Friday, May 6, 2016

Trump Suggests That Under Certain Circumstances the US Should Pay Out Less Than 100% on the Government's Debt Obligations (What He Really Means)

Does Donald Trump think U.S. government debt should be handled the way he handled Atlantic City casino debt?

Apparently so. NYT reports:
One day after assuring Americans he is not running for president “to make things unstable for the country,” the presumptive Republican nominee, Donald J. 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.”

Such remarks by a major presidential candidate have no modern precedent. 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.
As with many Trump policy statements, there is a hint of radical libertarian policy thinking here, that is until you look beneath the  surface.

The important economist and libertarian, Murray Rothbard, was in favor of  repudiating the national debt, never mind just reducing payments.
I propose, then, a seemingly drastic but actually far less destructive way of paying off the public debt at a single blow: outright debt repudiation. Consider this question: why should the poor, battered citizens of Russia or Poland or the other ex-Communist countries be bound by the debts contracted by their former Communist masters? In the Communist situation, the injustice is clear: that citizens struggling for freedom and for a free-market economy should be taxed to pay for debts contracted by the monstrous former ruling class. But this injustice only differs by degree from "normal" public debt. For, conversely, why should the Communist government of the Soviet Union have been bound by debts contracted by the Czarist government they hated and overthrew? And why should we, struggling American citizens of today, be bound by debts created by a past ruling elite who contracted these debts at our expense? One of the cogent arguments against paying blacks "reparations" for past slavery is that we, the living, were not slaveholders. Similarly, we the living did not contract for either the past or the present debts incurred by the politicians and bureaucrats in Washington.

Although largely forgotten by historians and by the public, repudiation of public debt is a solid part of the American tradition. The first wave of repudiation of state debt came during the 1840s, after the panics of 1837 and 1839. Those panics were the consequence of a massive inflationary boom fueled by the Whig-run Second Bank of the United States. Riding the wave of inflationary credit, numerous state governments, largely those run by the Whigs, floated an enormous amount of debt, most of which went into wasteful public works (euphemistically called "internal improvements"), and into the creation of inflationary banks. Outstanding public debt by state governments rose from $26 million to $170 million during the decade of the 1830s. Most of these securities were financed by British and Dutch investors. 
Rothbard's proposal was to repudiate current government debt, not take on new debt and stiff creditors if things head south with the economy. The latter is Trump's plan.

The mainstream media, who  are focusing on Trump's comment, fail to understand what Trump was really up to in making that statement. The NYT headline, for example, blasts, Donald Trump’s Idea to Cut National Debt: Get Creditors to Accept Less. 

This is not the real essence of Trump's statement. He is not saying, I am going to reduce the current national debt by getting creditors to accept less.

A more accurate headline would be: Trump Recognizes His Major Spending Plans Will Result in His Taking on Much More Debt, But He Is Not Concerned Because If Things Don't Go Right He Will Negotiate Payment Reductions on the Debt.

What Trump was making obvious is that his spending plans will require a huge jump in the deficit and his comment was laying ground-work for those who will object to massive debt increases.

This is what he was really saying (translating the Trump speak)

"My spending plans are huge. It will require a massive increase in US debt outstanding. But don't worry. My brilliant spending plans will get the economy going, and make the additional debt easy to pay off, If for some reason the economy stays down, it won't matter. Don't worry. Given my brilliant negotiating skills, I will get Treasury security holders to take pennies on the dollar."

What Trump is really saying is that, if he becomes president, he will be the most reckless spender in presidential history.



Krugman nails it:

In other words, Trump is even too much of a crazed Keynesian for Krugman. That should tell you a lot!


  1. Krugmans a hypocrite. His presidential wet-dream would be one who would turn the spigot wide-open and damn the consequences. I'll bet he can't name one significant cut to government largesse that he could support.


  2. Is the conversation about to change? Between the Brexit and Trump along with 'Skull and Bones' now getting exposed, the NWO crowd may have to do something drastic and soon:

    Obama Plans a "RED WEDDING" for America

    OBAMA gives the " 2 FINGER salute" To ALL AMERICANS

    Obama Mocks Us Again!!!WOW

    Although Kleck's assertion in a past video that the 1st and 2nd Temples were destroyed also on 9/11 may be mistaken (11th of AV, Hebrew; AV is the 5th month, not the 9th according to other sources) and Kleck says Revelation 18:15 (below) is NYC and "her burning" refers to the Statue of Liberty, but Shoebat has another much more convincing argument that it is referring to Mecca, Arabia and the Kaaba, the weirdness of these Obama videos along with too many numerical and symbolic cross references to be coincidental, together with the timing of so many things geopolitical and geological coming together may indicate something big is coming.

  3. Isn't this the point of debasing the currency? Sure you pay back in full but with dollars that are less valuable. It's the same thing as discounting the numerical value of the debt, but less perceptible by the general public. Since all the central banks are doing it, no big deal. Just don't talk about it. Reminds me of the restaurant scene in Pulp Fiction. "Everybody be cool." Now if you want to debase and restructure at the same time...shiiiiit you might have some problems.

  4. Whoever willingly lends money to the US government is a collaborator and deserves to be stiffed. That Trump is considering stiffing the enablers is a great thing, in my opinion.

  5. Yeah it's amazing people buy bonds now.

  6. Just wait a minute Murray. The majority of our current debt was not accrued 150 years ago but within the past 50 years, when many of us were very much alive and voting for the Statists that created this mess!