The U.S. Debt Tops $16 trillion – Who’s Our Biggest Creditor?

In September, the national debt topped $16 trillion. And question is, just exactly to whom do we owe that enormous sum?

The answer will probably surprise you.

Most of us tend to think that our burgeoning debt is being funded by China, thus placing us in a dangerous position when it comes to our foreign policy relations with that nation.

However, as Greg Wilson, reported in an article at (9/4/2012), “Fully two-thirds of the national debt is owed to the U.S. government, American investors and future retirees, through the Social Security Trust Fund and pension plans for civil service workers and military personnel. China, it turns out, holds less than 8 percent of the money our government has borrowed over the years.”

The Social Security Trust Fund and federal pension systems hold a big chunk of the national debt, with just under $5 trillion owed to the Social Security Trust Fund and federal pension systems.

Slightly more than $11 trillion is owed to foreign and domestic investors and the Federal Reserve, which over the past four years has been buying up U.S. Treasury securities in order to keep interest rates low through what’s referred to as “quantitative easing.”

A little less than four years ago, on January 28, 2009, the Federal Reserve owned $302 billion in Treasury securities. As CNSNews reported, “On April 25, 2012, the latest date reported, the Fed owned five and a half time that much in U.S. Treasury securities–$1.668 trillion. That is an increase from January 2009 of $1.366 trillion—or 452 percent.”

This makes the Federal Reserve, not China, the largest owner of U.S. government debt.

China has been decreasing its holdings of U.S. debt over the past year. It now holds $1.16 compared to $1.31 trillion in June 2011. Japan is the second biggest foreign creditor, holding almost as much as China at $1.12 trillion.  Although China and Japan are the U.S.’s biggest foreign holders, Brazil, Russia, Taiwan, Switzerland, the United Kingdom, and dozens of other nations, hold trillions more.

When Americans think about foreign countries holding our debt, we tend to think immediately of China, not Japan, or any of our other foreign creditors. “There’s a lot of China-bashing,” said Burton Abrams, an economics professor at University of Delaware and a research fellow at the Oakland, Calif.-based Independent Institute, a nonpartisan think tank that focuses on politics and economics.

Political candidates in the last election cycle would often bring up China’s holdings of America debt. Republican U.S. Rep. Michele Bachmann joked during her run for the GOP presidential nomination that when it came to America’s debt, “Hu’s your daddy,”—a reference to China’s President Hu Jintao.

In his 2008 campaign for President, Barack Obama criticized President Bush for taking “out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents … so that we now have over $9 trillion of debt that we are going to have to pay back.”

Mitt Romney also brought up U.S. debt to China during his campaign for president. “Does the America we want borrow a trillion dollars from China?” he said at the Republican National Convention. And, Romney, just as Obama did during his 2008 campaign, also referred to those who would be stuck paying for our debt in the future. “But it’s not just this generation that’s paying the price,” said Romney. “The next generation has been saddled with enormous debt because of President Obama’s policies.”

The fact that the Federal Reserve holds more of our nation’s debt than China or any foreign power is not reason for us to worry any less about the size of our current debt.

As the Government Accountability Office (GAO), the federal government’s auditor, says, the United States is on a fiscally “unsustainable” path. Until now politicians and the electorate have been unwilling to change this path.

Let’s hope and pray that this changes in the coming months.

You can read more at:
“The Federal Government’s Financial Health,” pp. 7-8. United States Government Accountability Office. , (accessed October 11, 2012)

Top Customer: Under Obama, Fed’s Holdings of U.S. Debt Have Jumped 452%
By Terence P. Jeffrey, June 7, 2012

US debt tops $16 trillion: So who do we owe most of that money to?
By Greg Wilson, Published September 04, 2012,

Source:  Truth in Action


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