Government Debt: Who Collects The Interest? The Mystery When Explained Still Leaves You Concluding That This Is A Smokescreen.
When you realize that every country is in debt , a natural question follows: who are they all in debt to? The answer exposes a complex web of central banks, private lenders, supranational institutions, and shadow finance structures. The following is a typical breakdown analyzing to whom governments are in debt. Central Banks and Bondholders (Domestic and Foreign) Most governments finance their debt by issuing sovereign bonds . These bonds are bought by: Domestic banks and pension funds Foreign governments and investors Insurance companies Investment firms and hedge funds Central banks (including their own) For example: The U.S. is in debt to countries like Japan and China , but also to its own Federal Reserve and domestic institutions. Japan’s government debt is over 200% of GDP—but most of it is held domestically , by Japanese banks and institutions. In this sense, countries are often in debt to themselves , or to other governm...