QE and Stimulus set to continue even with a Trump win

QE and Stimulus set to continue even with a Trump win  By Ronan Manly – If the US presidential election is contested, appealed, and its outcome challenged, this will create near term market uncertainty, volatility and unrest. But whoever the victor, Fed QE and US government stimulus spending will continue, amid the associated destruction of the dollar and economy. All of which is gold price positive. Continue reading… 

With polling results tight in the US Presidential election, there is still concern that whatever the outcome, it will be contested, disputed, appealed, and legally challenged. The wider fear then is that such delays and disputes will create economic uncertainty, market volatility, and civil unrest for a number of weeks and perhaps for far longer.

This year’s US presidential election is perhaps the most divisive ever, and will be complicated by the use of record mail in ballots, patterns in popular versus electoral college voting, and the potential of a Supreme Court intervention. Add to this that the entire drama is taking place in a weak economic environment amid seemingly limitless injections of fiscal and monetary stimulus, and the whole thing is shaping up to be one that future historians will write about for years to come.

Not to forget the parallel House and Senate elections also happening on Election Day, whose outcomes will affect the efficiency of the next presidency both politically and economically (via the ease with which legislation can pass through Congress).

The Electoral College      

A contested presidential election is not just a theoretical possibility, and has happened as recently as 20 years ago in the 2000 Bush vs Gore race. At that time, it was only after five weeks that the US Supreme Court declared George W Bush president on 12 December 2000. That election had been held on 7 November. Delays on that occasion were due to a series of vote recounts in Florida (on which Florida’s electorate votes hinged), and an outcome only emerged after the Supreme Court blocked further recounts.

 

While most people’s eyes glaze over at the mention of the convoluted US electoral college system, the key to remember is that the popular election vote isn’t to elect the US President, but to determine which way the electoral college electors from each state will vote on the candidates. There are 538 electoral votes up for grabs, which means a majority in the electoral college votes is 270.

Like the House or Representatives, each of the 50 US states is entitled to electoral college votes based on state population. Given that there are 435 representatives in the House of Representatives, and 2 senators per state, this gives 435 + 100 = 535. Add in 3 more electoral college votes for Washington DC and this gives 435 + 100 + 3 = 538 votes. Electors are appointed by and represent their respective parties and practically always vote to reflect the outcome of the popular vote in their state. 

Supreme Court

In 2000, Gore received more of the popular vote, but lost to Bush because George W received more electoral college votes (271 votes) following the Supreme Court decision. Likewise in 2016, while Trump received less of the popular vote than H Clinton, he received more of the electoral college vote (306 votes vs 232). So the takeaway here is that you can win less votes overall in some big populous states but still receive more electoral college votes.

If there is a close (or not so close) outcome this year in the electoral college vote, then it’s possible that there may be legal actions and appeals that will involve the Supreme Court. Currently, the Supreme Court has a 6 -3 conservative majority, three of which have been appointed by Trump. This does not necessarily that there are 6 Republican judges vs 3 Democrat judges, but if the election ends up being decided by the Supreme Court, it could cause even more public protests and delays.

Turning to the Congress elections that are also running in parallel on 3 November, these are for all 435 seats in the House of Representatives (lower house) and this year are for 35 of the seats in the Senate (upper house). The Senate currently has a Republican majority of 53 to 47. The House has a large Democrat majority. With 35 Senate seats up for election, 23 of which are Republican, voter sentiment for Trump will affect how many of these seats can be retained by the Republicans. The House of Representatives will probably retain its Democrat majority.

The new (117th) term of Congress will begin on 4 January 2021, with the  presidential inauguration slated for 20 January 2021 in Washington DC. Interestingly, a US Government shutdown is possible on 11 December as a recent stopgap spending bill for the federal government only covers spending up to 11 December. Add to the mix then the possibility that the US Government could shut down even before the new term of Congress.

Read the remainder of the article at https://www.bullionstar.com/blogs/ronan-manly/qe-and-stimulus-set-to-continue-even-with-a-trump-win/