US government warns it's running out of cash
 

[url=http://news.yahoo.com/s/afp/20051230/ts_afp/uspoliticseconomy:6b7d0]Link...[/url:6b7d0]

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WASHINGTON (AFP) - Treasury Secretary John Snow has warned that unless Congress raises the national debt limit, the US government will run out of cash to finance its daily work in two months.

In a letter to Senate leaders Thursday, Snow said the statutory debt limit imposed by Congress of 8.184 trillion dollars would be reached in mid-February and the government would then lose its borrowing power.

"At that time, unless the debt limit is raised or the
Treasury Department takes authorized extraordinary actions, we will be unable to continue to finance government operations," said the letter, seen by AFP.

Snow warned that even if the Treasury took "all available prudent and legal actions" to avoid breaching the ceiling, "we anticipate that we can finance government operations no longer than mid-March".

"Accordingly, I am writing to request that Congress raise the statutory debt limit as soon as possible."

The Republican-led Congress last voted to increase the debt limit in mid-November 2004, despite opposition from Democrats who demanded the free-spending federal government tighten its belt instead.

The US debt limit sparked bitter partisan battles in the mid-1990s between a Republican-dominated Congress and the Democratic administration of president
Bill Clinton, leading to shutdowns of the federal government.

Once the US government hits the ceiling, it comes under threat of defaulting on its debts and can lose the ability to raise future credit on the capital markets.

Snow underlined that the "full faith and credit of the United States" was a unique selling point on the markets.

"A failure to increase the debt limit in a timely manner would threaten this unique and important position," he wrote in his letter.
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meh the US will never run out of "cash" moving along.

exactly, as long as the Fed is in place then there will be a neverending supply of cash.. and in my opinion, that contributes to inflation, because the banks practice fractional reserve banking, when they run into financial trouble, the fed waves its magic wand and more dollars appear.

what? Are you saying that they will just print more money?

thats exactly what they do. Heres how it works:

Banks accept your money when you deposit into your account. They then lend out that money to other people. They practice this method called fractional reserve banking, where they only have 1/10th of the money they say they have (and it is legal for them to do so). When a bank is in trouble and every account holder starts withdrawing, the bank doesn't have everyones physical cash. So the bank "borrows" money from the Fed aka the Federal Reserve System. The Fed has an absolute unlimited amount of money, because the U.S. Dept. of the Treasury is part of the Fed, and they just print up more money and loan it to the bank in trouble.

And this is where it gets bad, in my opinion. This leads to inflation of the money supply, and prices go up.

You do realise that paper money is meaningless without sufficient gold reserves right?

..if you read my post and understood economics, you would already know my response to that ;)

The government isn't stupid, they know that printing more will cause inflation, what makes you think they'll do something stupid like that?

i dont think anyone uses the gold standard anymore. our money isnt based on gold reserves.

Yep, it's based on faith (dare I say faith)

heh, there are two ways of economic thinking, the Austrain school of thinking (Frederick von Hayek) and the Keynesian view (John Maynard Keyenes). The Keyensian view is the more popular one, especially after WW2, by saying that the government should have some control over the economy, and that giving money to the masses is a good thing. To them, inflation means high prices, but that is only a symptom of inflation. The Austrian view has been all but forgotten, because it calls for a free market, and an unplanned economy. I think that is the reason most economists in the USA are Keyenians, because without a planned economy they would be jobless.

America was based on Adam Smith's laissez faire economy of little governmental control...We try to keep the economy out of the hands of the government except in a regulatory role (to prevent trusts/monopolies and whatnot) and some other minor exceptions ie: Amtrak and the Post office being governmental corporations...The only reason we have any governmental control is because of the ways capitalism has affected people in different ways in different periods like regulatory commissions after the Great Depression and anti-trust laws from the guilded ages.

I may be wrong, but what I'm getting from what you are saying is that it you think the US government controls the economy which is only true to a very small extent.

america is anything BUT laissez faire. think about it: If the economy was truly a free economy, there would be no tarrifs, there would be no illegal anything, (that means you could buy weed from your local walgreens).

the government is cutting into the economy by controling a trust/monopoly. you see, it is actually the consumer that should control the economy, and it is the consumer that builds a monopoly. look at bill gates. he didn't force anyone to buy Windows, he just provided an alternative with more options and a cheaper price, and that is what the consumers wanted.

have you noticed that most consumers haven't complained about windows (stfu techheads), and most of the lobbyists for anti-trust laws are from companies that compete against microsoft?

I said they were for the most part laissez faire, but some things contradict that theory. The taxes are to raise income so that the country can function so that's an acceptable violation of laissez faire...the anti-trust stuff is not laissez faire, and I said that in my earlier post, but it hardly ever happens and it's only for regulatory reasons. Other than that, the American government is very uninvolved with the economy because it has been that way forever and we want to keep it that way as much as possible. Earlier you were trying to tell me that the United States favors a government controlled economy, which is untrue. We were based on Adam Smith's beleifs of capitalism and the policy of laissez faire. Even if changes have occurred that aren't necessarily compliant with these policies, we still live by them for the most part.

Most economists in the United States are Keyensian economists, they favor a planned out economy. Planning out an economy is the most you can do to interfere with the natural phenomena. While the US may practice a really watered down version of laissez faire, they still get involved with the economy. In my opinion, the government should just let the economy be by itself, it is after all by the people, for the people, and made of the people.

On a related note, you said taxes help the country function...taxes are collected because they are there to pay for public school teachers, police, and the military...Now, what if you had everything privatized...that would mean a private police force, private schools..you wouldn't have to pay taxes. You would get a monthly bill for police protection, for your childs school, for the firefighters etc..

Now while you may think that is inconveniant, and money squandering or stupid, look at it this way. Every year, you pay taxes for public education, even if you send your child to a private school. You pay for other people's welfare, while there are those who exploit the system.