The crash of 2026

A fiction

Looking at the facts, there’s no reasonable conclusion except that US democracy is done for. But rather than face facts, I’m turning to fiction. So, here’s a story about the collapse of Trumpism, crony capitalism and the AI/crypto bubble. Fiction is a relatively unfamilar mode of writing for me, so critique (on style and structure rather than plausibility) is most welcome.

The crash of 2026

The crash of 2026 began with a literal crash. A Tesla robotaxi operating on an open highway for the first time, inexplicably swerved into the path of oncoming traffic. Coming in the other direction was a Cybertruck whose driver, relying on self-driving capabilities, was busy checking his investments on the phone. His instant death spared him from the knowledge of his impending bankruptcy.

Tragically, a school bus was following, and its brakes failed (the school district later blamed budget cuts for inadequate maintenance) The driver did her best to steer around the wreckage but the bus overturned and burst into flames. By the time the smoke cleared, there were six deaths, including the busdriver and two children, as well as the occupants of both Teslas. More then 30 schoolchildren were taken to hospital. The images of death and disaster ran on TV and social media for weeks.

The reaction was swift. By the end of the day, Tesla’s robotaxis had been taken off the road throughout the US, and demands for retribution were everywhere. Several Tesla dealerships were torched and others closed down. The situation wasn’t helped by a bizarre tweet from Elon Musk, appearing to suggest that the bus driver was a “crisis actor”.

By the time Wall Street opened the next day, the financial analysts had done their sums. The legal liability for the disaster would run into billions, enough to wipe out most of Tesla’s cash reserves. And with the robotaxi business gone, there was nothing to conceal the truth of Tesla’s situation: a company with declining sales and margins trading at more than 100 times its current earnings. With the prospect of massive short sales at the opening bell, trading in Tesla shares was suspended.

This was bad news for Musk, who faced margin calls and the loss of his holdings in X and SpaceX, both secured by his ownership of 16 per cent of Tesla. But as usual in such cases, he got off easily. Musk turned up soon afterwards on a Caribbean island he had bought through a shell company years previously, along with the government of the nation that supposedly ruled it. No longer the richest man in the world, and theoretically bankrupt, he nonetheless enjoyed the comforts of a mansion and a super-yacht, each with its fleet of servants.

The situation was rather different for the owners of the other 84 per cent of Tesla, who collectively faced the loss of nearly a trillion dollars. Those with diversified holdings and no debt took the loss philosophically, as an offset against the massive profits of recent years. But others, who had borrowed to buy both Tesla and crypto assets like Bitcoin, faced disaster, especially when rumors spread that Tesla was about to dump its own massive Bitcoin holding.

The price of Bitcoin fell 25 per cent overnight. Longstanding HODLers were not concerned, reminding themselves that Bitcoin had fallen many times before, and had always rebounded. But now that crypto-currencies were embedded into the financial system, there were plenty of players with a shorter-term perspective. They started talking to economists, who almost universally agreed that crypto-currencies were inherently worthless. Traders who had gone all in on crypto suddenly saw the merits of profit taking. Regulators, who had been quiet since the passage of the GENIUS Act, started asking questions.

The real disaster came with the exposure of large-scale fraud at Tether, the most prominent of the stablecoins, which were supposed to trade at exactly $1 US. As the volume of investors seeking to quit crypto increased, it emerged that the supposedly ironclad asset backing of Tether had been undermined by a complex web of derivative transactions, allegedly the doing of a “rogue trader”.

Once Tether “broke the buck” the run was on in earnest. Wall Street banks found that that they had significant direct exposure to crypto and even more through their counterparties. They went into lockdown, calling in whatever debts they could.

The realisation that the multi-trillion dollar valuations of Tesla and Bitcoin had been spun out of thin air led to a harder look at Wall Street’s “Magnificent Seven” now reduced to six. Claims that AI was about to generate massive wealth if only more billions were invested looked silly. Investment in data centers stopped abruptly.

Nvidia was the first casualty. Once orders for chips from the hyperscalers dried up, its business was over. The advertising businesses of Google and Meta, and the Amazon retail business, went next. There would be no growth in sales of consumer goods for some time to come. Microsoft and Apple, with real businesses and products, fared better, but their values, based on hyperbolic price-earnings ratios, fell drastically. Crowds of ruined investors, milling in the streets, became violent, and were suppressed by heavily armed and masked thugs, presumed to be ICE, with several deaths. Increasingly violent protests and even more violent suppression followed.

At this point, a global financial crisis similar to that of 2008 was now inevitable. There were loud calls for an internationally co-ordinated response. But such co-ordination, already inadequate in 2008, was non-existent this time. Fed Chair Kevin Hassett, appointed by Trump after the removal of Jerome Powell, couldn’t even get his global counterparts to pick up the phone.

With less direct exposure to the crisis, other countries sought to protect themselves, imposing exchange controls, and preventing repatriation of funds to the US. Crypto trading was banned in many jurisdictions, and holders of crypto were required to report their positions to regulators.

Taken collectively, these disasters threatened to wipe out the entire wealth of the Trump family. Naturally, Trump struck back, announcing the discovery that trillions of dollars in US foreign debt was fraudulent, and would be expropriated. The remaining US public debt, following the plans previously announced by Stephen Miran (chair of Trump’s Council of Economic Advisers) would be forcibly converted into 100 year bonds, at rates to be set by the US. The EU and Canada reacted by freezing US-owned assets. Trading on major stock exchanges around the world was suspended.

At this point, global capitalism seemed doomed, along with democracy. But somehow things turned around. With their donors facing ruin, dozens of Republican Representatives and Senators switched sides, throwing control of Congress to the Democrats, who immediately announced impeachment proceedings against Trump. Trump called on JD Vance to expel the traitors from the Senate, but, sensing the ground shifting, Vance temporised.

Trump attempted to declare martial law, but was forestalled by Vance and the Cabinet, who invoked the 25th Amendment to remove him. At Trump’s urging, a MAGA mob, including dozens of the masked gunmen now ubiquitous on American streets, marched on the Capitol, planning a repeat of 2020. But this time they were met by the army, with fixed bayonets and machine-gun emplacements. After a brief exchange of fire, the crowd fled, leaving dozens of dead and wounded behind.

The Vance Administration lasted only a few days. After seeking assurances that he would not face prosecution, Vance resigned in favor of Jerome Powell, who had been hastily appointed as Vice-President and was seen as the technocrat most likely to restore faith in the US,

The fallout was rapid. Facing impeachment and likely criminal charges of corruption, Supreme Court justices Thomas and Alito resigned, while Gorsuch and Kavanaugh decided that their appointments had been improper all along. The five remaining members of the court unanimously overturned the previous finding of Trump’s presidential immunity, and discovered that participation in the January 6 insurrection was in fact treasonous.

Facing this catastrophic defeat, MAGA fragmented. A minority of Trump’s supporters genuinely repented of the disaster they had brought on their country and became zealous defenders of democracy. Another group pointed to the feeble statements they had made criticising Trump and tried, with varying degrees of success, to maintain a role in public life. Some of the MAGA base gave up on politics altogether, suddenly discovering that Trump was just as corrupt as the Democrats he had railed against. Others remained loyal to their fallen leader. Republican state governments collapsed as the party fragmented.

Trump’s trial proceeded rapidly this time, and he was sentenced to spend his remaining days in prison, along with many of his cronies. There were some scattered insurrections which were rapidly put down, with their participants held in the various detention centres conveniently created by Trump.

Now, in early 2028, the world economy is gradually climbing out of the pit created by the crisis. The financial sector, a shadow of its former self, remains largely nationalised, and the disastrous losses in the crypto sector have yet to be resolved. But AI technologies, now in the public domain after the collapse of the hyperscalars. have started deliver significant (though not stratospheric) productivity benefits. Continued declines in the cost of solar power and battery storage have dispelled concerns about shortages of electricity, and have supported new investments in rewiring the economy in the US and other countries.

The reconstruction of the US political system will take much longer. President Powell, virtually assured of re-election, has proposed a constitutional convention that would replace the failed two-party system. The first step, already implemented in most states, has been a shift to instant runoff voting in Congressional elections, along with the scrapping of the primary system. But a shift to full-scale proportional representation is expected, with the former Republican party splintering, and socialists gaining significant support in cities and even some rural areas.

There is, as Adam Smith observed, a great deal of ruin in a nation. It will take decades for Americans to repair all the damage done by their experiment with fascism. But America has huge resources, both human and natural, and (at least in this fictional account) the traditions of democracy are finally reasserting themselves.

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