The US can’t run out of dollars, unless some deeply misguided politicians decide that it should

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The FT includes this comment this morning:

Janet Yellen has warned the US Treasury risks running out of cash next month unless Congress increases its borrowing limit, as Joe Biden’s administration grows increasingly worried about a possible debt default.

In a letter to congressional leaders on Wednesday, the Treasury secretary said she could not offer “a specific estimate” of when it would run out of cash, but the “most likely outcome” was that its coffers would be “exhausted” during October.

The comment is, of course, misleading. There is no chance of the US running out of cash, or defaulting, unless that is what the Republicans choose that it should. The US can in reality create as much money as it wants, subject (if it is prudent) to inflation constraints and, of course, politics.

The  Republicans could try to crash the dollar. But let’s be quite clear, that is not necessary. And the impression given that the US is running out of money is false. It can’t do that unless some deeply misguided politicians choose otherwise.