Heisenberg Report

Trump Election Delay Could Force World To Rapidly Re-Evaluate Dollar’s Reserve Status

In a dubious (if wholly predictable) development, Donald Trump on Thursday suggested delaying the US presidential election.

For months, the president has insisted that mail-in voting would lead to massive fraud, a largely unsubstantiated claim which prompted Twitter to add what amounted to warning labels to some of Trump’s tweets starting in May. “Get the facts about mail-in ballots”, the tags read.

In a Thursday broadside, Trump suggested that 2020 has the potential to be “the most inaccurate and fraudulent election in history”, something he said would “embarrass” the country. He then asked if the election should be delayed.

While it’s best to avoid trafficking in hyperbole around the president’s bombastic tweets, this does represent the first time Trump has seriously floated the idea of not holding the election on schedule.

He’ll likely say he wasn’t serious (or that he was merely “asking” a question), but it seems obvious that he intends to push the envelope. Indeed, he made that his pinned tweet shortly after it appeared.

Asked by Fox in June if he would accept the results of the ballot were he to lose, Trump suggested he would, but in a subsequent interview with the network’s Chris Wallace, Trump said “you don’t know until you see”, when asked the same question.

On May 26, in “The US Election May Be Decided By June. But Would Trump Leave If He Lost?“, I wrote the following about this scenario:

I do not think it is a foregone conclusion that Trump leaves office if he loses a close election. No sell-side analyst is going to write that, but it should be on your radar, even if you think it’s a ridiculous thing to fret over. I also do not think it is necessarily guaranteed that there will be an election in November if it coincides with a meaningful second wave of the virus and Trump is behind in the polls.

Fast forward exactly two months, and there is, in fact, a meaningful second wave of the virus in the US, and Trump has explicitly floated the notion of delaying the election.

In same linked piece, I wrote the following:

Remember, Trump claimed massive voter fraud even after he won in 2016. He has never dropped that claim. Given how litigious Trump is, and considering the exigent circumstances that may end up surrounding the vote, it is not out of the realm of possibilities that the president simply refuses to leave office. It’s also not at all clear what could be done in that scenario.

I think, as intelligent people who are keen on making predictions about the future of markets and the political outcomes that affect asset prices, we would all be naive not to at least consider that as a possible tail risk.

Thursday’s tweet (shown above) underscores that this is, in fact, a tail risk. Surely we can say that it is no less likely than a pandemic was this time last year.

This has serious implications for the dollar. The following excerpt (from “Why ‘The Tide Is Going Out On US Dollar Exceptionalism’”) now seems particularly prescient, penned as it was on Wednesday evening:

At the same time, the perception that the US suffers from intractable political dysfunction… undermines investor psychology, as does pervasive societal unrest tied to myriad inequities and prejudices seen as increasingly incompatible with the prevailing attitudes and ideals that characterize other modern, developed nations.

The dollar retreated quickly following Trump’s Thursday tweet, before recovering.

You’ll note that the move shown in the figure (below) is most assuredly down to the “delay” remarks, which came a full 16 minutes after GDP and jobless claims figures were released.


“President Trump floated the idea of delaying the next US election because he maintains without evidence that mail-in voting will lead to fraud”, Ye Xi wrote, adding that “the idea could change the VIX curve, narrowing the spread between [the] October contract versus the rest of the year”.

For those wondering what might have the power to accelerate de-dollarization and force the world to adopt a new sense of urgency when it comes to establishing an alternative avenue for safeguarding global savings and facilitating financial transactions, a move by a sitting US president to delay an election by decree when he is trailing in the polls might well do the trick.

During this week’s confrontational hearing on Capitol Hill, William Barr came across as somewhat noncommittal when asked if he would accept a Trump loss.

“Mr. Barr, what will you do if Donald Trump loses the election on November 3rd but refuses to leave office on January 20th?”, Rep. Hakeem Jeffries wondered.

“Well, if the results are clear, I would leave office”, Barr responded.

“Do you believe that there is any basis or legitimacy to Donald Trump’s recent claim that he can’t provide an answer as to whether he would leave office?”, Jeffries asked, in a follow up.

“I really am not familiar with these comments or the context in which they occurred, so I’m not going to give commentary on them”, Barr said.

Logistically speaking, Barr would be the first line of defense for Trump in the “science fiction” scenario where the president decides to remain in office or delay the vote.

For those inclined to suggest that this is not a possibility (and some readers have, in the past, indicated that even raising the issue is somehow out of bounds, despite the fact that the president has broached the subject on numerous occasions), below is the exchange between Wallace and Trump from the official transcript provided by Fox News. I’ll present it without further comment.

TRUMP: You don’t know until you see. It depends. I think mail-in voting is going to rig the election. I really do.

WALLACE: Are you suggesting that you might not accept the results of the election?

TRUMP: No. I have to see. Look, Hillary Clinton asked me the same thing.

WALLACE: No, I asked you the same thing at the debate.

TAPE: Presidential Debate, October 19, 2016

WALLACE: There is a tradition in this country — in fact, one of the prides of this country — is the peaceful transition of power and that no matter how hard-fought a campaign is, that at the end of the campaign that the loser concedes to the winner. Not saying that you’re necessarily going to be the loser or the winner, but that the loser concedes to the winner and that the country comes together in part for the good of the country. Are you saying you’re not prepared now to commit to that principle?

TRUMP: What I’m saying is that I will tell you at the time. I’ll keep you in suspense. OK?