The Politics of Impeachment: High Crimes, Misdemeanors, and Gold
When we think of Presidential impeachment, we recall Bill Clinton waving his finger in denial on national television or Richard Nixon’s emphatic claim that he is “not a crook.” It brings to mind endless gavel committees, subpoenas, contentious Capitol Hill hearings, and a host of dark moments from the archives of American political history.
Removing a president is, after all, an extreme undertaking. Albert Broderick, a professor at The Catholic University of America Columbus School of Law wrote in the American Bar Association Journal back in 1974 that, “Impeachment is a political rather than legal process in the American Constitutional system.” In his essay called, “The Politics of Impeachment,” Broderick proclaims that we “must free ourselves from the tyranny of legal mystique when we consider impeachment, particularly impeachment of a president.” He describes a process where the House acts as accuser and prosecutor, the Senate plays judge and jury, and the sentence and final pronouncement is virtually indisputable.
It is for this very reason that the framers of the Constitution, fearing partisan sway, made the removal of a sitting president a difficult undertaking. It requires a super-majority vote or a two-thirds conviction in the Senate and the likely crossing of party lines. Out of the 45 individuals that have held the office of President only three have faced impeachment. In 1868, Andrew Johnson was impeached for dismissing a government official without the approval of the Senate but was ultimately acquitted and remained in office. Similarly, Bill Clinton was impeached for perjury and obstruction of justice; he too was acquitted by the Senate and finished his term. In 1974, Richard Nixon was brought up on charges of obstruction of justice, abuse of power, and contempt of Congress but resigned prior to what was a certain impeachment by both legislative chambers.
Nixon was forced from office during a turbulent time of high inflation, rising oil prices, and soaring unemployment. The heavy military spending, trade imbalances, and massive foreign aid racked up during the 1960’s triggered massive runs on the dollar in the 1970’s. Since U.S. currency was still backed by gold, it threatened to wipe out federal gold reserves and caused Nixon to end the gold standard. As a result, the dollar became dramatically unstable as did free-floating fiat currencies around the world ushering in a period of pronounced stagflation.
The New York Times recently noted, “From the date burglars broke into the Democratic National Committee headquarters in the Watergate complex in 1972 until the resignation of President Richard Nixon two years later, the S&P 500 fell 25 percent.” And, just 5 months after Nixon’s departure, the Minneapolis Fed described economic barometers as “giving out strong signals of unsettled conditions, with a possibility of rough seas.” The report specifically addressed inflation, recession, global stagflation, and nagging questions of financial stability.
President Trump is now the subject of a similar impeachment inquiry and various committees have issued subpoenas, interviewed witnesses, requested transcripts, records, documents and even text messages in an effort to gather enough evidence to remove him from office. If they succeed, it could have a dramatic impact on the economy for the remainder of 2019 and well into 2020.
There’s no doubt that a changing of the guard can stoke economic unease, and there’s perhaps nothing that the stock market hates more than uncertainty. The anxiety of impeachment proceedings must be added to the current agitation surrounding the trade war, bond yields, asset bubbles, slowing global growth, rising global debt, and sinking corporate profits.
Trump’s potential removal from office will undoubtedly get the financial community ‘wound up’ and not necessarily in a good way. Let’s face it, Wall Street likes the president’s policies. That’s not a political assessment, it’s an economic one. Corporations have benefited from the Trump tax cuts, regulatory rollback, and overall pro-growth agenda. In short, this President has been good for business but industry and commerce are clearly not top-of-mind to lawmakers at the moment.
In announcing the impeachment inquiry, Nancy Pelosi, Speaker of the U.S. House of Representatives and a leading opposition party voice stated that Trump’s recent call with the President of Ukraine revealed, “the president’s betrayal of his oath of office, betrayal of our national security, and betrayal of the integrity of our elections.” Pelosi later quipped that she wants to “see him in prison.”
The House Intelligence Committee chair, Adam Schiff, called out what he believes is the President’s “losses of leadership” claiming President Trump was “determined to weed out anyone who may dare disagree” and dubbed it “one of the most challenging moments for the Intelligence Community.”
The bottom line is, we don’t know if the President will be impeached, nor do we know if he will be removed from office. More importantly, we don’t know how much more “stuff’ investors will be able to shrug off. Much like the Nixon era, we’re living in volatile times where trade turmoil, political upheaval, massive debt, manufacturing weakness, feckless monetary policy, extreme partisanship, and investor skepticism have created a world of wild cards.
And while Trump’s pro-growth policies have juiced our portfolios we now need a solid impeachment hedge. Throughout the 1970’s, gold climbed over 1000% and as Congress approaches the point of no return with respect to “high crimes and misdemeanors,” gold is uniquely positioned to once again provide balance, protection and critical diversification for savings and retirement accounts worldwide.
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