The last paragraph sums it up well:<p>"The Bottom Line
Many people believe that much of U.S. debt is owed to foreign countries like China and Japan. The truth is, most of it is owed to Social Security and pension funds. This means U.S. citizens, through their retirement money, own most of the national debt."
It almost feels as though economics discussion is made complicated on purpose. Almost none of the comments and article mean anything practical to me. A country issues debt to itself? In money it can print?<p>Here's the crux:
The US goes into 'debt', to pay for something. Where did the money (resources) come from?<p>- it printed it itself -> that isn't debt, just 'money creation'<p>- someone else -> it is debt, owed to another entity<p>You can't pay your groceries by taking a loan from yourself, you either have the money or you don't
Pension funds own a lot of it but the Fed has more on their balance sheet, about a third of all US debt. But this is the same situation with most central banks - ECB, BoE - they have roughly a third of their respective national debts on their BS.<p>It has been going up since the global financial crisis and accelerated during COVID. Central banks keep saying they’re going to taper but it will be very, very slow tapering in order to not hurt the economy.<p>In essence, currency is being debased when central banks buy debt to protect the financial system from sudden shocks, and keep buying it because the economy remains fragile and gets hooked on the central bank asset purchases.<p>Due to artificially low interest rates (because of said debt purchases) asset bubbles are formed elsewhere in the economy, and the ones who gain disproportionately the most from this are people who own invested assets, while those who don’t are no longer able to afford financialised assets like housing, or goods affected by inflation.
There's a lot of misunderstanding about what is currency and what is debt.<p>All modern currency is debt. All of it. The amount of debt created and the amount of new money created is equal, because x=x for all x. It's just that simple - there isn't a difference.<p>There are the printed bills (that everyone has access to), there's the digital base money printed by the Fed that you keep hearing about, it's the liabilities side of their balance sheet (that only select large financial institutions have access to), then there are govt bonds and govt-guaranteed bonds (Mortgage-backed securities) (which again everyone has access to, but they're impractical for day-to-day conduct of business; they're extremely liquid though, you can convert them by the hundreds of millions to bills/base money by a single phone call). But all of this is money, just different types / quality of money.<p>Operations such as QE are just a means of conversion between the types of money. For example since 2008 we have continuous conversion of high quality bonds (govt and govt-guaranteed) into base money (the top quality money). All of it is still a government liability, since the Fed is a part of the government.<p>Similarly, the Social Security buying Treasury bonds is just an internal government operation. Pension liabilities are just like government bonds (it's a promise to deliver money at a later point in time), if you fund a pension liability with tbonds you're just doing some internal reshuffling within the federal government books. No actual funding takes place, i.e. no one is delaying their personal (or corporate or nonprofit) consumption in exchange for a future payoff.<p>If you don't believe me then please try to explain why hasn't Japan experienced a double or triple digit inflation. They are so much more advanced in the "central bank money magic".<p>PS. I'm using "quality" to refer to types money to simplify a bit, the more accurate first order approximation term would be "duration". Then there are further technicalities such as coupon structures, whether or not the coupons depend on the CPI (TIPS), whether or not they exist at all and maybe you just get a lump base money sum at the end, etc.<p>PS2. I've skipped the (actually larger) private credit. Yes, bank credit and the bond market also create money, though definitely lower quality than anything discussed above. Private credit is allowed to disappear at any given point in time. The Fed is currently not allowed to touch private credit whatsoever (this might change if the Congress decides so), they very briefly violated their own rules in March of 2020 by doing a weird type of deal with the Treasury (which is allowed to deal in the private credit, as the Treasury is allowed to spend; buying a bond that later defaults is effectively spending). And by the way: their announcement of an intervention in the non-govt guaranteed credit markets was the exact bottom of the covid market panic.
The flip side of Social Security owning the US national debt is that Social Security's solvency is entirely dependent upon the USA being able to pay. If you assume that, then Social Security is fine for decades to come.<p>Unfortunately once the Baby Boom retires and their SS payments come due, there is no reasonable path to the US government being able to actually pay. Doubly not when expenses from Medicare is projected to double in the next decade.<p>And yes, I know it is popular to say that we can just cut the military. But that is not enough. In fact if we eliminated all government programs except social security, medicare and medicaid, by the middle of this century our federal budget still can't add up. :-(
More importantly: will it ever be paid? Let's say this is a household that decides to stop accumulating debt and starts a pay off plan. How long will it take?
I am somewhat confused by all of this. If mostly pension/mutual funds, social security, military, Medicaid, is buying our debt (as in Americans are buying its own debt? Very confused), aren’t we basically saying the economy can never have a serious prolonged correction? We’d all have to default on the debt we bought to give ourselves?<p>Really confused and scared here.
From across the Atlantic it sounds like US national debt is often brought up by Internet libertarians as to why the US can't afford basic healthcare and welfare for its citizens.<p>It's manipulative strategy that takes advantage of people wrongly thinking that national debt is like personal debt.<p>There are plenty of countries with higer national "debt" as % of GDP and with a higher quality of life than the US:<p><a href="https://en.wikipedia.org/wiki/List_of_countries_by_external_debt" rel="nofollow">https://en.wikipedia.org/wiki/List_of_countries_by_external_...</a><p><a href="https://en.wikipedia.org/wiki/List_of_countries_by_public_debt" rel="nofollow">https://en.wikipedia.org/wiki/List_of_countries_by_public_de...</a>
> The Biggest Owner Is Not Foreign Entities, but U.S. Taxpayers<p>In other words, the average US citizen has, over the years, been taxed way harder than they've ever realized.<p>And the argument that this is a "debt" and can therefore be "repaid" at some point does not hold, since it will be repaid in USD, whose value generally decreases over time and is controlled by the USG (they can produce arbitrary amounts of it).<p>Nice way to boil the frog.
For those using TOR: <a href="https://web.archive.org/web/20210828180159/https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124" rel="nofollow">https://web.archive.org/web/20210828180159/https://www.theba...</a>
Maybe the US strategy is to become (or stay) too big to fail, after all it’s the same people rotating in and out the banks and govt. Once everyone’s on the dole with UBI there’s no problem using inflation as a back door tax.
> The truth is, most of it is owed to Social Security and pension funds<p>After all that data, how did they come to this conclusion? Based on numbers in the article, SS and pensions account for only 13%. The clear largest holder is the federal reserve + government at 35%. Whether or not this means US citizens effectively own most of the debt is another discussion.