Donald Trump’s rise to the Presidency is a lesson to us all: apply for the job you want, regardless of how much experience you have. Of course, most jobs don’t come with the power to use the global economy as toilet paper.
With no political experience at all, Trump sold the success of his presidency on his business track record. He paints himself as a maverick, a renegade who plays by his own rules, whose business brains and determination made him a multi-billionaire.
Except, none of that is true because, and unlike most entrepreneurs who start businesses or investments with a level head and a lot of hard work, Trump’s career has left a trail of bankruptcies, loan defaults, and out-right lies. For example, his total debt – mainly bank loans – went from $350 billion in 2015 to $630 billion last year. Meanwhile, his actual net worth is estimated to be $2-3 billion, not the $10 billion he claims. Nor did he start from nothing and climb his way to the top. After wanting to be a film producer, he left university in the late ‘60s and immediately got a job at daddy’s real-estate business. Despite losing money on multiple projects, his father continued to finance him throughout the ‘70s, with over $10 million. Even his break into hotels was bankrolled by his father, who guaranteed $70 million, organised a line of credit with the bank and a 40-year tax abatement from New York. Surely that was enough to guarantee success? Nope. By ’79 he was so much in debt, daddy had to give him $7.5 million pay them off.
The same thing happened over the years, with vast sums of money lost buying and losing casinos, and a short-haul airline. He made and lost dozens of real-estate deals, defaulted on bank loans, and issued a tonne of junk bonds. In 1990, The Trump Organization revealed it was $5 billion in debt (although that was raised to $8.8 billion by some estimates).
So, not really the sort of man you want running the US economy then.
Broad economic forecasting is as difficult as predicting British weather, but there are certain things we can be certain of.
First of all, it’s not all going to be bad news. The US economy is expected to grow, so no recessions, at least in the short-term. Trump is also keen to reverse a lot of banking regulations, which will mean more loans to middle-income families for home building and a nice boost to the construction industry.
He’s also said the US will stop being the World’s policeman and instead be more ‘live and let live’. That will mean less friction and greater international stability with Russia, China (although he’s in trouble there by his inviting the Taiwanese representative to his inauguration) and the Middle East. For the UK, we can expect some short-term pressure off the pound, which fell following Brexit. We’re also the second-biggest exporter of services and the US takes most of them. That’s unlikely to change any time soon. In Europe, less US military presence is likely to see a boost in EU defence spending.
Unfortunately, that’s about it for the good. Trump has promised huge tax cuts, but also high public spending, which will lead to inflation and higher interest rates. Economists expect both to be “dramatic”…
With the dollar already over-valued and expected to increase further, this will hit developing economies hard. Trump is also even more protectionist than most, and is backing away from free trade, globalisation, and open markets. Again, that will impact emerging economies most, but also multinational companies.
Politically, the international stability mentioned earlier comes at the expense of human rights and possible military action in those regions. Russia’s Vladimir Putin has been keen to seize back the Baltic States – Estonia, Latvia and Lithuania – for years. Without the threat of the US stepping in to stop that, and Trump and Putin openly back-slapping each other, the Baltics are rightly getting nervous.
Elsewhere in Europe, Brexit and Trump’s openly far-right sympathies have given the far-right a lot of confidence to become more politically active, which aside from the higher rates of racist attacks we are seeing, could trigger a further break-up of the EU. Some may see that as a politically good thing, but it’s also sure to be economically risky.
Whatever happens, one thing’s for sure: we’d better stock up on toilet paper, because life’s about to get interesting.