US debt $19.9 trillion. So who exactly owns all of this debt. I think you are going to be surprised.

1. Who Owns the U.S. National Debt?
The Biggest Owner Is You! (www.TheBalance.com)
Published June 17. 2017
The U.S. debt is $19.9 trillion. Most headlines focus on how much the United States
owes China, one of the largest foreign owners. What many people don’t know is that
the Social Security Trust Fund, aka your retirement money, owns most of the national
debt. How does that work, and what does it mean?
The Debt Is in Two Categories
The U.S. Treasury manages the U.S. debt through its Bureau of the Public Debt.
The debt falls into two broad categories: Intragovernmental Holdings and Debt Held by
the Public. (Source: "Debt to the Penny," U.S. Treasury, January 26, 2017.)
Intragovernmental Holdings. This is the portion of the federal debt owed to 230 other
federal agencies. It totals $5.554 trillion, almost 30 percent of the debt. Why would the
government owe money to itself? Some agencies, like the Social Security Trust Fund,
take in more revenue from taxes than they need. Rather than stick this cash under a giant
mattress, these agencies buy U.S. Treasuries with it.
By owning Treasuries, they transfer their excess cash to the general fund, where it is
spent. Of course, one day they will redeem their Treasury notes for cash. The Federal
government will either need to raise taxes or issue more debt to give the agencies the
money they will need.
Which agencies own the most Treasuries? Social Security, by a long shot.
Here's the detailed breakdown (as of December 31, 2016).
• Social Security (Social Security Trust Fund and Federal Disability Insurance Trust
Fund) - $2.801 trillion
• Office of Personnel Management Retirement - $888 billion
• Military Retirement Fund - $670 billion

2. • Medicare (Federal Hospital Insurance Trust Fund, Federal Supplementary Medical
Insurance Trust Fund) - $294 billion
• All other retirement funds - $304 billion
• Cash on hand to fund federal government operations - $580 billion. (Source:
"Treasury Bulletin, Monthly Treasury Statement, Table 6. Schedule D-
Investments of Federal Government Accounts in Federal Securities, U.S.
Department of the Treasury, December 2016.)
Debt Held by the Public. The public holds the rest of the national debt ($14.403
trillion). Foreign governments and investors hold nearly half of it. One-fourth is held by
other governmental entities. These include the Federal Reserve, as well as state and local
governments. Fifteen percent is held by mutual funds, private pension funds and holders
of savings bonds and Treasury notes. The remaining 10 percent is owned by businesses,
like banks and insurance companies. It's also held by an assortment of trusts, companies,
and investors.
Here's the breakdown of holders of the public debt:
• Foreign - $6.281 trillion
• Federal Reserve - $2.463 trillion
• Mutual funds - $1.379 trillion
• State and local government, including their pension funds - $874 billion
• Private pension funds - $544 billion
• Banks - $570 billion
• Insurance companies - $304 billion
• U.S. savings bonds - $169 billion
• Other (individuals, government-sponsored enterprises, brokers and dealers, bank
personal trusts and estates, corporate and non-corporate businesses, and other
investors) - $1.349 trillion. (Sources: “Factors Affecting Reserve Balance,”
Federal Reserve, January 18, 2017. “Treasury Bulletin, Table OFS-2, Ownership
of Federal Securities", U.S. Department of the Treasury, June 2016.)
This debt is not only in Treasury bills, notes and bonds but also Treasury Inflation
Protected Securities and special State and Local Government Series securities.
As you can see, if you add up the debt held by Social Security and all the retirement and
pension funds, nearly half of the U.S. Treasury debt is held in trust for your retirement. If
the United States defaults on its debt, foreign investors would be angry, but current and
future retirees would be hurt the most.
Why Does the Federal Reserve Own Treasury Debt?
As the nation's central bank, the Federal Reserve is in charge of the country's credit. It
doesn't have a financial reason to own Treasury notes. So why did it double its holdings
between 2007 and 2014?
That's when it ramped up its open market operations by purchasing $2 trillion in
Treasuries.

3. This quantitative easing stimulated the economy by keeping interest rates low. It helped
the United States escape the grips of the recession.
Is the Fed monetizing the debt? Yes, that's one of the effects. The Fed purchases
Treasuries from its member banks, using credit it created out of thin air. It has the same
effect as printing money. By keeping interest rates low, the Fed helps the
government avoid the high-interest rate penalty it would usually incur for excessive debt.
The Fed ended quantitative easing in October 2014. As a result, interest rates on the
benchmark 10-year Treasury note rose from a 200-year low of 1.442 percent in June
2012 to around 2.17 percent by the end of 2014. For more, see Relationship Between
Treasury Yields and Mortgage Rates.
What About Foreign Ownership of the Debt?
Japan owns $1.1 trillion in U.S. debt. As of April 2017, it was the largest foreign
holder. China owns $1.09 trillion. Both Japan and China want to keep the value of the
dollar higher than the value of their currencies. That helps keep their exports affordable
for the United States, which helps their economies grow. That's why, despite China's
occasional threats to sell its holdings, both countries are happy to be America's biggest
foreign bankers. China replaced the United Kingdom as the second largest foreign holder
on May 31, 2007. That's when it increased its holdings to $699 billion, outpacing the
United Kingdom's $640 billion.
Ireland is third, holding $300 billion. Brazil is the fourth largest holder at $268 billion.
The Cayman Islands is fifth, at $257 billion. The Bureau of International
Settlements believes it is a front for sovereign wealth funds and hedge funds whose
owners don't want to reveal their positions. So are Luxembourg ($212 billion) and
Belgium ($96 billion).
The next largest holders are Switzerland, the UK, Hong Kong, Taiwan, Saudi Arabia
and India. They each hold between $124 and $234 billion. (Source: “Foreign Holding of
U.S. Treasury Securities,” June 15, 2017. "Petrodollars and Global Imbalances," U.S.
Treasury, February 2006.)
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