Bob Woodward book: Trump confused about federal debt, printing money

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Raedle/Getty Images

• During a meeting with his top economic adviser, President
  Donald Trump suggested that since interest rates were going up
  the US government should simply borrow massive amounts of money.
• That’s according to Bob Woodward’s new book, “Fear: Trump in
  the White House.”
• When Gary Cohn explained that increasing borrowing would push
  up the federal deficit, Trump suggested simply printing money to
  pay off the debt.
• Cohn explained that could be seriously harmful to the US
  fiscal and economic situation, but Trump did not appear to
  understand, the book says.

During the first meeting between President-elect Donald Trump and
his former economic adviser, Trump appeared confused by elements
of the federal debt and US monetary policy.

Veteran journalist Bob Woodward’s new book, “Fear:
Trump in the White House,” describes a conversation
between Trump and Gary Cohn, the former director of the National
Economic Council.

During the meeting at Trump Tower in November 2016, Cohn touched
on a series of economic issues, including the Federal Reserve.
Cohn told Trump that the Fed would likely increase interest rates
during his term. Trump then offered an idea of how to deal with
the rising rates.

“We should just go borrow a lot of money, hold it, and then sell
it to make money,” Trump said.

While Trump was correct that many private businesses issue debt
at a time of low interest rates, Cohn was “astounded at Trump’s
lack of basic understanding” about what the government borrowing
would mean, Woodward wrote.

During the campaign, Trump ran on a promise to
eliminate the entire federal debt during his presidency.
Borrowing more would increase the deficit and add to that debt,
Cohn explained. The president-elect offered a solution.

“Just run the presses — print money,” Trump said, according to
Woodward.

Cohn suggested that would be detrimental to the fiscal and
economic health of the US, since vast amounts of money printing

is thought to lead to inflation. But Trump returned to
the idea of simply printing money later in the conversation.

Cohn also pointed to
the federal debt ceiling, a statutory limit to the amount of
debt the federal government can have outstanding. Even
approaching
the debt ceiling can be harmful to the stock market and US
economic growth.

But according to Woodward, Cohn’s message did not seem to
connect.

“It was clear that Trump did not understand the way the US
government debt cycle balance sheet worked,” Woodward wrote.

Trump’s view on the debt is perhaps best espoused
by Modern
Monetary Theory, a burgeoning theory among some economists
that posits
the federal debt is not an economic restraint for the
US. But MMT is not generally accepted by lawmakers of either
party, likely making it politically untenable at this point.

The back and forth over the debt was just the first clash between
Cohn and Trump on economic policy, according to Woodward’s book.
The pair fought over Trump’s desire to place tariffs on imports,
and Cohn reportedly stole documents off of Trump’s desk to
prevent the president from pulling the US out of major trade
deals.

Business Insider obtained a copy of Woodward’s book, which
is being published by Simon & Schuster and is set for release
on Tuesday. 

The
White House has denied the contents of “Fear,” calling
Woodward’s book
“nothing more than fabricated stories.” 

Here are more details from the book so far: