7 ms·

Ok, this is probably a silly question, but who holds all the debt now? The avg US citizen would say China holds much of the US debt, but now it sounds like Chin

Ok, this is probably a silly question, but who holds all the debt now? The avg US citizen would say China holds much of the US debt, but now it sounds like China is borrowing their way into trouble too... it's not any of these third world countries... who is it?

make3 9y ago
it's debt, all the way down :p
- kadfasd4324 9y ago
  ... until you hit the central bank.
Amygaz 9y ago
I forgot where I read that, but Bernanke said that most of their debt is internal, so not as bad a problem as it sounds.
- matheweis 9y ago
  They being China or the US?
  - IA21 9y ago
    China
state_less 9y ago
US government borrows money from the Fed. People (China) also buy Treasury bonds, but I think this is much smaller than the debt we owe ourselves. Someone else can chime in with more depth, but basically the US government has been good about not borrowing too much from itself. I just hope we can stay rational as a country and this continues.
- HillaryBriss 9y ago
  but, strictly speaking, the Fed isn't the same as the federal government. also, the US government has borrowed a whole hell of a lot of money from outside sources (e.g. corporations, US investors, and foreign governments from Japan to China to Saudi Arabia to European nations)
  - state_less 9y ago
    The Fed was enacted by the federal government and lives under its rule of law. I'm not sure what you're digging at. I think we need numbers because I don't know what you mean when you say, "a whole hell of a lot of money." It looks like the citizens hold 70% of the debt. And keep in mind, these countries come to us to put their money in treasury bonds. They buy bonds that don't pay a very spectacular rate either (2.28% for 10 year bond). I'd caution against the rhetoric that we are broke, or people don't want to lend to us. It's often pushed by people who want to reduce federal spending (usually spending cuts on healthcare and welfare for the less fortunate).
    - HillaryBriss 9y ago
      You're right, but, I'm just focusing on the fact that the Fed maintains a distance, an independence, from politicians and government officials. The Fed is not directly accountable to an elected leader in the same way that a typical federal agency is. As for who buys government bonds from the US Treasury, I just wanted to emphasize that the Fed is not the only buyer. The often repeated notion that, "to a great extent, we owe this money to ourselves," is not necessarily comforting. Most American citizens have very little, if any, savings. The "ourselves" in that notion is heavily weighted to a relatively small number of wealthy US citizens. It's fair to question whether their interests align with the interests of the average US citizen.
      - state_less 9y ago
        > The Fed is not directly accountable to an elected leader in the same way that a typical federal agency is. That can be a good thing. We separate the three branches, specifically not to have direct accountability to a single branch. And we buffer power changes over many election cycles. Otherwise one branch, say the executive, could just fire a judge or investigator when they broke the law. > The often repeated notion that, "to a great extent, we owe this money to ourselves," is not necessarily comforting. I wasn't repeating that notion. In my mind, going bankrupt is not a good thing in either case. > Most American citizens have very little, if any, savings. The "ourselves" in that notion is heavily weighted to a relatively small number of wealthy US citizens. I guess you could say, if you're wealthy you have more to lose, but poor people might lose their life if the US goes bankrupt whereas wealthy families would probably survive, though with a smaller balance sheet. So it matter to both poor and wealthy alike if we are reckless and go bankrupt, probably more so if you're poor. And I agree, we should be questioning if wealthy interests are putting themselves or the country first, because we don't have much use for those who aren't improving citizen's welfare.
wu-ikkyu 9y ago
>The avg US citizen would say China holds much of the US debt, but now it sounds like China is borrowing their way into trouble too... it's not any of these third world countries... who is it? The central banks, obviously. Many of them not being beholden to a nation but to private individuals.
- state_less 9y ago
  At the end of the day though, even private individuals are beholden to the people in the nation. It's a social contract, so people may no longer agree to allow those private individuals to be wealthy and run the banks. That said, if you're holding the wealth, it's not too hard to keep the shop running (people happy) so long as you don't get bored, reckless and feckless.
  - mistermann 9y ago
    Luckily, they also control the government and military.
    - state_less 9y ago
      The citizens elect the government, so I have to take issue with this point. Wealthy people do have quite a bit of influence though. Basically what I'm saying is, we can elect a government that serves our own interest if we cared to. If it does get ugly, and the government/military turns on its citizens then the US as we know it will be dead or on life support. Probably, in such a scenario, people won't go quietly into that night.
      - mistermann 9y ago
        > we can elect a government that serves our own interest if we cared to. In theory, I'm still waiting to see it in practice. The Bernie Sanders situation from last election was a decent illustration of how legitimate the election process is, and they took care of him before the gloves even came off. (Trump was far trickier but as it turns out he's more of the same, if not worse.)
zanny 9y ago
The average US citizen should say the US citizen holds much of the US debt. Since they do. About 70% is domestic, and 7% is owned by China. The Chinese are in a similar boat. About 60% of their debt is domestic. Their inflating debt, however, is in part what is driving the gap between the two, and they are ramping up foreign debt faster as a result.
r00fus 9y ago
The biggest group holding US debt are its citizens. The social security trust fund has been raided for decades by the general fund to spend on defense security state and has not been paid back. Politicians and their funders hope everyone is hoodwinked into forgiving the debt or just taxing everyone more to make up for the stolen^W borrowed money.
- afarrell 9y ago
  > The social security trust fund has been raided for decades by the general fund to spend on defense security state and has not been paid back. Where is the money in the social security trust fund kept. I had assumed it was in treasury bonds and therefore lent to the US Government general funds to be spent at the will of congress. Is the Social Security Administration actually holding VOO or physical gold?
- lowpro 9y ago
  Although this has been done, the social security system is primarily going to fail because more people are using it then have paid for it, so the system is actually borrowing from the future citizens (our kids). You can blame defense spending (which is too much), but that's not the main reason the system itself is broken.
photonOli 9y ago
The source of all the debt is money creation. Any amount of money can be created by central banks. The commercial banks can also create money by lending more (up to 10x) money that what they have.
HillaryBriss 9y ago
This is from the NYTimes article itself: ... the biggest category of debt in China is corporate debt, which equals almost 170 percent of annual economic output. This debt consists overwhelmingly of loans by state-owned banks to state-owned enterprises. So ... does that answer the question? I'm not sure. I'm used to thinking about how much money the US government owes to outsiders. But, this "state owned enterprise" and "state owned bank" thing -- how do you make sense of that? The government, which also controls and creates the currency, has loaned its own enterprises a bunch of money. So what if they default? Does it matter? How do you even think about that?
- state_less 9y ago
  Here is a toy scenario, suppose we have 1000 people and they are capable and willing to build a new solar electric system. The problem is, nobody has any money. The 1000 people could form an institution, let's call it a bank, that would hand out IOUs to anyone who wants to build and install the solar panels. Some of the 1000 people agree and start building out the electric system. Once the system is in place, people start paying the organization for electricity and then all the IOU holders can get payed for their work. The payments to the organization might come in the form of goats, chickens, timber, or even IOUs! If the organization had used the debt to make a bunker instead of an electric system. The citizens may not be so interested in hanging out and using (paying) for the bunker, so all the IOU holders would be out of luck. In other words, if the IOUs to the contractors aren't eventually repaid. People won't accept IOUs from the organization (bank) anymore.
- legolas2412 9y ago
  Except it isn't really a government giving money to itself, it's the banks. When and if the enterprises default, the banks will go under. This means that Chinese people will lose money (or the government will try to be fiscally prudent to recover money lost in bad investments, which will mean that Chinese people will lose money). Money owed by a government owned bank to a government owned enterprise is a real debt, which if defaulted upon will have a lot of real effects.

make3 9y ago

it's debt, all the way down :p

kadfasd4324 9y ago
... until you hit the central bank.

Amygaz 9y ago

I forgot where I read that, but Bernanke said that most of their debt is internal, so not as bad a problem as it sounds.

matheweis 9y ago
They being China or the US?
- IA21 9y ago
  China

state_less 9y ago

US government borrows money from the Fed. People (China) also buy Treasury bonds, but I think this is much smaller than the debt we owe ourselves. Someone else can chime in with more depth, but basically the US government has been good about not borrowing too much from itself. I just hope we can stay rational as a country and this continues.

HillaryBriss 9y ago
but, strictly speaking, the Fed isn't the same as the federal government. also, the US government has borrowed a whole hell of a lot of money from outside sources (e.g. corporations, US investors, and foreign governments from Japan to China to Saudi Arabia to European nations)
- state_less 9y ago
  The Fed was enacted by the federal government and lives under its rule of law. I'm not sure what you're digging at. I think we need numbers because I don't know what you mean when you say, "a whole hell of a lot of money." It looks like the citizens hold 70% of the debt. And keep in mind, these countries come to us to put their money in treasury bonds. They buy bonds that don't pay a very spectacular rate either (2.28% for 10 year bond). I'd caution against the rhetoric that we are broke, or people don't want to lend to us. It's often pushed by people who want to reduce federal spending (usually spending cuts on healthcare and welfare for the less fortunate).
  - HillaryBriss 9y ago
    You're right, but, I'm just focusing on the fact that the Fed maintains a distance, an independence, from politicians and government officials. The Fed is not directly accountable to an elected leader in the same way that a typical federal agency is. As for who buys government bonds from the US Treasury, I just wanted to emphasize that the Fed is not the only buyer. The often repeated notion that, "to a great extent, we owe this money to ourselves," is not necessarily comforting. Most American citizens have very little, if any, savings. The "ourselves" in that notion is heavily weighted to a relatively small number of wealthy US citizens. It's fair to question whether their interests align with the interests of the average US citizen.
    - state_less 9y ago
      > The Fed is not directly accountable to an elected leader in the same way that a typical federal agency is. That can be a good thing. We separate the three branches, specifically not to have direct accountability to a single branch. And we buffer power changes over many election cycles. Otherwise one branch, say the executive, could just fire a judge or investigator when they broke the law. > The often repeated notion that, "to a great extent, we owe this money to ourselves," is not necessarily comforting. I wasn't repeating that notion. In my mind, going bankrupt is not a good thing in either case. > Most American citizens have very little, if any, savings. The "ourselves" in that notion is heavily weighted to a relatively small number of wealthy US citizens. I guess you could say, if you're wealthy you have more to lose, but poor people might lose their life if the US goes bankrupt whereas wealthy families would probably survive, though with a smaller balance sheet. So it matter to both poor and wealthy alike if we are reckless and go bankrupt, probably more so if you're poor. And I agree, we should be questioning if wealthy interests are putting themselves or the country first, because we don't have much use for those who aren't improving citizen's welfare.

wu-ikkyu 9y ago

>The avg US citizen would say China holds much of the US debt, but now it sounds like China is borrowing their way into trouble too... it's not any of these third world countries... who is it? The central banks, obviously. Many of them not being beholden to a nation but to private individuals.

state_less 9y ago
At the end of the day though, even private individuals are beholden to the people in the nation. It's a social contract, so people may no longer agree to allow those private individuals to be wealthy and run the banks. That said, if you're holding the wealth, it's not too hard to keep the shop running (people happy) so long as you don't get bored, reckless and feckless.
- mistermann 9y ago
  Luckily, they also control the government and military.
  - state_less 9y ago
    The citizens elect the government, so I have to take issue with this point. Wealthy people do have quite a bit of influence though. Basically what I'm saying is, we can elect a government that serves our own interest if we cared to. If it does get ugly, and the government/military turns on its citizens then the US as we know it will be dead or on life support. Probably, in such a scenario, people won't go quietly into that night.
    - mistermann 9y ago
      > we can elect a government that serves our own interest if we cared to. In theory, I'm still waiting to see it in practice. The Bernie Sanders situation from last election was a decent illustration of how legitimate the election process is, and they took care of him before the gloves even came off. (Trump was far trickier but as it turns out he's more of the same, if not worse.)

zanny 9y ago

The average US citizen should say the US citizen holds much of the US debt. Since they do. About 70% is domestic, and 7% is owned by China. The Chinese are in a similar boat. About 60% of their debt is domestic. Their inflating debt, however, is in part what is driving the gap between the two, and they are ramping up foreign debt faster as a result.

r00fus 9y ago

The biggest group holding US debt are its citizens. The social security trust fund has been raided for decades by the general fund to spend on defense security state and has not been paid back. Politicians and their funders hope everyone is hoodwinked into forgiving the debt or just taxing everyone more to make up for the stolen^W borrowed money.

afarrell 9y ago
> The social security trust fund has been raided for decades by the general fund to spend on defense security state and has not been paid back. Where is the money in the social security trust fund kept. I had assumed it was in treasury bonds and therefore lent to the US Government general funds to be spent at the will of congress. Is the Social Security Administration actually holding VOO or physical gold?
lowpro 9y ago
Although this has been done, the social security system is primarily going to fail because more people are using it then have paid for it, so the system is actually borrowing from the future citizens (our kids). You can blame defense spending (which is too much), but that's not the main reason the system itself is broken.

photonOli 9y ago

The source of all the debt is money creation. Any amount of money can be created by central banks. The commercial banks can also create money by lending more (up to 10x) money that what they have.

HillaryBriss 9y ago

This is from the NYTimes article itself: ... the biggest category of debt in China is corporate debt, which equals almost 170 percent of annual economic output. This debt consists overwhelmingly of loans by state-owned banks to state-owned enterprises. So ... does that answer the question? I'm not sure. I'm used to thinking about how much money the US government owes to outsiders. But, this "state owned enterprise" and "state owned bank" thing -- how do you make sense of that? The government, which also controls and creates the currency, has loaned its own enterprises a bunch of money. So what if they default? Does it matter? How do you even think about that?

state_less 9y ago
Here is a toy scenario, suppose we have 1000 people and they are capable and willing to build a new solar electric system. The problem is, nobody has any money. The 1000 people could form an institution, let's call it a bank, that would hand out IOUs to anyone who wants to build and install the solar panels. Some of the 1000 people agree and start building out the electric system. Once the system is in place, people start paying the organization for electricity and then all the IOU holders can get payed for their work. The payments to the organization might come in the form of goats, chickens, timber, or even IOUs! If the organization had used the debt to make a bunker instead of an electric system. The citizens may not be so interested in hanging out and using (paying) for the bunker, so all the IOU holders would be out of luck. In other words, if the IOUs to the contractors aren't eventually repaid. People won't accept IOUs from the organization (bank) anymore.
legolas2412 9y ago
Except it isn't really a government giving money to itself, it's the banks. When and if the enterprises default, the banks will go under. This means that Chinese people will lose money (or the government will try to be fiscally prudent to recover money lost in bad investments, which will mean that Chinese people will lose money). Money owed by a government owned bank to a government owned enterprise is a real debt, which if defaulted upon will have a lot of real effects.