When everything is dangerous and stupid nothing is dangerous and stupid

My goodness Donald Trump sunk to new levels of ignorance today when he off-handedly suggested completely blowing up the US and world economy.  That is not hyperbole.  Josh Marshall explains:

On CNBC this morning Trump suggested that one strategy he’ll use for reducing the national debt is having bond holders accept “haircuts”. To be clear what that means, he’ll try to get people who own US Treasury bonds and are owned X to accept X/2, or some reduced amount of what they are owed.

That’s called defaulting on a debt obligation.

In other words, he wants to put the US through something like bankruptcy. Now, to be clear, in the world of business this is not at all uncommon. In a bankruptcy proceeding almost everyone takes a haircut. Many lose everything. You were owed $7 million and you have to accept $2 million. It often happens in simple business negotiations too. Things aren’t going great. Debt has to be restructured to help the company survive. A creditor thinks they might lose everything so they’ll accept 50 cents on the dollar.

So all good, except the United States is not a struggling casino. It’s a sovereign nation with sovereign debt.

It is not too much to say that centuries of American prosperity have been undergirded by the “full faith and credit of the United States.” In other words, the US always pays its debts in full and on time. Indeed, it’s black letter text in the US constitution that the country’s debt can never even be questioned. Defaulting on the national debt would clearly be unconstitutional.

That’s the constitution part, which is a weighty matter. But the entire architecture of the global economy and the United States place in it rests on the certainty and basic risklessness of US government debt obligations. It’s as simple as that. (This has actually allowed the US to in effect have people pay the Treasury to hold on to their money since 2008.) Introducing the idea that the US might pay back only a portion of the returns on Treasury bonds would basically disrupt the entire global economy, have massive and traumatic knock-on effects on the US economy and its ability to service its own debt. It would be catastrophic, an entirely self-inflicted wound.

To be clear, this will never happen. But the fact that Trump is proposing it shows that when it comes to macro-economics and global economics Trump is a huge ignoramus who shouldn’t be allowed anywhere near the Treasury. It’s amazing suggestion. Not just stupid but someone who simply knows nothing about how the economy works.

Yep.  Anybody who has had a single course in Political Economy or macroeconomics should get this.  It truly is astounding for a major presidential candidate to say something so epically dumb and irresponsible.  But for Trump, it is just a matter of degree compared to his near-daily spew of phenomenally ignorant things.  The problem is, what do you do when you are the media confronted with this?  The NYT has a fairly sober piece full of phrases like, “Such remarks by a major presidential candidate have no modern precedent” and “Experts also described Mr. Trump’s vaguely sketched proposal as fanciful,” and “But Mr. Trump’s statement might show the limits of translating his business acumen into the world of government finance,” but that’s about all you can do.  A reporter cannot write a phrase that more accurately describes this such as “mind-blowingly stupid.”

Alas, Trump has already set the bar for stupid and dangerous so low, that this will probably barely even make any waves.  I don’t care what people think about Hillary Clinton, anybody who has the slightest clue how the global economy works is a fool and beyond hopelessly blinded by partisanship if they think it a remotely reasonable idea to vote for Trump.

About Steve Greene
Professor of Political Science at NC State http://faculty.chass.ncsu.edu/shgreene

6 Responses to When everything is dangerous and stupid nothing is dangerous and stupid

  1. R. Jenrette says:

    Mind blowing but not surprising. It will be interesting to see how the Republicans wiggle in response to this outburst of ignorance.

  2. Jon K says:

    Almost as dangerous and stupid as suggesting we would pull out of NATO, South Korea, and Japan. If he’s going to to just blow up the world order that has maintained stability in the world since 1945 then he may as well destroy the economy too.

  3. rgbact says:

    Especially since much of it is owned by Soc Sec members, who are compelled to own government debt

    The guy doesn’t want to cut spending though, its clear. Liberals should like that.

    • Steve Greene says:

      There’s nothing to like about somebody who’s dangerously incompetent (except that presumably enough people will recognize this to assure that he loses).

      • R. Jenrette says:

        Chris Hayes on MSNBC last night had an informative interview on this subject. Did any other “news” channels cover it?

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