Trump's Idea to Cut $19 Trillion National Debt: Get Creditors to Accept Less Image: Trump's Idea to Cut $19 Trillion National Debt: Get Creditors to Accept Less (AP)
By Newsmax Wires | Saturday, 07 May 2016 10:54 AM
Donald Trump has proposed that he will slash the $19 trillion national debt by persuading creditors to accept less than full payment.
Trump, the presumptive Republican nominee for president, recently told CNBC he could use his business savvy to reduce America’s debt burden by pushing creditors to accept write-downs on their government holdings.
"I am the king of debt. I do love debt. I love debt and I love playing with it,” he told CNBC on Thursday. “But of course now you're talking about something that's very, very fragile, and it has to be handled very, very carefully," he said.
The United States government is able to borrow money at very low interest rates because Treasury securities are regarded as a safe investment, “and any cracks in investor confidence have a long history of costing American taxpayers a lot of money,” the New York Times explained.
However, rates are expected to continue rising over time.
“What do we do with all of the money that we owe everybody when rates go up and now all of a sudden we have to borrow at two points more. One point more even is devastating. But two, three, four, five points more. It's a real dilemma,” he told CNBC.
"I would borrow, knowing that if the economy crashed, you could make a deal," Trump said. "And if the economy was good, it was good. So therefore, you can't lose."
Bloomberg News noted that “since the founding of the country Treasury secretaries have been unwavering in their commitment to always make good on government obligations, an assurance that’s helped make U.S. debt a haven from risk around the world.”
A default would put that status in jeopardy, sinking the value of the dollar and sending yields surging, according to David Ader, head of government-bond strategy at CRT Capital Group LLC. Growth could stall as borrowing costs for holders of mortgages and other consumer loans -- which are tied to government debt yields, spiked.
“This is stupid and ridiculous and never going to happen,” Ader said from Stamford, Connecticut. “But it’s not impossible that he could be president, and could try all the seemingly ludicrous and impossible things he’s talked about. You can’t just dismiss it when the guys got his finger on the button, so to speak,” he told Bloomberg.
Experts also told the Times that Trump’s proposal was “fanciful,” saying there was no reason to think America’s creditors would accept anything less than 100 cents on the dollar, regardless of Trump’s deal-making prowess.
“No one on the other side would pick up the phone if the secretary of the U.S. Treasury tried to make that call,” said Lou Crandall, chief economist at Wrightson ICAP. “Why should they? They have a contract” requiring payment in full, he told the Times.
Many other Wall Street veterans doubted Trump would actually try to renegotiate U.S. debt.
"No chance," William Lee, head of North American economics at Citigroup, told CNBC. "There's no chance unless he pulls a miracle. The miracle he would have to strike is for Congress to restructure entitlements and reform the tax system. That's the holy grail of fiscal reform and he — even the great negotiator — is unlikely to do that."
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Poster Comment:
The corporate UNITED STATES OF AMERICA is a bankrupt entity and has been since June 5, 1933 when the gold standard was suspended. All money (FRNs) are obligations of the United States and are "evidence of debt".