Thursday, July 7, 2011

14 Trillion and Counting

Who Owns Our Debt?

In prior postings, the UC has discussed the very odd phenomenon where a segment of our population seems to enjoy wallowing in bad news about the economy.  The bad news can include real, greatly exaggerated, or outright fictitious problems.  The UC has tried to present factual arguments to expose the fallacy of some of the greatly exaggerated or fictitious problems.

On the list of greatly exaggerated problems is the very popular refrain that says ‘the Chinese own us’.

The list below is based on US Treasury data published in March.  The Treasury publishes this information quarterly, but the June update has not been posted yet.  The numbers may have changed a bit since March, but the June snapshot of this data will look very similar to the March version. 

The truth is, we mostly owe ourselves.

US entities (highlighted above in gray), which are ultimately made up of US citizens, hold approximately $9.9 Trillion of US Treasury debt. (NOTE: strictly speaking, I should say ‘almost entirely made up of US citizens’ here to allow for those instances where foreign nationals have savings accounts in US banks or own shares in US based mutual funds.) 

If you consider our total public debt currently stands at $14.3 trillion, US entities own approximately 70% of our Federal debt and approximately 30% is owned by foreigners.  The data here says that the Chinese own around 8% of our debt.  I don’t think holding 8% of our debt meets anyone’s definition of owning the US.

Let me be clear, I am by no means happy that we owe the Chinese $1 trillion nor am I comfortable with our current $14.3 trillion debt situation.  I’ve said on numerous occasions in this space, our debt situation is a very serious problem that we should all be worried about.  Hopefully the knuckleheads in Washington can make some real progress in the next few weeks instead of making a bunch of cuts in the 'out years' and claiming victory.

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