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Government Debt: US’s leading export?

 

Government Debt: US’s leading export?

According to new figures from the Treasury Department, foreign holdings of US debt now exceed $6 trillion dollars. China is the leading holder of US debt, holding  $1,268,400,000,000 at the end of June. In comparison, the Federal Reserve held  $2,396,972,000,000 in Treasury Securities during the same period.

Other leading foreign holders of US debt include Japan, Belgium, “Oil Exporters,” and  “Caribbean Banking Centers.” Russia is the twelfth leading holder of US debt, which could mean the US Treasure Department is borrowing from Russia to finance “regime change” in…..Russia.

The large amount of US debt held by China raises the question of what will happen if (when?) China–and other foreign investors– decide that US Treasuries are not such good investments after all. Apparently, the US Government shares this concern (H/T: Conservative News Service):

A 2013 Congressional Research Service report on Chinese holdings of U.S. government debt noted efforts by the U.S. government to reassure the government of the People’s Republic of China that U.S. government debt is a good investment.

“Since the beginning of the global financial crisis in 2008, U.S. government officials have increasingly sought to offer assurances to Chinese officials regarding the safety of China’s holdings of U.S. government debt securities and to encourage China to continue to purchase U.S. securities,” said the CRS report. “For example, during her first visit to China on February 21, 2009, (then) Secretary of State Hillary Rodham Clinton was quoted as saying that she appreciated ‘greatly the Chinese government’s continuing confidence in the United States Treasuries,’ and she urged the government to continue to buy U.S. debt.”

The CRS report continued: “However on March 13, 2009, (then) Chinese Premier Wen Jiabao at a news conference stated: ‘We’ve lent a huge amount of capital to the United States, and of course we’re concerned about the security of our assets. And to speak truthfully, I am a little bit worried. I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.”

“The U.S. debt issue was a major topic during Vice President Joe Biden’s trip to China in August 2011,” said the CRS report. “At a meeting with Chinese Premier Wen Jiabao on August 19, 2011, Vice President Biden stated that ‘we appreciate and welcome your concluding that the United States is such a safe haven because we appreciate your investment in U.S. treasuries. And very sincerely, I want to make clear that you have nothing to worry about in terms of their—their viability.”

Of course, the US Government can only continue to run huge deficits for so long before investors stop buying the US debt instruments, forcing the Fed to monetize the debt and creating a real economic crisis.  This is why Campaign for Liberty will continue to work to get Congress to take real actions to reduce the deficit by making Real Cuts, Right Now.


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