China Wins! ($585 Billion In I.O.U.’s)

Just put it on our tab, comrade!

It’s official. An authoritarian communist country is now our biggest, and most important, banker.

Japan sold off a good chunk of it’s $600 billion in U.S. Treasury I.O.U.’s in September. It now owns a mere $571 billion worth. But China just kept snapping them up, increasing its holdings to a cool $585 billion worth of prime, Uncle Sam debt.

First they win more gold medals than us in the Olympics, and now this.

And, as the Foreign Policy blog points out, we’re probably in hock to the Chinese for a hell of a lot more. No one knows yet how much of the $700 billion bailout bill was financed by our friends in Beijing, but those figures are due out soon. (What, you think we actually have cash sitting around to shower on Wall Street? Hank Paulson put it all on our signature Mao Zedong Amex.)

Years ago, before we started running trillion dollar budget deficits, one of the ways we rationalized our national debt was by saying we owed it to ourselves. Even if our government was running in the red, it was still palatable because the vast majority of Treasury Bonds that backed that debt were owned by Americans. That meant the interest from those bonds went into American pockets and then right back into the American economy.

Those days are long over. Foreign investors and foreign governments now own nearly half of all outstanding, or public, debt. That comes to almost $3 trillion. Last year, the government shelled out more than $450 billion on interest payments–hundreds of billions of which now fly out of the country, never to return.