Good morning. Here’s your Early Warning for Wednesday, 08 May 2019.
Politics & Governance
Impeachment: In recent days, House Speaker Nancy Pelosi (D-CA) continues to bring up impeachment, but her reluctance may be softening. Previously, Pelosi said that impeachment was off the table unless there was bi-partisan support. But just a few days ago, Pelosi said this:
“As you probably know on the articles of impeachment for President Nixon, article 3 was that he ignored the subpoenas of Congress, that he did not honor the subpoenas of Congress. This is very, very serious. But my judgment [on impeaching Trump] will spring from the judgment of our committee chairs… Let them work their will and then we’ll go to the next step… I think that the statements being made by the president of the United States has given a blanket statement that he’s not going to honor any subpoena is obstruction of justice. I think that all–many of the statements that the–that the administration has made has been about obstruction of justice.”
Clearly she’s drawing a precedent for impeachment on the grounds of obstruction. There exists the distinct possibility that Pelosi wants to hold impeachment proceedings, but at a time closer to the election, or perhaps if Trump is re-elected. She’s previously balked at impeachment, believing that it will hurt Democrats’ chances in 2020 elections. “Trump is goading us to impeach him. That is what he is doing every single day — taunting, taunting, taunting,” Pelosi said on Monday.
Barr’s contempt: The House Judiciary Committee is scheduled to call for a vote to hold Attorney General Bill Bar in contempt of Congress this morning for not releasing the Mueller report in its unredacted entirety. The version Barr released to the public was 90% unredacted, and the version sent to Congress was 98% unredacted. The Justice Department responded to the contempt threat by threatening to invoke executive privilege for Barr if Congress holds Barr in contempt.
Tax leak: The New York Times has obtained transcripts of Trump tax returns from the 1985 to 1994. The transcripts were leaked from someone who had “legal access” to them, according to the Times’ reporting.
This morning, President Trump tweeted that China’s top trade official was ‘coming to make a deal’ on the trade war. One trend we’ve been following is China’s minor financial crisis of corporate debt defaults. So far this year, Chinese corporations have defaulted on $5.8 billion worth of loans, which is triple the pace of 2018, which was four times higher than in 2017. The entire Chinese bond market is $13 trillion, which not entirely at risk; but China will have a much larger problem in 2019 if the trend continues. I’ve previously discussed the trillions in debt contained in China’s shadow banking system, which Chinese president Xi Jinping is reportedly trying to reform. Goldman Sachs warned in an investment note yesterday: “Credit stresses are higher than what the defaults are showing.” Now is a really good time for China to make a U.S. trade deal that allays fears of China’s economic slowdown. A deal will also be positive news for the U.S. economy.
And speaking of the U.S. economy, DoubleLine Capital’s Jeff Gundlach warned during a CNBC interview yesterday that our economic growth is not all it’s cracked up to be. First, Gundlach, who’s at the very top of my Economic Warning Matrix, says that a few months ago there were no indicators of recession, but now it’s “not a lock” that we’ll make it through the 2020 election before a recession hits. “We’re so late in the cycle, the data is weakening, and interest rates, amazingly, have been tightened to a level that’s causing economic concern.” Piling on, Gundlach, who previously warned that our GDP growth is illusory, reiterated that view. “People are starting to realize that the.. deficit and the national debt are totally out of control… [In 2018] the national debt increased by over six percent of GDP. Nominal GDP rose by 5.1 [percent]. What that means, Judge, is if we hadn’t increased the national debt at all in 2018, GDP [growth], nominally, would have been negative. And in fact that’s the truth for the last three years, and the last five years; that the national debt growth is responsible for all of the growth in the U.S. GDP.” Gundlach asks,” What’s going to happen when we turn down?” [source]
Global/Defense Situational Awareness
Iran: Iranian leaders say they’ll resume the enrichment of uranium for their nuclear program unless they’re able to sell their oil again on the global market. (AC: This is setting up another inconvenient foreign policy hurdle for the Trump administration, and as well as a potential flashpoint as long as Iran war hawk and national security advisor John Bolton has the president’s ear.)
“In the coming days, I expect that Congress will have no choice but to confront the behavior of this lawless Administration. The Committee will also take a hard look at the officials who are enabling this cover up.” – Rep. Jerry Nadler (D-NY)