Foreign Financing of US Government Debt

Economy In Crisis ^ | 3/4/06 | U.S Federal Reserve

[hawkiye]

Total foreign ownership of US Federal deficit currently stands at 45% as of end of first half of 2005 COUNTRY OWNERSHIP OF U.S. GOVERNMENT DEBT

Japan $687.3Billion

China $252.2 Billion

United Kingdom $182.4 Billion

Caribbean Banking Centers $102.9 Billion

Taiwan $71.8 Billion

Germany $63.5 Billion

Korea $61.7 Billion

OPEC $54.6 Billion

Hong Kong $48.1 Billion

Canada $47.8 Billion

Grand Total $2,065.5 Billion

Conclusions:

* Foreign sources financed 54% of US Federal deficit in 2002, 73% in 2003, and 99% in 2004

* Total foreign ownership of US Federal deficit currently stands at 45% as of end of 1st half of 2005

* The US Government currently owes Japan $687 Billion, China $252 Billion, and Korea $62 Billion - together $1.0 Trillion

* The US Government currently owes $2.0 Trillion to foreign lenders

[Echo Talon]

[Echo Talon]

Here a little bigger

[SampleMan]

Is owing money to potential enemies a good thing? Maybe.

If China attacks Taiwan and in the process attacks us, what happens to that debt?

How would you feel if the we owned $300 Billion of Chinese debt? Would the desire to see that money again effect our foreign policy?

As an act of war, canceling our debt to China would be a natural response with little implication for downgrading our securities.

[hubbubhubbub]

Read the book, "Empire of Debt". Very good.

[hubbubhubbub]

An extremely silly hypothesis.

[SampleMan]

An extremely silly hypothesis.

Really? Explain why the Chinese don't have to be worried about collecting on that debt, if they choose to attack us?

[Leisler]

"Right! Wink wink, nod nod. Eh? Know what I mean?"

[Leisler]

"I have long believed that when we buy goods from all over the world, trading them for dollars, those dollars enable people in countries all over the world to improve their standard of living. They then can produce even more goods and can consume some of them, not exporting everything to American consumers."

Men have always wanted to trade with each other. In this case the fairly stable and reliable American dollar provides a recognized financial lubricant to the vast majority of people outside their thieving, slippery, manipulated by leftist and greed-head rulers. In a way we have provided a smooth highway for goods and services to move about, just as the US Navy provides safe sea lanes. Pax Americana. It is good for us, the world and the right and moral thing to do.

[Leisler]

"It's breaking news in that we're reaching levels never before seen in the history of the nation."

Bull. The Republic of Venice, the Dutch Republic, England many times, all have had debt to wealth ratios many times higher. This was in more primitive times too where accounting, trust were all lower in quality and loans made out to more dubious rulers and countries.

[R.W.Ratikal]

The best way to make the average American's eyes roll upward is to begin talking about financial matters, especially the national debt.

An old political put-off is, "It's no matter what our national debt is, we owe it to ourselves." Wrong. We owe it to whoever holds the treasury bonds it represents and to whoever is entitled to the interest on that debt.

The truth is that other nations want a bigger and bigger share of the U.S. debt. The U. S. is the most creditworthy nation, some would say almost the only creditworthy, nation on Earth. Where better to invest money?

The U.S. is the soundest debtor in the world. The U.S. will not default; will not nationalize; and keeps creating wealth at a more consistent extent than any other country.

If a nation owed me money I would want it to be America.

[trickyricky]

"Right! Wink wink, nod nod. Eh? Know what I mean?"

Some people know what time it is.
Some people don't

[Leisler]

"Gumba." A soft oooh went through the crowd. "Umba umba umba gumba," the Sage added suggestively.

[snowsislander]

If your concern is that foreigners are wisely investing dollars they earn from free trade, that's an entirely different concern. We would need some data on foreign ownership of real estate and foreign investment in US corporations to get the real magnitude of the issue on the table.

Foreign ownership of U.S. assets was around $12 trillion as of the latest annual IIP report of June 30, 2005:

Foreign-owned assets in the United States increased $1,739.3 billion to $11,537.0 billion with foreign direct investment in the United States valued at current cost, and they increased $1,846.0 billion to $12,515.0 billion with foreign direct investment in the United States valued at market value.

Foreign official assets in the United States increased $414.9 billion to $1,982.0 billion. The increase was largely attributable to net purchases of U.S. Treasury securities.

Foreign holdings of U.S. securities other than U.S. Treasury securities, excluding official holdings, increased $579.7 billion to $3,987.8 billion. Foreign holdings of U.S. stocks increased as a result of large price appreciation and modest net foreign purchases. Foreign holdings of U.S. bonds increased mostly as a result of net foreign purchases.

Foreign holdings of U.S. Treasury securities, excluding official holdings, increased $96.5 billion to $639.7 billion, mostly as a result of sizable net foreign purchases.

U.S. liabilities to private foreigners and international financial institutions reported by U.S. banks increased $383.5 billion, to $2,304.6 billion, mostly as a result of financial inflows of $322.6 billion.

Liabilities to unaffiliated foreigners reported by U.S. nonbanking concerns increased $126.9 billion to $581.3 billion, mostly as a result of financial inflows of $124.4 billion.

Foreign direct investment in the United States valued at current cost increased $123.0 billion to $1,708.9 billion, mostly as a result of net financial inflows. At market value, foreign direct investment in the United States increased $229.7 billion to $2,686.9 billion, as a result of net financial inflows and price appreciation of owners’ equity resulting from an increase in U.S. stock prices.

U.S. currency held by foreigners increased $14.8 billion to $332.7 billion. (Excerpt from 2005 IIP News Release from the BEA)

To give an idea of the scale of $12 trillion, that's just a bit under one year's worth of GDP in these United States.

There's an interesting graph in this BEA document as to the rising extent of foreign ownership of U.S. assets.