What happens if people stop buying US debt?
The US government would have to find other buyers for its debt, which could lead to higher interest rates and lower long-term growth. The retreat of one of the largest buyers of U.S. Treasurys could bolster the Federal Reserve's efforts to push interest rates higher to cool the economy.
Entities with extra cash buy treasury bonds. When no one buys them anymore, we will reduce the national debt.
If China (or any other nation that has a trade surplus with the U.S.) stops buying U.S. Treasuries or even starts dumping its U.S. forex reserves, its trade surplus would become a trade deficit—something which no export-oriented economy would want, as they would be worse off as a result.
Economic recession or slowdown: A default could undermine investor and consumer confidence, leading to reduced spending and investment. This could also result in an economic slowdown or even a recession, affecting businesses, job creation and overall economic growth.
The international buying appetite has been falling over the past 10 years (dropping from 40% to the current 30%). The major international owners of US debt include Japan ($1.1T), China, UK, Belgium, Switzerland, Cayman Islands and smaller amounts from the rest of the world.
Among other countries, Japan and China have continued to be the top owners of US debt during the last two decades. Since the dollar is a strong currency that is accepted globally, holding a substantial amount of US debt can be beneficial.
| Characteristic | National debt in relation to GDP |
|---|---|
| Macao SAR | 0% |
| Brunei Darussalam | 2.06% |
| Kuwait | 3.08% |
| Hong Kong SAR | 4.27% |
The US dollar has been the world's reserve currency for decades, but its dominance is fading. Sanctions against Russia have spurred other countries into considering backup currencies for trade. US monetary policies, the strong USD, and structural shift in the global oil trade also contribute.
As a result, totals from January 2023 are lower than reported. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).
This is an effort by a growing number of countries to reduce the role of the U.S. dollar in international trade. Countries like India, China, Brazil, Malaysia and Bolivia, among others, are seeking to set up trade channels using currencies other than the almighty dollar.
What 3 countries own the most U.S. debt?
- Japan. Japan held $1.15 trillion in Treasury securities as of January 2024, beating out China as the largest foreign holder of U.S. debt. ...
- China. China gets a lot of attention for holding a big chunk of the U.S. government's debt. ...
- The United Kingdom. ...
- Luxembourg. ...
- Canada.
China is one of the United States's largest creditors, owning about $859.4 billion in U.S. debt. 1 However, it does not own the most U.S. debt of any foreign country.
One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.
At the end of September 2023, domestic creditors held 77 percent of the outstanding debt held by the public. Foreign creditors held the remaining 23 percent.
It's going to put it into bonds of other countries. It will have to buy other currencies in order to invest in those countries' bonds. So US interest rates will no doubt rise as the supply of US Treasury bonds suddenly increases and the dollar will fall as China moves a lot of money out of dollars.
- Japan. Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP. ...
- United States. ...
- China. ...
- Russia.
China owns 384,000 acres of American agricultural land. That's a 30% increase just since 2019. And on top of that, they own land near an air force base in North Dakota.
Domestic Holders of Federal Debt
The Federal Reserve, which purchases and sells Treasury securities as a means to influence federal interest rates and the nation's money supply, is the largest holder of such debt.
In the latest reports, Russia National Government Debt reached 285.4 USD bn in Dec 2023. The country's Nominal GDP reached 494.7 USD bn in Mar 2023.
China owes the United States $1.3 trillion, which is the most debt out of all the countries that are its debtors. Japan was the primary debt holder until 2008, but now comes in second place, with $1.2 trillion. Other countries with outstanding U.S. debt include Russia, India and South Korea.
Which country borrows the most money from world Bank?
India takes the top spot. Its $39.7bn debt towards the WB recorded at the end of 2021 is double that of the next biggest debtor, Indonesia, with $19.6bn. Pakistan and Bangladesh follow with $18.3bn and $17.8bn, respectively, according to WB figures.
A nation saddled with debt will have less to invest in its own future. Rising debt means fewer economic opportunities for Americans. Rising debt reduces business investment and slows economic growth.
Eliminating the U.S. government's debt is a Herculean task that could take decades. In addition to obvious steps, such as hiking taxes and slashing spending, the government could take a number of other approaches, some of them unorthodox and even controversial.
If all Americans pitched in, it would take $94,000 from each one of us, every man, woman and child, to pay off the national debt. The U.S. national debt, in dollars, is by far the largest in the world. But we also have the largest economy in the world. And that is how most experts approach this.
Foreign holders of United States treasury debt
Of the total held by foreign countries, Japan and Mainland China held the greatest portions, with China holding 797.7 billion U.S. dollars in U.S. securities. Other foreign holders included oil exporting countries and Caribbean banking centers.
