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Morning Brief: Percentage of U.S. Debt Held By Foreigners Rose for Sixth Straight Month

by Jonathan Masters
March 16, 2012

Japanese 10,000 yen notes, $100 notes and Chinese 100 yuan notes (Truth Leem/Couresty Reuters). Japanese 10,000 yen notes, $100 notes and Chinese 100 yuan notes (Truth Leem/Couresty Reuters).

For the sixth consecutive month, the percentage of U.S. debt held by foreigners rose (Washington Post). While the United States faces short and long term budgetary challenges, uncertainty in Europe has made U.S. debt a relative safe haven. China is the largest holder of Treasury debt, and bought more for the first time in six months. Both China and Japan hold over a trillion dollars worth in public and private accounts; Britain is the third largest lender, but has less than $150 billion in total.

As the United States becomes increasingly dependent upon other nations for funding, the debate over how to reduce the deficit continues. This CFR Backgrounder outlines the competing policy paths on fiscal reforms and the global consequences for failing to bring down U.S. debt.

Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.

Education and Human Capital

New Brookings Study on Immigrant Workers

The Brookings Institution and the Partnership for a New American Economy issued a report on immigrant workers in the U.S. labor force. As the U.S. population ages, immigrants disproportionately grow as a share of the labor force, though the recession recently slowed immigration. More immigrants in low-skilled positions lack a high school diploma than native-born Americans (28.9 percent vs 7.4 percent), but educational profiles are similar among high-skilled workers. Immigrants tend to cluster around different occupations within an industry and are over represented  in the fastest growing occupations.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

International Trade and Investment

Showdown Over Ex-Im Bank

The Senate is likely to consider legislation to raise the $100 billion lending cap of the Export-Import Bank of the United States (Ex-Im Bank) and reauthorize its charter for four years (Congressional Quarterly). Manufacturers such as Boeing see the Ex-Im Bank as an important lending source for foreign customers who otherwise could not purchase American products, while U.S. firms that buy these same goods–such as the airlines–see the Ex-Im Bank as an unfair advantage for their foreign competitors. In the House, Majority Leader Eric Cantor is drafting a bill to bridge differences among House Republicans. Some support the Ex-Im Bank to spur exports, while dissenters want to match expansion authorization with governance reforms.

CFR’s Edward Alden discusses the issues facing lawmakers as they consider Ex-Im reauthorization in this blog post.

International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.

Corporate Regulation and Taxation

CFTC Focusing on High Frequency Traders

The Wall Street Journal reported that the Commodity Futures Trading Commission (CFTC) is developing a system to monitor all buy and sell futures orders, rather than just those completed; over 90 percent of orders are cancelled, and high frequency traders are responsible for over half of all offers. May 2010’s “Flash Crash” showed the potential for computerized algorithmic trading to increase instability; the DJIA plunged 600 points over five minutes due to massive sell orders on futures contracts. The CFTC’s tracking burden will increase soon as the Dodd-Frank Act mandates that more derivatives trading occur on exchanges rather than between individual traders.

Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.

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