Politico reports on Donald Trump and his supposed plan to renegotiate debt:
“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,” the presumptive Republican nominee said in a telephone interview on CNN’s “New Day.”
Those who said he wants to buy debt and default on it are “crazy,” he added.
“This is the United States government. First of all, you never have to default because you print the money. I hate to tell you. So there’s never a default. But the point is it was reported in the New York Times incorrectly,” he said, referring to a critical Times article that ran on Friday.
Trump is correct. The US technically cannot go bankrupt, at least until they want to (buy not pushing outwards the debt ceiling, for instance). They can always let the central bank – the Fed – buy government bonds so that the government never has to worry about having access to central bank deposits (which we might call money). The May 5th excerpt from the Fed’s balance sheet features this asset:
U.S. Treasury securities – 2,461,443 (million USD)
So, I have to say that yesterday’s article was based on misleading information that the NYT seems to have published, with Paul Krugman picking it up later and me publishing on top of this. Sorry.