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Does Trump's diplomatic row with Denmark mark the start of real estate politics?

27 August 2019

This week President Trump cancelled a visit to Denmark in response to the Danish government rejecting his offer to buy Greenland. When Trump initially suggested that the United States wanted to buy Greenland, the idea was not taken seriously after he tweeted a picture of a Trump tower on a Greenland landscape with the caption 'I promise not to do this to Greenland!' However, following the cancellation of his trip, it appears he was being serious. The US has a history of buying territory, most notably the procurement of Louisiana in 1803, when they paid France $15million for 827,000 square miles of land which doubled the size of the United States. This was soon followed by the purchase of Alaska from the Russians in 1867 for $7.2million adding 586,000 square miles to the US land mass. Greenland is 836,000 square miles so the purchase would not be unprecedented. 

Greenland is predominantly covered in snow and ice, with a small population of just 56,000, making it one of the least densely populated countries in the world. So why is Trump so keen to acquire it? Greenland already has a US military presence and is considered of strategic importance from a defence perspective against Russia. However, the latest interest could stem from the mineral deposits and rare earth elements that can be found in Greenland. At the moment, China is largely responsible for global production of these materials, but in light of the latest trade policy with China, it would be of benefit for the US to have access to these elements. 

As it stands, the Danish territory is not for sale, and even the greatest dealmaker of all would struggle to pull this off. This will come as a relief to the US taxpayer, as a "trophy" real estate deal has previously not been a success for Trump, if you look at the Plaza hotel deal as an example.

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Source: Twitter

It seems Trump views Greenland as just another real estate deal in his long career in this field. In retrospect, it is possible to see many of his decisions relating to the associated impact it would have on his estates.  Rising interest rates would increase the cost of the loans against his property portfolio. High interest rates in the late eighties made Trump's debt load unsustainable and resulted in a pre-packaged bankruptcy of the Trump Taj Mahal hotel. Trump frequently posts on Twitter about interest rate policy, an area the President is not supposed to be involved in. For now, the Federal Reserve (Fed) maintains its independence, with an attempt to seize control likely to be heavily criticized on both sides of the house. His trade policy with China is an attempt to get US businesses to repatriate production, therefore bringing jobs into the US. In practice, this has slowed the US economy and the Fed has responded by cutting rates. A booming economy may lead to a rise in inflation but would also make Trump's re-election more likely. His badgering for interest rate cuts may serve this aim, while ensuring that when he takes back control of his real estate empire it is worth more than when he entered the White House.

So rather than being the start of real estate politics, it may just be a continuation of policies that benefit President Trump as much as his electorate. 

 

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