I remain baffled by the combination of stuff I agree with and stuff I think is crazy. First, the question "who owns the US debt" and "who was buying US debt since 2008" are different questions with different factual answers.
Much of the Federal debt is, as you say, just accounting between government programs, money owed by one part of the government to another. (I think of Social Security this way, but that does tend to start arguments with people who think this is a separate fund and not just a government pension scheme.) But that has been true for ages. This is not hazardous debt, and could be cancelled harmlessly except for the accounting issues. It has no macro relevance.
The Federal Reserve has a congressional mandate to create stable 2% inflation, and the method by which they do that is to print money and buy bonds through repo markets when inflation is low, and the opposite when inflation is high. Bonds that move on and off the fed balance sheet for this reason are simply the operation of monetary policy, in pursuit of pretty modest targets.
That leaves about half the debt, most of which is held by foreign governments and investors - banks, pension funds, etc. They hold US debt because it is super-safe debt denominated in the global reserve currency. If they didn't like what was happening, they could sell, and if they did, the Fed couldn't do much about it, without risking either rampant inflation, exchange rate collapse, or both. But they are not selling, and so the US faces no problem at present. We'll see what happens with a president who wants to cut taxes and increase spending, but my bet is that the US $ is very robust, because it is backed by the US taxation power.
-Jester
Afterthought: If you're getting your truth from cranks like IWB, no wonder it looks grim...
Much of the Federal debt is, as you say, just accounting between government programs, money owed by one part of the government to another. (I think of Social Security this way, but that does tend to start arguments with people who think this is a separate fund and not just a government pension scheme.) But that has been true for ages. This is not hazardous debt, and could be cancelled harmlessly except for the accounting issues. It has no macro relevance.
The Federal Reserve has a congressional mandate to create stable 2% inflation, and the method by which they do that is to print money and buy bonds through repo markets when inflation is low, and the opposite when inflation is high. Bonds that move on and off the fed balance sheet for this reason are simply the operation of monetary policy, in pursuit of pretty modest targets.
That leaves about half the debt, most of which is held by foreign governments and investors - banks, pension funds, etc. They hold US debt because it is super-safe debt denominated in the global reserve currency. If they didn't like what was happening, they could sell, and if they did, the Fed couldn't do much about it, without risking either rampant inflation, exchange rate collapse, or both. But they are not selling, and so the US faces no problem at present. We'll see what happens with a president who wants to cut taxes and increase spending, but my bet is that the US $ is very robust, because it is backed by the US taxation power.
-Jester
Afterthought: If you're getting your truth from cranks like IWB, no wonder it looks grim...