Thread: Donald Trump tries to clean up economic comments

Repurchasing old debt "doesn't change the interest burden one iota," said economist Dean Baker, a director of the center. "It’s utterly meaningless."

Trump seemed to acknowledge these shortcomings of his ideas during the interview on CNN. "If interest rates go up and we can buy bonds back at a discount, if we are liquid enough as a country, we should do that," he said. The United States is not liquid enough to make the purchases -- that is, the government would have to borrow the money to do so.

Trump also seemed to concede that investors wouldn't take him up on the offer to repurchase debt -- after all, they can sell their debt anytime they want on the global market for bonds issued by the Treasury.

"With the government, they’re never going to walk in and say, 'Do me a favor, will you buy my debt at a discount?' " Trump said.

Yet Trump didn't recant his proposal. "Here's the story, just to have it corrected," he said. "If we have an opportunity, where interest rates go up and you can buy debt back at a discount, I always like to be able to do that if you can do it."

Yes, it does make a difference and it can be meaningful if the interest rate differential warrants a discount. The value of it is whatever the net discount is at the time of the buyback or refinance.

When you buy back "old debt" with new debt, the old debt is removed and replaced with the new debt, so the benefit is whatever the discount is. That's what bondholders and T-bill traders do every day. There has to be the right market conditions but it's definitely something to keep in mind. This is what businesses and traders of commercial paper do every day with private securities as well as government securities.

This is a way to reduce the debt through the discounts without having the money to pay off the debt. It will be a long time before we can pay down this horrible debt considering we're still borrowing.

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