Coronavirus Relief: US Foreign Debt Holders

In response to COVID-19, the U.S. Government has tried numerous things to bolster the economy. 

In Q2 alone, the U.S. Treasury borrowed a record $3 trillion dollars for coronavirus relief. It's already the largest-ever borrowing for any fiscal year, and it brings our total above $26 Trillion (over $80,000 per citizen).

The concept of "Debt" can be confusing to a layman. Most people understand what it means to take on debt with a local bank, but it can be harder to understand the role debt plays in global economics. Debt often enables governments to run smoothly. But sometimes you can have too much of a good thing.

Many worry that our "excessive" government debt levels impact economic stability, the strength of our currency, and unemployment. For all the potential, it's certain that our debt with a country affects the relationship. So who "owns" most of our debt?

via HowMuch

Japan holds more U.S. debt than any other country but is followed closely by China. Both countries hold more than 6% of total foreign-held debt. 

The chart focuses on foreign debt - but only about 30% of the national debt is held by foreign countries. The rest is held by investors, the Federal Reserve, and the government. 

Taking a step back, how does our debt compare on the world stage? An important metric of debt is the debt-to-GDP ratio. It is a key indicator of the sustainability of government finance.

via OECD 

Ultimately, we're in the highest bracket, but also have a historically strong GDP to back it. It's also worth noting that lower debt levels don't necessarily translate to safety on a global scale. Yugoslavia had very low government debt until its breakup. 

In some ways, it seems like paying-off our debts seems insurmountable. Yet, our economy is reliable so we're allowed to continue borrowing. Debt is also an important part of the economic machine - it can be argued that we wouldn't have money without debt. 

While this doesn't mean we can go on borrowing forever, it does mean we have options. 

If you want to see an updated, interactive version of the U.S. Debt Clock, just click here.  It is worth spending a little time watching the pace the numbers turn.

Actions have consequences.

Something to think about.