Who Really Owns The US Debt?

it is election time and we hear from the Right about the evils of China….first, they are stealing American jobs…that is an oversimplification….the jobs are given away…not stolen….second, those Chinese devils own massive amounts of American debt….so in essence they are our creditors…….let us look at the debt thing before you go out and start believing the Mitt tale on China….

The recently released Federal Reserve Flow of Funds report for all of 2011 reveals that Federal Reserve purchases of Treasury debt mask reduced demand for U.S. sovereign obligations. Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis. This not only creates the false appearance of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.

It is true that the U.S. government has never been more dependent on financial markets to pay its bills. The net issuance of Treasury securities is now a whopping 8.6% of gross domestic product (GDP) on average per annum—more than double its pre-crisis historical peak. The net issuance of Treasury securities to cover budget deficits has typically been a mere 0.6% to 3.9% of GDP on average for each decade dating back to the 1950s.

But in recent years foreigners and the U.S. private sector have grown less willing to fund the U.S. government. As the nearby chart shows, foreign purchases of U.S. Treasury debt plunged to 1.9% of GDP in 2011 from nearly 6% of GDP in 2009. Similarly, the U.S. private sector—namely banks, mutual funds, corporations and individuals—have reduced their purchases of U.S. government debt to a scant 0.9% of GDP in 2011 from a peak of more than 6% in 2009.

The Fed is in effect subsidizing U.S. government spending and borrowing via expansion of its balance sheet and massive purchases of Treasury bonds. This keeps Treasury interest rates abnormally low, camouflaging the true size of the budget deficit. Similarly, the Fed is providing preferential credit to the U.S. government and covering a rapidly widening gap between Treasury’s need to borrow and a more limited willingness among market participants to supply Treasury with credit.

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Looks like all the chest thumping in the GOP ranks, at least at this election time, may be just another blowjob handed to the voter……please spend a little time checking the issues that will decide this election…please become an informed voter……..please help save this country from itself!

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7 thoughts on “Who Really Owns The US Debt?

  1. it is election time and we hear from the Right about the evils of China….first, they are stealing American jobs

    The political system is evil. And they are stealing American jobs.

    that is an oversimplification…

    Not really. You must consider the unfair trade practices.

    …those Chinese devils own massive amounts of American debt….so in essence they are our creditors…….let us look at the debt thing before you go out and start believing the Mitt tale on China….

    It’s only because of the United States that China itself is even partially solvent. They’re not forced to buy up American debt; they do so gleefully. Whether anyone wants to admit it or not, China needs us a helluva lot more than we need them. It’s American business that’s keeping afloat.

    Looks like all the chest thumping in the GOP ranks, at least at this election time, may be just another blowjob handed to the voter

    The only reason we’re in so much debt is, in large part, because of Democrats and their entitlement handouts. Do you have any idea the amount of unfunded liabilities the government has? Almost all of which contrived in the mind of a Leftist. This is just reality. Obama’s debt in his first term is higher than President Bush’s entire presidency —- wars included!!!!

    These are just facts.

    • Terrance, if you want it to be it is oversimplification…but the but simple fact is the system is broken and it took both parties playing pretty to get us there.

      And the rest they are unfunded is because of the damn silly piece of paper from Grover. The fact is that all this stem from Reagan….and to pretend that it is all is the fault of Obama is just propaganda for the election….

      So you agree with Mitt…we stood have let the auto industry go under….we should have let Wall Street fail……and we should do nothing to get the country back on track but cut taxes on everyone ….?

      • Lobotero,

        I don’t deny the system is broken. I don’t deny that Republicans are also to blame. But most of the blame, in my view, must rest with those who push programs that the country simply cannot afford. Nobody could run their business the way the government runs theirs, else they’d be in the poor house.

        It’s been proven that raising taxes to their most extreme amount would do nothing to reduce the deficit if you’re not also going to talk about reducing spending. Secondly, your statement totally ignores liberty and the right to property. People shouldn’t have to labor only to have their fruit turned over to government to blow it.

        The auto industry bailout was initiated by President Bush, as was the Wall St. bailout. Obama continued them, but they only account for a small portion of Obama’s debt. And what has he pushed through that has helped get this country back on track? He wasted so much political capital on that healthcare boondoggle that will be struck down soon. And what else? The American Reinvestment Act? Cash For Clunkers? Boondoggles, all of ‘em. They’ve done very little to improve the situation.

      • Again Terrance, I point to paid academics…..we can find lots of info showing that the Dems have an adequate plan…..places that you would not look….and then the GOP would offer a contrary set of facts from places that I would not necessarily look….but my point is that the truth lies between the two extremes…..but few people are willing to find the actual facts…..

        I do not believe I ignored anything……for I believe that citizens have a political obligation……and i do not believe the so-called stats that say cutting taxes will speed us to recovery….it has not yet and we are paying lower taxes than anytime in the past….

        the whole thing about a smaller government is not possible…well it is but we would have to go back to the Articles of Confederation and if we keep pretending that states are the best place for the rights to be preserved….I believe is just wrong.

    • Sorry Terrance but I had to meet with a guy and did not give my thoughts on China….yes China games the trade….but nothing will be done that is substantial….no matter what Mitt promises….WALMart et al like the balance the way it is and their political clout is much greater than the people that China’s practices are harming…..trade and foreign policy are tied closely together and for that reason any trade changes will be small……

      Let us not forget, as much as repubs would like, the TARP was a Bush policy not Obama….was it expanded yes but at that time ANY president would have done what the Obama admin did…..and let us not forget the unfunded drug program in the trillions….I am not blaming it all on the GOP but that both sides are as guilty as the other….sorry to say Mitt is a big government repub….no matter what he wants us to believe….he wants to be pres more than he wants to help the country…..

      • Lobotero,

        I think all American companies – including Wal-Mart – have an interest in ensuring that consumers have more money with which to purchase goods and services. China’s unfair trade practices are costing enough jobs to have a serious economic impact. Some reports suggest that Michigan and Ohio alone have lost tens of thousands. This all slows economic growth. Mitt Romney has vowed to do something about it.

        I do agree, however, that trade and foreign policy are connected. But, after all, this is the United States of America. We are the most powerful nation in the world by a longshot. Not only that, but we hold China’s economy in the palm of our hand. There is absolutely no reason we should be kowtowing to them.

        TARP was a Bush policy. Indeed. But, again, that’s only a small portion of Obama’s debt. The rest mostly came from him and his Leftist pals. Look at how much debt the healthcare law if and when it goes into full action will create!!! Over $2 trillion!!!!

        Mitt Romney, for all his talk, is a business man. He knows how to fix things.

        Look, you can either try someone new and see if, perhaps, they can bring about a change, however unlikely. Or, you can stick with the status quo, which you know doesn’t work. Insanity is doing the same thing over and over again and expecting a different outcome.

        People who vote for Obama are insane.

      • Terrance, I will not call Mitt a liar, only that things change once he sworn in….there is more to trade policies than the rhetoric of a campaign…..yep Mitt is a handy man but I do not think anything he could do will fix this economy…..I agree with you about change…but either of the two parties are not change just mild tweaking of the same ideas…..I do not know if i would call people who vote for Obama insane…but rather misinformed and part of a cult of personality….but then the Repubs are too…..

        You once asked what i was…sometimes a socialist and then later maybe a liberal….well i wrote a post for tomorrow about that and where my confusing stances came from…..I hope it helps….

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