This right here is why Donald Trump is dangerous. In a wide-ranging interview with CNBC yesterday, he intimated that he would cause a default on the national debt to make bondholders take a haircut.
He didn't say that. Instead, he framed things in his usual Drumpfian way, but the implication is clear.
"I am the king of debt. I do love debt. I love debt and I love playing with it, but of course now you're talking about something that's very, very fragile, and it has to be handled very, very carefully," Trump said.
Analysts reacted with some alarm. David Ader, chief Treasury strategist at CRT Capital said, "Imagine the most risk-free asset suddenly becoming not a risk-free asset. By the way, S&P and Moody's would have to downgrade it if you could renegotiate the value of the debt you hold or try to force it down. What are we, Argentina?"
A shocked Josh Marshall over at Talking Points Memo wrote, "The United States is not a struggling casino. It's a sovereign nation with sovereign debt."
Indeed. And we are the nation most able to manage and repay our debt. So why is Trump talking about "restructuring" it?
Because he doesn't really know what he's talking about, as most of us already knew. He blows smoke and pretends we should all take a whiff.
Donald Trump seems to think the United States is just like Trump Holdings, or whatever he calls his company now. And just for a trip down memory lane, let's have a look at how Donald Trump has benefitted from debt restructuring.
From the Wall Street Journal earlier this year:
He also squeezed money out of his casino empire and shifted it to struggling properties. He ran all three of his casinos through bankruptcy court.
He continued drawing cash even then. In 1992, when Trump Castle casino was in chapter 11, it paid Mr. Trump $1.5 million for guiding it through the process. In all, he took more than $160 million out of Atlantic City between 1990 and 1996 through fees and other payouts, according to a Wall Street Journal review of a wide array of documents from New Jersey gambling regulators and the Securities and Exchange Commission.↓ Story continues below ↓
“For many years I took money out of Atlantic City,” Mr. Trump said in an interview. “The money I made in Atlantic City fueled a lot of projects.”
Those who entrusted him with their funds or labor, including employees, vendors and bond and stockholders, often fared less well. Taj Mahal contractors were told to take less than they were owed. Workers lost their jobs.
Between 1990 and 1996, Mr. Trump persuaded creditors to revamp his original restructuring agreement again and again. According to a person familiar with his dealings, he intentionally made them as complicated as possible to keep others from fully understanding what he was doing.
Forbes, on the impact of his FOUR corporate bankruptcies:
He did take a personal hit the first time around: he’d financed the construction of the Trump Taj Mahal with junk bonds and was unable to pay the high interest. His business was in the red, and so was he, to the tune of about $900 million in personal debt. By the mid-90s, he’d reduced most of that debt, selling his Trump Princess yacht, his Trump Shuttle airline, and his stake in a handful of other businesses. More importantly, he stopped guaranteeing debt with his own wealth. “The first bankruptcy was the only time his personal fortune was at stake,” said Ted Connolly, a Boston bankruptcy lawyer who used Trump as model for getting out of debt in his book The Road Out Of Debt: Bankruptcy and Other Solutions to Your Financial Problems. “He learned from it. He’s insulated.”
As Trump himself stated, there was nothing personal about the bankruptcies. They weren't him, they were companies with his name on them. That's all they were, and he's fine with that.
Now translate that to the country, where he would like to put the United States in bankruptcy in order to force other countries and the world as well as retirees and ordinary savers to lose some money so billionaires can pay less in taxes and interest rates can stay low.
It wouldn't be him declaring bankruptcy, so no big deal, right?
That is a very, very big fcking deal. That is something that should have every journalist lighting their hair on fire.
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.
Combine Trump's fecklessness on this question with the screaming masses of uneducated Tea Partiers who were ready to default on the national debt over the Affordable Care Act, tax cuts, and whether a Democrat said something mean to them. Does it take much to imagine a President Trump blowing up the entire global economy right alongside our own country?
Not so much. He is a dangerous, feckless, man who has no business being within 10 miles of the White House, much less inside it.