Trump On Debt Renegotiation: "You Never Have To Default Because You Print The Money"

Tyler Durden's picture

Following Donald Trump's Thursday comments that rising interest rates would be disastrous for the economy, saying that "we're paying a very low interest rate. What happens if that interest rate goes up 2, 3, 4 points?" hinting that the U.S. should "renegotiate longer-term debt" with creditors and that if the economy crashes he "can make a deal", various media outlets went to town on Trump, most notably the NYT, which took Trump to task:

Asked on Thursday 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.”

 

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.

 

Experts also described Mr. Trump’s proposal as fanciful, saying there was no reason to think America’s creditors would accept anything less than 100 cents on the dollar, regardless of Mr. 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.

As the NYT admits, when "pressed to elaborate on his remarks, Mr. Trump did appear to step back. He said that he was not suggesting a default, but instead that the government could seek to repurchase debt for less than the face value of the securities. The government, in other words, would seek to repay less money than it borrowed."

In any case, the confusion about Trump's intentions continued and ultimately led to his latest CNN appearance in which he explained what he meant earlier this morning.

"If interest rates go up, we can buyback debt at a discount if we are liquid enough as a country. People say I want to default on debt - these people are crazy. First of all you never have to default because you print the money I hate to tell you, so there is never a default. It was reported in the NYT that I want to default on debt - you know I am the king of debt, I love debt, but debt is tricky and its dangerous. But let me just tell you: if interest rates go up and bonds go down, you can buy debt - that's what I'm talking about. So here is the story, if we have an opportunity where interest rates go up and you can buy back debt at a discount. I always like to be able to do that if you can do that. That's all I was talking about, they have it like I'm going to go back to creditors and I am going to renegotiate or restructure debt. It's ridiculous."

Here is the clip:

Aside from the comment that "one never has to default if one is printing the money", which has not exactly led to favorable outcomes for countries which have done just that and the only difference in the case of the US is possession of the reserve currency for now, what Trump is really talking about is inflating away the debt, something the Fed and all other central banks have been desperately trying to do for the past 7 years, so far without much success. 

In effect, Trump's point is really just a continuation of Fed policies: boosting inflation, and leading to a spike in long end yields; all Trump does is explain mechanistically how the US can take advantage of this "debt inflation", which as he correctly points out, can simply be repurchased at a price well below par if rates are surging in effect reducing the nominal debt burden.

Which incidentally brings us back to Trump's point about wanting lower interest rates: if the "king of debt" is so eager to buyback debt at a discount, what he should be urging is not lower but far higher interest rates. Now that is a proposal the Fed, Goldman and all global banks would love to get behind, even if it means leaving the economy in a state of even bigger collapse...

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clooney_art's picture

The media and elites in general are idiots. Just because they don't want to talk about the issue of insurmountable debt, it doesn't mean the problem does not exist. Someone has to start talking about this issue. Trump's got it. The other idiots can live in their fantasy world.

Hitlery_4_Dictator's picture

I wish he would default on it and get rid of welfare at the same time. 

Killtruck's picture

You go ahead and do that, Donny. I'll cover you with my rifle in case it doesn't work out. 

Unless you collapse the world economy and somehow miraculously build the US economy into an export giant simultaneously, I'm not sure there's any way out of this mousetrap. Because at some point, we have to stop borrowing and we have to actually make shit that people want. 

Sure makes me wish we still had our Fort Knox shiny... 

ParkAveFlasher's picture

"...and I'm putting Ron Paul in charge of the money supply..." said no Trump ever.

Mr. Universe's picture

If he doesn't "get it" he's gonna get it. Financial Armageddon is what the Donald brings to the table, he won't know what hit him, or it was the plan all along.

Aside from the comment that "one never has to default if one is printing the money", which has not exactly led to favorable outcomes for countries which have done just that...

 

Stackers's picture

So the plan is to pay off low interest loans, by using high interest loans to pay off the low interest loans that are now being sold at a face value discount ???

Call me confused.

Leopold B. Scotch's picture

If we just plow $ billions of tax dollars into electric car battery subsidies and subsidies for solar panels, it'll all be ok.  "Free" energy will eliminate all debts and deficits.  It will even end war.

mtl4's picture

Donald is the king of debt for sure so from that standpoint there's probably no better person to talk about how to handle someone (or even a country) that overspent. The guy has been bankrupt several times and each time he bought back his stuff for pennies on the dollar.  The difference here is that countries and companies differ in their ability to create money.  Once you start telling bond holders of a country you are going to give them a haircut, not only do they start selling your bonds, they also refuse to buy any more (think budget short squeeze) and interest rates skyrocket as a result so that whole plan of buying back your own bonds at cut rate prices falls apart pretty quickly.  I believe Germany tried this same tactic after WW1 and it didn't end very well for them which eventually gave rise to Hitler and WW2.

putaipan's picture

default? ..... no. repudiate? ..... yes. it's odious.

eforce's picture

This article fails to take into account Trump's economic policies which involve getting the economy working again so the debt can be inflated away along with not adding any more to it.

Mr. Universe's picture

You Trumpettes think anyone has the power to right things at this point? Government is going to solve the problem? Voting will change things? Time to put the crack pipe down boys. Trump = Big Money, he will play the bankers game one he gets a seat at the table. Sure it seems like electing Trump is if you were Jenny throwing rocks at your old house.

Forrest Gump: Sometimes, I guess there just aren't enough rocks.

tmosley's picture

So you think NOT voting will change things?

That sure has worked great for the young people of our nation, hasn't it?

gladius17's picture
gladius17 (not verified) tmosley May 9, 2016 1:02 PM

"So you think NOT voting will change things?"

No, stupid fuck, nothing will change things. This system is going to collapse. Fucking pull your head out of your asshole some time this century, shit for brains.  

 

"That sure has worked great for the young people of our nation, hasn't it?"

Yes, all that voting you oldfags did in the past sure did leave us youngins with a wonderful nation to grow up in with a great future. Now go fuck yourself to death with a sword. 

TruthHammer's picture

I see you wearing vans, a dope beastie tee, sipping from your coke.

What you said is why you want someone running things who is:

anti-globalism

anti-free trade

pro physical economy

anti-debt

pro manufacturing

 

Everyone here knows the system is going down, having President Trump's agenda being inacted will lower the fall-out, at least slightly, and put us in a good place to rebuild.

So smoke on that while you work on your liberal arts degree there lil'neck beard internet tough guy, "i'll beat you to death ed"

gladius17's picture
gladius17 (not verified) TruthHammer May 9, 2016 1:23 PM

"I see you wearing vans, a dope beastie tee, sipping from your coke."

What the actual fuck?

 

"What you said is why you want someone running things who is:"

What makes you think the U.S. President is the one "running things", imbecile?

 

"Everyone here knows the system is going down, having President Trump's agenda being inacted will lower the fall-out, at least slightly, and put us in a good place to rebuild."

Wrong, stupid ass. World War 3 is happening regardless, and this is a war that the U.S. will lose, regardless. The only fallout that will be "lowered" is when your local urban shithole and/or military base gets vaporized into a cloud of radioactive ash. 

 

"So smoke on that while you work on your liberal arts degree there lil'neck beard internet tough guy, "i'll beat you to death ed""

You are too stupid to survive World War 3. 

TruthHammer's picture

"I see you wearing vans, a dope beastie tee, sipping from your coke."

What the actual fuck?

Tool fans will get it....don't care if you do. *kisses*

"Everyone here knows the system is going down, having President Trump's agenda being inacted will lower the fall-out, at least slightly, and put us in a good place to rebuild."

Wrong, stupid ass. World War 3 is happening regardless, and this is a war that the U.S. will lose, regardless. The only fallout that will be "lowered" is when your local urban shithole and/or military base gets vaporized into a cloud of radioactive ash.

I don't live with my parents, and I own multiple properties, vehicles, weapons, gold & silver, you know nothing about me and if WW3 happened, I will make sure to use your ashes as fertilizer in my fields, will mix well with manure.

"So smoke on that while you work on your liberal arts degree there lil'neck beard internet tough guy, "i'll beat you to death ed""

You are too stupid to survive World War 3.

Yah, Engineering Degree and real job while you were still sucking your mom's "whatever" as Trump would say.  Keep trying, you will win the internet soon.  Don't have any more time to waste on millenial rejects.  The Walking dead refernce, "i'll beat you to death ed", unlike the tool lyrics, were something you should be able to understand.  Being an internet tough guy will catch up with you some day.  My advice, learn to be a man before trying to act like one...

Peace lil neckbeard

dcohn's picture

Ya know guys the only way we are all going to survive is if we fucking learn to get along with each other.

This fighting even here at ZH shows we are no different than the dingbats running the world into the dirt.

There is a very real solution but no one can accept it.  STOP FIGHTING between us and fight THEM.

Stop calling people fucking asshole and shit head and fucktard.  It does not work.

As a NY'er from the friggin Garment Center when it still existed in NYCITY I know very well how to be a snide sonofabitch.  I did it very well for enough years.

Well guess what.  It is not the way to become happy.  I would hope all of our goals = Happiness in our lives on this rock.  Well that cannot happen if you feed the fucking EVIL entities running this planet.  

GUESS WHAT FEEDS THEM.  Negative attitudes and comments between us.

Lets get our shit together.  We can find a way if even on this one friggin ZH forum.  JEEZ

AVmaster's picture

When you head on over to usdebtclock.org, it puts things into perspective fairly quickly.

 

We are the titanic, we hit the iceberg back in December 23, 1913, when the founding fathers were no longer around to protect us from the Fed...

 

We have two ways that this is gonna end: Like japan, or spectacularly(I don't even need to describe that one...)

 

Meanwhile, i'll be sitting on some uninhabited island in the middle of the pacific watching the ICBM's fly and a margarita in one hand...

 

 

Tall Tom's picture

dcohn

 

This is NOT Agreement Club

 

This is Fight Club.

 

You have missed the UNDERLYING THEME of the site.

 

Our host, Tyler Durden, is a fictional character in the book and movie, Fight Club.

 

We are here to hone our skills so that when we MUST FIGHT, and we will, then we will stand a fighting chance against those oppressors.

 

ALL fights are MENTAL first, well before they ever become physical.

 

If you cannot grow a thick skin then you stand no chance.

Battlefield USA's picture

Yes, there will be a WWIII. No, we are not going to lose. But then again, we are not going to win either.

 

And, the statement that: What makes you think the U.S. President is the one "running things", imbecile?

 

Is true. TP'sTB will be briefing Trump on how things "really" are shortly after he is elected president. How many here believe that congress is going to back up Trump? CIA? NSA? Pentagon? DHS?

 

Federal Reserve Banks?

Squid-puppets a-go-go's picture

maybe the Fed likes trump and needs trump because for the fed itself to change direction so hard on a dime and go volcker will totally shred any remaining creibility it has and lead to permapitchfork until the fed is removed altogether

If they were in a position to say 'trump made us do it.....'   Thats why we have these liited tenure disposable presidents, so the INSTITUTIONS dont have to take the hit

All Risk No Reward's picture

Trump is pushing a Debt-Money Monopolist psy-op. I'm surprised so many people still for it.

MONEY IS NOT PRINTED.

MONEY IS LENT INTO EXISTENCE AT INTEREST FROM PRIVATELY OWNED AND CONTROLLED BANKING INTERESTS.

Are you people so clueless as to think you can pay down credit card debt by maxing out new credit cards and calling it "printing?"

Yup. You are that clueless.

Since the Banksters finance every major institution, they control every major institution, therefore, THEY WILL DECIDE how money is created, not Trump or anyone else.

You better believe that Trump has already kissed their brass ring, that's why he gets more press on BanksterVision than any other candidate!

John_Coltrane's picture

This forum has more posters who have read Ed Griffiths, "The Creature Form Jeckyl Island" than any you're likely to encounter anywhere.  So, to suggest we don't know how banking cartels, bailouts and debt function is laughable.  Have you read that tome?  If not, don't come back to comment on our ignorance until you have done so! 

And here's an insight into human psychology:  when people say they really hate you, you'll be a tyrant and they might leave the country if you become president its not mass reverse psychology-its what they actually "think".  Remember, these are the incompent morons who designed Obamacare.  Don't overthink things-they are completely incompetent and quite afraid of being fired from their cushy .gov sinecures.  Unlike Trump they've never had a real job in their life.  At best, they're part of affluent non-profit sector (i.e. the core of the democratic party).

gladius17's picture
gladius17 (not verified) John_Coltrane May 10, 2016 3:11 PM

<----- Trumptard

<----- Trumpfag

How do you self-identify? 

All Risk No Reward's picture

Hi John,

I was specifically talking to the people who continue to think that money is printed such that they don't call out the obvious LIE when it is told.

In addition, I'm calling out the people who think that money will be "printed" (again, it isn't printed, it is lent into existence at interest AND FOR A REASON) to pay down the debt.

I believe that G. Edward Griffin believes that the the debts will be hyperinflated away like the establishment libertarian narrative (Rockefeller funded Mises - look it up!).

He's technically probably correct, but he's unaware of a HUGE detail.

The Debt-Money Monopolists will use the debt to maximize their asset stripping of ordinary people first. This is what they did in the Great Depression and this time will be worse.

Once they've used their money and debt paper to own most of the world (take all the debtors stuff), THEN they may hyperinflate to balance their books.

Also, Griffin focuses on the inflation aspect of the monetary system and completely ignores, probably because he doesn't know, the fundamental fraud of creating money out of debt as illustrated in the following example...

If I loan you $20 @ 5% interest in ARNR notes, in one year you will owe me $21 due to double-entry bookkeeping adjustments that add $1 interest liability to your balance sheet and $1 interest asset to my balance sheet.

After one year, you will have $20, owe me $21, and I control the only $1 that is valid to pay back the loan.

That is the FUNDAMENTAL FRAUD of the system. The inflationary aspect covered by Griffin is an effect. The FUNDAMENTAL FRAUD is the cause, which Griffin doesn't address.

I'm not parroting Griffin's work, I am relating actual knowledge of how the system works.

I like Griffin's work a lot, but I expose a blind spot.

If you don't think it is a blind spot, then reply with a link to where he explains the $20 to pay $21 in debts when the lender controls the $1 issue anywhere on the net or in any book. Maybe I missed it.

And common sense tells you that the Debt-Money Monopolists won't zero out their trillions in debt paper and cash... until they've seized the collateral and bought up assets for, wait for it, "pennies on the dollar."

Do you know why that term exists? Not because Banksters immediately hyperinflate away their own debt paper and cash.

Publicus_Reanimated's picture

Same suggestion I made to the last poster who said there was no hope:

Please kill yourself.  It will be easier for the rest of us to keep trudging along if we don't have to listen to you tell us we're wasting our time.

Victor von Doom's picture

"So you think NOT voting will change things?

That sure has worked great for the young people of our nation, hasn't it?"

So has voting, and that's the point.

All Risk No Reward's picture

The vote that matters is with your mind, your time, and your money.

Voting for candidates selected by private clubs controlled by Debt-Money Monopolists is a fool's errand.

It is Charlie Brown kicking that field goal again, and again, and again...

Yuubokumin's picture

things are changing. 'if voting made any difference, they'd make it illegal'

that'd be George Carlin, and old fuck one can really get behind to 

eforce's picture

Trump has an army of angry heavily armed people behind him, when it comes to an economic crisis, he can strip away all the socialism at will.

His personal fortune is tied to the wellbeing of the country, like he said 20 years ago, he'd only step in if things got so bad, which they have.

mkkby's picture

He's saying exactly the same thing as QE.  The lying, goat sucking media call QE god's work, while Trump saying the same thing makes him a no-nothing villain.

The budget can be balanced and paid off VERY EASILY.  Stop the ridiculous MIC spending, stop letting medical monopolies financially rape us, stop paying welfare to able-bodied people who can work, stop all benefits to illegals.

It's that fucking easy for someone who ACTUALLY CARES about america and americans.

Librarian's picture

I hear what you are saying.  I agree with much of it.  But, respectfully there is no painless solution to this problem.

Let's look at the massive scale of the problem by using just two numbers.  

Debt - 20 trillion vs. MIC FY$ - 600 billion

I'll extend to you the benefit of the doubt that you aren't an a crazy anarchist who supports ideas that will have our retired parents starving to death.  For example, unemployment insurance should be available to those who have paid into it through their payroll deductions.  You just want to cut "the fat".  That's how I've taken what you said.

Military spending is the biggest numbers from your list.  Even if we ended the military (not likely) it still wouldn't put the US in the black. 600 bln to 20 trln isn't even close.  Even if you run the numbers at double of what most experts believe can be saved, it still barely dents the 20 trillion.

I truly wish as you do that there could somehow be an easy solution to all of this.  If you do what I did two years ago and actually start adding and subracting our budget numbers, a very ugly truth comes out.  I believe that we have passed the point of no return over 15 years ago.

We are either looking at a war, a worldwide crash or a massive (20% or more) devaluation of the USD against the value of the SDR.

If you believe otherwise, then please show me the numbers you are using.

COSMOS's picture

Only 20% or more.  How bout minimum 200% or A LOT more

Battlefield USA's picture

Trump has an army of angry heavily armed people behind him, when it comes to an economic crisis

 

LMAO!

 

Yes, and most of these peoples weapons are under their beds with the barrels collecting moth-balls... and rust.

John_Coltrane's picture

Never heard of hunting and target and competitive shooting?  There are millions of hunters and its a lot more challenging to kill a deer or elk in the woods than pick off any member of an urban group chimping out because their EBT cards bounced.  I guess you've never owned a gun or belonged to the NRA.  We're very polite unless you push us too hard.

All Risk No Reward's picture

He's probably doing this to preserve his Debt-Money Monopolist position to prevent the collapse of his business empire... he has a lot to lose if he angers the Debt-Money Monopolists WHO FINANCED EVERYTHING HE'S EVER DONE!

But there is no relation there, right?

Suckers.

Miles Ahead's picture

I believe Germany tried this same tactic after WW1 and it didn't end very well for them which eventually gave rise to Hitler and WW2.

Not sure this is what Germany quite did, but in any case if it led to the rise of Hitler then thank you Jesus.

And what gave rise to WWII were the Allies trying to dismantle Germany; France, Poland, Czechoslovakia, peeling off parts of Germany and keep German speaking natives under their thumb.  That and oh, American Jewish Congress declaring War on Germany. 

Fixed.

SWRichmond's picture

Germany couldnt make anything as their productive mines and factories had been stolen.

Miles Ahead's picture

Yes that too.  And all the other stuff  ;P

zeronetwork's picture

First of all Americans should stop considering world is stupid. Most countries are moving away from printed money and setting up system based on gold which can not be printed. America will be left with arms like a bully and nothing more. And we should get ready for that time.

SMG's picture

One thing which should be pointed out here is without America the much of the world would starve. That's some leverage Germany did not have.

NoBillsOfCredit's picture

So why is that? Because the government made them dependents just like they always do. It is unconstitutional for the United States Congress to take tax money and use it for anything but the items listed in the Constitution.

RichardParker's picture

Laws are for little people, not CONgress. Silly plebe... LOL

McCormick No. 9's picture

Trump is just telling the truth. that's what he is getting in toruble for. bernake said the same thing (re "helicopter money"), and he got zero blowback. printing money is what the Fed has been doing in spades for the last eight years. But Donald comes out and says what everyone knows to be true and the talking heads' heads explode. Emperor's new clothes, bitchez.

But/and: Raising interest rates to lower bond prices WILL have a downside, which will be to bring valuation back to the market... not a bad idea in theory, but the elites will not like the haircut (buzzzzzzzz style) they will receive. Can Trump do it? Can he do it and stay alive? Big Question!