Not Financial Advice: As reported by Bloomberg.com, Japan is set to overtake China as America’s largest foreign creditor as the Bank of Japan’s latest attempt to end two decades of economic stagnation prompts investors to eke out any returns they can.
While China cut its investment in U.S. government securities for a fifth month in January, Japan added $7.7 billion, narrowing the gap to $1 billion, the latest U.S. Treasury Department data showed. Read more here.
But for all the worries that China (or any other country) will turn out to be a vengeful creditor, it is worth noting that a far bigger US creditor is… the US itself. Even before the Federal Reserve began its massive bond-buying program, its Treasury holdings were substantial. And although China overtook it for a couple years after the recession, the Fed has flowed back into first place.
Here is a breakdown of the top domestic investors in US public debt as of September 2012, the latest figures available:
- Insurance companies: $263.8 billion
- Depository institutions (commercial banks, credit unions): $337.4 billion
- State and local governments: $492.2 billion
- State and local government pension funds: $190.3 billion
- Private pension funds: $615.6 billion
- Mutual funds: $889.1 billion
- U.S. savings bonds: $183.8 billion`
- Other investors (Includes individuals, government-sponsored enterprises, brokers and dealers, trusts and estates, businesses, and more): $1.172 trillion
In buzz, if federal employees were a foreign country they would rank only behind China and Japan as holders of U.S. Treasury securities, according to federal data. The Civil Service Retirement System and the Federal Employee Retirement System hold a combined $837 billion in Treasury securities, and the Thrift Savings Plan holds another $194 billion. In combination they rank only behind the Social Security Trust Fund, China and Japan as holders of public debt. Read more at Federal Times.