The Federal Open Market Committee (FOMC) voted to keep its key target interest rate unchanged.  There were two dissenting votes who wanted to raise the rate by 25 basis points.  This decision comes less than a week before the big mid-term elections.

Some might claim that this is the Federal Reserve staying out of politics.  But you could make that claim with any decision.  It is almost always seen as helping one candidate or one party over another, even if the decision is to do nothing.

It is Donald Trump who is pleading for lower interest rates.  He isn’t shy about saying that he is a low interest rate guy.

Yet, the two biggest things Trump has done have led to this slightly tighter monetary policy.  Trump’s tariffs (taxes) have increased the prices of products being imported, or in some cases, have reduced the number of products being imported.  In other words, Trump’s tariffs have made things more expensive for the American consumer.

Trump’s foreign policy, particularly with Iran, has also led to higher prices in some areas, most notably energy.  The prices for oil and gas are much higher than they otherwise would have been had Trump not started a war with Iran.

Even when it comes to Ukraine, Trump is blaming Ukraine for striking at Russian energy facilities and driving up the price of diesel.  Even if that’s the case, it is Trump who has continued to fund Ukraine with money, weapons, and intelligence.

These two Trump policies (tariffs and war) have directly led to higher prices for Americans.  Because of this, the Fed is not sure how to handle the price inflation, but they are leaning towards higher interest rates to help bring the rate of price inflation down.

Post Election

Trump has strongly suggested that he might attack Iran again after the mid-term elections.  But if Iran is such a great threat, why would he wait?  Iran obviously isn’t a threat (if not attacked), but Trump doesn’t want to attack again before the elections because it would cause even more chaos and drive oil prices even higher.

Likewise, the markets are giving something like an 85% chance that the Fed will hike its target rate in the December meeting.  But why wait?  If inflation is a problem right now, why are you waiting another 6 weeks to hike rates and tackle the inflation problem?  Why wouldn’t you just hike rates now in the October meeting?

By trying to be seen as not political, the Fed is actually being political.  Trump is just more blatant about it, like almost everything else.

What’s Ahead?

Trump’s approval rating is at all-time lows.  On economic matters, 65% of Americans say they disapprove of the job he’s doing.  This means that the Democrats are going to win big next week.  They are likely to take majorities in both the House and Senate.

Liberty lovers might be a little optimistic that this will provide some gridlock.  When it comes to spending, that probably isn’t going to happen.  Most of the government spending is essentially on auto pilot.  The one place where it could be cut easily is on foreign adventurism.  But what are the chances that the Democrats will actually not fund the wars of choice by Trump?

Maybe if Trump is wrapped up in investigations and impeachment proceedings, then he will have less time on his hands to think up other wars.  But that’s not necessarily the case.

The one good thing about a big Democratic victory will be the feedback to other Republicans.  Most Republican politicians are scared of Trump.  They don’t want to get on his bad side.  Look at what happened to Thomas Massie.

But realization is going to set in that Trump is now highly unpopular, and some Republicans are going to start to stray from Trump and perhaps even be a little critical of him.

On the economic front, it is impossible to say what will happen.  The debt is growing at a staggering pace, and this is during a time when unemployment is still low and stock indexes are doing well.

Higher interest rates are a big threat because people are over leveraged and the government is beyond that.  Higher yields mean higher interest payments on new debt that is issued.

If we hit any kind of significant downturn or financial crisis, just wait to see what kind of socialist policies the Trump administration pulls out.  The so-called Democratic socialists are a big threat, and they are very wrong on economic issues, but it is hard to not roll your eyes at the big-spending Republicans who scream socialism about the Democrats.

Nvidia is the world’s largest company.  Based on its share price, it is worth more than $5 trillion.

There are currently about 14 companies valued over $1 trillion, but it is hard to count something like Berkshire Hathaway because it is more of a holding company that owns shares in other companies.  There are also a couple of companies outside the U.S. that are included on the list, which are chip/ technology companies.

Other notables are Apple, Microsoft, Alphabet, Amazon, and Meta.  Aside from Berkshire and Eli Lilly, they are primarily technology companies.  Perhaps Tesla and SpaceX are debatable, but they are selling their technology to a certain degree.

Apple was the first publicly-traded U.S. company to reach a trillion dollars in market cap.  That was in 2018.  Here we are 8 years later with about a dozen.  Again, Nvidia is over 5 times the amount that Apple reached in 2018.

Tech Bubble 2

It’s hard to believe that the tech bubble of the late 1990s is almost 30 years ago.  I had just started trading stocks and following the markets around this time.  It is almost hard to believe that we could have something of a repeat from what happened then.

Today, it is still technology.  In the 1990s, companies would stick a “dot com” at the end of their name, and that would instantly raise interest amongst investors.  There were some ridiculous valuations for companies that were not even making a profit.  Some of them were barely making any revenue.

(Perhaps one of my biggest financial mistakes of all time was selling shares of Amazon that I had bought around that time.)

When the tech bubble burst in the early 2000s, it meant some companies went bankrupt.  Aggressive investors lost quite a bit of money.  Yet, it was not the end of the internet.  In fact, it was barely the beginning.

The same will likely go for artificial intelligence (AI) and chipmakers today.  Many of these companies will go bankrupt.  Some of the big players will probably survive.  AI itself is not going to die.  The hype around it will fizzle, and reality will set in that you can’t get rich simply by investing in something that is in the AI space.

A company is only going to be profitable in the long run if it can produce products that are in demand in the marketplace.  The only exception to this rule is a company that makes its money through government contracts or government favors, although even here they usually have to produce something.

Will it Repeat?

There are a lot of similarities between now and the first tech bubble of the late 1990s.  I do have to acknowledge one significant difference.  We have a lot more monetary inflation now than we did then.

If you remember the late 1990s, it was the last time the federal government was anywhere close to not running a budget deficit.  There may have been some accounting tricks in counting the excess Social Security tax collections as a surplus when they were really supposed to be going to a trust fund.  Still, we were close to a balanced budget.  The Fed’s inflation was mild compared to today.

Now we are seeing $2 trillion deficits, and this isn’t during a recession.  The Fed already went crazy with monetary inflation in 2008/ 2009, and again in 2020.  In that sense, maybe some of these trillion-dollar valuations are somewhat justified.

Still, stock prices, and particularly big tech stock prices, have gone up much faster than consumer prices in general.

If there isn’t an immediate mass inflation ahead, then a reversion to the mean will likely mean a big drop in these tech giants, including the ones that are quite profitable.

When the tech bubble popped in 2000 to 2002, the Nasdaq fell almost 80% from its peak.  I am not saying it will be this bad this time.  If anything, the Fed would probably step in sooner and be more aggressive.

But imagine if the Nasdaq were to fall just 50% from where it is today.  That would be quite significant.  It would probably change the retirement plans of millions of people.  It might change their vacation plans too.

The latest CPI figures were released for September 2026.  The CPI showed an increase of 0.6% for the month of September.  The annual rate stands at 3.7%.

The median CPI came in lower at 0.2% for the month and an annual rate of 2.6%.

If you take out food and energy, the CPI was still up 0.3% for the month.  The year-over-year CPI less food and energy stands at 2.6%.  In other words, even if you take out the price you are paying at the gas pump, prices are still rising more than 2% per year.

This is the last CPI report to come out before the mid-term elections.  Don’t get me wrong.  I understand that voters aren’t sitting there waiting for a government report to determine how they are doing.  It’s not as if someone would vote for a Republican next month if the CPI had just come in a few points lower.

Still, it points to the overall picture that things are tough for the average American.  Even though wages have gone up in nominal terms, they are generally not keeping up with the cost of living.

Every person’s personal CPI is different.  Some people have to commute for an hour a day, while others work at home.  Some people have to buy health insurance and car insurance for the whole family.  If you have older teenagers, you understand.

This has to be the number one voting issue on people’s minds, especially for swing voters.  Voters who are passionate about cultural issues probably won’t be swayed one way or the other.  But someone who is middle of the road may decide to vote Democrat this time around because they rightly hold Republicans responsible for this round of price inflation.  There are also libertarians like me who will just not vote for either major party.

Inflation, War, and Tariffs

Milton Friedman once said that “inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

Friedman was talking about price inflation.  The real definition of inflation is the actual increase in the supply of money.

Anyway, I believe I have quoted Friedman on this before, and I believe he was generally correct in what he said.  In order to have sustained price inflation over a long period of time, it has to be because of monetary inflation.

Still, I want to be clear that the government can still make our lives more expensive without monetary inflation.  The government can regulate, tax, restrict trade, and restrict competition.  This makes our lives more expensive than they otherwise would have been.

The problem for Trump and the Republicans is that their policies can be directly tied to the higher price inflation we have now.  It isn’t just a monetary phenomenon.

The two signature things Trump has done over the last year and a half is to constantly change and threaten to raise tariffs and starting the war against Iran.

Tariffs are taxes on imports, which make the products Americans import more expensive.  If the tariffs stay the same from here on, then they shouldn’t continue to raise prices  at some point because it will just be the new high prices.  It is like any other tax in that sense.

The war on Iran directly caused the price of oil to go much higher.  This, in turn, caused higher gas prices.  It happened almost immediately after the war started in late February 2026.  Trump can blame higher diesel prices on Ukrainian attacks against Russia (which Trump continues to fund), but it is quite obvious and correct to conclude that gas prices wouldn’t have gone anywhere near this high if Trump hadn’t started the war against Iran.

Sure, there are some people like me who are critical of the war first and foremost because it is immoral and killing people.  But this war is directly tied to higher gas prices for Americans, so it makes Americans pay more attention than they otherwise would have.  Even the Trump apologists understand that the higher gas prices are tied to the war.

This is why the Republicans are going to get destroyed in the upcoming elections.

The Fed’s Next Move

The next FOMC meeting is the last week of October.  It will be just a week before the election.  Who knows if this will play into their decision?

The Fed is still mildly inflating its balance sheet while simultaneously hiking its target interest rate.  We don’t know if we will see another small rate hike in October or December.  I don’t think any of the FOMC members care about hurting Donald Trump except in that they don’t want to experience his wrath.  Even Kevin Warsh, who was recently appointed Fed chair by Trump, probably wouldn’t care if the Democrats come into power and impeach Trump.

Trump continually calls for lower interest rates.  Trump is an economic ignoramus, as you can see from his tariffs.  The only reason the Fed is essentially forced to hike its target interest rate is because of the higher prices from Trump’s tariffs and his war against Iran.  But Trump is too much of an idiot to even see or understand this.

Sure, the Fed is also responsible for price inflation.  Typically, it is the main culprit.  But if you didn’t have the war and the tariff craziness, it is not hard to imagine that the Fed wouldn’t be hiking rates at this point.  If the CPI numbers showed price inflation going back to the Fed’s target of 2%, we certainly wouldn’t be seeing these rate hikes.

It is hard to say how much the Fed is driving yields and how much yields are driving the Fed.  But these higher interest rates, including higher long-term interest rates, are also trouble for Trump and company.  It raises the cost to borrow for Americans, and it also raises the amount of interest the government has to pay out on its massive debt load.

I don’t think Trump has much, if any, control over the Fed now, even with his threats.  The Fed will react to bond investors, inflation numbers, and the general consensus of the financial community.

If the economy gets worse, Trump will blame everybody but himself.  He will certainly blame the Fed.  But the man he just appointed as Fed chair voted with the others to hike rates at the last meeting.

Ken Paxton is running for U.S. Senate from the state of Texas.  Texas may turn blue (Democrat) in this election cycle because of the unpopularity of Republicans in power.

Paxton was in a private event for donors and lobbyists.  It was reported that he said that the Iran war and high gas prices are really dragging him and other Republicans down.  In reference to this problem, he is reported to have said, “I don’t make the decision.”

So what is Paxton doing about it?  He is coming out with a tax cut plan.

Paxton reportedly said that he can’t stop the war and that he has no control over gas prices.

Yes, if you are halfway up Donald Trump’s butt and can’t publicly criticize the emperor-in-chief, then it’s true that you can’t do anything about it.

If voters don’t like the Iran War and high gas prices (largely caused by the war against Iran), then you can take a position of opposing the war.  You could say that you will not support any funding for the war.

But no.  Ken Paxton, like most other politicians, just lives under the assumption that he can’t do anything about a war.  After all, if he criticized Trump, he might get attacked by Trump, and he wouldn’t want that.

Learning from Trump

Maybe Paxton just learned from the number one blame shifter.  When diesel prices hit an all-time high, Trump insistently shifted the blame.  No, it wasn’t the war that he started against Iran.  It was because Ukraine was hitting Russian energy plants that produce diesel.

Even though this is a load of garbage that Trump is trying to sell, let’s just pretend for the sake of argument that the high price of diesel is largely because of Ukrainian attacks against Russia.

Hey, Trump.  You are the moron who continues to send money and weapons to Ukraine.  Your administration also probably provides military intelligence.

If you want Ukraine to stop hitting Russian energy, then tell them to stop.  And if they don’t stop, then cut off all money and weapons.

Of course, all money and weapons should be cut off anyway, but you get the point.

Trump is shifting blame to something that he helped produce.

If I give the kids in my neighborhood some alcohol and they start going around and vandalizing property while drunk, should I complain about the kids to my other neighbors as I continue to hand alcohol to them?  Better yet, maybe I can blame the companies that sold the alcohol.

Conclusion

The Republicans deserve to lose good and hard.  The American people don’t deserve the Republicans or Democrats.  Well, at least a good portion of us don’t deserve it.

The Republicans need to be punished good and hard for following Trump over a cliff.  Trump thinks he is doing favors for these Republican politicians in red states who are on the verge of losing.  Trump is actually doing great damage to them just by standing by their side.

When the Republicans lose hard next month, I hope that the Republicans split hard away from Trump.  I don’t expect them to have any principles, but at least we can rid ourselves of Trump controlling the Republican Party and driving this country over a cliff with the Republican Party.

In his second term as president, Donald Trump has become unhinged and a total puppet of the war hawks.  His record as president in his first term was not great, but it was a lot better than now.  He had his share of war making in his first term, but at least he didn’t start any major new wars at that time.  That is a low standard to be sure, but it wasn’t true of several previous presidents before him.

Now the power has gone to his head in a bad way, and Trump responds to almost everything with threats and bluster.  Even when he was asked about the bond market, he responded that he always has the military as the ultimate intervention.

I knew Trump had his ego problems before 2025, but it has gotten to an absurd level.  He brags about kidnapping the president of Venezuela and stealing the oil there.  He has lost so badly to Iran that he seems to threaten to annihilate Iran almost every week now.

It scares me that it isn’t just bluster.  Trump, like many other politicians, can act like a wild animal when trapped in a corner.  He is completely unpredictable at this point.

In one breath, he says he doesn’t really care about the mid-term elections, or at least not enough to change anything with Iran.  In the next breath, he is offering a $5,000 bribe to every adult American to vote Republican.

If Trump won’t at least pretend to seek peace with Iran to calm oil and gas prices now, what is he going to be like post election?

The Worry for Iran

Iranian officials are likely worried about what Trump might do after the November elections.  They should be worried because he is nuts.  Trump is living up to the worst caricatures of himself as portrayed by the left.

Trump has already attacked Iran three times while Iran was in negotiations, or so they thought.  The first time was killing Soleimani in early January 2020.  The second time was the so-called 12-day war in June 2025.  The third time was February 2026 that started the fighting that is still ongoing.

Even if Iran gets Trump to make some kind of peace deal before the November elections, why should they trust it at all?  Fool me once, shame on you.  Fool me four times?

Either way, Trump doesn’t like that the U.S. is losing the war to Iran, if he is even aware enough to realize it.  It is a big hit to Trump’s ego that Iran won’t bow down to his commands.  Iran has effectively blocked the Strait of Hormuz, and Iran has damaged or destroyed most of the U.S. military bases in the Middle East.

The only option Trump has left to fully defeat Iran is to try to obliterate the place.  This means using nuclear weapons or something close to it.

It’s ironic that Trump keeps repeating that Iran can’t have a nuclear weapon, and that is the supposed reason for the war.  Yet, it is Trump who shouldn’t have access to a nuclear weapon as he continually threatens to annihilate 90 million people.

I am not saying that this is going to happen, but I am genuinely worried about what Trump does after the election.  I think that is the reason that Iran has been so measured and proportional in its responses to Trump’s attacks on Iran.

Lame Duck

The Democrats are going to win the House.  They will probably win the Senate.  It is unfortunate that they will probably win a bunch of local seats too.  We may see a handful of red states elect Democratic governors.

The Republicans in Congress deserve to lose.  The American people don’t deserve either of the two major parties.

The term lame duck has typically been used when referring to the final months of a president’s term in office after the election.  Biden was a lame duck in November 2024 through January 20, 2025.

It’s easy to say that Trump will be a lame duck over the next 2 years.  He can’t legally run for president again, and he will be stuck with a Democrat-controlled Congress, which was his own doing.

The problem is that the president has so much power now.  The president does many things without Congressional approval, including making wars and setting arbitrary tariffs.  Yes, Congress could technically not approve the spending for wars, but that just doesn’t happen because most of the people in Congress are not working on behalf of their constituents.

Perhaps the best-case scenario for the American people over the next 2 years is that Trump is bogged down with the conflict in Iran (without too much escalation) and with the Democrats investigating him for every stupid thing.

Trump deserves to be investigated.  He should be impeached for starting wars and bombing at least 7 countries over the last 2 years.  He really should be in prison.  But the Democrats will focus on more minor things because they don’t want to set a standard of impeaching a president for starting wars.

Two More Years as the Empire Declines

Let’s hope that Trump doesn’t try to use nuclear weapons.  Let’s hope that he doesn’t try to invade Cuba or any other countries.  Let’s hope he doesn’t give us too much socialism if and when the economy gets worse.

He is a pathetic man.  He betrayed his own “America First” message.  He is a war criminal.  His approval ratings are at a dismal 30%.  Still, how can 3 in 10 people still say that they approve of the job he is doing?

Trump is destroying the reputation of the U.S. military and the U.S. dollar.  He might be doing Americans a favor in the long run.  He isn’t playing 5-D chess though.  You don’t get to murder a bunch of little Iranian girls and say it was all part of the plan.

In a way, Trump is overseeing the crumbling of the U.S. empire.  It is much the same way that a communist takes his ideology to an extreme that results in a revolt against communism.

If the response we have seen by Iran forces the U.S. military to abandon the Middle East, the American people will be better off for it.  The world will certainly be better off.