$10,000,000,000,000

[superluser]

But if that is the case, why do they continue to invest in the US deficit? If it's continually rising, and it is as of this post, 10.23 trillion, why would they continue their bad investment instead of just cutting their losses? I suppose an extremely unrealistic gauge of the situation could lead to continued bad investment, or a possibly realistic hope that the U.S. will shape up, or perhaps for some other reason which could have to do with the United States handling on foreign policy. (maybe China wants us to continue the war in Iraq, but I have no idea if that's true or not.) There has to be some reason they continue investing, even if it's not a logical reason.

Remember--the largest holder of US debt is the US government.  5 trillion dollars of the debt is fictional--it doesn't really exist.

Remember the Simpsons episode where Homer went to find his emergency donut and finds a note ``Dear Homer, I. O. U. one emergency donut.  Signed, Homer.''?  Most of the governmental debt is like that.  It's the government lending money to itself to set aside a trust fund for future obligations.  We're stuffed when those obligations come due, and at that point, that $5T willl become very real, and will probably be bought by China (or paid off by printing more money), but for now it's just a debt on paper.

Of the debt that is held by foreigners, the majority is held by the Japanese, who really don't want to see us fail, so they won't call it in. 

China holds $502B in US debt.  Similar to Japan, China has a huge economic incentive not to see us fail, but I'll grant that that's not enough of an incentive not to call out debts in.  What is an incentive is the fact that we will most likely eventually (in decades, not years) pay the debt off, and in the interim, we are paying $237B in interest to various people and countries for that debt.  They are making a few billion dollars per year off of the US debt, and they don't want to see it go away.

Finally, as I stated, if they called our debts in and the US looked like it was unable to pay, the US would simply repudiate its debt.  Every country in the world knows this, and if they were in the same situation, every country would do the same.  This provides the supreme economic reason.  If they leave our debts alone, they will make a little money on the interest, and never see the principal for many years.  If they call it in, they will lose both the principal and the interest, and the world will suffer a gigantic economic meltdown, ruining economies all over the world.

Which would you choose?

This is a very good example of such a stunt that got Canada very upset with the US, and I'm sure I can dig up plenty more examples of horrid misconduct by the US government. Repudiating the debt might just trigger an explosion of the worst kind.

That stunt got a lot of Americans angry at the administration (not me--I was already at the maximum anger level before I found out that they were doing this), but I don't see what it has to do with the topic at hand.  No explosion will occur, because these countries already know how a situation like this would play out, and there's nothing to be surprised about.

Oh, and also:

But if that is the case, why do they continue to invest in the US deficit?

(emp added)

Not deficit.  Debt.  The deficit is the difference between what the government spends this year and what the government has collected this year.  The debt is sort of like an accumulation of past deficits, plus unpaid interest on the debt and money the government owes to itself.

[Alondro]

I'd just like to note that my predictions of the stock market fall and the bailout were spot on!   

Now all that's left is the little bump up in stability this winter and spring, and then the total world economic crash next June/July.

After which the world domination plan goes into effect.   

[Brunhidden]

my concern now- assume there's two or three countries that manage to survive the economic crash somewhat unscathed. what do they do? they are in a perfect position to buy up everything they care for ha-pennys on the dollar and could supplant pretty much every other first world country in much the same way rome or imperial brittan took control


either that or we all go back to an agrarian society....

[Reese Tora]

I honestly have to wonder who the government keeps borrowing from...

Mainly from itself, strangely.

The majority of Treasury Securities are owned by the US Government, I believe as a method of preparing to fund Social Security.

X dollars in Social Security payments come in each year, Y dollars get paid out, X-Y dollars are left over and used to buy bonds from the US government.  (in other words, the government borrows everything that's left over each year)

The intrest from those bonds and principle from matured bonds is paid back to social security from the general fund each year, along with the next year's SS taxes.  X dollars comes in, Y dollars is paid out, leftovers are used to buy more bonds.

[Valynth]

Then enters the continuous problem of X<Y.

The only way to make it work is to either increase X (through essentially taxes), or decrease Y (through lower or more difficult to get payments) to get either X=Y or X>Y.

Otherwise the Social Security System will collapse upon itself, as we're now finding out. When this system was first established, getting to 62 years old was a feat unto itself, but now that it's become a common thing (I think the average life span is 72 years now), more and more people are drawing on it, increasing Y far faster than new workers can generate increases in X at a constant tax rate.