— This is the script of CNBC's news report for China's CCTV on September 12, 2019, Thursday.
Trump is always "generous" to criticize the fed that he does not like, Sep 11, local time, Trump tweeted twice accusing the fed officials are "bonehead".
In that twitter, Trump made a request that shocked market, saying the interest rate should down to zero, or less, that is negative interest rate, and he said then we should start to refinance our debt.
This is a totally fresh saying that he has never used in criticizing the fed, and there is no precedent in U.S. history. The U.S. has $22.5 trillion in debt, $16.7 trillion of which is held by the public.
That debt load has grown $2.6 trillion, or 13% under Trump, during a CNBC interview in May 2016, Trump said that if the economy turned south, he would try to get creditors to accept partial payment on U.S. debt and if the creditors would know the economy will crash, you could make a deal.
Now he is proposing to refinance U.S. debt at ultra-low interest rates, and that is for reducing the debt cost for U.S. government. But that also make the U.S. a less desirable spot for capital flow as the ability to generate yield would become more difficult, U.S. savers and banks would be hurt.
So some analysts think re-financing would certainly be beneficial to the United States government. Whether it would be beneficial to the United States economy is an open question. "It's not viable", said Mark Zandi, chief economist at Moody's Analytics, "it would be incredibly disruptive to investors, financial markets and the whole U.S. economy" in his view, this isn't a mortgage, this is a contractual relationship the Department of Treasury has with investors and related to the whole America.
Before Trump came up with re-financing debt, Treasury department also said they are considering issuing longer-term treasuries of 50-year and 100-year. Some believe Trump hopes to get more room for budget surplus with the cooperation of the fed and treasury department. Now, more pressure is left to the fed that is going to have FOMC meeting on Sep 17 and 18.
Currently, the market expects the fed will cut 25 basis points and probably cut rates again by the end of this year and early next year.
We will keep a close eye on this issue.