The United States borrows money from various sources, both domestic and foreign. Here are some of the major entities from which the U.S. government borrows money:
Individuals and Institutions: The government issues Treasury securities, including Treasury bills, notes, and bonds, which are bought by individuals, banks, insurance companies, mutual funds, and other financial institutions. These securities are considered safe investments, and they form the bulk of the government's borrowing.
Foreign Governments: Foreign governments, particularly countries with significant foreign exchange reserves, such as China and Japan, hold a substantial amount of U.S. debt. These countries purchase Treasury securities as part of their investment strategies and to manage their currency exchange rates.
Federal Reserve: The Federal Reserve, the central bank of the United States, plays a significant role in the government's borrowing. Through a process called open market operations, the Federal Reserve buys Treasury securities from the market, injecting money into the economy and effectively lending to the government.
Social Security Trust Fund and other Government Trust Funds: The U.S. government borrows from trust funds such as the Social Security Trust Fund to finance current expenditures while issuing IOUs to these funds. These IOUs represent the government's debt obligation to the trust funds and are considered part of the overall national debt.
It's important to note that the U.S. government debt is traded globally, and ownership of Treasury securities can change hands multiple times. The exact breakdown of who holds U.S. debt can vary over time and depends on various economic and geopolitical factors.