Who Is the US Borrowing Money From and to Whom

The US government's borrowing habits are a complex topic, but let's break it down simply. The majority of the US government's debt is held by its own citizens, with over 66% of the debt being owned by American investors.

This is a significant fact, as it shows that the US government is essentially borrowing money from itself. The remaining 34% is held by foreign governments and institutions, including China, Japan, and the UK.

These foreign governments and institutions are major players in the global economy, and their investment in US debt is a significant factor in the US government's ability to finance its activities.

The U.S. borrows from a diverse group of lenders, including foreign governments, U.S. banks and investors, and even itself.

U.S. banks and investors are among the many domestic lenders that hold U.S. national debt.

State and local governments, mutual funds, pension funds, and insurance companies also own U.S. debt.

Investors in savings bonds are another domestic group that lends money to the U.S. government.

The U.S. government also borrows from itself, with various agencies and entities within the government owning debt, known as intragovernmental debt.

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The US government borrows money from a wide range of investors, including foreign governments, individual investors, and institutions.

Foreign governments hold a significant portion of the public debt, with 34% of the US debt held internationally by foreign investors.

Individual investors, including those in foreign countries, buy US Treasury bonds as investments, contributing to the nation's debt.

State and local governments hold a substantial portion of the public debt, with over $1.55 trillion in holdings.

Mutual funds also play a significant role, with over $2.84 trillion in public debt holdings.

Insurance companies, U.S. savings bonds, private pension funds, and other holders, including individuals, government-sponsored enterprises, and corporate businesses, also contribute to the nation's debt.

As of December 2022, foreign and international investors held over $7.4 trillion of the public debt.

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Domestic investors are a significant part of the U.S. national debt, owning 38% of it. This includes regular American citizens, private banks, and other institutions.

Public debt is also held domestically, with domestic private investors owning 15% of the national debt. This is a substantial chunk of the debt.

The U.S. Federal Reserve Bank buys and sells Treasury bonds as part of its work to control the money supply and set interest rates in the U.S. economy, so they hold 13% of the debt. They're like the bank for the federal government.

U.S. state and local governments have also lent money to the federal government, making them owners of 13% of the national debt. It's like a big loan from the states to the feds.

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The United States is currently borrowing money from a variety of sources, including foreign countries and its own citizens.

About four-fifths of the total national debt is public debt, which includes Treasury holdings by foreign countries.

One of the largest foreign holders of public U.S. government debt is Japan, owning $1.13 trillion in debt as of August 2024.

Other major foreign holders of U.S. debt include China, the U.K., the Cayman Islands, and Luxembourg.

The total national debt is a staggering $35.91 trillion as of November 5, 2024.

Here's a breakdown of the top five foreign holders of U.S. debt:

The United States borrows money from several countries, each with its own unique dynamics. China is the largest foreign creditor, holding over $1.1 trillion in US debt.

China's investment in US debt is a significant aspect of the US-China economic relationship. Japan is another major creditor, with over $1 trillion in US debt.

Japan's investment in US debt is also a result of the country's large trade surplus with the US.

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The U.S. government owes a significant amount of debt to itself, known as intragovernmental debt. This debt totaled over $6.89 trillion in January 2023.

Some federal agencies, like the Social Security Trust Fund, take in more revenue than they need and invest it in U.S. Treasurys. This allows them to transfer their excess revenue to the general fund, where it's spent.

The Social Security trusts held $2.71 trillion in Treasurys as of December 2022, making them the largest holders of debt. The Military Retirement Fund was the next largest, with $1.36 trillion in Treasurys.

The Office of Personnel Management Retirement and Medicare also hold significant amounts of debt, along with cash on hand to fund federal government operations.

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The Cayman Islands is a global tax haven, and many investment firms are headquartered there, holding a significant chunk of U.S. Treasuries. As of November 2024, the Cayman Islands holds $419.5 billion of U.S. debt, making up 4.9% of the total.

This is a notable amount, especially when compared to other countries. The Cayman Islands holds more U.S. debt than the U.K., which is the third-largest holder with $645.8 billion.

It's worth noting that the Cayman Islands' position in holding U.S. debt has not changed much over time.

China is a significant player in the U.S. debt market, holding $774.6 billion in Treasury holdings as of November 2024.

This amount puts China in the second spot behind Japan among foreign holders of U.S. debt.

China's economy has experienced rapid growth in recent decades, which is a major factor in its large holdings of U.S. debt.

It's worth noting that China's ownership of U.S. debt is often portrayed as a political issue, but it's actually a logical investment for a country with high foreign currency reserves.

China currently holds 9.1% of U.S. foreign debt, a significant share but not the largest.

The U.S. debt is unsustainable, with annual federal budget deficits projected to average around $2 trillion per year over the next decade.

The federal debt has been a part of the nation since its inception, and while borrowing can be prudent during times of crisis, the current trend of borrowing heavily during periods of economic growth is increasingly unsustainable.

By 2029, the government is on pace to spend more each year on interest than on national defense, according to the Congressional Budget Office.

Interest payments on the federal debt are becoming a significant burden, with the cost of living on borrowed money rising as interest rates increase.

A decade of very low interest rates meant that even as the federal debt swelled, interest payments remained relatively modest, measured as a share of the national economy.

However, the era of low interest rates has ended, and the burden of interest payments is now growing, with interest payments set to consume an amount equal to 3.6 percent of the nation's economic output by 2033.

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