Monday, September 8, 2014

Yet Another United States Debt Record

Updated January 2015

While the recent announcement out of the Treasury Department that the budget deficit is at the lowest level since 2008 is good news, Washington should not get too far ahead of itself when it comes to the nation's overall financial health.  The United States has reached yet another debt landmark.  For the first time, at the end of June 2014, foreign countries owned more than $6 trillion worth of Treasuries, in fact, they owned $6.058 trillion worth.  This is up from $5.655 trillion on October 31, 2013, an increase of 7.1 percent on a year-over-year basis as shown here:

Here is a graph showing how foreign ownership of American debt has increased since 2000:

Since 2000, the amount of American federal debt owned by foreign countries has increased by 567 percent.

Here are the top three foreign owners of U.S. Treasuries:

China - $1.257 trillion
Japan - $1.222 trillion
Belgium - $348 billion

If we go back to June 2007, we find that Japan was the largest holder of U.S. Treasuries at $622.9 billion followed by China at $477.3 billion and the Oil Exporters (i.e. OPEC nations) at $133.2 billion.

Here's a graph that shows how China's Treasury ownership rose rapidly during the first decade of the new millennium and how it has levelled off since 2010:

According to SIFMA, at the end of October 2014 there were $12.349 trillion worth of outstanding Treasury Bills, Notes, Bonds and TIPS.  This means that at the end of June 2014, foreign countries owned 49.1 percent of all outstanding Treasuries.  

If you add in the $2.462 trillion worth of Treasury securities owned by the Federal Reserve on October 29, 2014, three parties, China, Japan and the Federal Reserve, own $4.941 trillion or 40.0 percent of all outstanding United States federal marketable debt.

By way of comparison, here is a pie chart from the Bank of Japan showing what percentage of Japan's government bonds are owned by foreign parties:

At only 8 percent, the world's second-most indebted nation is in far more control of their economic destiny than the United States where an increasingly uncomfortable portion of the debt is owned by foreign nations.

The fact that so much of Washington's debt is owned by foreign nations, particularly those with a human rights problem (i.e. China), will have an impact on how America reacts to obvious abuses of power.  In the case of Russia, there was no need to tread softly, however, in the case of China, the United States appears to be far more reluctant to take meaningful actions to create a more democratic society.

1 comment:

  1. that's largely a function of our ongoing trade deficit, wherein American companies pay for what we import with Treasury script...if we curtail importing, foreign ownership of our script will stop growing...