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.
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Perhaps Janet Yelland doesn’t know that the US dollar is no longer backed by the gold standard. Has anybody checked the vaults of Fort Knox lately? Maybe the computers at the Fed have crashed which is the only other explanation.
Wow, it sounds as though the American Treasury Secretary is in danger of mimicking Liam Byrne’s brainless insanity, and apologising for there being no money left
In doing so, Byrne shot Labour in the foot for every election since, and possibly for more than one generation, and there’s a danger that Yellen could do the same to an otherwise economically enlightened Biden administration.
By his actions, Biden has shown himself to be brave enough to call the neoliberals’ bluff, and pull back the curtain to show that “the great and terrible Wizard of Oz” is only a doddery old man, capable of instilling fear, but only on the basis of rumour and report.
Yellen could, by contrast, “big up” the doddery old man back into “the great and terrible Wizard of Oz”, so handing even more power to the fanatical Republicans bent on embedding minority rule into American politics, to everyone’s discomfiture.
On minority rule, never forget the shocking fact that the 50 Republican Senators were elected on 41.4 FEWER votes than the 50 Democrat Senators, all achieved by YEARS of gerrymandering and voter suppression.
Byrne’s “Inanity”, not “insanity”, though it was certainly a mad thing to do.
🙂
Wish you could edit these posts.
I SHOULD have said ‘41.4 MILLION’ fewer votes. The Republicans also took the House in e g. 1996, on a minority vote, and had the chutzpah to call it “the will of the people “!!
Sorry – I can’t control WordPress, which is the programme I use for the blog
The US of course can run out of money because there is a self imposed debt limit set by Congress. This is why there are those bizarre episodes when the US Government starts to shut itself down. The reality is there is no real limit as long as politicians are willing to sanction an increase.
Once again, the Neo-liberals are trying to create their own reality.
The US has a legal debt limit. Congress has passed a law – you know, democracy and all that – which says that the national debt can only become “so big”.
Every few years they realise how much this is constraining their spendthrift ways and vote again to make the new debt limit “so plus big”.
The Federal Reserve does not print dollars and send them to Treasury. Instead, financing is done by the Fed buying Treasury bonds (bills, notes) meaning that the debt size is, given the debt cap, a constraint of the number of dollars available to the government.
Congress has, in the past, refused to raise the debt cap. And government has started to close down for lack of money. They do, generally, quickly then raise the debt cap.
The US is one of those places where the national government can actually run out of its own cash.
Only if it is stupid enough
Which was my point