The United States is the first economic power of the world, if we don’t count the European Union states as an entity. Last year, the total gross domestic product in the U.S. reached the historically high level of $17.5 trillion, which is $7 trillion more than China, which is the second country on the list.
It’s not all so great across the pond. In fact, the total national debt of the United States is $19.1 trillion, which is almost 109 percent of its annual GDP.
Fortunately, the majority of the United States’ debt is inside its borders, and some 67.5 percent of this huge amount is held by American physical and legal entities, such as state and local authorities, pension funds, joint funds and the Federal Reserve.
The other 32.5 percent is held by international entities, primarily foreign countries. The first among them is China, which owns 6.9 percent of the American debt, or almost $1.3 trillion. The second place debt-holder is Japan with $1.13 trillion, while far away in third place are the Cayman Islands, a small Caribbean country with a population of 60,000 and a popular tax paradise for American dollars. The Cayman Islands do not tax companies, which allows them to safely keep huge amounts of money far away from the state’s needy hands.
The most important of all these numbers is the amount of American debt held by Saudi Arabia. Based on records provided under the Freedom of Information Act, Bloomberg News finally obtained information that the Saudis are the owners of $ 116.8 billion in American debt, which puts them in 13th position among foreign U.S. creditors.
Since 1970, the U.S. Treasury Department has kept information about the debt of the Saudis classified, as it merged those numbers with the debts of other states that export petroleum, such as Iran and Venezuela. That practice ended Monday, with a move that was explained as a desire to provide the public eye with ‘’more detailed and transparent’’ information.
It is possible that Saudi Arabia owns an even greater part of the American debt than was disclosed Monday, CNN reports. The national bank of this petroleum exporter announced in March that it owns $587 billion in foreign reserves, and due to the fact that the majority of these reserves is in American bonds, the number of ‘’just’’ $116.8 billion worth of American debt in the property of the Saudis sounds too small.
This might be explained if Saudi Arabia holds a part of the American bonds through accounts in other countries, which is the practice of the Chinese.
Also, we should not forget the problems of the United Kingdom caused by the drop in oil prices; since 2014, the Saudis have spent almost $130 billion of their foreign reserves, a great part of which was certainly the American debt.
Why does all this matter? Keeping in mind the recent tensions between the United States and Saudi Arabia, especially the publication of 28 pages of the 9/11 Commission report on the 9/11 attacks that imply the involvement of members of the Saudi Arabian government in the attacks, the amount of the American debt held by this state could turn into a potential weapon.
In fact, if Saudis get rid of a great number of American bonds at once, it could cause a significant decrease in the bonds’ value and potentially destabilize the global financial system. Allegedly, the United States faced a similar threat in April, when Congress considered passing a law under which the families of 9/11 victims could sue foreign governments.
But, since that move could severely damage Saudi Arabia, it seems purely a threat, as CNN concluded.
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