United States of America

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United States of America

Fireworks fly over the Jefferson Memorial on the Fourth of July. Wonder what the Founding Fathers would have made of the vast U.S. public debt today>

iStockphoto/Thinkstock

Creditor Name: American Public and State and Local Governments

Amount of U.S. Debt Owned (January 2013): $4.14 trillion

Percent of U.S. Public Debt (January 2013): 36 percent

Surprise! The country the United States is most indebted to is ... itself. Actually, the federal government borrows from a host of domestic investors, including private citizens, banks, corporations, local and state governments, and investment funds. Here is a breakdown of the top domestic investors in U.S. public debt as of September 2012, the latest figures available [source: Financial Management Service]:

  • Insurance companies: $263.8 billion
  • Depository institutions (commercial banks, credit unions): $337.4 billion
  • State and local governments: $492.2 billion
  • State and local government pension funds: $190.3 billion
  • Private pension funds: $615.6 billion
  • Mutual funds: $889.1 billion
  • U.S. savings bonds: $183.8 billion`
  • Other investors (Includes individuals, government-sponsored enterprises, brokers and dealers, trusts and estates, businesses, and more): $1.172 trillion

Why would individual Americans, businesses and local governments continue to loan money to the United States? Doesn't it seem risky to put money into an institution that's already $16 trillion in the hole? Believe it or not, investing in the government isn't a high-risk proposition. While the federal government is hemorrhaging thousands of dollars by the second in order to pay interest on its debts, the U.S. has a vested interested in not defaulting on its loans. America's credit rating would drop. and the booming market for U.S. debt could dry up. How would the U.S. government function without its international credit card? Let's hope we never find out.

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