Who do we exactly owe the national debt to?

[aldian159]

A girl in my PSC 120 (The American Political System) class asked who do we owe this 6+ trillion dollar debt to. After the Revolution, the fledgling nation owed 66 Million dollars, (somethink like 14+ trillion today) but owed them in the form of war bonds. It's a great question, and I don't know the answer. Any ideas from the great minds here at DU?

[kalashnikov]

1. We owe it, as in the american people are the debtors.

The govt can do 3 things about it: print more money (which raises inflation=bad), borrow in the form of bonds (higher interest rate=bad ususally), or balance the budget which is the best possible route.

[tritsofme]

6. The government could also sell of some of its assets

to pay down the debt as well.

[dennis4868]

28. I always wondered....

can the government whenever it wishes simply ring out money to pay back debts? Are there any limits to doing this? (Sorry for my ignorance here) :-)

[kentuck]

29. Yes, they can print money but...

There is such a thing as inflation. Too much money chasing too few goods. Money is not worth much if it takes $100 to buy a burger, for example.

[dennis4868]

31. Thanks for the explanation in...

layman terms :-)

[Yupster]

34. That may be the way we ultimately pay off our debt some day

You just inflate the money horribly.

Owe 10 trillion dollars? Inflate the money to the point where a loaf of bread costs a trillion dollars. Then give up 10 loaves of bread and your debts are paid off.

The bad part is that people who saved money their whole life now own a slice of bread, but it is an effective way to get out of debt.

[Brian Sweat]

44. Yes, this is called monetizing the national debt.

Most economists consider this to be an extremely bad idea that would result in rampant inflation.

[tritsofme]

2. We owe it to bondholders and those that own US securities

who are mostly domestic, but a growing and increasing concern is foreigners who hold the debt, it used to be that we could say that the debt was only owed to ourselves and not really a concern.

[librechik]

42. 40% of bonds owned by foreign banks n/t

[Yupster]

3. Has your grandma ever bought you a bond?

That's who we owe it to.

The US Government sells savings bonds. You can buy EE or I bonds at a bank. You can buy treasuries at auction or from your broker all the way to 30 years out.

Anyway, if you buy a bond, you have lent the US government money.

So to answer the question of who does the US owe this money to?

Anyone who has bought a US government bond, which is most everybody, either you or your pension funds owns some.

[La_Serpiente]

4. Good question

What happens is that when we borrow money, we take if from foreign governments. Countries like China provide us bonds I believe and then we usually just pay the interest off of it.

What does that mean? We are now hostage to European countries and Japan and China. If the US was getting too powerful or pissing off too many people, they could call the loans.

What would happen? Well, our taxes could skyroket, our currency could devalue, or we could go into default, thus screwing up our credit rating.

[RandomUser]

19. How can they call the loans?

Please see #18

[JackRiddler]

22. debt

T-bills are a form of interest-bearing savings, considered a secure investment with a guaranteed return. The potential political leverage comes on maturity, if the investors decide not to renew. So far the debt hasn't been used as a political weapon, but the day will probably come. Japan has bought very heavily into t-bills, much more than China. (Some numbers are cited in posts below...) Number one item in the U.S. federal budget is INTEREST payments on debt.

[wtmusic]

5. Anyone who buys government bonds used to pay

for $87B/year in Iraq, the rapidly escalating costs of Social Security, etc. etc. etc.

[Syrinx]

7. Bonds

We owe it to American people, but also the Japanese and Saudis.

[A HERETIC I AM]

8. All debt is underwritten

No matter what the debt, whether it is your Dept. Store credit card, your home loan, your county library or the national debt. ALL debt has to have someone, somewhere (Or a lot of someones, everywhere) saying "Yes, i will put up the money for that" Treasury bonds are how it is done in this country. I think most Americans would find it interesting to see just how much of the Bush family's portfolio is invested in Treasury Bonds. Run up the debt? No prob. We just get to cash in later!

[TexasPatriot]

11. send them to this link

http://www.publicdebt.treas.gov/sav/savpatriotlook.htm

Then they can see how grandma is financing the war on tearrr. BTW... Grandma needs to get out her checkbook.

[nadinbrzezinski]

9. good question

about 40% of it is owed to Japan and China,

Then there is the other about 30% to European states

And the rest to the American People

If any of our foreign friends want to bring us down, it is easy
just call on the debt.

We will have two choices...

1.- Default on it

2.- Pay on it and really drive this country down

[tritsofme]

10. Like I said earlier, dont overlook selling government assets to pay it

down

[nadinbrzezinski]

12. You know most "muricans are

really not familiar onto the land we are going into

But anotehr country once nationalized the oil and to pay
reparations the people sold just about anything they
had, chickens, gold, silver, cloacks, you mention it

(Mexico, after the nationalization of Oil in 1938)

You truly think we would do the same?

By the way, BushCo would be all but happy to sell
public assets as he wants to privatize the things that make
life in this country better, such as social security
and medicare

[tritsofme]

13. It would not be preferable,

but I do believe that the government holds well over $7 trillion in assets.

[Dogmudgeon]

14. Does this mean ...

... if the post-Soviet bloc, OPEC, and China start using the Euro as their reference currency instead of the Dollar, that we are, in effect, as fucked as it's possible to be?

How much debt are we in, anyway? And if the Euro does emerge as the reference currence, just whose bitch will we be?

--bkl

[tritsofme]

15. The debt ceiling for now is about $6.8 trillion

[kalashnikov]

16. theres a conspiracy theory out there

that belives we went to war with Iraq to stop it from using the euro. B.S., but still...

[rman]

20. fact is Saddam wanted to drop the dollar and use the Euro

fact is Irak using the dollar is more in the interest of the US.

[DUreader]

24. I recall that Saddam DID switch to Euro, for oil sales at least

no link on that

[Gulf Coast J]

25. Would that affect bonds though?

It's good for the US Treasury that the dollar is the quasi-official currency of the international black market. Something like 3/4th of all hundred dollar bills are in circulation outside of the US. (Just started reading Reefer Madness, but I had heard this before). There was some worry that the Euro would replace the dollar, but that will probably take awhile. The dollar has an unmatched history as a stable currency.

Bonds seem to be a different matter. We have paid off our debts for over 225 years. We can charge a lower interest rate than any other bond. I don't see how other countries referencing the euro would make our bonds less attractive.

[RandomUser]

18. Can they really "call in" the debt?

If any of our foreign friends want to bring us down, it is easy
just call on the debt.


I was under the impression that these treasury bonds have maturity dates and pay schedules. That means the bond holders can't arbitrarily decide to "call in the debt" to collapse the U.S. government.

Of course, when those bonds mature, it's time to pay up. And that's when we face the choice of defaulting, raising taxes, cutting spending, selling more bonds, or other revenue generation methods -- assuming we can't pay for it out of surplus. Inflation helps. We can always print enough money to cover it, but the inflation might ruin the economy.

But at the same time, we probably own some debts that other countries owe us as well.

[Bandit]

26. You can sell your bonds at any time but suffer a penalty if before

maturation. If you buy a hundred dollar bond for eighty dollars and will be able to sell it for a hundred dollars in twenty years that is good. If you sell that bond before the twenty years are up you only get seventy five dollars for it. You can still sell it though and if it looks like there may be a default down the road, some feel it would be smart to get out while the gettin is good.

[RichardRay]

39. Bonds can't be "called in"

A bond can be sold in the secondary market, but that doesn't call the debt from the issuer. If it's a 30 year treasury it's due in 30 years. As a matter of fact, one of the things buyers of bonds look for is protection from the issuer redeeming the bonds early. Bond holders want the cash flow they get from owning the bond; they don't want the issuer to suddenly buy the bond back and deprive them of that benefit.

The secondary market in bonds is very active. It is the alternative to equity markets. When stocks deteriortate you'll see the bond market improve.

Issuing bonds is not a bad thing. It's like any other debt - it's a way to borrow money to invest in something. If I borrow a big hunk of money and invest it in something that works then I get a big return and paying off the debt is not an issue. If I invest it unwisely the debt becomes a serious anchor.

Issueing debt to invest in things like education and public infrastructe may very well be a good idea - the return to society from educated citizens and an efficient system of production will probably be able to pay back to debt easily enough. Investing in a huge warehouse full of nuclear weapons is probably a bad idea since there is no return on that investment. It gets gray in the middle, but that's the basic idea.

[kodi]

17. Saudi Arabia $1Trillion Japan 1$Trillion China 1/4 $Trillion (T bonds)

the rest of the federal treasury bonds are held mostly by various foreign national treasuries, retirement funds and wealthy individuals.

[jonoboy]

21. it's like taking out a mortgage on the farm

when you once owned it lock stock and barrel. But that's what Governments do..sell off things that are not theirs in the first place

[adriennel]

23. ourselves!

[kentuck]

27. Not hardly !

:)

[adriennel]

30. are you joking or serious?

correct me if I'm wrong

[Spazito]

33. Post # 9 lays out who owns the "paper" on the US debt....

only 30% is domestically owed, the rest is to foreign holders.

[adriennel]

36. debt from others

do these numbers factor the amount of debt owed to the US by foreign nations?

[Spazito]

37. Yes, it refers to European nations like France, etc

the other related issue is foreign investment in the US. Foreign investment is down 40%, not good news.

[adriennel]

40. Thank you

very helpful. I want to be the best informed screaming liberal I can be : )

[fishnfla]

32. Asia is our landlord right now

In 2005-06 they are gonna ask for the rent. Be prepared.

[Beaker]

35. It's almost enough to make you want to keep * in the driver's seat-

http://seattletimes.nwsource.com/html/opinion/2001788814_plate12.html

Chinese, Japanese investments leave U.S. economy vulnerable

"..."In short, the colossus that currently bestrides the world has feet of clay. The latent fiscal crisis ... implies, at best, an empire run on a shoestring, at worst a retreat from nation-building."

This worry concerns two major Asian nations in particular — China and Japan. That's because they have invested heavily in U.S. bonds. Many Americans are aware that the Japanese government socks away heaps of yen in Treasury investments, both for safekeeping and interest yields. But the extent of China's U.S. Treasury holdings is not as well known.

But it's well known in China, which, earlier this year, became the second-biggest holder of American T-bonds (after Japan, but ahead of No. 3 United Kingdom), carrying well more than $300 billion in various ways. A recent editorial in People's Daily, China's official newspaper, expressed this concern: "In case the two countries suddenly became foes due to the Taiwan question or other issues, China might face economic sanctions and blockade imposed by the United States; then, the huge amount of U.S. T-bond assets China holds may face the political risk of being frozen."

Anything's possible — but here's another scenario that's at least as plausible. Given President Bush's penchant for costly empire building and tax cuts, it's not hard to imagine the federal deficit considerably exceeding its current level of 5 percent of gross domestic product, with inflation popping into double digits.
That would put the U.S. economy in dire straits — and perhaps give China the opening to cause trouble in the Taiwan Strait..."

When the economy craters, the party in power, and the president at the helm is going to be held responsible for decades to come.
But like I said it's almost enough...It would be better to have someone who's up to the challenges to come...and BTW, Bill Clinton would make an Ass-kickin' Secretary of State, at a time when we're going to need his skills.

[proud patriot]

38. We owe to our own Rich and Wealthy

You see they got a tax break , and use the money to
buy bonds which the states and Fed take on loan .

Honestly if you are independently wealthy right now
you can make a mint off deficiet spending by the Gov.

[RichardRay]

41. Or invest in a bond fund....

If you've got anything to invest (401K, whatever) you can also choose to invest in a bond fund that makes tax free bonds available to smaller investors. Just be ready for the low rate of return low risk, tax free investment offers. Unless one is hyper-wealthy an investment strategy that puts 100% of your available funds into treasury notes is probably not a good idea.

[Yupster]

46. And don't put

tax free municipal bonds in a retirement account.

[proud patriot]

49. The indepently wealthy don't think in short term High Risk ways

They simply want to keep the money, slowly growing
over Generations . So Each Generation has it as a
safety net .

New money comes from Gambling in short term high risk ways.

Old Money been in the system for a hundred years or more
slowly growing for generations .

[snippy]

43. There are two components of the national debt.

They are the debt held by the public and the debt held by the federal government itself. The debt held by the public is all the federal debt held by "individuals, corporations, state or local governments, foreign governments, and other entities outside of the United States government." It represents the accumulated total of the annual deficits and consists primarily of treasury bonds, notes and bills. The debt held by the federal government itself consists primarily of the "trust funds" like social security. This is "debt" that the government owes to itself.

As of June, 2003 the total national debt was $6.67 trillion. Of this amount, $3.5 trillion was publicly held and $3.2 trillion was held by the government. Of the $3.5 trillion of publicly held debt, $1.355 trillion is owned by foreign governments, foreign inviduals, and foreign institutions. The rest of the publicly held debt is owned by American individuals, state and local governments, insurance companies and mutual funds.

http://www.fms.treas.gov/bulletin/b33ofs.doc

http://www.publicdebt.treas.gov/opd/opdfaq.htm#opdfaq2

[progressivejazz]

48. Thank you, snippy.

Finally! It took until post #43 to get the answer to the question as it was asked.

[info being]

45. The rich, banking elite, mostly

That's why our government likes debt...in fact the major campaign contributors benefit directly when the debt increases. It is a way of systematically funneling money from you and I to the wealthy elite...practically a sure thing. Get it, guaranteed interest without risk?

Our education and our media have labotomized the populice in that most people don't realize this.

[info being]

47. This thread really highlights the ignorace of DU

Sorry to say. I would encourage any of your who don't understand this to RESEARCH and keep asking these difficult questions. This question is fundamental to understanding the world power structure. As you peel back the layers, you realize that the elected government is really just the puppet of the people behind the scenes - the bankers. The same people who buy our elections, control the media, etc., etc., also benefit directly from national debt.

Let's say they own shares in Lockheed, so they benefit when the government buys weapons...and they buy those weapons with borrowed money...borrowed from the rich bankers. When a greater percentage of our tax dollars go to paying interest, our money is essentially being funneled back to them. No matter, though, because these same people are behind the Federal Reserve...they are the same ones who actually CREATED our money. So the game is rigged and they can't lose, get it? That's why they say that "when you have power you don't need money." You get to invent the money. Which is why a lot of radicals out there are interested in "alternative currencies"...which are, by the way, illegal. Interesting, huh?

I'm struggling, though, to recommend any good book or site to explain this better...

[tabasco]

50. Actually, I think just the opposite

There were many well-informed answers to the question. Not all of us are experts in banking and government finance. Perhaps there are areas in which you are not an expert. If you ask a question here at DU, you will probably get good answers. If you ask me, the supporters of the borrow and spend repugs are the truly ignorant ones.