How the Midterm Elections Could Impact Your Finances

midterm elections 2022

It’s not an exaggeration to say that our country isn’t doing too well right now. Just about everything that could go wrong has gone wrong.

We’re seeing the highest inflation in over 40 years, the possibility of stagflation that we haven’t seen since the 1970s, and the economy is starting to slow down. Millions of American households are finding themselves between a rock and a hard place, pinched by rising prices for food, energy, and housing, while their paychecks aren’t rising nearly as fast.

Against this backdrop we have midterm elections coming up soon, with the possibility of real changes in Congress. The consequences of this election could change the trajectory of this country for years to come, so a lot is on the line. But how might various electoral outcomes impact your finances?

The First Two Years of the Biden Administration

Even many Democrats would admit that the first two years of the Biden administration have been horrible. High inflation and an economy still recovering from the effects of 2020’s lockdowns have taken their toll.

Gas prices are more than double what they were a few years ago, while food prices seem to rise every week. And while housing prices may be starting to fall, rent continues to increase. Americans just can’t seem to catch a break.

In a recent poll, only 13% of Americans believe the country is headed in the right direction. Many Americans are hoping that the midterm election will result in a change in Congress and a change in policy. But will a change of party in Congress be the silver bullet many are hoping for?

The Worst Case Scenario

Bill Clinton famously won the 1992 Presidential election due to the poor performance of the economy under George Bush. As the quote from Clinton advisor James Carville went, “It’s the economy, stupid.” People tend to vote with their pocketbooks, for whichever party they think will leave them better off financially.

The poor performance of the economy under Biden has led to expectations of a red wave come November. But with the Supreme Court overturning Roe v. Wade, there are worries that Democratic voters are going to head to the polls in droves, dampening the prospects for Republicans.

In a worst case scenario, Democrats would maintain control of Congress, with the result that Biden would have another two years to push through his spending plans. While he has had difficulty getting his spending bills past the Senate, that could change if energized Democratic voters turn out at the polls in numbers. And if Biden is able to spend billions more dollars that the federal government doesn’t have, it could push inflation even higher.

The Best Case Scenario

The best case scenario for the economy would be a Republican sweep that would give control of both the House and Senate to Republicans. But that assumes that Republicans are going to be able to get serious about cutting down federal spending.

The federal government has run such large budget deficits for so long that it’s hard to imagine Congress getting serious about spending. But at least with a Democratic President and a Republican Congress we could hope for gridlock that would allow neither party to press ahead with its big spending aims, whether welfare for Democrats or warfare for Republicans.

If you’re hoping for the midterm elections to deliver a silver bullet that will right everything that is wrong with the economy, a Republican victory won’t be it. At best it could delay things, but even an overwhelming sweep won’t change the direction of the economy overnight.

Rome wasn’t built in a day, nor was the bubble that’s currently bursting. It’s been over a decade in the making, and Congress isn’t going to be able to unwind anything anytime soon.

The Elephant in the Room

The reason we’re in the situation we’re in is because of the Federal Reserve System. Just like the 2008 financial crisis, the coming crisis is the result of the Federal Reserve keeping interest rates too low for too long, coupled with an unprecedented amount of money creation.

The Fed was faced with a dilemma in 2020 as the federal government spent trillions of dollars it didn’t have in a matter of weeks. The Fed could have stood firm and refused to monetize those trillions of dollars of debt, allowing markets to choose how to absorb such a massive increase in Treasury securities. But that would have risked blowing up debt markets, forcing interest rates higher, and causing the Fed to lose any control over interest rates.

The Fed judged those risks to be higher than the risk of monetizing trillions of dollars of newly issued debt, and went ahead creating money out of thin air to enable the federal government’s spending. The result, as we’ve seen in recent months, has been inflation that is the highest we’ve seen in over 40 years.

Even if Republicans were to take control of Congress and start running budget surpluses, it wouldn’t undo the damage already caused by the Fed’s monetary easing. The problems of inflation and the business cycle have their origins in monetary policy, which is the purview of the Fed. And even though this loose monetary policy was undertaken to support Congress’ fiscal policy, there isn’t anything that fiscal policy can do to undo what the Fed has done.

At best we can hope for a Congress that tries to balance the budget, hard as that may seem to accomplish right now. But the real onus will be on the Fed to clean up its act, and until that happens, nothing Congress can do will help mitigate the impact inflation is having on your pocketbook.

The Need for Financial Protection

The bad news with regard to the Fed is that its track record isn’t exactly stellar when it comes to being able to combat inflation. After all, by the government’s own statistics the US dollar has lost 97% of its purchasing power since the Fed’s creation in 1913. And 86% of the dollar’s purchasing power has been lost since President Nixon closed the gold window in 1971, permanently severing the last link between the dollar and gold.

For the past 50 years the government has placed its trust in fiat paper currency and in the monetary management of the Federal Reserve. The results have been consistent inflation, with periodic bouts of high inflation, rapidly rising government debt, and a deterioration of Americans’ standard of living as wages have failed to keep up with inflation. So what are you going to do about that?

Officials in Washington were convinced that by closing the gold window and officially eliminating gold’s role as a monetary metal that gold would go by the wayside. But markets have a way of acting the way they want to, not the way governments want them to.

Gold took off in the 1970s, with annualized gains of over 30% over the course of the decade. Rather than fading away, it remained a safe haven asset for those looking to protect their wealth. And over the past 20 years that importance of gold as a safe haven and a hedge against inflation and financial turmoil has once again come to the fore.

It’s clear that we live in unprecedented times, with inflation near 40-year highs and the risk of recession seemingly growing every day. And millions of Americans are now relying on the actions of a handful of unelected officials at the Federal Reserve to help keep their savings and investments from losing massive amounts of money.

This is the same Federal Reserve that couldn’t figure out how to tackle stagflation in the 1970s and had to resort to creating a massive recession in the early 1980s in order to get things under control. The same Federal Reserve whose loose monetary policy grew the mid-2000s housing bubble that collapsed so spectacularly in 2008. The same Federal Reserve that created $3 trillion out of thin air in a matter of weeks, claimed that that wouldn’t cause inflation, claimed inflation wasn’t occurring, and then claimed that inflation was merely transitory.

Are you willing to risk the well-being of your financial assets by trusting the Federal Reserve?

Many Americans aren’t, which is why they’re turning to gold to help protect their finances. They see the writing on the wall and realize that the economy is weaker than Washington likes to tell us it is. And they’ve seen how gold has helped protect people in the past and are hoping that gold will provide that same protection in the future.

Many people are turning to a gold IRA to help protect their wealth, allowing them to roll over or transfer their existing retirement savings into gold tax-free. Still others are choosing to buy gold coins directly to store at home, giving them the safety and security of being able to hold a tangible physical asset in their hands. But no matter which way you choose to buy gold to protect your wealth, Goldco is here for you.

With over $1 billion in precious metals placements, we’re one of the largest companies in the precious metals industry. And with direct relationships with mints around the world, we cut out the middlemen and can guarantee that the gold you buy is 100% authentic.

For over a decade, our experts have helped thousands of satisfied customers protect their financial well-being with gold. So if you’re looking to protect your financial well-being from future financial turmoil, call Goldco today.

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