On Monday, December 17, the US Treasury Department announced that China and Japan have increased their purchases of United States government securities despite concerns over the continuing negotiations over the "fiscal cliff." Foreign holdings rose to $5.5 trillion in October, or about one-third of the country’s $16 trillion national debt. The increased interest in owning U.S. government debt by foreign governments is welcome as the government’s deficits continue growing at about $150 billion every month.
Although China is often referred to as the primary financier of America’s continuing profligacy, that country’s total holdings, some $1.16 trillion, represents just a little over 7 percent of the U.S. national debt. Japan comes in at second place, owning $1.13 trillion, with Brazil holding $255 billion. In contrast, two-thirds of the country’s national debt is owed by individual American investors and by the Social Security and civil service and military pension plans. The balance of $1.6 trillion is owned by the Federal Reserve.
How much longer can such profligacy with its resulting trillion-dollar annual deficits continue? Back in 1995, Harry Figgie wrote Bankruptcy 1995 and predicted the end would occur within five years:
The good news and the bad is that neither we nor any other nation can continue the sin of deficit spending indefinitely. The laws of economics eventually exact their punishment, and we are dangerously close to getting ours.
Just as interest compounds in a savings account, it compounds on our debt. The $4 trillion debt we owed in 1992 becomes $6.56 trillion in 1995 and $13 trillion by the year 2000 just from the accumulation of deficits and interest alone.
Only a fool would contend that this insanity doesn't have to end.
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