The U.S. public debt held by foreigners is known as external public debt, accounting for a significant part of the U.S. debt and representing a potential outflow of economic power.
The U.S. public debt held by foreigners is known as external public debt. This debt represents money the U.S. government owes to entities outside of the country, which is distinct from debt owed within the nation (internal debt). While government debt held internally can be managed through means such as issuing more bonds or redistributing tax revenues, external debt signifies a loss of purchasing power since it involves money flowing out of the U.S. economy to pay foreign creditors.
Foreign investment in U.S. debt is substantial, accounting for about 15-20% of the total debt, and it is an essential component of how the country finances its operations. However, the long-term sustainability of this debt is a concern, especially considering projected increases in the cost of social insurance programs and the potential for this debt to grow to 144% of GDP by 2049. This could lead to worries about the government's ability to repay its external creditors, possibly resulting in higher interest rates.