The US gross national debt has now reached $30.4 trillion, having spiked by $7.0 trillion since March 2020. Every one of these Treasury securities had to be bought and is held by some institutional investor, bank, government entity, or individual in the US or globally.
See the growth in US debt in the ridiculous chart and learn more here. Since the start of the Biden administration, the US has been on a drunken joy ride of printing and borrowing money until everyone is broke. It should be noted this is not an accident. It is planned, and the inflation results of this policy insanity are knowable. We can stop blaming Covid and Putin.
So who are the buyers of US debt? There is a common belief that China is financing the US debt bubble. What if China decides to sell its US debt? It could be a disaster for the country, and the Chinese will control us via debt. This narrative is mostly false.
Foreign holders of US Treasuries accounted for $7.61 trillion at the end of Q1, according to the Treasury Department’s Treasury International Capital (TIC) data, down by $134 billion from the prior quarter but up by $575 billion from a year ago.
About $4.07 trillion of it is held by foreign central banks and government entities; the rest by foreign institutional investors, corporate entities, banks, and individuals. The key takeaway is that foreign US debt holders are only 25% of the total and at a rapidly declining rate.
Japan is actually the highest US foreign debt holder, and China is second. However, neither of these two countries holds a significant percentage (each only 3 to 4%) of the total US debt. The other takeaway one should note China, and more recently Japan is losing their appetite for US debt.
And if you look behind Japan and China, listed below are the next top ten foreign US debt holders.
- UK: $635 billion (+43% year-over-year)
- Ireland: $316 billion (+2% year-over-year)
- Luxembourg: $301 billion (+6%)
- Cayman Islands: $293 billion (+36%)
- Switzerland: $274 billion (+8%)
- Belgium (home of Euroclear): $265 billion (+12%)
- France: $247 billion (+117%)
- Taiwan: $251 billion (+3%).
- Brazil: $237 billion (-7%)
- Canada: $222 billion (+109%)
See below, the major holders of the US National Debt, stacked on top of each other. It is interesting to note that there are two major groups that have increased their holdings above trendline growth in recent years – these are a.) US buyers and b.) the Fed. The other groups have maintained a more steady trendline.
Here are the two largest groups that recently had a growing appetite for the US debt.
- US institutional and individual investors: $8.8 Trillion, up by $722 billion from the prior quarter and up by $2.4 trillion from March 2020. These include bond mutual funds and money market funds, US pension funds, individual investors, US insurance companies, state and local governments, and other US entities.
- Federal Reserve: $5.76 trillion at the end of March, up by $818 billion year-over-year, and up by $2.42 trillion from March 2020 when it kicked off its most reckless money-printing binge ever.
Have you ever played the game of musical chairs? Or have you heard the expression “last man out is the loser” and will be left “holding the bag?” In this case, the bag of stinky US debt. Examine below the players that are already heading to the exits below.
- Foreign US debt holders have already headed for the exits.
- The Fed, the single largest US debt buyer until early this year, is no longer adding to its holdings. And in June, it will start reducing its holdings, even as the government will issue more debt and someone has to buy it all.
So who will be left holding the bag? This “US institutional and individual investors” group seems to be the only ones left to buy the expanding US debt bubble. This group could be further broken down into a;) the high net worth folks and b.) the institutions that manage many of the average American’s pension funds, insurance funds, and local governments.
Is it possible that when it comes time for this group to exit and not get stuck with the stinky US debt, the high net worth folks can hedge or exit when necessary, leaving the average American funds at risk?
“If you’re in a con game and you don’t know who the mark is … you’re the mark.”
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