, $1 Trillion in 12 months. But Who Bought This Pile of Treasury Securities? Nope, the Fed dumped. But there was huge demand elsewhere.
The US Gross National Debt has jumped by $363 billion in the two weeks since President Trump signed the law that suspended the debt ceiling. This surge pushed the total debt to $22.39 trillion. That’s up by $1.01 trillion from 12 months ago. And these are the good times. Watch this debt balloon during an economic downturn! Whoopee! Note the technical term at the top right of the chart:
The question, “Who the heck is buying all this debt” – because every dime has to be bought by some entity – is becoming increasingly nerve-wracking, particularly as the trade war with China puts the possibility out there that Chinese entities might dump their US Treasury securities, much like Russia has already done. But Russia was only a small-ish holder. China is – or rather was – the largest one.
So we got some answers on Thursday when the Treasury Department disclosed in its TIC data how much of this debt was held, bought, and dumped by foreign investors through June. Foreign investors bought hand-over-fist. But not the Chinese!
All foreign investors combined – so “foreign official” holders, such as central banks, and foreign private-sector investors such as banks and Mexican billionaires – held $6.64 trillion in US Treasury bonds and bills, having raisedtheir holdings in the month of June by $97 billion, and over the 12-month period by $411 billion, all of it driven by frantic buying over the past seven months.
In dollar terms, this $6.64 trillion held by foreign investors is a record (blue line). In terms of the percentage share (red line) of total debt, it’s a far cry from the record maintained from July 2012 through May 2015, when it maxed out at 34.1% of total Treasury debt. The share dropped to 28.5% at the end of last year. Under the recent surge in buying, it has ticked up to 30.1%:
Belgium is home to Euroclear, which handles large amounts in fiduciary accounts (in parenthesis, Treasury holdings in June 2018):
UK (“City of London” financial center): $341 billion ($274 billion)
Brazil: $312 billion ($300 billion)
Ireland: $262 billion ($301 billion)
Switzerland: $233 billion ($235 billion)
Luxembourg: $231 billion ($220 billion)
Cayman Islands: $227 billion ($191 billion).
Hong Kong: $216 billion ($196 billion)
Belgium: $203 billion ($155 billion)
Saudi Arabia: $180 billion ($164 billion)
Poster Comment:
The money is printed in the US and used to buy Treasuries through foreign bank accounts. This trick won't last much longer as rates are cut.