Why Markets Will Crash If Trump Tries To Steal The Midterm Election

President Donald Trump
All the political experts are telling us that the Republicans face a shellacking in November. The Democrats seem virtually certain to win the House and are increasingly likely to take the Senate. If that happens, it will put an effective end to the Trump administration.
Donald Trump clearly hates losing and has no respect for democracy. He tried to steal the last election he lost in 2020. For that reason, we have good reason to expect he will try to steal this one.
However, a major restraining factor is the likelihood that the stock market will crash. Trump’s billionaire buddies care far more about their money than about him. If letting Trump continue to play king is going to cost them a large share of their fortunes, they will use their considerable power to insist that the election results be respected.
To be clear, I’m not under any illusion that these people respect democracy. Many of them, like Elon Musk, openly express their contempt for it. But overturning a democratic election is the sort of lawlessness that is likely to send investors fleeing and markets tumbling.
We all know that Trump has already taken huge strides to move the country away from a law-governed system. He regularly sells pardons to people convicted of everything from fraud and tax evasion to drug dealing and child sex trafficking. A contribution to Trump’s campaign funds can win tariff relief or favorable regulatory rulings. And he has turned the White House into a sales office for Trump crypto and all sorts of other Trump products.
These practices have already undermined the country’s status as a safe place to do business. In Donald Trump’s America, a business can be hit by a shakedown attempt at almost any time for any reason. This is undoubtedly part of the story in the sharp rise in interest rates since Trump took office.
But stealing an election is a qualitative leap into Zimbabwe-land. If an election can be stolen in broad daylight, Trump can do anything, and no investment in the United States is safe.
And to be clear, there is zero doubt that we would be talking about stealing an election. All of Trump’s claims of fraud are batshit crazy, as everyone who has tried to examine them has determined, and every court that heard the cases has ruled.
In fact, it is surprising how little fraud along Trumpian lines exists. The Department of Homeland Security flagged 16,000 cases in Nevada of potential non-citizens who were registered to vote. It whittled this down to a list of 185 people that it turned over to the state’s election officials. On closer inspection, the state found that every last one of these people was in fact a citizen.
Virtually all the immigrants who come here do so to work, and hope to eventually get citizenship. They are not going to jeopardize this opportunity by illegally voting and committing a felony. Still, we might think that a few would mistakenly register, but at least in Nevada, a state with over 2.0 million registered voters, this does not appear to be the case.
So, everyone who is not in the Trump cult will know that the claims of fraud are nonsense and that Trump has stolen an election in broad daylight. This is in effect saying there is no more law in the United States with Trump in the White House.
This is likely to translate into stock and bond market meltdowns very quickly. Foreigners hold close to $20 trillion in U.S. stock and another $16 trillion in government and private debt. Much of this money could leave quickly.
It’s not that these foreign countries and wealth holders are necessarily huge lovers of democracy, but they put their money into the United States under the expectation that it was a country that respected the rule of law. Trump stealing an election is saying as clearly as possible that the law means nothing in the United States. Investors demand a much higher return on investment when they put money in a country where dictators can do whatever they want.
Take the case of Kazakhstan, a good example of a dictatorship with limited respect for the rule of law. It pays almost 14% interest on its 10-year government bonds. The interest rate on 10-year bonds in the United States stands at roughly 5.3%, about 0.6 percentage points higher than when Trump took office. But even if interest rates never get near Kazakhstan levels, bondholders would take massive losses if rates just rose 1-2 percentage points. They all understand this and likely would look to get their money out before the crash.
The same logic applies to stocks. Foreign investors can shift much of their money to countries that do respect the rule of law. And it’s not just foreign investors. Most brokerage houses offer options with 401(k)s to invest in foreign funds as an alternative to U.S. stock and bond funds. Many people already have a substantial share of their assets in these funds. That percentage is sure to rise considerably if Trump throws our election results in the garbage.
The effect of people who invested in the United States, shifting trillions into countries that actually are safe havens, will be an unprecedented crash in the stock and bond markets. The recognition of this fact may be sufficient to motivate Donald Trump’s billionaire buddies to tell him that he has to respect the results of the election. That may be our best hope, because clearly Trump has contempt for voters and democracy, and his cabinet and other top aides all feel the same way.
Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack, from which this is reprinted with permission.
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