Monday, July 25, 2011

The TRUTH About Who Really Owns All Of America's Debt

Who is going to be hurt if the United States doesn't raise the debt ceiling and has to default on paying back those loans?

One answer is clear -- all Americans are going to be hurt because the debt rating of the country will be lowered, and this will make it much harder for the nation to borrow (no matter how critical that need to borrow is). It will be harder to get the money and it will cost a lot more to pay it back.

Conservative folklore is that foreigners hold most of America's debt -- particularly China and Japan. This message has become so pervasive through conservative messaging that people think China now controls America. Not true!

China only holds about 8% of the American debt, and Japan holds about 6.4%. In fact the total part of the American debt held by foreigners, including the United Kingdom, Hong Kong, Brazil Taiwan, Caribbean bankers, the Saudis and other the oil-exporting countries, is about 31.5 percent, or $4.5 trillion. This is enough to cause some worldwide economic problems if we default on that debt, but it is nowhere near the majority of the American debt.

In fact, the majority of the debt-holders are the American people themselves, both by individuals and by government entities. The people that would be hurt the most by a government default on the debt are the Americans themselves, because that is who holds most of the debt -- about 68.5 percent, or $9.8 trillion.

The Social Security Trust Fund holds 19 percent ($2.67 trillion) of the debt. The Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds invest exclusively in special issue bonds that are only available to the Social Security trust fund. These are not publicly traded securities, but they still constitute a huge amount of debt. Congress has been using the Social Security Trust Fund as their piggy bank for deficit spending for years.

According to Business Insider, here is the list of U.S. debt holders:
  • Hong Kong: $121.9 billion (0.9 percent)
  • Caribbean banking centers: $148.3 (1 percent)
  • Taiwan: $153.4 billion (1.1 percent)
  • Brazil: $211.4 billion (1.5 percent)
  • Oil exporting countries: $229.8 billion (1.6 percent)
  • Mutual funds: $300.5 billion (2 percent)
  • Commercial banks: $301.8 billion (2.1 percent)
  • State, local and federal retirement funds: $320.9 billion (2.2 percent)
  • Money market mutual funds: $337.7 billion (2.4 percent)
  • United Kingdom: $346.5 billion (2.4 percent)
  • Private pension funds: $504.7 billion (3.5 percent)
  • State and local governments: $506.1 billion (3.5 percent)
  • Japan: $912.4 billion (6.4 percent)
  • U.S. households: $959.4 billion (6.6 percent)
  • China: $1.16 trillion (8 percent)
  • The U.S. Treasury: $1.63 trillion (11.3 percent)
  • Social Security trust fund: $2.67 trillion (19 percent)

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