At this point, it might be interesting for us to look and
see what the US public debt Or government debt, or national debt.
Fiscal debt.
Any of the terms you want to use, actually looks like.
And, I've got figures here from the
US Department of the Treasury in September 2013.
So you can see in this first graph, as we break it down.
Now, the US public debt is More than $15 trillion right
now, and you can see that there are different groups, okay?
We can see the different people that enter into that secondary market.
You see state and local governments, for example, buying U.S. debt.
There's other investors.
There are mutual funds, which one of those may be yours.
You've got private pension funds.
You've got banks and credit unions, insurance companies savings
bonds, some of the groups that we've been talking about.
And then you have that big chunk on the right, which is close
to half of the total, about 48% of the total, which is foreign investors.
Again, remember this is not foreign debt, because it's all in US dollars.
But foreigners have come in.
And actually, this number has risen
pretty sharply, since the Eurozone crisis started.
Because foreign investors have said, wait a minute, get me out of Eurozone debt.
Maybe the Euro will break up.
Maybe, I have a major currency risk here.
Let me go into US debt, even though interest rates are low.
Because I feel safer.
Now, if we take that foreign investor piece, and I want
to be really clear with you that what we're taking is
that 48% of the total, and we break it down and
we see who actually owns it, which foreigners actually own it.
And I know this chart is a little bit difficult
to read because there's a lot of foreigners in there.
But anyway.
What you can see is that China owns 23% of that 48%.
Okay.
So do the math.
China owns about 11% of U.S. debt.
And you can see that they are followed very
closely by Japan which has 20% of that 48%.
Okay?
And then you go on around you see who else, what other foreigners own U.S. debt.
Well.
Surprisingly though, the next one are Caribbean banking centers, and
then we have the oil exporting countries with about 5%.
Then we go on to Brazil, Taiwan.
Switzerland has about 3%.
Belgium, the U.K. has, about 2 to 3% as does Luxembourg.
And then there are other smaller, proportions.
So Again, what I want to emphasize, this is not technically called foreign debt,
this is external US public debt would probably be the best way to refer to it.
And you can see that it makes up a little less than
half of US debt, and is owned by a lot of different countries.
Now if we look at this same picture, and this is a little
bit older so the, the U.S. number doesn't exactly match the previous slide.
If we do the same thing with a group of countries.
First of all there's a bar showing how big U.S.
public debt or excuse me, how big national debt is.
For the different countries, alright.
This is what we were looking at on the Google public data explorer.
So the total bar goes out, you can see with Japan, to more than 225% of GDP.
But then we have a black zone which is which shows you
how much of that 225, 230% of GDP Is owned by foreigners.
Okay?
You can see in the case of Japan, very few foreigners have bought Japanese debt.
They own most of it themselves.
But if you go down to Greece, the next long bar, you can
see that a little more than half of their debt, is owned by foreigners.
This is why Greece has had so much
difficulty in the Euro zone crisis because it was
foreign countries That were selling their debt and causing
lots of movement in that secondary market, all right?
Because countries perceived a risk, a sovereign risk with Greece.
A lot of that is owned by Germany and France, so the
currency's the same, but they are worried that the government won't be
able to pay, so you can see that the Euro Zone countries
are in kind of a A gray area in terms of this debt.
It's not foreign debt, but, the Greek government does
not control the supply of Euros in the world.
Okay?
It's jointly controlled by the Euro Zone countries.
Talk about that in the next session.
If you look at Italy, you can see they are the third largest debt as we saw
On the Google data, and you can see that
a little less of that is owned by foreigners.
We go down to Ireland and Portugal, lots of foreign ownership of that debt.
Those black lines are about half.
Again, this helps us to understand why there was
so much crisis with these countries in secondary markets.
And then you come down to the United States.
You can see foreign ownership of US debt was actually not that high at that time.
As I just mentioned, it's gone up, up to 2013.
It's about half now.
And then you go on down.
You can see Britain, which owns most of its own debt.
Germany is about half and half.
Canada actually owns most of its own debt domestically.
And Spain foreign ownership is a little bit smaller than the other countries.
Again, these black bars do not represent foreign
debt, they are in the issuer's own currency.
But it does mean that foreigners are more active
in those markets and have bought more of that debt.
And sometimes they are more prone to sell on fears of What the country is going to
do in the future and this may cause interest
rates to be more volatile in the secondary market.
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Gayle AllardProfessor
