Hours after locking up the Republican presidential nomination this week, Donald Trump suggested that defaulting on the national debt could be a good thing. Economists and financial observers pointed out that his proposal to buy back U.S. debts for less than what America borrowed would send interest rates soaring and cripple the dollar’s vital status as the world’s safest investment.
Pressed to explain why he thinks a huge national lender like China would accept a loss on their investment in the United States on Sunday, Trump offered only a verbal shrug.
“You never know,” he told ABC’s George Stephanopoulous. “At some point, they might want to get out. Maybe they need their money, they might wanna get out.”
It is extremely unlikely that any holder of U.S. bonds would take the sort of desperate need-cash-now approach to those investments that Trump imagines. But even if that did happen, the outcome wouldn’t be good for anyone involved. If Trump yanked the rug out from underneath the global financial system in this way, the resulting instability would slaughter the economy.