Who Owns The U.S. Debt?

Right now, U.S. debt stands at just over 11 trillion dollars and it’s growing everyday. Many are coming to understand that the ballooning debt is going to cause adverse reactions in the domestic economy, despite claims to the otherwise by folks like Ben Bernanke and Paul Krugman. However, it’s not only domestic affairs that will be affected.

When the U.S. sells debt security to a nation or institution it is also selling its leverage on the international stage. For example, you and I might be staunchly opposed to the way China treats Tibet. President Obama and Secretary of State Hilary Clinton might be just as opposed to it on a personal level as well. Yet, in order for President Obama to actually fund some of the things on his ambitious domestic agenda (like education) somebody has to buy the debt that will result from that spending. It’s much like any other loan you would get – except in this case, the U.S. “prints” money in the form of some type of security, China might buy it up because it has a guaranteed return, the U.S. government can then spend that money on some domestic program in hopes of jolting the economy into better shape (though those hopes are usually short-sighted), eventually the government gets a return on that investment in the form of tax revenue, and finally (in theory) pays back China with interest as a way of saying “thanks for funding our growth when nobody else could spend the money”.

Since America’s government is so dependant on China to fuel its economic growth (as distinct from progress) do you really think government officials could take a hard stand against China’s abuse of Tibetans? Quite obviously the answer is no. You might wonder why the government doesn’t just print the money and spend it directly without looking for someone to buy the debt (buying securities is essentially the same thing as an investment or giving a loan). We can’t do that for the same reason Zimbabwe can’t just pass around 10 million dollar bills and expect to turn their country around. (I know that’s not much of an explanation, but it’s not an essential issue here).

So it’s important to know just who owns our debt, not just for domestic reasons, but because it deeply affects foreign policy and international relations. Who does the U.S. have to compromise itself for? Without further ado, here’s the 15 biggest holders of U.S. debt:

15. Russia – 128.1 billion

14. Depository Institutions – 145.4 billion

13. Hong Kong – 146.2 billion

12. Brazil – 157.1 billion

11. Insurance Companies – 162.2 billion

10. Caribbean Banking Centers – 179.8 billion

9. Oil Exporter Nations – 187.7 billion (list includes Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria)

8. United Kingdom – 277.5 billion

7. Pension Funds – 490.2 billion (includes private retirement accounts and governmental pension accounts as well)

6. State and Local Governments – 528. 3 billion

5. Mutual Funds – 694.5 billion

4. Japan 757.3 billion

3. China (mainland) – 789.6 billion

2. Other Investors/Savings Bonds – 1.114 trillion

1. Federal Reserve and Intragovernmental Holdings – 5.127 trillion (and rising with every report)
*intragovernmental holdings is a form of governmental liabilities (like social security trust fund and the medicare trust fund)

Aside from the obvious implications for foreign policy, we can also see one of the reasons that Washington has been so interested in the health of Wall Street. The more Washington spends, the more it pads the pockets of Wall Street elites. Even if you’re a progressive and you support things like a government provided health care public option, education spending, and social programs you must also realize that a nation dripping in debt also carries with it the effect of distorting and corrupting many markets and institutions. This is much to the detriment of average folks like you and me.

source CNBC