This weekend Donald Trump settled multiple cases related to his Trump University for alleged scams that bilked 5,000 students out of $40 million of their hard-earned savings with the promise that they’d be taught how to make money in business.
Judge Gonzalo Curiel, the judge whom Trump alleged was biased because he is Mexican-American, kindly gave Donald an “out” by suggesting that President-elect Trump would be too busy to fight his lawsuits. And that was the reason Trump gave when he paid $25 million to settle.
But was it the real reason? Hardly! Donald Trump settled his previous scams because he has way bigger fish to fry.
The tell
On Friday, MSNBC news featured Hollywood Reporter, Michael Wolff on the Chris Hayes’ show. Wolff was first to interview Steve Bannon, Trump senior counselor.
In this interview Steve Bannon gave us a hint of what he’s really up to.
The media and many Americans have been consumed with worry about the racism, sexism, homophobia, and other prejudice that Trump voiced during his campaign and that Bannon’s Breitbart website fuels.
Asked about this, Bannon hastened to assure Wolff those things were not “what he was about.”
Next, Bannon claimed his chief goal is to create new jobs for Americans.
I can believe Bannon’s first assertion, but not his second.
Here’s what led me to discount Bannon’s second statement.
According to Wolff, Bannon alleged there would be no problem with putting Americans to work on infrastructure projects because of the negative-interest rates many central banks are offering their bond customers.
This is a huge hint about what Donald Trump is really up to.
The biggest financial scam ever
What are central banks
A central bank provides banking and financial services for a country’s government and commercial banks, such as tracking and managing the money supply, issuing currency, regulating banks, and influencing bank interest rates.
Almost every country in the world has a central bank. But only a few play a major role when it comes to currency exchange and impacting global economies; the US Federal Reserve, European Central Bank, Bank of England, Bank of Japan, Swiss National Bank, and three more.
What are negative interest bonds
This year Eurozone central banks (and Bank of Japan) began selling negative interest government bonds. Yes, you read that right. Buyers pay to own bonds that won’t return all their money.
Why? Wealthy individuals, institutions, and sovereign wealth funds are simply buying a safe haven for their money and/or gambling they can sell the bonds for a profit as negative interest rates keep sliding downwards.
Negative interest rates on foreign government bonds have been a boon to US and corporate bonds in 2016.
What about the US central bank
Our central bank, the Federal Reserve, has kept interest rates positive but near zero. US government bonds pay positive, but very low rates.
Donald Trump has repeatedly said he wants the take over the Fed, or at least fire Janet Yellen as soon as he can (i.e., next year) to make the Fed raise interest rates on US bonds.
For most Americans, even those with new jobs from infrastructure projects, higher interest rates would bring inflation, making things we buy more expensive. Interest rates on credit cards, mortgages and automobiles would all rise as a result. Less money so spend in American’s pockets could even mean another great recession.
Yet Steve Bannon gloated that higher interest rates would make our government bonds more enticing to wealthy investors here and abroad, and he implied that this money would pay for the $1 trillion to create new jobs for unskilled American workers.
The big hitch
Funding those infrastructure projects with bonds would put our government $1 trillion deeper in debt. That money would be gone—with no money coming in to pay off the deficit. Why not?
Citizens and businesses alike derive benefits from infrastructure projects, but these things are not constructed for the purpose of making a profit.
Bridges, roads, railways, airports, etc. are “common goods” that taxpayers have to subsidize. Even when quasi-public agencies maintain infrastructure projects and charge users, these projects lose money.
The money to pay off investors’ bonds and maintain infrastructure will come from taxpayers’ pockets. And there’s the rub. Trump’s new tax plan for corporations and the wealthy is not going to cover the trillion-dollar-proposed cost of these projects.
Goldman Sachs, Steve Bannon’s first employer, however, will no doubt make a hefty profit from negotiating deals for infrastructure repairs, and it will owe lower taxes. Businesses who win bids on infrastructure projects would profit. They also would pay less taxes.
And those with enough money to invest in US government bonds will profit. Or will they?
Donald Trump said when campaigning, if he were President when the US deficit rises he could just walk away and not pay our debts to investors.
This time there’d be no judge or court able to make Trump settle.
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