The current economic challenges in the United States and across the globe have prompted discussions among the international community that would have been unthinkable just three years ago. With the U.S. Dollar as the world reserve currency and a pre-pandemic economy that was absolutely soaring, it’s not shocking (though clearly irresponsible) for our nation to owe over $7 trillion to foreign creditors.
Here’s an infographic that shows which nations have the highest tabs for us, courtesy of Visual Capitalist.
According to their article:
Today, America owes foreign investors of its national debt $7.3 trillion.
These are in the form of Treasury securities, some of the most liquid assets worldwide. Central banks use them for foreign exchange reserves and private investors flock to them during flights to safety thanks to their perceived low default risk.
Beyond these reasons, foreign investors may buy Treasuries as a store of value. They are often used as collateral during certain international trade transactions, or countries can use them to help manage exchange rate policy. For example, countries may buy Treasuries to protect their currency’s exchange rate from speculation.
In the above graphic, we show the foreign holders of the U.S. national debt using data from the U.S. Department of the Treasury.
Top Foreign Holders of U.S. Debt
With $1.1 trillion in Treasury holdings, Japan is the largest foreign holder of U.S. debt.
Japan surpassed China as the top holder in 2019 as China shed over $250 billion, or 30% of its holdings in four years.
This bond offloading by China is the one way the country can manage the yuan’s exchange rate. This is because if it sells dollars, it can buy the yuan when the currency falls. At the same time, China doesn’t solely use the dollar to manage its currency—it now uses a basket of currencies.
This is just another reason we strongly recommend Americans move their wealth or retirement to physical bullion they can store at home or use to back their retirement accounts. We all benefit when you talk to Ira Bershatsky, our gold guy, about transactions over $2500.