How likely is a U.S. debt crisis?

Federal Debt

$39 trillion

The total U.S. federal debt, which surpassed 100% of GDP.

Dollar Reserves Share

56.8%

The U.S. dollar's share of global foreign exchange reserves by the end of 2025.

Dollar's Transaction Dominance

90%

The percentage of all foreign exchange transactions accounted for by the U.S. dollar.

§ 01 Executive Snapshot

What: Concerns are growing regarding the U.S. dollar's stability amid rising public debt and geopolitical tensions.
Who: UBS Global Family Office respondents, U.S. government, and foreign investors.
Why it matters: The declining share of the dollar in global reserves and the increasing national debt raises questions about the U.S. economy's future stability.

Nearly 30% of respondents in the UBS report have cut back or are considering reducing exposure to dollar-denominated assets.
The U.S. dollar's share of global foreign exchange reserves decreased from 59.4% in late 2021 to 56.8% by the end of 2025.
Federal debt surpassed $39 trillion in early May, exceeding 100% of GDP, up from around $36 trillion the previous year.

The U.S. dollar remains dominant, accounting for about 90% of all foreign exchange transactions, despite the declining share in reserves.
Historical context shows other countries have sustained higher debt-to-GDP ratios without experiencing immediate crises, indicating that the U.S. may manage its debt without collapse.

The immediate market consequence may involve increased volatility if the U.S. debt rating is downgraded due to persistent debt issues.
Long-term implications could include higher risk premiums demanded by investors if confidence in U.S. fiscal management wanes.

Potential risk includes the possibility of a debt crisis if investors lose confidence in the U.S. government's financial management.
Competition from other currencies, particularly the yuan, poses a risk but remains limited due to capital controls and non-convertibility.

Monitoring U.S. national debt levels and the response of Treasury yields to Federal Reserve policy changes will be crucial.
Future developments in geopolitical tensions and economic growth rates will signal the potential for a debt crisis or further declines in dollar dominance.

§ 07

What are the main concerns regarding the U.S. dollar?

Concerns are growing about the U.S. dollar's stability due to rising public debt and geopolitical tensions.

Who is expressing concerns about the U.S. dollar's stability?

Concerns are being voiced by UBS Global Family Office respondents, the U.S. government, and foreign investors.

How has the U.S. dollar's share of global reserves changed recently?

The U.S. dollar's share of global foreign exchange reserves decreased from 59.4% in late 2021 to 56.8% by the end of 2025.

What could happen if investors lose confidence in U.S. financial management?

If investors lose confidence, it could lead to a debt crisis and increased volatility in the market.