Trump’s Ponzi Scheme To Bankrupt The U.S. Economy

Trump's wads of wasted cash

Donald Trump loves debt. “I’m the king of debt” he boasted to Wolf Blitzer.  Wheeling and dealing debt is how he’s made millions, but he never admits that his investors, shareholders, and bondholders lost billions of dollars in the process.  And now he wants to use that talent to burn your hard-earned dollars and bankrupt the U.S. economy.  How?

Swashbuckler Trump

On Squawk Box last month, Trump told host Andrew Ross Sorkin,

“I’ve borrowed knowing that you can pay back with discounts. And I’ve done very well with debt. Now of course I was swashbuckling, and it did well for me, and it was good for me and all of that.”

That “swashbuckling” was revealed in graphic detail by New York Times and USA Today investigations into his failed casinos in Atlantic City.  Trump builds his empires with other people’s money, so he never loses when they crash.  It’s essentially a Ponzi scheme, but with real estate.  As the Times reported, “Mr. Trump assembled his casino empire by borrowing money at such high-interest rates — after telling regulators he would not — that the businesses had almost no chance to succeed.”

Trump leveraged one debt-ridden property to prop up another, sometimes issuing junk bonds, at 14% interest.  In mid-1990, between his Atlantic City casinos and New York real estate projects, Trump was carrying $3.4 billion in debt.  Meanwhile, he was intentionally misleading investors by cooking the books to look like his ventures were profiting.

It’s little wonder that while other casinos were thriving in Atlantic City, Trump’s went to bankruptcy court four times because they couldn’t pay their debts.  Each time, he convinced bondholders to accept lower payments on their investments.  One time his dad made an illegal loan by buying $3.3 million in chips from The Castle casino to cover that month’s interest payments.  He didn’t pay his bills to hundreds, perhaps thousands, of individuals and small businesses, driving many to bankruptcy themselves.  At one point, his lenders even put him on a monthly allowance.  In the end, investors lost more than $1.5 billion as the casinos failed, all while Trump paid himself generous million-dollar bonuses that may have been illegal.  Yet in that same Times interview, Trump describes that time as “a very good cash cow…for a very long time.”

Trump’s Plan for U.S. Debt

What does this have to do with our national debt and the economy?  Trump has suggested lowering our national debt by “persuading creditors to accept something less than full payment.”  He told CNN’s New Day that we could just print more money, or that we can buy back debt when interest rates are high.

It sounds good, but does it also sound familiar?

The U.S. has never defaulted on its debt, and one reason investors buy our bonds is that they know they will be paid in full.  So asking our investors to accept 80 cents on each dollar they invested is the equivalent of putting the U.S. economy into bankruptcy.  Period.

Printing more money to pay back debt might make the investor happy, but it causes massive inflation.  In other words, everything you buy is more expensive, but you don’t get a raise.

Buying back debt at high interest is the ultimate shell game.  When interest rates go up, Treasury Bonds that were issued at low interest rates can be bought at discounted prices.  That’s because the higher interest rates mean the Treasury pays the same amount to the investor.  Principle went down, but interest went up, so you still owe the same money and make the same monthly payments.

The Actual Plan: A Shell Game of Debt and Bankruptcy

So let’s say Trump buys up $10 trillion of debt at higher interest for 70 cents on the dollar.  He can claim he cut that debt by 30% to $7 trillion.  But we had to borrow that $7 trillion at higher interest.  So long-term, the actual debt hasn’t changed!  You can see Trump’s smug face, telling everyone how in one transaction he slashed the debt?

Even Trump knows that if anything bad happens to the economy, less money flows into the government but the debt payments must still flow out.  That means more borrowing.   He told CNBC.  “I would borrow knowing that if the economy crashed you could make a deal.”

Higher interest debt makes investors skittish, so interest rates stay high and our credit suffers.  It’s a downward spiral from there.  That’s exactly how Trump crashed his casino empire.  Bankruptcy through more debt than revenue.

The Scorpion and the Frog

Do you remember this fable?  A scorpion needs to cross a river and asks a frog to carry it.  The scorpion promises the frog that it won’t sting.  The frog believes the scorpion and starts to carry it.  Halfway across the river, the scorpion stings the frog.  As they both sink into the water, the scorpion says it was in its nature to do so.

Now Trump is saying he’s a changed man.  No matter what Donald Trump promises you, his fortune has been made squandering other people’s money in Ponzi schemes of debt.  It is in his nature and he will never change.

The question is, are you going to let him take down the whole U.S. economy with his sting?

 


This is part 7 in a continuing series to critically examine Donald Trump’s presidential bid.

  1. Who Are The Ten Most Honest And Lying American Politicians?
  2. Why Can’t You Believe Hillary Clinton Is Inherently Honest?
  3. Trump Bankruptcy Reveals Chilling Details
  4. `Crooked Hillary?’ That Time Donald Trump Destroyed Email Evidence
  5. Caught Again: Trump Still Hiring Foreign Workers Over Americans
  6. Donald Trump’s Secret Plan To Bring Back Jobs: He Can’t
  7. Trump’s Ponzi Scheme To Bankrupt The U.S. Economy
  8. Trump’s Service Record Speaks For Itself

 


Featured Image Credit: flickr.com

About Charlie Barrel 143 Articles
Charlie has been writing news, opinion, and spoof pieces on politics off and on since 1994. In between gigs, he's a stand-up philosopher.