America’s $39 trillion debt problem has an unlikely new backstop: Tether

The United States owes more than $39 trillion in gross federal debt. But here’s where it gets interesting: the composition of who’s actually lending America all that money is shifting in ways that should make both traditional finance and crypto investors pay very close attention. Foreign investors hold approximately $9.1 to $9.5 trillion in US Treasuries, representing roughly 30% to 32% of the publicly held debt. That sounds like a lot. It is a lot. But it’s a dramatic decline from where things stood just over a decade ago, when foreign holders owned nearly 49% of publicly held US debt back in 2011-2012. The great rotation away from Treasuries Japan remains the largest foreign holder at roughly $1.18 trillion, followed by the UK at approximately $866 billion and China at around $683 billion. China’s position is particularly notable because it has been steadily reducing its exposure for years, a trend that accelerates every time US-China tensions flare up. The current account deficit sits close to 4% of GDP. Someone has to fund that gap. And increasingly, the “someone” isn’t a central bank in Tokyo or Beijing. It’s domestic mutual funds, the Federal Reserve’s residual holdings, and,...