For the first time in quite a while, the national debt sparked a lot of attention. Instead of talking about how immense the national debt really is and how the United States can’t possibly pay it back, though, the media entered into uproar when Donald Trump suggested the government could renegotiate the $20 trillion debt.
This generated a lot of vitriol from newspapers all over the nation. But one contrarian investor sees it differently: it’s an admission that the U.S. can’t possibly pay off the astronomical debt load. And that’s why everyone is upset, suggests Peter Schiff.
Speaking in an interview with CNBC last week, Schiff, president and CEO of Euro Pacific Capital, conceded that Trump was actually correct in his statement.
“Trump just admitted on CNBC that America has too much debt to afford a rate hike, and that he wants our creditors to accept less than 100 cents on their Treasuries,” Schiff told the business news network. “In other words, Trump knows a U.S. government default is inevitable.” (SEE: Of Course the US Government Will Default on Its Debt)
With so much debt, potential rate hikes from the Federal Reserve could leave the U.S. in a very vulnerable position, warns Schiff. He likened the nation’s current state to that of Puerto Rico. Simply put: the U.S. is bankrupt.
“If rates go up, refinancing [debt] doesn’t help. The only thing that helps is restructuring,” Schiff explained. “[Puerto Rico] can’t pay because they are broke, well math applies on the main land just like it applies in Puerto Rico, we can’t pay either.”
He added: “And if interest rates go up Donald Trump is right, we have no choice than to tell our creditors they are taking a big haircut.”
Schiff commended Trump for understanding that the U.S. is in a bubble, noting that out of all of the remaining presidential candidates, Trump has the best understanding of how bad things really are in the U.S. today.
“To get great again we need to recreate what made us great in the first place, and so we’re going to have to let interest rates go up,” Schiff stated. “A big part of that is admitting that we aren’t going to be able to re-pay the debt.”
The author of “Crash Proof” and “How an Economy Grows” has said that Trump is right on a lot of issues, but has also said he has missed the mark on others. He wrote a superb op-ed outlining what’s good and bad about Trump and his quest to Make America Great Again.
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