Who Holds The US Debt and What Are the Implications?

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This article contains a slide show that lists the holders of US debt. The largest single holder of the debt is the Social Security Trust Fund which holds 19% of the debt. That represents the $2.6 trillion in surplus payroll tax revenues collected which were used for other purposes. The Federal Reserve is the next largest holder at 11%. International investors, primarily central banks, hold about 31% of US debt. China and Japan hold 8% and 6% respectively which reflects their trade surpluses with the US.

The treasuries held by investors are assets to them and liabilities to the US Treasury.
Therefore, 69% of the US debt represents assets held by US investors and government agencies. In essence, the US held debt is a form a wealth and the interest payments are a source of US income. The debt held by foreign investors is another matter. The interest payments are a cost of servicing the debt that does not increase US income.

The total US debt is currently $14.3 trillion and the interest payments on that debt are a cost of government. The Treasury refinances the treasury notes when they come due and does not pay down the principle. This means that the cost of refinancing the debt is dependent upon variability in the interest rates demanded by investors.