Chart: Who Owns the U.S. Debt?

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SimpleGift
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Chart: Who Owns the U.S. Debt?

Post by SimpleGift » Thu Aug 25, 2011 7:57 am

Just to complement the earlier chart on US equity ownership, this chart looks at the ownership of the US Treasury debt. The data comes from a June, 2011 Treasury Bulletin, but the chart itself is from a recent article in Congressional Quarterly.

Personally, what surprises me most about this chart is that, despite all the press reports on the size of their purchases, the Federal Reserve still only holds 15% of the publicly-owned U.S. debt — and China only holds 12% of it. Much less than I would have expected. (This is not to invite political commentary, please!)


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Post by Sidney » Thu Aug 25, 2011 8:23 am

Interesting chart. Thanks for posting.
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Post by Ice-9 » Thu Aug 25, 2011 8:37 am

Thank you for posting this. What surprises me the most is how close Japan is behind China. I had the impression China was in the lead by a much wider margin. Of course the drop-off to #3, United Kingdom, is much greater.

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Post by jeffyscott » Thu Aug 25, 2011 8:38 am

For the foreign ownership, I assume that combines governments and private citizens/entities. I always wonder what that breakdown is, do many Japanese, Chinese, UK citizens or other private entities hold US treasury securities?

It is also interesting that about 1/3 of the debt is internal, eg. treasury debt owed to SS. Then the part held by the Federal Reserve is sort of almost internal also. Only a bit under 60% is truly privately held.
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Post by SimpleGift » Thu Aug 25, 2011 8:57 am

jeffyscott wrote:For the foreign ownership, I assume that combines governments and private citizens/entities. I always wonder what that breakdown is, do many Japanese, Chinese, UK citizens or other private entities hold US treasury securities?
Jeffy, I believe you're right. I've never seen any Treasury data that separates foreign government ownership from foreign investor ownership. And just to complicate matters a bit, the Treasury data on foreign ownership also includes this:
Congressional Quarterly wrote:Countries listed under "foreign investors" indicate where Treasury securities are held. That does not mean that citizens, governments or central banks of that country own the securities. They may actually be owned by citizens or institutions from third countries that used the listed country for the purchase transaction.
Cordially, Todd

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Post by etarini » Thu Aug 25, 2011 9:09 am

Interesting that the Social Security Trust Fund holds more than the Federal Reserve and China combined.

The Social Security Trust Fund was accumulated with a tax on wages only, with a built-in inflation-adjusted tax exemption for the highest portion of high-earners' income (this year, no tax on amounts above $106,800). It was specifically designed to capture excess revenues beyond the annual requirements of the program, which it has been doing since 1983.

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Post by sperry8 » Thu Aug 25, 2011 9:30 am

Great post! Thank you. I find it interesting... once again the mainstream press puts their own spin on everything. I like to see how much is held by "all other" foreign too. A nice amount, but held by "all".
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Post by SimpleGift » Thu Aug 25, 2011 10:56 am

sperry8 wrote:I like to see how much is held by "all other" foreign too. A nice amount, but held by "all".
Sperry, this Treasury Report will give you the top 35 countries that hold US Treasury debt — an expansion on the 15 countries in the chart above. But the Treasury Dept. limits their reporting to 35 countries, I believe, and still leaves a substantial "All Other" category. The complete list would include nearly every country on the planet, I expect.
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Post by sschullo » Thu Aug 25, 2011 11:31 am

Interesting, 2/3 of the foreign countries listed are developing countries.
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Post by Indices » Thu Aug 25, 2011 11:48 am

But the media told me China owns "most" of our debt, and is controlling our economy?!?!?

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Post by Sheepdog » Thu Aug 25, 2011 12:08 pm

China only holds 12% of it which is much less than I expected. It's not that that is small, but less than I assumed. At least the "public" owns most of the debt which is us, including our personal treasury notes, bonds and mutual funds.

Very interesting chart. Thanks for posting it. I have forwarded it to several friends as well.
Jim
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Post by GammaPoint » Thu Aug 25, 2011 12:16 pm

Yes, that is interesting. If I had to choose a number out of thin air as to how much China had I would have guessed something higher based on what people are always saying.

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Post by NAVigator » Thu Aug 25, 2011 12:33 pm

These two charts are incredible; Who own the US equity market and this post, Who owns the Federal debt. As others have commented, this data is in stark contrast with the "information" we are given by the media. Thank you so much for posting this.

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Post by RobG » Thu Aug 25, 2011 1:05 pm

sschullo wrote:Interesting, 2/3 of the foreign countries listed are developing countries.
Yeah, and most of our foreign oil comes from Canada, not the middle east.

However, I wonder how much of our current debt is bought by China. If they stopped buying it I wonder how much of an impact it would have on rates and our ability to borrow.

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Post by SimpleGift » Thu Aug 25, 2011 2:12 pm

Thanks, all, for your kind words on the charts. When you're addicted to the "visual display of information" — guilty here — you're never quite sure that other folks are appreciating the charts, maps or diagrams in the same way.

Glad to know there are a few Bogleheads with refined visual tastes! :)
Last edited by SimpleGift on Thu Aug 25, 2011 11:50 pm, edited 1 time in total.
Cordially, Todd

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Post by charmeleon » Thu Aug 25, 2011 2:22 pm

so this is saying the ss trust fund is buying debt from the same place they need to repay so its basically 2x that

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Post by jeffyscott » Thu Aug 25, 2011 2:29 pm

charmeleon wrote:so this is saying the ss trust fund is buying debt from the same place they need to repay so its basically 2x that
:?:

It is saying treasury owes SS $2.6 trillion and that $2.6 trillion is part of the ~$14 trillion national debt.
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Post by Steelersfan » Thu Aug 25, 2011 4:04 pm

charmeleon wrote:so this is saying the ss trust fund is buying debt from the same place they need to repay so its basically 2x that
Social Security has run a surplus for many years and needs a place to invest those accumulated funds until such time as they might need them. They invest them in the safest possible instrument, U.S. Treasuries

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Post by dyangu » Thu Aug 25, 2011 6:40 pm

I'm surprised so many bogleheads did not know this considering this is widely available information.

I look at this chart and see a glass half empty. Less than 25% of US debt is owned by private US investors, and I would guess less than 50% by individuals/entities who are actually interested in the properties of bonds we care about, such as safe yield, low correlation to equity, etc. The Fed obviously doesn't price bonds like a regular investor. The Chinese government (and to some extent, Brazil and other developing countries) mostly buy US bonds to devalue their currency. I'm pretty sure SS and other government funds automatically allocate 100% bonds.

So when bogleheads say that bonds are efficiently priced, I'm wary. Most of the bond market are "voting" on the market price without a care for whether or not it's a good price.

Also, to answer someone's question, individual investors in developing countries rarely own US bonds because their local bonds yield much higher. Individuals in countries like Japan and UK do allocate some part of their portfolio to US bonds.

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Post by sunspotzsz » Thu Aug 25, 2011 6:58 pm

Media did a great job in misrepresenting the facts.

I thought China had most of the debt.

Still Chinese have a amount of them, especially if you add China, Hong Kong and Taiwan together.

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Post by fishndoc » Thu Aug 25, 2011 7:02 pm

RobG wrote: I wonder how much of our current debt is bought by China. If they stopped buying it I wonder how much of an impact it would have on rates and our ability to borrow.
That's far more important than how much we already owe the Chinese (or any other entity): How dependent are we on their continued willingness to finance our deficit? What would happen if they decided not to show up for a Treasury auction???
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Post by Deacon Mike » Thu Aug 25, 2011 7:15 pm

Steelersfan wrote:
charmeleon wrote:so this is saying the ss trust fund is buying debt from the same place they need to repay so its basically 2x that
Social Security has run a surplus for many years and needs a place to invest those accumulated funds until such time as they might need them. They invest them in the safest possible instrument, U.S. Treasuries
required by law to do so

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Post by Karamatsu » Thu Aug 25, 2011 7:30 pm

Fascinating chart. For comparison, this <a href="http://www.mof.go.jp/jgbs/publication/n ... df">PDF</a> document is a summary of Japanese government bonds issued by the Ministry of Finance last month. On page 7 there is a pie chart showing the composition of ownership of JGBs. The breakdown is<table>
<tr><td>Private Banks</td><td>44.8%</td></tr>
<tr><td>Insurance Companies</td><td>20.2%</td></tr>
<tr><td>National Pension Plans</td><td>14.0%</td></tr>
<tr><td>Bank of Japan</td><td>8.3%</td></tr>
<tr><td>Foreign</td><td>5.0%</td></tr>
<tr><td>Households</td><td>4.3%</td></tr>
<tr><td>Other</td><td>3.1%</td></tr>
<tr><td>Government Pension Plan</td><td>0.3%</td></tr>
</table>
Note there are two national pension plans shown, but I combined them. They don't provide a breakdown of which countries hold JGBs but Japan has been pushing trading partners to buy them for quite some time.

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Post by 1210sda » Thu Aug 25, 2011 8:59 pm

This is really terrific. I feel so smart and well informed now that I think I'll go and start a squabble with my know-it-all neighbor. Is he ever in for a licking.

Thanks Simplegift.

1210

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Post by SimpleGift » Thu Aug 25, 2011 9:00 pm

fishndoc wrote:
RobG wrote: I wonder how much of our current debt is bought by China. If they stopped buying it I wonder how much of an impact it would have on rates and our ability to borrow.
That's far more important than how much we already owe the Chinese (or any other entity): How dependent are we on their continued willingness to finance our deficit? What would happen if they decided not to show up for a Treasury auction???
Actually, the percentage of new Treasury issues bought by China and other foreign buyers has already dramatically decreased in the last few years — with the Federal Reserve and other domestic purchasers taking up the slack. Figuring out just who is driving the market for new Treasury issues is complex, but if you're interested, the current supply/demand picture is well-explained in this research article just published today:

Who Is Buying U.S. Treasuries?
Cordially, Todd

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Post by Indices » Thu Aug 25, 2011 10:26 pm

sunspotzsz wrote:Media did a great job in misrepresenting the facts.

I thought China had most of the debt.

Still Chinese have a amount of them, especially if you add China, Hong Kong and Taiwan together.
Taiwan is not part of China.

I think the media and much of the American public has convinced itself that China is about to destroy the US and become the wealthiest nation in the world. Anyone who has spent time there will know that China is a poor country with too many people and a lot of problems. And as Eastern Europe and the Middle East have shown us, countries that are dictatorships have a nasty habit of going kaboom. No matter how much money or missiles they have.

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Post by fishndoc » Fri Aug 26, 2011 8:07 am

Simplegift wrote: Actually, the percentage of new Treasury issues bought by China and other foreign buyers has already dramatically decreased in the last few years — with the Federal Reserve and other domestic purchasers taking up the slack. Figuring out just who is driving the market for new Treasury issues is complex, but if you're interested, the current supply/demand picture is well-explained in this research article just published today:

Who Is Buying U.S. Treasuries?
Thanks for the link - clarifies a lot of the statistics.
A couple of interesting points from the article:
Even though foreigners have almost doubled their buying of Treasuries in the last few years, they have not kept pace with growing Treasury issuance over the same period. As a result, foreign purchases now account for less than half of what has been issued since mid-2008
and, regarding the Fed's category of "Domestic Purchasers":
To be clear, the “household sector” is misnamed. It is the residual account with a fancy name. So given this, what does it mean when the residual account soars? We would suggest that it means there is a measurement problem. In this case, the Federal Reserve cannot “find” the buyers of Treasuries thanks to the exploding deficit. They correctly assume that the buyer exists (otherwise the market would not exist) and therefore place the “missing” buying in the residual account. Since this account is called the “household sector”, we all assume that “mom and pop” bought this sum.
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Post by jeffyscott » Fri Aug 26, 2011 8:14 am

Indices wrote:Taiwan is not part of China.
China disagrees. :?
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Post by jack1719 » Sat Aug 27, 2011 12:23 am

Steelersfan wrote:
charmeleon wrote:so this is saying the ss trust fund is buying debt from the same place they need to repay so its basically 2x that
Social Security has run a surplus for many years and needs a place to invest those accumulated funds until such time as they might need them. They invest them in the safest possible instrument, U.S. Treasuries
But SS is a long term plan,thats like telling a 20 year old dont invest in equities ever,just treasuries....

SS security would have done way way better over the last 30,40,50 years etc..if it had alot of more equity investment..look at pension funds over their history,how very strong returns have been..

what has long term return of SS been over its history?

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Post by jeffyscott » Sat Aug 27, 2011 6:00 am

jack1719 wrote:But SS is a long term plan,thats like telling a 20 year old dont invest in equities ever,just treasuries....
No SS is not like a 20 year old, also the federal government is not a business, nor a family.

The government as a whole has had no surplus money to invest in the stock market, spending has been greater than taxes collected. Do you want the US government to issue treasuries ("print money") and then buy stocks with that money?

What would the net effect of that be? A portion or corporate profits would go to fund government programs, rather than going to some other private shareholders? Sounds kind of like a tax, doesn't it?

The SS trust fund is an accounting mechanism to ensure that the taxes that workers pay to fund SS, eventually do fund SS and do not, instead, get permanently diverted to funding other government spending.
press on, regardless - John C. Bogle

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Post by jack1719 » Sat Aug 27, 2011 12:05 pm

jeffyscott wrote:
jack1719 wrote:But SS is a long term plan,thats like telling a 20 year old dont invest in equities ever,just treasuries....
No SS is not like a 20 year old, also the federal government is not a business, nor a family.

The government as a whole has had no surplus money to invest in the stock market, spending has been greater than taxes collected. Do you want the US government to issue treasuries ("print money") and then buy stocks with that money?

What would the net effect of that be? A portion or corporate profits would go to fund government programs, rather than going to some other private shareholders? Sounds kind of like a tax, doesn't it?
------------------------------------------------------------------------------------
The SS trust fund is an accounting mechanism to ensure that the taxes that workers pay to fund SS, eventually do fund SS and do not, instead, get permanently diverted to funding other government spending.

the Trust fund has been raided and basically left with an IOU by the Goverment...

so many things goverment can do,that would be not be legal for states..Goverment can run up as much debt as possible,states must have balanced budget,if a state pension fund had been raided like uncle sam did with SS,you would have people in jail..

Thats why I was reading something like 1/3 of states have a surplus in 2011 now on their books..and uncle Sam keeps going deeper and deeper into the red..

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Post by jeffyscott » Sat Aug 27, 2011 1:06 pm

jack1719 wrote:... left with an IOU by the Goverment...
IOU aka a bond, much like any other bond.

...something like 1/3 of states have a surplus in 2011 now on their books.
The 14 million (or is it really more like 25 million?) unemployed Americans are thrilled to know this, I'm sure.
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Post by Harold » Sat Aug 27, 2011 1:48 pm

jack1719 wrote:
Steelersfan wrote:
charmeleon wrote:so this is saying the ss trust fund is buying debt from the same place they need to repay so its basically 2x that
Social Security has run a surplus for many years and needs a place to invest those accumulated funds until such time as they might need them. They invest them in the safest possible instrument, U.S. Treasuries
But SS is a long term plan,thats like telling a 20 year old dont invest in equities ever,just treasuries....

SS security would have done way way better over the last 30,40,50 years etc..if it had alot of more equity investment..look at pension funds over their history,how very strong returns have been..

what has long term return of SS been over its history?
If the 20-year-old is looking for an absolutely guaranteed amount -- he'd better be investing in treasuries or something similar.

Returns from risky investments aren't free, even if they pay off. And if they do pay off for programs like Social Security or a corporate pension plan, the person/generation receiving the benefits took the risk, but isn't getting the return.

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