Trump’s Master Plan–Strategic Bankruptcy

Donald Trump may have a master plan for saving the country, or he may not.  Phase 1 of Trump’s plan will be to consolidate power.  His best course of action will be to emulate Ronald Reagan’s fiscal irresponsibility.  While some remember Reagan as a great conservative, federal deficits soared to unprecedented levels under his administration.  Reagan had two primary goals and he achieved them both.  His first goal was to lower all marginal tax rates and simplify the tax code.  His other goal was to rebuild the US military.  Reagan seldom had full congressional support for these measures, and the media fought him every step of the way.  To overcome congressional opposition Reagan simply bought cooperation with deficit spending.  Congressmen may make noise about balanced budgets, but they all love to spend money on their constituents.  Reagan’s deficits were strategic.  He ensured cooperation with the parts of his program that mattered to him, and he felt that economic growth would make all the spending irrelevant overall.  Things did not work out quite so rosy, but the Soviet Union did come apart.

Donald Trump is no Regan, but he may elect to use a similar strategy.  Trump does not care so much about abortion, tax policy, or military spending as many so-called conservatives.  Trump’s main issues seem to be border security, and favorable trade deals.  Neither of these issues are popular with congress, and the media hates the idea of an America first policy.  This does not matter to Trump—he will buy cooperation.  Already there are rumors of a massive infrastructure spending bill in his first 100 days.   This bill will do very little to put Americans to work.  Public works projects just do not employ many people compared to the old days, and projects take forever to leave the planning stage.  All this spending will buy cooperation from key members of congress who are eager to reward their friends with a big pork dinner.  Trump will also use military spending and tax cuts to buy cooperation.  These measures will be fiscally irresponsible in the extreme, and will place stress on an already shaky financial system.  Trump will not care.

Trump will use all the cooperation that he buys to build a real border wall.  He will also act to create what amounts to a security state favorable to most Americans.  Deportations of illegals will begin and this step is critical to the overall plan.  Trump will also seek to delegitimatize the media, and weaken their power.  His judicial appointments will also help to secure his power for the next important phase.  He will seek to obtain a great relationship with the FBI and military.  He will build friendships with state and local law enforcement.  When he senses that the time is right, Trump will collapse the system.

The idea that Trump will use spending to build cooperation should not be controversial.  Whether Trump intends to cause or allow an economic collapse is highly speculative.  (Larping) Consider that Donald Trump is no stranger to bankruptcy.   He has used bankruptcy to successfully defend and rebuild his business empire.  Trump does not share the same sky is falling, woe is me, the world is ending, attitude about business failure that is common in the media.  Donald Trump is likely to use the economic collapse to save the county.  Bankruptcy is beautiful and deflation is divine.

People who are what Rush Limbaugh calls low information voters think of rich people as if they had huge vaults full of money, when the truly rich are considered to be rich because of the market value of their assets.  This market value fluctuates, and many of the wealthiest people in the world also hold a great deal of debt.  As long as their assets can generate enough revenue to keep paying on the debt these people and institutions remain rich.  As soon as the checks start to bounce, an entire empire can come to its knees quickly.

Consider the case of an Iowa corn farmer who owns 1000 acres of prime farmland free and clear.  If the land is worth $8000 per acre, this farmer holds 8 million worth of land, and perhaps has another $100,000 or so in the bank.  If the price of corn and the price of land collapse so that his farms are only worth $500,000 instead of 8 million he really does not care.  This farmer, who may lead a very middle class lifestyle, has simply moved sideways down the asset deflation bubble as it pops.

A corporate farm may also own 1000 acres, but the land will almost certainly be paid for with borrowed money.  In a major economic downturn, the corporate farm is instantly bankrupt and those 1000 acres will be offered for sale by the court at a fire sale price.   The popping of the asset inflation bubble will be painful for many people in addition to all the large corporations, but the end result will be affordable family formation and a healthy society.

Asset inflation has been one of the most destructive forces damaging American families, and it has been tolerated since the 1970’s.  The price of a house in a non-inflated economy will remain fairly stable, but housing prices in the USA have been steadily rising.  While homeowners typically see this as a good thing and have been known to consider their houses as speculative investments, rising asset prices kill the middle class.  Health care, education, transportation, and food have all been inflated to absurd levels.  When section 8 housing vouchers pay for a $1000 per month apartment, a middle-class family needs to spend $1500 per month to stay in a nice area.  White people choose not to have kids.  Society gradually degrades.

While Trump is a wealthy man, he has middle class sensibilities.  Lion of the Blogosphere has observed that Trump has 1950’s values.  Since Trump understands the real estate market as well as anyone, he will not be intimidated into another TARP.  The big banks will fall.  Asset prices will fall, but those assets will become productive once more since the cost of operating farms, factories, and stores will be so much more reasonable.  America will be much stronger and better post collapse.  The key to making all this happen is for Trump to have very strong political control of law enforcement, the judiciary, and the military.  Even if the dollar collapses a new currency, perhaps based on gold, could be created.  Instead of bailing out the big banks, Trump may choose to bail out the holders of CDs, checking accounts, small businesses, and farms.  These people, who may see the prices of their houses fall by 50% or more will suddenly feel rich.  These people will rebuild the country.

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