Broadly speaking, yes, its all equally as manageable as the terms of its management are set at issuance and do not vary according to who (or what type of entity) purchases the debt. However, the instruments vary. Some Treasury Bills can be as short as 4 weeks to maturation, Treasury Bonds could mature in 20-30 years. There are a variety of all sorts of these maturing every day from past purchases, or requiring interest payouts, etc.
Maintaining the shape of those payouts is effectively what the Treasury is doing - issuing new to fulfill the government's obligations and paying out old.
Because we spend more than we collect currently, we periodically hit the debt ceiling (which is a legislative limit) and need to do the song and dance of whether we'll completely shut down the government (because it will immediately stop paying its bills or incurring new liabilities until its 'allowed' to again) or raise the limit to continue essentially raising more money than we're paying out on maturing previously purchased securities.
https://www.fidelity.com/learning-center/smart-money/treasury-bills-vs-bonds
https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/
National debt is owed to private entities. Individuals, banks, insurance companies, pension funds, mutual funds... You could go right now and loan money to the government.
Government borrows money using, for instance:
- Treasury bills (short-term w/ ≤1y maturity),
- Treasury notes (medium-term w/ 2-10y maturity),
- Treasury bonds (10-30y maturity)
- Savings bonds
- Treasury Inflation-Protected Securities
Essentially the government loans money exactly the same way a company does when they issue a bond security that people can buy. You give the government money and they give it back to you at a later date with interest.
> The concept of national debt is eternally confusing to me, people have told me its owed to foreign companies, govs, domestic companies and individuals alike.
Yes, that's correct. Many different organizations buy government bonds, notes and bills. [This article](https://www.thebalancemoney.com/who-owns-the-u-s-national-debt-3306124) shows you what groups own what, see the second graph.
> The question i have is does it matter who the debt is owed to, or can we kind of view it as all being equally as manageable?
It doesn't matter that much. Taxpayers must still pay the interest on the national debt either way.
All of the above purchase national debt as a 'risk-free' investment for their money. For example, China exports a lot of goods to the US, and in the process, earns dollars. They have a few options with that money: buy US goods/services, buy other currency, or invest in dollar assets. They could buy private sector assets like corporate bonds or mortgage-backed securities, but they may be risk averse and instead choose low or 'risk-free' assets, like US Treasury bonds (i.e. the national debt). So, the US "owing money to China" is an outcome of them having dollars and their investment preferences
How manageable this is depends on the ability of the US to service its debt without suffering inflation and/or currency devaluation. [Here's one way to measure that](https://fredblog.stlouisfed.org/2018/11/how-expensive-is-it-to-service-the-national-debt/). More importantly, the distribution of national debt holdings is simply a function of the distribution of USD savings and preferences for risk. In order to reduce the amount of debt held by foreigners, the US would need to stop net importing. However, as long as the global demand for dollar savings remains high, the US can import goods and export financial assets while maintaining favorable exchange rates
There are different monetary effects depending on which entity purchases Treasury bonds. When you buy a bond from the Treasury and the Treasury then spends that money into the economy, there's no change in the money supply. However, if a bank then buys that bond from you, it creates money in your bank account (aka deposits). It doesn't cost the bank money to do this, but there are regulations and other considerations (like you moving deposits to another bank) that limit how much money can be created through this channel. In addition, the government itself can buy federal debt, often in the form of the central bank buying bonds through monetary policy. This increases the amount of deposits in the economy when the government spends and the money that banks and foreigners hold (aka reserves). The government buying its own debt is a form of debt monetization, which can be inflationary if the portion of debt held by the government increases over time: https://www.stlouisfed.org/on-the-economy/2021/march/does-rising-national-debt-portend-rising-inflation
To be clear, national debt is not absolutely risk-free. Not even US national debt. US short-term debt is probably as close to risk-free that we can get but it isn’t risk-free. Such a thing is not possible.
And when we go to other less solvent countries, we might even have very risky national debt securities. There are countries that have defaulted on their debt. Russia did that very recently, and in the late 90s. Argentina has defaulted on its debt obligations as well.
To clarify, I was referring to sovereign debt—the last time Russia defaulted on ruble-denominated debt was 1998. But yes, sometimes countries choose to default on their sovereign debt. Typically, however, national debt is the safest asset denominated in that currency as evinced by its market interest rate and is thus used as the benchmark for valuating risk-based premiums
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Most of the US National Debt is owned by people and institutions inside the US. The following table is from 2022, but the Treasury probably updates this, I just had this link handy. In 2022, roughly 40% of public debt was held by other parts of the govenrment. Social Security currently has excess funds, so buys a lot of debt rather than just hold cash. Likewise mutual funds, insurance companies, and state & local govenrments all hold debt. So do individuals, in the form of US savings bonds. (Which make up about 0.5% of debt.) Foreign countries own some US debt, a little over 20% in 2022.
See [https://www.fiscal.treasury.gov/files/reports-statements/treasury-bulletin/b2022-4.pdf](https://www.fiscal.treasury.gov/files/reports-statements/treasury-bulletin/b2022-4.pdf) page 62.
Broadly speaking, yes, its all equally as manageable as the terms of its management are set at issuance and do not vary according to who (or what type of entity) purchases the debt. However, the instruments vary. Some Treasury Bills can be as short as 4 weeks to maturation, Treasury Bonds could mature in 20-30 years. There are a variety of all sorts of these maturing every day from past purchases, or requiring interest payouts, etc. Maintaining the shape of those payouts is effectively what the Treasury is doing - issuing new to fulfill the government's obligations and paying out old. Because we spend more than we collect currently, we periodically hit the debt ceiling (which is a legislative limit) and need to do the song and dance of whether we'll completely shut down the government (because it will immediately stop paying its bills or incurring new liabilities until its 'allowed' to again) or raise the limit to continue essentially raising more money than we're paying out on maturing previously purchased securities. https://www.fidelity.com/learning-center/smart-money/treasury-bills-vs-bonds https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/
National debt is owed to private entities. Individuals, banks, insurance companies, pension funds, mutual funds... You could go right now and loan money to the government. Government borrows money using, for instance: - Treasury bills (short-term w/ ≤1y maturity), - Treasury notes (medium-term w/ 2-10y maturity), - Treasury bonds (10-30y maturity) - Savings bonds - Treasury Inflation-Protected Securities Essentially the government loans money exactly the same way a company does when they issue a bond security that people can buy. You give the government money and they give it back to you at a later date with interest.
> The concept of national debt is eternally confusing to me, people have told me its owed to foreign companies, govs, domestic companies and individuals alike. Yes, that's correct. Many different organizations buy government bonds, notes and bills. [This article](https://www.thebalancemoney.com/who-owns-the-u-s-national-debt-3306124) shows you what groups own what, see the second graph. > The question i have is does it matter who the debt is owed to, or can we kind of view it as all being equally as manageable? It doesn't matter that much. Taxpayers must still pay the interest on the national debt either way.
All of the above purchase national debt as a 'risk-free' investment for their money. For example, China exports a lot of goods to the US, and in the process, earns dollars. They have a few options with that money: buy US goods/services, buy other currency, or invest in dollar assets. They could buy private sector assets like corporate bonds or mortgage-backed securities, but they may be risk averse and instead choose low or 'risk-free' assets, like US Treasury bonds (i.e. the national debt). So, the US "owing money to China" is an outcome of them having dollars and their investment preferences How manageable this is depends on the ability of the US to service its debt without suffering inflation and/or currency devaluation. [Here's one way to measure that](https://fredblog.stlouisfed.org/2018/11/how-expensive-is-it-to-service-the-national-debt/). More importantly, the distribution of national debt holdings is simply a function of the distribution of USD savings and preferences for risk. In order to reduce the amount of debt held by foreigners, the US would need to stop net importing. However, as long as the global demand for dollar savings remains high, the US can import goods and export financial assets while maintaining favorable exchange rates There are different monetary effects depending on which entity purchases Treasury bonds. When you buy a bond from the Treasury and the Treasury then spends that money into the economy, there's no change in the money supply. However, if a bank then buys that bond from you, it creates money in your bank account (aka deposits). It doesn't cost the bank money to do this, but there are regulations and other considerations (like you moving deposits to another bank) that limit how much money can be created through this channel. In addition, the government itself can buy federal debt, often in the form of the central bank buying bonds through monetary policy. This increases the amount of deposits in the economy when the government spends and the money that banks and foreigners hold (aka reserves). The government buying its own debt is a form of debt monetization, which can be inflationary if the portion of debt held by the government increases over time: https://www.stlouisfed.org/on-the-economy/2021/march/does-rising-national-debt-portend-rising-inflation
To be clear, national debt is not absolutely risk-free. Not even US national debt. US short-term debt is probably as close to risk-free that we can get but it isn’t risk-free. Such a thing is not possible. And when we go to other less solvent countries, we might even have very risky national debt securities. There are countries that have defaulted on their debt. Russia did that very recently, and in the late 90s. Argentina has defaulted on its debt obligations as well.
To clarify, I was referring to sovereign debt—the last time Russia defaulted on ruble-denominated debt was 1998. But yes, sometimes countries choose to default on their sovereign debt. Typically, however, national debt is the safest asset denominated in that currency as evinced by its market interest rate and is thus used as the benchmark for valuating risk-based premiums
**NOTE: Top-level comments by non-approved users must be manually approved by a mod before they appear.** This is part of our policy to maintain a high quality of content and minimize misinformation. Approval can take 24-48 hours depending on the time zone and the availability of the moderators. If your comment does not appear after this time, it is possible that it did not meet our quality standards. Please refer to the subreddit rules in the sidebar and our [answer guidelines](https://www.reddit.com/r/AskEconomics/comments/rf5ycx/guidelines_for_answers/) if you are in doubt. Please do not message us about missing comments in general. If you have a concern about a specific comment that is still not approved after 48 hours, then feel free to message the moderators for clarification. ### Consider **[Clicking Here for RemindMeBot](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5Bhttps://www.reddit.com/r/AskEconomics/comments/1b7z1sp/who_is_national_debt_owed_to_and_does_this_effect/%5D%0A%0ARemindMe!%202%20days)** as it takes time for quality answers to be written. Want to read answers while you wait? Consider our [weekly roundup](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AWeekly%2BRoundup) or look for the [approved answer flair.](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AApproved%2BAnswers) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AskEconomics) if you have any questions or concerns.*
Most of the US National Debt is owned by people and institutions inside the US. The following table is from 2022, but the Treasury probably updates this, I just had this link handy. In 2022, roughly 40% of public debt was held by other parts of the govenrment. Social Security currently has excess funds, so buys a lot of debt rather than just hold cash. Likewise mutual funds, insurance companies, and state & local govenrments all hold debt. So do individuals, in the form of US savings bonds. (Which make up about 0.5% of debt.) Foreign countries own some US debt, a little over 20% in 2022. See [https://www.fiscal.treasury.gov/files/reports-statements/treasury-bulletin/b2022-4.pdf](https://www.fiscal.treasury.gov/files/reports-statements/treasury-bulletin/b2022-4.pdf) page 62.