The U.S. government debt has surged to $36.2 trillion, up 54% from five years prior, with foreign investors holding approximately a third in Treasury securities. This foreign ownership is pivotal as it lowers borrowing costs for the U.S. economy and maintains high demand for the dollar. Countries such as China and Japan reinvest their trade surpluses in U.S. debt, leveraging their financial ties for greater influence over U.S. fiscal policy, emphasizing the interconnectedness of global financial systems.
Foreign ownership of U.S. debt keeps demand for the dollar high, allowing the United States to finance its budget deficits at lower interest rates.
Many countries with close financial ties to the U.S. also use U.S. debt as a sound investment and safe store of value, accumulating large amounts of U.S. dollars.
Countries like Japan and China, which have large trade surpluses with the U.S., reinvest a significant portion of their dollar earnings in U.S. government bonds.
While large holders of U.S. debt find Treasury bonds a safe investment, they also give those national governments leverage over the U.S. financial system.
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