During the past couple of years the US Federal Reserve has been the single largest buyer of US government debt. This is probably just as well given that China’s holdings of US debt has stagnated, dropping from a peak of $1 318 billion in October 2010 to $1 164 billion in June 2012.
China is still the single biggest foreign holder of US debt, but increased buying from other sovereigns has meant that China now represents only 22% of the total US debt held offshore, down from a peak of almost 30% in mid-2010. In contrast, Japan has been systematically increasing its holding of US debt, and has almost surpassed China (see chart attached).
Interestingly, Brazil is the third largest holder of US government debt followed by Taiwan, Switzerland, Russia and the UK. South Africa is in 34th place, holding a mere 0.2% of the total US government debt that is held offshore. In aggregate, foreigner’s hold approximately 33% of US government debt, which is significant, but far from dominant. This has been a key factor in allowing the US to increase its debt to around 105% of GDP.
Similarly, Japan is able to sustain its absurdly high level of government debt, in part, due to the fact that foreigner’s own less than 10% of Japan total government debt.
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