Trump has already damaged our economy
For a presumptuous presidential candidate to suggest that the United States might default on it debt, and negotiate a "haircut" for the bondholders, is itself damaging, even if he is defeated in the GE.
Krugman has the basic idea. But I don't think he goes far enough. If US debt is not a safe asset, then there is no safe asset -- and a world without a safe asset is one that we have not experienced since sometime in the 1700s. If he were to go forward with it, a worldwide economic collapse that would make 1929 look small is a real possibility. Even to bring this possibility into a presidential campaign in this country will create uncertainty and risk that can to major harm to our economy, and others.
By the way -- a lot of US debt is held by the Social Security system, so a "haircut" on US debt would put SSI in real danger of insolvency, far more than it is now. And a lot is held by the FED, which -- I'm pretty sure -- could not even negotiate about a "haircut" without explicit authorization by Congress. Fat chance. And it's pretty clear that The Donald doesn't know any of this.
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