Who Holds the Federal Debt?
Key Takeaways
- The federal debt is divided between intragovernmental holdings (primarily the Social Security Trust Fund) and debt held by the public.
- Public debt holders include domestic investors, foreign entities, and the Federal Reserve, which has significantly increased its holdings in recent years.
- Foreign ownership of U.S. debt represents a substantial portion, raising opportunities and potential economic stability risks.
The federal debt is often classified into two buckets: intragovernmental holdings and debt held by the public.
Intragovernmental Debt
As of November 21, 2024, intragovernmental holdings totaled $7.35 trillion, 20.4% of the total outstanding public debt of $36.03 trillion. The Social Security Trust Fund holds the largest share of this intragovernmental debt.
Debt Held by the Public
Debt held by the public can be broken down into debt held by the U.S. public, foreign entities, and the U.S. Federal Reserve.
The U.S. public is a broad category that encompasses domestic non-federal investors. It includes state and local governments, private pension funds and insurance companies, banks, and other investors.
Foreign entities include governments and central banks of other countries and private international investors.
In recent years, even relative to the first two groups of debt holders, the U.S. Federal Reserve has greatly increased its holdings of government debt. The Federal Reserve buys the debt with newly created reserves, but these purchases raise inflation risk by monetizing the debt. Since new reserves can increase the nation’s money supply, they can increase prices as more dollars chase the same volume of goods and services.
The Federal Reserve asserts, “Federal Reserve purchases of Treasury securities from the public are not a means of financing the federal deficit.”
However, Federal Reserve asset purchases are traditionally a means of circulating newly printed bills. While new tools like interest on monetary reserves can mitigate the impact of such expansion, the dramatic increase of Federal Reserve debt purchases (which include mortgage debt, corporate bonds, and Treasurys) is a serious concern.
Given the persistence of federal deficit spending, if demand for U.S. debt does not keep pace with debt accumulation, the risk of debt monetization via Federal Reserve purchases rises further.
Who Holds U.S. Debt
Quarterly data (1981-2024)
Foreign Debt
Demand for U.S. debt has remained strong because the dollar is still the world's de facto reserve currency. The Bretton Woods system, which pegged other currencies to the U.S. dollar (itself redeemable for gold), effectively ended after President Richard Nixon suspended dollar-to-gold convertibility. Since then, the nations of the Organization of the Petroleum Exporting Countries (OPEC) have primarily denominated oil sales in U.S. dollars, sustaining global demand for America’s debt.
Historically, many countries have relied on the safety and stability of U.S. Treasurys. However, recent sanctions—including those imposed on Russia—underscore that this “risk-free” asset is not risk-free for countries that are out of alignment with American foreign policy.
Foreign Holdings of U.S. Debt
March 2025 (nominal dollars), includes non-sovereign holders
Top 20 Countries
China and Japan still account for a significant share of foreign-held U.S. debt. However, with the recent deepening trade tensions between Washington and Beijing, and Japan’s demographic challenges, it is no longer a given that either country will continue absorbing large amounts of new U.S. debt indefinitely.
Ultimately, the United States must accept that it does not have an unlimited capacity to finance deficit spending. This reality will become more pressing as obligations for programs like Social Security and Medicare continue to grow rapidly.