 "President Barack Obama delivers his State of the Union address to a joint session of Congress on Capitol Hill in Washington. Photo: PTI")
President Barack Obama does not believe that 'full faith and credit' should be subjected to negotiation or the threat of hostage taking, the US has said, indicating that it is opposed to any kind of bargaining on the country's debt.
"The United States of America is a global leader when it comes to our economic strength because the world has confidence in the 'full faith and credit' of the US," White House Press Secretary Josh Earnest said.
"The President does not believe that 'full faith and credit' should be subjected to negotiation or the threat of hostage taking," he said at his daily news conference yesterday.
'Full faith and credit' of the US refers to an unconditional commitment to pay interest and principal on debt, guaranteed by the government.
Not only Obama, but every US president has made it clear that protecting the 'full faith and credit' of the US is critically important, he said.
"The President's effort to protect the 'full faith and credit' of the US has been strongly endorsed by the American business community because they understand the repercussions that our economy would sustain if that were called into question," Earnest said.
Earnest was responding to the comments made by presumptive Republican presidential nominee Donald Trump, 69, last week that he would be able to reduce the national debt by persuading creditors to accept "haircut" on that debt.
This would mean creditors would be paid less than the face value of the US Treasury bills of bonds.
"I said, if we can buy back government debt at a discount, in other words, 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. In other words, we can buy back debt at a discount," Trump told CNN in an interview yesterday.
"People said, I want to go and buy debt and default on debt and - these people are crazy. This is the US Government. First of all, you never have to default because you print the money, I hate to tell you, so there's never a default.
"It was reported in the failing 'New York Times' and other places that I want to default on debt - I'm the king of debt. I understand debt better than probably anybody. I know how to deal with debt very well. I love debt," he said.
Trump claimed that his statement was taken out of context.
"If there's a chance to buy back debt at a discount... You can buy debt, that's what I'm talking about. People had it, 'The Times' and others wrote, oh, Trump wants to go and see creditors and buy debt at a discount.
"I bought mortgages back when the market went bad. I bought mortgages back at tremendous discounts and I love doing that. There's nothing like it, actually. It gives me a great thrill. But in the US with bonds, that won't happen because in theory, the market doesn't go down so that you default on debt and that's what happens," Trump added.
