Guess Who Holds America's Debt? You'd Be Surprised

[Justice]

Bill Clinton touched on this in his speech.

Yesterday, I heard Senator Blanche Lincoln speak on this issue (she is on the Senate Finance Committee).

Lincoln said the four biggest holders of the US Debt are China, Japan, the UK and "banks in the Caribean" (and who knows whose money that is). (and the numbers are big, I think Japan holds about 10% of our debt)

The point Clinton and Lincoln made was the danger in our bullying other countries, particularly China, Japan - when those countries are our bankers.

Interesting comment, and one that makes you stop and think about what we are doing. The government says the debt is held by the general public - all of us - but really it is held by many foreign investors and foreign countries.

[Frodo]

1. Interesting comment indeed

Especially since the problem is CAUSED by our massive trade deficit - which basically BEGAN on his watch and has only gotten worse since.

[Killarney]

6. this is different from the trade deficit

it's our national debt. borrowing real money from other countries to pay for our deficits year after year.

[Frodo]

7. Not really different.

Where do you think they GET the money to do this? You have to buy US Treasuries in US Dollars. The massive trade deficit is what GIVES them those dollars to spend.

And once you've GOT hundreds of billions of Dollars, what can you do with them? The safest Dollar-denominated investment in the world (heck THE safest investment in the world) is US Treasury securities - backed by the "full faith and credit" of the strongest government/economy on the planet.

They could alternatively SELL those Dollars to buy some other currency, but that just drives down the value of all of their existing dollar-denominated assets and makes their goods and services relatively more expensive here.


It's simple enough to test. Look at WHICH countries own all that debt and what that debt-ownership picture looked like 20,30,50 years ago.

You really think it's a coincidence that the countries that own all that debt are the ones we have massive trade imbalances with?

[silverpatronus]

11. i don't understand the economics of currency...

how can the US have the strongest economy if the US dollar is worth less than pound sterling (and the euro?)?

[NewJeffCT]

12. easy

It's all relative. Just because a person is making $25,000 per year in the US does not mean the person in the UK is making 25,000 pounds per year. More likely, the person in the UK is making around 15,000 pounds per year.

While that may fluctuate as currencies fluctuate - if the value of the Pound goes up dramatically (like it has under Bush), a person making 13,000 pounds per year may now be the equivalent of a person in the US making $25,000 per year.

Also, the US's population is much bigger than any individual European country, so our overall economy is bigger. I'm sure if countries like Japan, the UK & Germany had the same sized populations as the US, they might be very close to our overall economy, if not ahead of us.

[muriel_volestrangler]

21. GDP per capita, using Purchasing Power Parity

(ie currency conversions that use a relative cost of living, which is stable, rather than market exchange rates that fluctuate) show the US more prosperous, on average, than nearly all other countries (Luxembourg is basically one prosperous city).
http://www.cia.gov/cia/publications/factbook/rankorder/2004rank.html

Of course the income distribution in the US is more uneven than in most European countries, so the 'typical' person in the US may not be better off than the typical German, say.

[gottaB]

23. funky weights and measures

before decimalization, it was like 12 pence = 1 shilling, 20 shillings = 1 pound.

http://www.nationmaster.com/encyclopedia/Pound-Sterling


In the past, the US had invested in the euro to keep its value roughly equivalent to the dollar. That was then. Now, I don't understand Bush's weak dollar policy, or his spend-and-pretend treasury sprees, or his voodoo economics response to flagging US productivity. I think the effects will be a weaker dollar for some years to come, though eventually we may see more parity with the euro.

[terrya]

2. Don't the Saudis hold some of the debt, as well?

This is a very good point. We'd better wake up to this fact very soon.

[Justice]

4. Saudis - I am sure they do

I just don't know about much.

I remember in F911, the amount of investment money in the US was stated. Staggering number.

[GreenPartyVoter]

13. 6 to 7% They should be in the top 5 or 6 of debtholders, I imagine.

[readmylips]

5. I read by when the Iraq war was being cooked up.....

that the Saudis had pulled most of their investments out of the US. Not only do they pay to teach their children to hate us, they increased our oil debt, and pulled their investments out of our stock market. Those are bush's friends and the pride of Bab mama bush. She states in her book that she has all of the Saudi royal family's private telephone number in her little black book.

[Frodo]

8. Well THAT's demonstrably untrue

"states in her book that she has all of the Saudi royal family's private telephone number in her little black book"


That "little black book" would have to be pretty big to fit ALL of the royal family's phone #s

[sangh0]

17. It's demonstrably true

A telephone # doesn't take up all that much room. You could fit thousands in a small black book.

[Frodo]

24. Uh huh.... AND???

There are MORE than that many members of the "royal" family in SA.

[AP]

14. Saudis own our equity, not our debt. They have less faith in our economy.

[Frodo]

25. That makes little sense.

Equity is more endangered by a poor economy than our debt is.

You ever seen a stock that is backed by "the full faith and credit" etc???

Companies go out of business and/or lose money all the time. The US Govt NEVER defaults on it's debts.

[Eurobabe]

3. paraphrasing Crashcart Cheney:

"Terrorist attacks are not caused by the use of strength. They are invited by the perception of weakness,"

I assume this means economic weakness as well?

One well aimed strike could topple the apple cart, look what happened after 9-11. Thanks Bu$hCo, you've made us a whole lot safer!

[oldcoot]

9. We supposedly won the "Cold War"

Conservatives like to talk about how capitalism beat communism during the Cold War. Yet we are in debt to a communist country.

[wabeewoman]

10. Somehow I remember

the conservative talking heads having a hissy fit about Clinton giving technology to China. Funny they aren't commenting that we are 'owned' by the Chinese. I do hope the FIRST thing Kerry does after disinfecting the White House is to bring back the fairness doctrine and break up the media. I am SOOOO tired of the media corruption.

[redqueen]

15. I find it sad and disturbing more aren't aware of this

Isn't this kind of ... um ... I don't know ... important?

Y'know... being aware of who we're in debt to, and the affect that may have on our foreign and TRADE policy?

:mad:

[NewJeffCT]

16. tricky game with the Chinese

The Chinese do not allow their currency to float as of yet - it is tied in value to the US dollar. They allow a very small amount of fluctuation, but it is pennies on the dollar at the most.

So, if the value of the US dollar goes down, the value of Chinese currency goes down as well, meaning that if China wanted to buy any more Russian submarine like they did last year, they would have to spend more money... So, right now at least, it is in China's interest to keep the US dollar from total collapse by buying dollars by the fistful.

However, as China's economy is growing by leaps & bounds, they could elect to take the hit and either let their currency float (speculation is that the current rate of 8 yuan to the dollar would quickly move to about 5 yuan to the dollar, meaning that if they held $80 billion of US debt, it would now be worth only $50 billion) or they could tie it instead to the Euro. Their debt holdings in US dollars would lose also money, as the dollar would go in the toilet with nobody buying it anymore.

But, if the US's interests went against China in regards to Taiwan or Middle Eastern oil, the Chinese might be willing to take the hit, knowing that they would likely be able to recover quicker than the US from a plunging dollar.

[NewJeffCT]

18. should also add...

That the US is still the biggest consumer market in the world, so if our dollar collapses due to the Chinese no longer buying our dollar, the Chinese would be losing a good chunk of the market for all their manufactured goods as we'd be paying a lot higher price for goods imported from China.

[realFedUp]

19. Those Chinese men do need brides.....

maybe we can make a deal.

[NewJeffCT]

20. good one...

Speaking from experience, if you get a Chinese man from the eastern part of China (i.e., the more modern area), they are very good with doing housework.

[info being]

22. Does anybody here understand banking?

They *hold* the debt...which means we the people *owe* them payments and interest. To not understand this is to not understand the fact that the rich elite benefit from national debts. They benefit because there is a practically guaranteed flow of payments (with interest) from the US government. The higher the debt is, the more opportunity for the rich to make easy money.