Trump said in a television interview Thursday that he might seek to reduce the national debt by persuading creditors to accept something less than full payment.
Asked whether the United States needed to pay its debts in full, or whether he could negotiate a partial repayment, Mr. Trump told the cable network CNBC, "I would borrow, knowing that if the economy crashed, you could make a deal.”
He added, "And if the economy was good, it was good. So, therefore, you can't lose.”What’s happening here is Donald Trump is applying his knowledge of business to governmental affairs.
Businesses view debt this way. A real estate developer, for example, may borrow money to invest in a project and if that project doesn’t pan out they renegotiate a loan to pay back less than they owe so that at least the lender gets something.
U.S. debt does not and cannot work that way.
The United States of America, however, is not a real estate development company. If a real estate company defaults on its debts and its creditors lose money, that's their problem.
Every assessment of risk in the financial system is based on the idea that the least risky thing is lending money to the federal government because government debt -- that is Treasury Bills (T-Bills), Treasury bonds, and even US Savings Bonds -- is backed by the FULL FAITH AND CREDIT OF THE UNITED STATES GOVERNMENT.
If that full faith and credit is withdrawn, business investment will collapse, state and local finances will be crushed, and shockwaves will emanate to a whole range of foreign countries that borrow dollars.
Remember 2008, when the markets went from thinking housing debt was low-risk to thinking it was high-risk, and a global financial crisis was the result? This would be like that, but much worse — US government debt is the very foundation of low-risk investments.
However, I'm certain you Trump-istas will continue to support Trump because they are stupid-blind to his evil and his ignorance.
This is just the beginning.