Who is the US borrowing money from?
The federal government borrows money from the public by issuing securities—bills, notes, and bonds—through the Treasury. Treasury securities are attractive to investors because they are: Backed by the full faith and credit of the United States government.
Country/territory | US foreign-owned debt (January 2023) |
---|---|
Japan | $1,104,400,000,000 |
China | $859,400,000,000 |
United Kingdom | $668,300,000,000 |
Belgium | $331,100,000,000 |
Of that amount, about $24.5 trillion, or 78 percent, was debt held by the public — representing cash borrowed from domestic and foreign investors. The remaining $7.0 trillion (22 percent), was intragovernmental debt, which simply records transactions between one part of the federal government and another.
Among other countries, Japan and China have continued to be the top owners of US debt during the last two decades. Since the dollar is a strong currency that is accepted globally, holding a substantial amount of US debt can be beneficial.
The major international owners of US debt include Japan ($1.1T), China, UK, Belgium, Switzerland, Cayman Islands and smaller amounts from the rest of the world. After the recent weak treasury auction, US government officials warned that they are seeing waning demand from international buyers.
The United States pays interest on approximately $850 billion in debt held by the People's Republic of China. China, however, is currently in default on its sovereign debt held by American bondholders.
1) Switzerland
Switzerland is a country that, in practically all economic and social metrics, is an example to follow. With a population of almost 9 million people, Switzerland has no natural resources of its own, no access to the sea, and virtually no public debt.
U.S. debt offers the safest haven for Chinese forex reserves, which effectively means that China offers loans to the U.S. so that the U.S. can keep buying the goods China produces.
Tax hikes alone are rarely enough to stimulate the economy and pay down debt. Governments often issue debt in the form of bonds to raise money. Spending cuts and tax hikes combined have helped lower the deficit. Bailouts and debt defaults have disadvantages but can help a government solve a debt problem.
At the top is Japan, whose national debt has remained above 100% of its GDP for two decades, reaching 255% in 2023.
Who does the US owe trillions to?
Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion.
One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.
With $1.1 trillion in Treasury holdings, Japan is the largest foreign holder of U.S. debt. Japan surpassed China as the top holder in 2019 as China shed over $250 billion, or 30% of its holdings in four years.
Economists at the Penn Wharton Budget Model estimate that financial markets cannot sustain more than twenty additional years of deficits. At that point, they argue, no amount of tax increases or spending cuts would suffice to avert a devastating default.
China owes the United States $1.3 trillion, which is the most debt out of all the countries that are its debtors. Japan was the primary debt holder until 2008, but now comes in second place, with $1.2 trillion. Other countries with outstanding U.S. debt include Russia, India and South Korea.
By dumping US Treasuries, as the theory goes, China can induce waves of sell-offs of the bonds and tumble their value. The problem with this thinking is that it does not account for the size of US Treasuries held internationally, which is US$7.4 trillion. China holds merely 1.3 percent of them.
According to the Bank of Russia's estimate, external debt of the Russian Federation as of March 31, 2024 totaled $304.0 billion, having decreased by $12.8 billion, or by 4.1%, since the end of 2023.
The value of U.S. Treasury securities held by residents of Russia amounted to 33 million U.S. dollars in June 2023, the lowest over the period under consideration. Furthermore, in March 2020, the figure decreased sharply to 3.85 billion U.S. dollars, down from 12.6 billion U.S. dollars one month prior.
China owns 384,000 acres of American agricultural land. That's a 30% increase just since 2019. And on top of that, they own land near an air force base in North Dakota.
Jerome Kerviel, The Most Indebted Person In The World, Owes $6.3 Billion To Former Employer, Societe Generale. In a hyper-competitive world where everyone strives to be the biggest, boldest and most famous, no one covets Jerome Kerviel record-breaking achievement.
What is Canada's debt?
Government debt for fiscal year 2021. | Amount ($billions) | Percent of GDP |
---|---|---|
Federal government: | ||
Gross debt | $1,570 | 62.5% |
Net debt | $910 | 36.3% |
Debt securities liabilities | $1,227 | 48.9% |
A sovereign debt default is the failure of a government to honor some or all of its debts. Common causes of sovereign defaults include economic stagnation, political instability, and financial mismanagement.
Debt as a share of GDP has risen to about the same level as in the United States, while in dollar terms China's total debt ($47.5 trillion) is still markedly below that of the United States (close to $70 trillion). As for non-financial corporate debt, China's 28 percent share is the largest in the world.
Nations like China typically hold US debt in the form of various US Treasury debt, including bonds and other notes. None of these instruments allow debt holders to simply demand repayment…you get the terms and conditions associated with the bond and there's little flexibility to “calling in all of their debts”.
As a result, if the United States and other countries were to stop trading with China, it would disrupt global supply chains and cause economic disruptions in many countries.
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