The governing Democrats have opened a new chapter in the electoral cycle of the U.S. economy. High inflation, wobbly financial system, parlous public finances, slowing economy and far-flung proxy wars make them virtually unelectable. The only thing they have going for them are their weak and unappealing Republican opponents.

Hence the Democrats’ apparent readiness to field the incumbent octogenarian for the second term of office in 2024.

That’s quite a unique and remarkable moment in American history. The two most recent national opinion polls show President Joe Biden and the former President Donald Trump in a very close contest within a margin of error.

One may take that as a continuation of the political landscape after the Congressional mid-term elections last November. Instead of an expected landslide, Republicans got a narrow victory to control the House of Representatives and a tie in the Senate, where the Vice President Kamala Harris now casts a winning vote for Democrats.

Three things need to happen to change America’s current political balance of power: (a) the economic outlook with a clear cyclical pattern, (b) Republicans with more inspiring presidential candidates, and (c) a greater clarity regarding the objectives and the means of the unfolding great power competition.

Democrats haunted by their slogan “it’s the economy, stupid”

Barring Washington’s major and direct participation in the European war, economy will be the key issue in next year’s elections.

A grossly mismanaged economy is Democrats’ serious liability. Raising the money market interest rates from below 1% last spring to the recent peak of nearly 5% in order to stop an accelerating price inflation has depressed interest-sensitive components of aggregate demand (private consumption and residential investments) which constitute three-quarters of the country’s GDP.

Tightening credit conditions have also repriced portfolio assets and produced systemic risks in an apparently inadequately supervised financial system. As a result, the interbank market has again been flooded with fresh liquidity driving the money market rates down by 60 basic points over the past week. In addition to that – as it befits an election campaign -- official statements have been made that plentiful funds were available to guarantee a safe and orderly operation of American financial markets.

It, therefore, seems that inflation will take a back seat to preventing systemic failures in an overstretched financial system. Sadly, though, that is like jumping out from the frying pan into the fire because a core inflation rate (inflation corrected for allegedly volatile energy and food prices) between 5% and 6% will not come down without further credit tightening to balance the forces of demand and supply in labor and product markets.

And that clearly means that rising interest rates will aggravate the ongoing growth recession, with a high probability of systemic tensions in major financial institutions.

That’s the near-term scenario that will damage Democrats’ election chances.

Republicans can run on a dream ticket

Republicans clearly have a good opportunity to use that opening. Trump has a slight lead over Florida Governor Ron DeSantis, his undeclared and widely rumored opponent.

In his recently published book, “The Courage to be Free,” DeSantis acknowledges Trump’s help in his election to lead Florida, and he also emphasizes Trump’s “star power” – possible hints that a Trump-DeSantis ticket could be a winning draw.

And then, there is a war and peace issue: Whoever wins the next year’s election has a bipartisan policy objective to defend the U.S. world order against Russia and China.

The question here is whether a “systemic and strategic competition” will have to be conducted through proxy and hybrid wars, trade limitations with sanctions and extraterritorial judicial overreach – or whether negotiated solutions could bring about a peaceful and constructive modus vivendi among the world’s three great powers.

We already have the answer: The war in Europe, and the contested status of Taiwan, is a culmination of the bellicose option that is now leading toward a direct confrontation of increasingly hostile nuclear-armed adversaries.

Washington, Beijing and Moscow know that they have to talk – and do that as soon as possible. The problem is that Beijing and Moscow seem to believe that Washington – for electoral reasons – is not ready for serious negotiations.

If that indeed is the case Republicans have an opportunity of using to their advantage the Democrats’ warmongering. Trump is already doing that with his one-day solutions to Europe’s intractable bloodshed.

Democrats, of which I am, are on a slippery slope of an economic recession, systemic financial crises and a dangerous confrontation with Russia and China. Those two countries have all but given up on their Western ties. They are organizing an alternative world order through BRICS and their captive constituencies of the Global South.