It is interesting to learn who is it that is lending the US government money to cover it’s own intereste payments on it’s debt. Apparently the government owes itself the most.
As of last June (the latest complete breakdown available), the biggest holder of Treasury debt was the U.S. government itself, with about 52 percent of the total $8.5 trillion in paper that’s out there. Most of the government’s holdings are massive savings accounts for programs like Social Security and Medicare.. That’s leaves a little over $4 trillion in public hands. The biggest chunk (about 25 percent of the $8.5 trillion total) is held by foreign governments. Japan tops the list (with $644 billion), followed by China ($350 billion), United Kingdom ($239 billion) and oil exporting countries ($100 billion).
Other big holders of Treasury debt include state and local governments ($467 billion); individual investors, including brokers ($423 billion); public and private pension funds (319 billion); mutual funds ($243 billion); holders of US savings bonds ($206 billion); insurance companies ($166 billion) and banks and credit unions ($117 billion.)
With these statistics it makes one wonder about the all the rhetoric that the US is beholden financially to foreign governments. Even though it is not apparent. The biggest issue that the US has is that it is simply borrowing beyond it’s means to pay back it’s debt, especially to itself? Right now the government continues to borrow just to make payments on interest payments. The biggest threat with so much debt would be a slide in the US dollar.
Foreign investment in the U.S. – in U.S. stocks, bonds, real estate and businesses – isn’t necessarily a bad thing. Some observers point out that strong demand for U.S. investment is a sign that the U.S. is still the best place in the world to invest. What matters most is the ongoing strength of the U.S. economy and the federal government’s financial health. To the extent that Congress can control spending, eliminate the federal budget deficit and keep the economy growing, we should be fine.
But the current trends aren’t promising. At the moment, the U.S. economy is still relatively strong – both unemployment and inflation are relatively low. But growth seems to be slowing and, at some point, the economy could slide into a recession. When that happens, the economy shrinks and so do tax revenues. But Uncle Sam still has to the pay interest on what he’s borrowed – just like you don’t get a break on your mortgage payment when you lose your job. If we keep spending more and more on interest, the federal budget gets squeezed that much harder when the economy eventually stumbles.
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