Thursday, October 6, 2016

Hillary Clinton will probably win, and elite Republicans are actually fine with that

If you listen to Donald Trump and the apocalyptic warnings of talk radio personalities, the election of Hillary Clinton means the end of civilization as we know it.  If you look at PredictWise, Clinton currently has around an 81% chance of winning, after having rebounded from that rocky period of pneumonia etc.  Remember, though, that there are a lot of different types of Republicans.  There are social conservatives, who are concerned primarily with issues like abortion.  There are those who care primarily about reducing redistribution through the federal budget.  And then there are those I call the Chamber of Commerce types.  The ones who basically want stability so that business can proceed apace.  Most will vote for Donald Trump because, in the ballot booth, party loyalty "trumps" just about everything else.  Yet, if the election of Hillary Clinton were as terrifying as Trump claims, it would be time to batten down the hatches.  Here's the S&P 500 year to date.

That ain't battenin' down those hatches.  Is this because Clinton will spark the next phase of an historic bull market?  Nope.  This bull market has already gone on for a rather long period of time, largely because we had a terrifying drop in the financial crisis.  Rather, markets and the economy as a whole are only weakly influenced at best by the president, under normal times.  The dirty secret here is as follows:

Read the commentariat among the business class and they will whine about how the Fed is keeping interest rates too low.  Then, the markets freak the fuck out every time it looks like the Fed might raise interest rates.  They rally, then, on news that the Fed won't raise rates.  Markets maintain stability as Clinton's lead solidifies while Trump promises to throw out Yellen in favor of someone who will jack up interest rates, doing exactly what investors claim to want, but which causes them to freak out as soon as they worry that it might actually happen.  There is more to it, of course, including a general worry about Trump's unpredictability, but that's kind of the point.

So, Clinton is ahead.  And, the markets are fine with that.  Republican investors are fine with that.  Would that be the case if Republicans had nominated Jeb Bush, Marco Rubio, or someone else less Trump-y?  Uh...  Good question.  After all, talk of raising rates is now Republican standard.  Would they really push for it where they in charge, or is it kind of like talk of deficit reduction when the president is a Democrat?  Uh...


  1. It's not all about rates. I'm not sure it's even mostly about rates.

    I actually think it's about net profits (for the finance class). Those depends on rates. But they also depend on tax cuts (which Trump would give them, just as any GOPer would) AND on the rest of us schlubs having enough money to buy shit.

    They're not worried because Clinton represents the best possible outcome at this point: a stable economy, but possibly higher tax rates (but, there's that whole Congress that they're unlikely to lose control of, so that's very unlikely). Trump would give them great tax rates, which would be awesome to bake into the system, but he would also bring on the Trumpocalypse, which is bad for business.

    1. Profits actually depend mostly on completely exogenous stuff. It's just that in terms of policy, they depend more on monetary policy than you think. If some ignoramus jacked up interest rates too soon, that would be a disaster, and regardless of what they say, they actually know it. And, tax cuts matter less to the eventual bottom line than most think. Remember that whole 90's thing? They do, regardless of what they say. Sure, the CEOs want tax cuts, and sure, they help. But, even now, take them into an unmonitored booth, and let them cast truly secret ballots to either raise the corporate tax rate by 5% or the prime rate by 5% and they'll raise their own taxes. And then deny it.