Foreign holders of U.S. Treasury securities | Hacker News Reader

Foreign holders of U.S. Treasury securities

money.cnn.com

40 pointsabhisekumar43 comments

Meanwhile, at the end of 2011, 54% of US T-bills were still held by domestic entities: http://www.gao.gov/special.pubs/longterm/debt/ownership.html

edit: and it appears that China holds 22.6% of 46%, or (unless my math is horribly wrong) only about 10% of total US debt. Which, in the grand scheme of things, really isn't that much.

Exactly. Though the CNN chart looks super cereal[1], China only owns about 8% of the US debt as of 2011[2]. Of course, that's not to say we don't have an addiction to cheap credit in this country[3].

EDIT: The parent post was edited to add the China info, making this one largely moot. Leaving here for the links (sorry about the first one ;-)

[1] http://www.youtube.com/watch?v=h05YfP_8UsU

[2] http://en.wikipedia.org/wiki/National_debt_of_the_United_Sta...

[3] http://www.usdebtclock.org/

And while everybody is arguing about China nobody notices the small little island called Japan owning almost as much as China while allegedly having a very unhealthy economy.

"Addiction" seriously?

If you can get cheap credit and do something useful GDP-wise with it, you take it. You should always take it - there's never a reason not to.

If and and. Funding wars abroad is generally never intelligent from a GDP PoV (funding wars at home at least gets you to rebuild/modernise stuff later on).

"United Kingdom includes Channel Islands and Isle of Man"

Well, I'm glad they specified that!

Though I am left wondering if the total for France includes New Caledonia... and of course, it's something of a travesty that they didn't indicate whether or not the total for Russia includes the Kaliningrad oblast.

New Caledonia isn't a tax haven. The Channel Islands and the Isle of Man are, and most likely contain quite a large proportion of the UK's t-bill holdings.

The Channel Islands are not a 'tax haven'[1], though we sometimes get called this by foreign politicians[2]. It is easy to take a cheap shot at a few islands outside your voting district. A much easier idea for a politician to sell, than a plan to balance the budget at home.

[1]http://www.jerseyfinance.je/ceo-blog/it-s-official---jersey-... [2]http://www.bbc.co.uk/news/world-europe-jersey-23902431

If an island has 0%/10% corporate tax it is considered an offshore tax haven in the minds of the people that pay 15%+, just like sometimes Ireland or Cyprus is considered that way even though their tax is not 0%.

I'm not sure what the definition of a tax haven is, but here's a page from the jersey govt. I don't study this, but it seems like it is a light/very light tax regime?

http://www.gov.je/LifeEvents/MovingToJersey/HighValueResiden...

"companies are generally taxed at 0% and there is a special 10% rate applying to certain regulated financial businesses."

"There are no 'wealth' taxes such as capital gains tax or inheritance tax."

"the first £625,000 of world wide income (including Jersey based) will be taxed at 20% thereby accruing the £125,000 per annum minimum tax contribution all personal income over £625,000 will be taxed at 1%"

http://www.theguardian.com/business/2012/nov/09/hsbc-jersey-...

UK tax authorities are in the early stages of examining a recently received leaked list of 4,388 British residents who bank with HSBC in the tax haven of Jersey.

HM Revenue and Customs confirmed it was probing the list, following a report that serious criminals were banking in the Channel Islands, for potential tax evasion.

"We can confirm we have received the data and we are studying it," HMRC said in a statement. "Clamping down on those who try to cheat the system through evading taxes and over-claiming benefits is a top priority for us, and we value the information we receive from the public and business community."

The information is the latest in a string of illegal leaks of private offshore financial details from some of Europe's most controversial tax haven jurisdictions. HMRC is reported not to have paid for the information on HSBC accounts, though that could not be confirmed.

Secret bank accounts with low tax rates? Refusal to co-operate with UK tax authorities? Sounds like a tax haven to me.

Yes, strange and inconsistent indeed. They also didn't specify wether 'The Netherlands' included the Dutch Caribbean or not. On a side note, I think that 80% of the Dutch don't know the difference between 'England' and 'UK'. I hear 'Im flying to Edinburgh tomorrow. England rocks!' all the time.

80%? Are you sure it's not 60%, the percentage that's not in Holland?

Try saying that once you step off the plane in Edinburgh.

It's worth specifying that if they've lumped them in with the UK, since the Channel Islands and the Isle of Man aren't actually part of the UK. Heck, they aren't even part of the EU either.

http://en.wikipedia.org/wiki/Terminology_of_the_British_Isle...

Wikipedia has a nice Euler diagram and the full nitty gritty details.

Wikipedia definitely has a thing for Euler diagrams[0], but this one is actually useful. Thank you very much! :)

[0] https://en.wikipedia.org/wiki/File:Supranational_European_Bo...

I don't understand why China (and Japan) did get into this so lightheartedly. I mean, the devaluation strategy applied by the US has been obvious for so long now. I'm actually surprised to not see some kind of "bank run".

Where's a better place for they to put their money/all those dollars coming in from exporting to the US?

This. China buy t-bills because they really have no other safer/better options. That they basically get a negative interest rate at that (due to inflation) is just a cost of not having the money burning a whole in their country's economy.

The real reason is that China has, for a long time (not any more... sort of), had a policy of pegging the Yuan to the Dollar. In order to do this, they needed to buy a lot of Treasuries.

Right. If China didn't buy treasuries, they would have no choice but to strengthen their currency, and since their development plans are export-oriented, this would be really bad. Japan does the same thing less effectively, by the way, even if the Yen is fully convertible.

The gov has tried to get away from a pure dollar peg, they've even played around with Euros, but today I think they are strictly back on a dollar peg.

Even if they didn't peg to the dollar....where else are they going to put all that cash? They already own as much of the other commodities as they can get their hands on.

Ultimately, they want to protect the surpluses they have accumulated. What better way to do that than put it in the safest security in the world - well to date anyway.

Sucks to be them though....they have no choice but to keep buying Treasuries.

This is the point that many people miss. Yes...America is indebted to China...but it's really China that is more at the mercy of America.

If they leave their cash in cash, inflation will kill them over the long term. They can't realistically own 100% of all the commodities...and if they did that would be self-defeating because the price would plummet over time because people would find something else to replace the scarce commodities so their holdings would become worthless.

So their prudent management of their economy has given them a cash pile that no one else can rival, and has put them at the mercy of the largest debtor nation on the planet.

Its the old "if you owe the bank $10,000 you've got a problem...if you owe the bank $10 million the bank has a problem".

The title is incredibly misleading and relies on understanding what "foreign holders of U.S. Treasury securities" in the description means and placing it in context: it's a small subset to the national debt.

The vast majority of the national debt is actually "owed" to Americans: individual and institutional American investors, the Federal Reserve, the Social Security trust fund, and federal pensions. Only about 37% of the national debt is held by foreign investors.

Er, rather, the original title, "Who we owe" was misleading. Apparently I can't edit or delete my comment anymore, even though it was only posted 6 minutes ago.

Monthly data from the treasury: http://www.treasury.gov/resource-center/data-chart-center/ti...

Foreign net purchases of US long-term debt: http://www.treasury.gov/resource-center/data-chart-center/ti...

More info: http://www.treasury.gov/resource-center/data-chart-center/ti...

Debt held by public is $11.918T.

China owns 10.7% of all treasury debt, Japan 9.5%, and all foreigners hold 46.9%. I imagine we're making the world a little nervous right now.

According to Wikipedia, the combined total public debt is $16.805 trillion:

- Debt held by the public: $11.959 trillion. $5.6 trillion or approximately 47% of the debt held by the public is owned by foreign investors (the discussed article)

- Intragovernmental holdings: $4.846 trillion

isn't "we" in the title a bit US-centric? (realize it's the original page's title, but probably deserves an edit when submitted to an external site like HN)

edit: original title of submission was "Who we owe"

Given the cnn.com domain name, I think it's pretty clear who "we" refers to.

Ted Turner?

CNN is in the US, so is YC

I honestly assumed that it was an article about who CNN owes money.

When government pays the debt with paper issued as a result of issuing more debt, it's like AAPL paying dividends per share in newly issued shares. In other words, it's de-facto default. De-jure it's not because in this case there is no court over U.S. government to proclaim its default.

And that's what bankrupcy looks like..:

No, bankruptcy would be if we default. Having debt != being bankrupt.

This is from last year, but:

The government has an “official” debt of $15.8 trillion and mounting. But wait, there’s more. This doesn’t include the liability from Social Security and Medicare. When you factor these in, the amount according to some, exceeds $120 trillion. With U.S. Federal tax revenue of just over $2.3 trillion, that puts our debt-to-income ratio somewhere around 5,082%.

I don't think that changes the fact that having debt != default.

I have a mortgage for a multiple of my current income, that doesn't mean I'm bankrupt because I'm unable to pay it off right now if demanded by the lender. Same thing with Social Security, if we had to suddenly pay out the entire amount tomorrow to everyone, yes we would be bankrupt but that's not how Social Security (or I would guess 90% or more of our debt securities) work.

Except that is not how liabilities work. On an account ledger there is no column liabilities.

Because of political posturing the whole meaning of liabilities has been distorted

Conservative economists are constantly wrong but somehow people keep believing them. Where's that runaway inflation that they've been predicting over and over again for years?

In any case, the US cannot default on its debt because it is denominated in US dollars, and we can always print more dollars. That is unless Tea Party extremists force us to jump off that cliff.

In any case, the US cannot default on its debt because it is denominated in US dollars and we can always print more dollars.

There's a name for that solution - it's called a soft default, and it's not a new idea. Clearly there is a limit to this, or politicians wouldn't bother with a budget or taxes at all - they'd just print money as required. It dilutes the value of existing currency and is a dangerous game which is not sustainable. Kingdoms and empires which have devalued their currency (and many have tried) have always paid for it in the end, with interest. It also punishes the poor disproportionately with inflation - which doesn't have to be hyperinflation to be damaging if it is sustained.

So anyone suggesting it should also be suggesting a way to balance the budget and get back to a sane monetary policy. That's not hard though - the US spends a lot on military budgets (much more than any other country in the case of the military), pensions and healthcare. You might argue how to cut and how fast, but there is a lot which could be done if necessary. Printing money is not a solution, it's just a stop-gap to avoid a hard default.

Inflation doesn't punish the poor. It punishes the savers.

Balanced budget/deficit/surplus are tools and not goals. When the business don't/can't spend it is the government job to pick up the slack (deficit). And when business is investing it makes sense for the government to not compete for the same capital and labor with the private sector (balanced/surplus).

There are different kinds of inflation of course, and if you have high wage inflation then the poor won't really be punished more than others, but asset inflation and the early stages of inflation (as we have seen in this particular crisis) do punish the poor, who in general don't have:

savings in assets other than cash

the flexibility to switch between asset classes to avoid inflation

large assets

large debts secured on assets

On top of that, too much inflation (asset or wage) does hurt everyone just as deflation does, so it is a balancing act, and simply printing more money whenever it is required is not a balanced policy. I don't agree with the current shutdown or manufactured crisis, but that's not an excuse to present money-printing as the magic solution to all government funding problems.

Balanced budget/deficit/surplus are tools and not goals

I disagree with that. It's fine to act in a counter-cyclical way as you have laid out above, and naively aiming for a balanced budget at all times would of course be damaging, but I do think a balanced budget and low inflation should be the explicit long-term goal of governments - otherwise the temptation is always to inflate their way out of difficulty, to start endless wars and never to pay down debts. If a crisis is required to borrow more, they'll invent one to do so.

It punishes the poor because prices for goods and services rise much sooner than wages or salaries. Those making the lowest wages are hurt the most by this.

If we are going to have a minimum wage, it would be a bit more sane to have it change automatically and regularly, pegged to inflation by some agreed-upon and not-constantly-screwed-around-with formula ... but that doesn't mean the BLS wouldn't fudge the numbers anyway, in order to help / hurt those in power.

Reply on news.ycombinator.com