Everything in markets remains bitterly political. In fact the risk is that from here on, everything is going to be political.
A second set of impeachment proceedings have begun against President Trump. There may not be time to complete that action before 20 January, but the desire to do so is clear. However, as liberal law professor Jonathon Turley wrote over the weekend:
“The author Franz Kafka once wrote, “My guiding principle is this. Guilt is never to be doubted.” Democrats suddenly appear close to adopting that standard into the Constitution…Congress is now seeking an impeachment for remarks covered by the First Amendment. It would create precedent for the impeachment of any president blamed for violent acts of others after using reckless language. What is worse are those few cases that would support this type of action. The most obvious is the 1918 prosecution of socialist Eugene Debs, who spoke against the draft in WW1 and led figures like Woodrow Wilson to declare him a “traitor to his country.” Debs was arrested and charged with sedition, a new favorite term for Democrats to denounce Trump and Republicans who doubted the victory of Joe Biden.”
Even so, the American Civil Liberties Union(!) is calling for “a special counsel to investigate and, if warranted, prosecute Trump, his associates and any other federal officials who may have been involved in attempts to subvert the outcome of the election, including the violence at the capitol.” (From a legal standpoint, there were repeated Democrat statements that the 2016 election was “hacked” by Russia; and verbal support for 2020 protests that saw uncalled-for violence occur.)
Meanwhile, an FBI report warns “Armed protests are being planned at all 50 state capitols from 16 January through at least 20 January, and at the US Capitol from 17 January through 20 January,” and of people “‘storming’ state, local and federal government courthouses and administrative buildings in the event POTUS is removed as President prior to Inauguration Day.” The report also alleges specific threats made against President Elect Biden, Vice-President Elect Harris, and House Speaker Pelosi. This is simply appalling.
Threats to politicians are shocking but not new: the US has had presidents assassinated or shot before, and 2020 saw Senator Paul physically attacked. Armed uprisings take matters to another level. 2020 saw similar in Seattle and Portland: yet doing so across the US with guns would mean a genuine insurrection – and not one any politician is calling for. Yet returning to a point made by Luttwak over 6 January: would this actually mean seizing power? Not at all. There would likely be terrible violence, but government and all key institutions would remain in control. Society would be a total mess, however.
Meanwhile, there are calls for the disbarment of Republican senators and representatives who challenged the 2020 election results – though Democrats challenged the last three Republican presidential victories; and there has been a call for not just honorary degrees but actual academic qualifications to be rescinded from Trump supporters: the political divide becomes more and more bitter, with fewer and fewer neutral spaces.
Moreover, tech censorship –firms which a Democrat-led House committee found to be private monopolies just a few weeks ago– widens and deepens. As one voice on Twitter puts it: ‘Twitter & FB ban accounts. “It’s not censorship, you can create your own app.” Then Google & Apple ban apps. “It’s not censorship, create your own website.” Then Amazon bans web hosting. “It’s not censorship, create your own…” What? Your own internet? Just so you can tweet?’ You know who also has their own internet? China and Russia. Is the US going to have to build a duplicate?
To top it all off, there are even (paranoid?) suggestions flying around that the new Congress will propose legislation to classify MAGA rallies as “domestic terrorist activity” and require the FBI, DOJ & DHS to take steps to prevent such: as such, even future Trump rallies could perhaps become illegal.
In such bitterly polarised times, everything becomes political. (A point Vaclav Havel made in his piercing 1978 essay ‘The Power of the Powerless’ when referring to the Czechoslovak greengrocer compelled to put up a sign saying “Workers of the world, unite” next to his tomatoes.) That includes markets, of course, even if they want to pretend that this has nothing to do with them; or that both Turchin’s and Piketty’s grim forecasts of where neoliberal policies can ultimately lead in terms of societal breakdown are all wrong. On which note, I see more people making comparisons between 6 January and Hitler’s putsch of 1923: you know what then led him to power in 1933? A government that deliberately implemented biting austerity after the 1929 Wall Street Crash to crush the unions: so something did happen “because markets” for once.
But back to those markets. One would think that the risk of US social collapse would see people going long Bitcoin. Not so much: it’s down bigly. Is this buy-the-rumour, sell-the-fact? Or are people finally seeing that when push comes actual physical shoving, crypto will be regulated away by the government in order to maintain their control, just as was the case with gold in the 1930s? Sorry guys: if you don’t have liberty, you don’t have liberty: you don’t get to day-trade from your basement and think that makes you free in any sense.
Or is Bitcoin going down because US long yields are going up? And are those US yields going up because the Biden administration is going to spend USD trillions to try to paper over the gaping US social chasm? If so, recall that Democratic Senator Manchin just said he would not even support USD2,000 checks. Or is the bond sell-off more a reaction to the US political unrest, a new risk premium, as some suggest is the case? Is even the sacrosanct US Treasury market coming under political pressure? In which case where exactly do you think is going to be a safe haven in reality over the longer term? Where looked good in Europe when Rome collapsed? Were there pockets that were less Dark Ages-y than others?
Ironically, for now it’s the USD that is benefitting most as US political credibility goes the same way that the dollar itself has for the last few months. It is, after all, about as risk off as it can get in the worst of worst case scenarios. Indeed, if there is one thing that still isn’t powerless it’s probably the USD – though nothing is forever.
On which note, US-China relations face a rocky final few days of Trumpism. Secretary of State Pompeo has already moved the US much closer to Taiwan by removing self-imposed restrictions on official contact; and China has introduced new legislation making all firms based there liable for damages if they comply with foreign legislation such as sanctions – with which they must comply according to the US. In short, they would have to choose who to listen to on current and any future lawfare over sanctions.
So who has the power and who is really the powerless? That’s what we are currently finding out in all manner of dimensions.
By Michael Every of Rabobank