The general populace holds over $22 trillion of the national debt. A substantial amount of the public debt is held by foreign governments. In contrast, the balance is held by American banks and investors, the Federal Reserve, state and local governments, mutual funds, pension funds, insurance companies, and holders of savings bonds. In a quarterly Treasury bulletin, the Treasury breaks down who owns how much of the public debt.

The national debt and the deficit are inextricably linked. A budget deficit occurs when the federal government spends more money than it receives in tax revenues. This imbalance must be filled by borrowing additional money, which adds to the debt.

Government agencies
Andrew Jackson paid off the nation's interest-bearing debt in 1835. He is the first and only president to accomplish so.

As the country's central bank, the Federal Reserve is in control of the country's credit. It has no financial need to hold Treasury bills. So, why does it do it? Between 2007 and 2014, the Federal Reserve's assets more than tripled. In response to the financial crisis of 2008, the Fed increased open market operations by purchasing bank-owned mortgage-backed securities. In 2009, the Fed began buying US Treasury bonds. By 2011, it had amassed $1.6 trillion in assets, reaching a peak of $2.5 trillion in 2014. Quantitative easing (QE) boosted the economy by lowering interest rates and flooding the financial markets with cash. It ensured that firms could continue to borrow at low rates for operations and expansion.

The Fed used to credit it generated out of thin air to buy Treasurys from its member banks. It had the same impact as if money had been printed. By keeping interest rates low, the Fed assisted the government in avoiding the high-interest rate penalty that would have been imposed if it had taken on too much debt. Important: In October 2014, the Federal Reserve announced the conclusion of its quantitative easing program. As a result, 10-year Treasury note interest rates jumped from a 200-year low of 1.43 percent in July 2012 to roughly 2.17 percent by the end of 2014. In 2017, the Federal Open Market Committee (FOMC) announced that the Fed would begin to reduce its Treasury holdings. It did, however, buy Treasurys again a few years later. The Federal Reserve stated on March 15, 2020, that it would buy $500 billion in US Treasury bonds and $200 billion in mortgage-backed securities over the next few months. On March 23, 2020, the FOMC increased QE purchases to an unlimited amount. By May 2021, its financial sheet had expanded to $8.76 trillion. Foreign ownership of US debt is currently at an all-time high. In July 2021, Japan held $1.32 trillion in US Treasury bonds, making it the country's largest foreign debt holder. China is the second-largest holder, with $1.07 trillion in US debt. Both Japan and China want the dollar to remain higher in value than their own currencies.

This allows them to keep their exports to the United States affordable, allowing their economies to thrive. When China boosted its holdings to $699 billion in 2006, it surpassed the United Kingdom as the second-largest foreign holder. With $579.8 billion, the United Kingdom is the third-largest holder. As the effects of Brexit continue to wreak havoc on the country's economy, its holdings have risen in rank. Ireland is next, with $324.3 billion in its coffers. The top ten include Luxembourg, Switzerland, the Cayman Islands, Brazil, Taiwan, and France.