I challenge all of you to vote Whig and raise the dead in 2020. These two parties don't even care about their own platform. Look at the GOP, who needs State rights anyhow? Obviously not the GOP. What is the over/under on the 2020 nominees being baby boomers again? Enough is enough, are you going to hand over the keys to another generation or what? What will be left when they finally do? A bill for $25 trillion? What happens when we cannot pay the interest on that debt? How soon are we from that point?
What most ppl fail to realize is that debt, our national debt, is less than 2.5 trillion owed to other countries. .. The remaining 22.5 trillion is owed to the American ppl in the form of Government stocks, bonds, social security, YOU!...
The U.S. debt is more than $19.9 trillion. Most headlines focus on how much the United States owes China, which is one of the largest foreign owners. What many people don’t know is that the Social Security Trust Fund, aka your retirement money, owns most of the national debt. How does that work, and what does it mean?
The Debt Is in Two Categories
The U.S. Treasury manages the U.S. debt through its Bureau of the Public Debt.
The debt falls into two broad categories: Intragovernmental Holdings and Debt Held by the Public. (Source: "Debt to the Penny," U.S. Treasury, January 26, 2017.)
Intragovernmental Holdings. This is the federal debt owed to 230 other federal agencies. It totals $5.554 trillion, almost 30 percent of the debt. Why would the government owe money to itself? Some agencies, like the Social Security Trust Fund, take in more revenue from taxes than they need. Rather than stick this cash under a giant mattress, they buy U.S. Treasurys with it.
By owning Treasuries, they transfer their excess cash to the general fund, where it is spent. Of course, one day they will redeem their Treasury notes for cash. The Federal government will either need to raise taxes or issue more debt, to give the agencies the money they will need.
Which agencies own the most Treasuries? Social Security, by a long shot. Here's the detailed breakdown (as of December 31, 2016).
Social Security (Social Security Trust Fund and Federal Disability Insurance Trust Fund) - $2.801 trillionOffice of Personnel Management Retirement - $888 billionMilitary Retirement Fund - $670 billionMedicare (Federal Hospital Insurance Trust Fund, Federal Supplementary Medical Insurance Trust Fund) - $294 billion
All other retirement funds - $304 billionCash on hand to fund federal government operations - $580 billion. (Source: Treasury Bulletin, Monthly Treasury Statement, Table 6. Schedule D-Investments of Federal Government Accounts in Federal Securities, U.S. Department of the Treasury, December 2016.)
Debt Held by the Public. This is the rest of the national debt, totaling $14.403 trillion. Foreign governments and investors hold nearly half of the nation's public debt. One-fourth is held by other governmental entities. These include the Federal Reserve, as well as state and local governments. Fifteen percent is held by mutual funds, private pension funds, savings bonds or individual Treasury notes. The remaining 10 percent is owned by businesses, like banks and insurance companies, and an assortment of trusts, companies, and investors. Here's the breakdown:
Foreign - $6.281 trillionFederal Reserve - $2.463 trillionMutual funds - $1.379 trillionState and local government, including their pension funds - $874 billion
Private pension funds - $544 billionBanks - $570 billionInsurance companies - $304 billionU.S. savings bonds - $169 billionOther (individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors) - $1.349 trillion. (Sources: “Factors Affecting Reserve Balance,” Federal Reserve, January 18, 2017. “Treasury Bulletin,” Table OFS-2, Ownership of Federal Securities, U.S. Department of the Treasury, June 2016.)
This debt is not only in Treasury bills, notes and bonds but also Treasury Inflation Protected Securities and special State and Local Government Series securities.
As you can see, if you add up the debt held by Social Security and all the retirement and pension funds, nearly half of the U.S. Treasury debt is held in trust for your retirement. If the United States defaults on its debt, foreign investors would be angry, but current and future retirees would be hurt the most.
Why Does the Federal Reserve Own Treasury Debt?
As the nation's central bank, the Federal Reserve is in charge of the country's credit. It doesn't have a financial reason to own Treasury notes. So why did it double its holdings between 2007 and 2014?
That's when it ramped up its open market operations, such as purchases of Treasuries. This quantitative easing stimulated the economy by keeping interest rates low. It helped us escape the grips of the recession.
Is the Fed simply monetizing the debt? Yes, that's one of the effects. The Fed purchases Treasurys from its member banks, using credit it created out of thin air. It has the same effect as printing money. By keeping interest rates low, the Fed helps the government avoid the high-interest rate penalty it would usually incur for excessive debt.
The Fed ended quantitative easing in October 2014. As a result, interest rates on the benchmark 10-year Treasury note rose from a 200-year low of 1.442 percent in June 2012 to around 2.17 percent by the end of 2014. For more, see Relationship Between Treasury Yields and Mortgage Rates.
What About Foreign Ownership of the Debt?
Japan owns $1.108 trillion in U.S. debt. As of November 2016, it was the largest foreign holder. China owns $1.049 trillion. Both Japan and China want to keep the value of the dollar higher than the value of their currencies. That helps keep their exports affordable for the United States, which helps their economies grow. That's why, despite China's occasional threats to sell its holdings, both countries are happy to be America's biggest foreign bankers. China replaced the United Kingdom as the second largest foreign holder on May 31, 2007. That's when it increased its holdings to $699 billion, outpacing the United Kingdom's $640 billion.
Ireland is third, holding $275 billion.The Cayman Islands is fourth, at $260 billion. The Bureau of International Settlements believes it is a front for sovereign wealth funds and hedge funds whose owners don't want to reveal their positions. So are Luxembourg and Belgium. Luxembourg is seventh ($221 billion), and Belgium is twelfth ($113 billion).
Brazil is the fifth largest holder at $258 billion. The next largest holders are Switzerland, the UK, Hong Kong, Taiwan and India. They each hold between $118 and $229 billion each. (Source: “Foreign Holding of U.S. Treasury Securities,” January 18, 2016. "Petrodollars and Global Imbalances," U.S. Treasury, February 2006.)
Data are from various reports that are released at different times. Therefore, the numbers in this article may not add up to $19.9 trillion.
U.S. Economy
U.S. Debt to China: How Much Does It Own?Exactly How Much U.S. Debt Does China Own? And Why? SHARE PIN EMAIL
China owns so much U.S. debt to improve its competitiveness in global trade. Photo: Thomas Kuhlenbeck/Getty Images
By Kimberly Amadeo
Updated February 02, 2017
The U.S. debt to China is $1.05 trillion, as of November 2016. That's 27.8 percent of the $3.77 trillion in Treasury bills, notes, and bonds held by foreign countries. The rest of the $19.9 trillion national debt is owned by either the American people or by the U.S. government itself. For more, see Who Owns the U.S. National Debt?
China holds less than the $1.11 trillion held by Japan. Both countries have reduced their holdings in the past year, but China has reduced it faster.
China held $1.3 trillion in U.S. debt in November 2013. The reason China is reducing its holdings is to allow its currency, the yuan, to rise. To do that, China has to loosen its peg to the dollar. That makes the yuan more attractive to forex traders in global markets.
Long-term, China wants the yuan to replace the U.S. dollar as the world's global currency. China is also responding to accusations of manipulation. For more, see Currency Wars.
Before February 2014, China had been strengthening the yuan in response to U.S. pressure. ThenBut it reversed course when the dollar rose 25 percent in 2014 and 2015, dragging the yuan with it. China needed to lower the yuan to remain competitive with other emerging markets with free-floating currencies. For more, see Asset Bubble and Yuan to Dollar Conversion.
China has consistently held more than $1 trillion in U.S. debt every year since 2010. That's when the Treasury Department changed how it measures the debt.
Before July 2010, Treasury reports show China held $843 billion in debt. This makes it difficult to make long-term comparisons. (Source: "Major Holdings of U.S. Treasury Securities," Department of the U.S. Treasury, September 6, 2016.)
How Did China Become One of America's Biggest Bankers?
China is more than happy to own close to a third of the U.S. debt.
Owning U.S. Treasury notes helps China's economy grow by keeping its currency weaker than the dollar. It keeps Chinese exports cheaper than U.S. products. China's highest priority is creating enough jobs for its 1.4 billion people.
The United States allowed China to become one of its biggest bankers because the American people enjoy low consumer prices. Selling debt to China funds federal government programs that allow the U.S. economy to grow. It also keeps U.S. interest rates low. But China's ownership of the U.S. debt is shifting the economic balance of power in its favor.
Why Does China Own So Much U.S. Debt?
China makes sure the yuan is always lower than the U.S. dollar. Why? Part of its economic strategy is to keep its export prices competitive. It does this by holding the yuan at a fixed ratecompared to a "currency basket" of which the majority is the dollar. When the dollar falls in value, the Chinese government uses dollars it has on hand to buy Treasuries. It receives these dollars from Chinese companies that receive them as payments for their exports.
China's Treasury purchases increases demand for the dollar and thus its value.
Also, China promises to redeem dollars for yuan at the fixed rate. It must keep a good supply of Treasury notes in reserve to do that.
China's position as America's largest banker gives it some political leverage. Now and then, China threatens to sell part of its debt holdings. It knows that if it did so, U.S. interest rates would rise. That would slow U.S economic growth. China often calls for a new global currency to replace the dollar, which is used in most international transactions. China does this whenever the United States allows the value of the dollar to drop. That makes the debt China holds less valuable.
What Would Happen If China Called in Its Debt Holdings?
China would not call in its debt all at once. If it did so, the demand for the dollar would plummet like a rock. This dollar collapse would disrupt international markets even more than the 2008 financial crisis. China's economy would suffer along with everyone...
