We have complained of the lack of substance in the current presidential campaign and especially of the lack of economic substance since the U.S. economy is no longer supporting a middle class and too much wealth is forsaking those citizens to the hands of the one percent. Candidates have complained of that, but no credible methods for dealing with it have been proposed.
Now, Mr. Trump has commented on his view of the situation. As in other aspects of U.S. problems, he at least recognizes that there are problems and seems willing – anxious in some cases – to discuss them.
His much touted “border wall” is loudly decried by the opposition as either impossible or ridiculous, but in the end, it simply amounts to a return to enforcement of immigration laws long on the books. It is not the border that is the problem; it is the unwillingness of the President to enforce existing law. But our economic problem is different and sadly, Mr. Trumps’ comments about it are problematical.
Credit is due to him for at least bringing it up; but his ‘solution’ is an indication of either economic ignorance or major disingenuousness. You decide.
He said that the massive U.S. debt will never face default because the government can print money. It can buy back the debt at a discount. Simply, it offers to settle with its creditors at say, 50 cents per dollar. Suddenly, it owes half as much as before. Magic!
This cavalier dismissal of America’s debt burden ignores two bits of reality, though it is no doubt reassuring to those who failed or did not sit though Econ 101.
Dollars are not wealth. They are pieces of paper or just electric or magnetic charges in a computer. Wealth is property, resources, commodities, etc. Doubling the number of dollars does not increase any wealth, it just doubles the number of dollars available to buy wealth. Or in other words, it cuts in half the amount of wealth each dollar can buy. That’s called: “Inflation.” It deprives all who hold dollars of half their purchasing power. A government that does that, steals half its citizens’ wealth thereby, usually while hoping that the citizens will be too ignorant to understand what is going on. The effect in the end is the same as though the government had forced the citizens to repay the original debt via taxes. Except of course, the poor and middle classes are stuck with a larger share of the burden.
As for negotiating a repayment of a discounted amount of the debt, that is default, just with a negotiation covering it. A negotiation in which one side has a pistol in its pocket and the other doesn’t. After such an event, that government and its citizens may have a long time to wait before investors will trust capital to be invested or lend it money again. That’s hard on an economy. Mr. Trump either is unaware of these basics or prefers to ignore them.
We credit Mr. Trump with his willingness to bring up immigration and other verboten topics, to the obvious chagrin of his competition. We are not persuaded that he has used similar candidness on economics, at least to date. And it seems to us, that is the most important subject of our times.