What a Trump impeachment could really mean for the markets

President Trump thinks the stock market will crash if he is impeached. And people will be a whole lot poorer, he said last week.

Let’s think about this a little because obviously Trump hasn’t.

Yes, the stock market would probably decline if Trump was thrown out of office and his economic policies were voided. After all, Trump has been good for the stock market and the economy — at least so far.

But “impeachment” is a long way from getting him out of office. Just ask Bill Clinton. Impeachment of a president only means that charges are brought against him in the House of Representatives.

Even if it gets that far, the Senate would then vote on whether to throw Trump out of office. With the Senate and House both controlled by Republicans the first and second steps of impeachment are already rigged. Unless the Democrats could take control of both houses of Congress in November, but nobody really sees that happening. Or they might retake control of just the House, which would allow them to take the first symbolic step — bringing charges that’ll go nowhere.

I mentioned another possibility to Trump before he was elected. If he picked someone as vice president whom the Republicans liked more than him, I told him he runs the risk of having his own party turn on him.

I still think that’s a possibility, especially if Trump becomes more unlikable and the Republicans see an opportunity to seize back control of their party from him, as many still consider Trump to be an outsider.

Even if impeachment is unlikely, let’s consider Trump’s indirect threat — that the stock market would crash if he is impeached. Trump’s not saying he would intentionally crash the market because he can’t, so this is more cause and effect — an unintended consequence of impeachment.

As I’ve written before, there’s a precedent here. When Bill Clinton was impeached (charged) by the House in 1998, the stock market was on a hot streak. But just in case the market was thinking of collapsing, the Federal Reserve stepped in to cut interest rates in the late ’90s.

That liquidity kept the market from reacting to the political turmoil. In fact, all the money that the Fed was pumping even helped the market achieve a bubble in the dot.com era that would pop soon afterward.

So there was a mini-crash, but it didn’t happen because of the Clinton impeachment thanks probably to the actions of the Fed. (The Fed is raising rates right now, so it has room to cut them in the future in case politics makes that necessary.)

Let’s look at Trump’s observation that the market would crash if he is impeached from another angle. Is that really a good argument for Trump to make against impeachment? In other words, do the American people really care enough about the stock market for this to be an effective threat?

Remember the old saying that’s been around since the first Clinton presidential run: “It’s the economy, stupid.” Adviser James Carville gave that bit of wisdom to Clinton, who took it and improbably ended up in the White House.

People care about the economy. And if I — or Carville, or Clinton — have to tell you that, then you don’t know the most basic thing about human nature: People first and foremost want to feed and take care of their families.

From what he said last week, Trump would have you think that the old saying is, “It’s the stock market, stupid.” But is it?

According to a Gallup poll finding, only 54 percent of US adults own stock. That was the second time ownership has been this low. And that figure includes ownership of individual stock, stock mutual funds or a self-directed 401(k) or IRA — things that many people don’t pay attention to.

A breakdown of the ownership is even more telling. In 2008, before the Great Recession, ownership was at 62 percent. More people own homes now than own stocks.
And the richest 10 percent of Americans own 84 percent of all stocks.

So Trump’s warning that the stock market will crash “everybody would be very poor” was ill-conceived because “it’s the economy, stupid” and not the stock market that the vast majority of Americans really care about.

What the President should have said is: “If I get impeached, a lot of my economic plans will be cancelled, business will slow, and a lot of people will be out of work.” That’s a much better veiled threat.

But even that argument would cause Trump grief. His enemies will say that the one thing really jeopardizing the economy right now is the trade fight that Trump seems to be picking in every part of the globe.

With the economy growing better than it has in years (and, yes, it’s because of a controversial tax cut than could do long term damage), it is unlikely that people will vote many Republicans out of office simply because investigators have confirmed that Trump is sleazy.

Trump’s mention of impeachment may be just his clever way of getting Republicans out to vote.

But that’s not to say that the political landscape won’t be chaotic this fall. And that chaos could very easily cause damage to the economy by reducing foreign investors’ faith in the US and panicking business leaders.

What kind of chaos? As I’ve mentioned before, there are numerous investigations going on concerning the dirty tricks played by the Democrats during the last election — the aborted Hillary Clinton investigation, fake dossiers, phony national security requests for warrants against the Trump campaign, FBI bias in favor of the Clinton campaign and against both Trump and the other Democratic candidate Bernie Sanders, just to name a few.

If the Democrats want to survive all this they will need to take the offensive against Trump even more strongly than they already are. What Special Counsel Robert Mueller has come up with so far just isn’t going to be enough.

That could end up in the biggest political free-for-all America has ever known. And that may not only hurt the stock market, but also the economy.

If that happens, Trump’s prediction could pan out even if he isn’t impeached.

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