How are US government deficits financed?
The public portion of the US government's deficit is financed by borrowing money from investors. (Other parts are financed by one part of the government borrowing from another.) The government borrows money by selling government securities. These are things like Treasury bills and Treasury bonds. The various types of securities vary mainly in the length of time in which they mature. US government debt is bought by many people. It is bought largely by institutional investors, including foreign governments. As of early 2011, something like half of the US government's debt was held by foreign governments.