This episode explores the potential legal and market ramifications of unconventional actions the Trump administration might take regarding U.S. sovereign debt. Against the backdrop of discussions surrounding a hypothetical "Mar-a-Lago Accord" involving debt swaps, the conversation delves into the surprisingly flexible nature of bond contracts. More significantly, the guest expert reveals that U.S. Treasury bond documents lack clauses explicitly preventing the government from unilaterally extending maturities, a move that, while seemingly tantamount to default, might not trigger credit default swaps. For instance, the expert cites a historical precedent from the 1930s where the U.S. government abrogated gold clauses in contracts without catastrophic market consequences. As the discussion pivoted to other potential actions, the possibility of settling historical debts owed to the U.S. by leveraging current holdings of U.S. Treasuries by other countries was raised. Finally, the conversation touches upon the implications of potential border changes and the applicability of historical conquest laws to modern-day debt obligations, highlighting the fluidity of both bond contracts and national borders in the face of evolving geopolitical norms.
