Posted in Uncategorized

US government shutdown of 2013 & US government debt

Thank you to the gentlemen who made me look these things up :

Source : http://forexillustrated.com/usa-government-shutdown-2013-simply-explained-for-dummies/

The meaning of the government shutdown 2013 and the reason behind it – the Democrat party failed to agree with the representatives of the Republican Party about the budget for the fiscal year 2014. The Republican Party used their power to freeze the passing of the budget bill as a leverage to push their interests and also to attack the reputation of Obama’s administration. And they did it under the slogan of “Budget cuts have to be made and Obamacare project is flawed to its core and must be ended.” The absence of an approved budget left the government without the money needed to pay the federal employees so ~800 000 where indefinitely laid off and ~1.3 million people had to work without knowing when they would get paid thus many institutions and also tourist sites had to be closed.

Another source : http://www.treasurydirect.gov/kids/what/what_borrow.htm

How does the U.S. Government borrow money?

Here’s where the Government is different from individual people and businesses. When the Government borrows money, it doesn’t go to the bank and apply for a loan.  It “issues debt.” This means the Government sells Treasury marketable securities such as Treasury bills, notes, bonds and Treasury inflation-protected securities (TIPS) to other federal government agencies, individuals, businesses, state and local governments, as well as people, businesses and governments from other countries. Savings bonds are sold to individuals, corporations, associations, public and private organizations, fiduciaries, and other entities.

Here is how Treasury securities – such as savings bonds – generally work. People lend money to the Government so it can pay its bills. Over time, the Government gives that money, plus a bit extra, back to those people as payment for using the borrowed money.  That extra money is “interest.”

This is how the U.S. system of debt works:

  • The U.S. Treasury issues or creates the debt.
  • The Bureau of the Fiscal Service manages the Government’s debt. That means it keeps records, takes care of selling the debt, and handles paying back people who loaned the Government money.
  • The U.S. Treasury and the Bureau of the Fiscal Service do not decide how the money is spent. The legislative branch of Government (Congress) decides how the money is spent.
  • There is a maximum amount of debt the Government can have. This is known as the “debt ceiling.” To raise that amount, the U.S. Treasury must get Congress to approve a new and higher limit.

Source : http://www.learnbonds.com/treasury-and-fed/ >>> This page teaches me about the difference between the Federal Reserve and the US Treasury

And finally, a video that is the clearest one to me thusfar :

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s