preclude the irreversible decline of the West 
  • Financial markets have rescinded their oversight duty over governments – Markets watch idle and remain silent as policy makers print paper money to buy bonds and stocks – especially of de facto near bankrupted companies and states. Many are too quick to blame money managers – it is often clients that no longer want to see a down year in performance just as consumers don’t want a down year in GDP growth. This is systemic. ESG tries to improve governance in micro realms, while at the macro level governance is broken
  • The press has also rescinded its oversight duty over the Political Process. Rather than reporting or analysing, journalists use their positions to advance their personal ideological views. The press sees itself now as a driver and major influencer of the Political Process. The press is keen to highlight any possible foreign government meddling into domestic politics, but it is blinded to its own efforts to influence public opinion and its own meddling into the Political Process. In a time of hyper activism, many think the goals sanctify the means.

My personal thoughts

Considering the economic devastation of 2020 and looking at where the Republicans were just four or two weeks ago (Trump down with Covid), this tight race now with a potentially conservative-leaning Senate is a stunning result. It may enter history as an impressive turnaround and lesson on damage control. As I said earlier – if elections would be two weeks later, Trump would probably sweep the board.
Even if Mr. Trump fails to win a 2nd term, he has already rendered a huge service to the conservative cause. Against the odds he was facing this Fall, few political leaders on the left and right would have been able to turn around such a certain defeat into an open race.
There is nothing for democracy like a clear victory that is called in the election night and conceded by the other candidate. That was 2016, but not 2020. Even if the Democrats can pull this one, a protracted and contested victory will not yield the strong mandate they had hoped for.

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By Christian Takushi MA UZH, Independent Macro Economist & Geopolitical Strategist. 4 Nov 2020 (adapted release to the public delayed by 6 hours)

Disclaimer: None of our comments should be interpreted or construed as an investment recommendation

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(a) All nations & groups advance their geostrategic interests with all the means at their disposal

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(e) Takushi only writes when his analysis deviates from Consensus

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