What Donald Trump Understands About Money That You Don’t
And why what he doesn’t know picks your pocket
Making the world go round
Yuval Harari summed it up in his book, Sapiens, better than anyone.
“Money is the most universal and most efficient system of mutual trust ever devised.”
Money is the bedrock of society.
I’ll think up an example while you read on and act interested:
You can grow potatoes in Scotland, sell those potatoes for a promissory note and deposit that note in a bank where it becomes a series of digital zeros and ones.
You can exchange some of those zeros and ones for a flight to America and exchange the rest into dollars when you get there. Then you can walk into a restaurant and buy yourself some fries.
Imagine how difficult that would be if we didn’t have money.
Noses in the trough
Where there is money, there are people willing to take it from you — and that includes the bankers. They offered their strongholds to protect the accumulated wealth of the people.
As their stores of money grew, the bankers offered your money in their strongholds as loans to the butchers, bakers and candlestick makers. The banks trusted these businesses to make money in the future and pay back their loans, with interest.
It was a profitable enterprise. But the banks were greedy. They were the ones printing the promissory notes, and they realised they could loan more money than they had.
It’s called the fractional reserve banking system.
Governments allow banks to lend more than they hold in actual deposits. They don’t need to have all the money they loan, they can legally lend 10 x the amount they have in reserves.
If a bank has £10 million in its vault, it can dish out £100 million in loans.
The government trusts the banks to recoup the money they didn’t have but loaned out. The banks trust the people to pay back the loans they gave them from the money they didn’t have. People put their trust in the future.
Blessed are the meek
The butcher, baker and candlestick maker could not build their businesses without accessing wealth from the future. Trading potatoes only gets you turnips in return.
Butchers need tools and materials to build their abattoirs. They need to pay farmers for their livestock. Bakers need flour and furnaces. They both have to pay their employees a wage.
Without the bankers first producing money from thin air, the whole thing would grind to a halt.
Money has no value unless we trust we can exchange it for goods and services. It is the basis of worldwide cooperation.
That orange balloon
Donald Trump represents the puffed up Cheeto of the rich. He likes loans. He said it himself:
“I do it all the time in business. It’s called other people’s money. There’s nothing like doing things with other people’s money because it takes the risk — you get a good chunk out of it and it takes the risk.”
The ordinary person takes out a loan, buys a house and then spends most of his working life paying off that loan. If he defaults, he loses his house.
What Donald Trump understands about money is the bigger the loans you have, the greater the incentive it is for the banks to make sure you don’t fail.
“If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” — John Paul Getty
But Trump especially understands how to make it the bank’s problem. The Trump Organisation is a group of about 500 business entities of which Donald Trump is the sole or principal owner.
Each entity borrows money as a limited company. A limited company makes it legal for owners’ assets and income to remain separate and distinct from the company’s assets and income.
This way, Trump, despite owning these companies, has limited liability if they go bust. Trump has owned companies that have gone bankrupt. But he has never filed for personal bankruptcy.
He isn’t the only one.
In 2020, in the USA alone, 21,655 companies filed for bankruptcy. That’s the lowest number since 2006. In 2009, a disturbing 60,837 filed for bankruptcy.
When one of Trump’s companies cannot pay its bills and goes insolvent, the remaining assets are shared between the debtors. Trump walks away unscathed and carries on with his other 499 companies as if nothing ever happened.
Business speak
It’s an economical way of doing business. If his enterprise fails, Trump absolves himself of any personal responsibility for the debt and it is the banks and creditors who lose out.
There are other ways Trump avoids paying. Like the time he contradicted his own numbers:
The Trump Organisation’s disclosure to the Office of Government Ethics valued the Trump International Golf Club in Jupiter, Florida at more than $50 million. Yet, he whined about Palm Beach County’s $19.7 million valuation of the property as being too high — effectively deflating its value for tax purposes.
Kicking butt
Donald Trump paid $750 in federal income taxes the year he won the presidency and another $750 in his first year in the White House.
According to the New York Times, He had paid no income taxes at all in ten of the previous fifteen years — largely because he reported losing much more money than he made.
It is an insidious disease of the rich to take advantage of the laws and loopholes — generally implemented for them — that deprives the very country that has supported their wealth.
Taxes pay for welfare so people don’t starve. It pays for health care, defence, public safety, defence, transport and many more essentials required to ensure the fabric of modern-day society doesn’t rip apart.
What Trump, and others like him, don’t understand is that without the continual repair of the fabric of society, there is no society. There are riots, looting, despair, and starvation.
Modern biology
Trump, and other grubby money-grabbers, tout trickle-down economics as the way to boost the economy and bring wealth to everyone.
Trump cut the corporate tax rate from 35% down to 21%. He also reduced the top individual tax rate to 37%. If you own a lot of companies and earn lots of money — it’s Christmas all over again.
It’s a nice theory — if you are rich.
Look at what happened: big businesses and rich people paid less tax and their wealth grew. The country had to cover the reduced income by cutting spending.
Trickle-down economics has never worked. It has done the same for a country’s prosperity as bloodletting with leaches does for the common cold.
What Trump and other rich folk don’t understand is that they are bleeding the arm that works for them.
Henry Ford got it. He understood he needed to pay a fair wage and give his workers more time off to spend their money on his cars, otherwise, he wouldn’t sell many cars.
A starving man will buy food if you give him a job. Help a cold man earn more money and he buys a blanket. If you support a homeless man by giving him a decent paying job, he buys shelter.
People have to grow food, make blankets and build homes. The economy grows and businesses, even the ones owned by Trump, thrive.
If you already have all the money you need, and you receive a tax cut, you squirrel that money away. It never sees the light of day. It doesn’t get spent, it doesn’t get taxed — it gets frozen out of the system and people suffer.
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