Tuesday, May 8, 2018

Trying to Assess the US Political Divide -- Impact on Stability

Readers here know that this blog tries to completely avoid any kind of political agenda because the purpose of this blog is to try and assess events to determine what impact they may have on the stability of the present monetary system and if they may create conditions that could lead to major change from the status quo (good or bad). 

However, it is obvious that the political environment can contribute to instability so we have to try and assess that as best we can. Below is an attempt to do that based on current conditions.

For some time now, it has been clear that the US population (and even the global population) is deeply divided on major political issues. While this is not anything new in either US or World history, the intensity of the divide and the lack of civility between those on the extremes at each end of the fight is the worst I have seen during my lifetime. 

The election of President Trump has done nothing to change this situation as far as I can determine. Those who literally hate President Trump are clearly determined to get rid of him one way or another and the tactics used don't appear to matter. For his part, President Trump is living up to his promise to fight his enemies the only way he has ever known. He has no qualms about using any tactics he thinks will work in his favor. His supporters will back him no matter what happens.

This potentially explosive conflict is always out there daily as the two sides engage in bitter attacks back and forth. One expert I talk to from time to time who has years of experience working with US intelligence agencies told me we currently witnessing "a slow motion civil war" unfolding in the US politically. 

The incredible thing to me (at least so far) is that this ongoing "civil war" has somehow not had much negative impact on financial stability as markets seem to just ignore the situation and life on "main street" just continues on fairly normally for most people.

We have constant news articles appearing suggesting that either the President or some of his family members could face indictments. On the flip side, we now have legal investigations into those who are leading the legal investigation into the President (or have led it in the past). Some members of the Obama Administration are said to be at risk for potential indictments over all this with recent referrals by the Justice Department. 

Let's let all that sink in. We are at a point in time where all kinds of key people (both pro and anti President Trump) are said to be at risk of felony indictments and the markets just yawn at it all as if nothing were happening.

We must ask why this is the case? I really don't know all the answers, but we have to assume that the markets do not truly believe anyone significant (in the view of the markets) is going to face legal charges any time soon or they would surely be reacting to that. So far they seem to just view all this as a political stalemate (no one is winning the "civil war"). President Trump is continuing to move forward with parts of his agenda despite all the obstacles in his way even as some of his agenda items get sidetracked. But the country still functions fairly normally for the most part on a day to day basis.

As for the average person out here like myself who follows the news, but is mostly just trying to make a living and provide for a family, I don't see any significant interest in all this political battling. I think most people just write it off as politics as usual and are not seriously engaged unless something happens that directly impacts their daily lives. Otherwise, they just figure there is not much they can do about whatever happens except vote when the time comes to do that.

So I think as long as the political fighting continues as a stalemate and no significant major political players are indicted, most people will just mostly ignore all this and get on with their lives. The stock market seems OK and real estate values are OK so far. (see my added comments below for my best guess at trying to assess where all this may be going from a legal standpoint).

Until something happens that suggests markets are truly upset by all this fighting, this political divide is not really impacting things in a way that might create instability or lead to major changes as best I can tell. I suspect that if that changes, we will all know it pretty quickly because the markets will tell us something is seriously wrong and we will easily see that stability has been shaken. 

I can only suggest readers just monitor news events and follow market reactions to those events. If you see any or all of the following:

- steep stock market drops (far beyond a normal correction)
- sharply rising gold prices
- a sharply falling US dollar index price
- a major financial institution or institutions go under

it will be time to pay very close attention and watch events very carefully. 

For now, the political stalemate seems to be holding and not having too much impact on financial stability or markets. There are no indications that major monetary system change is on the horizon and I continue to believe it will take a new major financial crisis (and therefore systemic instability) to alter the landscape. 
Added note: This recent article appearing on CBSnews.com seems to make several of the same points noted above. 

My added comments: Here is my best guess at trying assess where all this is headed from a legal standpoint based on listening to the experts involved:

It is my understanding that most agree that a President may not be indicted while in office, but there is some precedent for a President being subpoenaed before a grand jury. However, no President has ever appeared before a grand jury as I understand it. (President Clinton appeared in a video interview I believe).

The President's attorney stated that unless the Special Prosecutor agrees to conditions that are acceptable to the President's lawyers, he will not be allowed to be interviewed. If no interview takes place, the Special Prosecutor will then have to decide if he wants to take another step to ramp all this up even more and try to subpoena the President to appear before a grand jury.

It is my understanding the President's lawyers will then fight the subpoena in court all the way to the Supreme Court which would probably take months or even years to play out. Meanwhile, we would expect that this action would ramp up the intensity of this whole fight to the point where both sides were attacking constantly in the media and that the media will only feed the fight on both sides. 

We can expect the public to become enraged by all this if the day to day operations of the government are visibly impacted in ways they feel in their lives or if the spillover from it impacted the markets and the US economy (a risk that I think increases the longer this goes on).

Regardless of whether the President ever appears before a grand jury or if he is ever charged with any crime (even years from now), we can expect that both sides of this fight will use every means at their disposal to try and influence the voting public leading up the the November mid term elections. In fact, I believe that much of what we are seeing now is posturing to try and influence voters since most everyone knows the President will not be indicted while in office and is not likely to appear before a grand jury before November (if ever). 

If the Democrats were to win the House of Representatives, many assume they would immediately begin impeachment proceedings. Republicans, of course, want to prevent that. If impeachment proceedings are started, we can expect this to go to a whole new level of intensity.

To say that all this has the potential to be explosively destructive to the country both in terms of political ill will (that will probably go on for years no matter who is in office) and to severe disruption to financial markets would probably be an understatement. One expert with years of experience working with our intelligence agencies (who I view as non partisan politically) has told me we would be watching a "slow motion civil war" take place. I doubt the public will sit still quietly and just watch the country torn apart without significant anger if we get to that point.

Unless something happens to tamp back down the intensity of this situation and resolve it without creating a constitutional crisis involving the President, we will have to move this whole problem to the top of our list of events to watch carefully that could potentially trigger a major financial crisis. It is impossible to determine at this time which way this is going to go as both sides are ramping up pressure with no signs that either plans to back down.

The collateral damage from such a "civil war" to the country and regular citizens not involved in all this (except as possible victims) could be enormous. Hopefully, something will change the current course of events and a constitutional crisis will be avoided. The markets have not indicated they take this seriously yet, but that could change eventually.

No comments:

Post a Comment