How does the purchase of US government bonds by foreign governments help the US economy?

Answer 1

By keeping U.S. interest rates lower than they would have been otherwise.

Answer 2

A bond is nothing more than a loan. When you buy a bond, you're loaning money now in return for the promise of getting it back with interest later.

Other governments are loaning the US govt money, because they know they'll get it paid back. The US economy benefits, because it needs money to spend.

The problem is that there's so much US money now sitting in foreign bank vaults, that the foreign bankers can't spend it all, nor can they try to cash it in because the value of a dollar will sink if they all try to do it at once.

Answer 3

It doesn't. It makes the US economy more and more vulnerable to foreign interference. However, a government of out-of-control spendthrifts doesn't care.