Trump's "financial genius"
Oct. 2nd, 2016 11:21 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
timeletsTrump's 1995 tax records prove that back in 1990 Hyman Minsky was right about Trump's Ponzi scheme financing (pp 6-7): http://digitalcommons.bard.edu/hm_archive/94/
Essentially, in the 1980s Trump covered his large cash flow problems by borrowing lots of money against appreciating real estate. In the 1990s, real estate stopped appreciating and Trump's investors, including his own business, incurred huge losses on this Ponzi scheme.
The same scheme created even greater losses when the real estate bubble burst in 2007.
The puzzle is that the lenders failed to recognize that the arithmetic of his cash flows was virtually identical with that of the developing countries; in effect Trump was Brazil in drag. In the short run, Trump could make his interest payments with funds from new loans— but when the increase in property prices declined to a value below the interest rate, Trump would become short of the cash necessary to pay the interest on outstanding loans. (Minsky, 1990, p. 7)
Essentially, in the 1980s Trump covered his large cash flow problems by borrowing lots of money against appreciating real estate. In the 1990s, real estate stopped appreciating and Trump's investors, including his own business, incurred huge losses on this Ponzi scheme.
The same scheme created even greater losses when the real estate bubble burst in 2007.
