|LINK: Trumpanomics 101: Just print more “money”!|
Donald Trump on Monday said it was "crazy" to think he would try to negotiate his way out of full repayment of government bonds — despite what he suggested last week — but he did suggest another potentially alarming option for debt management.
"First of all, you never have to default because you print the money," the presumptive Republican presidential nominee said on CNN.
This is true, but as with trying to get bondholders to take a haircut, it's out of the economic mainstream.
Last Thursday, Trump suggested on CNBC that he would be able to reduce the national debt by persuading creditors to accept a "haircut" on that debt, in which case creditors would be repaid less than the face value of US Treasury bills and bonds. For example, a Trump administration might repay $80 of a $100 bond to the bond's holder.
"I've borrowed knowing that you can pay back with discounts," he said. "I would borrow knowing that if the economy crashed, you could make a deal."
Such a proposal, implying that the US would not fully pay back its debts, was immediately condemned in the finance world.
US government debt is widely viewed as one of the safest available investments. So the idea of investors' receiving less than they were promised by the most powerful government in the world would almost certainly dramatically increase interest rates in the US and would very likely set off a global recession, experts said.
In a Monday interview on CNN's "New Day," as Trump attempted to clarify his plans for the national debt, he said the US would never default on its obligations because it printed money (emphasis added):
If interest rates go up, and we can buy bonds back at a discount, if we are liquid enough as a country, we should do that. In other words, we can buy back debt at a discount. People said I wanted to go and buy debt and default on debt, these people are crazy. This is the United States government. First of all, you never have to default because you print the money, I hate to tell you.Read the rest of the story HERE.
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