“This chart is a year old but shows a lot of foreign countries holding big bucks in US debt:”
About half the debt is still held by foreign and domestic investors. The other half is owed to the government itself.
But if those foreigners decide they no longer want US debt at 1% interest rates, the gov’t doesn’t need to raise rates. They have the out of simply selling to themselves at 1% interest.
It’s a big change in the last 10 years. Every government in the world has quietly embraced Modern Monetary Theory without any public discussion on what that means.
It means they will continue to pretend they are all solvent (or at least able to pay their debts), otherwise the whole house of cards comes down worldwide. It is a classic Mexican standoff.