Insuperably Dunderheaded Trump Threatens To Crash Global Economy

Political Incorrectness: Taking A Page From "The Donald's" Playbook

http://paxonbothhouses.blogspot.com/2016/05/political-incorrectness-taking-page.html

Revealing his utter ignorance, Trump threatens to default on U.S. debt and crash the global economy.

Yesterday, Donald Trump gave an interview to CSNBC in which, among other things, he described his approach to the national debt.

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 could 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. As Matt Yglesias at Vox explains:

Trump is a businessman, and in terms of thinking like a businessman his idea makes sense…

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. If that turns out to be much riskier than previously thought, then everything else becomes much riskier too. 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.

http://www.dailykos.com/stories/2016/5/6/1523858/-Revealing-his-utter-ignorance-Trump-threatens-to-default-on-U-S-debt-and-crash-the-global-economy