We all know that foreign interests have holdings in U.S. Treasury debt, but I never understood the magnitude before.
..........
WASHINGTON – China reduced its holdings of U.S. Treasury debt in May as total foreign holdings of government debt posted a slight increase.
China's holdings fell by $32.5 billion to $867.7 billion, the Treasury reported Friday. Total foreign holdings edged up $5.8 billion to $3.96 trillion.
The drop in China's holdings and the weak showing overall was a surprise. Analysts expected a sizable gain because they thought foreign investors would seek the safety of U.S. Treasury debt, responding to fears over the European debt crisis.
China is the largest foreign holder of Treasury securities. The 3.6 percent drop in China's holdings in May will likely raise concerns that China could shift money away from Treasury securities. That could raise the cost of financing America's soaring budget deficits.
Japan, the world's second-largest holder of Treasury securities, also cut its holdings in May, to $786.7 billion. That's a drop of 1.1 percent from April.
However, the United Kingdom, the third-largest holder, posted a 9 percent increase. Its Treasury holdings rose to $350 billion.
The Treasury reported that net purchases of long-term securities, covering U.S. government debt and the debt of U.S. companies, increased by $35.4 billion in May. That followed bigger gains of $81.5 billion in April and $141.4 billion in March.
Foreign holdings of U.S. debt are closely watched because they can provide signals on the direction of U.S. interest rates. The financial crisis pushed U.S. interest rates down significantly after foreign investors rushed to the safety of U.S. government bonds.
That development helped reduce the costs of financing federal budget deficits, which have soared under the impact of the government's efforts to deal with a severe recession.
The federal deficit hit an all-time high of $1.4 trillion last year and is forecast by private economists to total $1.3 trillion this year.

... and the current administration is incurring more and more debt.

I think Will Rogers said it pretty good:

__________________
Lost it all in a boat accident

There's your sign! POTUS recently got into it with the leaders of the other developed nations over their austerity plans to reduce debt, especially in Europe. He reckons that there should be more stimulus spending (two word term for debt) to encourage a recovery that will then pay off the debt in taxes. This has never worked anywhere to my knowledge, and for a number of reasons has no chance of success here.

1) Politicians are reluctant to acknowledge and pay pay debt because it reduces the amount of pork for their state/district.

2) If the economy recovers to some degree and the tax money rolls in, refer to point 1.

3) If the economy recovers to some degree and the tax money rolls in as an election approaches, the taxes will be given back in some way to buy the election.

Notice the common theme? The debt is never repaid, at least not on the incumbents watch. After that, do not confuse them with somebody who gives a rat's.

Europe has realised this and is not about to make the stimulus mistake. They will slash public spending while raising taxes in order to pay off the debt. This can happen because the pork factor is much smaller than it is in the US. The measures will not be popular. Just go to the BBC News website and look at some of the proposed percentage cuts in some government departments.

Just before the last UK General Election, The Governor of the Bank of England (Eddie George, sort of Fed Chairman equivalent) ran his mouth to a buddy in the US stating that "If the incoming government actually does what is required to straighten out the country's finances, they will likely later find themselves in the political wilderness for a generation". In other words, expect a voter backlash. Personally, I do not believe that. Mrs Thatcher carried out a similar cuts program in the early 80's and her party held power from 1979 until 1997. Maybe Eddie George has underestimated the common sense of the average British voter, which would be a nice surprise.

For perspective:

A million seconds is 12 days.
A billion seconds is 31 years.
A trillion seconds is 31,688 years.

I'm an owner.

If China thinks they're going to grab their collateral, they'll have to go through me.

__________________
VIVERE MILITARE EST

Old Infantry piece of advice - If you ain't standing on it, you don't own it, and if you don't have Artillery, you're a temporary occupant.

__________________
You do what you are.

Americans own it[for now].Dennis Miller said it best on O'Reilly-don't pay the people that have the notes.What are they gonna' do?China sells it's goods to America.They need us as we need them.It's a stand off.

__________________
WALSTIB

... and thereby destroy what little faith remains in the World's banking system and throwing us all under the bus. Come that day I hope we all have a well stocked bolt hole in which to hide. I suspect Mr Miller has little understanding of the linkage and leverage involved in the World's economy.

Our GDP is about 14 trillion.... so we're borrowing 1.4 trillion (10%) of GDP to get about 3% GDP growth? Looks like absent borrowing monies and dumping it into our economy that GDP would be showing a dramatic decline rather than growth. Can we borrow ourselves into prosperity?

Economics makes my head hurt.

Damn it,Its My country........

DG