Here’s a great chart just released by the International Monetary Fund.   Note that almost half — 47 percent –  of the US$14.7 trillion U.S. federal government debt is held by the Federal Reserve and the government itself, such as the Social Security trust fund. Add to that the 22 percent foreign official holdings (mainly central banks)  and almost 70 percent of the debt of the U.S. government is held by non-market/non-profit oriented investors.   Stunning!

It’s also interesting to hear Europeans quote the $14.7 trillion (apx. 100% of GDP) figure while U.S. officials like to refer to marketable or debt held by the public, which totals US$10.1 trillion (apx. 75% of GDP).   We’ll be back to you with more on this issue.

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click on the chart to enlarge

http://macromon.files.wordpress.com/2011/09/holders-of-sovereign-debt.jpg

Category: Bailouts, Credit, Current Affairs

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “Holders of Sovereign Debt”

  1. Just An Australian says:

    Confused. If the US government owes half of it’s debt to itself, does this count to the debt ceiling or not?

  2. machinehead says:

    ’70 percent of the debt of the U.S. government is held by non-market/non-profit oriented investors.’

    Is this a good thing? Non-market investors tend to be the most clueless — the caboose on the sentiment train, as it were.

    Treasuries propped by non-market demand may be trading at a price well above intrinsic value. Rest assured that the price will not converge gradually and linearly to intrinsic value — it’ll all happen in a few wild weeks.

    Today’s announcement of more Monetary Madness from Crazy Bennie (‘his rates are in-S-A-A-A-N-E!) likely will blow up in his face by popping bonds’ 30-year secular bull market.

    Fade the non-market Fedsters!

  3. TLH says:

    There is no free market. Wall Street expects more manipulation today. We must get government out of the markets. All markets. Create a level playing field. The Republicans are just as bad as the Democrats. That is why the people are losing faith in our government.

  4. JDinCT says:

    Hey barry,
    Great graphs!

    Do you think the market is ready to roll back over today or tomorrow?
    It seems like the momentum up we had the past couple weeks is fading.

  5. Greg0658 says:

    another one there Australian .. can we get one of those track lines > where we borrow some more at 1/4% and pay it all back after charge’g 18% interest? and how much faster will we get there with 24%?

  6. ByteMe says:

    So all that European debt… did they write derivatives on it and who holds THAT paper?

  7. Breezy says:

    The fact that 47% of federal debt is held by the Fed and US government means 47% of the interest payments made on that debt end up being paid back to the US Treasury (minus a small fraction for Fed operating cost). That 47% is not a cost to taxpayers because it’s paid back to the Treasury.

    This means every time we read a news report attempting to scare us with a big number about the cost to taxpayers for interest payments on the US debt, we should mentally cut it in half. Then to make sense of it, we should divide it by the size of our economy. If it’s safely less than…what, 1%, then it’s not a drag on our economy and not a problem.

  8. DeDude says:

    The problem is that by counting the debt to the social security trust fund into US government debt we no longer get an apples to apples comparison. The other countries have a similar government pension system but it is part of the government’s regular budget expenses with no separate taxation and no trust funds. Yet they will just like the US have to deal with the baby boomer generation going into retirement. It’s just that their obligations to the old people doesn’t show up as part of their intra-governmental debt/holdings.

  9. Guan Yang says:

    Just An Australian: All debt counts towards the debt ceiling, because of the way the debt ceiling law is written.

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  11. alwaysontherivet says:

    Congressional Quarterly’s information doesn’t seem to match up to the IMF’s … Who is right? Or am I confused? http://innovation.cq.com/media/debt_components/

  12. endorendil says:

    Actually, I quote the 18-plus trillion dollars the government (federal, state and local) holds. It makes the debt-to-income ratio of the US government look better too (only about 300%, ballpark the same as Greece). It is a bit cheesy, because local and state governments have almost no discretionary income, and can’t help pay off the federal debt (in fact, without federal help there would be a lot of defaulting states in addition to the defaulting locals).

    Anyway. 18 trillion and counting.

  13. endorendil says:

    ByteMe, spot on. There are a lot of CDS on european debt. When the German and French banks start sinking in the morass, they’ll be calling those in. European banks hold most of the debt, but not the risk. Who is actually holding the risk? Well, it took Lehmann to find that out for US mortgages. It will take Greece defaulting to really find out who is playing with fire. I’m betting AIG for most of it, because I’m sure that G-S and the other big banks are offloading what they can on them.

    That’s why Geithner flew out there – he doesn’t want to end up owning all of that crap paper too.