The 20 Biggest Holders of U.S. Debt

The U.S. National Public Debt is now over $11.2 trillion. And it's climbing at a rate of $2.7 million per minute! By the time you are done reading this article, the U.S. National Public Debt will have climbed over $20 million. And Uncle Sam is running up this tab with ever-increasing speed. In the past five months alone, the U.S. government has increased National Public Debt by $1 trillion. It has been the fastest jump in U.S. history.

It took the American government a full 191 years (from 1791 until 1982) to rack up its first trillion dollars in national debt. The second and third trillions got on the scoreboard much more quickly, each within just four years. By the time George W. Bush was inaugurated as President in 2001, the National Public Debt stood at $5.7 trillion. The Bush Administration increased Public Debt by almost $4.9 trillion. Under his authority, Bush increased National Public Debt faster than nearly all of his predecessors combined.

But I'm not just picking on Bush and the Republicans. . .
National Debt stood at $10.6 trillion on the day Barrack Obama took office. But if his budget projections are accurate, President Obama's administration will run up nearly as much national debt in four years as Bush did in eight. In fact, during the eleven weeks since Obama took office, the National Public Debt has increased almost $600 billion. And the federal budget he unveiled in February projects even faster increases in the National Public Debt. It is estimated that Public Debt will rise to almost $13 trillion by the end of the fiscal year on September 30th.

The hundreds of billions of dollars being spent as part of the federal bailout of the financial markets is a leading factor in the rapid increase in government debt. And as the U.S. government spends an unprecedented amount of money to fix the nation's economy, there is a need to raise the cash to pay for it. This can only be accomplished by raising taxes, which is an very unpopular option, or through borrowing whereby America sells U.S. Treasury securities of varying maturity.

For investors, U.S. government bills, notes, and bonds are considered a safe financial product with AAA ratings from agencies such as Moody's, Standard & Poor's, and Fitch. These credit rating agencies assume a guaranteed rate of return based on the "full faith and credit of the United States." The federal government has been partially funding operations via Treasury debt securities for decades. This borrowing adds to the National Public Debt. Much of that debt is held by private sector, but about 40% is held by public entities, including parts of the government.

What is U.S. National Pubic Debt?
U.S. National Public Debt comprises Debt Held by the Public and Intragovernmental Holdings. The Debt Held by the Public is all federal debt held by individuals, corporations, state or local governments, foreign governments, and other entities outside the United States Government less Federal Financing Bank securities. Types of securities held by the public include Treasury Bills, Notes, Bonds, TIPS, United States Savings Bonds, and State and Local Government Series securities.Intragovernmental Holdings are Government Account Series securities held by Government trust funds, revolving funds, and special funds; and Federal Financing Bank securities. A small amount of marketable securities are held by government accounts.

Here are the 20 biggest holders of U.S. government debt;

#20. Republic of Ireland — $50 Billion
As a country with just 4.2 million citizens, Ireland currently holds $50 billion in U.S. government debt. Between January 2008 and January 2009, Ireland increased its holding of American debt by 221%.

#19. Germany — $56 Billion
Germany is a member of the United Nations (UN), North Atlantic Treaty Organization (NATO), Group of Eight (G8), and Organization for Economic Co-operation and Development (OECD). It is a major economic power with the world's third largest economy by nominal GDP and the fifth largest in purchasing power parity. Germany is the world's largest exporter and second largest importer of goods. The central European country controls $56 billion in U.S. Treasuries.

#18. Switzerland — $62 Billion
The neutral, landlocked, alpine country, which hosts many international organizations including the Red Cross and World Trade Organization (WTO), owns just over $62 billion in U.S. debt.

#17. Hong Kong — $72 Billion
Renowned for its expansive skyline and natural setting, Hong Kong holds about $72 billion in U.S. government debt. Hong Kong is one of the world's leading financial capitals, a major business and cultural hub, and maintains a highly-developed capitalist economy.

#16. Taiwan — $73 Billion
As another advanced, high-income Southeast Asian economy, Taiwan owns about $73 billion in U.S. Treasuries. The country's technology industry plays a key role in the global economy, as Taiwanese companies manufacture a giant portion of the world's consumer electronics.

#15. Luxembourg — $87 Billion
With a population of less than 500,000, Luxembourg owns over $87 billion in American debt. The tiny country is a founding member of the European Union (EU), NATO, UN, Benelux, and the Western European Union, reflecting a political consensus in favor of economic, political, and military integration.

#14. Depository Institutions — $107 Billion
According to the Federal Reserve Board of Governors, depository institutions, such as commercial banks, savings banks, and credit unions, hold over $107 billion in government debt.

#13. Russia — $120 Billion
Russia is the largest country in the world, covering more than an eighth of the Earth's land area. With 142 million people, it is the ninth largest by population. The transcontinental country currently holds about $120 billion in U.S. debt. This figure increased 240% between January 2008 and January 2009.

#12. United Kingdom — $124 Billion
Britain was the world's first industrialized country and the world's foremost power during the 19th and early 20th centuries. Today, the United Kingdom currently holds $124 billion in U.S. debt securities and has the fifth largest economy in the world by nominal GDP.

#11. Insurance Companies — $126 Billion
The Federal Reserve Board of Governors lists insurance companies as holding $126 billion in Treasury securities. This group includes property-casualty and life insurance firms.

#10. Brazil — $134 Billion
Brazil is the fifth largest country in the world by geographical area, occupying nearly half of South America, and the fifth most populous country. The South American economic giant holds $134 billion in U.S. debt.

#9. Caribbean Banking Centers — $177 Billion
The U.S. Treasury identifies the Bahamas, Bermuda, the Cayman Islands, the Netherlands Antilles, Panama, and the British Virgin Islands as holding $177 billion in American debt.

#8. Oil Exporters — $186 Billion
Included in the group of oil exporters are Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria. The group combines for a total of approximately $187 billion held in U.S. government debt.

#7. Other Investors — $413 Billion
This diverse group includes individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts, estates, and both corporate and non-corporate businesses for a total of $413 billion held in U.S. national debt.

#6. Pension Funds — $456 Billion
Pension funds control large amounts of cash, which is reserved for personal retirements, and are therefore obligated to make relatively safe investments, such as U.S. Treasury securities. This group includes both private and local government pension funds, totaling over $456 billion.

#5. State and Local Governments — $523 Billion
State and local governments hold over a half-trillion dollars in U.S. Treasuries. The level of investment has remained very stable over the past three years, moving within the range of $517 billion and $550 billion from 2006 to 2009.

#4. Japan — $635 Billion
As another major U.S. trade partner, the archipelago country of Japan holds a huge amount of America's debt with a stunning $635 billion. Japan has the world's second largest economy by nominal GDP and the third largest in purchasing power parity.

#3. Mainland China — $740 Billion
The economy of Mainland China is the second largest in the world after that of the United States with a GDP of almost $8 trillion by purchasing power parity. China has been the fastest-growing major nation for the past quarter of a century with an average annual GDP growth rate above 10%. As one of the world's continuous civilizations, consisting of states and cultures dating back more than six millennia, China now controls approximately $740 billion in U.S. debt.

#2. Mutual Funds — $769 Billion
Mutual funds hold the second largest amount of American debt compared to any other group. Including money market funds, mutual funds, and closed-end funds, this group of investments manages approximately $769 billion of U.S. Treasury securities.

#1. The Federal Reserve and U.S. Intragovernmental Holdings — $4,806 Billion
This probably comes to you as no surprise. The largest holder of U.S. government debt is the privately-owned Federal Reserve. The Federal Reserve system of banks and other U.S. intragovernmental holdings accounts for a stunning $4.8 trillion in U.S. Treasury debt. And with recent announcements from the Fed, another potential $1 trillion may be added to its balance sheet.

All this debt has put the United States economy and the U.S. dollar in a perilous situation, especially with the global economic recession right now. Historically, currencies were backed by precious metals. But in the current scheme of fiat money, the U.S. government is free to print all the money it wants. Consequently, the government cannot technically go bankrupt as any debtor nation can just issue more money through a practice known as seigniorage.However, a gross imbalance between the amount of new money being brought into circulation and the amount of economic goods represented by an economy is an unstable situation that can lead to hyperinflation.

By Luke Burgess
Posted on Tuesday, April 7th, 2009