Trump: I’d drive hard bargain with US creditors

Donald Trump has a new strategy for dealing with the nation’s debt: drive a hard bargain.

The self-proclaimed “king of debt” told CNBC Thursday that if elected president, he would push to borrow more under today’s low interest rates. And if times got tough, he said, he would use his business acumen to strike a deal with the nation’s creditors for something less than full payment.

{mosads}“I would borrow, knowing that if the economy crashed, you could make a deal,” he said. “And if the economy was good, it was good. So, therefore, you can’t lose.”

Trump’s suggestion that the nation would not make full payments on its Treasury debt, which is widely considered the safest investment in the world, raised some eyebrows.

The New York Times wrote, “Such remarks by a major presidential candidate have no modern precedent.”

Trump went on to say that he was worried about what would happen when interest rates rose and borrowing became more expensive for the United States. He also suggested that the U.S. could buy back some of its debt, if the situation called for it, at a price lower than the face value of those bonds.

The notion of bringing into question the safety of U.S. governmental debt could have wide-ranging consequences for financial markets and economies across the globe. As the gold standard for debt, Treasury bonds serve as the foundation and benchmark for a host of other types of debt, such as mortgages and business loans.

If an atypical maneuver to manage away debt obligations drove up concern that Treasury bonds would not be repaid in full, those ramifications would be felt across all debt markets, as borrowing costs would climb for debt seen as riskier than Treasury bonds.

There is also a question of whether such a maneuver would be unconstitutional. The 14th Amendment to the U.S. Constitution makes explicit that the United States’s commitment to paying back its debt is rock solid.

“The validity of the public debt of the United States … shall not be questioned,” the amendment says, in part.