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At the first meeting between President-elect Donald Trump and his main economic adviser, Trump appeared confused by elements of the federal debt and US monetary policy.
Veteran reporter 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. Business Insider has obtained a copy of the book, which is published by Simon & Schuster and is expected to come out on Tuesday.
At the meeting in Trump Tower in November 2016, Cohn addressed a series of economic issues, including the Federal Reserve. Cohn told Trump that the Fed would most likely raise interest rates during his tenure. Trump then offered an idea of how to handle rising rates.
"We should just borrow a lot of money, keep it and then sell it to make money," Trump said.
While Trump was right to say that many private companies are issuing debt at a time when interest rates are low, Cohn was "stunned by Trump's lack of basic understanding."
During the campaign, Trump pledged to eliminate the federal debt during his presidency. Borrowing more would increase the deficit and add to that debt, Cohn said. The elected president has proposed a solution.
"Just run the presses – print money," said Trump, according to Woodward.
Cohn suggested that this would be detrimental to the economic and economic health of the United States, as it is thought that printing large amounts of money would lead to inflation. But Trump came back to the idea later in the conversation.
Cohn also pointed to the federal debt ceiling, a statutory limit on the amount of debt the federal government may have outstanding. Even the approach of the debt ceiling can hurt 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 how the US government's debt cycle works," wrote Woodward.
Trump's perspective on debt may be better espoused by modern monetary theory, a booming theory among some economists, that the federal debt is not an economic constraint for the United States. But MMT is generally not accepted by lawmakers of both parties, which makes it very likely politically untenable at this stage.
The back and forth debt was only the first clash between Cohn and Trump on economic policy, according to Woodward's book. The pair fought for Trump's desire to set tariffs on imports, and Cohn reportedly stole documents on Trump's desk to prevent the president from removing the United States from key trade deals.
The White House has described "fear" as "nothing more than fabricated stories".
Here are more details of the book up to now:
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