Who Bought the Nearly $1 Trillion of New US Government Debt over the Past 12 Months?

The Fed & China dumped. But there was huge demand elsewhere. Here’s who bought.

The US debt-ceiling charade is back. It’s where different political power groups in Congress stall legislation that would raise the maximum amount of money the government is allowed to borrow to fund what Congress had ordered the government to fund. It’s a game of chicken that can push the US government into default, to the bewilderment of the foreign creditors of the US that are holding a big part of this debt that would default.

The debt ceiling went into effect on March 1. Since then, the government has not been allowed to increase its debt, which had just exceeded $22 trillion. But the government, as told by Congress, will continue to deficit-spend, and fund this deficit-spending by robbing Peter to pay Paul. This works for a few months, until Peter has nothing left to rob. That’s the out-of-money day, on which the government will not be able to redeem Treasury securities that come due, followed by stunning financial fireworks across the globe. On the other hand, when the debt ceiling is lifted, default is averted, and the gross national debt jumps by $800 billion or so in a couple of weeks:

The Treasury Department disclosed this afternoon (TIC data) how much of this debt that gets so iffy during every debt-ceiling fight was held by foreign investors through April, and how much they bought or dumped.

This is a question that is getting increasingly nerve-wracking as this debt is ballooning even in good economic times, while practically no one in Congress or the White House even pays lip-service to fretting about it anymore.

Everyone knows, including the foreign holders, that this debt will balloon into the stratosphere when the economic cycle turns. So here we go.

All foreign investors combined – “foreign official” holders, such as foreign central banks and government entities, and foreign private-sector investors – raised their holdings of Treasury securities over the 12-month period through April by $253 billion, to $6.43 trillion.

But over the same period, the total gross national debt soared by $960 billion, to a tad over $22 trillion. And the share of the US debt held by foreign holders dropped to 28.8%, down from the 34%-range in 2012 through mid-2015:

The Big Two Foreign Creditors of the US.

China, the largest foreign creditor of the US, dumped $69 billion of its Treasury securities over the 12-month period, including $17 billion just in March and April. At the end of April, China’s holdings were down to $1.11 trillion (the peak: $1.25 trillion in February 2016).

Japan, the second largest foreign creditor of the US, added $32 billion in Treasury securities to its holdings over the 12 months, even after shedding $14 billion in April, to $1.06 trillion (the peak: $1.24 trillion at the end of 2014):

The relative importance of China and Japan as creditors to the US has been declining for years, as their holdings have zigzagged lower while the US gross national debt has continued to balloon. Their combined holdings of US Treasuries have now dropped to 9.9% of the US gross national debt: China holds 5.1% (red line) and Japan 4.8% (blue line):

Other Major Foreign Creditors of the US

Far behind China and Japan is a gaggle of other foreign holders, most of them tax havens for foreign corporate or individual entities. Belgium is home to Euroclear, which handles vast sums in fiduciary accounts (in parenthesis, Treasury holdings in April 2018):

  • Brazil: $307 billion ($294 billion)
  • UK (“City of London”): $301 billion ($263 billion)
  • Ireland: $270 billion ($300 billion)
  • Switzerland: $226 billion ($242 billion)
  • Luxembourg: $224 billion ($214 billion)
  • Cayman Islands: $217 billion ($181 billion).
  • Hong Kong: $206 billion ($194 billion)
  • Belgium: $180 billion ($139 billion)
  • Saudi Arabia: $177 billion ($160 billion)

Other than foreign investors, who else bought this huge pile of new US debt?

The US gross national debt soared by $960 billion over the 12-month period through April. Over the same period, all foreign investors combined increased their holdings by $253 billion, as seen above. This leaves $707 billion that someone else must have bought. Who?

Nope, not the Fed. It shed $271 billion in Treasury securities over the 12 months as part of its QE unwind, bringing its holdings down to $2.12 trillion by the end of April.

US government entities piled on $102 billion in Treasury securities over the 12 months, bringing their total to $5.83 trillion. This “debt held internally” is held by government pension and disability funds, the Social Security Trust Fund, etc., that have invested their beneficiaries’ money in Treasury securities, rather than stocks or other instruments. This “debt held internally” is owed the beneficiaries of those funds and is a real debt of the US government.

To summarize: Over the 12 months, foreign investors added $253 billion; the Fed got rid of $271 billion; and US government funds acquired $102 billion. All three combined, accounted for a net increase of Treasury holdings of $84 billion.

But the total gross national debt soared by $960 billion over the same period. Someone must have bought the remaining $876 billion. But who? The only one left…

American institutions and individuals added $876 billion of Treasuries to their holdings, bringing them to $7.64 trillion. US banks held nearly $500 billion of them, according to the FDIC. Other US institutional holders include pension funds, mutual funds, hedge funds, corporations such as Apple, and others. Individuals also hold a portion of these Treasury securities, either indirectly via bond funds or pension funds, or directly via their brokers or at Treasury. All combined, American institutions and individuals held 34.7% of the US gross national debt:

Ironically, there is no shortage of demand for this debt – despite the charade of the debt-ceiling-default threat hanging over it. On the contrary. Investors, mostly US institutional and individual investors but also some foreign investors, have gone nuts over it, bidding up prices and thereby pushing down yields, with the 10-year yield today settling at 2.09%.

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  74 comments for “Who Bought the Nearly $1 Trillion of New US Government Debt over the Past 12 Months?

  1. WES
    Jun 17, 2019 at 7:30 pm

    Aren’t US banks and pensions required by law to buy US debt?

    • Iamafan
      Jun 17, 2019 at 7:50 pm

      This is exactly the “trick”. The new banking regulations require so much assets to be HQLA. Meaning, the Fed basically requiring that banks buy Treasuries. Same is true for the money market after SEC reform. Today about 80% of the repo is government security as collateral.

      The volume of international net purchases isn’t enough to explain what’s happening nowadays.

      • WES
        Jun 17, 2019 at 9:12 pm

        Thanks Iamafan: I had forgotten the exact reason but what you said rings a bell!

        Those guys don’t miss a trick do they!

        • d
          Jun 18, 2019 at 1:23 am

          “This is exactly the “trick”. The new banking regulations require so much assets to be HQLA. Meaning, the Fed basically requiring that banks buy Treasuries.”

          The trick behind this is to ensure banks have a percentage of stable non speculative assets to protect their depositors and their stability.

          Some capitalist nations used to require banks to have a minimum 30% of depositors funds in T’s and hey, guess what, those nations had very stable banks, and in the gfc, at least 2 of those nations did not loose, or have to bail out even 1 of their bank’s.

          I know it was 30 % as I used to work in such a bank ,in the department that was required to ensure daily compliance with that regulation and 30% of daily closing depositors fund’s balance, was the bare minimum to avoid a fine.

          Which meant in reality we had to keep average 34% to ensure we never dipped under 30% on any given day.

          The real trick, was how the, Heads we win, Tails you loose, american’s, who call themselves bankers.

          Forced so many of those GOOD regulations, to be unwound globally.

          At the expense of depositors and taxpayers.

    • Ppp
      Jun 18, 2019 at 2:10 pm

      Question for all you Wolf cubs: why do we have to wait for our fascist dictatorship, why can’t we have it right now?

  2. Paul
    Jun 17, 2019 at 7:47 pm

    It makes me feel better to know that the government has figured-out a way to sell debt and fund their pension obligations at the same time!

  3. Lisa
    Jun 17, 2019 at 7:54 pm

    It seems that the commonly held belief both within our country and outside it, is that the US economy is in good shape and the dollar will remain strong – or at least stronger than most other currencies. But the problem is, most people have no clue what kind of shape the US economy is really in (judging by the consumer confidence index) and they don’t care to find out. They are brainwashed believers that US is invincible.

    • Pinto
      Jun 18, 2019 at 2:27 am

      Don’t worry there are worst brainwashed believers!
      Like those who buy NIRP bonds like EUssr or Japan, or China fake accounting.

      Repeat after me:
      The dollar is the least dirty shirt

    • Cashboy
      Jun 18, 2019 at 3:18 am

      Don’t worry; the Euro Zone is in a lot bigger mess than the USA so the US dollar has no reason to fall against other currencies except maybe a few SE Asian currencies such as the Thai bt.

  4. Iamafan
    Jun 17, 2019 at 8:07 pm

    Just remember that during QT, when the Treasuries at the Fed matured; roll-off meant the bank had to buy the same amount of maturing Treasuries with their prior excess reserves. The Fed reduces it’s assets and liabilities while the bank exchanges reserves for new Treasuries. So the banks actually bought more Treasuries.

  5. HBGuy
    Jun 17, 2019 at 8:13 pm

    The number that stands out among the largest holders of IOUSA debt is Brazil, at $307 billion per Wolf. Who or what in Brazil can afford $307 BN?

    • Jun 17, 2019 at 9:24 pm

      They have a lot of natural resources (oil, soybeans, coffee, etc.), and those that they don’t consume are sold for dollars, plus they manufacture and export air planes (Embraer) and other goods.

    • MC01
      Jun 18, 2019 at 12:56 am

      Brazilians like to park their wealth in US dollars as an insurance policy against the real’s well known instability and tendency to lose value very quickly. To dive an example 10 years ago 1 euro bought 2.7 real. Today it buys 4.3 real. US Treasuries are plentiful, safe and very liquid: in a country with a currency as volatile as Brazil it’s a win-win scenario. Sure, there are also euro-area bonds, but why bother when they pay no interest to speak of?
      This tendency is not only widespread among Brazilian savers, but also among banks, insurance companies and businesses. The latter category includes the (very large) Brazilian subsidiaries of US corporations such John Deere and Caterpillar.

      Brazil is in many ways like India: it’s a country of enormous social contrasts. Plenty of very rich and plenty of very poor people. Both countries make the US and Europe look like egalitarian paradises.

      • Iamafan
        Jun 18, 2019 at 5:08 am

        Sounds like an easy equation. Brazil keeps its balance of payments in US dollars thereby keeping the value of its currency low vis-a-vis the dollar and keeps the dollar high. Meanwhile there are less jobs here. Add the Chinese trade war which includes US feedstock and agriculture, you get a Brazilian Bonanza.

        • MC01
          Jun 18, 2019 at 7:00 am

          I think most Brazilians would love to have a central bank with a long-term devaluation policy. At least it would be a stable policy as opposed to the usual monetary chaos those poor people have to put up with: the real can lose as much as 20% against the US dollar and the euro in 40 days and then gain 25% in a couple of months.

          Also it doesn’t seem to me US agri exports are suffering from Brazilian competition. Here’s a chart from the USDA on corn exports: https://apps.fas.usda.gov/esrquery/egraph5y.aspx On track to be best year in recent memory for US corn exports. Rice is recovering nicely after a crummy start of the year and is likely to have another great year: https://apps.fas.usda.gov/esrquery/egraph5y.aspx Cotton had such a big year in 2018 it will be hard to be beat for 2019; it’s still doing very well though: https://apps.fas.usda.gov/esrquery/egraph5y.aspx .

          Trust me on this: my grandfather owned a farm and by listening to him and his pals by age ten I had already lived through so many natural and man-made calamities to make the Plagues of Egypt look like a veritable walk in the park. The Agri industry has a not-so-nice tendency to exaggerate everything (IE “best year ever for wine” every single year in my memory) both to shill their wares and to try and obtain more and more from the ever suffering taxpayer. ;-)

      • Morty Mc Mort
        Jun 18, 2019 at 6:11 am

        Here in Canada – Yesterday, met with the CEO of an expanding internet enabled Financial business. They can hire 3 Filipino, Telephone Service Reps, THATS THREE!!! with excellent English, and fantastic people skills, for the cost of one Canadian Rep. As a business decision..well, guess who gets the jobs…

        • Paulo
          Jun 18, 2019 at 8:23 am

          That’s why we have call display at home and always hang up on call ‘delays’ when we do answer. Last year I moved all our insurance business to a company that has an in-house rep that answers the phone and directs my calls to an appropriate agent.

          Any company that directs my calls through the Phillipines, India, and lately Illinois and Texas does not get my business. I ask where people are ‘talking’ from, as well.

  6. Max Power
    Jun 17, 2019 at 8:41 pm

    Front-running the Fed. The oldest game in town.

  7. James
    Jun 17, 2019 at 8:43 pm

    Where do foreign investors keep their billions of dollars if they don’t put them in treasuries?

    • Iamafan
      Jun 18, 2019 at 4:47 am

      Good question. They need to put money (or savings) in foreign reserves, gold, or real estate.
      Much of the money you see the NY FED keeps or holds for foreigners are really used for the countries’ international payments. The interesting thing is the difference between government and private holdings of foreigners. I read somewhere that governments keep a lot more shorter term securities, I guess so they can use them to pay other Banks and countries.

  8. Justin Wiedeman
    Jun 17, 2019 at 8:56 pm

    Your including money in the fudiciary funds that we owe to ourselves. That is odd accounting.

  9. Michael
    Jun 17, 2019 at 9:06 pm

    I just bought physical silver so don’t include me.

  10. Ppp
    Jun 17, 2019 at 9:09 pm

    Oh dear. Deutschebank has instigated a collateral crunch which is spreading throughout the world.

    • Jun 17, 2019 at 9:12 pm

      There is absolutely zero about a collateral crunch in this article :-]

    • Iamafan
      Jun 18, 2019 at 4:57 am

      The so-called collateral crunch is the US dollar “shortage” in Emerging Countries. This is just another way of saying our Yield or Interest rate is or was higher. There’s so much zombie companies or countries that I can’t imagine what will happen if and when interest rise.

      • Ppp
        Jun 18, 2019 at 11:52 am

        Actually, we have moved on in about 8 hours. The collateral crunch ends as the Second Depression takes hold. This time around there will be a flood of dollars, but the dollar will collapse. This is the final stage of a true global Ponzi.

        This is not your father’s Ponzi. You may be sure that, with Fuhrer Trumpf leaking a Powell demotion story, things are moving at lightning speed.

      • Herb
        Jun 18, 2019 at 10:13 pm

        So , all I want to know is when and where will Zimbabwe pay me my $150 trillion on my bonds.

      • Juanfo
        Jun 19, 2019 at 1:14 pm

        No such thing as a shortage down here, the price of the dollar is relatively low despite the deplorable so called economy. The demand for $ is low because of plummeting imports. There is literally physical tons of paper $ currency laundered in the country from Mexican drug lords hoarding their retirement stash. The pressure on the banks, companies and individuals to legitimize an endless flow of $ cash pallets creates a very interesting dynamic.

  11. V
    Jun 17, 2019 at 9:35 pm

    So if it isn’t buying US treasuries, what is China doing with the trillions of dollars it gets from US trade?

    • DR DOOM
      Jun 17, 2019 at 11:32 pm

      Gold is a large part of what the chinese are buying with US fiat dollars it gets for trade. Which do you think will become scarce first fiat or gold ? This is how fiat dies. The tipping point is always a cocktail of lack of trust and a splash of fear that brings fiat down. No one knows when this will happen. I would live in a tent and eat dirt before I became dependent on the Wall Street and Central Bank Cabal and its Fiat.

      • RD Blakeslee
        Jun 18, 2019 at 7:07 am

        “I would live in a tent and eat dirt before I became dependent on the Wall Street and Central Bank Cabal and its Fiat.”

        I would. too, if I had to. but I don’t. Been in personally owned and used (as personal productive capital) hard assets, starting 70 years ago.

        Example: A thirty-inch throat Crescent bandsaw made in Cleveland, Ohio, circa 1800s. Converted from flat-belt pulley drive run be a steam engine to a 3-phase electric motor.

        A bandsaw is a the closest thing there is to a universal wood cutting machine. It’s just slower than some specialty saws.

        But slower can be better – it’s been a good life!

        What would the bandsaw’s fiat dollar price (NOT VALUE!) be? Who cares.

        • Paulo
          Jun 18, 2019 at 8:33 am

          Shoot, and here I thought I was doing pretty good rebuilding my 1950 Southbend metal lathe. :-) You and I agree on land and other hard assets, for sure. When I read today’s dire financial predictions regarding debt levels I do so out of curiosity and hope it doesn’t affect my kids.

          Soon, countries will have to hire celebrities to try and sell economic “War Bonds” to stay afloat if this continues much longer. I can see it now, Tom Brady and ilk talking up opportunities and patriotism to finance Govt operations.

        • DR DOOM
          Jun 18, 2019 at 12:17 pm

          RD- I just machined a delrin replacement hub for my wife’s 40 year old food processor on a 90 year old “worthless” 1in (spindle )lathe . I rewound the motor on it myself. I got old ” worthless” vertical mills and old tooling that is also “worthless” I could easily have bought that new food processor but my wife entertains my need to hold on and repair and puts up with my disease . It took 3hours to machine that part because I had to cut the ID drive flat by modifying a worn out woodruff key broach (worthless tool grinder was used)that I couldn’t bring myself to throw away 20 years ago. I got the disease bad and it’s terminal. However, the old 1965 ford 3000 has become a valuable gem in terms of fiat dollars.

  12. p coyle
    Jun 17, 2019 at 9:36 pm

    “Foreign Holders Are Not Amused” may just be the best chart title ever. unlike the foreign holders, i had a good chuckle!

  13. Art V
    Jun 17, 2019 at 9:46 pm

    What will happen first, resumption of QE or a sustained PCE above 5%?

    If you are buying treasuries, you believe the former will surely happen first, and allow for an opportunity to exit since the Fed is obviously a price-insensitive buyer.

    The Fed reminds me of Comrade Diyatlov poisoning the reactor before the meltdown finally happens.

  14. Michael Engel
    Jun 18, 2019 at 2:01 am

    1) The world is awash with USD debt.
    When interest rates fall, investors take profit to serve debt. They kick the can down, until the next installment due date come.
    China is the most dehydrated nation in the world.
    Satisfying their quench make sense.
    Since US & China relationship deteriorate fast, China reduce risk. China preempt before US freeze Chinese assets deep in their pocket, including one Trillion US treasury.
    2) Politician get elected by promising voters.
    Since the 1960’s entitlements grew, so did gov agencies to deliver them.
    Gov size expand and the unionized bureaucracy become
    a metastasis cancer nobody can stop or control.
    They make decisions for their own sake, to please themselves, against voters wishes, or US national interest.
    They promote elected politicians that keep the cancer alive .
    They are good for politicians and politicians are good for them. Gov shutdown did not drain the swamp.
    US gov debt keep growing to feed this beast.
    When investor smell a stench, they purge inventory, before US gov troubles take them down with them.

    • Iamafan
      Jun 18, 2019 at 5:14 am

      The world is awash with every currency you can think of. There was synchronized money printing by all the Central Banks.

      Think about what can happen when you don’t print and the US adds almost 5 trillion. Your exports will become uncompetitive. Therefore you print, too. This looks like a board game.

  15. Franz-Xaver Huber
    Jun 18, 2019 at 3:29 am

    It seems most people have no idea how to preserve their wealth. They feel paper money is relatively safe and accept a bit of devaluation every year.

    That’s why all governments prefer inflation over taxation. It’s so much easier to do.

  16. High Yield Consultant
    Jun 18, 2019 at 3:42 am

    Let us review the current state of affairs;

    -A decline in savings rates to extremely low levels which depletes productive investments
    -An aging demographic that is top heavy and drawing on social benefits at an advancing rate.
    -A heavily indebted economy with debt/GDP ratios above 100%.
    -A decline in exports due to a weak global economic environment.
    -Slowing domestic economic growth rates.
    -An underemployed younger demographic.
    -An inelastic supply-demand curve
    -Weak industrial production
    -Dependence on productivity increases to offset reduced employment

    These are some of the reasons I hedge my income portfolio.

    • Jun 18, 2019 at 8:51 am

      High Yield Consultant,

      Here’s is some data for your first point: “A decline in savings rates to extremely low levels …”

      The personal savings rate in the US is currently 6.2%. It has been above 6% since 2010. From 2005 through 2008, it was mostly in the 2% to 4% range. So the current savings rate would hardly qualify as “extremely low levels” by US standards. But other countries have higher savings rates.

      • Jun 18, 2019 at 10:53 am

        Does that savings rate include stock portfolios marked (higher) to market?

        • Jun 18, 2019 at 2:34 pm

          No, it’s based on income from all sources, including dividends and interest, but NOT capital gains of any kind (stocks, housing, etc.).

  17. CoCosAB
    Jun 18, 2019 at 4:06 am

    “Debt out the wazoo” because the system keeps printing paper “Money out the wazoo”!

    Under the present rules only the destruction of paper-money can reduce the debt.

    It seems they are not ready to do that just yet.

  18. sig fromm
    Jun 18, 2019 at 5:07 am

    Well I know who has been buying the 1-3 month stuff paying almost 2.5%, but I haven’t a clue who has been buying the 10yr stuff paying almost 2%.

    IMHO this article doesn’t really answer the question, buy innuendo we’re to believe that the public, buy way of the banks getting 2% and paying out 2.5% on a CD did the buying,

    Remember back in 2007, the secret $10T off-book that was used to prop up EURO, and what about PPT?? Where is that money on the books??

    IMHO ‘secret FIAT’ is being created to buy these inverted low-yield 10 years, as there is no way in hell a person who ‘worked for this money’ would buy for those yields.

    How much really of people getting 0.01% from their savings, so that the same bank can buy 10yr? Really? The same people who barely have $500 to their name in assets? The big money ( ppl have have a net-worth north of $10k USD ) is getting real yields.

    The GOV needs to keep the 10yr down for a lot of reasons, but mainly because the entire system uses the 10yr as the metric to gauge everything else.

    The entire system is a FAUX PONZI, has been forever, well at least since inception.

    Also not mentioned is that china is paying 4.5% real return, and russia is paying 7%, while europe zero, and swiss negative, but there are lots of places that are safer that the USA.

    Historically the USA has defaulted 3 times on its debt since 1800’s, thus the notion of Safety&US-GOV is an oxymoron.

    The best currency on earth is not the USD, and you can google them.

  19. Rob
    Jun 18, 2019 at 5:29 am

    whats the split between US primary dealers, US banks and other US institutions?

    https://www.newyorkfed.org/medialibrary/media/banking/reportingforms/primarystats/dealpdf.pdf?la=en

  20. Kent
    Jun 18, 2019 at 5:57 am

    So the big question is where does the money come from to buy the treasuries? If the money supply is fairly static, we should see corresponding decreases in other areas. Is money being pulled from the stock market? Corporate bonds?

    Or is the federal government or banks just creating new money and that money is being used to buy the treasuries?

    • Anon
      Jun 18, 2019 at 10:49 am

      The money to buy Treasuries could come from the rehypothecation of Treasuries. I’ve read that rehypothecation is limited to 140% in the US. So every Treasury sold can be borrowed against 140%. Different people have different opinions on whether this creates fiat money. Makes for a lively market.

    • Iamafan
      Jun 18, 2019 at 6:49 pm

      I’ve asked that question before. Where did the “down and out” banks in 2008 and 2009 get all the money to buy Treasuries that the FED bought on the Open Market (sure deal). Hard to believe they had all that money to buy Treasuries and MBS they sold to the Fed.

  21. David Hall
    Jun 18, 2019 at 6:31 am

    I bought some short term treasuries to balance my portfolio as these were paying better interest than CD’s with higher yields than the official inflation rate at the time I bought them.

    I imagine Europeans might find them more attractive than negative yielding issues.

    • Art V
      Jun 18, 2019 at 8:07 am

      David, are you sure US treasury bonds are more attractive than negative yielding issues in Europe? The Fed is less likely to tolerate negative yields, while ECB will buy your bond for “whatever it takes”

      • Setarcos
        Jun 18, 2019 at 8:45 am

        Art (or anyone else) could you explain further? Why would someone “invest” in an asset that is designed to depreciate?

        • Art V
          Jun 18, 2019 at 10:03 am

          You wouldn’t buy a new car if your government promised payment above your purchase price for the same car at some point in the future?

  22. Gershon
    Jun 18, 2019 at 6:58 am

    Who in their right mind is going to buy government or corporate debt that is going to be printed away by the Federal Reserve?

    • Anon
      Jun 18, 2019 at 10:35 am

      Money is parked in treasuries because it is reasonably safe and can be turned into spending money without too much effort. Security and Liquidity. Something to think about once someone gets more than the FDIC limit in their bank account. Most non-poor people will have a Treasury Direct account if trends continue. US Federal Government will need to capture income streams now going to banks and insurance companies. Treasury Direct accounts or something similar make that possible. Everyone will have an EBT card. Equality.

  23. Gershon
    Jun 18, 2019 at 8:06 am

    Precious metals are surging this morning as the Keynesian fraudsters at the ECB prepare to double down on their failed monetary policies by printing up more “stimulus” i.e. embark on a new round of counterfeiting to further debase every Euro currently in circulation.

    • James Levy
      Jun 18, 2019 at 11:34 am

      Given, it’s a bad policy.

      But, what is your alternative? The mass immiseration of millions and the 1930s 2.0? That didn’t end well.

  24. Bruce T.
    Jun 18, 2019 at 8:59 am

    So who will repay this monster? I cannot imagine any way other than default! And this is world wide. Big OOPS! I do not imagine living long enough (my three score and ten is up in less than a year!) to experience what my generation feels is their entitlement at the teat of our corporate masters and their politicians.

  25. Debt Wazoo
    Jun 18, 2019 at 9:30 am

    My favorite Wolf Street chart caption strikes again! In *green*!

    • MC01
      Jun 19, 2019 at 2:31 am

      Hey, we were missing you! I suspected you would resurface as soon as the debt ceiling charade would give you a well-deserved break.

  26. John Hope
    Jun 18, 2019 at 9:33 am

    All money is fiat aka computer digits. If the US government chooses to tax less and spend more then it has to issue Treasuries to cover the deficit. Those Treasuries are other peoples’ savings. That’s how all balance sheets work There is no mystery to this. The ‘ debt ‘ is never going to be repaid and more can be created at will. Anyone wanted to cash out can only be repaid in dollars . What’s the issue ?

    • Jun 18, 2019 at 3:29 pm

      “Treasuries are other peoples’ savings.” Yes, of course. Accounting 101, day 1. This is also the case with credit card balances, junk bonds, auto loans, mortgages, subprime mortgages, leveraged loans, accounts payable, leases, etc. … they’re all someone’s assets and represent savings of one sort or another, directly or indirectly. But that simple balance-sheet fact you learn on your first day in accounting class says nothing about the situation.

  27. Gershon
    Jun 18, 2019 at 9:35 am

    Looks like a new “race to debase” is being set up as the Keynesian fraudsters at the central banks get ready to embark on a new counterfeiting spree. When will Powell drop all pretense of being a responsible central banker and join the printing party?

    Buy your wheelbarrow now and beat the rush.

  28. Jun 18, 2019 at 11:14 am

    How much of this is held by ETFs? The bond funds are on a tear, of course these are liquid, and disposable positions, here we have it here we don’t. Is Hong Kong the new Belgium? XJ may rethink his push to enforce rendition. Or maybe not? The obstructionist politics that creates debt ceiling impasses seem to be forming again. You can’t separate politics from the bond market.

  29. Ishkabibble
    Jun 18, 2019 at 1:09 pm

    The current UN -estimated population of the “Cayman Islands” is 63,090.

    According to Wolf, the “Cayman Islands” has $217 billion of US Treasury (toilet) paper IOUs.

    $217 billion divided equally among 63,090 islanders equals $3,439,530 per person.

    • Jun 18, 2019 at 2:41 pm

      Yeah, the per-capita math gets really funny with tax havens.

  30. Wes
    Jun 18, 2019 at 2:06 pm

    Being there is such great demand for U.S. Treasuries then why did Wall Street ask the Federal Reserve to reduce the selling of their Treasury Portfolio? It seems that the Federal Reserve could accommodate the markets for treasuries by selling their treasury holdings and to an extent increase treasury yields during this current high demand period. In turn this would reduce dollars in circulation.

    Think about the SOFR (Secured Overnight Financing Rate) and the requirements for Wall Street banks to post secured collateral on their trades.

  31. WES
    Jun 18, 2019 at 2:27 pm

    Ish: In our upside down world having the most worthless debt makes you wealthy!

  32. Bradley
    Jun 18, 2019 at 5:56 pm

    Get the Fed to buy up every dollar of debt and then write it off , simple easy solution to the problem.

  33. Kye Goodwin
    Jun 18, 2019 at 7:28 pm

    Inflation is the only possible negative consequence of a sovereign government’s spending too much of their own currency. Whether its borrowed or printed it is SPENDING the new money that causes inflation. All spending, private or public tends to lower the value of the currency being spent against real goods and services and against other currencies.

    All this talk of default? Has that ever actually happened to a sovereign country owing its own currency? Don’t bother telling me about Zimbabwe or Germany after WWI. They suffered massive inflation, but they didn’t default. Given the choice between paying money that is owed and admitting that it can’t pay, a government will always chose to pay, and if it owes it’s own currency it always can pay.

    Maybe the US has managed to pass a law that can force it to default, but its never defaulted yet. Default is an instant serious crisis. Paying might produce inflation but certainly not a crisis. I think that default will somehow be avoided this time too, but some political factions may want a crisis, so you never know.

    • Laughing Eagle
      Jun 19, 2019 at 5:16 am

      Kye read sig fromm’s comments where he said the US has defaulted 3 times since 1800.
      I know of two. FDR took dollar of gold standard in 1933 and gold was officially devalued in 1934. Nixon removed the gold backing of the dollar in 1971, and the oil boys of the Middle East did not like that and they going to get the true value for their oil by causing shortages of oil to US and inflation went sky high until Volcker increased the interest rates to double digits in the 1980’s to bring down the inflation. Just shows the value of gold.
      I bought an Olds Cutlass in 1978 for $7,500 and by 1983 the same Cutlass cost $14,000. Talk about losing purchasing power with the dollar all because we devalued it in 1971 which essentially is a default. Why anyone thinks US Treasuries are a safe haven is beyond me. When our government cannot pay the debt they will default again, but come up with some BS story of why they had to do it. Your only safe haven is gold which has been a proven asset to maintain purchasing power of any currency or now maybe cryptos if one is backed by gold.

      • Anon
        Jun 19, 2019 at 6:40 am

        An individual’s community is their only safe haven. Gold is only good when there is an accessible market to trade it in. That is the problem with cryptos right now. The crypto market isn’t broad enough. Read “Mission Earth” ScienceFiction series nominally by LRH (Dianetics and Scientology inventor) for satirical comments on banks and how much banks hate gold. Fun stuff.

      • Kye Goodwin
        Jun 19, 2019 at 4:39 pm

        Laughing Eagle, Hi. Sig fromm doesn’t include any detail with that claim about 3 defaults. Your examples sound more like inflation than default to me. (Or maybe deflation in the first case if the value of gold in dollars went down?) True, if a currency is pegged to gold or to another currency then the sovereign might have to abandon the peg at some point if it gets too expensive, but unless their debt is denominated in gold or in a foreign currency they can always pay.

        I’ve read more than one explanation for the high interest rates of the 80’s. I thought they were brought in to crush inflation, inflation caused by full employment policies and union power, a wage-price spiral. The inflation did subside and the US didn’t go back on the gold standard.

        A true default happens when some entity is owed payment at a particular time and they don’t get it. If the US government failed to pay debts on time later this year I wonder what the consequences would be?

        • Laughing Eagle
          Jun 20, 2019 at 10:16 am

          Kye, the inflation of the union wage occurred after and was a result of the oil embargoes of 1973 and 1979. Nixon removed the gold backing of the dollar because the French wanted gold for their dollars and we could not afford the loss of gold. To me that is a default.

  34. P H
    Jun 19, 2019 at 10:45 am

    There is a simple explanation: Japan, German and French 10 years bonds all have negative interest for a long time. Only Greek and Italy have interest rate comparable to U.S. Policy makers have already find a easy solution to all government spending problem: push interest rate to zero or even negative . If U.S. interest rate drops by half, we can double our debt (another 22 T) and still paying the same amount for our debt. This probably will last us for about 20 years. After that inflation and economic growth may double our GDP and we are back to the same GDP to Debt ratio.

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