It has by now become abundantly clear that Donald Trump feels entirely unbound by anything he says. Never has a major U.S. party's presumptive presidential nominee considered himself so unaccountable for the reckless and erroneous utterances that pour out of his huge mouth.
The likely Republican nominee had foreign-policy experts falling off their chairs with his loose talk of a nuclear Japan and South Korea, an "obsolete" North Atlantic Treaty Organization and an isolationist United States, which would produce global geopolitical chaos if they came to pass.
Now, Wall Street is getting a taste of what a Trump presidency might mean for financial-market stability with his comments on the U.S. dollar, federal debt and taxes. Were an actual U.S. president to say what Mr. Trump just did, there might not be a market to stabilize.
"I have borrowed knowing that you can pay back with discounts," the serial bankruptcy-filer told CNBC's Squawk Box last week. "Now, we're in a different situation with the country. But I would borrow, knowing that if the economy crashed, you could make a deal."
Where do you begin with a statement like that? A president suggesting the U.S. Treasury might seek to renegotiate its $19-trillion (U.S.) in outstanding debt would vaporize trillions in bond value, make the 1929 stock market crash look like a mild correction and send the U.S. dollar into peso territory, not to mention rip the foundation out from under the entire global financial system.
Mr. Trump's business career provides a good indication of how scrupulously he manages other people's money, having talked about his four Chapter 11 bankruptcy filings as if they were strokes of genius. "I used the law four times and made a tremendous thing," Mr. Trump said during one Republican debate last fall. "I'm in business. I did a very good job."
The U.S. government is not some Atlantic City casino that can be turned over to its creditors if the economy tanks. Nor is it some junk bond issuer. Since Alexander Hamilton, the first U.S. Treasury secretary, the world has been able to take the full faith and credit of the U.S. government to the bank.
By Monday morning, Mr. Trump was doing damage control, or perhaps just more damage. "People said I want to go buy debt and default on debt, and I mean these people are crazy," he told CNN. "First of all, you never have to default because you print the money."
So, after undermining the credibility of the Treasury, Mr. Trump would also scrap the independence of the Federal Reserve Board, turning it into the president's personal Gestetner? Cynics might argue that it's effectively become that, keeping interest rates low enough to finance federal deficits ad infinitum without difficulty. But Mr. Trump's economics would turn the United States into Zimbabwe.
Or not. Later on Monday, Mr. Trump told The Wall Street Journal that U.S. debt is "absolutely sacred" and that what he really meant by his CNBC comments was that, should interest rates spike, the U.S. Treasury could take advantage of the corresponding decline in bond prices to buy back some debt at a discount to its face value. But to do so, the Treasury would need to issue new debt at the higher prevailing interest rates, likely leaving it no further ahead.
This sounded like just more after-the-fact mopping-up by the self-proclaimed "king of debt." It fit the Trump pattern: Say something eye-poppingly outrageous, blame the media for misconstruing your words, then offer up a less-than-convincing explanation of what you really meant.
It is giving too much credit to Mr. Trump to suggest he knows much more than his imprecise meanderings suggest, or that his debt comments were a clever ruse aimed at China, the largest foreign owner of U.S. Treasury bonds. Mr. Trump regularly accuses China of manipulating its currency to torque its exports, which he considers the main cause of U.S. economic woes.
Not that Mr. Trump is above resorting to currency manipulation of his own, saying he favours a weak dollar rather than a strong dollar, which is the opposite of what every U.S. administration, regardless of party, has always publicly maintained in the name of global financial stability and the continued status of the U.S. dollar as the world's reserve currency.
But what do you expect from an odd-man Republican who channels Milton Bradley more than Milton Friedman? From someone whose fiscal plan would add $12-trillion to the U.S. debt, pushing the debt-to-GDP ratio to 129 per cent in 2026 from 74 per cent this year?
Huge, indeed.
Konrad Yakabuski