China is not the biggest investor in U.S. National Debt

August 24, 2018

From an article I read from "the balance", I was quite surprise with the following breakdown. China or Japan, they are not the bigger investors in the U.S. debt of $21 trillion, it is the Social Security Trust Fund, that is the American's retirement money.

 

Two Categories of U.S. debt:

 

Intragovernmental holdings and debt held by the public.

 

Intragovernmental Holdings

 

This is the portion of the federal debt owed to 230 other federal agencies. Intragovernmental holdings total $5.6 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, these agencies buy U.S. Treasurys with it.

 

By owning Treasurys, 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. 

 

The U.S. Treasury published a report as of December 31, 2017. The data is in the Monthly Treasury Statement, Table 6. Schedule D-Investments of Federal Government Accounts in Federal Securities. It's updated quarterly.

As of that date, the total debt was $20.5 trillion and intragovernmental debt was $5.67 trillion.

 

Here is the breakdown:

  • The Social Security Trust Fund and Federal Disability Insurance Trust Fund - $2.820 trillion.

  • Office of Personnel Management Retirement - $884 billion.

  • Military Retirement Fund - $742 billion.

  • Medicare, which includes the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund - $202 billion.

  • All other retirement funds - $415 billion.

  • Cash on hand to fund federal government operations - $606 billion. 

Debt Held by the Public. 

 

The public holds the rest of the national debt of $14.7 trillion. Foreign governments and investors hold almost half of it. 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, and holders of savings bonds and Treasury notes. The remaining 10 percent is owned by businesses, like banks and insurance companies. It's also held by an assortment of trusts, companies, and investors.

 

The U.S. Treasury published the breakdown of holders of the public debt as of December 2017. At that time, the public debt was $14.8 trillion.

  • Foreign - $6.285 trillion. At that time, China owned $1.184 trillion and Japan owned $1.061 trillion. That's more than one-third of foreign holdings.

  • Federal Reserve - $2.463.

  • Mutual funds - $1.788 trillion.

  • State and local government, including their pension funds - $934 billion.

  • Private pension funds - $385 billion.

  • Banks - $633 billion.

  • Insurance companies - $344 billion.

  • U.S. savings bonds - $160 billion.

  • Other holders such as individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors - $1.831 trillion. 

    This debt is not only in Treasury bills, notes, and bonds but also in 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, almost 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.

     

    About Social Security Trust Fund:

    https://www.investopedia.com/terms/s/social-security-trust-fund.asp

     

    Source and credit to: https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124

     

    http://www.weipedia.com/volatility

     

     

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