Here is a simple one page guide to the ownership of US debt, which is quickly approaching $40 trillion. This is always surprising to people but the single largest holder of that debt is the federal government itself, about $11.5 trillion worth. A bunch is held by the Federal Reserve in its ceaseless effort to manipulate interest rates. The Fed doesn’t actually “pay” for the debt it buys; it just makes up money. This practice of buying debt should be banned. Interest rates should be set solely by the market. And the real reason the Fed buys it at this point is to try to hide the pernicious effects of all that debt. Other parts of Government, like the Social Security Trust Fund also hold some of the debt.
Foreigners, including foreign governments, hold about $8.7 trillion. The proportion of debt held by foreigners has steadily risen over the last 25 years. Japan is the single largest foreign buyer at about $1 trillion, followed by China at $759 billion. As US debt has soared, the percent held by Japan and China has declined. Other foreign buyers have stepped in. Foreign governments and entities have a variety of reasons for purchasing, many related to trade and currency. Foreign buyers are extremely important in recent auctions, routinely buying 60% or more. If they begin to limit buying, it will create stress. (FT Post)
