Who ever said that “hell has no fury like a women scorned,” had probably never met an angered President of the United States Donald J. Trump, and the largest and most powerful economy and military the world has ever seen has been angered and went on a rant on the popular social media outlet known as Twitter.
The president took to Twitter to declare that if he would to be impeached, it will undoubtedly harm the U.S market as well as the global economy. The cause for his uproar? The increasing possibilities and probabilities of his impending impeachment after the midterm elections. There doesn’t seem to be any place you can look or go where people are not openly debating this issue, to impeach or not to impeach.
There is growing concern for investors on the rising probability of the impeachment of the current U.S president. Economic fears have risen over the last few months and have been building for the past few years. All the anxiety has accumulated to the tipping point, and the president of the United States has commented on what he believes will happen if he is impeached. The president has proclaimed that there will be an economic downturn if he is impeached. Whether the idea of impeachment is lawful is up for debate, whether the president ought to be impeached is also up for debate. Yet, what is not up for debate is what will happen to the U.S economy if impeachment proceedings are introduced and concluded.
To understand what will happen we must first understand what an economic downturn is. An economic downturn is when the current economy is hit with a recession or even worse a great depression. Now the question becomes, what causes economic downturn? The answer varies. In 2008 for example, it was the failed mortgage banks that lead the downturn and created one of the worst recessions in recorded history. In the early 20th century, attributing variables like high cost of common goods, low wages to high inflation and historic unemployment rates could be used to explain the causes of the Great Depression. In today’s global market based economy, anything can impact the global stock exchange from a celebrity tweet to a political debacle.
When the question arises of whether or not an impeachment of the highest office will hurt the U.S economy, the answer might be complicated but overall easy to understand. To put it in a nutshell, biases aside, it is almost certain that an impeachment of the president of the United States will hurt the global economy. The reason why it would, are as followed.
First, the global economy is based on demand and supply and growth is relative to the stability of markets across varying regions. The more stable a region is in regards to its politics, cultures, religious and racial tensions, the better off their economies will be. This is because investors rely on constant growth and stability in order to properly invest their funds. While instability and volatility is what scares them off. Thus, when a region is stable and its direction predictable, investors buy in and help grow the economy, while a region that is unstable and its future unpredictable is what forces investors to look elsewhere in order to invest.
Investors don’t like putting their money in a lost cause, when the outcome may be negative. In order to turn a profit, investors have to weigh the risk versus the possible gain, and when there is high risk and low gain, investors shy away. Yet, all is not lost. If the president is impeached, I would most certainly expect to see a correction or at worst a bear market. (A correction is when the economy drops by 10 percentage points while a bear market is when it drops 20 percent or more.)
Although it would hurt the global economy in the short term, it should and most likely will benefit the global economy in the long term. This is because, although creating immediate instability with the impeachment of a state leader, the stability that will come after a new state leader is elected will be well worth it. In other words, if today the president is impeached then today the economy will drop. Yet, tomorrow a new president will be elected and with it hope comes stabilization and economic growth.
The economy is like a spring mattress, what goes up must come down and what goes down must come up. The good thing about this is that the worst off the economy gets, the better it will be after it recovers.