China Not Out of the Economic Woods Yet

Republican presidential candidate Donald Trump gestures as he speaks at a campaign rally Friday, Feb. 5, 2016, in Florence, S.C. (AP Photo/John Bazemore)

During a recent interaction with panel members on CNBC’s “Squawk Box,” Presumptive Republican presidential nominee Donald Trump let it be known that unlike many of the other candidates who have come and gone on both sides of the isle, he may be the only one who truly understands how delicate the country’s debt problem has become.

For anyone who is wondering why the Feds have been reluctant to continue raising interest rates, the issues seem to go much deeper than a softening of the economy. As the national debt continues its march towards an unfathomable $20,000,000,000,000, Trump has indicated he is well aware that any material increase in interest rates would result in the US having to approach its creditors for debt restructuring. Its really tantamount to admitting the US can’t pay its debts.

Upon hearing Trumps comments about the US debt, financial market expert Peter Schiff was forced to admit that Trump is technically correct. “Trump just admitted on CNBC that America has too much debt to afford a rate hike, and that he wants our creditors to accept less than 100 cents on their Treasuries,” Schiff explained during a recent CNBC interview. “In other words, Trump knows a U.S. government default is inevitable.”

As the inevitability of a debt default moves closer to reality, any interest rate hike could create tidal waves through financial markets that are already overwhelmed by issues in both China and now Japan where the Yen is under tremendous pressure. One gets the feeling that with all the economic insecurity found throughout the world, something is about to break.

This information goes a long way towards explaining why the Feds indicated they would start increasing interest rates, only to put the brakes on after a single quarter point raise late last year.