Who Bought the $1.6 Trillion of New US National Debt Over the Past 12 Months?

As a flood of US debt washes over the globe, someone has to buy.

So far in this fiscal year, which just started on October 1, the US gross national debt – the total debt issued by the US government – has jumped by $138 billion in just 11 business days, fueled by a stupendous spending binge and big-fat tax cuts, to a breath-taking $21.654 trillion, after having jumped $1.27 trillion in fiscal 2018. And these are the good times!

So who owns and buys all this debt? This is a critical question going forward, because the flood of new debt inundating the market is spectacular, and someone better buy it. Today we got another batch of answers from the US Treasury Department’s TIC data on this increasingly edgy topic.

In August, foreign private-sector investors (banks, hedge funds, individuals, etc. outside the US) and “foreign official” investors (central banks, governments, etc.) owned $6.287 trillion of marketable Treasury securities. This was up $37.6 billion from August last year but was about flat going back to the beginning of 2016.

Over the same 12-month period through August 31, 2018, the US gross national debt jumped by $1.614 trillion. So who bought it?

The biggest foreign holders didn’t buy; they shed.

China’s holdings of Treasury securities have been inching down ever so gingerly with its holdings at the end of August at $1.165 trillion, down $37 billion from a year earlier.

Japan’s holdings fell by $72 billion year-over-year to $1.03 trillion and are now down by $210 billion from the peak at the end of 2014:

China and Japan are still by far the largest foreign creditors of the US. But their role is diminishing, based on two factors: the ballooning US debt, and their declining holdings of this debt. Their combined holdings (green line in the chart below) dropped from about 13% of total US government debt at the end of 2015 to 10.2% in August, with Japan’s holdings (blue line) accounting for 4.8%, and China’s (red line) for 5.4%:

The next dozen.

Among countries, the next 12 largest holders of US Treasuries are far behind China and Japan. Seven are tax havens for foreign corporate and/or individual entities (marked in bold in the list below). Belgium is on the list because it is home to Euroclear, a massive outfit that serves as transit point and fiduciary for all kinds of assets owned by central banks, broker dealers, commercial and investment banks, investment managers, global custodians, and supranational organizations.

The list shows the year-over-year change and the total amount of Treasury securities held; the biggest year-over-year jumps were in Brazil ($80 billion) and Belgium ($57 billion), and the biggest declines in the Cayman Islands (-$45 billion) and Taiwan (-$19 billion):

  • Brazil: +$80 billion to $318 billion
  • Ireland: +$7 billion to $316 billion
  • UK (“City of London”): +$48 billion, to $273 billion
  • Switzerland: -$16 billion to $232 billion
  • Luxembourg: +11 billion to $224 billion
  • Cayman Islands: -$45 billion to $198 billion
  • Hong Kong: -$1 billion to $193 billion
  • Saudi Arabia: +$32 billion to $170 billion
  • Taiwan: -$19 billion to $163 billion
  • Belgium: +$57 billion to $155 billion
  • India: +2 billion to $141 billion
  • Singapore: +$11 billion to $130 billion

Russia’s Treasury holdings no longer matter. It has liquidated 90% of its holdings, bringing them from $153 billion in May 2013 to just $14 billion in August.

All foreign entities combined – from central banks to individuals – owned $6.287 trillion of US Treasury securities in August, up $37.6 billion from August a year ago. This brought their ownership of US gross national debt to 29.2%.

Over the same period, the US gross national debt surged by $1.613 trillion to $21.459 trillion.

This leaves US entities and individuals as owners of the remaining 70.8% of the US debt, or $15.172 trillion. It’s a dirty job, but someone has to do it:

  • US government holdings (USG pension funds, Social Security, etc.) increased by $21 billion over the 12-month period, bringing the “debt held internally” to $5.673 trillion, or 26.4% of the gross national debt.
  • The Federal Reserve shed $152 billion through the end of August as part of its QE unwind, reducing its pile to $2.294 trillion, or 10.7% of the total.
  • American institutional and individual investors – pension funds, hedge funds, banks, insurance companies, corporations such as Apple, and regular folks like myself, directly and indirectly, added $1.517 trillion to their holdings over the 12-month period, and owned $7.185 trillion, or 33.5% of the gross national debt!

Why might American institutions and individuals be buying such large amounts of US Treasury securities?

Part of the answer is in yields. They’re becoming attractive to investors. All yields for maturities of three months and longer are now above the rate of inflation as measured by CPI (2.27%), with the three-month yield at 2.30% today and the 10-year yield at 3.16%. By comparison, the S&P 500 dividend yield is currently only 1.86%.

For the US government, this mix of rising interest rates and ballooning debt is going to get increasingly expensive.

But yield investors – a beaten down bunch – now have options beyond the sheer “financial repression” of the past 10 years. Read…  Amid Market Rout, Decade of “Financial Repression” Ends, Capital Preservation Suddenly is a Thing  
 

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  93 comments for “Who Bought the $1.6 Trillion of New US National Debt Over the Past 12 Months?

  1. Setarcos
    Oct 16, 2018 at 9:50 pm

    Treasury yields seem higher in may cases vs. CDs and can have a state tax benefit.

    However, Ally is offering up to $1,000 bonus for moving new $ to them. Must remain on their books about 3 months. So you can essentially buy up to a $100,000 CD from them for 3 months at a yield of ~6%.

    • Jon
      Oct 17, 2018 at 8:12 pm

      I don’t see that on their website. Link please

      • robt
        Oct 18, 2018 at 11:32 am

        1.9% + 1000 dollar bonus for 3 months (i.e. $4000 effective annual yield to move $100K there to a savings account) = ~5.9%, one-time 3 month yield for funds moved there.
        If left for a year, then 2.9%. $1900 + $1000 bonus.

  2. Paulo
    Oct 16, 2018 at 9:51 pm

    Steven Moore today on CNN stated that the aforementioned debt doesn’t matter because the forcasted 10 year growth pays for it with tax receipts. He stated it was the CBO that came up with this figure. Called out on it by a Washington Post reporter, he had to admit the forecast was basically WH financial wonk’s statement. Actually, he didn’t really admit it, he just stayed silent with a stupid look on his face and a nervous little laugh. He kept talking about Obama’s debt after 2008 even though he knows full well the deficits were ballooned to goose the crashing economy.

    Not answered was this question: In this supposed healthy and robust economy, isn’t right now the best time to arrest and pay down debt as opposed to adding to it?

    Someday the chickens will roost. This Debt is not okay. Borrowed money is borrowed money. If it will never be paid back then the debt will have to be inflated away through currency debasement. Either way, regular people are becoming poorer by the day. Both parents work, 7-8 year car financing, burgeoning personal debts, insane housing costs, and cement filled student loan shoes does not provide any sense of optimism. Oh yeah, interest rates are rising, too.

    Got preps, Scouts? A good Scout is always prepared, or so I’ve been told. I brought home some cash today for the hidden envelope and re-filled some Gerry cans for the winter. Just in case……. some kind of hurricane hits the BC Coast.

    Forgot to add some news. The housing slowdown has started to hit the BC Logging industry…this week. Unannounced, but in planning stage is a looming 4 month shutdown/layoff of the Englewood logging division. One sawmill is also shutting down this month for a few weeks. This is how it starts. I have seen logging shutdowns and layoffs last years.

    • Mike
      Oct 18, 2018 at 3:02 am

      Amen. Do not forget the Forbes estimated total US liabilities of over 100 trillion… Over $1000000 PER TAXPAYER. The smart money is selling off.

      The gullible or those blind to risks in chasing yields (I am talking to you pension funds) will stay until the panic selling starts. Then it will be like yelling fire in a standing room only theatre… Who will be crushed in the rush for the exits? … Pensioners and other Innocents. The pension managers will have moved on or will be insured with insurance paid by the pensioners!

      • Bob B.
        Oct 18, 2018 at 2:50 pm

        Bob B.

        Nice chart, but why did it not start with year 2000?

    • Mark
      Oct 21, 2018 at 7:33 am

      “…because the forcasted 10 year growth pays for it with tax receipts. ”

      I can assure you that if I were elected tomorrow I can make that debt look so small with “growth” that any one of you could pay it out of your coffee money. All it takes is a 20 trillion dollar note plus some pocket change given enough inflation.

      But, real growth meaning a REAL increase in organic business and higher standards of living for all not just three men (Jeff Bezos, Warren Buffet, and Bill Gates, who now have more wealth than the bottom 70% of us in America) I am afraid we not only do not have that, we have in real terms for the vast majority of us continuing declines. Yes home prices and equity are up, and so is home ownership as people panic into the housing market at any price before interest rates make that impossible, but they are taking on massive new debt to do it, the net wealth is still dropping. In the meanwhile rents for those of us not in the buyers market is rising at double digits as it has since 2014. Any more of this glorious “growth” of theirs and I will be living in my car, looking for a WiFi hotspot so I can challenge the jerks of the right who claim that there is no inflation. And what the majority of Americans are saying and those in politics and business are not hearing is do not piss on our legs and tell us it is raining. The majority will turn to socialism and the far right is going to respond as their true nature dictates, with deportations to camps in the desert.

      I have always said all political talk is actually economic talk, but now I am saying all talk is economic talk, as economics is leaving 90% of us in dire fear of what is coming. We have fully entered the last stages of hubris prior to the full collapse. The only reason for optimism at this point is the US’s relative advantages, but political instability which was a given here is now very questionable.

      I also say and will defend to the bitter end that REAL interest rates are still negative, in order to think that inflation over the span of the next ten years will be limited to 3.2% or so, or that annual inflation is now running at 2% you have to be indulging in some fine Yukon Gold.

  3. Frank
    Oct 16, 2018 at 10:00 pm

    With these kind of numbers I’m amazed at how well the USD has held up. Thank goodness as I am
    heading down to Oz this week.

    • Oct 17, 2018 at 10:03 am

      US corps don’t have to hedge the currency when they buy Treasuries. The Fed raises rates A: to normalize B: so they can lower them when the recession starts C: to cool off this tepid overheating economy C1/2: to let some pressure off the asset bubble D: to prop up the dollar so Treasury can they can sell their paper to unsuspecting foreigners which candidate Trump promised to haircut.

  4. Bad Company
    Oct 16, 2018 at 10:02 pm

    So if the trend continues with further declines in Japanese and Chinese holdings of treasuries then we’re looking at permanently higher interest rates on US treasuries to attract American buyers.

    The Fed is therefore raising rates not for the purpose of dampening inflation, but instead to attract buyers to treasuries.

    This is very very deflationary.

    Higher rates will kill the economy and the Fed will not be able to cut rates to stimulate it.

    • Oct 17, 2018 at 10:10 am

      By logic you win. Raising rates to counter inflation is by definition deflationary. Russia by ex. has cashed in their chips, makes you wonder, if the shift to all gold is going to payoff or leave them in the wake of massive global reflation. New QE. Maybe inflation is the way to payoff debt, but deflation has its proponents as well. Bob Prechter writes that the two events are similar in that one follows the other, inflation follows deflation.

    • Mike
      Oct 18, 2018 at 3:04 am

      Amen.

  5. Old dog
    Oct 16, 2018 at 10:12 pm

    “For the US government, this mix of rising interest rates and ballooning debt is going to get increasingly expensive.”

    Indeed. And if interest rates keep climbing, a few years from now (10?) interest on the debt will crowd out all the other outlays.

    I doubt the Defense department will be willing to shrink its budget ($679B or 59% of FY2018).

    The savings will have to come from the weakest link: entitlements for DA PEOPLE. We can’t afford lobbying. We’re too apathetic to vote those who don’t give a damn out of office.
    Turbulent times ahead.

    • Setarcos
      Oct 17, 2018 at 6:37 am

      The fact that you put them in groups based on whether they “give a damn” or not is interesting. One could make a compelling argument that none really care …or that all really care. So making value judgements based on what is said (or emoted) is pointless. Let’s look at actions and results for real insight.

      There was a bipartisan commission on fiscal responsibility (2010) led by Erskine Bowles & Alan Simpson. They actually put forward workable ideas and solutions. Both were subsequently shot at sunrise without a cigarette.

    • lemarem
      Oct 17, 2018 at 9:38 am

      IMO, it’s less “voter apathy” than (lack of) “choices” – or, whom to vote FOR. Example: I have exactly TWO (allowed, apparently) choices in this next election for State Governor. I want neither. So, why would I bother to “vote” FOR one or the other at all? This is “apathy”? FAIL! All politicians by default “accept” a vote FOR as an endorsement of their platforms/agendas: it never occurs to them that a vote FOR might actually be exactly nothing other than a vote AGAINST the (sole?) opponent! Case in point is the 2016 Presidential election, where it was (essentially) Hillary or Donald. While I despise Trump, I voted “Never Hillary” – the lesser of two evils, literally my prime consideration and thus paramount priority. I didn’t vote FOR Trump; I voted AGAINST Hillary.

      It’s baldly obvious to me that the ENTIRE “election process/electoral system” in the USA is in dire need of radical reform/revision. Just like the financial markets, the extant “system” is thoroughly corrupted by monied special interests – who “buy” their special pets (elected politicians) to write/pass the laws that enable the entrenched “lifer” bureaucrats to craft the resultant regulations that enable perpetuation of said corruption – such that the entire concept of “democracy in America” has become a resoundingly successful absolute delusion that is (still) embraced by the (deliberately woefully ignorant) masses of the American public.

      What’s my ANSWER to all this? Time – for status quo to attain that point of over-reach where self-implosion becomes inevitable both internally and externally. The resultant cataclysm will be SO GREAT that status quo will be completely obliterated and a wholly new paradigm (for human existence) will (eventually) evolve.

      The “death” of status quo will likely be decades-long, immensely destructive, and extremely violent.

      “Necessarily so” – or not – is not a QUESTION that can be answered by simply “voting” in rigged elections. It’s a matter of presenting actual, authentic “choices” (and thus actual, authentic “alternatives”) to those (alleged/purported ) VOTERS in their hundreds of millions in the USA – and in their billions all around the world.

      • Bill from Australia
        Oct 17, 2018 at 3:43 pm

        Well said lEMAREN you nailed it but this is not just a problem in the U.S.A it is world wide , the solutions could be dire for future generations. glad I am a baby boomer pity the kids.

    • Tony P.
      Oct 17, 2018 at 8:21 pm

      Damn, I can’t believe the defense budget is almost $700 billion annually! All in the name of national security right? We protect countries that don’t even deserve our commitment; take our protection, yet the people hate America, and burn our flag in the street? Now I see why Trump want’s to revamp our foreign policy, and cut back our NATO commitment! Taxpayer’s are tired of playing big brother to these nation’s that don’t even appreciate what we do for them, and their conflict’s they can’t afford!

      • Ian
        Oct 22, 2018 at 9:13 am

        Tony, the defense budget is NOT allocated to protecting those who protest in the countries held up as justification for those expenditures, it is to protect multinational corporate interests in those regions. The citizens protest because OUR business interests prey on them and their resources with even less compassion than they afford YOU.

  6. Dwight d Turinski
    Oct 16, 2018 at 11:01 pm

    Does anyone know what % of the Federal Budget goes to service the debt?

    • Oct 17, 2018 at 12:11 am

      Currently, the USG expenditures for interest run at an annual rate of $534 billion

      Fiscal 2018 outlays are $4.1 Trillion (including interest).

      So at this rate, interest would amount to about 13% of the total outlays, or 15% of non-interest outlays.

      • Sadie
        Oct 17, 2018 at 10:44 am

        Wolf, another great article. It’s nice to have all the numbers in one place to see the big picture. No double talk here to confuse anyone just the facts. Why can’t our congress and the media make it this simple?

      • Danlxyz
        Oct 17, 2018 at 2:08 pm

        So, last week we learned that the federal debt increased by $1.27 trillion and this week we learn that the federal deficit for 2018 was $793 billion. Why is there a difference? What is missing?

        • Oct 17, 2018 at 3:12 pm

          Danlxyz,

          Yes, this is a huge issue, and it crops up constantly.

          The government is essentially on a “cash accounting” basis, not an “accrual accounting” basis (companies use accrual accounting). So by using cash accounting, the deficit should match over time the increase in the debt. But the deficit is almost always a lot lower than the increase in the debt.

          Under government accounting, various accounting rules and also Congressional decisions decide what this deficit figure looks like and what it doesn’t contain. So you also get some smoke and mirrors.

          But the debt is real. These are securities that are tracked. We know this is money the government spent that it didn’t have, and therefore had to borrow. So to look at the real health of government finances, the only number we can trust is the debt, and the changes in that debt.

        • ewmayer
          Oct 17, 2018 at 3:35 pm

          The lower of the 2 numbers, the one that appears in MSM headlines, refers to “debt held by the public” – the difference appears in the form of “intragovernmental holdings”, which is USgov debt held by the various govt trust funds, the largest of which is social security. It’s a nice little bit of accounting sleight of hand used to make the headline number look smaller. The UST’s debt to the penny page shows both figures.

        • Oct 17, 2018 at 4:57 pm

          ewmayer,

          Good try, but your explanation is unrelated to the deficit issue as posed by Danlxyz above.

          “Debt held by the public” and “debt held internally” are both debts owed by the US government. Debt held internally represents funds that are owed by the government to the beneficiaries, such as Social Security recipients. It doesn’t matter who holds the debt. Debt is debt, in terms of what the government owes.

          The only reason why “debt held internally” is listed separately is because it is not publicly traded and is therefore not subject to the vagaries of the bond market. This debt is very stable. No one has to worry about it. Yields are in control of the government. Demand is predictable.

          But the government does have to worry about the portion that is publicly traded (where yields rise based on the Fed and market forces). It’s in the publicly traded portion where difficulties may arise when the government tries to sell bonds, and suddenly there is no demand.

          The Deficit in not related to the separation of those two types of owners of government debt. Please see my comment above on that.

        • ewmayer
          Oct 17, 2018 at 6:01 pm

          @Wolf: You are right, I should’ve actually checked the YoY numbers for all the categories. Here they are:

          Date Debt Held by the Public Intragovernmental Holdings Total Public Debt Outstanding
          09/29/2017 14,673,428,663,140.94 5,571,471,352,912.57 20,244,900,016,053.51
          09/28/2018 15,761,154,524,132.45 5,754,903,659,047.78 21,516,058,183,180.23

          The difference (2018-2017) between the figures in those 3 columns are

          Public Debt: +1.088 $Tln
          Intragovernmental Debt: +183 $Bln
          Total Debt: +1.271 $Tln

          So the total-debt increase matches Danlxyz’s figure, but the Public-Debt jump is in fact nearly 300 $Bln than the MSM-headline deficit figure, i.e. the latter piles fiction atop fiction in order to understate the true total-debt jump by roughly a half-trillion.

          Re. the stable interest rate on Intragovernmental Holdings, two questions for you:

          1. Is the interest rate somehow set in relation to that of recently-issued public debt (i.e. tied to some measure of the ‘market rate’), or can the Treasury pay whatever rate it likes on newly-issued debt of this kind? (And what is the current effective rate on those $5 Tln+ in total IG debt?) Of course the interest paid on this debt is again a circle-jerk, the “government paying itself interest” either via more debt issuance or from taxes.

          2. Should any of the trust funds begin to run a deficit rather than (as at present) a surplus which can be invested in more “special IG debt holdings”, the shortfall must be made good via added public debt issuance, yes?

        • Oct 17, 2018 at 6:46 pm

          ewmayer,

          To your question #1 — yes, and good question: The rate of interest “is determined by a formula enacted in 1960. The rate is determined at the end of each month and applies to new investments in the following month,” says the SSA. This link to the SSA provides some good Q&A about how the SS system works.

          To your question #2 — yes, any SS shortfall will eat up the prior surplus (the $2 trillion in the “Trust Fund”). It will take many years before this $2 trillion is burned through. But what this means is that the US government has to effectively pay off this debt to the Trust Fund with money it raises from investors. So that portion of the “debt held internally” gradually is replaced by “debt held publicly.”

      • KFritz
        Oct 17, 2018 at 8:11 pm

        Correct me if I’m mistaken, but these sources seem to indicate that we’re not yet paying double digit interest.

        https://www.nytimes.com/2018/09/25/business/economy/us-government-debt-interest.html

        https://www.thebalance.com/interest-on-the-national-debt-4119024

        • Oct 17, 2018 at 8:15 pm

          No one was talking about “double digit interest.” What I said was that interest expenditures account for 13% of total expenditures.

  7. Bobber
    Oct 16, 2018 at 11:34 pm

    It’s just crazy how no legislators care about the debt any more. The two political parties are in a competition to see who can promise more goodies to taxpayers. We need a balanced budget amendment more than ever.

    Problem is, 80% of the population has no financial sense and no interest in it. I guess it’s one of those things that just has to explode in peoples’ faces before they pay attention.

    Maybe we need a dictator. At least then someone would some ownership of the system.

    • Setarcos
      Oct 17, 2018 at 6:21 am

      They are the people’s mirror …and they seek perpetual reelection. So race to the bottom is circular and self-reinforcing.

      We have seen foundational laws ignored and put into play by leading voices. So it’s not hard to imagine some future pol saying “why should anyone or any country, pay debts that are someone else’s “fault””?

      If you are advocating lawlessness, then why bother with using Inflation or other more covert means of debt resolution.

      • RD Blakeslee
        Oct 17, 2018 at 10:06 am

        I agree that outright dishonor of the debt may be coming.

    • Unamused
      Oct 17, 2018 at 7:30 am

      ->It’s just crazy how no legislators care about the debt any more.

      It took Clinton eight years to balance the budget, which Bush Jr. promptly blew up. How soon we forget.

      ->Problem is, 80% of the population has no financial sense and no interest in it.

      Bankers prefer it that way because debt peonage is their goal, and which is why financial and personal immaturity and irresponsibility are corporate and federal policy.

      ->Maybe we need a dictator.

      In three weeks time you may no longer have a choice, and never will again. So much for the much-vaunted mythical American love of liberty. You will be taught to love your chains, if you have not already learned.

      Then star nor sun shall waken, nor any change of light, nor sound of waters shaken, nor any sound or sight. Nor wintry leaves nor vernal, nor days nor things diurnal – only your chains, eternal, in an eternal night.

      Be careful what you wish for. You might get it. But if it’s what you want, I have just the guy for you. He loves debt. Can’t get enough of it.

      • Bobber
        Oct 17, 2018 at 9:48 am

        I was joking on the dictator comment. I like having my appendages attached to my body.

        What we need is a balanced budget amendment. Are there any reasons NOT to have a balanced budget?

        • Unamused
          Oct 17, 2018 at 11:10 am

          Economists agree that some leeway is desirable in case something goes wrong, like an oil embargo or a meteor strike, and that it should be temporary.

          Permanent debt is symptom of mismanagement because it’s wasteful and unnecessary under normal circumstances. Except for unusual situations, like getting your teeth fixed or saving your life, debt should never be incurred unless the return on investing the borrowed money is greater than its cost, like buying a house to avoid rent, or to acquire plants and equipment to generate normal profit. Better to have reserves in case of an emergency. Going into debt to pay for a vacation is financially asinine.

          Bankers would never allow a balanced budget amendment because debt is how they make their money and how they establish and maintain their control, so obviously they prefer to be the ones who decide such things. That’s why any number of prosperous countries are deep in debt even though they could easily run surpluses.

          That said, virtually all the world’s most serious political and economic problems can be attributed to the global banking cartel, and it’s telling that this is not publicly acknowledged. Their profitable proxies are governments, militaries, and corporations. In answer to the question posed by the title of this article, they can buy any amount of debt generated by every country because they control the world’s currencies, and they will always want more because debt and debt peonage are what empowers them. They don’t much care that you know because there’s nothing you can do about it, but it can be embarrassing to the politicians.

          Q: How deep does this rabbit hole go?
          A: All the way to the bottom.

        • ewmayer
          Oct 17, 2018 at 3:40 pm

          “Are there any reasons NOT to have a balanced budget?”

          Yes, there are – this is topic regularly covered by the MMT (Modern Monetary Theory) crowd over at NakedCapitalism.com .

      • Oat
        Oct 23, 2018 at 9:14 am

        National debt went up every year during President Clintons term. I think his last year in office it went up only 17 Billion but still up. Every year if you look at the start of the National debt on Oct 1 and the balance again at the end of calender year sept 30, it always goes up.

        Looking closer you can see that in every one of those years when President Clinton and his Respublican Congress touted this accomplishment you can see two things….

        Public debt actually DECREASES! Totally cool. Intragovernmental debt increases by More that the Public Debt decreases. This makes an overall increase of the National debt

        Basically this sounds like me taking a HELOC to pay off credit cards. And then scream. This year I stopped going in debt

        Debt is debt. Was very bummed to see this.

    • Marcus
      Oct 17, 2018 at 7:39 am

      1) Term limits
      2) Ranked choice voting
      3) Focus on sustainability over max growth

      If we could all rally around these three points, independent of party or ideology, then things would improve. And by improve, I do not mean easy street. Things could get tough for a while. In the end, we would be better off.

      • polecat
        Oct 17, 2018 at 10:50 am

        4) Hand-counted PAPER ballots, In a public venue !

    • Maximus Minimus
      Oct 17, 2018 at 11:02 am

      Democracy driving itself into bankruptcy? Well, naturally. I wish Plato left behind some more specific advice rather than some generalities about democracy ending in tyranny.

  8. Chris
    Oct 17, 2018 at 12:23 am

    Hey Wolf,

    The Treasury Bulletin makes it clear who it isn’t buying US Treasury debt (banks, insurers, pension funds, savings bonds, nor state / local governments)…

    According to the Treasury Bulletin, there are really only two buyers (in size) among the US public since QE ended in late 2014…
    1- Mutual funds have added $0.9 trillion (180% increase)
    2- “Other investors” have added $1.2 trillion (220% increase)
    All other domestic buyers together (detailed above) have added about $330 billion

    BTW – According to the Treasury, “Other investors” is made up of individuals, GSE’s, brokers and dealers, bank personal trust funds and estates, corporate and non-corporate businesses, and “other investors”(?).

    BTW BTW – from the beginning of QE to the end of QE, “other investors” bought net zero US treasury debt…and since QE ended, have gone hog wild. I’m curious why? Perhaps you can help explain what we are looking at here since this is the only net buyer maintaining a bid for America’s debt? Glad to hear your thoughts on this.

    • Chris
      Oct 17, 2018 at 12:51 am

      All #’s shown above are through March, 2018…or lagging almost 7 months and $550 billion that has been issued since March.

  9. GP
    Oct 17, 2018 at 1:00 am

    “stupendous spending binge and big-fat tax cuts”

    Link to the categories of spending: https://www.whitehouse.gov/wp-content/uploads/2018/02/hist-fy2019.pdf
    (refer page 145 for mandatory spending and page 159 for discretionary spending).

    • Oct 17, 2018 at 9:01 am

      GP,

      Add up outlays by the Department of Defense, the VA, the nuclear weapons program that is part of the Energy Department, the Intelligence Community that is spread over other departments, including Homeland Security, and pretty soon you get $750 billion for 2018, and that’s the Defense-Intelligence-Industrial complex in the US.

      SS or Medicare are funds that receive direct contributions from taxpayers and pay out money to beneficiaries. They should be split out from the budget entirely, and set up as funds with their own receipts and outlays. SS contributions have been higher than payouts for years, enough so that $2 trillion has accumulated, and this $2 trillion has been lent to the rest of the government to fund the DOD and other departments.

      Defense-related agencies don’t receive their own contributions. They just suck up taxpayer and SS money. You want to cut? Start there.

      • Maximus Minimus
        Oct 17, 2018 at 11:08 am

        You might want to add to the defense (war) expenditures the portion of the interest payment on the past debt.

        • Oct 17, 2018 at 2:55 pm

          Yes, I forgot to add all kinds of things that have been tucked away somewhere :-]

      • BVian
        Oct 17, 2018 at 5:32 pm

        My understanding was that while SS is mostly solvent because there are people participating in the economy & paying into it, Medicare/Medicaid and SS Disability are on their way to being insolvent and whose costs are growing faster than the economy (correct me if I am wrong) and therefore consuming the federal budget.

      • GP
        Oct 17, 2018 at 6:49 pm

        I think we are mostly in agreement – except for the political rhetoric.
        As with any large organization, especially a government one, there is a lot of room for efficiency in DoD and VA. I am guessing at least a savings of $100B/year without impacting research and combat readiness programs.
        I am not proposing any cuts in social safety net programs. Just pointing out their sheer costs and their ponzi nature.
        For example, payroll tax revenue for 2017 was around 1.3B while spending was > $2B. This gap has been increasing over the years.
        https://fred.stlouisfed.org/release/tables?rid=53&eid=5272&od=2017-10-01#
        https://fred.stlouisfed.org/series/W780RC1Q027SBEA
        Instead of highlighting unsustainable nature of these programs, why blame POTUS 44 or POTUS 45 for the deficits?
        Separation of social insurance programs (revenue, payments, performance, savings) from rest of the tax law would be so awesome.

        • Oct 17, 2018 at 9:30 pm

          GP,

          “Social insurance” includes not only SS and Medicare but a slew of other programs such as food stamps, lousy healthcare for the poor, and the like. These programs are different from SS and Medicare.

          SS and Medicare should be set up as separate funds that receive the receipts from their contributors and pay benefits to beneficiaries.

          Programs like food stamps, Medicaid, and other federally funded safety net features should be part of the regular budget. And if the budget needs to be cut, it needs to be cut at the corporate-welfare end and at the defense end of it, and corporate subsidies need to be annulled. And if that’s not enough corporate taxes need to be raised, and there should be a tiny minuscule tax of one tenth of 1% on all transactions taking place anywhere in the US, including derivatives trading. That would take care of a lot. Don’t take the budget cutting out on the backs of the most vulnerable and poor.

        • GP
          Oct 18, 2018 at 4:18 pm

          If we just look at SS and Medicare, picture is not rosy as one would assume. From SSA report:

          https://www.ssa.gov/oact/TRSUM/ (especially table 4).

          Separating out payroll taxes and payments would be awesome because that would improve transparency.

    • MC01
      Oct 17, 2018 at 10:35 am

      Thanks for the link.
      I find the projected 22% growth in “DOD-Military” from FY2017 to FY2020 illuminating. This looks like a massive stimulus program, similar to the Weinberger Surge under Reagan, the only difference being there are no Soviet armored divisions waiting to pour through the Fulda Gap (or stop NATO from doing the same).
      If this spending binge goes ahead it will allow a whole lot of conglomerates to avoid restructuring and keep on thriving on obscenely overpriced military contracts, pulling a whole string of similarly inefficient subcontractors along with them.

  10. Brother George
    Oct 17, 2018 at 1:09 am

    I think we’re all a’headin – headin to Armegeddon!

  11. raxadian
    Oct 17, 2018 at 2:02 am

    Part of the reasons QE unwind exists is to get rid of US debt. As long as the unwind keeps going the government can rightfully claim they are doing something to reduce debt, even if is drops of water falling on a ocean sized lake.

    • nearlynapping
      Oct 17, 2018 at 8:01 am

      What

      • raxadian
        Oct 17, 2018 at 12:41 pm

        [The Federal Reserve shed $152 billionthrough the end of August as part of its QE unwind, reducing its pile to $2.294 trillion, or 10.7% of the total.]

        Quoted from this same article.

        • nearlynapping
          Oct 17, 2018 at 7:39 pm

          But the debt still exists. The creditor just changed. Probably just bought by some US pension fund or institution.

  12. Silly Me
    Oct 17, 2018 at 4:42 am

    What kind of a country can’t even print its own currency?

    • safe as milk
      Oct 17, 2018 at 7:36 am

      a european country ;)

      • Crysangle
        Oct 17, 2018 at 10:20 am

        Shhhh.

  13. makruger
    Oct 17, 2018 at 5:24 am

    Don’t you worry folks, the majority party in the U.S. Senate and House of Representatives have a grand solution to this debt crisis. They will balance that budget on the backs of the poor (as some in the minority party might say), by shredding the social safety net (AKA entitlements). This will all be perfectly fine as the majority party’s wealthy constituents don’t need them anyway.

    • Top-GUN
      Oct 17, 2018 at 6:52 am

      “They will balance that budget on the backs of the poor (as some in the minority party might say), by shredding the social safety net (AKA entitlements). ”
      Since entitlements, SS, Medicare/caid etc are UnConstitutional what is the problem with stopping those expenditures..
      I’m all for stopping those payments right now today,,, bonus,, we’d have a near balanced budget..

      • Unamused
        Oct 17, 2018 at 7:16 am

        ->Since entitlements, SS, Medicare/caid etc are UnConstitutional what is the problem with stopping those expenditures..

        The USSC found SS to be constitutional in Helvering v. Davis in 1937, and the decision applies to other programs as well.

        The problem with stopping those expenditures is that you would be consigning millions of Americans to die in the streets in the service of malignant and vicious avarice.

        -> we’d have a near balanced budget..

        No, you wouldn’t. Not even close. But it would crash the economy overnight.

      • Stillworkinghard
        Oct 17, 2018 at 8:38 am

        SS Retirement and Medicare ARE NOT ENTITLEMENTS. SS Retirement was basically a paid in insurance policy. Medicare is insurance paid into each and every month. Medicaid, welfare, food stamps are ENTITLEMENTS that serve the purpose of making more people dependent on the elected ones.
        SS Retirement and Medicare would be in good financial condition if it had been administered properly.

        • Unamused
          Oct 17, 2018 at 8:51 am

          ->SS Retirement and Medicare would be in good financial condition if it had been administered properly.

          SS has accumulated a surplus in the trillions over decades, and Medicare is also in surplus. It’s no wonder thieves are going after it.

        • Paulo
          Oct 17, 2018 at 9:02 am

          The word ‘entitlements’ was enacted in order to demonize and lay the groundwork for cuts. It has already been done with Unions and labour rights. If Snowden hadn’t come along a political rally might look like something in North Korea.

          Oh, they already do. I forgot. drip drip drip.

        • Beans
          Oct 17, 2018 at 9:59 pm

          Entitlements are really just government stimulus programs. The recipients are merely the conduits. The purpose of entitlements is to fund companies that do government work. They companies employ lots of people and wouldn’t exist without the entitlement programs. The recipients are just the pass thru.

      • economicminor
        Oct 17, 2018 at 9:21 am

        All those *entitlements* are spent into the economy almost immediately. Stopping them would indeed crash the economy including our hospital/health care system. I mean crash it as much of it is based upon debts to build and equip all those fancy hospitals. Paid for by medicare and medicaid with a little private insurance thrown in for profits.

        I just can’t figure out what the plan is, if there is a plan other than winning the Monopoly Game. And what happens when someone wins at Monopoly? The game is put away to start another time.

        As a corporation, if they aren’t up to their eyeballs in debt, then any slow down puts them as a candidate for take over. Yet to much debt in a severe slow down can put them under. We are watching a no win game with the eventual loss being devastating to our way of life.

        • Marcus
          Oct 17, 2018 at 9:40 am

          ^This
          I understand the moral hazard (and in fact real hazard) of making too many people dependent on government support. There is a reciprocal hazard that would emerge with no safety net. So, what we are really talking about is a balance. We need fair systems that put a floor on desperation when things go wrong (safety net) while not creating a culture of dependence. All that being said, I think the poster above makes a key point… entitlement money does not disappear. It immediately reenters the economy in the form of salaries for health care workers, payments to drug companies, subsidized rent for landlords, developers and investors. Money bounces off of poor people. And then it trickles right back up the ladder, along the way, even passing through supermarkets (food stamps -> go to salaries, farming, food corps). Money moving is the blood of our economy organism. Like any organism, it can support symbiotes (those who return the support in the form of added benefits to all – productivity, service, citizenship, etc), but it can also support parasites (those who take, take, take, but never provide anything in return). Everyone I know who supports entitlement programs understands this dynamic. We see the moral hazards and risks. But we also see the value and the deep integration of these programs into the economy. So “fixing” it, is not so simple as cutting it.

          In the end, as I look back through history, the same theme appears over and over again. Humans are horrible at planning but quite good at reacting. We are adaptable. Even when societies collapse, humanity persists. When the great 21st Century Everything Bubble bursts, things will get tough. But, we will adapt and survive.

        • QQQBall
          Oct 17, 2018 at 10:35 am

          Economic Monor

          “entitlement” money is borrowed or comes from taxes after the gubbermint lacky skim to administer the program; the skim includes lifetime pension and bennies. Benefits are paid out from funds that were paid in. You do realize that people paid into SS for 1/2 century? That is not welfare

          The entitlement meme in relation to SS and Medicare is a step toward cutting off or reducing benefits.

          Wasn’t Federal Debt like $4T in 2000. Thinking in graphic terms, the debt has gone parabolic.

      • AV8R
        Oct 17, 2018 at 12:29 pm

        Social Security should be means tested. If that means admitting its a Welfare program, I’m fine with it.

        For most it is supplemental to retirement planning, but for many it simply is Welfare and without it those in need would go begging at other Government sources. I ask: What difference does it make?

        • Petunia
          Oct 17, 2018 at 3:08 pm

          Social Security should not be means tested because workers don’t have the choice to not contribute. It is a forced contribution for a defined benefit and every participant should get their defined benefit.

          While disagreeing with you, I have to point out that SS is in fact means tested through the limits placed on earnings and through taxation of benefits. There are limits on how much you can earn after retirement and income taxes if your income is above a low threshold.

        • PRice
          Oct 20, 2018 at 5:23 am

          I’ll add to Petunia’s point by noting that traditional IRA withdrawals are in the same 1040 section as wages. It’s taxed as everyone understands, but the withdrawals will also increase the amount of SS received that’s taxed.
          El goodo dealo, no?

    • Unamused
      Oct 17, 2018 at 7:03 am

      All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.

      • Setarcos
        Oct 17, 2018 at 7:44 am

        True. Some masters have collected money and some have collected power (and it’s by byproduct, democide).

    • polecat
      Oct 17, 2018 at 11:01 am

      Well, wouldn’t ya know .. that the national budget, oh excuse me .. debt .. is now Classified !! .. as per Catherine Austen Fitts.

      According to her, and varified by others, that there’s another 21, or 22 TRILLION off the books, that’s not accounted for ..

      20 trillions here, 20 trillions there .. pretty soon your talkin real Depression ..

  14. Hugs
    Oct 17, 2018 at 6:33 am

    At least three things help explain TIC data.
    1) Companies are moving money back to the US. Only risk free USD asset to hold that amount of money is US treasuries. eg Siemens had the ECB create a special account to hold Siemens’ Euro holdings because of European banking risk. 2) China, Japan, et al can only accumulate dollars to buy US treasuries from trade. World trade is not very robust right now. 3) US treasuries are used as collateral. Rehypothecation makes US treasuries better than cash in some markets.

  15. polistra
    Oct 17, 2018 at 7:03 am

    More magnificent graphs. Especially the debt ceilings. Maybe we should rename them to debt coffee breaks.

  16. blindfaith
    Oct 17, 2018 at 7:22 am

    Lets see, just about every country in the world less Russia, Singapore, and Switzerland is flat broke but still getting hamburgers for their IOU’s. Just reveled that China has up to 50 trillion in ‘unrecorded’ debts that should be a part of the whole MASSIVE debt equation for China, and Japan doing just about the same thing…can’t be long before they will both look like Argentina and facing crushing interests rates. Can we be far behind? Wolf, you indicate the real interest rate for our USA debt is upwards to 15%, if true, we are indeed, on the edge of the Grand Canon cliff.

  17. safe as milk
    Oct 17, 2018 at 7:46 am

    i don’t expect the u.s. to have a problem selling treasury securities. people are desperate to get their money out of the emerging markets and europe. u.s. treasuries that pay real interest is the safest place to keep your money.

    i don’t think the fed spends as much time worrying about the stock market as people assume. i think the fed is hoping to end the “irrational exuberance” without bring on a full blown crash. i think they are very concerned about the damage that zirp did to the pension system. also, they don’t mind inflicting some pain on the gov’t to dampen our irresponsible fiscal policy.

  18. Steve Graves
    Oct 17, 2018 at 8:49 am

    It’s all part of the GOP plan. They want us to return to trillion dollar deficits so they can have an excuse to gut Social Security & Medicare. It’s a self-fulfilling strategy, albeit a hypocritical one. They’re still social Darwinists at heart, despite their rhetoric to the contrary.

    • Peter Graves
      Oct 17, 2018 at 9:39 am

      And the democrats want trillion dollar deficits to keep people under the thumb of central government by handing out candy.

      There’s no difference… it’s still the District of Corruption.

    • Setarcos
      Oct 17, 2018 at 12:17 pm

      When it comes to deficits and accumulated debt, NO Party can claim higher ground. Yes, ignore rhetoric … all rhetoric. Refocus not on what is said, but what is done and the results. If we haven’t faced evidence of where we were wrong and reconsidered our key opinions atleast a time or 2 over the years, we are simply not trying.

      I am a buyer of the TBills referenced in this article, but the Fed and the pols have a very bad habit of creating and then perpetuating/rewarding moral hazard … much more unpredictable and dangerous than old fashioned greed. After years of free drinking, the Fed is telling the alcoholics we are getting so drunk that we need to sober up. In other countries, their CBers are still paying folks to drink. What could go wrong?

  19. Tom Pfotzer
    Oct 17, 2018 at 9:55 am

    To continue to attract the latest “customer set” for Treasuries, the rates have to stay high enough to beat the other alternatives. If the stock market has peaked, and the ROW’s short-term commercial performance is (seems to be) compromised, then USG debt is the default choice.

    The Fed has telegraphed at least another 3/4 point rise in rates over the next year. Seems like that’s plenty of inducement to attract continued funding of USG debt.

    The deficit has not and will not matter unless and until the USG debt sales falter.

    The natural limit on Fed interest rate hikes is the tipping-point into the next recession.

    Once the recession starts, the Fed must reduce rates, and that might put pressure on USG debt sales.

    As I posted a few days ago, the amount of tightening (FedFundsRate increases) that the economy can tolerate before rolling over has been gradually declining over the past few decades. The Fed seems to be setting the “neutral” rate bar pretty low lately.

    I think many policy makers understand this well. The trade war is a rather dramatic, maybe even desperate effort … along with the rest of the recent foreign-policy strong-arming … to break out of the box our economy is in.

    As Wolf suggests, pretty soon the domestic populace might be choosing between entitlement payments and defense spending. I think that’s what’s behind the really viscious political gamesmanship of late.

    For balance, though, consider that Japan was able to successfully force their population to buy Japan’s gov’t bonds, funding the debt-to-gdp ratio that has grown to become the highest in the developed world. There are still a lot of moves left for the gov’t.

  20. Oct 17, 2018 at 10:15 am

    I’m waiting for US bonds 20% off. I want mine up front.

  21. Hugs
    Oct 17, 2018 at 11:02 am

    “…in relation to SS and Medicare is a step toward cutting off or reducing benefits.”

    Social Security is means tested by using Medicare. Medicare premiums have been rising and Social Security payments haven’t been rising at the same rate. Medicare part D is means testing under a different name. SS Lock Box has a big Medicare hole in it.

  22. nss
    Oct 18, 2018 at 5:32 am

    It seems like the majority of the money coming in to buy the debt is american in origin. Does that mean that is some sort of way we are monetizing our debt?

    • Oct 18, 2018 at 7:54 am

      It does not mean that. All it means is that these Treasury securities are finding buyers in the US at these higher yields (better deal than before), and that dollar hedging is very expensive these days, so non-dollar-based investors would not be able to currency-hedge their bet on dollar-Treasuries, which reduces the appeal of Treasuries for foreign entities, but not for American entities.

  23. Silly Me
    Oct 18, 2018 at 6:02 am

    The “final solution” to the debt crisis seems to be the following course of planned demolition:

    The US government reassumes the right to issue dollars, repays its debts, which will cause a systemic collapse. At that point, the right will be returned to the private bank that has been usurping it since 1913, the Federal Reserve.

    As Huxley said, in an ideal world, the slaves love their slavery. And as usual, profits will remain privatized, while losses will be covered by the public.

  24. Oct 18, 2018 at 10:19 pm

    The inference towards the end of the recent book “Moneyland” by Oliver Burroughs at Page 252 and thereafter is that USA is closing the world’s tax havens except those in the continental USA (Delaware, Nevada, South Dakota, Wyoming, etc.). The OECD’s Common Reporting Standard and Washington’s Foreign Account Tax Compliance Act have made USA the sole tax haven on the planet. The restrictive terms of thr agreements are enforceable against the old treasure islands but not against USA.

    Tax havens that have signed up to the Standards are listed at http://www.oecd.org/ctp/exchange-of-tax-information/MCAA-Signatories.pdf. They agree to exchange information on bank account holders with other jurisdictions. A primary effect is to ensure that the former surplus revenue from tax havens will now go directly to the Fed. This should prop-up the USD a bit longer.

  25. jannie
    Oct 19, 2018 at 3:39 pm

    So…on the list of big holders of US debt is countries that receive aid from the US. So…..they get free $$$ from the US and buy the US Treasury notes. Great deal! Another deal for DJT to go after.

  26. shelly weiner
    Oct 20, 2018 at 10:44 am

    the national -gov’t debt is deliberate-or at least exploited–to create as society of serfs–it is not just foolish spending
    it brilliant-deadly-and hidden from view
    1-be able to print , create all the money you want
    2-and then force your constituency to borrow from you–thru gov’t deficit funding–you can easily bribe the congress to do this
    3-reach the point where the public, thru its gov’t. has to borrow more from you to just pay the interest
    4-from that point on all money and power will eventually accrue to the creditor class, the int’l banking cartel

    {resembles the mafia, dosent it?]

  27. Daniel S.
    Oct 23, 2018 at 4:06 pm

    The in the know and in power have dumped the debt onto individuals at the top of the price curve, as yields climb the price of that debt falls and all the losses are with un-interested individuals.. the same individuals paying the purchasers to look after their wealth.

  28. Jim Volstad
    Oct 23, 2018 at 4:53 pm

    Maybe the Treasury should mint a Trillion dollar coin. Screw the Fed.

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