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Comment by drcongo | Hacker News Reader

I'm painfully aware that this is a stupid question, but who do they owe that to?

As others said, U.S. Treasury bonds are widely held across the globe.

But the largest single holder is actually the U.S. federal government itself, which holds about 20% of the total debt as “intragovernmental” debt. These are real, legally binding financial obligations to federal agencies, most famously to Social Security.

US treasuries (bonds, notes and bills) are mostly considered as good as cash. They're used heavily in the international banking system (for payments, and as loan collateral themselves). They're also held to maturity by large institutional investors with predictable liabilities (ie payments) like pension and insurance funds. Banks will hold some of their assets (eg deposits) in treasuries too.

Also foreign governments and central banks will have holdings. Tether (the cryptocoin) is largely backed by US treasuries.

Bonds for the most part.

So who owns the obligations? Many individuals and foreign states.

So who's that, it doesn't give any sense of proportion.

It's complicated as one can never be sure how a bond get wrapped into another product sold in foreign, and often obscurely complex structures. But we do have some estimated data points.

Contrary to another comment pointing at China, this country accounts only for tiny fraction of the overall amount credited.

For example, the UK, Japan, individually own more U.S bonds than China.

Anyhow they each represent around 1 trillion, so where is the rest coming from?

The majority of creditors in value are U.S entities and U.S individuals.

Some may recall a bank in California that went bankrupt a year or two ago. Unveiling a financial gig certain institutions enjoy doing: accumulate bonds as it always pays.

A few references: https://www.nasdaq.com/articles/20-countries-holding-most-us...

https://www.crfb.org/papers/qa-gross-debt-versus-debt-held-p...

Edit: another comment nicely broke down list of which U.S entities own what.

This is the big misnomer - it's debt on the U.S. balance sheet, but is a credit on someone else's balance sheet. By itself, it's not necessarily bad; it really depends on who the debt is issued to, why, and on what terms.

Time would be better spent talking about other issues, but national debt is a simple number politicians can complain about rather than talking about the more complex issues that really impact the rest of us.

Can you elaborate? National debt seems like one of the few relatively straightforward metrics one could use to understand the state's fiscal responsibility (or irresponsibility).

It's similar to the problems with GDP, CPI, U-3 (Unemployment rate), etc. You really need at least 30-100 metrics or more to get a grasp of what's really happening in a complex eonomy. Debt can be good if it causes more growth in the economy, and bad if just gets trapped in a few foreign investment funds. But the number by itself doesn't tell us any of that, yet that is all that grabs the focus.

Often politicians will try to shrink or control the debt without deeply investiagting the true causes, because the real causes may be politically inconvenient.

That sounds a little like saying, "Don't check my bank account balance, because I've got lots of things in motion and some of them are going to pay out big." Might be true but the balance still says a lot about your general posture, how aggressive/risky you are, how defensive.

National debt tends to confuse people, because they imagine the government like a household, or maybe a small business: You have some income (taxes), which you use to spend on things (government services, military, social security, etc). If you run out of money, you have to borrow it. If you borrow too much, people stop lending you money, you're up shit creek and have to cut spending.

That's not really the case with a nation-state with sovereign control over their own monetary policy. In that case, currency works a lot more like an MMO currency like RuneScape gold. The government gets to set up sources (government spending, killing goblins), and sinks (taxes, buying stuff from in-game shops), with the risk of screwing up the balance being a shift in perception of value of the currency. Just like how I never need to worry that RuneScape will run out of gold, and the next goblin I kill won't drop any, the government can't run out of money. It can always print more. Taxes are used to induce a demand for the currency (since you need to pay your taxes in USD), creating a flow of money through the economy. Tax too much, or print too little, and you make people expect the money to gain value, and shrink the value proposition of investment compared to hoarding money. Print too much, or tax too little and you end up with money piling up in some subset of your participant's balance sheets, shifting people's expectation to the money being worth less in the future, leading to a devaluation of said currency (since the people with a bunch of money are willing to spend more of it for the same good).

The key is that whole "expectation of future value" element, which differentiates government debt from private debt. It's a much looser coupling than "I have 45 cents in my bank account, I can't buy groceries this month". A currency can be useful, valuable, and perfectly suitable even if it loses a couple percent of its value every year, forever. That would reflect as a forever increasing national debt, but it's fine, because national debt doesn't matter.

Unexpected changes to the rate of change of the national debt is the thing that matters, and even then only indirectly, by way of the public perception of the value of the currency, which leads to the inflation/deflation rate.

That all tracks, and it's a helpful framing. I think the alarmism here is more about the rate of increase rather than the absolute value.

Not even someone else's! A significant amount of the national debt is owed to themselves.

At the end of the day, in the world of fiat currency, taxes and spending are not intrinsically linked. They're mediated by public perception of the value of the currency, which can be sensitive to unexpected speed ups of the money printers, but is frankly unaffected by the normal rate.

The entire financial services industry. Even including some of the cryptocurrency parts: USDC is backed by a Blackrock account holding Treasury bills.

(a default on the debt, any of it, would be an extinction level event for the global financial services industry and then most real US industries in the following weeks)

When all the dust settles, what has actually changed?

Who knows? The possible outcomes range from Argentina to Zimbabwe.

In rough order of size of treasure holdings

- The Federal Reserve

- Intergovernmental holdings

- Mutual Funds

- state and local gov

- Pension funds

- Insurance companies

- Deposit insurance

- Foreign holdings of all types

>Deposit insurance

Does this mean the FDIC's Deposit Insurance Fund?

Yes, DIF is funded by a mix of insurance premiums charged to banks and investments which are primarily US treasuries.

Debt is just promises for future currency. One persons debt is another person asset. But what happens is when you "over promise" by accumulating too much debt then all those people with debt as their assets think they have X dollars, but if there's more debt than underlying resources can cover then it might end up all those people only end up getting like 0.65X or possibly even lower. Kind of like a bank run

Anyone who has bought US treasuries/bonds, which includes regular people, but also most nation states.

Thank you for asking the question. I wondered about this in the back of my mind.

Anyone who owns US treasuries. That may be you. But I am sure many here own US debt. Institutions and sovereign entities own quite a bit. The US Social Security Trust Fund is a major holder as well.

Thank you all for the excellent answers, that's helped my brain model it somewhat.

raises hand

I buy Treasury products for my investment portfolio sometimes.

I-bonds had a great buying opportunity a couple years ago.

It's not a stupid question

Weirdly themselves. Makes my head hurt but the central bank, the social security fund and some other bits of US government basically own most of the national debt. Then it's the Japanese, British, Chinese and Warren Buffet. But less than you would guess.

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