Are American holders of US debt, next in line to Suckerville? We saw what the Obama Administration did to holders of GM (General Motors--not Government Motors, that ship has not sunk yet) debt and will they use the same theory when it comes to US debt?
When you look at the top holder of debt being the Federal Reserve and that is more than the next 6 holders which include China and Japan, a strange thought hit us. Since a majority of the debt is held by Americans through Insurance Companies, Mutual Funds, Individual investors and the Fed and not by foreigners, it be easy to hurt only Americans and not really hurt other nations.
How would you do this? First of all, you would guarantee the value of all foreign investment in the US. China, Japan, Great Britain and any other nation holder of government paper would get 100% of their pre-debt values before what we call the "Great Recalculation" or GC for short. In brief, It would reduce the value of debt held by Americans by 90% therefore wiping out a majority of the debt the country owes. Every $100 of federal debt would be reduced to $10 overnight.
The way the GC would be sold by the President would be that the majority of holders of debt are wealthy Americans who can afford to "contribute" more to the debt crisis than Middle America. In fact, they will assert that Middle America will be helped due to the fact that the interest on the debt will be significantly decreased therefore allowing things like more weeks of unemployment or an expansion of Obama Care. Additionally, the debt owed to the Fed would be a paper transaction and have no impact on the economy at all. There will be no mention of the fact that foreign nations would be not impacted by the loss at all.
The problems with this scenario is that it would devastate all prices in the country, would make funding of future governmental spending near to impossible and would definitely remove the Green Back from the reserve currency of the world. All of which means, this is a definitely a possibility.
So, are we smoking those funny cigarettes again or is there something in this nightmare? Please let us know. Either way we will publish your comments.
Conservative Tom
Biggest Holders of US Government Debt
By Paul Toscano | CNBC – 13 minutes agoAs the U.S. government spends an unprecedented amount of money to fix the economy, there is an equally great need to raise the cash to pay for it. This is accomplished through borrowing, whereby Uncle Sam sells Treasury securities of varying maturity.
For investors, government bills, notes and bonds are considered safe because they have a guaranteed rate of return, based on faith in future U.S. tax revenues. The government has been partially funding operations via Treasury securities for decades.
This borrowing adds to the national debt, which has recently surpassed $15 trillion and is rising every second. The amount of debt is quickly approaching the federal debt ceiling, a legal limit to borrowing that currently stands at $16.4 trillion.
Much of that debt is held by private sector, but about 40 percent is held by public entities, including parts of the government. Here's who owns the most. Foreign countries listed include private and public investors, according to monthly U.S. Treasury data.
1. Federal Reserve and Intragovernmental Holdings
U.S. debt holdings: $6.328 trillion
That’s right, the biggest single holder of U.S. government debt is inside the United States and includes the Federal Reserve system and other intragovernmental holdings. Of this number, The Fed's system of banks owns approximately $1.65 billion in U.S. Treasury securities (as of January 2012), while other U.S. intragovernmental holdings - which include large funds such as the Medicare Trust Fund and the Social Security Trust Fund - hold the rest.
In the monthly Treasury bulletin, both are combined into one category and the total accounts for a stunning $6.328 trillion in holdings as of September 2011 (the most recent number available). The amount is an all-time high as the Federal Reserve continues to expand its balance sheet, partially to purchase U.S. government debt securities. The Social Security Trust fund is required by law to invest in securities where the principal and interest is guaranteed by the Federal government.
About a decade ago, the total government holdings were "only" $2.5 trillion.
2. China
Photo: DAJ RM | Getty ImagesU.S. debt holdings: $1.132 trillion
The largest foreign holder of U.S. Treasury securities, China currently has $1.132 trillion in American debt, although it is down from all time highs of $1.173 trillion in July 2011. For more on China and currency, see CNBC Explains.
3. Other Investors/Savings Bonds
U.S. debt holdings $1.107 trillion
With the most recent numbers from June 2011, this extremely diverse group includes individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts, estates, savings bonds, corporate and noncorporate businesses for a total of $1.107 trillion.
Although the level of debt held in U.S. savings bonds has remained basically constant since 2000, the broad category of "other" investors has nearly quadrupled since reaching a four-year low in December 2007.
[Also see: Money Missteps That Matter]
4. Japan
Photo: APU.S. debt holdings: $1.038 trillion
One of the U.S.'s largest trade partners, Japan is also one of the U.S.'s largest debt holders, currently owning $1.038 trillion in Treasury securities.
5. Pension Funds
U.S. debt holdings: $842.2 billion
Pension funds control large amounts of money, reserved for personal retirements, and thus are obligated to make relatively safe investments. This group, which includes private and local government pension funds, holds $842.2 billion in U.S. debt. The private pension fund category also includes U.S. Treasury securities held by the Federal Employees Retirement System Thrift Savings Plan G Fund.
6. Mutual Funds
U.S. debt holdings: $653.5 billion
According to the Federal Reserve, mutual funds hold the sixth-largest amount of U.S. debt compared to any other group, although mutual fund holdings have diminished by more than $105 billion since December 2008. Including money market funds, mutual funds and closed-end funds, this group of investments managed about $653.5 billion in U.S. Treasury securities as of June 2011, which are the most recent numbers available.
7. State and Local Governments
U.S. debt holdings: $484.4 billion
U.S. state and local governments have nearly a half-trillion dollars invested in American debt, according to the Federal Reserve. The level of investment has remained stable since 2006, moving within the range of $484 billion and $576 billion. The current debt holdings, however, represent the lowest aggregate level for state and local governments since December 2005, when they stood at $481.4 billion.
[Also see: Save Up to 50% at the Grocery Store]
8. The United Kingdom
Photo: Dominic Burke | Getty ImagesU.S. debt holdings: $429.4 billion
The U.K. currently holds $429.4 billion in U.S. debt, but the country's investment has fluctuated dramatically during the past two years. Now at its all-time high (and rapidly increasing), British holdings were as low as $55 billion in June 2008.
9. Depository Institutions
U.S. debt holdings: $284.5 billion
As of June 2011 (the most recent numbers available), the Federal Reserve Board of Governors lists depository institutions as holding about $284.5 billion in U.S. debt.
This group includes commercial banks, savings banks and credit unions. In 2011, its holdings more than tripled from the 2008 low of $105 billion. Between June and September 2011, holdings for depository institutions fell by nearly $44 billion.
10. Insurance Companies
Photo: Sylvain LeprovostU.S. debt holdings: $250.1 billion
According to the Federal Reserve Board of Governors, insurance companies hold $250.1 billion in Treasury securities. This group includes property-casualty and life insurance firms.
For investors, government bills, notes and bonds are considered safe because they have a guaranteed rate of return, based on faith in future U.S. tax revenues. The government has been partially funding operations via Treasury securities for decades.
This borrowing adds to the national debt, which has recently surpassed $15 trillion and is rising every second. The amount of debt is quickly approaching the federal debt ceiling, a legal limit to borrowing that currently stands at $16.4 trillion.
Much of that debt is held by private sector, but about 40 percent is held by public entities, including parts of the government. Here's who owns the most. Foreign countries listed include private and public investors, according to monthly U.S. Treasury data.
1. Federal Reserve and Intragovernmental Holdings
U.S. debt holdings: $6.328 trillion
That’s right, the biggest single holder of U.S. government debt is inside the United States and includes the Federal Reserve system and other intragovernmental holdings. Of this number, The Fed's system of banks owns approximately $1.65 billion in U.S. Treasury securities (as of January 2012), while other U.S. intragovernmental holdings - which include large funds such as the Medicare Trust Fund and the Social Security Trust Fund - hold the rest.
In the monthly Treasury bulletin, both are combined into one category and the total accounts for a stunning $6.328 trillion in holdings as of September 2011 (the most recent number available). The amount is an all-time high as the Federal Reserve continues to expand its balance sheet, partially to purchase U.S. government debt securities. The Social Security Trust fund is required by law to invest in securities where the principal and interest is guaranteed by the Federal government.
About a decade ago, the total government holdings were "only" $2.5 trillion.
2. China
Photo: DAJ RM | Getty ImagesU.S. debt holdings: $1.132 trillionThe largest foreign holder of U.S. Treasury securities, China currently has $1.132 trillion in American debt, although it is down from all time highs of $1.173 trillion in July 2011. For more on China and currency, see CNBC Explains.
3. Other Investors/Savings Bonds
U.S. debt holdings $1.107 trillion
With the most recent numbers from June 2011, this extremely diverse group includes individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts, estates, savings bonds, corporate and noncorporate businesses for a total of $1.107 trillion.
Although the level of debt held in U.S. savings bonds has remained basically constant since 2000, the broad category of "other" investors has nearly quadrupled since reaching a four-year low in December 2007.
[Also see: Money Missteps That Matter]
4. Japan
Photo: APU.S. debt holdings: $1.038 trillionOne of the U.S.'s largest trade partners, Japan is also one of the U.S.'s largest debt holders, currently owning $1.038 trillion in Treasury securities.
5. Pension Funds
U.S. debt holdings: $842.2 billion
Pension funds control large amounts of money, reserved for personal retirements, and thus are obligated to make relatively safe investments. This group, which includes private and local government pension funds, holds $842.2 billion in U.S. debt. The private pension fund category also includes U.S. Treasury securities held by the Federal Employees Retirement System Thrift Savings Plan G Fund.
6. Mutual Funds
U.S. debt holdings: $653.5 billionAccording to the Federal Reserve, mutual funds hold the sixth-largest amount of U.S. debt compared to any other group, although mutual fund holdings have diminished by more than $105 billion since December 2008. Including money market funds, mutual funds and closed-end funds, this group of investments managed about $653.5 billion in U.S. Treasury securities as of June 2011, which are the most recent numbers available.
7. State and Local Governments
U.S. debt holdings: $484.4 billion
U.S. state and local governments have nearly a half-trillion dollars invested in American debt, according to the Federal Reserve. The level of investment has remained stable since 2006, moving within the range of $484 billion and $576 billion. The current debt holdings, however, represent the lowest aggregate level for state and local governments since December 2005, when they stood at $481.4 billion.
[Also see: Save Up to 50% at the Grocery Store]
8. The United Kingdom
Photo: Dominic Burke | Getty ImagesU.S. debt holdings: $429.4 billionThe U.K. currently holds $429.4 billion in U.S. debt, but the country's investment has fluctuated dramatically during the past two years. Now at its all-time high (and rapidly increasing), British holdings were as low as $55 billion in June 2008.
9. Depository Institutions
U.S. debt holdings: $284.5 billion
As of June 2011 (the most recent numbers available), the Federal Reserve Board of Governors lists depository institutions as holding about $284.5 billion in U.S. debt.
This group includes commercial banks, savings banks and credit unions. In 2011, its holdings more than tripled from the 2008 low of $105 billion. Between June and September 2011, holdings for depository institutions fell by nearly $44 billion.
10. Insurance Companies
Photo: Sylvain LeprovostU.S. debt holdings: $250.1 billionAccording to the Federal Reserve Board of Governors, insurance companies hold $250.1 billion in Treasury securities. This group includes property-casualty and life insurance firms.
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