Friday, September 25, 2009

The Numbers: Foreign Ownership of US Debt

"Talking heads" on cable news and on CNBC regularly decry our reliance on the willingness of China and Japan (and other foreign countries) to continue to buy US treasuries to fund our national debt and our annual budget deficits, predicting financial disaster for America if they were to stop these purchases.

It's open to question, I think, whether these nations could ever really stop buying US treasuries (especially in any sort of abrupt way), since they in part fund our ongoing purchases of goods and services from them. They both have export-led economies, and we are their single largest customer. So there is mutual dependence.
But, I wondered, how much of our debt do foreign countries and other foreign investors really hold? As it turns out, according to data from the US Treasury (reflected in the pie chart above), they held just under 28% in 2008. While that may well give them significant pricing power, I don't think that minority stake justifies the volume on the most hysterical rhetoric.

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