Often times, we hear that the US is indebted so much to foreign nations, that we’re beholding to said nations. Typically, recently, the nation which is most often named as the US creditor is China.
Well, it is true, China does own some US debt. Indeed, they own the most US debt than any other nation in the world …. for now.
WASHINGTON (AP) — Foreign holdings of U.S. debt rose in March as China ramped up its purchases and displaced Japan as the leading owner of U.S. Treasury securities.
The Treasury Department says overseas ownership of U.S. debt rose 2.1 percent in March to $6.18 trillion. That is below January’s record of $6.22 trillion.
China added $37.3 billion of Treasury debt, bringing its stockpile to $1.26 trillion. That’s ahead of Japan, which added just $2.5 billion, lifting its total to $1.23 trillion.
In February, Japan became the leading owner of U.S. debt for the first time since August 2008. China overtook Japan that year as the Great Recession, higher government spending and a steep drop in tax revenue pushed up U.S. government borrowing.
The U.S. deficit topped $1 trillion from 2009 through 2012.
Foreign governments, primarily through their central banks, account for two-thirds of the foreign holdings. In March, the total held by foreign governments rose 1 percent from the previous month to $4.13 trillion.
A group of oil exporting nations, which includes Saudi Arabia, Iraq, Algeria, Venezuela and Nigeria, added $500 million to bring their holdings to $297.3 billion, the third largest. Caribbean banking centers, a group that includes the Bahamas and the Cayman Islands, added $10.9 billion, lifting their holdings to $293 billion, the fourth largest.
Demand for U.S. Treasurys, widely considered one of the world’s safest investments, is likely to remain strong. While U.S. interest rates are still low, they may climb later this year if the Federal Reserve begins to raise interest rates.
Now, don’t get me wrong. I’m not in favor of selling our debt to foreign governments. I firmly believe there should be a law against it. It should never be allowed for even the impression that our nation is subject to the command of another nation, especially because of our debts owed. But, we should interject some reality, when we can, to the conversation. The point is, we should, by law, prohibit ever being able to become as Greece is. But, the reality is, we’re nowhere close to that situation.
It is American institutions and the American people who are largest US debt holders. ….. And, if we are to drill down as to who or what among American is the largest US debt holder, it would be Social Security.
One of my biggest concerns is the interest paid towards our debt. Currently, we enjoy historically low interest rates. As alluded to, this is related to the interest paid towards our debt. But, even still, it is our 5th largest expenditure, today. When interest rates go up, and they are certain to do so at some point, it will easily be the 4th largest expenditure, and moving on upward to eventually surpass even our defense budget. Left unchecked, it will be our largest expenditure, after all the baby boomers die off …… assuming the millennials will one day learn how to be productive people and not sponges.
IMHO, we should move to cease the endless money games with Social Security. The fact of the matter is, it is a government agency. We’re long past the pretense that it’s the individual citizens money. It’s an entitlement program. It’s a tax. It’s run and ruled by the federal government. If we simply quit pretending it’s something separate, and officially absorb it into the US federal government, then our elected officials would have to quit pretending. You can’t borrow money from yourself, which is exactly what our government does in regards to Social Security, because we’re all intent on pretending it’s something it isn’t. Yes, it is suppose to be something different, it just isn’t. And, it allows for our elected officials to play pretend.
At some point, if we don’t stop pretending, SS will cease being the cash cow that it is today. (2030 or so). At that point, SS won’t be able to pay the benefits it promises to retirees without the federal government repaying the money it’s “borrowed” from SS. Of course, the feds won’t have the money. So, they’ll either renege on the benefits promised, or, borrow more money from other entities ……. like China …… or Russia ….. or OPEC ….
Then, we’ll have a real concern about whether or not we are beholding to another nation.