- Jonathan Ernst/REUTERS
Federal Reserve Chair Janet Yellen spoke in Philadelphia on Monday.
The topic, of course, was the economy and monetary policy and the question of when the Fed will raise interest rates. (Short answer: It’s unclear.)
After giving her prepared remarks, Yellen took questions from the crowd at the World Affairs Council of Philadelphia.
The final question put to Yellen, naturally, was about Donald Trump, the presumptive Republican presidential nominee.
A gentleman asked Yellen a question regarding commentary the person – who was not a member of the media – had heard on the morning and Sunday political shows (think “Meet the Press” and “Morning Joe”) about the potential for a Trump presidency to cause “an economic crash all over the world” because of how the rest of the world sees Trump (namely: as a loose cannon).
This gentleman asked simply, “Is this a possibility?”
Yellen laughed, and said only: “I’m sorry, I’ve got nothing for you. We’re focused on our jobs.”
Back in May, Trump said that in business he had borrowed knowing that you could “pay back with discounts,” which is another way of saying your lenders won’t get all their money back.
And while issuing the high-risk debt of a casino company might allow for this possibility, Trump floated this idea with respect to US government debt, considered the safest and most liquid noncash asset in the world.
Josh Barro wrote at the time that the idea was crazy and not to be joked about. But then again Trump is, in Barro’s words, the “tail risk candidate.” So if there ever were a candidate who possessed the desire to willingly launch the global financial system into crisis, it would be Trump.
But realistically this probably won’t happen, even if Trump is elected president.
Deciding to simply not repay the US’s financial obligations, which are infinitely fundable given 1) the country’s ability to print money and 2) the financial market’s unfailing trust in the government’s ability to pay back its debt, is an insane decision even for a candidate who might preach more fiscal discipline from the government.
Any sensible businessman would know better, and so we’re all probably better off heeding Yellen’s advice and just focusing on our jobs.