But Who Bought this Huge Pile of US Government Debt?

Foreign holders, US banks, and US government funds all dumped. But two big players gorged on it – and one of them was the Fed.

By Wolf Richter for WOLF STREET.

Foreign investors – including central banks, governments, companies, funds, and individuals – shed $44 billion of US Treasury securities in April, compared to March, according to the Treasury Department Monday afternoon. Over the same period, the mountain of US Treasury securities grew by $1.287 trillion. Someone must have bought this $1.287 trillion in additional US debt that was issued in April, plus the $44 billion that foreign holders dumped. This amounts to $1.33 trillion. But who bought it?

This unloading of US Treasury debt by foreign entities comes as the US government is borrowing vast amounts, at a rate of $1 trillion every four to six weeks. And some entity always has to buy this debt.

Yet, buying Treasury securities is an unpalatable undertaking today. The yield ranges from near-zero for short-term Treasury bills to 0.7% for a security with a remaining maturity of 10 years, and up to a whopping 1.45% for 30 years. Inflation will reduce the purchasing power of the principal by more than the interest paid. And yet, there is demand for them, or else the yields would spike as prices plunge. But who are the entities buying them?

These entities fall into five broad categories: Foreign holders; the Fed; the US government’s pension funds and Social Security Trust Fund; US commercial banks; and finally the motley collection of other US institutions such as bond funds, insurance companies, cash-rich corporations such as Apple, highly leveraged hedge funds with complex trades involving Treasuries, and individual investors needing to park some money. So here we go…

  1. Foreign Creditors.

All foreign investors combined – “foreign official” holders such as central banks, and foreign private-sector investors – dumped $44 billion in US Treasury securities in April, which took their total holdings down to $6.77 trillion, according to the Treasury Department’s Treasury International Capital (TIC) data. And their share of the incredibly ballooning US Treasury debt ($24.97 trillion at the end of April) dropped to 27.1%, the lowest since March 2008.

The chart below shows foreign holdings in trillions (blue line, left scale) and as a percentage of total US debt (red line, right scale):

Japan and China are the two largest foreign creditors of the US. Since 2018, they have gone the opposite way, with Japan adding to its holdings, and with China continuing to shed its holdings. Japan’s holdings, after a massive buying spree early in the year, ticked down a smidgen in April.

China unloaded $19 billion in April, which brought it back to about its December level. In the chart below, if you ignore the plunge in China’s holdings during its period of capital flight from mid-2016 and the recovery through mid-2017, and you’ll get the green long-term trend line. So we can see where this is going. China held only 4.3% of total US debt, the lowest in years. Japan held 5.1%.

The next 10 major holders are mostly tax havens and financial centers, including the UK (City of London financial center), Belgium (home to Euroclear), and Ireland where many US corporations, including Apple, have mailbox entities where they register part of their global profits to dodge taxes in the US, which results in some of their US Treasury holdings being held in entities in Ireland. In parenthesis are their Treasury holdings as of April 2019:

  • UK (“City of London” financial center): $368 billion ($300 billion)
  • Ireland: $300 billion ($270 billion)
  • Luxembourg: $265 billion ($224 billion)
  • Brazil: $259 billion ($307 billion)
  • Hong Kong: $243 billion ($207 billion)
  • Switzerland: $241 billion ($227 billion)
  • Belgium: $210 billion ($180 billion)
  • Cayman Islands: $207 billion ($217 billion).
  • Taiwan: $202 billion ($171 billion)
  • India: $157 billion ($155 billion)

Saudi Arabia has fallen off the list as it has dumped one-third of its holdings, slashing them from $184 billion in February to $125 billion in April.

Mexico and Germany, with which the US has the second and the fourth-largest goods trade deficit, do not rank here. Germany is in 20th place, and Mexico in 23rd place, demolishing the theory that countries with which the US has a big trade deficit must end up holding large amounts of US debt.

  1. The Federal Reserve

In March, the Fed added $1.02 trillion to its pile of Treasury securities (including repos). As it then was cutting back its purchases, in April it still added $526 billion in Treasury securities, for a two-month total of $1.56 trillion. This brought its total holdings of Treasuries (including repos) by the end of April to $4.13 trillion.

March and April combined, the Fed monetized 100% of the additional debt. Over the two-month period of March and April, the US government increased its debt by $1.56 trillion (most of it in April); and over the same two-month period, the Fed bought $1.56 trillion in Treasury securities (most of it in March) and thereby monetized 100% of the additional pile of debt during the two-month period.

  1. US government funds

US government funds – including the Social Security Trust Fund and pension funds for federal civilian employees and the military – dumped $91 billion in Treasuries in April, whittling down their total holdings to $5.9 trillion. Often called “debt held internally,” these are assets that belong to the beneficiaries of those funds.

  1. US Commercial Banks

US commercial banks dumped $51 billion in Treasuries in April, compared to March, which brought their total holdings down to $919 billion, according to the Federal Reserve’s data release on bank balance sheets. In other words, they hold about 3.7% of the total US debt.

  1. Other US entities & individuals

Other US entities – institutional investors, bond funds, pension funds, insurers, highly leveraged hedge funds engaging in complex trades, private equity firms, plus cash-rich corporations, and individuals directly or indirectly – gorged on US Treasuries, some of them likely in panic mode. They loaded up with an additional $948 billion in April and brought their total holdings to $7.24 trillion, which makes them the largest holder of US Treasury securities.

In summary, in April:

  • Foreign holders: -$44 billion
  • Federal Reserve: +$526 billion
  • US government funds: -$91 billion
  • US commercial banks: -$51 billion
  • Other US entities: +948 billion

In the chart below, which shows Treasury holdings by category, the holdings of US banks and other US entities are combined into the yellow field:

In May and so far in June, the Fed has further cut back on its purchases of Treasury securities, even as the US government debt has now ballooned to over $26 trillion. But demand beyond the Fed has been brisk, shown by Treasury prices that have remained high and yields that have remained ultra-low.

But the pileup of the US national debt continues. It spiked by $1 trillion in 5 weeks to now over $26 trillion. And business debts spike to high heaven. Read…  Wow, That Was Fast: Debt Out the Wazoo

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  132 comments for “But Who Bought this Huge Pile of US Government Debt?

  1. Kent says:

    So… MMT is accurate?

    • Cas127 says:

      Accurate in the sense of almost entirely destroying the interest rate paid to anyone foolish enough to save in USD.

      And therefore destroying the desire to save in USD.

      No one in DC has ever had to remotely “function” in the economic world their grotesque incompetence has made inevitable.

      Systemic, global fraud is not a skill.

      • Willy Winky says:

        My USD holdings spiked nicely as the NZD crashed to 55 cents vs USD….

        • Cas127 says:

          What are NZ prices like?

          All countries can (and do) manipulate the supply of their own currency for many reasons (manipulate intl trade, manipulate domestic economy, etc).

          I have no idea if NZ is doing so or has done so in the past…or if it is capital sloshing around the world – NZ was considered a 1 percenter Covid sanctuary for physical escape, perhaps some of that capital is being repatriated as C19 becomes more of a known entity.

          The point is, running a gvt on the basis of systemic debasement (ie, fraud) does not work over the long haul – that is why LatAm nations are habitual basket cases of capital flight – their citizens know what their gvts are.

        • No Expert says:

          NZD is heavily traded, I think 11th most traded currency. Not sure about current govt but previous govt had an ex currency trader (Merrill Lnych) as our Prime Minister who somewhat successfully (in the short term) pulled the exch rate down to aid exporters. Not sure such a small state can have much influence on world markets.

        • Cas127 says:


          Since a country can always print unlimited amounts of its own currency under a fiat regime (albeit with domestic inflationary consequences) it should be able to push down its foreign exchange rate relative to other currency.

          If X and Y are 1 to 1 in foreign exchange and country Y doubles its money supply (and the respective real asset ratio between the countries remains the same – which printing pieces of paper does not change) then the value of Y should fall by about half (because twice as much money represents the exact same amount of real assets in country Y).

          Money is just a representative overlay of real assets – printing it does not magically create new real assets.

          So the foreign exchange rate adjusts to reflect the new money/real asset ratio that holds in country Y.

          These are always going to be approximations (too many constantly changing variables are involved) but directionally and with decent accuracy these rules should hold.

          If nothing else, country Y can always keep printing until it gets the exchange rate it wants…at the cost of creating domestic inflation (because of the engorged supply of money used to drive the FX rate down).

          In a very real way, fiat governments are empowered to seize control of their citizens wealth in pursuit of the G’s macro economic goals, right or wrong…regardless of any property protections citizens may appear to have.

          That is because fiat gvts can always dilute the existing money/real asset ratio at will, to whatever extent it sees fit.

          Not likely Constitutional in US (5th Amendment taking) but very little of the US gvt pays strict attention to all Constitutional laws…they pick and choose.

          Because they are so much smarter.

          Which their performance has given so much evidence of…

    • timbers says:

      Yes. It’s never not been inaccurate.

      • timbers says:

        Err…meant to type:

        Yes. MMT has always been accurate.

        The advertising cause my keystrokes to lock and/or skip frequently…making me an ever worse speller and grammer-tition than I already am.

        • HONmt says:

          Imagine if the “identitarians” so caught up in identity politics yelling at each other in the streets and social media could spend just a few moments on this site educating themselves.

      • timbers says:

        Sorry, meant to say

        Yes. It’s never been inaccurate.

        • Lisa_Hooker says:

          Hoist with his own petard.
          The double negative strikes again.
          We are all mad princes now.

        • Implicit says:

          No such thing as complete 100% accuracy about anything.
          It has never proven to not not be accurate :>{)

    • Alain Belanger says:

      It won’t be China or other Countries

    • Detroit Dan says:

      Yes, MMT just basically describes how fiat currency systems work these days. Its major contribution is to simplify the operations involved by removing layers of bureaucracy from the description.

      Thus, conventional economics claims that governments must borrow to pay for deficits. But, as Wolf notes, the U.S. government just printed $1.56 trillion in March and April. Technically, the government created time deposits (bonds & bills), then converted the time deposits to demand deposits (central bank reserves). The extra steps of creating bonds and then buying the bonds obscures the way current system works, which is that the government just prints money, adjusting interest rates by converting time deposits to demand deposits, or vice versa. Inflation and the value of the currency internationally are the real constraints.

    • Kathleen T Smith says:

      YEP — we have MMT which means deficits don’t matter. MOst of the financial gurus that are pushing gold – r either stupid, stubborn or are just fucking idiots but they keep insisting the FED balance sheet matters. When it obviously doesn’t. Tell this to an idiot big shot on twitter and they block you. PRIVATE DEBT IS THE ISSUE – and has ALWAYS BEEN THE ISSUE. Big difference betweed USD issuer which is the Federal Govt and the USD user which is everyone else.

  2. 2banana says:

    Supply/Demand and world wide political risks.

    For example – India has $150 billion and China has $1.1 trillion in treasures. And they both are a cat’s whisker away from a major shooting conflict.

    “But demand beyond the Fed has been brisk, shown by Treasury prices that have remained high and yields that have remained ultra-low.”

    • John Amaral says:

      Rob Kirby and Jim Willie have been saying for years the Treasury itself through the Exchange Stabilization Fund (with the 30 trillions dollars disapeared) buys it own debts

    • Cas127 says:

      Holders other than the Fed are essentially becoming irrelevant (although other central banks will still print to buy USD to some extent, in order to manipulate their FX rates downward in order to maintain intl trade advantages).

      It seems pretty clear that DC will print any amount of money (inflation be damned) rather than show any amount of spending restraint.

      • Portia says:

        “rather than show any amount of spending restraint.”

        It really depends on who the money would be going to…it’s PAYGO for the peons, and since the hole keeps getting deeper and deeper, no soup for you!

        • timbers says:

          Portia, have you noticed that those who deny it would work for us totally acknowledge it’s working for Wall Street and e rich?

      • Implicit says:

        …the inflation built in bias is why the the gov. and fed do not forgive debt. They only create “schemes” like the UK that eventually end up in staggered bankruptcies over time.

  3. Bobby Dents says:

    When the Fed “buys”, commercial banks have a tendency to cut back, mainly because they are the fed. This causes interest rates to spike initially. This fact blows by so many people. It confirms that us commercial banks aren’t what own the debt, but domestic etf’s that live the dollar standard. It’s why breaking it requires destroying their ability to finance.

    • Beardawg says:


      I am hoping you can expand on this. I don’t even understand what happens when the FED buys a Treasury. Does this mean the Treasury creates X’s and O’s which are given to CBs to hoard for the .00005% interest paid….OR…..to sell those Treasuries to any number of Buyers ?

      • Petunia says:

        When the fed buys treasuries it can be for several reasons. Buying treasuries is a way to pump cash into the economy in times of recession, selling bonds takes money out of the economy. The fed could also be a buyer when nobody else is buying, no demand, or they could be buying to keep the interest rate stable.

        Right now I think the fed is buying because demand is down due to the low rates and if they don’t buy rates will rise.

        • Bobby Dents says:

          I don’t see how. Buying bonds forces others to sell.

        • Beardawg says:


          I appreciate your attempt to explain, but I remain befuddled. If Fed buying treasuries keeps interest rates low when they are already ZERO, I don’t understand the purpose. Why not let the excess amount of treasuries in existence be bought/sold as needed…by the US, the world, pension funds, whatever?? If no one is buying Treasuries now, and no more cash is needed in the “system” because no one is really buying anything, I don’t get why more of an unwanted investment is being created. I’m a real estate person,not a high finance person, so my ignorance is evident, but I do want to understand.

        • Petunia says:


          If the seller is the treasury and the primary dealers are buying as little as possible, you get into a no demand situation. The primary dealers will only buy more if the rate is high. The fed then becomes the customer thru the primary dealers, but the treasury is the real seller. I heard there were a couple of no bid days back in March, don’t really know because I don’t follow the market.

        • Petunia says:


          If at zero interest there is no demand for treasuries the price would have to drop to entice buyers, this gives you negative rates which the fed does not want. Since zero is a rate real investors don’t want, the fed has to buy the treasuries to monetize the debt. Somebody has to buy the debt we keep creating, at an interest rate we can afford, and that somebody is the fed. The primary dealers make money on the fees for being in the middle. Also see my response to BD.

        • Petunia says:


          I didn’t mean negative rates in my comment, I meant higher rates. Sorry.

        • Cas127 says:


          Fairly decent explanation but I think all such explainers should include a statement that all the Treasury-Fed to’ing and fro’ing never adds a single real asset to existence, even as it greatly increases the money supply – therefore devaluing the worth of all existing dollar savings.

          It solves the problem of the G’s gross incompetence by essentially seizing the value of citizens’ accumulated savings.

          That is what it means in practice to “lower interest rates” due to Fed printing.

          To get too caught up in the mechanics is to lose sight of the underlying crime.

        • VintageVNvet says:

          Agree with you SO much on this Cas,,
          Time and enough to get rid of the FED as one part of a good start back to the path USA founding folks stipulated and speculated..
          Never mind trying to keep them, these ancients of all and every society, to the standards of today.
          Time and enough to advance ”PRINCIPLES” that these ancient folks stipulated to each and every challenge Today,,, especially controlling the very clear corruption and criminality of today by the very people who can, could, and should be doing their very very best to ensure THE best possibilities for ALL folks willing to work… almost the opposite of what has been happening the last few decades.

        • Beardawg says:

          PETUNIA & Cas127

          Those supplemental explanations were helpful and I thank you. When we talk on this site about inflating away Joe Bag-o-Donuts’ life earnings (and savings) via production of excess treasuries and Fed’s purchase of those treasuries, it is infuriating. It is even more befuddling trying to understand how deflation can come into play during these activities in any way shape or form. It just does not make any sense to me, but I am going to keep it getting myself. ;-)

        • Cas127 says:


          Deflation can come into play because general economic chaos and the ever widening knowledge that the Fed is simply printing trillions in unbacked/non-asset supported money causes USD holders to dramatically alter their spending behavior.

          People worried about the honesty/sanity of their gvt tend to spend less…biding their time, looking for an exit.

          Also, if ZIRP causes home prices to double, the rqd down pmts also double…and that is money that has to be saved (not spent) much longer.


          There are all sorts of unpredictable consequences to ZIRP but the bottom line is, the more irresponsible the G is, the more careful individuals feel they have to be.

          DC’s demento God complex does not take account of this, where it does not actively attack it.

        • THE BASICS: (1) The Treasury Dept HAS TO sell treasury bonds, because the government is spending money it doesn’t have. This is how the deficit is covered. (2) If the Fed didn’t buy them, and there were not enough other buyers, the Bond rate would have to increase to entice new buyers… so the absence of demand drives rates up. This can also be thought of as oversupply. (3) The main thing that currently keeps rates low is artificial demand from the Fed. Excess demand (from central banks printing money out of nothing) is probably the main factor that makes rates go negative. (4) Some additional buyers, e.g. pension funds, retired persons, etc., are risk averse, so they may buy bonds because, despite their negative return, as the risk is knowable. (5) Momentum players will buy low or negative yielding bonds if they think rates will fall further still, as falling rates can equal dramatically higher prices due to high relative increments. (6) If at some point there is a loss of confidence in the currency, this would force down non-central-bank demand, and thus force up rates, as we see in countries like Argentina. (7) Will the US become a relative pariah like Argentina at some point? I think the answer is “yes.” That is, bonds everywhere (not just the US) will start to be seen as “not worth the guaranteed losses to inflation.”

        • Prasenjit says:

          Fed is buying to avoid the USD liquidity crunch felt by the market. Those selling USTs are trying to meet the USD pent up demand if not met will impact their Money Market Interest Rates and Exchange Rates adversely.

      • Wolf Richter says:


        “I don’t even understand what happens when the FED buys a Treasury.”

        When the Fed buys Treasuries, it first creates electronic dollars. Then it buys Treasuries from its primary dealers and pays them with these newly created electronic dollars. Now these newly created dollars are out there and need to go somewhere (other assets), and the Fed holds Treasuries.

        Treasuries are also electronic entries. So all this is easy. The Fed receives the coupon payments that the US Treasury Dept. sends out to holders of Treasury securities.

        • Beardawg says:

          Thanks Wolf. I had not read your comment when I posted a thank you to Petunia and Cas 127.

        • Wolf: I guess this is an obvious question, but I suppose the Fed buys through dealers to keep arm’s length, and the dealers get a commission for their trouble? (The Fed is a “customer.”)

        • Wolf Richter says:

          Dealers always make money when they buy-and-sell something. It may be the buy-sell spread rather than a percentage commission. It’s small, but since the quantities are huge (trillions), it ads up.

        • Chris says:

          If the Fed has to print to buy the treasuries off the primary dealers, where do the primary dealers (banks) get the dollars from to purchase the treasuries initially. I assumed the banks created debt against their reserves to buy treasuries, which the feds new dollars repaid. Suggesting the banks were not left with newly created dollars needing somewhere to go?

    • They used to refer to them as money center banks, banks which don’t rely on depositor funds, and provide a conduit for international investment. Fed taking new debt off the market, causes a tightening of supply, so Fed provides liquidity, through REPO, and not solely to domestic banks, (because there are none). Ex. Turkish debt in dollars, is bought by Paribas, who owns Bank of the West. Before the crisis Fed was opening up REPO for hedge funds, and dollar swap lines. ‘Bank and OTHER US entities’ implies foreign holdings. Fed REPOS them, they buy Govt Bond ETFs. We probably need to see how the allocation matches in equities, where foreign ownership is declining.

  4. Wisdom Seeker says:

    Is it really a “debt” if the plan is to “pay off” using a few keystrokes, rather than going to the effort to produce, earn, and save something of value? And if, in the meantime, the “debt” costs nothing in interest?

    I’d love to have such “debts”, myself…

    • 2banana says:

      It’s a small club and you ain’t in it.

    • cb says:

      Yes, but if the plan is to pay off via higher taxes, and diminished purchasing power of existing savings and future fixed income receipts(ie pensions), then you do have a portion of such “debts”.

      • polistra says:

        There will never be higher Federal taxes. Federal taxes will always decrease.

        • There will always be those interested in taxing the rich. Obviously the rich have some defenses, but, historically, rich Americans paid much higher taxes in the days when the economy was also really growing. The rich will always be a minority in a democracy, though they obviously have other ways of wielding influence.

      • Wisdom Seeker says:

        1) Since a print-to-repay “debt” isn’t truly debt, then “savings” denominated in same currency aren’t truly savings. To accumulate genuine wealth, have to “save” in an “unprintable” form. ;)

        2) Those whose savings aren’t in print-to-pay currency, are NOT holders of such “debts”. (But they get to have other issues…)

  5. Portia says:

    I am confused as to what the below result means to the “assets” held by beneficiaries of US govt funds:

    “US government funds – including the Social Security Trust Fund and pension funds for federal civilian employees and the military – dumped $91 billion in Treasuries in April, whittling down their total holdings to $5.9 trillion. Often called “debt held internally,” these are assets that belong to the beneficiaries of those funds.”

    • Portia says:

      I really am hoping someone will give me an answer to the above–thx in advance

      • Cas127 says:


        Maybe the G just sold Treasuries to buy something else, or the phoney-baloney SS “surplus” is being drawn down as the demographics get worse and worse.

        • Portia says:

          oy and ugh, cheers

        • LetItRainUSDs says:

          There’s nothing phoney about the Social Security balance. The SS balance was plugging huge holes in the General Budget for generations. It is the General Budget that is out of whack. Now that SS has to properly draw down on its actuarially-proper balance, you will be told that SS is tottering, when it is really that the General Budget and its balance sheet that is tottering as SS funds can’t be hijacked – SS has its own function to fund.

    • Portia: Say you’re a veteran. Your pension fund sold treasury bonds (which have a real negative yield, so, yeah). Your pension fund would then buy something else, maybe with a real positive yield (this implies more risk or volatility, however). Your fund would sell the treasury bonds to someone else on the open market (not at a government auction). Your pension fund is increasing bond supply on the market by unloading the bonds, so that would tend to raise the interest rate and to lower the face value of the bond on the market through supply and demand (obviously the value doesn’t change at maturity).

      • Portia says:

        Thank you for that explanation. But this is govt pensions and SS contributions I thought. When the govt uses this money to buy treasuries and then “dumps” them, how does this relate to a private fund? How is Treasury “managing” these contributions, and what is the net effect? Is there a report that is meaningful?

        • LetItRainUSDs says:

          It’s not a clear statement to say SS was buying Treasurys. What should be said is that SS was funding the general budget with a promise that in the future, when the SS reserve that is in place is needed, the general budget would return the funds.

        • Portia says:

          LetItRainUSDs, thanks, that had been my understanding, that SS was being “borrowed”, earning interest one would hope.

  6. RD Blakeslee says:

    Wolf, awhile back, you were pretty harsh with a contributor who was pushing modern monetary theory like a religion.

    But if that theory is destined to enter “the wastebin of history”. What is going to happen with the Fed’s practice – exponentially increasing debt? Is that not the same as instituting modern money theory? How do you think it will end?

    • 2banana says:

      How do you think it will end?

      There are a plethora of examples throughout history. The mongols, the romans, the germans, etc.

      One of my favorites: The french assignat.

      They all end the same. In misery, ruin and bankruptcy. And then in complete changes of governmental systems quickly followed by war.

      “How do you think it will end?”

    • Bobby Dents says:

      That isn’t mmt. mmt is getting rid of bonds and interest. You are really confused.

    • Cas127 says:

      MMT’ers just provide the thin academic veneer for the gross crimes DC can no longer survive without.

      Read a MMT book or two and you find out just how thin…and sophistic.

      MMT’ers are big on saying governments can never go bankrupt…knowing the general public takes “bankrupt” to mean economically ruined.

      But when cornered by anyone with half a brain, MMT’ers admit that countries can still be ruined via inflation…so it is all just word games with them.

      They are lackeys of a corrupt political class.

      • VintageVNvet says:

        Agree with you SO much on this Cas,,
        Time and enough to get rid of the FED as one part of a good start back to the path USA founding folks stipulated and speculated..
        Never mind trying to keep them, these ancients of all and every society, to the standards of today.
        Time and enough to advance ”PRINCIPLES” that these ancient folks stipulated to each and every challenge Today,,, especially controlling the very clear corruption and criminality of today by the very people who can, could, and should be doing their very very best to ensure THE best possibilities for ALL folks willing to work… almost the opposite of what has been happening the last few decades.

      • Bobby Dents says:

        Lol, nope. That isn’t mmt. You sound like a Dr Rothschild. You don’t even know who the founding fathers were.

      • sunny129 says:

        MMT’ers are big on saying governments can never go bankrupt…

        Yep. As long as the rate growth of GDP exceeds that of the DEBT
        As of now we need more & more debt to produce 1% growth of GDP’
        Soon the service of National debt (26 T and growing) will be competing with defense and other social spending!

        MMT doesn’t solve the PRIVATE debt save Corp debt, which now directly financed by the Fed.

        • Cas127 says:

          “As long as the rate growth of GDP exceeds that of the DEBT”

          Any how many years has honest GDP (vs. G bootstrapped) been greater than the deficit, over the last 50?

          It is like the Keynesian deficit reduction phase…needed to keep the theory from being self-evident gibberish, but essentially fictional in the real world, given the reliable, predictable venality of politicians.

      • timbers says:

        You really do need to try using facts for a change. The crime you refer to have not been committed by those you refer to. And it has worked brilliantly to make the stocks go higher, proving it does in fact work. Why do oppose using it to benefit us?

  7. cb says:

    Wolf said: “if you ignore the plunge in China’s holdings during its period of capital flight from mid-2016 and the recovery through mid-2017”

    What is the significance of China’s capital flight regarding the plunge in China’s Treasury holdings? Can’t capital fly and be held in Treasuries? Does flight capital have to held in in foreign bank acounts, foreign stock brokerage accounts, foreign real estate or foreign mattresses?

    • sunny129 says:

      I presume predominantly in the REAL ESTATE – homes, in the west along with fake shell corporations. Arts, paintings and other collectibles?

  8. RedRaider says:

    Why is it when you and I borrow money it’s called a loan but when the government borrows it’s called a bond? Gee, I wonder which ones propaganda?

    • Bobby Dents says:


    • 2banana says:

      Can you print money, tax your neighbors, jail your neighbors or send an army overseas?

    • Wisdom Seeker says:

      RedRaider – in my mind, the difference is actually fairly simple.

      A loan is a single debt, owed by one entity to another.

      A bond is one of a group of identical, readily tradeable loans, owed by one entity to a group of bondholders.

  9. 1) We know where the bonds are held, but not who owns them. 2) The Fed would say they are buying those bonds to keep interest rates low (QE) not monetize debt. Fed buying this debt is problematic, as one Congressman said today. 3) Pension fund contributions are down? 4 & 5 ) ‘Complex Trades’ are what drives this market, the rate of return is less salient than the leverage to collateralize, and cost of currency derivative insurance. Remove the opportunity to collateralize, and this is where you have a crisis. No one owns these bonds for their face value return. Those who do are getting really screwed.

    • sunny129 says:

      No one owns these bonds for their face value return.”

      For CAPITAL gains when ZRP will be ‘forced’ to go into NIRP, some time down the future, if the dis-inflation deepens!

  10. MCH says:

    It’s hilarious that all the debts are becoming “internal” So, what happens if the rates goes negative, and the Fed start to binge on it? Does that mean then that the Fed will owe money. It would be hilarious if the yield goes negative, followed by treasury, and the Feds buys the stuff. Talk about a snake eating its own tail.

  11. Brant Lee says:

    All we are seeing is U.S. asset stripping (let’s see, who is the secretary of the treasury?) and the FED with its own personal private equity firm sucking off anything that remains of value in this country for themselves and rich friends. They don’t go to jail, they get a pension.

    • Portia says:

      Do I understand correctly that Treasury is giving away what it does not have? But recording it as taxpayer debt/expanding the deficit?

      • Lisa says:

        Portia, look up Mike Maloney on YouTube, he has a series of videos explaining how currency flows in the system – it’s called the secret of money.

  12. DR DOOM says:

    Eventually there could be a bifurcation of our debt , Foreign and Domestic. If the Foreign entity making our stuff don’t want our debt or Reserve Fiat Note they could force a Gold Trade Note issued by the Treasury of the US not the Federal Reserve. This would be following the constitution as we did once upon a time with regard to money.The Federal Reserve sole role,if it survives ,would be to keep the Domestic de-basement / credit scheme alive and its population of economic serfs healthy enough for bleeding with the domestic Federal Reserve Note. It will take the US sheeple a long time to figure out they are being screwed even while living a decreasing standard of living. The financial sector with its Congress Lapdogs will do very well with this system. Eventually if you want stuff you will have to put your own work in to get stuff if no one will swap their time for your Fiat Currency to get you the stuff you want. Yes , it really is that simple.

    • Bobby Dents says:

      Your not quite right. Basically a federal reserve note is like a gold note. Gold notes don’t have any value either. Capital flight and financial liquidation are older than the hills under a fractional reserve banking system, but that is what capitalism is created for. Like 1929 showed under the good standard, when the reserve currency collapses, it’s brutal. Sometimes there is nothing you can do, from a private sector pov.

    • 2banana says:

      If America was “following the constitution as we did once upon a time with regard to money…The Federal Reserve” would be abolished.

    • Wisdom Seeker says:

      Re “If the Foreign entity making our stuff don’t want our debt or Reserve Fiat Note they could force a Gold Trade Note”

      … no, they couldn’t. We make everything that matters: food, fuel. And we’re perfectly capable of making the rest of our stuff again if we wish. It would be a painful transition, but it might actually be a good idea.

      • Cas127 says:

        “And we’re perfectly capable of making the rest of our stuff again if we wish. It would be a painful transition, but it might actually be a good idea.”

        Agreed…although simply diversifying away from the single, absolutely lowest cost vendor (China) would go a long way and buy time to make the inflationary transition less wrenching.

        Why DC absolutely refused to course correct for 15 years, after agreeing to WTO obligations that restricted US action but left China free to manipulate the Yuan in order to create astronomical US trade deficits…is almost inconceivable (but just almost, as the truth, as usual, is likely that DC was just bought).

        • VintageVNvet says:

          Agree with you once again Cas,,
          But in spite of it all, it seems very very clear that USA pres, etc. sold out to asian markets each and every thing possible 92-2008,,, and it may become clearer in future that that selling out has continued right up to today.
          It is indeed unfortunate that so called ”leaders” of USA would and did do that,,, and WE the PEEDONs can only hope that it does not continue.
          At this point, I am not ”holding my breath” waiting for these sell outs to stop,,, but I do have a TON of HOPIUM,,, as should we all IMO…

        • The Rage says:

          Those trade deficits are what buy debt. Your not putting it together. The U.S. Economy would have a large contract. Period. Over growth is what’s happened.

      • sierra7 says:

        Wisdom Seeker:
        “….making the rest of our stuff again if we wish. It would be a painful transition, but it might actually be a good idea.”
        Only after complete elimination of the present financial/political class and as a “commons”.

        All this discussion of FED “phraseology” only re-enforces why it is called, “The Creature of Jekyll Island”!

        I can see that there are many commenters that do not quite understand how the FED “works”……not surprising since they (the FED) continue to come up with more ways than a snake shedding it’s skin to load up with what I would change the title of this article to:
        “Who bought this huge pile of ‘Excrement'”????
        What does all this mean to the poor schmucks trying to make a decent living????
        Who’s gonna pay for all this complicated financial goings on when the ball drops????
        Oh, I forgot!
        Some businesses are to big to fail (jail)!!

        None of this can end up well. Be prepared.

    • Paul says:

      I expect you might be right.

      However, at current market value, the 8300 tons or so of gold reserves would only cover the current account deficit for less than 9 months.

      A lot of things need to change drastically.

  13. MonkeyBusiness says:

    The Fed will win in the end, they’ll buy high and sell low. I’ve been told that that’s the ultimate investing secret.

  14. Lemes says:

    Awesome job as always Wolf!

  15. Crush the Peasants! says:

    Shouldn’t holding UST’s move in the direction of sales to the US of your products or services?

  16. Cobalt Programmer says:

    US gov is in business for like 250 years and never went broke. If fed can purchase corporate debt, they can also buy government debt. Corporations do business, get profits and pay the interest. Government is also doing official activities and collect taxes to pay back the treasury bonds. The corporation can go broke but US government cannot go broke. What makes a difference now?

    Lets think about India. In a third world country, US government debt is the highest quality debt and dependable to the local private corporations. China is the Fed to the US government now-a-days. They also sell goods and also buy the government debt. Also the EU has only two choices. EU bonds with negative rates and US bonds with low but positive and reliable rates. What can go wrong? Now, lets get back to the Robinhood trading because stocks are making more money today. Everything is covered.

    • MonkeyBusiness says:

      How can a government that issues its own currency go bankrupt? In theory it just can’t.

      But you missed one thing. In the past you can exchange your US Dollar for gold. Nowadays you can’t. The US Government still can not go bankrupt by definition even if that’s the case, but the US Dollar can still lose a ton of value.

      • BuySome says:

        The denomination is in dollars, not ounces. The sitting corporate board of Guvco can always vote to change the value of a metal so you get less bang (ounces) for your buck. They can even make it illegal to hold metal in any form used for monetary exchange and close the window for redemption.
        Guvco is the model for Privco. How much actually does go away anymore? It is said that Department of War was renamed Department of Army. Was it, or was DoA a new entity which absorbed DoW? Is DoW a closet space with a rubber stamp in the basement of the Pentagon? Who knows? It is a shell game, and Privco plays it too. Things are moved around until only inside lawyers can find them. States like Nevada had to retire whole lists of deadbeat corporations in the past. But does that really happen much now, or do the corporate shells simply move around as assets while the debts are transferred onto the backs of the public in one form or another? And here’s the scary part…what is there to prevent the legislature of any Guvco from simply voting for putting their debts under the banner of another Guvco (funny, the spellchick wanted to change that to Gucci..she’s got her priorities)? Would a future public accept going broke or would they say “Hell yeah, Worldco stock is up!”? Will Privco dump their debt on Guvco and then go on to run Worldco from the sidelines?

  17. John Dimas says:

    The only time the U.S. Federal Reserve will lose is when the U.S. disappears. All the brainwashed young minds from universities will have to learn the hard way as my high school teacher in class said to class agitators.

  18. Thomas says:

    What a frightening economic landscape. And moving forward into it, I like others become more conscious of time. It will become increasingly uncomfortable as folks realize there’s no way to retreat. We must move forward. Our leaders see no other way out. It would seem then that panic is somewhere along our path. It seems inevitable. This realization process has driven many into precious metals and self sufficiency options. Perhaps the ‘first to panic’ already have.

    • David Hall says:

      I checked the Bureau of Labor Statistics CPI calculator.

      $1000 in January 2020 bought the same amount as
      $1518.93 bought in May 2000.

      The government does not include the price of a new home in the CPI. They did not fully account for the increases in the price of a new vehicle as they deducted for technological advances.

      • Wisdom Seeker says:

        David, I think you got the direction wrong.

        You needed 1518.93 today to buy what you could have bought for $1000 in 2000. On average. Over some assumed “consumer products index”. Which doesn’t count housing, college, or medical care expenses correctly… and assumes that your $40,000 car is worth more because it has more features than the vehicle from 20 years ago, even though both drive you to work at the same speed limits… and assumes that your laptop today is worth more than the same-priced one from 20 years ago, even though you did more or less the same work on both… Hedonic-ism is as bad as hedonism…

        • Silpheed says:

          A $1000 laptop today can perform about 10^11 operations per second.

          A human being has a brain capable of carrying out the equivalent of about 10^17 operations per second. 10^17/10^11=10^6.

          Therefore everyone possesses the equivalent of 1,000,000 $1000 laptops and so is literally a billionaire.

  19. timbers says:

    Social Security buys U.S. Treasuries?

    But…but…but…I’ve read here sssssssssssssssssoooooooooooooooo many times in comments that SS is the biggesty mostesty deficit contributor?

    How is that possible? Fake News anyone?

  20. Tony22 says:

    “The Internal Revenue Service was necessary to collect the interest on the public debt created by the recently created Federal Reserve Act.”

    Is that true?

  21. DeerInHeadlights says:

    Thanks for the breakdown Wolf. This site is truly an encyclopedia when it comes to the details of how this debt is created and where it goes.

  22. DR DOOM says:

    The Federal Reserve Note does not certify on it that there is on deposit in the US Treasury the face value of the Note nor does the Note certify its value to gold or silver. The old dollar had printed at the top these words ” This Certifies That There Is On Deposit in The US Treasury ” below this text is the face value being certified. The absence of this claim on the Federal Reserve Note means that at the end of the day the holders of Federal Reserve Note does not have a claim on the Treasure of the US. The only claim made on the Federal Reserve Note is that yon can legally use it for debts public or private. The Treasury of the US by a simple act of Congress can cut the Reserve Note loose in a manner and standard as “Proper and Necessary” . It’s wise to know the difference between money and currency.

    • BuySome says:

      Yes, there was mention of “in the past”. Nothing stops them from going back “in the future” beyond the fact that they are getting richer from “in the present” and the alleged lack of any metals in the vault, irregardless of Goldfinger and Pussy Galore. BTW…”This Note Is Legal Tender For All Debts, Public And Private” emphasizes that this is only for existing debt…it does not specify that you can demand to use it for any new purchasing nor force anyone to take it…it is an Achilles Heel for the public holding them and an escape clause for the bankers who seek ways around the Constitutional provision of one money system. They use every scrap of paper and every ledger to avoid admitting that they are debtors to us.

      • Petunia says:

        Actually you are wrong about federal reserve notes not having to be accepted for new purchases. When a seller puts goods or services for sale and you accept the goods or services, a debt is created, and the provider must accept the notes for payment.

        Example: I pick up a blouse at a store, take it to the counter and offer to pay in cash, but they tell me they don’t take cash. They have just broken a federal law. BTW, this happened to me last week. I paid by credit card, but I could have made a big stink about it.

  23. MonkeyBusiness says:

    Saudi dumping their holdings can either mean:
    1. They are defending their currency.
    2. The US Dollar will lose value soon.

    I am certainly hoping for 1 since I am short SAR.

    • 2banana says:

      Or they are having massive budget deficits with low oil prices and are trying to bridge the gap?

    • sunny129 says:

      The US Dollar will lose value soon’

      relative which currency out there? Eu, Yen, Yuan, Ruble?

      Lose in value in purchasing power, YES!

      • MonkeyBusiness says:

        Gold. The Saudi holds a ton of those and is probably increasing their reserves.

    • timbers says:

      I think it could also mean the Saudis might be running out of money, with oil so low.

      • MonkeyBusiness says:

        That’s why I listed “They are defending their currency.” as one of the possible reasons.

        Their currency is pegged to the US Dollar.

  24. DeerInHeadlights says:

    Latest from Powell:

    “We’re not actually increasing the dollar volume of things we’re buying,” he said on Tuesday. “We’re just shifting away from ETFs to this other form of index.”

    “If market functioning continues to improve, then we’re happy to slow or even stop the purchases,” he said. “If it goes the other way, we’ll increase.”

    So basically, they’re playing it by ear. Keeping the dollar amount of purchases as low as possible compared to what was actually promised at the onset of the crash and merely shifting it around asset classes rather than buying more stuff. It’s clear that they’re saving the ammo for the economic carnage that will inevitably unfold going forward, starting with Q2 earnings that’s approaching like a runaway train. Not only will they have to walk the talk at that point by actually implementing a much higher % of what was promised in the way of asset purchases or even all of it, but they might even be forced to “promise” new stuff.

    Exciting times ahead!

    • timbers says:

      Well, when Powell says”market functioning” don’t you think he really means “market going Hi up”? A truly functioning really ought go down but Powell only intervenes when it does that and never when it goes up no matter how dysfunctional that is.

  25. timbers says:

    Think a lot of confusion on MMT, IMO. To me it simply means we can never ever run out of currency to fund the government. And this is a REALLY REALLY big point. Anyone who paid attention to what the Corporate Fake News Media constantly reported as TRUTH during the previous WH during debt increase votes in Congress, knew that if we didn’t cut spending or raise taxes on working folk to pay for tax cuts for the rich and increase the debt ceiling, we would run out of money. Wrong wrong a 1000% just plain false. The Treasury can mint as much currency as it wants and it never ever run out.

    • timbers says:

      Forgot to mention Fed can buy its own debt, too.

    • Wisdom Seeker says:

      MMT is horse manure. You may not “run out of currency”, but you definitely cannot “fund your government” when no one accepts the currency because it’s worthless. Many, many global examples, and even historical examples within US territory.

      That being said, I agree 100% that the Corporate-Media coverage of econ policy issues is horse manure squared.

      • Crush the Peasants! says:

        Absolutely, and I urge everyone to send me their worthless dollars. I will dispose of them at no cost to you.

  26. LeClerc says:

    This is an excellent object lesson in The Law of Large Numbers.

    The amounts of Treasury debt held by “foreign official” entities were, until recently, large numbers.

    But the aggregate amount of recent US debt issuance is the new Large Number. Foreign Treasury holdings have become actual rounding errors.

    This is a serious, if not catastrophic, error condition.

  27. historicus says:

    Governments end when games like these are played.
    Trump said “negative rates would be a gift”.
    To whom?
    To Him and his legacy or endless spending.
    Fiscal insanity.
    And this is how governments fail.

  28. Thomas Wolfe says:

    Claim the Yen is stable if you want but I believe Japan is adding UST’s because they see hyperinflation coming and will need a whole lot of Dollars to round up and ‘sell’ in order to buy back a sea of Yen as it devalues. And when Japan becomes a forced seller of US debt, one guess as to what happens to UST yields and the Fed’s balance sheet to monetize all of it?

    I don’t believe for one second Japan (a small island nation with an avg population age of 43) can keep up 234% debt/GDP while monetizing all of its gov debt at neg rates and nationalizing the Nikkei in the process.

    No amount of, “But they manufacture goods or have a high savings rate'” will stave off this kind of lunacy. When the Yen blows within the next 5 years (mark my words) currency traders are going to feast on selling it for Dollars as the greatest trade of the decade. USDJPY is going over 1000 and final solution will be to amputate Japan from the world financial economy to stop the hemorrhaging. Long-term heat death for Japan = Greece 2.0.

    This will be the catalyst I believe for a major Dollar short squeeze as Japan’s wealthy pour into USD, US stocks, US real estate, Gold and yes even Bitcoin ala Pacific Ocean thru a garden hose. When all is said and done, this is the beginning of the end for the Euro and eventually Dollar because of the quadrillions central banks will need to print to rescue collapsing banks, hedge funds, pensions, insurers and stock markets joined at the hip with the Yen as a ‘safehaven or hedge’.

  29. historicus says:

    Trump announces $1 Trillion infrastructure program…
    more fiscal madness.
    And Fed governors debating whether rates should be pegged at negative??!!
    The madness is beyond measure.
    Trump said negative rates would be a “gift”…..and that is a peek into his mindset…
    Reduce rates to zero and I will blow the doors off with new spendings….off of our future is my opinion.

  30. Finster says:

    “Yet, buying Treasury securities is an unpalatable undertaking today … But who are the entities buying them?“

    Yes buying Treasuries is unpalatable. But what are investors supposed to own then? Just stocks? Stocks have issues of their own, not least high valuations and low yields themselves, especially in the US. And few advisors would recommend 100% stocks for most investors. As unattractive as the long term prospects are, Treasuries appear to remain worthwhile ballast for a prudently diversified portfolio. That likely explains why so many investors continue to hold some.

    Real estate? That leaves the question of which real estate. Of course there’s also commodities. Among commodities, gold historically has about the lowest historic correlation to stocks and so offers the strongest diversification potential, so if you eschew Treasuries, gold seems to be an obvious alternative, but still not as strong as Treasuries. And few advisors would recommend 100% gold.

    So what to own? To say this or that major asset class looks crummy without weighing the alternatives leaves crucial questions, because at the end of the day investors have to own something. The only alternative is to take a vow of poverty and join the brotherhood.

  31. Hahaha says:

    The above comments all confirm to me that my decision to amass a fleet of buried shipping containers stuffed with silver and gold ingots was correct. (gleefully rubs hands together).

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