For all the personality flaws the press loves to dwell on, the presumptive Republican nominee understands more about real world finance than all the deficit hawk politicians in both parties put together.
As he clarified his remarks about consolidating U.S. debt by buying back bonds at a discount when interest rates rise, he was setting the record straight on those who thought he meant to renege on the debt and effectively default.
Not at all, Trump said last week. And then he dropped another bombshell in explaining why that’s not even possible.
“This is the United States government,” Trump said on CNN. “First of all, you never have to default because you print the money, I hate to tell you, OK?”
Bingo. With a stroke, Trump demolished decades of homage by many economists and virtually all politicians to the straitjacket of a monetarist dogma that ignores the realities of present-day finance.
In fact, intentionally or not, Trump embraced a radical view of money and debt advanced by economists like James Galbraith, professor at the University of Texas and son of the legendary economist and presidential adviser John Kenneth Galbraith.
That view, known as modern monetary theory (MMT), holds that governments that control their own currency can print money without risk of inflation unless full employment creates excess demand because it is no longer tied to gold or some other measure of value.
“This is a Nixon-goes-to-China moment,” Randy Wray, a leading MMT exponent atBard College in New York, told Bloomberg, hailing Trump as “a Republican far to the left of the Democratic party apparatus who wants to promote rising living standards of Americans.” (President Nixon’s 1972 trip to China represented a major breakthrough in relations because of his past as a fervent anti-Communist crusader.)
Along with all his controversial views on immigration, terrorism, and trade, Trump is bringing a new perspective to public finance and to financial regulation based on his first-hand experience of dealing with real financial issues around the world.