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I ran across an article on MSNBC about the National Debt that asked Just who owns the National Debt?
I have heard the term for years but never really understood exactly what it is or who 'owns' that debt.
This article was very informative as it breaks some myths down.
Firstly, every three months the U.S. Treasury has an auction where it sells debt in the form of securities to buyers. It only offers enough to cover current debt payoff and cover current spending, and then it stops the offering when those goals are met.
The Treasury takes those bids first that cost it the least amount in interest and keeps working it's way up until it meets the goals. The buyers are private industry, pension funds, foreign governments, some individuals, etc. People and entities with cash who want to park it somewhere that is considered 'safe' with a return.
What surprised me is who owns the debt. I had no idea that the U.S. government itself owns most of it. 52% of the National Debt is owned by parts of the U.S. government through the Social Security trust fund and Medicare accounts. That's almost 5 Trillion dollars worth of debt altogether.
Another 24% is owned by foreign governments. Japan owns the most at $644 billion, China owns only $350 billion, the UK owns $239 billion, and the oil producing countries in OPEC own about $100 billion.
The rest of the remaining portions are owned by U.S. state and local governments ($423 billion), public and private U.S. pension funds (your 401K) at $319 billion, mutual funds at $234 billion, U.S. savings bond holders at $206 billion, U.S. insurance companies at $166 billion, and U.S. banks and credit unions at $117 billion.
If you add all the U.S. owned debt securities out of the total National Debt, the U.S. government and other U.S. sources own almost $6.5 Trillion of the total $8.5 Trillion National Debt. 76% of the National Debt is owned by American sources the other 24% is owned by foreign sources.
I found that interesting! We always hear that China is our banker, and it certainly does recycle money back into the U.S. by buying the U.S. Treasury bonds, but the U.S. goverment itself and your 401K and retirement funds are also bigger players....who knew?
So basically the government just keeps on printing money and no one questions what's backing it up. Too bad we can't just write checks without having sufficient funds. But foreign money is heavily invested in mortgage securities so you never know how much of that huge real estate bubble is foreign owned.
According to the National Debt Clock each citizen's share of our nation's debt is over $29,000. Attached are a couple of graphs which show the amount of debt since WWII.
Last edited by square peg; 03-06-2007 at 11:27 AM..
When living just outside NYC (in Jersey) I remember seeing the national debt "clock" on a big billboard above Times Square every time I went to buy tickets at the discount theater ticket qiosk. If I was stuck waiting in line, I'd marvel at how fast a million dollars of national debt would get racked up.
So, if national debt is at $29K per person, it far exceeds the annual per capita income. The historical graph is pretty interesting. Looks like the national debt was almost flat from 1945 to early 70s. I gotta say, the past 5 years look awfully scary.
As a side note, I vaguely remember taking a macro economics class in about 1973, and recall a professor lamenting the day the national debt would surpass a trillion dollars.
If the markets decide that our interest payments on the debt is too high--like half of the annual budget (because of bad government gridlock), then wouldn't the dollar collapse, interest rate borrowing go high and, what stagflation?
According to the National Debt Clock each citizen's share of our nation's debt is over $29,000. Attached are a couple of graphs which show the amount of debt since WWII.
I wish this was correct, but it is not. The majority of our debt is in the form of unfunded Social Security, Medicare, and Pension Programs. Here are the real figures.
According to the USA Today, the $63.8 trillion dollar figure measures "what's needed today - set aside in a lump sum, earning interest - to pay benefits that won't be covered by future taxes".
The $63.8 trillion dollar number translates into $546,668 for every household in the United States. This represents each household's share of all of the federal government's unfunded debt obligations, commitments and promises.
What is really scary is that this debt is backed by every citizens "personal assets".
Location: Prescott Valley,az summer/east valley Az winter
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wow! guess this graph really shows that supply side economics really doesn't work~ as those presidencies of spendthrift Reagan and bushes 1 and 2 racked up more debt by far than any other presidencies~ So much for them being other than medeocre presidencies~ they really are in the hall of shame!
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