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MONETARY POLICIES

Trump’s Proposal “Print the Money” Echoes Franklin and Lincoln

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“Print the money” has been called crazy talk, but it may be the only sane solution to a $19 trillion federal debt that has doubled in the last 10 years. Can the solution proposed by ​Abraham Lincoln and the American colonists still work today?

“Reckless,” “alarming,” “disastrous,” “swashbuckling,” “playing with fire,” “crazy talk,” “lost in a forest of nonsense”: these are a few of the labels applied by media commentators to Donald Trump’s latest proposal for dealing with the federal debt. On Monday, May 9th, the presumptive Republican presidential candidate said on CNN, “You print the money.”

The remark was in response to a firestorm created the previous week, when Trump was asked if the US should pay its debt in full or possibly negotiate partial repayment. He replied, “I would borrow, knowing that if the economy crashed, you could make a deal.” Commentators took this to mean a default. On May 9, Trump countered that he was misquoted:

People said I want to go and buy debt and default on debt – these people are crazy. This is the United States government. First of all, you never have to default because you print the money, I hate to tell you, okay? So there’s never a default.

That remark wasn’t exactly crazy. It echoed one by former Federal Reserve Chairman Alan Greenspan, who said in 2011:

The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.

Paying the government’s debts by just issuing the money is as American as apple pie – if you go back far enough. Benjamin Franklin attributed the remarkable growth of the American colonies to this innovative funding solution. Abraham Lincoln revived the colonial system of government-issued money when he endorsed the printing of $450 million in US Notes or “greenbacks” during the Civil War. The greenbacks not only helped the Union win the war but triggered a period of robust national growth and saved the taxpayers about $14 billion in interest payments.

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