Which country is the third biggest foreign holder of US debt?

You’ll be surprised.

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10 thoughts on “Quiz question of the day

  1. I was surprised too, but you saying that I would be surprised sort of gave the game away 🙂

    Why was there such a big jump in UK holdings in June? And who in the UK holds most Treasuries – the Bank of England, or institutional investors? Or someone else?

  2. Well it was Oil Exporting countries until May 2009. Like Niklas I’d be interested to know why the switch came about and who in the Uk is actually holding it.

    I’m interested in this because of the argument developing (currently in my own head but aimed at a first piece on CommentisFree about credit rating agencies) that:

    a) any threat to the Aaa rating of the US sovereign debt is pretty well unthinkable given the importance of the US economy to the whole kit and caboodle, as well as the obvious institutional clout of a major (military) power, and that there will be a desperation to keep it Aaa whatever the ‘real’ economy is doing

    b) that given the tie in of the UK to that debt (10% of the lot) it would make no sense therefore to go anywhere near downgrading the UK rating, (more or less) whatever the circumstances.

    Does that logic make sense to you, as an informed observer of such matters? It seems tangential but I think the untouchable’ position of the US has a load of ramifications for the way the power of the credit rating agencies can (and should) be handled.

  3. Hi Paul

    I don’t think the UK’s holdings of US debt have a systemic linkage to our own govt’s debt – because it is not the UK govt that is doing the owning. I personally think the US is untouchable because it will always be able to pay – by inflation if needs be. And if they get downgraded, who do they launch a Tomohawk at? The offices of S&P?

    but intruiged all the same – sent us the CiF piece when or if it comes

  4. Ok thanks Giles. Appreciate your view.

    My rationale was really that if UK investors, of whatever there are type, were (hypothetically) mired in a sinking economy because of an adverse credit rating decision visited upon us by Moody’s etc as a way to ‘encourager les autres’, then that in turn would adversely effect at least 10% of the demand for US government debt and maybe even kick off a death spiral that not even a strategically directed Tomahawk would have influence over (directed ess at S&P’s officers, more at middle-Eastern countries keen to distance from buying US bills). But perhaps my imagination is starting to run riot on the last one.

  5. I think Duncan’s answer explains some of this. The Tbonds are not necessarily owned by people stamped through with Blighty. It may be the fact that we are a large international centre. In which case, knowig where to fire the T-hawk is even more problematic.

    I honestly don’t think we have gunboat diplomacy any more. I think the US gets to sell debt because security of contract etc is so much better, as is freedom of capital movement, and the use to which you can put $’s.

    Personally, while conceding your view of systemic bias in the grading of difficult securities in the housing bubble, I am not sure whether the logic can easily extend to sovereign debt. Does the US government pay a chunk to S&P for grading its bonds? I’m not sure.

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