I’ve once heard that the USA owns most of its debt to itself, how is that possible? How can you owe debt to yourself?

Question

I’ve once heard that the USA owns most of its debt to itself, how is that possible? How can you owe debt to yourself?

In: 252

Answer 1

So you have for instance FEMA which is a Federal disaster fund. Now FEMA gets given an annual budget and there is a certain amount of admin and prep work, etc that it does but a lot of its fund need to be ready to help out States when a natural disaster like a hurricane hits.

So FEMA has all this money that it needs for the future but what does it do with the money in the meantime? Does it keep it in cash in Fort Knox earning no interest? Does it invest that money in a private bank? Does it play risky stocks on the NYSE? Does it buy overseas bonds? Or does it invest in US bonds?

The answer is it buys safe and secure US Treasury Bonds. Then when the money is needed it sells those bonds off.