I keep hearing “warnings” about all the US debt being bought up by foreigners. Here’s one typical example from the Blue Dog Democrats; no doubt a lot more statements like this are being made on the campaign trail today:
“Mr. Speaker, you don't need a doctorate in economics to appreciate that our Nation's economy and its security is more vulnerable when we are deeply indebted to foreign creditors.”
Scaring people seems to be working. Judging from the many forums I visit (usually to see who’s linking to this website), it appears that fear-peddling tactics by politicians like the Blue Dog Democrats have made some headway with the public. Many people seem to be convinced that foreigners are about to spring a trap on us. According to the fear-peddlers’ innuendo, we’re supposed to be preparing for foreign T-bond owners—especially the Chinese—to conspiratorially dump all their holdings at once, sending everyone (including themselves) into the poorhouse. (Sounds a lot like the global-finance version of a suicide bomber, doesn't it?)
So I keep checking the official statistics looking for something to be frightened about. Unsurprisingly, I still can’t figure out what’s supposed to be so scary.
Below is the latest official data on foreign ownership of US Treasury debt. This one is sorted to show which foreigners have bought up (or sold) our debt instruments in the last twelve months. (The pie chart of who owns the debt hasn’t changed much since last time I posted it.)
The official numbers say that, if we are to trust the Blue Dog Democrats' rhetoric, we should now be deathly afraid of the British, who have bought three times as much new debt than the Chinese have in the last twelve months.
This probably won’t surprise you: I don’t take the same stance as the Blue Dog Democrats. I do think the British, the Chinese, the Canadians, and many other foreigners know a good, safe, secure investment when they see one. So my response to the Blue Dog Democrats fear-mongering about “foreign creditors” investing in United States Treasury securities is this:
“Mr. Blue Dog, you don’t even need a high school diploma to appreciate that the British are buying up our debt because they think it’s a safe, secure investment—and not because they’re planning to become T-bond suicide bombers.”
