Presumptive Republican Nominee Trump has set off a firestorm economic debate declaring “United States government. First of all, you never have to default because you can print the money.”.
Trump introduces the key tenant of Modern Monetary Theory into the economic debate. The key part theorizes sovereign nations that borrow in own currency should spend to boost their economy.
As this debate widens, it will spill into the gold markets as some people falsely fear the U.S. may kick off a bout of hyper-inflation if Trump wins the Presidency.
This morning in an interview with Chris Cuomo on CNN, Donald Trump was defending comments he made over the weekend about buying back U.S. debt at a discount. He stated media outlets misinterpreted his remarks and people saying he wants to buy U.S. debt and default on it are “crazy.”
Politico quotes Donald Trump as saying:
“”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.”
This comment is kick starting an obscure economic debate by placing it into the heart of the political mainstream in the U.S.. For those interested in an overview of Trump’s other economic ideas they can read this Seeking Alpha article President Trump And The Markets by Shareholders Unite. Modern Monetary Theory is a recent school of economic thought around the aspects of economies that are based in sovereign nations that control their own money supply. Translated into layman’s terms, countries that issue bonds in their own currency and only owe people their currency. The United States is such a country and Trump correctly states the U.S. can never default on its debt because it can always print whatever it owes. Therefore, the sovereign government can issue and spend as much money as it wants to attempt to accomplish the goals that it wants. It is not limited by the taxes it collects, or the need to control its debt…..