Who buys US debt and will they continue?

Thanks to Andrew for the link for part of this bit of news. See his comment under Debt Laundering and Theft.

Amoung the many owners and buyers of US debt it turns out that individual States and local governments had by dec ’09 bought $528 billion of Federal Debt. Now, as holdings go, this is far larger than the UK’s holdings but about two thirds what China or Japan hold. States and local governments are the sixth largest buyer of Federal Debt. Or were.

States buying Fed debt, especially in a recession is like parents who are broke asking their children for a loan from their pocket money. Not a terribly robust financial model. But when you add the fact that 32 of the 50 American states are officially bankrupt and one of those is CA which is – sorry – WAS the fifth largest economy in the world – then I personally, have pause for thought.

It turns out those 32 bankrupt states have already had to borrow back from the Federal Government $37 Billion in order to pay their unemployment benefits. Those benefits are not getting less, they are increasing. And the term for which people remain unemployed is also increasing. At the same time the tax take in ALL the states is decreasing. Thus that $37 Billion borrowed will be the first of several trips back to DC for free money.

That money, of course, has to be either borrowd or printed. If it is borrowed who will the Fed borrow it from. The States?

WHat happens to the web of debt when those tied together by debt all start to go broke together?

On the list of the top 15 buyers of US Federal Debt let’s look at who is already broke and thus should not be buying any more US debt. These are old 09 figures. The sotry would eb roughly the same only a little worse.

15th – Russia – Broke.
14th – Banks – Broke and in receipt of massive loans FROM the Government.
13th – Hong Kong – OK but worried about China slow down
12th – Brazil – OK
11th – Insurance Companies – OK
10th – Caribean Banks – OK and BOOMING – Mystery buyers, Money launderers and Drug money launderers (I’m not being rude just realistic) -Drug money is the last and biggest cash rich business.
9th – Oil Exporters – OK unless you’re Dubai. And remeber Oil in the $70’s means a LOT less revenue.
8th – UK – Broke but buying
7th – Pension Funds – Here they are. The reason so many people said “Oh but we MUST bail them all out or what will happen to my pension” Well here’s your answer. It is BECAUSE YOU BAILED THEM OUT, that now your pension is on the skids, owning so much Federal bail-out debt. Congrats!
6th – States – Broke
5th – Mutual Funds – OK- there go your other investments.
4th – China – OK Now using US debt to buy up the world’s resources out from under Uncle Sam’s nose.
3rd – Japan – Over 100% debt to GDP of its own.
2nd – Other – Broke – still buying, Includes Government sponsored enterprises. Government by another name.
1st – The US government – Broke and still buying when its not printing.