To me, this quote is a bigger deal than Musk's DOGE, and puts a broader plan into the context of what Musk is doing:
https://finance.yahoo.com/news/trump-says-u-might-less-221932449.htmlSpeaking to reporters aboard Air Force One, Trump said administration officials who have been combing through payment records in an effort to identify wasteful spending have turned their attention to the debt payments that play a central role in the global financial system.
"We're even looking at Treasuries," Trump said. "There could be a problem - you've been reading about that, with Treasuries and that could be an interesting problem."
He added: "It could be that a lot of those things don't count. In other words, that some of that stuff that we're finding is very fraudulent, therefore maybe we have less debt than we thought."
I can think of two possible directions:
1.So one of the only things I can imagine this being a setup for is a forced reduction in intra-governmental debt holdings - which amount to over $7T. These include Social Security and Medicare trust funds, civil service and defense retirement trust funds, and miscellaneous other things like the FDIC and highway fund.
As Wikipedia describes it:
...agencies may receive or spend money unevenly throughout the year, or receive it for payout at a future date, as in the case of a pension fund. Lending the excess funds to the government, typically on the accounts of its treasury, enables the government to calculate its net cash requirements over time.
So for example, if a lump of money is received by a retirement fund or for a highway project, the money is invested in treasuries until it is dispersed. This is basic controlling, and it's how a corporation would deal with the situation. Musk/Trump could force agencies to reduce their treasury holdings in an attempt to make the national debt gauge superficially go down in order to justify more spending and tax cuts, at the loss of the benefit agencies get from not having to worry about cash flows or insolvency during recessions.
But these aren't real debts either, so their erasure for political optics might be the "fraud" we should be talking about. The interest paid to agencies becomes part of the funding spent on retirements, medicaid, etc. so without this interest either they'll have to ask for more funding OR they'll have to scale back payments. This is how you cut Medicaid, Social Security, and federal retirement pensions without passing an unpopular law. Just take away their safety buffers and wait for them to fail when their fixed disbursement requirements are a mismatch with their variable tax revenues. With less of a financial buffer, SS and Medicaid could face acute financial distress during the next recession, when payroll tax receipts are suddenly reduced.
2.The other, even worse, possibility is that Musk/Trump are setting the stage to unilaterally cancel the US treasury's debts owed to political enemies or enemy countries such as China, on the grounds of supposed "fraud". The weapon of unilateral debt cancellation could be used as leverage to force other countries to either change their policies or watch their banks collapse. Of course, the cost would come in the form of much higher interest rates on treasuries as banks and governments around the world, and domestically, fled U.S. government treasuries. The other casualty would be the U.S. dollar, which would likely lose its status as the world's reserve currency and probably much of its purchasing power if US treasury debt was no longer guaranteed. A plausible scenario is that China attacks Taiwan in 2026 or 2027, and the U.S. starts cancelling treasury debts owed to Chinese entities. Free money glitch, right? Uh... right?
Even if the ratings agencies could be coerced into not calling these defaults, markets would not be fooled. This would be a default. The consequences could spiral out of control, because the world's financial and banking systems are all built upon a foundation of US dollars, with treasuries setting the risk-free rate and being the risk-free asset.
The U.S. has literally paid interest to governments while it was at war with those same governments, simply because the risks to default were too high. This government simply doesn't think there is any risk to the dollar/treasury based global order, which is part of why I moved my spare change out of SGOV and into IAU.
