The United States government has accumulated significant amounts of debt over the years. This debt is financed through the sale of government bonds and securities to investors around the world. But who are the major holders of US debt? In this article, we will examine the key questions around the ownership of US debt:
What is the total amount of US debt?
As of October 2022, the total amount of US debt owned by the public was approximately $24.1 trillion. This includes debt held by individuals, corporations, state/local governments, the Federal Reserve, and foreign governments/investors. The total debt is divided into two main categories:
– Intragovernmental debt – Debt owed by the federal government to other federal agencies, such as Social Security trust funds. This was approximately $6.1 trillion.
– Debt held by the public – Debt owed by the federal government to all other outside investors. This was approximately $24.1 trillion.
So in total, the gross US national debt stood at around $30.2 trillion in October 2022. This has steadily increased over the decades due to persistent federal budget deficits.
What are the major components of public debt?
The $24.1 trillion debt held by the public can be broken down into the following major components:
– Treasury bills – Short-term debt instruments (maturities less than 1 year) – $4.2 trillion
– Treasury notes – Medium-term debt instruments (maturities 2-10 years) – $11 trillion
– Treasury bonds – Long-term debt instruments (maturities of 30 years) – $6.8 trillion
– Treasury inflation-protected securities (TIPS) – Debt instruments indexed to inflation – $1.7 trillion
– Other public debt – Includes state/local government securities, savings bonds, etc. – $0.4 trillion
Treasury bills, notes, bonds and TIPS make up the bulk of marketable securities issued by the US government to finance the public debt. These are traded actively on secondary markets around the world.
What percentage of US debt is foreign owned?
As of August 2022, foreign governments and investors owned around 33.5% of the total US public debt or around $8.1 trillion. This is the amount of US Treasury securities owned by foreign official institutions like central banks and sovereign wealth funds ($7.1 trillion) and foreign private investors ($1 trillion).
So approximately one-third of America’s debt is owed to foreign creditors, with the remainder owned domestically within the US. Foreign ownership of US debt has gradually increased over the last few decades as demand for safe haven US Treasuries has grown globally.
Who are the major foreign holders of US debt?
The table below shows the top 5 foreign holders of US public debt as of August 2022:
| Country | Holdings in billions USD |
|---|---|
| Japan | $1,236.5 |
| China (Mainland) | $1,026.6 |
| United Kingdom | $617.9 |
| Luxembourg | $306.7 |
| Ireland | $287.4 |
As we can see, Japan was the largest foreign holder of US debt with over $1.2 trillion in Treasury securities. China was the second largest holder with holdings of around $1 trillion. Other major holders include the UK, Luxembourg, Ireland, Brazil, Switzerland, India, Hong Kong, and Saudi Arabia.
But the foreign ownership figure also includes investors in other countries acting through custodial accounts in places like the Caribbean banking centers. So the true ownership of foreign-held US debt is likely more diverse.
How much US debt does the public own?
Out of the total $24.1 trillion publicly held debt, around $16.4 trillion or 68% was owned by domestic US investors as of August 2022. This includes debt owned by:
– Individual investors – Individuals, trusts, estates – $8.3 trillion
– Pension funds – Private and state/local government – $3.0 trillion
– Mutual funds – $4.1 trillion
– State/local governments – $900 billion
– Banks/savings institutions – $700 billion
– Insurance companies – $300 billion
– Other investors – $100 billion
So combined, US individuals and institutions held around two-thirds of the total US public debt as of mid-2022. Ownership by pension funds, mutual funds, and individual investors increased markedly over the last decade due to the low interest rate environment driving demand for Treasury securities.
What about the Federal Reserve and intragovernmental debt?
In addition to debt held by the public, two other key owners of US debt include:
– The Federal Reserve – This owned around $5.7 trillion of US Treasuries as of October 2022, purchased via its quantitative easing programs over the last decade. This is now being reduced.
– Intragovernmental debt ($6.1 trillion) – Which includes debt owed by the US government to federal trust funds like Social Security, as well as other intergovernmental obligations.
So combining all the above categories, the ownership of the total US gross national debt of $30.2 trillion was approximately as follows as of October 2022:
– Debt held by the public – $24.1 trillion or 80% of total
– Intragovernmental debt – $6.1 trillion or 20%
– Of which:
– Foreign – $8.1 trillion or 27%
– Domestic – $16 trillion or 53%
– Federal Reserve – $5.7 trillion or 19%
Conclusion
In summary, foreign governments/investors own around one-third of all US public debt, with Japan and China being the largest foreign creditors. Domestic US investors, including individuals, pension funds, insurance companies, and government entities, own around two-thirds of the public debt. And America owes itself around 20% of the total debt through intragovernmental holdings like Social Security.
While foreign appetite for US Treasuries has helped finance America’s borrowing needs, the majority of the $24 trillion in publicly held debt is owned by regular Americans through vehicles like pensions and mutual funds. So in essence, the US government owes its citizens more than anyone else.