Skip to comments.The TRUTH About Who Really Owns All Of America's Debt
Posted on 08/24/2011 2:44:14 PM PDT by Carbonsteel
If you ever try comparing the debt situation in the US and Japan, someone will invariably say: Well, Japan can afford a lot more debt because it's all domestically owned, whereas US debt is owned by the Chinese.
It turns out this isn't really true, though unfortunately this destructive myth continues to dominate political/economic debates.
Yes, China holds a lot, but they're not dominant, and when you add it up, most debt is actually domestically held, just like in Japan.
(Excerpt) Read more at businessinsider.com ...
Dem talking points to hand wave around a major issue.
So, we’ll get screwed instead of the chinese...
By CHARLES KRAUTHAMMER
President Barack Obamas budget chief, Jack Lew, took to his White House blog recently to repeat his claim that the Social Security trust fund is solvent through 2037. And to chide me for suggesting otherwise.
If Lews claim were just wrong, that would be one thing. But it provides the intellectual justification for precisely the kind of debt denial and entitlement complacency his boss is engaged in. Therefore, once more into the breach.
Lew acknowledges that the Social Security surpluses were siphoned off to the Treasury Department and spent. He also agrees that the Treasury then deposited corresponding IOUs called “special issue” bonds in the Social Security trust fund. These have real value, Lew claims. After all, “these Treasury bonds are backed by the full faith and credit of the U.S. government in the same way that all other U.S. Treasury bonds are.”
Really? If these trust fund bonds represent anything real, why is it that in calculating national indebtedness they are excluded? We measure national solvency by debt to GDP ratio. As calculated by everyone from the OMB to the CIA, the debt to GDP ratio counts only publicly held debt. This means bonds held by China, Saudi Arabia, you and me. The debt ratio completely ignores the intra-governmental bonds that Lew insists are the equivalent of publicly held bonds.
Why? Because the intra-governmental bond is nothing more than a bookkeeping device that records how much one part of the U.S. government (Treasury) owes another part of the same government (the Social Security Administration). In judging the creditworthiness of the United States, the world doesnt care what the left hand owes the right. It cares only what that one entity owes the world.
Thats why publicly held bonds are so radically different from intra-governmental bonds. If we default on Chinese-held debt, decades of AAA creditworthiness is destroyed, the world stops lending to us, the dollar collapses, the economy goes into a spiral and we become Argentina. Thats why such a default is inconceivable.
On the other hand, what would happen to financial markets if the Treasury stopped honoring the “special issue” bonds in the Social Security trust fund? A lot of angry grumbling at home for sure. But externally? Nothing.
This “default” would simply be the Treasury telling the Social Security Administration that henceforth it would have to fend for itself in covering its annual shortfall. How? By means-testing (cutting the benefits to the rich), changing the inflation formula, raising the retirement age and, if necessary, increasing the cap on income subject to the payroll tax.
You can plug in whatever combination of numbers you prefer for the definition of “rich,” the slope of the sliding scale of benefit reduction, the rate of the retirement-age increase, or any other variable. Whatever the formula, we will have been forced to adopt the very reforms needed to keep Social Security in balance for years to come that were recommended by Obamas own deficit commission. Arguably, that would add to U.S. creditworthiness by demonstrating to the world our seriousness about bringing our unsustainable pension liabilities under control.
Invoking the “full faith and credit” mantra for those IOUs in the trust fund is empty bluster. It does not change the fact that, as the OMB acknowledged, those IOUs “do not consist of real economic assets that can be drawn down in the future to fund benefits.” Yet Lew continues to insist these “special issue” trinkets will pay off seniors for the next 26 years.
Nonsense. That money is gone with the wind. Those trust fund trinkets are nothing more than a record of past borrowings.
Consider: If Treasury had borrowed twice as much from Social Security in the past producing twice as many IOUs sitting in the lockbox would this mean the trust fund is today twice as strong? Solvent for 50-some years instead of just 26? Of course not. The trust fund “balances” are mere historical record-keeping. As the OMB itself admitted, future payouts will have to be met by future taxes and future borrowings or by Social Security reform that makes such taxing and borrowing unnecessary.
There is no third alternative. There is no free lunch. And there is nothing in the lockbox.
This crap could be explained in all of ten minutes. It’s just that the interested parties—MSM included—don’t want us peasants to know the truth, so they clog our minds with jargon and trivia.
That’s kind of the point of Obamacare and it’s Death Commission...ration the health care from the old to whom we owe a buttload of debt and let them die off so we don’t have to pay them back. And the socialist kids we’re raising and addicting to drugs haven’t a clue we’ll be stealing them blind also. At least the ones we can convince to get a job.
10 minutes is 9:30 longer than the media would give to any explanation, even if they weren’t biased against it.
On the link they list the 17 who own US Debt and that the total debt is $14.342 Trillion.
But if you add up the 17 owners of US debt the total is only $10.815 Trillion.
This is more than a rounding error!!!!
Here is another error-—
In all, the Treasury owes foreigners and foreign governments $4.514 trillion dollars
But Americans own most of their own country’s $14,342,909,569,328.74 of debt.
But if you add up the amounts owed foreigners it totals $3.283 Trillion. Again more than a rounding error.
(US Government "owes itself" over 30% of the total national debt)
Total Holdings of US Treasuries: $959.4 billion
Percent of US Debt that they own: 6.6%
The 'Household Sector' includes hedge funds.
Total Holdings of Treasuries: $1.16 trillion
Percent of US Debt that they own: 8%
The Federal Reserve
Total Holdings of Treasuries: $1.63 trillion
Percent of US Debt that they own: 11.3%
(most bought for the Quantitative Easing programs)
Social Security Trust Fund
Total Holdings of US Treasuries: $2.67 trillion
Percent of US Debt that they own: 19%
This money has been hijacked by crooked politicians and squandered on their pork projects and hand-outs.
This is one of the major reason Social Security is in financial distress.
The Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds invest exclusively in special issue bonds that are only available to the Social Security trust fund. These are not publicly traded securities, but they still constitute a huge amount of debt.
The Fderal Reserve and the Social Security Trust Fund own the most. Whew, I feel so much better! /sarc
Yeah....I was thinking about the same thing....The Fed Reserve AND Soc Sec ARE US!
Vice President Biden mistakenly claimed Americans own 85% of U.S. Treasury securities during his visit to China. Americans own 54% of the U.S. public debt that is, the amount of debt held by the public. They own 69% of the total debt, which includes money the U.S. government owes itself.
Social Security Trust Fund
Total Holdings of US Treasuries: $2.67 trillion
Which has all been spent by our fine career politicians.
The $3.5 trillion rounding error is certainly in keeping with the myth that somehow domestically held debt is comforting; that the national debt as an obligation we owe to ourselves does not create a problem. The problem is we keep passing the bonds, and the new ones issued as the old ones mature to other wes. Therefore, subsequent generations of wes must be willing to buy into the scheme, and in ever greater amounts. If the wes instead decide to hold gold or land, and/or decide they should buy more consumables, there are no bond buyers. This substitution of purchases causes prices for all goods and services to skyrocket, and bond yields to increase exponentially. Remember the late 70s and early 80s when federal debt traded at 12% to over 15%?
This scenario should actually commence overseas and with foreign individuals and countries like China who combined hold more than 8% of our debt and clearly understand they are not part of we. Since market prices are set by the 5% who make pragmatic, disinterested buy and sell decisions, foreign individuals and governments can begin a cascade effect the Fed cannot control.
The best analogy appears to be a multi-generational Ponzi scheme perpetrated on the American people, and finally revealed because our debt has grown to such enormous proportions that it can no longer be managed.
And about 1/2 the Japanese debt is held by the government so it doesn’t count to bond holders. Kind of like our SS trust fund.
Globalist propagandists like the author of the BS piece have been saying that our eventual bond crash will hurt China more than us. So from the globalist author’s latest drivel, we can assume the bond collapse will hurt Americans more than Chinese. They’ve been contradicting themselves while claiming for over four years that the Chinese economy is crashing (while China continues to increase production more than our USA).
Eventually, the globalists will be de-funded and tossed, and we’ll get back to work. Until then. avoid buying anything that you don’t need, and become more self-sufficient.
I get discourages for our country’s future when pro-SS trust fund articles appear on FR. I can understand why liberals would perpetuate that lie. I can’t understand how a conservative could fall for it.