So who will buy America's debt next? China already has a substantial investment and from their perspective, it makes much more sense to diversify. The end result for the US could very well be selling debt at a much more expensive rate. Sooner or later this problem will have to be addressed and it probably means higher taxes.
The Treasury Department reported that foreign holdings of U.S. Treasury securities fell by $53 billion in December, surpassing the previous record of a $44.5 billion drop in April 2009.
The big drop in China's holdings meant that it lost the top spot in terms of foreign ownership of U.S. Treasuries, dropping to second place behind Japan.
Japan also reduced its holdings of U.S. Treasuries, cutting them by $11.5 billion to $768.8 billion in December, but that amount was still more than China's December total of $755.4 billion.
