Who Bought the Huge $1.26 Trillion of New US Government Debt over the Past 12 Months?

There was strong appetite. Only the Fed shed them. Here’s who bought.

Over the 12 months through February 2019, the US gross national debt ballooned by $1.26 trillion to $22.1 trillion. Someone had to buy this new pile of debt – but who? That question is getting increasingly crucial as this debt is ballooning even in good economic times, fueled by deficits that Fed chairman Jerome Powell consistently calls “unsustainable.” Today, the Treasury Department’s TIC data shed some light on that question.

This US government debt that cost a record $523 billion in interest in fiscal 2018 is an asset for investors – the creditors of the US. The US relies on them to fund its huge deficits.

The foreign creditors.

China, the largest foreign creditor of the US, dumped $46 billion of its holdings of marketable Treasury securities over the 12-month period, according to the Treasury Department’s TIC data. But over the last three months, China added to its holdings. Those holdings at the end of February stood at $1.13 trillion (the peak was in February 2016 at $1.25 trillion).

Japan, the second largest foreign creditor of the US, added $13 billion in Treasury securities to its holdings over the 12 months. In January alone, it added $28 billion. Japan’s holdings of Treasuries now stand at $1.07 trillion (having peaked at the end of 2014 at $1.24 trillion ).

China and Japan are by far the largest foreign creditors to the US, but their relative importance has edged down over the past few years, as their holdings have declined while the US gross national debt has ballooned. Their combined holdings of US Treasuries amount to a share of 10.0% of the US gross national debt, with China holding 5.1% (red line) and Japan holding 4.8% (blue line):

All foreign investors combined raised their holdings of Treasury securities over the 12-month period through February by $164 billion, to $6.39 trillion.

The Treasury Department divides foreign investors into “Foreign official” holders (foreign central banks and government entities) and private-sector investors.

  • Foreign official holders reduced their holdings by $6 billion over the 12 months, to $4.02 trillion at the end of February.
  • But private-sector investors (foreign hedge funds, banks, individuals, etc.) increased their holdings by $170 billion, to $2.36 trillion.

Other Major Foreign Creditors of the US

The other foreign creditors cannot hold a candle to China and Japan, with the top four runners-up combined not being able to match China’s holdings. Most of the runners-up are tax havens for foreign corporate and/or individual entities. Belgium is where Euroclear operates; it holds about $32 trillion in assets in fiduciary accounts (the Treasury holdings in February 2018 are shown in parenthesis):

  • Brazil: $308 billion ($273 billion)
  • UK (“City of London”): $284 billion ($251 billion)
  • Ireland: $274 billion ($314 billion)
  • Luxembourg: $227 billion ($219 billion)
  • Switzerland: $226 billion ($248 billion)
  • Cayman Islands: $210 billion ($177 billion).
  • Hong Kong: $202 billion ($197 billion)
  • Belgium: $182 billion ($126 billion)
  • Saudi Arabia: $167 billion ($151 billion)

Other than Foreign Investors, who bought or dumped Treasuries?

Over the 12 months through February, all foreign investors increased their holdings by $164 billion, as we have seen above. But the government increased its gross national debt by $1.26 trillion over the same period. This leaves $1.096 trillion that someone else must have bought. Who?

Not the Fed. It shed $249 billion in the 12 months as part of its QE unwind, bringing its holdings down to $2.175 trillion as of the end of February.

US government entities added $160 billion in Treasuries over the 12 months, bringing their total to $5.86 trillion. This “debt held internally” is held by government pension funds, the Social Security Trust Fund, etc. They have invested their beneficiaries’ money in US Treasury securities. This “debt held internally” is owed the beneficiaries of those funds.

So over the 12 months, foreign investors added $164 billion, the Fed shed $249 billion, and US government entities added $160 billion, for a net increase of Treasury holdings by all three of $45 billion. But the total gross national debt increased by $1.26 trillion. And someone must have bought $1.19 trillion. Who? The only one left…

American institutions and individuals added $1.19 trillion of US Treasuries to their holdings, now at $7.7 trillion. US banks are large holders, with $500 billion in Treasury holdings at the end of Q4, according to the FDIC. Other large US institutional holders include pension funds, mutual funds, hedge funds, corporations, and others. Individuals directly or indirectly also hold a portion of these $7.7 trillion in Treasury securities. In total, these American institutions and individuals held 34.8% of the US gross national debt:

Foreign investors sharply increased their holdings of US Treasury securities over December, January, and February, adding $185 billion, while over the prior nine months, they had cut their holdings. These three months were the period when long-term yields sagged from the peak in November. And long-term yields sagged because of strong demand for these securities drove up prices, and part of this demand over those three months came from foreign investors. But the outstanding feature of the current landscape for US Treasury securities is that American institutions and individuals are buying them at a ravenous clip.

What’s the Fed Trying to Say? Read... My Fancy-Schmancy “Fed Hawk-o-Meter” Jumps 18%, “Patient” Gets Slashed, “Moderated” Disappears

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  66 comments for “Who Bought the Huge $1.26 Trillion of New US Government Debt over the Past 12 Months?

  1. Old dog says:

    Outstanding piece, as always.

    I have subscribed to the Treasury’s email alerts for several years and I haven’t been able to figure a cogent explanation about the offering amount for each issue.

    For example, last Thursday I got an auction alert for 5-year TIPS. The offering amount is $17B. Why not $1B, or $10B? Who, or what, determines this amount?

    Does the offering amount in, say, the 10y depend on the term and type of the other issues (1y, 5y, 30y…), or each maturity follows its own cycle?

    • Iamafan says:

      Look at the quarterly refund announcements by the TBAC. They give you the whole schedule and by tenor by auction for the quater. Then the Fed SOMA add on reinvestments can be put on top to total the expected amounts. No surprises here including you expect the primary dealers to overbid.

    • Depends on whether its an opening issue or a reissue. The first issues of each calendar year are new issues I believe and thereafter they reissue, using the same fixed rate, so occasionally you get some disparities in the value to par. Reissues are more predictable. Inflation expectations are pretty low right now, so you might expect a discount, especially if rates edge higher later this year. TIP buyers prefer low interest rates, if you watch the ETF you see it has rallied with the markets and the Fed walk back on the rate hike policy.

      • Iamafan says:

        Only 2year FRNs, 10year notes, 5-10-30year TIPs and 30 year bonds are reopened.
        The rest no.

    • Mike says:

      Now that Assange has been silenced, we must focus on Powell’s statement that this is unsustainable. What does that mean?

      Government will not let people see the inevitable, dire consequences of current and all post 1994 policies. Notice how countries with good incomes are buying gold now.

  2. fjcruiserdxb says:

    One question. Why would individual rush into buying overpriced US Treasuries when they can buy short term bills at better yield due to the curve inversion. I can understand American institutions who may be restricted by the amount of cash they can hold but not individuals.

    • Iamafan says:

      Check the yield curve lately. The sag in the middle is flattening. We got a steepener that reduced T bill yields so the longer term notes “look” better cosmetically.

      You cannot foretell where the T bill yields will be in the future. The market seems to be guessing lower for a while. So to guarantee a yield longer, then you might want to buy a treasury Note.

      The 2 year FRN has a spread of 0.115% over the 13 week high rate which lately printed 2.38 giving you a total yield of 2.495%. The yield goes up and down weekly with the 13 week auction results. It is not bad at all this week.

    • nofreelunch says:

      If you believe a recession is coming sometime in the next few years, at which time interest rates will go back to zero, or below, short term debt will mature and you will be stuck with no interest bonds going forward, whereas long term debt will still hold today’s rates through a recession, which are considerably better than negative.

      • Iamafan says:

        That’s right. That is the main difference between a Floating Rate Note (FRN) and a Fixed Coupon Note. You take chances.

    • Wolf Richter says:

      The data here includes all maturities, from 4-week bills to 30-year bonds. And yes, individuals are buying bills. But those who bet that yields will be lower in future years might be tempted to buy 10-year notes, for example, to lock in 2.5% for 10 years, or to sell at a gain after yields drop. This bet might be wrong, but when you invest, you always make a decision about what the future might look like.

      • GP says:

        fwiw, I have 4-week T-Bill ladder going with my emergency funds (money never more than 4 weeks away). Returns are better than online savings accounts.

        For long term rate-locking, I have some online bank CDs of 5 year term (rates easily beat those of long term treasuries).

      • Laughing Eagle says:

        Wall Street can sell trash with their glorious stories for long term investments for the lower 80% easily. Will the delusional paper will be worth what they it is? It is so easy to brainwash, built on the distant past history.
        It is all easy money if you invest in paper. Build a retirement fund. Delusions of grandeur. Past history changed in 2008.
        If you do not own anything other than paper, good luck.

  3. Iamafan says:

    By the end of Feb 2019, there were 15.7593 Trillion of “outstanding”(marketable) treasuries out there.
    12 months ending Feb 2019, the amount of treasuries “issued” totaled 10.8397 trillion for 12 months. Feb alone was already 1.0041 trillion.
    Now remember these are only Treasuries. You will be surprised if you add let’s say Agency MBS to the picture.

    At the end of 2018, there were 7.2687 Trillion of Agency Residential MBS and 1.1032 Trillion of Agency CMO “outstanding” for a total of 8.3719 Trillion outstanding. For Feb 2019 alone, there was 89.6 billion of new Agency MBS and CMO issued (as opposed to TBA or to-be-announced). There is also some PRIVATE issuance.

    Considering that there are other kinds of debt being securitized (e.g. automobile, student loans, credit cards, etc.), I think you get the big picture – we are drowning in debt.

    When you look at TICDATA, you need to differentiate between TRANSACTIONS versus HOLDINGS.
    While Foreigners HOLD about 6.3851 Trillion of Treasury Securities, it is interesting to compute their NET (purchases minus sales) transactions.
    In the last five (5) years, on the aggregate, they have been dumping Treasuries and Equity (stocks) and accumulating more Agency and Corporate Bonds.

    You might have to look at several pages of the Treasury, Federal Reserve and SIFMA and add numbers up, compute percentages; but the amount of raw knowledge you will get is amazing. A lot better than just reading the news out there. At least maybe it is not fake.

    • nick kelly says:

      ‘This US government debt that cost a record $523 billion in interest in fiscal 2018 is an asset for investors…’

      And to think that when Reagan took office the accumulated DEBT of the US since independence, two world wars etc. etc was ONE trillion and now the interest alone is half that per year and rising.

      The latest cave by the Fed has damaged the institution and signaled Trump it can be bullied further. Trump wants free money. He actually told former economic adviser Cohen to ‘just print it’ when they were discussing budget priorities. Cohen has since resigned NOT been fired.
      His replacement Larry Kudlow, who should know better, is echoing Trump in a call for cheaper money.

      For every 10 comments in this space criticizing monetary policy, the Fed’s job,there is maybe one criticizing fiscal policy, or spending. But no amount of monetary engineering can solve an overspending problem.

      The Fed needs to develop blinkers (if it can’t grow a pair) and to remember: to have a soft landing you need to descend.

  4. Wendy says:

    As long as treasuries can be held and traded in opaque accounts in tax haven countries, it is almost senseless to try to ascertain who is buying or dumping them. Are we really to believe what China is saying about their purchases? And if a country suddenly dumped all their treasuries, can we really rely on our Govt to report this market spooking event? Just like Madoff, for the charade to continue, “data” needs to be published, and the holders need to not question the data. Powell says the trend is not sustainable, which is true. So the game of musical chairs continues, until one day the music stops, but remember these treasuries are backed by the full faith and credit of the worlds largest printing press.

    I used to scratch my head as to why Ray Dalio would invest 5% of Bridgewater’s billions in GLD, but maybe he is on to something.

    But, by raising questions about treasuries, you Wolf may be credited as one of the first to question the Emperor’s wardrobe.

    • Iamafan says:

      Actually there are somethings you can do. I’ll give you an example. Russia.
      They dumped the US dollar and supposedly bought Gold for their reserves.

      You can see the TICDATA report for Russia here:

      Russia is country code 16101.
      You can see they SOLD a lot of Treasuries in 2018.

      County Code 99996 means ALL Countries.
      As you can see for Feb 2019, while they purchased 1,584,657 million of Treasuries, they also sold 1,564,747 million. So the NET purchase is only about $20 billion for Feb.
      That’s not a lot of money considering Treasury is auctioning more than a trillion a month.

      Anyway, the big buyer of Treasuries is now YOU or US the American taxpayer.

      I do understand your point about those surrogate countries for China.
      They hold securities very much larger than their GDPs.
      The way I understand it is that much of the dollars China uses for trade do not go back to China but remain offshore. Hence they have two currencies – offshore and onshore Yuan.

      • Justme says:

        >>Hence they have two currencies – offshore and onshore Yuan.

        What does that mean? Yuan (RMB) that are being bought/sold and settled against onshore versus offshore USD holdings?

        Great data by the way, always enjoy good data sources.

        • Iamafan says:

          The onshore is CNY and the offshore is CNH. There is a spread.

        • Justme says:

          But do you know the answer as to what is the real difference between onshore and offshore? Is it show trades are settled, as I suggested?

    • RD Blakeslee says:

      Kudos! Nice metaphor.

      “but remember these treasuries are backed by the full faith and credit of the worlds largest printing press”.

      • Paulo says:

        This debt/financialization orgy has made me throw up my hands. When I was a kid I once asked my Dad about Govt. debt and he said it was always made irrelevant as long as growth increased at a faster pace. Of course the data now used to demonstrate growth has been suspect for a long long time, plus manufacturing has been offshored and long-term investments have morphed into a weekend casino run.

        I am now at the point when I look at a Country’s health I appraise its population as per arable land, adequate water reserves, available resources, education and training levels in the general population, available/affordable health services, and the rule of law (does it exist?). I guess we also have to look at the percentage of the Leisure Class, what is produced and who produces it, and who really owns the means of production?

        I’m kind of thinking the US, Canada, and the EU (maybe all the so-called developed economies?) need to get their Wazoo checked out before it turns terminal. Until then, I’ll go back to the list of real assets in the previous paragragh. (Note to self: fill the cash envelope today, the woodshed by May, and water the tomato seedlings).

      • DR DOOM says:

        The institutions of non-producers are buying the debt because they have to. Hillbilly logic dictates that you do not eat the seed corn.We are .

    • Wolf Richter says:


      It’s not as opaque as you think.

      Treasuries exist only in electronic form (not paper), and they have CUSIP numbers, and their holders are known because trades have to be recorded electronically because that’s the only way the securities exist.

      This is not like unregistered paper bearer bonds that you could just hand around anonymously.

      If a fiduciary account holds Treasuries, that fiduciary account is known as the holder though the beneficial owner of that account may be obscured. But that amount held in fiduciary accounts at financial centers such as Belgium is not huge compared to the total outstanding.

      • Wendy says:

        I seem to remember one of your posts from last year where Belgium was at one point in time a major player in treasuries. As long as beneficial owners true identity can remain opaque, you will not be able to answer your question from your post as to who is buying, otherwise you would have figured it out. You are trying to apply logic to a Shell Game. Good luck with that.

        • Wolf Richter says:

          The Treasury holdings registered in Belgium over the past six years — since I started following this — have fluctuated between $120 billion and $390 billion (early 2014). But that surge in 2014 was an outlier. At about $180 billion now, they’re back in the range where they had been most of the time. That represents less than 1% of total Treasuries outstanding. So yes, there is some buying and selling going on that remains opaque. But it’s small compared to the vast $22 trillion Treasury debt.

        • safe as milk says:

          belgium is the one to watch. it is a rough yardstick of the confidence that private money inside the eu has for european banking system. it’s up almost 50% over last year which means a lot of people think it’s time to get their money out while they still can.

        • Iamafan says:

          Belgium is one tricky one, a very tricky one.
          If you look at Net Transactions, Belgium is a big dumper of both US and Foreign Securities.
          But if you look at HOLDINGS in the Monthly MFH table, there seems to be an “upward” trend in its treasury holdings. So it does not make sense unless Belgium is buying from a 3rd country and selling it in the USA.

    • Because those bonds never leave the Treasury. They are held in account. If China sells their bonds UST just changes the name of the owner, They are concerned about who owns their bonds. At the first China dump a young hedge fund manager bought bonds in size, and he got a personal audience with Bernanke, to grill him about Fed policy. Not sure who was calling who ‘sir’. The point of sterilization has been missed, it was only a delaying tactic. As the chart shows when China dumps that creates a capital flight problem. Right now they are adding to their holdings to save with face with 45, and get a trade deal.

  5. Migrant Worker says:

    To my untrained eye this begins to look a bit like the situation in Japan: a massive debt, but almost costless to carry due to very low interest rate, which in turn is possible to achieve and maintain because most of the debt is held within the country which means controlling interest rates much easier. Does that sound plausible as a parallel – not now perhaps, but say as a goal to be reached some years in the future? Japan may have had two lost decades, but it is still well off. Politically this may be a preferable solution to a depression caused by being abandoned by external creditors.

    • Rcohn says:

      Let’s expand upon the Japonification argument.
      Governments can easily issue zero coupon debt. If the central bank buys this debt and monetizes this debt and the markets accepts this monetization ( like in Japan)than there is no cost to government debt.
      If there is no cost to government debt and the amount of debt does not matter, then there is no governor on government spending . ANY and all projects are financially viable . And there is no need for taxes to help balance the budget.

      • Some Guy says:

        “If there is no cost to government debt and the amount of debt does not matter, then there is no governor on government spending .”

        The governor is the amount of real resources available – if you try to spend beyond the real capacity of the economy, you will get inflation. As long as there is (relevant) unemployment and spare industrial capacity, yes there is no reason not to put those resources to use due to some imagined lack of paper/electronic IOUs

        • Rcohn says:

          You bring up inflation
          Do you use the CPI
          or the Feds PCE which has consistently understated the CPI by almost 1/2 % for a protracted period
          Do you use hedonic and substitution effects which ALWAYS understate inflation and are only about 30 years old or do you use prices that people actually pay.
          Do you use the made up BS term “owner equivalent rents” or do you use actual housing prices.

          Spare industrial capacity
          What does this mean when services dominate our economy’s.

          Venezuala has tons of spare industrial capacity . Why have they had a little inflation problem?

  6. Gershon says:

    What “investor” in their right mind is going to buy monetized U.S. debt that is going to be printed away by the Fed?

    • Wendy says:

      Because that investment is still the cleanest shirt in the hamper of choices.

    • Iamafan says:

      Where else can you put your “hard earned” savings AND have:
      Return OF capital (safety) and
      Liquidity (can use my money for medical bills and emergencies)?

      I am retired and on Medicare (elected to wait for higher SS retirement benefits), so you understand where I am coming from.
      I got a stroke last year and survived.
      I might not have the time to wait for a “recovery” should the market have a draw down.
      How much choice do I have? I’m lucky for 2.4% no matter how small that might be. It’s all a matter of necessity. Simply put, I live on the interest of my savings. That’s why put most of eggs in this basket.

      • RD Blakeslee says:

        Our relaxed attitude (“life happens”) saves us from wasting our life’s time on despair, but the hard truth is fiat dollar savers have been screwed ever since Bernanke’s time.

        • Wendy says:

          Agreed, but the initial foreplay started with Nixon and cessation of the gold convertibility in 1971.

      • Rcohn says:

        The Federal reserve and our politicians have made the decision to steal money from you and give it to the corporations and the top 1/10% .
        Just one question . After subtracting the increase in Medicare , how much has your social security increased.

      • Johnny W. says:

        Iamafan, 2yr Treasuries might be a good place to ride this one out. That’s what I’m doing. Along with 12.5% in PM (Miners & Bullion).
        Still own Gazprom & seem to be stuck for life with Transocean LOL.
        Otherwise, I intend to be ready when this dam finally breaks.

  7. ken says:

    Be hilarious to get a list of exactly who and how much over the year rather than how much they’re presently holding and percentage pie charts. But to be honest, (a missing attribute in today’s financials), it would probably be as believable as the rest of data released by Corpgov. E for effort though….

  8. Bologna says:

    Jerome Powell the Carlyle Group guy said this is unsustainable ?really he said that ?wouldn’t the stock market crash if he used those words it’s like in some articles it says QE is coming ,I don’t recall him saying that anywhere but I would like a link to where he said those words unsustainable

    • Dale says:


      But that is good news for the markets! There is plenty of demand for bonds, as Wolf has related superbly above. The stock market, meanwhile, reads ‘the debt trajectory is unsustainable’ to mean that the Fed will lower interest rates, resume QE, and otherwise do whatever else is required to keep the bubbles going, regardless of its consequences to the real economy.

      I still hold out some hope that Jerome Powell, who per the Fed transcripts has been observing bubble behavior for 7 years now, will not continue damaging the economy. But he is under a lot of political pressure….

    • Gandalf says:

      Wolf had an article about all the institutional and other US investors dumping stocks for Treasuries and about how the biggest buyers for stocks these days were corporations buying back their own stocks. Wolf has also had a bunch of other great articles making some key points.

      So let’s see if we can put 5+5 together to get 10 and figure out where this is all going to blow up

      1. The huge tax cut passed during the last period of Republican hegemony added $1 trillion EXTRA each year to the already big annual Federal deficit

      2. Many corporations used this extra profit to buy back their own stocks to prop up their stick prices

      3. Buying back your own stock used to be illegal under the good old days as were most of the financial shenanigans allowing financial institutions to make loans with money they did not have (i.e. Glass

      4. Ergo, a major factor propping up the stock market is the huge Federal deficit.

      5. And, the only thing propping up sales of Treasuries which fund this huge debt out the wazoo are the slightly higher interest rates that Treasuries offer vs. the debt of other “reputable” industrialized nations, e.g. Japan and Europe. This is the “cleanest shirt in a the dirty laundry” effect

      At the next recession, this will all blow up. All the Cove-Lite and junk bond and borderline junk corporate debt fueled by years of near zero interest rates will blow up as corporations will not be able to refinance their loans.

      Corporations will no longer be able to afford to buy back their stock. The magically levitating stock market will finally crash.

      The Federal deficit will skyrocket to double or triple wazoo levels.

      Can the Fed save us all again by doing ZIRP and QE again?

      Here’s the problem I see – the key difference between the US and Japan and the whole idea behind MMT working in the US is that we run gianormous trade deficits with much of the rest of the world. Japan does not.

      Other countries, especially China, have been subsidizing our profligate lifestyles by continuing to sell stuff to us cheaply and thus keeping our alleged official inflation rate low. This can’t continue forever – China is so economically opaque that it’s hard to tell how much longer it can continue to keep up its currency wall and keep prices low for us. Economically, China is struggling already through some sort of debt unwinding that may turn into a meltdown if the US has another financial crisis

      Will cheap stuff from China suddenly skyrocket in price as their businesses collapse and their currency subsidy for us falls apart?

      Will the Fed be able to go back to ZIRP when inflation is skyrocketing? The Fed Fund Rate might be set to zero, but will anybody out there actually buy Treasuries at those low rates with inflation going up? Will anybody still be around to refinance all the bad corporate debt that is blowing up then?

      In an article I saw recently, Ray Dalio said that he did not think the US Federal debt was sustainable, and would likely blow up in 2-3 years. You may not believe Jerome Powell, but when it comes to debt, Dalio is worth listening to.

      The easiest way to solve this debt, of course, is to raise taxes again, especially on corporations, and to remove all the other twisted tax perks that American corporations get for offshoring their jobs and money. That’s happened before, usually after some major financial crisis that finally instilled some backbone into our politicians

      • d says:

        “The easiest way to solve this debt, of course, is to raise taxes again, especially on corporations,”

        All that will do is fuel consumer inflation.

        Corporations dont pay tax, they simply adjust their pricing to ensure they RECEIVE the profit margins margins THEY want.

        If you want Corporations to pay tax you need a “Tax” that is true before EBITA profit margin % related.

        The higher the gross margin the higher the TAX which reduces the attraction of the practice of changing price to maintain return in reply to a tax increase. You would also then have a TAX that the corporation, not the end user/consumer, paid.

        “and to remove all the other twisted tax perks that American corporations get for offshoring their jobs and money.”

        Now that will bring some productivity to the US, as a lot of US corporation activity, is about harvesting those perk’s

  9. RD Blakeslee says:

    I agree, Wendy.

  10. HR01 says:


    Many thanks for this informative piece.

    Not on par with Japan yet but still mostly “owe it to ourselves”.

    Fund managers continue to chase yield so as long as that’s the mindset, Treasury has no issues floating more debt. It’s only when the global recession truly gets going (by infecting the service economy) that sovereign treasuries the world over have a problem. Yet even in that scenario, U.S. Treasuries likely still outperform. We have the most liquid sovereign bond markets on the planet and the largest blue water navy.

  11. If Brexit goes through is half a trillion going to have to change hands? (UK and IRE) Also the competition in sovereign bonds denominated in dollars raises an issue of how much supply can buyers absorb. (us or US) (personally I wouldn’t touch a cent of it as I suspect that if the incumbent wins there will be an unpleasant bond market surprise in 2020). The Fed had a noble idea to raise rates enough to make the US the global bond buyers preferred destination, (rates high dollar strong!) but JP backed off any obligations implied or otherwise to work with fiscal policy or the dollar. Most Fed watchers only saw the walk back on rates.

  12. OldCodger says:

    Much of it, every year, is the US Department of Social Security.

    When all that debt is inflated away, guess who will be the poorer?

  13. Michael Engel says:

    1) Since mid 2015 US treasuries % are moving up, sending the value of Japan and China holdings down. China big banks hunger for US $ is growing.
    2) US gov debt is rising, in a bubble.
    – US on the way to hyper inflation, or deflation : yes or no.
    – DOW 70,000 or 10,000 : yes or no.
    – Gold to 10,000 or 700 : yes or no.
    3) SPX, monthly, 20 years chart, linear.
    The 2007 peak was an upthrust. The trading range : a resistance
    line coming from the 2000 peak and a support line coming from 2003 bottom. A double hump.
    March 2009, a spring board, sent the SPX up.
    4) Since the 2009 bottom, the SPX in a bubble.
    A line from 2010 high to 2014/ 15/ 16 cluster highs send the SPX to
    the current Apr 2019 high. Its the last, or one of the last points to sell stocks, before the decline start.
    5) Big ugly red supply bars will come next.
    6) Gold downtrend from 2011 peak to the selling climax in
    Dec 2015 low is primary #1.
    A correction, the current rally, is primary #2 .
    7) Gold will start primary #3 in direction to 680 – 700.
    The Fed and the US gov cannot change this trend.
    Hyper inflation or deflation, yes or no ? ==> NO for hyper inflation. Yes for a prolong deflation !!

    • Bologna says:


      • HR01 says:


        Thanks for the chuckles but you’re likely not far from the truth.

        Last 10 years have been all about holding back the deflationary collapse. Deflation can be delayed, not denied. Latest exhibit: coffee futures printing a thirteen-year low. Yet you won’t see Starblechs cutting customers any slack.

  14. Wisdom Seeker says:

    As Wendy noted, once we left the gold standard in 1971, the fundamental nature of the dollar was changed. Economists for the most part still haven’t caught up with this, and the language used for discussion is therefore hopelessly muddled.

    The foreign official holders of US Treasuries are not really creditors, at least not in the usual sense that they might close out their holdings and expect to be paid back. They are holding Treasuries as part of their central bank reserves, vital to ensuring the stability of their own currencies and economies. In keeping the global machinery running, these reserves are more like engine oil than gasoline. Or if we think of the economy as an organism, reserves are blood, not food. The foreign official holders cannot sell their Treasuries without imperiling their own economies.

    So the US (and Euro) get the “exorbitant privilege” of being able to print a globally valued currency at will, to fund internal needs. But the official holders get free interest on what is basically their own working liquidity.

    • James says:

      Ding ding ding! Right answer.

      Other countries are clamoring for usd and euro to trade and hold in reserves.

      This allows the treasury to keep going in infinite debt and have large trade deficits (some might say, trade deficits are necessary).

      The only problem is, if the rest of the world is antagonized enough that they don’t need US dollar for trade at all (or reduce their percentage of trade in USD) then USD value will collapse and inflation will skyrocket, killing all savers but saving all debtors.

      The US economy is meant to be in debt, filled with debtors.

      • bungee says:

        Nope. The article is saying that foreign official sources are not buying. its the private sector buying. The domestic private sector. Institutions and the like. They bought 1.19 of the 1.26 Trillion. Foreign official holdings, in aggregate, have been flat since 2013. What Wisdom Seeker is describing sounds like some sort of excuse for the past 50 years. It may have been a good way to describe it but its not some law that needs to continue. The future might see no foreign reserves at all.

        • Wisdom Seeker says:

          I was aiming for an accurate description, not an excuse. I agree it’s not some law that needs to continue – it’s a deeply flawed and unfair system which ought to be replaced by something better. Unfortunately it might be like democracy and capitalism in that respect. (as in Churchill’s “democracy is the worst form of government – except for all the others”…).

          Credit-Dollar system vulnerable to fraud, counterfeiting (paper or digital), abuse of fiat power (inflation), and general maldistribution since insiders needn’t work (much) to receive a slice of created credit. But gold standard also had flaws, and cryptos also flawed. Cryptos stimulating fresh thinking though, and maybe something better will emerge?

        • bungee says:

          Wisdom Seeker,
          I hear you. Im very suspicious of the ‘cleanest dirty shirt’ theory. It seems to be ubiquitous and across the board. In the past, when private sector stopped buying, foreign governments picked up the slack. Like they wanted to keep the sytem afloat for their own needs, even though that gave us a free ride. Like your blood analogy, our debt served a purpose other than profit. But its over. When the private sector decides theyve had enough, will China step up again? Europe? I hear many people saying that the world just cant get enough of our debt or our financial products. But posts on this site show that its companies buying their own stock and americans buying their own debt.
          p.s. there will never be another gold standard. But gold will be very valuable as …. a reserve!

  15. james wordsworth says:

    …and it looks like at least the same volume of new debt will be issued in the next 12 months, and the next 12 months after that. With little growth in trade, it won’t be foreign central banks buying, so it will likely again have to be US institutions and individuals. It will be interesting to see how much longer they can keep this pace of buying up, because when they can’t, relative rates will have to go up to bring in more foreign buyers. You have to think that at some point the deluge of debt is going to swamp something.

  16. Noble1 says:

    Smart move especially if one anticipated interest rates to decline and or pause due to the economy slowing down and or worried that the economy might slow down and stocks to decline ,and thus running to a “Safe Haven” .

    At least I consider it to be smart since November 2018 . Especially since 20 year treasury bonds(TLT / iShares 20 year +) printed a nice low at a Fib Ret in what I consider to be W-C in a zig-zag correction since the printed peak in July 2016. Then took off to form a nice impulsive 5 W pattern since that November low and peaked in late March within 21 Fib weeks -143 days ,1 day off Fib 144.

    We had that indication in 2018 through the Dow Theory triggering and Crude Oil collapsing once it completed W-C in a zig-zag proregressive correction ……….

  17. hertavein says:

    U.S. is entering new debt levels more than a year after Trump signed a $1.5 trillion tax cut that decreased the top corporate tax rate from 35 percent to 21 percent. The legislation also gave most U.S. taxpayers at least a small break, although the largest benefits went to the wealthiest Americans.

  18. Woods says:

    So then where are the private sector funds that are being used to buy treasuries coming from? Is it all cash accumulation? Is money moving off of other assets and if so which? Is it borrowed money? Is this the tax savings getting cycled into buying treasuries instead, while it sits waiting to be used for stock buybacks? And do they get borrowed against to yield more money to buy more treasuries? This all gives me a headache.

  19. yngso says:

    Stock buybacks and buing debt, it’s all unproductive financial voodo, only benefiting a few.

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