Monday, January 14, 2019

A State of Emergency for the markets too?

President Trump has threatened to impose a State of Emergency in order to get his Wall built. Can he do that? Analysis from The Economist indicates that there is historical precedence for such actions:
Presidents do have wide discretion to declare national emergencies and take unilateral action for which they ordinarily need legislative approval. A “latitude”, John Locke wrote in 1689 (and his writings influenced the US constitution), must be “left to the executive power, to do many things of choice which the laws do not prescribe” since the legislature is often “too slow” in an emergency. American presidents have, for example, suspended the constitutional guarantee of habeas corpus (Abraham Lincoln during the Civil War), forced people of Japanese descent into internment camps (Franklin Delano Roosevelt during the second world war) and imposed warrantless surveillance on Americans (George W. Bush after the September 11th attacks). With some notable exceptions, including when the Supreme Court baulked at Harry Truman’s seizure of steel mills during the Korean War, the judiciary has usually blessed these actions. In addition, Congress has passed dozens of laws—New York University law school’s Brennan Centre for Justice has catalogued 123—giving presidents specific powers during emergencies.
Once Trump has opened has opened the door to a State of Emergency, what happens next? What does that mean for the markets?

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Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).

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