US total cumulative debt per person
Encyclopedia
The overall financial position of the United States as of 2009 includes $50.7 trillion of debt owed by US households, businesses, and governments, representing more than 3.5 times the annual gross domestic product
of the United States
. As of the first quarter of 2010, domestic financial assets totaled $131 trillion and domestic financial liabilities $106 trillion. Tangible assets in 2008 (such as real estate
and equipment) for selected sectors totaled an additional $56.3 trillion.
The net worth
of the United States at the end of 2008 was $75 trillion or 5.2 times GDP.
is the sum of assets (both financial and tangible) minus liabilities for a given sector. Net worth is a valuable measure of creditworthiness and financial health since the calculation includes both financial obligations and the capacity to service those obligations.
The net worth of the United States and its economic sectors has remained relatively consistent over time. The total net worth of the United States remained between 4.5 and 6 times GDP from 1960 until the 2000s, when it rose as high as 6.64 times GDP in 2006, principally due to an increase in the net worth of US households in the midst of the United States housing bubble
. The net worth of the United States sharply declined to 5.2 times GDP by the end of 2008 due to declines in the values of US corporate equities and real estate in the wake of the subprime mortgage crisis
and the global financial crisis. Between 2008 and 2009, the net worth of US households had recovered from a low of 3.55 times GDP to 3.75 times GDP, while nonfinancial business fell from 1.37 times GDP to 1.22 times GDP.
The net worth of American households and non-profits constitutes three-quarters of total United States net worth - in 2008, 355% of GDP. Since 1960, US households have consistently held this position, followed by nonfinancial business (137% of GDP in 2008) and state and local governments (50% of GDP in 2008). The financial sector has hovered around zero net worth since 1960, reflecting its leverage
, while the federal government has fluctuated from a net worth of -7% of GDP in 1946, a high of 6% of GDP in 1974, to -32% of GDP in 2008.
The Federal Reserve issues routine reports on the flows and levels of debt in the United States
. As of the first quarter of 2010, the Federal Reserve estimated that total public and private debt owed by American households, businesses, and government totaled $50 trillion, or roughly $175,000 per American and 3.5 times GDP.
Interest
payments on debt by US households, businesses, governments, and nonprofits totaled $3.29 trillion in 2008. The financial sector paid an additional $178.6 billion in interest on deposits
.
In 1946, the total US debt-to-GDP ratio was 150%, with two-thirds of that held by the federal government. Since 1946, the federal government's debt-to-GDP ratio has since fallen by nearly half, to 54.8% of GDP in 2009. The debt-to-GDP ratio of the financial sector, by contrast, has increased from 1.35% in 1946 to 109.5% of GDP in 2009. The ratio for households has risen nearly as much, from 15.84% of GDP to 95.4% of GDP.
On April 2011, International Monetary Fund
says, "The US lacks a "credibility strategy" to stabilise its mounting public debt, posing a small but significant risk of a new global economic crisis.
Most debt owed by the US financial sector is in the form of federal government sponsored enterprise (GSE) issues and agency-backed securities. This refers to securities guaranteed and mediated by federal agencies and GSEs such as Ginnie Mae, Fannie Mae, and Freddie Mac, among others. This group also includes the mortgage pools that are used as collateral in collateralized mortgage obligations. The proportion of financial sector debt owed in the form of GSE and federally related mortgage pools has remained relatively constant - $863 million or 47% of total financial sector debt in 1946 was in such instruments; this has increased to 57% of financial sector debt in 2009, although this now represents over $8 trillion.
Bonds represent the next largest part of financial sector debt. In 1946, bonds represented 6% of financial sector debt, but by 1953 this proportion had risen to 24%. This remained relatively constant until the late 1970s; bonds fell to 14% of financial sector debt in 1981. This coincided with Federal Reserve chairman
Paul Volcker
's strategy of combating stagflation
by raising the federal funds rate
; as a result the prime rate
peaked at 21.5%, making financing through credit markets prohibitively expensive. Bonds recovered in the 1980s, representing approximately 25% of financial sector debt throughout the 1990s; however, between 2000 and 2009, bonds issued by the financial sector had increased to 37% of financial sector debt, or $5.8 trillion.
Bonds and GSE/federal agency-backed issues represent all but 12% of financial sector debt in 2009.
State and local governments have significant financial assets, totaling $2.7 trillion in 2009. In 2009, these included $1.3 trillion in credit market debt (that is, debt owed by other sectors to state and local governments). These figures do not include state and local retirement funds. State and local retirement funds held $2.7 trillion in assets at the end of 2009.
The federal government held $1.4 trillion in assets at the end of 2009. This is more than double the assets held by the federal government in 2007 ($686 billion), mainly due to the acquisition of corporate equities
, credit market debt, and cash. The federal government held $223 billion in corporate equity at the beginning of 2009; this had fallen to $67.4 billion at the end of that year.
These figures do not include federal government retirement funds. Federal government retirement funds held $1.3 trillion in assets at the end of 2009.
These figures also do not include debt that the federal government owes to federal funds and agencies such as the Social Security Trust Fund
. It also does not include "unfunded liabilities" to entitlement programs such as Social Security
and Medicare
either as debt or accounting liabilities.
Figures of total debt typically do not include other financial obligations such as derivative
s. Partly this is due to the complexities of quantifying derivatives - the United States Comptroller of the Currency
reports derivative contracts in terms of notional value, net current credit exposure, and fair value
, among others.
The number commonly used by the media
is notional value, which is a base value used to determine the size of the cash flows exchanged in the contract. Fair value (or market value
) is the value of the contract either on the open market or as it is appraised by accountants. Fair value can be positive or negative depending on the side of the contract the party is on. Credit exposure is defined as the net loss
which holders of derivatives would suffer if their counterparties
in those derivatives contracts defaulted
.
The notional value of derivative contracts held by US financial institutions is $216.5 trillion, or more than 15 times US GDP. However, care should be taken with this figure as it is not a reflection of the credit risk or the market value of derivatives; the notional value rarely changes hands, and as a result quotations of the notional value of derivative contracts significantly overstate their magnitude in the financial system.
The fair value of US-held derivatives contracts in the first quarter of 2010 was $4,002 billion (28.1% of GDP) for positions with positive values (known as "derivatives receivables"), and $3,886 for positions with negative values (27.3% of GDP). Interest rate derivatives form by far the largest part of US derivative contracts by all measures, accounting for $3,147 billion or 79% of derivatives receivables.
The measure preferred by the Office of the Comptroller is net current credit exposure (NCCE), which measures the risk to banks and the financial system in derivatives contracts. The net current credit exposure (NCCE) of American financial institutions to derivatives in the first quarter of 2010 to $359 billion or 2.5% of GDP, down from $800 billion at the end of 2008 in the wake of the global financial crisis, when it stood at 5.5% of GDP. The difference between the market value of US derivatives and the credit exposure to the financial system is due to netting
- financial institutions tend to have many positions with their counterparties that have positive and negative values, resulting in a much smaller exposure than the sum of the market values of their derivative positions. Netting reduces the credit exposure of the US financial system to derivatives by more than 90%, as compared to 50.6% at the beginning of 1998.
Derivatives contracts are overwhelmingly held by large financial institutions. The five largest US banks hold 97% of derivatives by notional value; the top 25 hold nearly 100%. Banks currently hold collateral
against their derivative exposures amounting to 67% of their net current credit exposure.
Foreigners own more than $15.6 trillion of US financial assets, or 107% of GDP. Americans own $11.5 trillion of foreign assets, approximately 78.9% of US GDP.
Foreign holdings of US assets are concentrated in debt. Americans own more foreign equity and foreign direct investment
than foreigners own in the United States, but foreigners hold nearly four times as much US debt as Americans hold in foreign debt.
15.2% of all US debt is owed to foreigners. Of the $7.9 trillion Americans owe to foreigners, $3.9 trillion is owed by the federal government. 48% of US treasury securities are held by foreigners. Foreigners hold $1.28 trillion in agency- and government sponsored enterprise-backed securities, and another $2.33 trillion in US corporate bond
s.
Foreigners hold 24% of domestic corporate debt and 17% of domestic corporate equity.
General:
International:
Derivatives
, the great unknown with its respect to impact on the total US cumulative debt
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. As of the first quarter of 2010, domestic financial assets totaled $131 trillion and domestic financial liabilities $106 trillion. Tangible assets in 2008 (such as real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
and equipment) for selected sectors totaled an additional $56.3 trillion.
The net worth
Net worth
In business, net worth is the total assets minus total outside liabilities of an individual or a company. For a company, this is called shareholders' preference and may be referred to as book value. Net worth is stated as at a particular year in time...
of the United States at the end of 2008 was $75 trillion or 5.2 times GDP.
Net worth
Net worthNet worth
In business, net worth is the total assets minus total outside liabilities of an individual or a company. For a company, this is called shareholders' preference and may be referred to as book value. Net worth is stated as at a particular year in time...
is the sum of assets (both financial and tangible) minus liabilities for a given sector. Net worth is a valuable measure of creditworthiness and financial health since the calculation includes both financial obligations and the capacity to service those obligations.
The net worth of the United States and its economic sectors has remained relatively consistent over time. The total net worth of the United States remained between 4.5 and 6 times GDP from 1960 until the 2000s, when it rose as high as 6.64 times GDP in 2006, principally due to an increase in the net worth of US households in the midst of the United States housing bubble
United States housing bubble
The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and may not yet have hit bottom as of 2011. On December 30, 2008 the...
. The net worth of the United States sharply declined to 5.2 times GDP by the end of 2008 due to declines in the values of US corporate equities and real estate in the wake of the subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
and the global financial crisis. Between 2008 and 2009, the net worth of US households had recovered from a low of 3.55 times GDP to 3.75 times GDP, while nonfinancial business fell from 1.37 times GDP to 1.22 times GDP.
The net worth of American households and non-profits constitutes three-quarters of total United States net worth - in 2008, 355% of GDP. Since 1960, US households have consistently held this position, followed by nonfinancial business (137% of GDP in 2008) and state and local governments (50% of GDP in 2008). The financial sector has hovered around zero net worth since 1960, reflecting its leverage
Leverage (finance)
In finance, leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. Important examples are:* A public corporation may leverage its equity by borrowing money...
, while the federal government has fluctuated from a net worth of -7% of GDP in 1946, a high of 6% of GDP in 1974, to -32% of GDP in 2008.
Debt
| Bond Bond (finance) In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity... s | Loan Loan A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.... s | Mortgages Mortgage loan A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan... | Other | Total | | % GDP | |
|---|---|---|---|---|---|---|
| Financial sector | 5612.9 | 807.7 | 167.4 | 8375.3 | 14963.3 | 104.9% |
| Households and non-profits | 266.1 | 335.1 | 10480.1 | 2421.8 | 13503.1 | 94.7% |
| Nonfinancial business | 4446.6 | 2835.7 | 3552.6 | 74.6 | 10909.6 | 76.5% |
| State and local | 2369.8 | 13.7 | 2383.5 | 16.7% | ||
| Federal | 8283.2 | 8283.2 | 58.1% | |||
| Total | 20976.6 | 3992.2 | 14200.1 | 10871.7 | 50042.7 | 351.0% |
GSE Government-sponsored enterprise A government-sponsored enterprise is a financial services corporation created by the United States Congress. Their function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent... issues and GSE/Agency-backed mortgage pool securities plus commercial paper Commercial paper In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of 1 to 270 days. Commercial Paper is a money-market security issued by large banks and corporations to get money to meet short term debt obligations , and is only backed by an issuing bank or... Consumer credit Commercial paper Commercial paper In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of 1 to 270 days. Commercial Paper is a money-market security issued by large banks and corporations to get money to meet short term debt obligations , and is only backed by an issuing bank or... |
||||||
The Federal Reserve issues routine reports on the flows and levels of debt in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. As of the first quarter of 2010, the Federal Reserve estimated that total public and private debt owed by American households, businesses, and government totaled $50 trillion, or roughly $175,000 per American and 3.5 times GDP.
Interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
payments on debt by US households, businesses, governments, and nonprofits totaled $3.29 trillion in 2008. The financial sector paid an additional $178.6 billion in interest on deposits
Deposit account
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
.
In 1946, the total US debt-to-GDP ratio was 150%, with two-thirds of that held by the federal government. Since 1946, the federal government's debt-to-GDP ratio has since fallen by nearly half, to 54.8% of GDP in 2009. The debt-to-GDP ratio of the financial sector, by contrast, has increased from 1.35% in 1946 to 109.5% of GDP in 2009. The ratio for households has risen nearly as much, from 15.84% of GDP to 95.4% of GDP.
On April 2011, International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
says, "The US lacks a "credibility strategy" to stabilise its mounting public debt, posing a small but significant risk of a new global economic crisis.
Financial sector
In 1946, the US financial sector owed $3 billion of debt, or 1.35% of GDP. By 2009 this had increased to $15.6 trillion, or 109.5% of GDP.Most debt owed by the US financial sector is in the form of federal government sponsored enterprise (GSE) issues and agency-backed securities. This refers to securities guaranteed and mediated by federal agencies and GSEs such as Ginnie Mae, Fannie Mae, and Freddie Mac, among others. This group also includes the mortgage pools that are used as collateral in collateralized mortgage obligations. The proportion of financial sector debt owed in the form of GSE and federally related mortgage pools has remained relatively constant - $863 million or 47% of total financial sector debt in 1946 was in such instruments; this has increased to 57% of financial sector debt in 2009, although this now represents over $8 trillion.
Bonds represent the next largest part of financial sector debt. In 1946, bonds represented 6% of financial sector debt, but by 1953 this proportion had risen to 24%. This remained relatively constant until the late 1970s; bonds fell to 14% of financial sector debt in 1981. This coincided with Federal Reserve chairman
Chairman of the Federal Reserve
The Chairman of the Board of Governors of the Federal Reserve System is the head of the central banking system of the United States. Known colloquially as "Chairman of the Fed," or in market circles "Fed Chairman" or "Fed Chief"...
Paul Volcker
Paul Volcker
Paul Adolph Volcker, Jr. is an American economist. He was the Chairman of the Federal Reserve under United States Presidents Jimmy Carter and Ronald Reagan from August 1979 to August 1987. He is widely credited with ending the high levels of inflation seen in the United States in the 1970s and...
's strategy of combating stagflation
Stagflation
In economics, stagflation is a situation in which the inflation rate is high and the economic growth rate slows down and unemployment remains steadily high...
by raising the federal funds rate
Federal funds rate
In the United States, the federal funds rate is the interest rate at which depository institutions actively trade balances held at the Federal Reserve, called federal funds, with each other, usually overnight, on an uncollateralized basis. Institutions with surplus balances in their accounts lend...
; as a result the prime rate
Prime rate
Prime rate or prime lending rate is a term applied in many countries to a reference interest rate used by banks. The term originally indicated the rate of interest at which banks lent to favored customers, i.e., those with high credibility, though this is no longer always the case...
peaked at 21.5%, making financing through credit markets prohibitively expensive. Bonds recovered in the 1980s, representing approximately 25% of financial sector debt throughout the 1990s; however, between 2000 and 2009, bonds issued by the financial sector had increased to 37% of financial sector debt, or $5.8 trillion.
Bonds and GSE/federal agency-backed issues represent all but 12% of financial sector debt in 2009.
Households and non-profits
In 1946, US households and non-profits owed $35 billion of debt or 15.8% of GDP. By 2009 this figure had risen to $13.6 trillion or 95.4% of GDP. Home mortgage debt in 1946 represented 66.5% of household debt; consumer credit represented another 24%. By 2009, home mortgage debt had risen to 76% of household debt and consumer credit had fallen to 18.22%.Nonfinancial business
In 1946, US nonfinancial businesses owed $63.9 billion of debt or 28.8% of GDP. By 2009 this figure had risen to $10.9 trillion or 76.4% of GDP.State and local governments
In 1946, US state and local governments owed $12.7 billion of debt or 5.71% of GDP. By 2009 this figure had risen to $2.4 trillion or 16.5% of GDP.State and local governments have significant financial assets, totaling $2.7 trillion in 2009. In 2009, these included $1.3 trillion in credit market debt (that is, debt owed by other sectors to state and local governments). These figures do not include state and local retirement funds. State and local retirement funds held $2.7 trillion in assets at the end of 2009.
Federal government
In 1946, the federal government owed $251 billion of debt or 102.7% of GDP. By 2009 this figure had risen to $7.8 trillion, but the federal government's debt-to-GDP ratio had fallen to 54.75%.The federal government held $1.4 trillion in assets at the end of 2009. This is more than double the assets held by the federal government in 2007 ($686 billion), mainly due to the acquisition of corporate equities
Equity (finance)
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
, credit market debt, and cash. The federal government held $223 billion in corporate equity at the beginning of 2009; this had fallen to $67.4 billion at the end of that year.
These figures do not include federal government retirement funds. Federal government retirement funds held $1.3 trillion in assets at the end of 2009.
These figures also do not include debt that the federal government owes to federal funds and agencies such as the Social Security Trust Fund
Social Security Trust Fund
In the United States, the Social Security Trust Fund is a fund operated by the Social Security Administration into which are paid contributions from workers and employers under the Social Security system and out of which benefit payments to retirees, survivors, and the disabled, and general...
. It also does not include "unfunded liabilities" to entitlement programs such as Social Security
Social Security (United States)
In the United States, Social Security refers to the federal Old-Age, Survivors, and Disability Insurance program.The original Social Security Act and the current version of the Act, as amended encompass several social welfare and social insurance programs...
and Medicare
Medicare (United States)
Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other...
either as debt or accounting liabilities.
Derivatives
| | Value | | % GDP | |||
|---|---|---|---|---|
| Notional value | 216,452 |
1,482% |
||
| Market value | | Receivable | | Payable | ||
| Interest rate Interest rate derivative An interest rate derivative is a derivative where the underlying asset is the right to pay or receive a notional amount of money at a given interest rate... |
3,147 | 21.5% | -3,052 | -20.9% |
| Foreign exchange Foreign exchange derivative A Foreign exchange derivative is a financial derivative where the underlying is a particular currency and/or its exchange rate. These instruments are used either for currency speculation and arbitrage or for hedging foreign exchange risk. For detail see:... |
347 | 2.4% | -345 | -2.4% |
| Equity Equity derivative In finance, an equity derivative is a class of derivatives whose value is at least partly derived from one or more underlying equity securities. Options and futures are by far the most common equity derivatives, however there are many other types of equity derivatives that are actively... |
77 | 0.5% | -78 | -0.5% |
| Commodity | 41 | 0.3% | -40 | -0.3% |
| Credit Credit derivative In finance, a credit derivative is a securitized derivative whose value is derived from the credit risk on an underlying bond, loan or any other financial asset. In this way, the credit risk is on an entity other than the counterparties to the transaction itself... |
390 | 2.7% | -370 | -2.5% |
| Total market value | 4,002 | 27.4% | -3,886 | -26.6% |
| Credit exposure | 359 |
2.5% |
||
Figures of total debt typically do not include other financial obligations such as derivative
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...
s. Partly this is due to the complexities of quantifying derivatives - the United States Comptroller of the Currency
Office of the Comptroller of the Currency
The Office of the Comptroller of the Currency is a US federal agency established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all national banks and the federal branches and agencies of foreign banks in the United States...
reports derivative contracts in terms of notional value, net current credit exposure, and fair value
Fair value
Fair value, also called fair price , is a concept used in accounting and economics, defined as a rational and unbiased estimate of the potential market price of a good, service, or asset, taking into account such objective factors as:* acquisition/production/distribution costs, replacement costs,...
, among others.
The number commonly used by the media
Mass media
Mass media refers collectively to all media technologies which are intended to reach a large audience via mass communication. Broadcast media transmit their information electronically and comprise of television, film and radio, movies, CDs, DVDs and some other gadgets like cameras or video consoles...
is notional value, which is a base value used to determine the size of the cash flows exchanged in the contract. Fair value (or market value
Market value
Market value is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with open market value, fair value or fair market value, although these terms have distinct definitions in different standards, and may differ in some...
) is the value of the contract either on the open market or as it is appraised by accountants. Fair value can be positive or negative depending on the side of the contract the party is on. Credit exposure is defined as the net loss
Income statement
Income statement is a company's financial statement that indicates how the revenue Income statement (also referred to as profit and loss statement (P&L), statement of financial performance, earnings statement, operating statement or statement of operations) is a company's financial statement that...
which holders of derivatives would suffer if their counterparties
Counterparty
A counterparty is a legal and financial term. It means a party to a contract. A counterparty is usually the entity with whom one negotiates on a given agreement, and the term can refer to either party or both, depending on context....
in those derivatives contracts defaulted
Default (finance)
In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant of the debt contract. A default is the failure to pay back a loan. Default may occur if the debtor is either...
.
The notional value of derivative contracts held by US financial institutions is $216.5 trillion, or more than 15 times US GDP. However, care should be taken with this figure as it is not a reflection of the credit risk or the market value of derivatives; the notional value rarely changes hands, and as a result quotations of the notional value of derivative contracts significantly overstate their magnitude in the financial system.
The fair value of US-held derivatives contracts in the first quarter of 2010 was $4,002 billion (28.1% of GDP) for positions with positive values (known as "derivatives receivables"), and $3,886 for positions with negative values (27.3% of GDP). Interest rate derivatives form by far the largest part of US derivative contracts by all measures, accounting for $3,147 billion or 79% of derivatives receivables.
The measure preferred by the Office of the Comptroller is net current credit exposure (NCCE), which measures the risk to banks and the financial system in derivatives contracts. The net current credit exposure (NCCE) of American financial institutions to derivatives in the first quarter of 2010 to $359 billion or 2.5% of GDP, down from $800 billion at the end of 2008 in the wake of the global financial crisis, when it stood at 5.5% of GDP. The difference between the market value of US derivatives and the credit exposure to the financial system is due to netting
Netting
In general, netting means to allow a positive value and a negative value to set-off and partially or entirely cancel each other out.In the context of credit risk, there are at least three specific types of netting:...
- financial institutions tend to have many positions with their counterparties that have positive and negative values, resulting in a much smaller exposure than the sum of the market values of their derivative positions. Netting reduces the credit exposure of the US financial system to derivatives by more than 90%, as compared to 50.6% at the beginning of 1998.
Derivatives contracts are overwhelmingly held by large financial institutions. The five largest US banks hold 97% of derivatives by notional value; the top 25 hold nearly 100%. Banks currently hold collateral
Collateral (finance)
In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan.The collateral serves as protection for a lender against a borrower's default - that is, any borrower failing to pay the principal and interest under the terms of a loan obligation...
against their derivative exposures amounting to 67% of their net current credit exposure.
Foreign debt, assets, and liabilities
| Foreign-owned US assets | US-owned foreign assets |
|
|---|---|---|
| Debt Debt A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a... |
7933.9 | 2084.2 |
| Equity Equity (finance) In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists... |
2774.4 | 4157.3 |
| FDI Foreign direct investment Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in... |
2030.9 | 3990.2 |
| Other | 2086.1 | 1283.7 |
| Total | 15625.3 | 11515.4 |
| Includes corporate equity Equity (finance) In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists... plus mutual fund shares Mutual fund A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :... |
||
Foreigners own more than $15.6 trillion of US financial assets, or 107% of GDP. Americans own $11.5 trillion of foreign assets, approximately 78.9% of US GDP.
Foreign holdings of US assets are concentrated in debt. Americans own more foreign equity and foreign direct investment
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
than foreigners own in the United States, but foreigners hold nearly four times as much US debt as Americans hold in foreign debt.
15.2% of all US debt is owed to foreigners. Of the $7.9 trillion Americans owe to foreigners, $3.9 trillion is owed by the federal government. 48% of US treasury securities are held by foreigners. Foreigners hold $1.28 trillion in agency- and government sponsored enterprise-backed securities, and another $2.33 trillion in US corporate bond
Corporate bond
A corporate bond is a bond issued by a corporation. It is a bond that a corporation issues to raise money in order to expand its business. The term is usually applied to longer-term debt instruments, generally with a maturity date falling at least a year after their issue date...
s.
Foreigners hold 24% of domestic corporate debt and 17% of domestic corporate equity.
See also
- Economy of the United StatesEconomy of the United StatesThe economy of the United States is the world's largest national economy. Its nominal GDP was estimated to be nearly $14.5 trillion in 2010, approximately a quarter of nominal global GDP. The European Union has a larger collective economy, but is not a single nation...
- discusses U.S. national debt and economic context - FRED (Federal Reserve Economic Data)
- History of the U.S. public debtHistory of the U.S. public debtAt the end of September 2009, the overall U.S. public debt was approaching twelve trillion dollars and passed that benchmark approximately 3 weeks later. The first yearly reported value was $75,463,476.52 on January 1, 1791. The debt was briefly reduced to zero on January 8, 1835.-Prior fiscal...
- a table containing historical debt data - National debt by U.S. presidential termsNational debt by U.S. presidential termsIn the United States, national debt is money borrowed by the federal government of the United States. Debt burden is usually measured as a ratio of public debt to gross domestic product; the U.S. debt/GDP ratio reached a maximum during World War II near the beginning of President Harry Truman's...
- Proposed bailout of U.S. financial system (2008)
- United States federal budgetUnited States federal budgetThe Budget of the United States Government is the President's proposal to the U.S. Congress which recommends funding levels for the next fiscal year, beginning October 1. Congressional decisions are governed by rules and legislation regarding the federal budget process...
- analysis of federal budget spending and long-term risks - Starve the beastStarve the beast"Starving the beast" is a fiscal-political strategy of some American conservatives to cut taxes in order to deprive the government of revenue in a deliberate effort to create a fiscal budget crisis that would then force the federal government to reduce spending...
(policy)
General:
- Balance of paymentsBalance of paymentsBalance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world.These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers...
- Government budget deficit
- Public debt - a general discussion of the topic
International:
- Global debt
- List of countries by current account balance
- List of public debt - list of the public debt for many nations, as a percentage of the GDP
External links
United States- U.S. Congressional Budget Office
- Office of Management and Budget
- Death and Taxes: 2009 A graphical representation of the 2009 United States federal discretionary budget, including the public debt.
- United States - Deficit versus Savings rate from 1981 Historical graphical representation of the 12 month rolling Fiscal deficit versus the Savings rate of the United States. (since 1981)
Derivatives
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...
, the great unknown with its respect to impact on the total US cumulative debt
- 190K Derivative burden per US person
- US Cumulative Debt per person mentioned in a video
- Video stating IMF, OECD & World Bank don't track Cumulative Debt per Person
- German Households Owe More Than Greece’s Do, a non-US case of the Cumulate Debt Per Person reference frame.