by Tho Bishop
Last week Donald Trump set the financial punditry class aflame with his suggestion that the United States may end up asking lenders to take a haircut on its debt obligations. The resulting firestorm created a race to see who could come up with the strongest condemnation of Trump, David Ader of CRT Capital Group told Bloomberg the comments were “stupid and ridiculous,” while Business Insider’s Josh Borro labeled them “insane.” Vox’s Matt Yglesias described the proposal as a threat to “incinerate the world economy.”
While Yglesias is correct that a US default would have major ramifications for the global economy, lost in all this hand wringing is the fact that the damage has largely already been done. As Jim Grant noted in his Time cover article this month, the United States debt situation is far more serious than most “experts” would like to believe. By accumulating a debt that now towers over $19 trillion, the United States government has written a check it will not be able to cash.