It’s no secret that the U.S. government spends a lot of money. Entitlements such as Social Security and Medicare cost a lot. In 2016, maintaining Social Security cost the government around $916 billion and providing Medicare cost tax payers $595 billion for the year. Discretionary spending such as financing the military and enacting fiscal stimulus packages aren’t cheap either. According to the U.S. Department of Defense, America spent $585 billion on its military for fiscal year 2016. With President Trump vowing to rebuild the U.S. military, the defense budget will likely only rise in the coming years. Similarly, rebuilding American infrastructure to stimulate the economy could cost hundreds of billions of dollars over a period of time.
The U.S. government has in recent decades not brought in as much as it spends. For various reasons, the U.S. national debt has ballooned from $5.6 trillion in 2000 to to almost $20 trillion today. In per capita terms, the U.S. national debt is over $62,000 for every man, woman, and child living in America.
Although the U.S. government has a lot of debt, U.S. Treasury bonds are still universally considered THE safe haven asset. When times get tough, many investors instinctively sell out of equities and pile into U.S. government debt. Given that the U.S. federal government has the strongest military in the world, a spotless payment record, and the technical ability to repay all its debts by printing money, there is no reason to believe that the U.S. will default on its debt, no matter how massive a number it might be. No matter what ratings agencies might say, U.S. Treasury bonds will always be Triple A rated in many investors’ eyes.
The U.S. government spending more than it brings in isn’t necessarily a bad thing either. If the government spends more during bad times, the economy will get moving again. America’s debt to GDP ratio is also not as bad as some other countries. Greece’s debt to GDP percentage is 176% for example. For more information on this vital metric, read this article on the 7 Countries with Highest Debt to GDP in the world.
Given the security of U.S. debt, it’s not surprising that many foreign countries own a lot of it. For many years in the 1980’s, Japan was the leading debt holder. In the 2000’s, China, currently home to the world’s second largest economy, took the top spot for a long period of time. While Japan and China are still very high on the list, there are also some surprising countries that also hold a lot of U.S. debt (in terms of U.S. Treasuries). In this article, let’s take a closer look at the 10 Largest Foreign Holders of US Debt according to the U.S. Treasury as of November 2016.
Clocking in at number 10 is Taiwan, with $183.1 billion worth of Treasury securities at the end of November 2016. Taiwan is one of the four Asian Tigers (along with Hong Kong, Singapore, and South Korea) and has a tech-based export economy. Due to its export economy, the country incidentally has an excess amount of dollars, which it uses to buy U.S. Treasury bonds.