Thursday, May 12, 2016

Trump's Claim He Is "King of Debt" Must Be Questioned

Trumps Understands Money And Debt!
Presidential candidate Donald Trump's recent statements concerning how he views debt should strike terror into the hearts of lenders and bond buyers everywhere. Sadly, what really puts some kick behind his statements is his blatant honesty and that he is simply speaking the truth. Repayment of dept is a promise and promises are not always carried out in good faith. Trump is not a banker, but he understands money. I contend that like many people whose business is rooted in real estate he understands both money and debt in a different way, a way that is far more related to long term value than those on Wall Street or in Washington can conceive.

The self-proclaimed “king of debt” told CNBC that if elected president, he would push to borrow more under today’s low interest rates. And if times got tough, he said, he would use his business acumen to strike a deal with the nation’s creditors for something less than full payment. Trump said, "I would borrow, knowing that if the economy crashed, you could make a deal,” he said. “And if the economy was good, it was good. So, therefore, you can’t lose.” In truth Trump’s politically incorrect comments only lay bare the fact that America's debt and that of countries around the globe are a major issue and very relevant.

Growing Government Debt Is A Global Problem
Immediately those in the media and political foes jumped in to question whether a maneuver to buy back debt at a discount would be constitutional. The 14th Amendment to the U.S. Constitution makes explicit that the United States has a commitment to paying back its debt that is rock solid. “The validity of the public debt of the United States ... shall not be questioned,” the amendment clearly states. If Trump is proposing a course that is unconstitutional and thus illegal they quickly banded together to contend this is proof Trump has no place or business as America's president.

Trump was merely trying to convey a tool many people in the business community and in banking understand when he stated the following, "I said if we can buy back government debt as a discount — in other words, if interest rates go up and we can buy bonds back as a discount — if we are liquid enough as a country we should do that. In other words, we can buy back debt as a discount," Trump said on CNN. Trump said his plan would center on buying back debt if interest rates went up. The self-described "king of debt" said debt is "tricky" and can be "dangerous." He went on to say, "I know how to deal with debt very well — I love debt — but, you know, debt is tricky, and it's dangerous, and you have to be careful, and you have to know what you're doing,"

Adding to this confusion and the media circus are statements Donald Trump later made on CNN's "New Day." where he said, "People said I want 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, OK? So there's never a default." The presumptive Republican presidential nominee echoed that sentiment during an interview on Fox Business, saying, "A lot of the papers said, 'Donald Trump wants to go and start negotiating with creditors.' First of all, you don't have to think about this, but we print the money." This again is proof that Donald Trump gets it.

Obama The Real King Of Debt!
Several reasons exist as to why Trump's rhetoric has caused such a ruckus. One possibility is the title "king of Debt" has already been taken by our current president and that he has no intention of giving it up without a fight. During the last eight years America has seen its debt grow leaps and bounds. Our whole so called "recovery" has been built on an unsustainable foundation of government spending. When we add $100 billion to the federal deficit it represents or equals $300 per person or $1,020 of debt for every family in America. Unfortunately, we are talking four, five, or six times this amount each year. Recently we saw several years where the deficits far exceeded one trillion dollars. One trillion dollars is ten times the $100 billion multiplied out above. That would represent a staggering $3,000 per person and $10,200 per family. Again we must remember nearly half of households not pay taxes, and if they don't someone else must pay their  share for them.

Trump has since pushed back on coverage of his remarks from outlets including The New York Times, which reported that Trump was suggesting he might reduce the national debt by persuading creditors to accept less than full payment. The New York Times wrote, “Such remarks by a major presidential candidate have no modern precedent.” That may be true, but it is also true that Trump is not your average modern day presidential candidate and is not operating under the constraints of past election protocol and rules. While many people choose to keep their head in the sand and deny the role currencies and debt play in the world economy I suspect that Trump understands economic reality far better than many of those currently in charge of the system.

Footnote; Debt plays a massive role in our economy, the articles linked below explore this to a much greater degree.

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