Everything is all interwoven. We hold tons of other countries debt, they hold ours.
I'm not sure if the U.S. government holds any foreign debt--though I may be wrong. Individuals in the U.S. certainly hold a large amount of foreign debt.
With all due respect - because I'm already in a hundred arguments across this godforsaken forum - yes, they absolutely do.
Its a debt-for-debt structure.
Other countries buy ours -
http://en.wikipedia.org/wiki/United_States_Treasury_securityand we buy theirs -
http://en.wikipedia.org/wiki/Government_bondIf they have a flag, we buy it. Every government issues bonds.
This creates a global "safety net", and it also gives us (and our allies) leverage towards their diplomatic policy.
I am of the opinion we are currently embroiled in WW3, and it's taking place in the financial markets. This is why everybody's making such a stink about the Euro-debt crisis, with the "PIIGS" countries. Greece is the "canary in the coal mine". Because they are so small, they're symptomatic of larger collapse. Nobody actually gives a shit if Greece collapses. Its the size of Rhode Island. But if they DO collapse, it portends a domino effect, the other countries may not be able to hold their system together as they pour financial aid into that small but gaping wound of a socialist country.
Then comes Italy. Then Spain. We hold debt on all of 'em. These are our ALLIES.
And we actually have to keep buying it, because it's scheduled auction just like ours is. If we suddenly stopped buying foreign debt at the same rate, (not financial interest rate, but volume) it would signal a lack of confidence. We buy a billion from those guys, half-a-bil from those folks, a hundred-mil from these folks, every so-many weeks, like clockwork.
If we stopped doing that, it would be no different than if the Chinese stopped buying ours. It would be shockwaves in their news. CHINA STOPPED BUYING OUR DEBT TODAY! Freakout.
Same shit, but from their perspective. Their currency would collapse. Imagine a country like.. Bulgeria. Or Czechoslovakia. (do they still exist?) A guy with a hundred "dollars" in spending power, suddenly couldn't buy a loaf of bread. Instant riots.
That is
why we buy their debt. Its easier than going to war with them.
And its not like its an endless money hole.. we churn it. As the bonds mature, we cash them. They pay us, and we buy more with it. Its a loop. What everyone is afraid of is, cutting the cycle. This is the term "Credit market freeze".
Thats why everyone in Greece is looking at us like "What the fuck, dudes?" And we're like NO, we buy 2 billion a year, no more, no less. We are NOT bailing out motherfucking
Greece. So, they turn their attention to Germany, and Germany wants to cut them the fuck out of the Euro Union.