The FT has reported this morning that:
The Congressional Budget Office on Wednesday predicted that the US Treasury will run out of cash in the first half of March if action is not taken on the debt ceiling.
This, of course, is not true. As a matter of fact the US Treasury can never run out of cash because it literally creates the stuff.
What US politicians can do is to decide to deny the US Treasury the right to create the cash to keep the US government going. But that is something very different.
As a matter of fact the US government can never run out of money.
And nor has there ever been a shortage of buyers for its bonds.
What there is instead is a process that incorrectly presumes neither of those things are true. And that's bad politics, and is bad for any economy.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
The words ‘if action is not taken on the debt ceiling’ show up on my screen. What device are you using, as it appears the last few words of the FT sentence have been cut from yours.
I quote that
I am bemused
My point is that it’s an artificial debt ceiling that has no bearing to reality in assuming it is the debt that funds government that is the issue here
Money creation funds government
Debt issue is a favour to money markets
In trying to make sense of the Congressional Budget Office’s inane statement. I am thinking that they could possibly try to rebuff your statement on the basis of a technicality – being that it is the Federal Reserve that creates money, not the Treasury.
That technicality would of course be peripheral. Statements like that reported in the FT merely deflect attention from the idea that Congress would be needlessly shutting down the government. A wilful shutdown is not the same as running out of cash. Referring to cash in this context (as if availability itself was an issue) is, as you suggest, misleading whether that is the intention or not.
Greenbacks worked
They could again
The Treasury only has to say they’re good for paying tax
Marco Fante says:
February 2 2018 at 9:22 am
“…..misleading whether that is the intention or not.”
Within the machinations of the US government the the proposition of running out of money is a device to create a crisis and the intention is obviously to mislead in order to make a preferred course of action appear to be the only way to go forward.
The debt ceiling is arbitrary and has been changed frequently in the past, so it is clearly a false crisis.
Why the FT choses to present the story in the terms it is preseted to them without questioning the underlying motives is anybody’s guess. It reinforces the austerity propaganda agenda here, so maybe that’s the motivation.
Donald Trump’s assertion that the MSM in the US is not serving the people well, applies just as strongly as a criticism of our own MSM. A ‘free press’ which obediently trots out the government line is either not free, or just not useful.
I agree entirely: this is narrative manufacture
To understand pretty much anything these days all you have to do is ‘follow the money’. Surely nobody expects the FT to be progressive. It’s owned by Nikkei ffs! While Lionel Barber may like us to think he’s an objective journalist, he’s not going to rock the Neo-liberal boat or cause sleepless nights for his core readership, is he?
But the diagram remains….
Here’s the CBO’s actual release – https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53514-debtlimit.pdf
All this misinformation does is reinforce that Governments are useless.
Therefore taxation is a joke and not worth the trouble (Government is a waste of time and a waste of money).
This is a coup against democracy through lies by the top 1% who increasingly end up in Government in the USA and increasingly elsewhere.
The USA and the UK are increasingly looking like ‘Idiocracies’.
Ideas like this (a sovereign Government running out of money) creates an ignorance that acts like a cage and restricts innovation and just trying other things.
Can we cope with 10 more years of this?
I like ‘Idiocracy”, Pilgrim.
I may even use it from time to time as an alternative to ‘Democrassy’ – government of the supid, by the stupid and for the stupid. 🙂
Please – by all means – do Andy.
There was a programme on BBC 4 on Tuesday this week about this kind of thing, called “Shaking the Magic Money Tree”. In it, the concepts of money creation (by keystroke), the myth of “Governments equal to households” and the real impact of QE were addresses. I tried sharing the link to the iPlayer programme on social media (facebook).
Since then, I’ve heard nothing about it from either mainstream or alternative media. I would have thought this kind of thing would be popular amongst commentators who are opposed to austerity, but it’s almost like the programme never happened..
I should point out, your blog seemed literally the only place I’ve seen anything about this programme, though I’d forgotten I’d seen it mentioned here and made a mental note to listen!
Thanks
Here’s the link: http://www.bbc.co.uk/programmes/b09pl66b
You’ll need to have a BBC iPlayer Radio login to listen.
The debt ceiling came into existence just a few years after the Federal Reserve was created in 1913. At the time that the bank was established many politicians, and certainly many citizens, were concerned that it could potentially lend unlimited funds to the government, a capacity that could short-circuit constitutional checks and balances and lead to the development of a Federal behemoth. As a result, the Fed’s “original” charter prevented the bank from buying or owning obligations of the U.S. Treasury. This provision allayed the fears of unlimited borrowing and it helped Congress approve the Act.
It is none the less pure pantomime. Yawn, okay move on, nothing to see here.
True
Except they believe it
And that matters