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Articles by Matthew Gilligan

Trump aftermath - what will it be?

AUTHOR: Matthew Gilligan

POSTED: 14 November 2016

What does a man with $1 billion of property do when he becomes president and finds himself in control of the money supply, influencing credit conditions and the quantum of the government's fiscal spend as stimulus? The sceptic in me offers the following prediction.

We know that if you give Americans credit to spend, they dive in head-first. When you loosen lending rules on housing, it's no different. Therefore, if the person who owns $1 billion of property can influence the supply of money and loosen credit, thereby inflating their $1 billion to $2 billion, do you think he might be tempted?

In my opinion, it's a no-brainer. Trump is going to try and inflate America through its woes, and he'll get popular doing it. Not only will he make billions through real estate inflation, the Americans who participate will all make money while the bubble builds, and they'll love it.

Of course it will be a giant bubble which will explode at the end, and the inflationary period will cause high interest rates. He is already talking about public spending programmes and reducing tax rates to 15% for fiscal stimulus. Think of it this way. If your household decided to spend more, and your income decreased (from gathering less taxes), what would happen to your household cash flow?

It will be interesting to see whether Trump shows restraint in spending, or whether he takes America donkey-deep further into debt while he inflates property values and the Trump empire.

I can only see inflation and higher interest rates from a Trump presidency. It's lucky I still own some US properties!

(I recently talked to Stuff about the Auckland property market and why investors need to exercise some caution – you can read the article here.)

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Matthew Gilligan
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© Gilligan Rowe & Associates LP

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