First of all, "most likely" is false. Actual numbers can easily be found, here's a secondary source: http://en.wikipedia.org/wiki/File:Estimated_ownership_of_tr

First of all, "most likely" is false. Actual numbers can easily be found, here's a secondary source: http://en.wikipedia.org/wiki/File:Estimated_ownership_of_treasury_securities_by_year.gif http://en.wikipedia.org/wiki/File:Estimated_ownership_of_tre... So less than one third is held by foreigners. This is more than for most other countries, but keep in mind that much of world trade is still run in US$ - this is what people (hopefully) mean when they say that it is a quasi-reserve currency, which naturally drives up demand for US$-denominated financial assets. Second, the fact that so much of those assets are held by foreigners has greatly benefited US citizens up to this point in time, because the foreigners holding those assets obtained them by selling their products to the US. So the US was able to receive a lot of real, physical goods that cost actual physical resources and work to produce, in exchange for the US simply running a computer system on which accounts are managed. If you ask me, that is a very good deal. Now, once China gets their act together and becomes able to change their economy into one that is not so export-heavy, they will sell of their assets over time. This will force the US to become a nation with net exports again. But from the perspective of US citizens, the worst case is that the US enjoys more physical resources (than it would be able to without trade) now at the cost of enjoying less (than they would be able to without trade) in the future. And in fact, they cannot even be forced to take that full hit in the future, because they could always choose to inflate the debt away. Now you may say that you would rather suffer a decrease in resources that you can enjoy now than suffering that decrease in the future. That is a reasonable political stance. However, the reality is that especially China is hell-bent on sending real goods to the US in exchange for paper. Trying to cut the budget deficit or to reduce debt directly is not going to change that. In fact, it will hurt US citizens long before it will hurt China. The only way to stop the flow of financial assets towards foreigners is via a combination of trade barriers and helping China to turn their economy into a domestic-consumption-based economy.