February 2012 U.S. Treasury Statement and Debt Overview

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The United States’ public debt stood at $15.223 trillion as of the end 2011, up from $14.025 trillion at the end of 2010 and more than double the level of a decade earlier. As can be seen from the charts above and below, nearly 89 percent of that debt was held by federal intra-governmental holding accounts (over half of which was comprised of the Federal Old-Age and Survivors Insurance Trust Fund, a.k.a., Social Security), and foreign and domestic investors of various types. The Federal Reserve held the remaining 10.8 percent. China, Japan and the OPEC countries were the three largest foreign holders of U.S. debt.

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The sea change in the distribution of U.S. public debt purchases among investor types that began in 1Q2011 continued in 4Q2011: Domestic private investors, and state and local governments remained on the sidelines. The Federal Reserve. with its purchases of $548 billion (55 percent of the total 2011 incremental change), and foreign and international investors bought up most of the new debt.
 

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The fiscal picture has continued to worsen since December. Indeed, the red ink deepened again in February 2012 as outlays of $335.1 billion and receipts of $103.4 billion added another $231.7 billion to the federal budget deficit. The total public debt outstanding grew to $15.489 trillion by the end of February.
 

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U.S. treasury purchases by foreign investors have been gradually rising, finally breaching the $5 trillion mark in January. All six of the largest holders were net buyers in January. China remained the largest foreign creditor with$1.160 trillion.
 

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The Federal Reserve has surpassed China in terms of U.S. Treasury holdings ($1.638 trillion). Interestingly, the Fed was a net seller of Treasuries in January.
 

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Evidence of somewhat stronger foreign interest in U.S. debt comes from the Treasury International Capital (TIC) accounting system. Three-month-average flows climbed to $42.4 billion in January. Essentially all of the inflows occurred in long-term public securities.
 

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We continue to monitor the contribution to GDP of each new dollar of total credit market debt. Although that contribution is still positive, it is well off the peak of 3Q2011 and appears to be returning to the 50-year trend of declining contributions.