Who’s Holding the Bag? Breaking Down the Ballooning U.S. National Debt
The U.S. national debt has exploded to an almost incomprehensible $36.16 trillion, an astonishing figure that highlights the reckless fiscal policies of a government addicted to borrowing. These Treasury securities—bought and held as interest-earning assets by entities at home and abroad—are both a ticking time bomb and a sobering reflection of the global appetite for U.S. debt.
But as the Federal Reserve continues its quantitative tightening (QT) program, dumping Treasury securities from its balance sheet, a critical question arises: Who is buying this debt? At the end of Q3, when the debt stood at $35.46 trillion, let’s examine exactly who the holders of this mountain of IOUs are.
The Breakdown: Public vs. Intragovernmental Holdings
Roughly $7.16 trillion of the total is held by U.S. government entities, categorized as “intragovernmental holdings.” These are Treasury securities parked in federal pension funds, the Social Security Trust Fund, and similar accounts. In short, it’s money the government owes itself—a shell game designed to obscure the true scale of the fiscal problem.
The rest, a staggering $28.31 trillion, is held by the “public.” This includes foreign governments, financial institutions, individuals, and more. Let’s dig deeper into who owns this debt and why it matters.
The Public Holders of U.S. Debt
1. Foreign Holders: 30.6% ($8.67 Trillion)
Foreign entities hold nearly a third of U.S. public debt, with the largest concentrations in key financial centers and major economies:
- Euro Area: $1.78 trillion
- Japan: $1.12 trillion
- China & Hong Kong: $1 trillion (a steady decline over the years)
- Canada, Taiwan, and India are rapidly increasing their stakes, with combined holdings approaching $900 billion.
The Euro Area’s growing appetite for U.S. debt has offset China’s retreat, but make no mistake—our dependency on foreign capital is a glaring vulnerability. What happens if these nations decide to pull back?
2. U.S. Mutual Funds: 17.6% ($5 Trillion)
Mutual funds—including bond funds and money market accounts—are the second-largest domestic holders. These funds are popular among middle-class investors, yet their heavy reliance on Treasury securities makes them susceptible to rate hikes and inflation shocks.
3. Federal Reserve: 15.4% ($4.36 Trillion)
Once the biggest buyer of U.S. debt, the Fed has now turned seller. Since June 2022, it has offloaded $1.46 trillion in Treasury securities under its QT program. While this effort helps reduce inflationary pressures, it also creates upward pressure on interest rates, making future borrowing even more expensive.
4. Individual Investors: 10.3% ($3.1 Trillion)
A growing number of individuals are directly holding Treasury securities, attracted by their perceived safety amidst financial uncertainty. But as interest rates rise, these assets become a double-edged sword—offering higher returns but also exposing savers to inflation risks.
5. State and Local Governments: 6.4% ($1.8 Trillion)
Pension funds and local government treasuries hold a significant portion of Treasuries. These entities rely on stable returns to meet obligations, but ballooning debt and rising interest rates could force cuts to essential services or tax hikes to cover gaps.
6. Commercial Banks: 6.1% ($1.73 Trillion)
Banks are once again piling into Treasuries, reaching record levels last seen in 2022. Their renewed enthusiasm may reflect broader economic uncertainty, but it also raises questions about their exposure to a potential debt crisis.
7. Private Pension Funds: 3.7% ($1.1 Trillion)
Retirement funds for millions of Americans are tethered to the performance of U.S. debt markets. Rising interest payments on the national debt could squeeze returns, jeopardizing long-term security for retirees.
8. Insurance Companies: 2.3% ($630 Billion)
Treasury securities provide a foundation of stability for insurance firms, but even they are not immune to the dangers of runaway debt and rising interest costs.
9. Nonmarketable Securities: 2.1% ($590 Billion)
These include savings bonds like the I-series and EE-series, largely held by retail investors, as well as specialized bonds sold to state and local governments. While these securities don’t trade on the open market, they reflect a quiet reliance on American savers to fund Washington’s excesses.
The Growing Burden of Interest Payments
The true catastrophe isn’t just the sheer size of the debt—it’s the cost of servicing it. As interest rates rise, the interest-payments-to-tax-receipts ratio has spiked to levels unseen in modern U.S. history. In simpler terms, more tax revenue is being swallowed just to pay the interest on our debt, leaving less for essential services and infrastructure.
The national debt is also outpacing GDP growth, further compounding the problem. We are hurtling toward a fiscal cliff, and the policies driving this debt binge show no sign of reversing.
What Does This Mean for You?
Every dollar of national debt represents a claim on future taxpayer earnings. As the government’s insatiable appetite for borrowing grows, the risks of economic instability, higher taxes, and inflation loom larger.
Don’t be caught off guard. You must take proactive steps to protect your wealth from the fallout of a broken system. Start by downloading Bill Brocius’ free ebook, 7 Steps to Protect Your Account from Bank Failure, which lays out actionable strategies to safeguard your savings.
For deeper insights, subscribe to Bill’s Inner Circle newsletter for just $19.95. You’ll gain exclusive access to strategies that hedge against inflation, debt crises, and government overreach.
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