Monday, May 16, 2016

Steve Cecchetti and Kim Schoenholtz — Donald Trump, Treasury Debt and the Dollar

Mr. Trump appears to assume that his sensibilities as real estate mogul and dealmaker can be directly applied to government debt management policy. They cannot. Treasury securities bear absolutely no resemblance to the debt issued by Trump Entertainment Resorts, which went bankrupt in 1991, 2004, 2009, and 2014.…
In this post we will make two points. First, the United States benefits tremendously from its ability to issue Treasury securities at low cost regardless of financial conditions. This benefit is inextricably tied to the role of the U.S. dollar as the world’s reserve currency. Second, candidate Trump’s statements risk undermining investor confidence in U.S. debt. It is no exaggeration to say that the sudden loss of these safe assets, and of the privileged reserve status of the dollar, would be a disaster for the country and the world.…
Money & Banking
Donald Trump, Treasury Debt and the Dollar
Steve Cecchetti and Kim Schoenholtz

Stephen G. Cecchetti, Brandeis International University and Kermit L. Schoenholtz, Stern School of Business, New York University, are co-authors of Money, Banking, and Financial Markets, 4/e.

1 comment:

TofuNFiatRGood4U said...

Maybe Trump is attractive to the big end of town -because- his businesses have lots of bankruptcy experience ... he could turn out to be the perfect choice for continuing the false narrative of the USA running out of money.