President Trump’s threat to veto any budget measure that does not include funds for a border wall and allow the United States to default on the national debt is just plain dumb. It shows a lack of knowledge about economics, politics, international relations, and the workings of government by a man who claims to be extremely smart. Thus far, after seven months in office, we haven’t seen any evidence of any of Trump’s so-called brilliance shining through. In fact, it’s been just one dumb move after another.
The dollar today is the dominant currency in the world based on the current-worthiness of the United States government. This gives the nation an advantage. It gives America low interest rates on its debt, saving a huge amount of money annually. It helps in trade relations with other countries to be able to import goods from other nations inexpensively (which benefits consumers and businesses). It makes foreigners want to buy US stocks and drives up the stock market. It makes tourism abroad relatively cheap. Of course, it does raise prices on American exports and products, and tourism in the United States is more expensive for people visiting here.
However, if America defaults on its debt, it will immediately become more expensive to finance that debt as interest rates will rise and the budget deficit will grow. Even more dangerous, however, is the possibility of some sort of global financial contagion like a full-blown recession which would hurt the world as well as America. And for the nation to retain its previous special position after a default would be extremely difficult as the implicit trust in the creditworthiness of the government and the dollar would be gone. Thus it is sheer lunacy for President Trump to be speaking about a debt default. But it is not a surprise.
Since Trump became president, it has been one dumb move after another, with little thought about its impact on the nation. Mike Flynn as National Security Adviser, then not firing him for three weeks after his lies and foreign connections were known. Destroying the Trans-Pacific trade agreement instead of renegotiating or signing it, throwing East Asia and Pacific nations into Chinese hands. Banning Muslim from some countries coming to US. Not signing the Paris Agreement and refusing to acknowledge global warming, endangering the planet and alienating our allies. Undermining NATO with negative comments. Pushing fossil fuels when the future and the jobs are with renewables, again handing the playing field to the Chinese. Refusing to condemn the white supremacist groups in Charlottesville. Promising to build a border wall in the first place. And the list could go on and on. It’s almost as if Trump was trying his best to damage America in various ways and help China and Russia.
People say that of course he won’t go through with his threat to default, but given his past moves, I wouldn’t be too sure. He acts on impulse and against the advice of his ‘trusted’ advisors. But even the threat itself hurts American credibility and the stability of the dollar. What dumb move is next on the list of his destructive agenda?
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