Tuesday, January 06, 2009

Fear Not Foreign Ownership of U.S. Debt


Follow the link to the the St. Louis Fed for a more detailed description and analysis.
clipped from www.stlouisfed.org
A recent analysis by the Congressional Research Service suggests that such a sudden and disruptive strategy is unlikely to be successful.[9] Even the largest foreign holdings of U.S. government debt are smaller than the daily volume of trade in Treasury securities. If such a strategy did disrupt the markets, the resulting decline in the value of U.S. Treasury securities would generate substantial losses to all debt holders, including those in the country attempting to use their debt holdings as political leverage.

The more grave risk is that investors in U.S. Treasury debt, foreign or domestic, would lose faith in the ability of the U.S. government to meet its obligations in the face of unsustainable, long-run structural deficits.

As of September 2008

$ Billions
Percent of Debt Held by the Public
China
587.0
10.1
Japan
573.2
9.8
United Kingdom
338.3
5.8
Caribbean Banking Centers [1]
185.3
3.2
Oil Exporters [2]
182.1
3.1
Brazil
141.9
2.4
All Other
852.9
14.6
Total
2,860.7
49.0

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Federal Surplus/Deficit, 1950-2008
clipped from www.stlouisfed.org

Federal Surplus/Deficit, 1950-2008


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