Social Security Trust Fund Owns More US Treasury Securities Than China, Japan, Russia and Brazil Combined

The G20 conference in London has drawn our attention to the large amounts of U.S. Treasury securities owned by foreign countries. An intriguing fact which arose from those reports are the proportions of the Social Security Trust Fund’s U.S. Treasury holdings: $2.419 trillion, which is more than three times as much as that of the largest non-U.S. country, and more than China ($739.6 billion), Japan (634.8 billion), Russia (119.6 billion) and Brazil (133.5 billion) combined.

There is a reasonable explanation for this surprising fact, and it lies in the Trust Fund’s obligation to purchase US government paper. This has both advantages and disadvantages. On one hand, it props up the U.S. government, allowing it to spend the money elsewhere while getting itself deeper into debt. On the other hand, the Trust Fund is taking quite substantial risks with no diversification nor any visible recovery option in the immediate future, other than the “full faith and credit of the U.S. government”, which is based on the rapidly eroding belief that the U.S. government can print new money and raise taxes endlessly without losing its credibility.

It’s interesting to note that the Social Security Trust Fund is very open about its financial operations, publishing a complete log of its investment holdings and investment transactions on its website, organized in very accessible databases. A good dip into the depths of that information may certainly lift a few eyebrows. Several peculiarities caught the attention of Bruce Krasting, commentator at the Seeking Alpha blog, who reported on his findings here.

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