Will ‘The King of Debt’ Fix America’s Debt Crisis—or Push It Over the Edge?

In 1990, Donald Trump proclaimed his Taj Mahal casino venture the “eighth wonder of the world.”

It was the world’s largest and most extravagant casino-hotel at the time.

Situated in Atlantic City, New Jersey, the project needed a $1 billion investment to get off the ground.

To finance this massive project, Trump had no choice but to issue $675 million in 14% high-interest “junk bond” debt.

That meant the Taj Mahal needed to generate roughly $94.5 million annually just to meet its interest obligations.

This staggering debt burden and the accompanying interest costs doomed the project from the very beginning.

The Taj missed its first interest payment only eight months after its grand opening.

“We could have foreclosed [on the Trump Taj Mahal], and he [Trump] would have been gone,” stated Wilbur Ross, the chief adviser for Rothschild & Co., which represented the Taj’s creditors at the time.

Had Ross chosen to foreclose on the Taj, it would have severely damaged Trump’s reputation and could have shattered his prospects of running for president.

However, during negotiations, something shifted Ross’s perspective.

While visiting Trump, Ross observed crowds flocked to “The Donald” wherever he went. People adored him. Ross recognized Trump’s star power.

This realization led Ross to convince the other bondholders to negotiate a deal with Trump that would preserve his reputation.

Trump and the Taj had narrowly escaped disaster, but it only delayed the inevitable for several months.

The Taj declared bankruptcy in November 1991, only 19 months after its lavish launch.

This bankruptcy was the first of several financial restructurings the Taj would undergo in the ensuing years.

In 1996, Trump’s publicly traded company, Trump Hotels & Casino Resorts, acquired the Taj.

However, Trump Hotels had the same problem that plagued the Taj—a crushing debt burden. At the time, the company’s debt had ballooned to more than four times its equity.

In 1997, Trump Hotels posted a $42 million net loss. The $205 million interest expense far surpassed its operating earnings of $143 million.

As time passed, the interest expense rose while operating earnings dwindled.

Even if the underlying businesses performed well, Trump Hotels wouldn’t have made any meaningful profits because of the interest expense.

Like the Taj, the interest burden from the massive debt pile doomed Trump Hotels from the beginning. Trump Hotels never made enough cash to pay down the debt principal.

The company went through two separate bankruptcies in 2004 and 2009.

Here’s why I’m highlighting this story today: it illustrates Trump’s propensity for accumulating reckless amounts of debt and the inevitable disasters that follow.

Trump openly admits his love for debt, describing himself as “The King of Debt.”

In a few months, Trump will again oversee the US government.

An urgent, existential problem will fall directly on his lap.

The US federal government has the biggest debt in the history of the world. And it’s continuing to grow at a rapid, unstoppable pace.

The only way to solve the debt problem is to address government spending.

However, efforts to reduce spending will be meaningless unless it becomes politically acceptable to make chainsaw-like cuts to entitlements, national defense, and welfare while reducing the national debt to lower the interest cost.

In other words, the US would need a leader who—at a minimum—returns the federal government to a limited Constitutional Republic, closes the 128 military bases abroad, ends entitlements, kills the welfare state, and repays a large portion of the national debt.

Short of that happening—which is an unrealistic fantasy—the federal debt and accompanying interest expense are only going to grow until it reaches a crisis, which is probably not far off.

The situation is truly urgent as it has reached a crucial tipping point.

That’s because the federal debt’s annualized interest cost exceeded the defense budget for the first time earlier this year.

It’s on track to exceed Social Security and become the BIGGEST item in the federal budget.

Due to the soaring interest costs, the US government will soon have to choose to:

1. Cut defense spending amid the most chaotic geopolitical period since WW2.

2. Default on its promises regarding Social Security, Medicare, Veterans’ Benefits, and welfare generally.

That’s why I think there is an excellent chance the debt crisis will explode on Trump’s watch—though it is not all his fault.

It’s a well-established trend that has been building for decades. At this point, I think it’s impossible to change its trajectory. It would be like trying to reverse an avalanche once it has already built unstoppable momentum.

The truth is, no matter what happens, the federal debt’s growth rate will not even slow down. It will increase exponentially until it reaches a crisis, which I believe is not far off.

It’s like being on a runaway train with no brakes.

The financial position of the US government has been gradually deteriorating for decades, so it’s not surprising that many people are complacent. They’ve long heard about the debt problem, and nothing has happened… yet.

That’s because the US government is the most powerful country in the history of the world, leader of the current world order, and issuer of the world’s premier reserve currency.

While the US government can extend the charade of solvency longer than any other entity on the planet, not even the most powerful empires in human history can do so forever, particularly when they start to struggle to pay the interest costs.

A moment of reckoning will come, and I believe soon. It will have massive geopolitical and financial implications.

When private businesses go bankrupt, shareholders get wiped out.

When governments go bankrupt, those who hold its fiat currency get wiped out.

One thing I think we can be sure of is that the US government will try to service its debt costs with currency debasement, just like many empires that collapsed before it.

That’s terrible news for the US dollar.

The worst of it could go down soon… and it won’t be pretty.

It will result in an enormous wealth transfer from savers and regular people to the parasitic class—politicians, central bankers, and those connected to them.

Countless millions throughout history were wiped out financially—or worse—because they failed to see the correct Big Picture as their governments went bankrupt.

Don’t be one of them.

That’s exactly why I just released an urgent new report with all the details, including what you must do to prepare.

It’s called The Most Dangerous Economic Crisis in 100 Years… the Top 3 Strategies You Need Right Now.

Click here to download the PDF now.

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