As you know by now, an “impeachment inquiry” is now underway in the U.S. House of Representatives. The frenzy surrounding impeachment was triggered by a speech by House Speaker Nancy Pelosi on Sept. 24 in which she endorsed an impeachment inquiry effort.
That’s significant because Pelosi has resisted previous calls for impeachment from the more radical elements of the Democratic Party.
On the one hand, nothing was changed by the speech. The House Judiciary Committee led by Jerry Nadler had been conducting an impeachment inquiry for months before Pelosi’s speech. All she did was add her imprimatur to the ongoing effort.
On the other hand, everything changed.
Pelosi’s endorsement gave new life to the slow-moving inquiry. Pelosi’s speech also coincided with the release of a transcript of Trump’s conversation with Ukrainian President Zelensky concerning an alleged deal to provide U.S. aid in exchange for investigation of corruption by Joe Biden involving his son Hunter Biden.
The allegation is that a Ukrainian energy company paid Hunter Biden as much as $50,000 per month for a board seat in an industry in which he had no experience. This payment is seen as a bribe or kickback to Joe Biden.
But here’s something you should know about the “transcript” of the call:
The “Transcript” Isn’t an Actual Transcript
There is not a transcript because the call was not recorded. Instead, there were several parties listening and typing the conversation, but that’s error prone. They compare notes afterward and put together the best version possible. So there’s a substantial subjective element at work here.
The two sides each have their own version of events. Trump says it was a typical phone call between heads of state and no illegal quid pro quo was offered. Trump’s attackers say that Trump illegally solicited foreign government interference in the 2020 election since Joe Biden is the Democratic front-runner for the nomination.
I expect these arguments will go back and forth without much resolution for the next several months. You can tune them out.
Here’s what really matters: Impeachment is a political process, not a legal one.
If the House wants to impeach Trump, it will, technical arguments notwithstanding. Impeachment will take place by early–mid-December.
But impeachment is only an accusation, not a conviction or removal from office. The trial on the impeachment charges will take place in the Senate, probably in late January. It takes 67 votes in the Senate to convict. The Democrats and independents have only 46 votes.
As a practical matter, Trump will be acquitted and that’s the end of the impeachment saga. The entire process is a political stunt. However, it will leave lasting scars on the country and create market uncertainty that will be a headwind to higher stock prices and economic growth.
But here’s something you might not know about the latest impeachment dustup…
The Swamp Changes the Whistleblower Law
It wouldn’t be happening without a recent change to the whistleblower law.
The Whistleblower Protection Act of 1989 protects federal government employees who leak information they believe violates U.S. law. They cannot be fired or otherwise punished.
But the law required that whistleblowers reported direct knowledge of any alleged wrongdoing. In other words, a whistleblower couldn’t report secondhand or hearsay evidence as proof of impropriety.
But guess what?
Between last May and this August, the intelligence community secretly eliminated that key provision that whistleblowers provide direct, personal knowledge of alleged impropriety.
That’s critical because the recent leaks of the details of that phone conversation between Trump and Zelensky were not the result of direct, firsthand knowledge.
The whistleblower was merely passing along information he claims to have heard and has in fact acknowledged that he was “not a direct witness” to the impropriety he claims Trump committed.
So under the old law, he’d have absolutely no legal standing to bring forth the allegations. You probably won’t hear much about that in the mainstream press, but that’s the reality.
Now get ready for another potentially shocking impeachment development…
The Return of Hillary?
Hillary Clinton ran for president twice (2008 and 2016) and lost decisively both times. In 2008, Barack Obama beat Clinton in the primaries. In 2016, Donald Trump scored a decisive 304-227 victory over Clinton in the Electoral College (Clinton got more popular votes).
With two defeats on her résumé and approaching her 72nd birthday, it seemed that Hillary was done with electoral politics once and for all.
Not so fast!
It now looks like she’s planning a comeback. Hillary has a full week of high-profile interviews this week on CBS Sunday Morning, The Late Show With Stephen Colbert and The View. She has also been outspoken about the impeachment process, calling Trump an “illegitimate president” (in reference to how he won in 2016) and claiming that Trump was using the same tricks to win in 2020.
Clinton may have calculated that Joe Biden will be severely wounded by his family’s involvement in Ukrainian kickbacks and Elizabeth Warren has been soundly rejected by the big Wall Street money.
Bernie Sanders is fading (and he’s not even a Democrat, he’s a registered socialist) and the other candidates have shown no momentum at all. With such a weak and fading field, Hillary Clinton may be able to ride in on a white horse at the last minute to sweep the field and set up a rematch against Trump.
Keep an eye on this possible development. Stranger things have happened.
Trump’s Secret Reelection Weapon
But here’s Trump’s secret weapon for winning the reelection: the Fed.
There is nothing the Federal Reserve values more highly than its supposed independence from politics. In truth, there’s less to this independence story than meets the eye.
In the late 1940s and early 1950s, the Fed followed White House and Treasury orders in keeping rates low to help finance the war effort in World War II and the Korean War. In the early 1970s, the Fed accommodated President Nixon by keeping rates low to help his 1972 reelection effort (this led to rising inflation in the mid-1970s and borderline hyperinflation in the late 1970s).
Given the current outlook, the Fed may need to keep cutting rates and expand the money supply in order to fight an economic slowdown and avoid a U.S. recession.
The Fed is trying its best to help the U.S. economy and also maintain its independence. Of course, those same policies will boost stock prices and greatly help Trump’s reelection chances.
This just goes to show that “independence” is in the eye of the beholder, and politics and money are deeply intertwined whether central bankers like it or not.
But here’s the bottom line:
Unless we get a recession before next year’s election, Trump will go on to a likely victory in 2020 and remain in office until January 2025, notwithstanding the “impeachment” label pressed on him by the Democrats.
In fact, my forecasting models gave Trump a greater chance at reelection after Pelosi joined the impeachment inquiry.