"Trump’s Tottering Towers"
By Bill Bonner
SAN MARTIN, ARGENTINA – "The big news at the weekend was that the president has not paid much in federal income taxes for years. In 2016 and 2017, for example, the billionaire paid only $750. Mr. Trump has portrayed himself to the public as a very rich and successful man. Yet, to the Internal Revenue Service (IRS), he has painted a different portrait… more like a Francis Bacon than Hans Holbein the Younger. That is, he cast himself as a loser… someone whose losses overpower his gains, and who thus, generally, owes no federal taxes. But let’s come back to that…
Bad Mule: It’s spring here in the Southern Hemisphere. The grass is green. The sky is blue. And it’s time to plant the garden. It was to that end that Gustavo put his shoulder to the plow on Saturday… and began an adventure.
Plowing with a mule.
We have tractors. But the garden is enclosed within adobe walls. Only a mule could get in to do the work. “Mules are better than horses,” Gustavo explained. “They’re strong. Reliable. But they’re temperamental. You have to work with them. You can get a horse that has been trained by a professional. But you have to train a mule yourself. You have to get to know it. Take your time. Mules don’t like to be rushed.
If you buy a mule… the seller will tell you it’s been trained and it’s very tame. But nobody sells a good mule. They’re not like cars. You can’t upgrade to a better mule. And you can’t downsize to a smaller mule. If someone sells you a trained mule, you know there must be something wrong with it. And you don’t find out what it is until you try to work with it.
One time, my grandfather bought a mule that had been trained up in the mountains… a long way away… maybe 20 hours on horseback. Well, he got the mule home and the next day, it ran away… It went all the way back to where it came from. Took a couple days. He got it back. But it was never a good mule. Some things you just have to do yourself.”
(The mule in question had come from a tiny, remote settlement – a speck of green oasis in a desolate landscape – on the other side of the most rugged mountains in the country. In the last century, it was a watering stop for drovers taking their animals to the city. Now, it may be abandoned… or turned into a hippie colony. No one knows for sure. Or even how to get there… We are planning an expedition… to be continued.)
Two Camps: In the meantime, we return to the grim story of the president’s tax returns. The news coverage broke immediately into two opposing camps. On one side, the president’s supporters considered it “fake news”… Or else, they thought it flattered Mr. Trump – it is quite an achievement for a man as rich as he claims to be not to pay much in taxes. “Bravo!” they said.
In the other camp, the news was taken as fact and thought to show not only what an unpatriotic sleazebag POTUS is, but also, how shaky his business empire is. Nancy Pelosi even imagined that a man in the White House with so much personal debt posed a “national security threat.” As to the latter claim, the House Speaker is surely exaggerating. The president’s $400 million in personally guaranteed debt may pose a threat to himself, but not to the nation.
King of Debt: And we only bring it up to make a familiar point. In the 1990s, Mr. Trump famously remarked that he was one of the poorest men on the planet. Many had zero, but he had less than zero; he was $100 million in the hole! That is probably where he would have stayed, were it not for the Federal Reserve.
It was in this period that the Fed began pushing down Mr. Trump’s cost of borrowing… and pushing up the value of his investments. The federal funds rate was nearly 10% at the beginning of 1989. Three years later, it was under 3%. This huge cut in the cost of financing allowed The Donald to climb out of his burrow. That’s why he called himself the “King of Debt” and a “low interest” kinda guy. He’s seen what artificially low interest rates can do.
Bigger Score: But those whom the gods would destroy are first made crazy. Real estate speculators are probably all a little nutty to begin with. No sooner have they made a big score than they are borrowing even more money… in search of an even bigger score. And with the intoxicating nectar of cheap credit flowing from every New York bank, Trump was unable to resist.
The president’s father made the family fortune in the nitty gritty, unglamorous world of middle-income housing in Queens. Donald crossed over to Manhattan and sought prestige.
To hear The New York Times tell it, he ended up with a lot of unprofitable property. He lost $162 million on the Trump National Doral golf resort in Miami alone. His hotel in Washington, only open since 2016, has recorded losses through 2018 of $55.5 million. These losses made such a dent in his finances that he has not paid any federal income taxes at all in 10 out of the last 15 years.
Hooked: But giving people cheap credit is a bit like inviting a friend to share your heroin. He becomes part of your fantasy world… and may have a hard time escaping it. Donald Trump was hooked many years ago. And so was much of the U.S. economy. Almost everybody became dependent on fake money and a federal funds rate below Consumer Price Index inflation.
So it was in January. Now, in late September, it has become more difficult – for the president and the nation. Stuff happens. And when the coronavirus happened, the Donald’s empire – hotels, casinos, resorts – was hit hard. Some 17 of Trump’s golf resorts closed their doors. Hotel occupancy rates in New York fell from 93% last August to only 38% this year. Gamblers have moved online. Golfers are back on the links, but not crowding around the bars.
Deep Hole: How deep is Donald’s hole this time? We don’t know. It’s none of our business. But Mr. Trump is resourceful… and lucky. He may climb out again. America’s hole, on the other hand, goes $80 trillion down… all the way to Hell."
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