Who Bought the $6.5 Trillion in Treasuries Piled on the Incredibly Spiking US Debt in 22 Months? Who

[corbe]

Who Bought the $6.5 Trillion in Treasuries Piled on the Incredibly Spiking US Debt in 22 Months? Who Holds the $30 Trillion?

by Wolf Richter • Feb 17, 2022

The question is particularly hot because Treasuries are now ugly instruments with the worst punishment yields ever.

In face of the incredibly spiking US gross national debt that just hit $30 trillion after having spiked by a mind-boggling $6.5 trillion since March 2020, the steamy-hot question is this: Who the heck is buying and holding all these Treasury securities?

The question is particularly hot because these are very unattractive instruments: Yields are still well below 1% for most short-term Treasury bills, and even the 10-year Treasury maturity yields only around 2%, while CPI inflation has blasted off and hit 7.5%, creating the worst punishment yields ever. To top it off, the most reckless Fed ever is still repressing interest rates and is still, though at a much slower pace, printing money.

The whole thing is a tragic clown-show, and yet every single one of the Treasury securities was bought and is held by some entity. Who are they? This is my quarterly update on who is holding this debt, and it’s an increasingly important question for increasingly iffy times.

Foreign Creditors of the US government.

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https://wolfstreet.com/2022/02/17/who-bought-the-6-5-trillion-piled-to-the-incredibly-spiking-us-national-debt-in-22-months-and-whos-holding-the-30-trillion/

[DB]

QE

The dept was just dollars added to the system backed by nothing.

[jmyrlefuller]

QE

The dept was just dollars added to the system backed by nothing.

That would be the least worrisome of the possibilities. Worrisome, still, but not as bad as having foreign bad actors with leverage over us.

[DB]

That would be the least worrisome of the possibilities. Worrisome, still, but not as bad as having foreign bad actors with leverage over us.

No. It is way worse.

Being able to create money out of thin air removes all tethers to economic reality. It is the only restraint that keeps a country from going the way of Venezuela. And we are well on our way.

[jmyrlefuller]

No. It is way worse.

Being able to create money out of thin air removes all tethers to economic reality. It is the only restraint that keeps a country from going the way of Venezuela. And we are well on our way.

The alternative is going the way of Crimea.

[DB]

The alternative is going the way of Crimea.

Not if you have a modern first world military.

[IsailedawayfromFR]

That would be the least worrisome of the possibilities. Worrisome, still, but not as bad as having foreign bad actors with leverage over us.

Can you explain how they have leverage over us since they are the ones who sent us assets in exchange for an IOU?

I believe that is backwards.

[DB]

Can you explain how they have leverage over us since they are the ones who sent us assets in exchange for an IOU?

I believe that is backwards.

Yep.

[Free Vulcan]

It's not the debt that will get us in the long run, it's the interest.

Even more immediate, the foreigners dump our bonds and refuse to buy them, among our other paper 'assets'.

[catfish1957]

Anybody buying UST's right now, at the present interest rate and par value, have basically been duped into the largest ponzi scheme in world history.

[catfish1957]

It's not the debt that will get us in the long run, it's the interest.

Even more immediate, the foreigners dump our bonds and refuse to buy them, among our other paper 'assets'.

Many, especially in Europe have been dealing with negative bond interest rates for some time now.  If they are buying our bonds they are really taking a risk, trading in their monetary positions that might have some better stability and basis, for our house of cards dollar.....   Just for a few percentage point gain.

I hope someone warned them.

[IsailedawayfromFR]

Many, especially in Europe have been dealing with negative bond interest rates for some time now.  If they are buying our bonds they are really taking a risk, trading in their monetary positions that might have some better stability and basis, for our house of cards dollar.....   Just for a few percentage point gain.

I hope someone warned them.

Exactly.  It is not the those buying the debt who have leverage.

It is the one selling the debt who has the leverage.  IOUs have little value.

[catfish1957]

Exactly.  It is not the those buying the debt who have leverage.

It is the one selling the debt who has the leverage.  IOUs have little value.

Very true.  A few years ago, I was on the fence 50/50 whether this thing would unravel as a '29 crash X10 or a Zimbawe, Weimar Republic inflationary spiral.

Now I am 35/65 toward the inflationary dystopian scenario. The house of cars falls, when the Fed reports that there has been a run on treasuries. Par values and interest rates dop together in historical tandem.    Bearers realize that their initial investment is worth somewhere between 10-25% of its iniital value.   At that point,   the U.S. government realizes it has no capital to operate.  Then it just gets uglier from there.

[massadvj]

The federal reserve and other entities controlled by the federal government has been the biggest buyer of treasuries over the past several years. In other words we are just printing money.

This ends badly.

[roamer_1]

Anybody buying UST's right now, at the present interest rate and par value, have basically been duped into the largest ponzi scheme in world history.

Unless the US is buying them with printed money... And who else can handle that weight?

[Hoodat]

This is the one who bought $6.5 trillion in Treasuries:

[jmyrlefuller]

Not if you have a modern first world military.

Tell me how that worked out in Vietnam and Afghanistan.

[jmyrlefuller]

Can you explain how they have leverage over us since they are the ones who sent us assets in exchange for an IOU?

I believe that is backwards.

They still technically own those assets. And until we pay them back, they own us.

[catfish1957]

They still technically own those assets. And until we pay them back, they own us.

Sovereign fidicuary does infer a stake of ownership.  Not a fact well known in this country.

[DB]

Tell me how that worked out in Vietnam and Afghanistan.

Seriously?

[corbe]

Tell me how that worked out in Vietnam and Afghanistan.

   @jmyrlefuller
   The Military didn't fail you in either of those aforementioned hellholes, it was the politicians, especially demonrats that tied our hands and kept us from achieving our objectives.

[IsailedawayfromFR]

They still technically own those assets. And until we pay them back, they own us.

We own what they paid us to start with.

They own nothing except what we choose to pay back.  What do you believe they can do about it anyway?

You act as if we will need to eat Chinese food if they tell us to

[DB]

What's that old saying:

If a man owes the bank a million dollars the bank owns him...

If a man owes the bank a hundred million dollars he owns the bank...

[Kamaji]

All the debtor's braggadocio on this thread is rather revolting.  Sounds more like a liberal modern monetary theory meeting.

[Hoodat]

It isn't that complicated.   All we have to do is to stop spending money we don't have, and use the money we do have to pay our bills.  This ain't rocket surgery.

[Free Vulcan]

The foreign bond holder sits in a very different position than a domestic one.

Any holder of an existing bond will see that instrument lose value if interest rates spike, opening the door to them selling that bond reducing the prices, and making rates spike even higher.

But the foreign bond holder also generally will convert the proceeds back to their currency, which they acquire by selling dollars, which drives down their price as well.

This entangles current holders of the dollar, because now they're assets are losing price too.

Do that enough and all US paper assets denominated in dollars, such as stocks and commodities, start losing value, which opens the door to a broad selloff of all those assets and massive cascading crashes across the board if there is a panic.

That can then snowball to multiple consequences which can reverberate into the real economy, real fast with very negative and possibly cataclysmic effects much like the fallout from the '29 crash, except on a huge multiple v. back then.

We are playing a very dangerous game with all this sudden explosion of debt.

[jmyrlefuller]

We own what they paid us to start with.

They own nothing except what we choose to pay back.  What do you believe they can do about it anyway?

You act as if we will need to eat Chinese food if they tell us to

Or, you know, they can always unleash yet another deadly, unvaccinatable airborne virus on the world.

[DB]

All the debtor's braggadocio on this thread is rather revolting.  Sounds more like a liberal modern monetary theory meeting.

Borrowing beyond one's means is deadly to both ends of the transaction.

But the truth is we are not borrowing anymore. Few were buying that debt. We're printing dollars instead.

When governments do that, their monetary system has failed.

[DB]

The foreign bond holder sits in a very different position than a domestic one.

Any holder of an existing bond will see that instrument lose value if interest rates spike, opening the door to them selling that bond reducing the prices, and making rates spike even higher.

But the foreign bond holder also generally will convert the proceeds back to their currency, which they acquire by selling dollars, which drives down their price as well.

This entangles current holders of the dollar, because now they're assets are losing price too.

Do that enough and all US paper assets denominated in dollars, such as stocks and commodities, start losing value, which opens the door to a broad selloff of all those assets and massive cascading crashes across the board if there is a panic.

That can then snowball to multiple consequences which can reverberate into the real economy, real fast with very negative and possibly cataclysmic effects much like the fallout from the '29 crash, except on a huge multiple v. back then.

We are playing a very dangerous game with all this sudden explosion of debt.

Which is why it is better not to play the game... But it is too late for that...

[Hoodat]

When governments do that, their monetary system has failed.

When a government does that, the government itself has failed.

[sneakypete]

Pretty much HAS to be China. They are the only ones making any money these days,thanks to all the western manufacturing contracts they are getting,combined with the slave labor wage market they control.

[IsailedawayfromFR]

Or, you know, they can always unleash yet another deadly, unvaccinatable airborne virus on the world.

don't know about you, but I do not succumb to blackmail.

[sneakypete]

Or, you know, they can always unleash yet another deadly, unvaccinatable airborne virus on the world.

@jmyrlefuller

I am thinking/hoping they pretty much wore that one out in "one".

[roamer_1]

It isn't that complicated.   All we have to do is to stop spending money we don't have, and use the money we do have to pay our bills.  This ain't rocket surgery.

That's right. And it happens on many kitchen tables across this country every month!

[sneakypete]

Me!

It wuz ME!

Ah confess!

Mah plan is to use sum ob that monies to buy and then rent out Biden,Truedoo,and most of the US Congress and Senate as male whores to Arab Sheiks,African warloards,and the really old and ugly ones to US street pimps.

Under the condition they treat them REALLY rough,of course.

[Kamaji]

According to the OP, most of the outstanding debt is held by the U.S. government itself, principally in the form of government agency pension funds and the federal reserve.

[Hoodat]

According to the OP, most of the outstanding debt is held by the U.S. government itself, principally in the form of government agency pension funds and the federal reserve.

The pension/Social Security portion should be budgeted anyway, and the Fed portion will never be repaid.

[DB]

According to the OP, most of the outstanding debt is held by the U.S. government itself, principally in the form of government agency pension funds and the federal reserve.

IOU.

A number.

Literally backed by nothing more.

[Kamaji]

IOU.

A number.

Literally backed by nothing more.

So why not simply print more, with empty abandon?  After all, it's not really real debt if it's just "empty IOUs".  Modern Monetary Theory quite agrees.

[DB]

So why not simply print more, with empty abandon?  After all, it's not really real debt if it's just "empty IOUs".  Modern Monetary Theory quite agrees.

Because your currency becomes worthless.

Which is exactly what's happening.

[Kamaji]

Because your currency becomes worthless.

Which is exactly what's happening.

Then it's not a costless exercise, is it?

[DB]

Then it's not a costless exercise, is it?

My point all along is printing money out of thin air is the path to total economic destruction. And we are well down that road. Have been since Obama was elected.

[roamer_1]

My point all along is printing money out of thin air is the path to total economic destruction. And we are well down that road. Have been since Obama was elected.

no... Bush, 'Too Big To Fail' started the redoubling.

[Hoodat]

no... Bush, 'Too Big To Fail' started the redoubling.

Yes, the "Too Big To (allow to) Fail" mantra was complete bullshit.  But in Bush's defense, the original $350 billion was paid back to the Fed in full.  Bush's total deficit for 2008 was $400 billion.

[DB]

no... Bush, 'Too Big To Fail' started the redoubling.

QE was the beginning which started under Obama I believe.

QE was simply creating money with no buyers of the debt.

Debt was bad, QE is worse.

It is third world banana republic time and has only accelerated. When was the last actual federal constitutionally required budget?

[catfish1957]

QE was the beginning which started under Obama I believe.

QE was simply creating money with no buyers of the debt.

Debt was bad, QE is worse.

QE I, II, III, etc.  IMO was the governments cognizant  decision that if there was going to be any kind of dystopian economy, that they would choose hyperinflation vs. traditional equity crash.   QE basically was a can kicking down the road exercise, with the intent it will be someone elses' problem at some point.  Many of the best ecomomist have stated that they thought the tippng point was somewhere between $25-$28T sovereign debt.  We just passed 30.

We now reside in a country whose financial system amounts to a house of cards. How and where it tips is still a mystery.  But one thing is certain that in the proven theories of the cycles in the economic world.  Gravity  prevails at some point 100% of the time. 

Hate to be of doom and gloom, but when I also see world events that have dire consequences, I have to wonder.

[Kamaji]

QE was the beginning which started under Obama I believe.

QE was simply creating money with no buyers of the debt.

Debt was bad, QE is worse.

It is third world banana republic time and has only accelerated. When was the last actual federal constitutionally required budget?

I believe the first WE in 2008 started under Bush.

[catfish1957]

It is third world banana republic time and has only accelerated. When was the last actual federal constitutionally required budget?

My senator Phil Graham made a career on that crusade back in the '80's.  He kept in in the limelight, with not too much success.  He even tried to create enough stir to have a constitutinal amendment to address it.

Gingrich's '94 revolution toyed, with some improvement, but not total success.

Since?  Congress has been worse than a crew of drunk sailors in port with their paycheck money in their pocket, and we are now saddled with a 30 Trillion Dollar bill.

[catfish1957]

I believe the first WE in 2008 started under Bush.

Yep, a fact that didn't help McCain in November. 

[sneakypete]

My senator Phil Graham made a career on that crusade back in the '80's.  He kept in in the limelight, with not too much success.  He even tried to create enough stir to have a constitutinal amendment to address it.

Gingrich's '94 revolution toyed, with some improvement, but not total success.

Since?  Congress has been worse than a crew of drunk sailors in port with their paycheck money in their pocket, and we are now saddled with a 30 Trillion Dollar bill.

@catfish1957

Yup,and just watch the next President,who will without a doubt be a Republican unless the Dims are allowed to steal the election again,take the blame for the hyper-inflation and all the money he has to spend to meet our obligations.

The whole damn thing will get blamed on him,and the ignorant goobers that tend to vote Dim will eat it with a spoon.

We are sooooo screwed,and the saddest part is we have no one to blame but ourselves.