He will default on the national debt
Trump loves not paying what he owes. We all know this. And even when not in office he’s frequently encouraged his pals in Congress to default on the national debt, as if it’s no big deal. And it may not seem like a big deal to people who aren’t business leaders and bankers; just leading their daily lives. After all, Congress can print as much money as they want, so people the US owes money to will get paid, eventually.
Except it is a big deal. Huge. It would change the world order. Forever. And hurt US citizens irreparably. Now, you may argue Trump didn’t do this when he was President before, so why would he do if now? Because since he’s been out of office, he keeps saying the treasury should default. To teach people a lesson. To bully people into bending to his will. More and more. And we all know that’s what his potential second term is going to be all about.
A feat which once done, the effects of which can never be undone.
Here’s why:
- The US enjoys a unique and wonderfully unfair (speaking as a US citizen) advantage over every other country in the world in that a massive majority of all transactions are done in US dollars. Meaning there’s always a demand for dollars, and it’s always easy to figure out what a dollar’s worth, and it’s always a lot. There’s even a term for it: “exorbitant privilege”. As China’s government snarkily points points out, it only costs about 17-cents for the US to print a $100 bill. Yet there are tons of people and countries willing and often compelled to pay $100 or even more for it if their credit isn’t great. That’s a massive bargain deal for the US government. And US consumers. And US corporations. Should the US default, suddenly no one would really know what a dollar is worth. Could be anything.
- US government bonds are considered the safest investment in the world. If the US defaults, that immediately becomes untrue. And forever. It won’t be able to be undone ever. All the riches that pour into the Treasury both from US investors, 401Ks, overseas fortunes, whatever, look to go somewhere else, because they don’t want to risk a repeat, meaning the US then has to pay tons more to lure them back in order to pay its debts. Which of course blows the budget deficit up to unheard of dimensions. And if the safest US investment since forever is no longer safe, can any investment in the US then be considered safe from that point on? Trump has already proven he doesn’t care about that. And he’s ducked out of paying what he owes in almost every business he’s run. So why should he run the US government any differently?
Because, as I’ve just explained, it is different.
Completely.
Now we all know corporations and corporate executives love their tax cuts Trump gave them. But a default would be so catastrophic I’m really surprised corporate America–with the exception of ideologues and lunatics who want to hasten the apocalypse (Elon Musk and Peter Thiel)–aren’t mustering everything they can to defeat Trump. Mark Cuban’s out there. That’s about it. Are they “working the phones” at the very least? Better hope so. We’ve got to hope there’s at least some money and some work going on in the background. It’s understandable if CEOs want to keep a low profile and hedge their bets just in case Trump wins, even if they’re trying to produce the opposite result? But are they? They should be, for the reasons I listed above, and everything I’ve discussed for the last couple of days. They still have a lot of silent power they can and should use. But are they?