We’ve been chronicling some of the myths about the US debt “crisis” including the (wrong) notion that America is funded by the Chinese.
That myth actually speaks to another big myth which is that because Americans aren’t “savers” our debt is held, mostly by foreigners, at least on a relative basis.
While it’s true that US debt isn’t as domestically held as, say, Japan’s, foreign ownership is still lower than you might think.
Photo: Deutsche Bank
And we’d expect the trend to continue. As America ages, domestic consumption will shrink meaning two things: More domestic savings, and a more balanced trade picture (thus less of a need for foreigners to hold dollar assets). So yes, the good news: We do owe it to ourselves, mostly.
And taking it one step further, all of those tens of trillions of unfunded liabilities (entitlements) that people freak out about? Also owed to ourselves, obviously.