CA P I TA L MA RK E TS

The Dollar’s Exorbitant Olivier Fines, CFA

Urav Soni
Privilege
CFA Institute Global Survey
on the US Debt and the Role
of the US Dollar
October 2024

The Dollar’s Exorbitant

Privilege
CFA Institute Global Survey
on the US Debt and the Role
of the US Dollar

Olivier Fines, CFA

Head of Advocacy and Policy Research, EMEA
CFA Institute
Urav Soni
Research Affiliate, Research & Policy Center
CFA Institute
AB O U T T HE R E S E A RC H A ND P O L I C Y C E N TE R
CFA Institute Research and Policy Center brings together CFA Institute expertise along with a diverse, cross-disciplinary
community of subject matter experts working collaboratively to address complex problems. It is informed by the perspective
of practitioners and the convening power, impartiality, and credibility of CFA Institute, whose mission is to lead the investment
profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate
benefit of society. For more information, visit https://rpc.cfainstitute.org/en/.

Unless expressly stated otherwise, the opinions, recommendations, findings, interpretations, and conclusions expressed in
this report are those of the various contributors to the report and do not necessarily represent the views of CFA Institute.

No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical,
including photocopy, recording, or any information storage and retrieval system, without permission of the copyright holder.
Requests for permission to make copies of any part of the work should be mailed to: Copyright Permissions, CFA Institute,
915 East High Street, Charlottesville, Virginia 22902. CFA® and Chartered Financial Analyst® are trademarks owned by
CFA Institute. To view a list of CFA Institute trademarks and the Guide for the Use of CFA Institute Marks, please visit our
website at www.cfainstitute.org.

CFA Institute does not provide investment, financial, tax, legal, or other advice. This report was prepared for informational
purposes only and is not intended to provide, and should not be relied on for, investment, financial, tax, legal, or other advice.
CFA Institute is not responsible for the content of websites and information resources that may be referenced in the report.
Reference to these sites or resources does not constitute an endorsement by CFA Institute of the information contained
therein. The inclusion of company examples does not in any way constitute an endorsement of these organizations by
CFA Institute. Although we have endeavored to ensure that the information contained in this report has been obtained from
reliable and up-to-date sources, the changing nature of statistics, laws, rules, and regulations may result in delays, omissions,
or inaccuracies in information contained in this report.

Cover photo credit: Getty Images/SEAN GLADWELL

CONTENTS
Executive Summary 1

Foreword 2

1. Spotlight: A Difficult Dichotomy to Resolve 4

2. Spotlight: A Regional Divide That Becomes Apparent 5

3. Introduction 6

4. Survey Methodology and Demographics 9

5. Statistics for Background and Context 13

5.1. Total Amount of US Federal Government Debt 13
5.2. US Federal Government Budget 15
5.3. An International Perspective on Government Debt
and Budget Ratios 16
5.4. US and International Current Account Balances 16
5.5. The US Dollar as a Reserve Currency 17
5.6. US Government Debt Held by Foreign Investors 18
5.7. The US Dollar Remains the Most Transacted Currency 19
5.8. Global Debt Remains Denominated Predominantly in US Dollars 20

6. Survey Results and Analysis 21

6.1. Are US Government Finances Sustainable? 21
6.2. Level of Confidence in the US Government’s Ability to Borrow
to Fund Its Expenses and Interest Obligations 23
6.3. Will the US Dollar Lose Reserve Currency Status
over the Next 5–15 Years? 25
6.4. The Factors That Would Most Likely Contribute
to the US Dollar Losing Its Reserve Currency Status 28
6.5. The Currency or System Most Likely to Displace the US Dollar
as the World’s Prominent Reserve Currency 30
6.6. Whether the United States Can Reduce Its Debt/GDP Ratio
to a More Moderate Level 34
6.7. The Measures the US Government Should Prioritize to Reduce
Its Debt/GDP Ratio 35

7. Conclusion 40

P ROF E SSION A L LE A RN IN G QUA LIF IE D ACTIVIT Y

This publication qualifies for 1.5 PL credits under the guidelines
of the CFA Institute Professional Learning Program.

© 2024 CFA Institute. All rights reserved. | iii

EXECUTIVE SUMMARY
This report examines market practitioners’ opinions on the sustainability of
US public finances, given the country’s high level of debt/GDP ratio and budget
deficits. By questioning the CFA Institute membership on a global basis, our
research evaluates possible implications of high debt levels for the role of the
US dollar as the world’s prominent reserve currency.

The report is based on a survey that was conducted from 15 to 31 July 2024.

Key Findings
● A supermajority of respondents (77%) believe US government finances
are not sustainable, while 59% believe investors in US Treasuries remain
confident in the United States’ ability to freely borrow to fund government
operations and interest obligations. This is the main dichotomy revealed in
our report.
● Interestingly, respondents from developed markets are even more
pessimistic on the sustainability of US finances (79% do not believe they
are sustainable) than those from emerging markets (65%).
● Regarding reserve currency status, 63% of respondents believe the US
dollar will lose that prominent status over the next 5–15 years, either in a
marginal way (51%) or in a material way (12%). For respondents in the BRICS
countries,1 this combined statistic reaches 72% (84% in India alone).
● Respondents indicated that the US dollar is most likely to be displaced as
the world’s prominent reserve currency by a multipolar currency system
(38%), followed by a digital currency (12%) or a hard currency, such as gold
(12%). The Chinese renminbi was selected by only 6% of respondents.
● Importantly, a sizable majority of respondents (61%) believe the United
States will not be able to reduce its debt/GDP ratio to a more moderate level
or otherwise contain deficit spending.
● In terms of measures to reduce the current, record-level debt/GDP ratio,
69% of respondents believe the US government should cut nonmandatory
spending (discretionary programs, such as defense), followed by cuts in
mandatory spending (52%), such as social insurance and health care costs.

1
BRICS refers to Brazil, Russia, India, China, and South Africa. We also include two recent additions to the group:
Egypt and the United Arab Emirates.

© 2024 CFA Institute. All rights reserved. | 1

 FOREWORD
As a former federal official, I have seen more than my fair share of financial
crises. I was the Assistant Secretary of the US Treasury during the 9/11 terrorist
attacks on our financial centers and Chair of the Federal Deposit Insurance
Corporation during the Great Financial Crisis of 2008. In responding to these
crises, as well as the more recent pandemic, the government appropriately
resorted to increased deficit financing to protect the citizenry from economic
and financial devastation. Unfortunately, once the crises passed, we just
kept spending. Our national debt now exceeds USD35 trillion, representing
a staggering 123% of GDP.

Today’s national debt exceeds even the lofty levels we attained at the end
of World War II, when it stood at 119% of GDP. After the war, our “greatest
generation” of political leadership steadily restored our nation’s finances to
sustainable levels, bringing it down to about 31% of GDP in 1981. Unfortunately,
in the 21st century, the political leadership has concluded that deficits don’t
matter. Both Republicans and Democrats have settled on deficits as the easiest
way to pay for politically popular initiatives, be they lower taxes (Republicans) or
higher spending (Democrats). They have become wary of braving the political
pain of deficit reduction, knowing their successors could easily squander those
hard fought battles with more deficit financed spending and tax cuts.

Our profligacy has been enabled by the dollar’s privileged status as the world’s
reserve currency. As the late US Senator Alan Simpson (R-WY) once famously
said, investors continue buying our debt because we are “the best looking
horse in the glue factory.” But as we continue to climb in the rankings of the
world’s most indebted nations, that perception could easily change. The shift in
sentiment could be sudden or gradual, but the consequences would be painful.
The federal government’s interest costs, already projected at USD892 billion
for 2024, would increase dramatically, forcing painful tax hikes or spending
cuts. Private sector borrowing costs tied to Treasury rates would also spike.
Financial institutions, managed funds, and other major investors in federal debt
would be exposed to trillions of dollars in market losses as Treasuries lost value,
threatening widespread distress in our financial system.

When will we reach this inflection point? No one knows. Could another
recession be the catalyst? In 2007, the federal debt to GDP ratio stood at 62.6%,
providing fiscal flexibility to fund relief programs during the Great Recession. It’s
now at 123%. How much higher will it need to go to provide relief for the next
recession? Will investors still be around to buy our debt? And at what rate?

The seasoned financial experts surveyed in this CFA Institute report are
remarkably—but justifiably—pessimistic about the sustainability of our
government finances and the ability of our government leaders to reduce the
debt/GDP ratio to a more moderate level. A significant majority, 63%, believe we
will begin to lose our reserve currency status within the next 5–15 years.

2 | © 2024 CFA Institute. All rights reserved.

 Foreword

In 2013, the CFA Institute Systemic Risk Council was dedicated to monitoring
and advocating for regulatory reform of US capital markets that reduced
systemic risk. The national debt is now, itself, a potential source of systemic
crisis. Washington’s policymakers should take heed.

Sheila Bair
Former Chair of the Federal Deposit Insurance Corporation
and Founding Chair of the CFA Institute Systemic Risk Council

CFA Institute | 3
 1. SPOTLIGHT: A DIFFICULT DICHOTOMY
TO RESOLVE
When respondents were asked:

Do you think US government finances are sustainable, despite running

crisis-level debt to GDP ratios and budget deficits?

Yes No
20% 77%

Will the US dollar lose reserve currency status over the next 5–15 years?
Yes (only marginally) Yes (materially)
No 51% 12%
34% Yes, Overall
63%

Yet, when asked:

Are investors in US Treasuries losing confidence in the US government’s ability

to borrow to fund government and interest obligations?

Yes No
34% 59%

And when asked:

Over the next 5–15 years, do you think the US will be able to reduce its debt/GDP
ratio to a more moderate level?

Yes No
33% 61%

Reserve currency status is clearly the unique structural advantage the United
States continues to benefit from on the international stage—thanks maybe to
its own “TINA” effect?2

TINA is an acronym for “there is no alternative.” See J. Chen, “TINA: An Acronym for ‘There Is No Alternative’
2

Defined,” Investopedia (10 September 2022). www.investopedia.com/terms/t/tina-there-no-alternative.asp.

4 | © 2024 CFA Institute. All rights reserved.

2. SPOTLIGHT: A REGIONAL DIVIDE
THAT BECOMES APPARENT
Do you think US government finances are sustainable, despite running
crisis-level debt to GDP ratios and budget deficits?

Yes No
20% 77%

Developed Markets
79%

Emerging Markets
65%

US
85%

Will the US dollar lose reserve currency status over the next 5–15 years?

Yes (only marginally) Yes (materially)

No 51% 12%
34% Yes, Overall
63%

US
59% (yes, overall)

BRICS
72% (yes, overall)

China
68% (yes, overall)

India
84% (yes, overall)

© 2024 CFA Institute. All rights reserved. | 5

 3. INTRODUCTION
With one debt ceiling broken after another, we are all wondering whether
there is an actual or virtual limit to the amount of debt the US government can
accumulate before it affects the credibility of the US dollar or the stability of
financial markets.

In parallel, the US federal government has been running budget deficits

uninterruptedly over the last 20 years, essentially since the 2001–02 dot-com
crisis. Notwithstanding the occasional episodes of economic crisis the country
and the world have endured over the period, the level of the US deficit has
also gradually grown over the years—such that the country’s ratio of debt to
GDP also has gotten worse over time, reaching in 2024 levels not seen since
World War II.

A natural corollary to these developments has been a steadily inflating and

accelerating level of money supply, concurrently with a Federal Reserve balance
sheet reaching record highs in 2022, in the wake of the COVID-19 crisis.

Yet by many accounts, the US dollar has maintained its prominence in global
markets as a medium of exchange for international transactions, a reserve
currency in central bank coffers, or the source material needed to purchase US
Treasury bonds (store of value), which have retained their appeal as a safe haven
asset, perhaps against logic.

In February 1965, before the Bretton Woods system came to an end, then
French president Charles de Gaulle referred to the “exorbitant privilege of the
US dollar”3 (a phrase made famous subsequently by his finance minister, Valéry
Giscard d’Estaing) while addressing journalists. His words are useful in our
attempt to illuminate the dichotomy we are discussing here:

The fact that many states accept dollars as equivalent to gold

in order to make up for the deficits of the American balance
of payments has enabled the United States to be indebted to
foreign countries free of charge. Indeed, what they owe those
countries, they pay in dollars that they themselves can issue
as they wish. This unilateral facility attributed to America
has helped spread the idea that the dollar is an impartial,
international means of exchange, whereas it is a means of
credit appropriated to one state.4

Even after the collapse of the Bretton Woods system in 1973, however, it seems
the US dollar has continued to enjoy this privilege.

See Barry Eichengreen, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International
3

Monetary System (New York: Oxford University Press, 2011).

4
Eichengreen, Exorbitant Privilege.

6 | © 2024 CFA Institute. All rights reserved.

 3. Introduction

The question remains: Can we expect a continuation of lax fiscal, as well as

monetary, policy to eventually result in a diminution in the level of confidence
global investors and savers grant to the US dollar? Should such an event take
place, abruptly or gradually, what would the impact be on the stability of global
financial markets?

The concept of de-dollarization is not new. CFA Institute gradually became more
interested in evaluating the merits of this concept as the world was collectively
witnessing the end of cheap money in the aftermath of the COVID-19 crisis.
Inflation started rising again on the back of expansionary fiscal and monetary
policies, and interest rates then followed suit.

The reduction of purchasing power, which the inflation of money supply and
eventually elevating price levels represent, should theoretically impact the
demand for the US dollar.

As part of a CFA Institute research program run in cooperation with Georgetown

University’s McDonough School of Business in Washington, DC, in spring 2024,
we asked a team of students in the university’s Master of Science in Finance
program to evaluate the reality of any de-dollarization trends and how they
could impact the stability of capital markets.5

The conclusions from their work are mixed, yet they offer an opportunity
to dig deeper into these topics:

● The United States’ economic robustness and sheer size globally continue to
act positively on the demand for the US dollar.
● Despite representing about a quarter of the world’s GDP, however, the
United States only accounts for about 10% of world exports, which applies
negative pressure on the balance of payments and generates a current
account deficit.
● The United States continues to enjoy deep and broad capital markets, at
least twice as large as those in the EU or China.
● Despite an observed drop in the US dollar’s share of allocated global
reserves from its peak in 2000, the currency remains the dominant world
reserve currency by a significant margin.
● The US dollar continues to represent about three-quarters of global foreign
exchange transactions.
● Foreign demand for US government debt (Treasuries) appears to have fallen
from its peak, such that foreign ownership of US Treasuries has fallen from
34% in 2012 to 23% in 2024.

5
Special thanks to the authors and members of the team for their outstanding work on the assignment: Andrew
Rivers, CFA, Nikki Singh, Liana Tsanova, Dani Figueredo, Sotima Koussere, and James Pisula. We also would like to
thank James J. Angel, PhD, CFP, CFA, associate professor and faculty affiliate, Psaros Center for Financial Markets
and Policy at Georgetown University, for his involvement in making this program possible.

CFA Institute | 7
The Dollar’s Exorbitant Privilege

The report notes two primary factors that may contribute to currency failure:
a lack of investor confidence and unsustainable government spending. In this
regard, the report concludes that “fiscal irresponsibility and the continued
reliance on borrowing to fund government operations could erode foreign
creditors’ confidence, potentially triggering a credit-liquidity spiral and
prompting the withdrawal of foreign currency holders. Furthermore, the US
government stands alone among primary reserve currencies in sustaining a
prolonged current account deficit. This deficit has dual effects: wealth transfer
to foreign entities and net selling of currency due to international trade.”

CFA Institute set out to build on this inquiry by conducting a global member
survey to capture the views of our members—finance professionals located all
over the world—on the following issues:

1. Are the US government’s finances sustainable?

2. Are investors in US Treasuries losing confidence in the US government’s
ability to borrow to fund its expenses and interest obligations?
3. Will the US dollar lose reserve currency status over the next 5–15 years?
4. What factors would most likely contribute to the US dollar losing its reserve
currency status?
5. Which currency is most likely to displace the US dollar as the world’s
prominent reserve currency?
6. Can the United States reduce its debt/GDP ratio to a more moderate level
over the next 5–15 years?
7. What measures should the US government prioritize to reduce its debt/GDP
ratio?

In the next two sections, we will provide context for our research, examining a
number of metrics and statistics that are useful to keep in mind as we engage in
the analysis of the survey results in the second part of the report.

8 | CFA Institute
 4. SURVEY METHODOLOGY
AND DEMOGRAPHICS
The online survey ran from 15 to 31 July 2024. It was sent to a random sample
of 103,739 CFA Institute members on a global basis. Where applicable, regional
limitations of the data are explained on each chart.

We received 4,243 valid responses to the survey, resulting in a 4.1% response

rate and a margin of error of ±1.47%, with a 95% confidence interval.

Exhibits 1–6 present the traditional set of demographic statistics on the

population of members who responded to the survey.

Exhibit 1. Regional Distribution of Respondents

EMEA
20%

APAC Americas
13% 67%

Note: EMEA stands for Europe, the Middle East, and Africa; APAC stands for Asia Pacific; Americas represents North and South America.

Exhibit 2. Distribution of Respondents Broken Down by Largest

Individual Markets
USA 2,177
Canada 433
Switzerland 135
United Kingdom 123
China 100
Germany 89
Hong Kong SAR 82
Australia 81
Singapore 77
India 63
Rest of World (ROW) 760

0 500 1,000 1,500 2,000 2,500

© 2024 CFA Institute. All rights reserved. | 9

The Dollar’s Exorbitant Privilege

Exhibit 3. Distribution of Respondents According to Employer Type

Asset Management/Investment Firm 1,267
No Response 606
Private Wealth Management Firm/Family Office/Trusts 476
Other (please specify) 370
Commercial Bank 302
Consulting Firm 266
Brokerage 129
Insurance 126
Investment Bank 122
Information Technology or Software 98
Government or Regulator 94
University/Educational Institution 84
Pension Fund 82
Manufacturing 50
Utilities (e.g., Oil and Gas, Energy) 46
Accounting Firm 42
Central Bank 25
Endowment 22
Credit Rating Agency/Firm/Bureau 17
Business or Knowledge Process Outsourcing 6
Sovereign Wealth Fund 6
Securities Exchange 4
Verification Firm 2

0 200 400 600 800 1,000 1,200 1,400

Exhibit 4. Distribution of Respondents According to Gender

Prefer Not to Answer
0.15%

Female
8.57%

Male
91.28%

10 | CFA Institute
 4. Survey Methodology and Demographics

Exhibit 5. Distribution of Respondents According to Age Range

Unspecified 1%

70 Years or More 8%

61–69 Years 13%

51–60 Years 22%

41–50 Years 24%

31–40 Years 26%

21–30 Years 7%

0% 5% 10% 15% 20% 25% 30%

Exhibit 6. Distribution of Respondents by Number of Years

with CFA Charter
35%
32.6%

30%

25%

20%
16.9%
15.4%
15%
10.7% 10.6% 10.5%
10%

5% 3.4%

0%
<2 2–5 Years 6–10 Years 11–15 Years 16–20 Years >20 Years No Charter

CFA Institute | 11
The Dollar’s Exorbitant Privilege

Notes on Regional Definitions for Terms Used in this Report:

ASEAN According to the Council on Foreign Relations, the Association of Southeast
Asian Nations (ASEAN) is a regional grouping composed of ten members: Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore,
Thailand, and Vietnam.

BRICS This group refers to Brazil, Russia, India, China, and South Africa. We also include
two recent additions to the group: Egypt and the United Arab Emirates.

EU The European Union consists of 27 countries: Austria, Belgium, Bulgaria, Croatia,

Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands,
Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden. We include
all except Slovakia and Estonia because none of the respondents are from those
countries.

Developed markets We use the MSCI Market Classification for developed markets and emerging
and emerging markets markets. For our analysis, we removed any country that has no respondents.6

OPEC and OPEC+ Current OPEC members include Saudi Arabia, the United Arab Emirates, Kuwait,
Iraq, Iran, Algeria, Libya, Nigeria, Congo, Equatorial Guinea, Gabon, and Venezuela.
OPEC+ additionally includes Russia, Azerbaijan, Kazakhstan, Bahrain, Brunei,
Malaysia, Mexico, Oman, South Sudan, and Sudan. For our analysis, we removed any
country that has no respondents.

Sub-Saharan Africa As per the World Bank, Sub-Saharan Africa includes 48 countries. Respondents from
the region are from the following 11 countries: Botswana, Ghana, Kenya, Mauritius,
Namibia, Nigeria, South Africa, Tanzania, Uganda, Zambia, and Zimbabwe.

MENA According to the World Bank, MENA (Middle East and North Africa) includes Algeria,
Bahrain, Djibouti, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Malta,
Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, the United Arab Emirates, West
Bank and Gaza, and Yemen. We received responses from members in Bahrain,
Egypt, Israel, Jordan, Kuwait, Lebanon, Malta, Oman, Qatar, Saudi Arabia, and the
United Arab Emirates.

South America We use the United Nations Statistics Division’s list of states/territories in the region
of South America.7 We received responses from Argentina, Bolivia, Brazil, Chile,
Colombia, Ecuador, Peru, Uruguay, and Venezuela.

6
See www.msci.com/our-solutions/indexes/market-classification.
7
See https://unstats.un.org/unsd/methodology/m49/.

12 | CFA Institute
 5. STATISTICS FOR BACKGROUND
AND CONTEXT
This section provides a collection of statistics and charts to help put in
perspective the findings from the survey.

The data show a number of cross-currents that are exerting either positive or
negative pressure on the demand for the US dollar, regardless of or in parallel
with the various theories underpinning global economics.

5.1. Total Amount of US Federal Government Debt

Exhibit 7 presents the evolution of the volume of total debt issued by the US
federal government since 1940 (in USD trillions) on the left-hand axis and as a
proportion of the country’s nominal GDP on the right-hand axis.

Exhibit 8 itemizes the total US federal government debt by security class, as of

the end of August 2024.

Exhibit 7. Total US Federal Government Debt, 1940–June 2024

30 120%

Debt-to-GDP Ratio (%)

Volume (USD trillions)

20 80%

10 40%

1940 1950 1960 1970 1980 1990 2000 2010 2020

US Government Debt to GDP US Government Debt

Sources: TradingEconomics.com; data from Office of Management and Budget.

© 2024 CFA Institute. All rights reserved. | 13

The Dollar’s Exorbitant Privilege

Exhibit 8. Breakdown of Total US Federal Government Debt

by Security Class, 31 August 2024 (USD millions)
Debt Held by Intragovernmental
Security Type Security Classification the Public Holdings

Marketable Bills $6,120,981.00 $821.00

Marketable Notes $14,186,936.00 $5,269.00

Marketable Bonds $4,650,816.00 $6,742.00

Marketable Treasury Inflation-Protected Securities (TIPS) $2,031,564.00 $633.00

Marketable Floating Rate Notes $587,537.00 $41.00

Marketable Federal Financing Bank — $4,514.00

Nonmarketable Domestic Series $15,171.00 —

Nonmarketable State and Local Government Series $106,178.00 —

Nonmarketable United States Savings Securities $161,845.00 —

Nonmarketable Government Account Series $302,452.00 $7,070,031.00

Nonmarketable Other $4,525.00 —

Total $28,168,005.00 $7,088,051.00

Total (Public + Intragovernmental Holdings) $35,256,056.00

Source: “U.S. Treasury Monthly Statement of the Public Debt (MSPD),” Treasury.gov. https://fiscaldata.treasury.gov/datasets/monthly-
statement-public-debt/summary-of-treasury-securities-outstanding.

As of June 2024, the five largest foreign holders of US Treasury securities

were Japan, China, the United Kingdom, Luxembourg, and Canada. Exhibit 9
shows the amount and proportion of US Treasury securities held by the top 10
countries in June 2024.

14 | CFA Institute
 5. Statistics for Background and Context

Exhibit 9. Foreign Country Holders of US Treasury Securities,

June 2024 (USD billions)
Country Volume of Holdings % of Total US Debt

Japan 1117.7 3.21%

Mainland China 780.2 2.24%

United Kingdom 741.5 2.13%

Luxembourg 384.2 1.10%

Canada 374.8 1.08%

Cayman Islands 319.4 0.92%

Belgium 318 0.91%

Ireland 308 0.88%

France 307.2 0.88%

Switzerland 287.1 0.82%

Sources: “Volume of Holdings” data are from “Table 5: Major Foreign Holders of Treasury Securities,” Treasury International Capital (TIC) System:
https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/slt_table5.txt. The “% of Total US Debt” data are from the
authors’ calculations based on the data in the “Volume of Holdings” column and the total US debt in June 2024.

5.2. US Federal Government Budget

Exhibit 10 presents the evolution of the ratio of US federal government annual
budget deficit or surplus to the country’s nominal GDP since 1948.

Exhibit 10. US Federal Government Budget Surplus or Deficit

to Nominal GDP Ratio, 1948–2023
4%

0%

–4%

–8%

–12%

–16%

1950 1960 1970 1980 1990 2000 2010 2020

Sources: TradingEconomics.com; data from US Treasury.

CFA Institute | 15
The Dollar’s Exorbitant Privilege

Exhibit 11. Comparative Analysis of Debt/GDP Ratio and

Budget/GDP Ratio in Various Markets, in 2000 and 2023
(debt figures as of December)
Debt to GDP Budget Deficit (–) or Surplus Percentage of Government Debt
Ratio (%) (+) to GDP Ratio (%) Held by Foreign Investors (%)

Market 2000 2023 2000 2023 2023

United States 55.6 122.3 +2.3 –6.3 23.3

European Union 66.5 81.7 –1.2 –3.5 42.8

Germany 59.3 63.6 –1.6 –2.5 45.2

France 59.5 110.6 –1.3 –5.5 51.0

United Kingdom 28.3 97.6 +1.4 –4.4 31.0

Japan 135.4 266.0 –7.6 –4.6 13.5

China 23.0 83.6 –2.8 –5.8 3.0

Sources: TradingEconomics.com; US Department of the Treasury; Eurostat; HM Treasury (UK); Ministry of Finance (Japan); IMF.org. The fol-
lowing sources were used to collect the data for foreign holders of sovereign debt: United States: US Department of the Treasury, “Securities
(B): Portfolio Holdings of U.S. and Foreign Securities.” https://home.treasury.gov/data/treasury-international-capital-tic-system-home-page/
tic-forms-instructions/securities-b-portfolio-holdings-of-us-and-foreign-securities. EU, Germany, and France: Eurostat, “General Government
Debt.” https://ec.europa.eu/eurostat/databrowser/view/gov_10dd_ggd/default/table?lang=en. (The EU figure was calculated as the weighted
average of EU country members.) United Kingdom: HM Treasury, “Debt Management Report 2024–25” (March 2024). https://assets.publishing.
service.gov.uk/media/65e759a9ce8540001c12c412/Debt_Management_Report.pdf. Japan: Financial Bureau, Ministry of Finance, “Debt Man-
agement Report: The Government Debt Management and the State of Public Debts—2024” (2024, p. 104). www.mof.go.jp/english/policy/jgbs/
publication/debt_management_report/2024/esaimu2024.pdf. China: Tracking Global Demand for Emerging Market Sovereign Debt database,
International Monetary Fund.

5.3. An International Perspective on Government

Debt and Budget Ratios
Exhibit 11 presents a comparative analysis of the debt to GDP ratio and the
budget to GDP ratio in various key economic markets around the world in 2000
and 2023. The exhibit also shows the percentage of each jurisdiction’s total
government debt held by foreign investors, which may be interpreted as an
indicator of the extent to which government funding in the jurisdiction depends
on foreign investors.

5.4. US and International Current Account Balances

Exhibit 12 demonstrates how the United States has been running current
account deficits for a prolonged period of time relative to its international
counterparts. In theory, such a situation should exert negative pressure on the
demand for the US dollar.

16 | CFA Institute
 5. Statistics for Background and Context

Exhibit 12. Current Account Balance in the United States, China,

Japan, and the EU as a Proportion of Nominal GDP, 2000–Q3 2023
Current Account Balance (% of GDP)

17

12

–3

–8
00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

23
20

20
20

20
20

20
20
20

20

20
20
20

20

20
20
20

20
20

20
20
20

20
20

20

US EU Japan China

Sources: International Monetary Fund; Moody’s Investor Service.

5.5. The US Dollar as a Reserve Currency

Exhibit 13 provides a perspective on the proportion the US dollar represents as a
world reserve currency, in terms of central bank holdings. Exhibit 14 shows how
the US dollar share of world reserves has gradually decreased over time, after a
record high of 71.5% in 2001.

Exhibit 13. Allocated Foreign Exchange Reserves in the World,

by Currency, Q1 2024
2% 2%

2%
4%

5%

6%

59%
20%

USD EUR JPY GBP

CAD AUD CHF Other

Source: International Monetary Fund, Currency Composition of Official Foreign Exchange Reserves (COFER) database. www.imf.org/en/Data.

CFA Institute | 17
The Dollar’s Exorbitant Privilege

Exhibit 14. Share of the US Dollar as a Proportion of World Foreign

Exchange Reserves, 1995–2024
74%
72%
70%
68%
66%
64%
62%
60%
58%
56%
54%
52%
50%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Source: International Monetary Fund, COFER database. www.imf.org/en/Data.

5.6. US Government Debt Held by Foreign Investors

Exhibit 15 shows that the proportion of US government debt held by foreign
investors has been falling since 2012, when their share represented about
34% of all US federal government debt.

Exhibit 16 shows that the amount of debt held by the main foreign investors in
US government debt has fallen over the last 10 years.

Exhibit 15. US Government Debt Held by Foreign Investors,

2000–2024
40%

35%

30%

25%

20%

15%

10%
12/1/2000
11/1/2001
10/1/2002
9/1/2003
8/1/2004
7/1/2005
6/1/2006
5/1/2007
4/1/2008
3/1/2009
2/1/2010
1/1/2011
12/1/2011
11/1/2012
10/1/2013
9/1/2014
8/1/2015
7/1/2016
6/1/2017
5/1/2018
4/1/2019
3/1/2020
2/1/2021
1/1/2022
12/1/2022
11/1/2023

Source: US Department of the Treasury, “Securities (B): Portfolio Holdings of U.S. and Foreign Securities.” https://home.treasury.gov/data/
treasury-international-capital-tic-system-home-page/tic-forms-instructions/securities-b-portfolio-holdings-of-us-and-foreign-securities.

18 | CFA Institute
 5. Statistics for Background and Context

Exhibit 16. US Foreign-Owned Debt by Top Five Holding Countries,

as of June 2004, 2014, and 2024 (USD billions)
1,400
1,268.4
1,219.3
1,200
1,117.7

1,000

800 780.2
741.5
666.6
600

400 384.2 374.8

194.3
200 161.7 145.3
53.5 39.7 66.2
23.2
0
Japan China United Kingdom Luxembourg Canada

June 2004 June 2014 June 2024

Source: Data are from the TIC System, “Major Foreign Holders of Treasury Securities.” https://ticdata.treasury.gov/Publish/mfhhis01.txt.

5.7. The US Dollar Remains the Most Transacted

Currency
Exhibit 17 presents the proportion of foreign exchange transactions represented
by the most traded currency pairs in 2023, illustrating the global presence of the
US dollar in international transactions.

Exhibit 17. Most Traded Currency Pairs: Proportion of Volume

of Transactions, 2023

17% 28% EUR/USD

USD/JPY
GBP/USD
3% AUD/USD
4% USD/CAD
USD/CHF
4%
NZD/USD
4% EUR/JPY
13% GBP/JPY
5%
EUR/GBP
5% Other
6% 11%

Source: FXSSI.com.

CFA Institute | 19
The Dollar’s Exorbitant Privilege

5.8. Global Debt Remains Denominated

Predominantly in US Dollars
Exhibits 18 and 19 demonstrate that there continues to be positive pressure on
the demand for the US dollar, simply because it remains the currency most used
to issue corporate debt on a global basis.

Exhibit 18. Global Investment-Grade Bond Issuance, 2017–2023 (Nov)

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2017

2018

2019

2020

2021

2022

2023
US Dollar Euro Japanese Yen British Pound Other

Source: Bloomberg Fixed Income Indices.

Exhibit 19. Global High-Yield Bond Issuance, 2017–2023 (Nov)

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2017

2018

2019

2020

2021

2022

2023

US Dollar Euro Other

Source: Bloomberg Fixed Income Indices.

20 | CFA Institute
 6. SURVEY RESULTS AND ANALYSIS
This section presents a detailed analysis of the survey results.

We constructed the survey questions to logically follow the thought process we

wanted to test with our members on a global basis.

Question 1 Do you think US government finances are sustainable, despite running crisis-level debt to
GDP ratios and budget deficits?

Question 2 Are investors in US Treasuries losing confidence in the US government’s ability to borrow to
fund government and interest obligations?

Question 3 Will the US dollar lose reserve currency status over the next 5–15 years?

Question 4 Please rank the factors that would most likely contribute to the US dollar losing its reserve
currency status over the next 5–15 years.

Question 5 If the US dollar were to lose reserve currency status, which currency is most likely to displace
the US dollar as the world’s prominent reserve currency?

Question 6 Over the next 5–15 years, do you think the US will be able to reduce its debt/GDP ratio to a
more moderate level?

Question 7 Please select up to three measures that you believe the US government should prioritize to
reduce the debt/GDP ratio.

6.1. Are US Government Finances Sustainable?

Question 1: Do you think US government finances are sustainable,
despite running crisis-level debt to GDP ratios and budget deficits?

We asked our global membership whether they believe US government finances

are sustainable.

Main Learning Point:

By an overwhelming majority of 77% globally, respondents believe US

government finances are not sustainable. Exhibit 20 shows these results.

Exhibit 21 shows the global survey results on this question for specific
regions and markets. The responses show interesting regional variations, with
developed markets showing a markedly higher level of pessimism about the
sustainability of US finances relative to emerging markets, in aggregate.

Answers to this question are also related to the age of respondents. Exhibit 22
shows that in general, older respondents tended to express more pessimism
about the sustainability of US finances than younger ones.

© 2024 CFA Institute. All rights reserved. | 21

The Dollar’s Exorbitant Privilege

Exhibit 20. Sustainability of US Finances: Global Survey Results

Do you think US government finances are sustainable, despite
running crisis-level debt to GDP ratios and budget deficits?
(N = 4,120)
No Opinion
2%

Yes
20%

No
77%

Exhibit 21. Sustainability of US Finances: Global Survey Results

for Specific Regions and Markets
90% 85%
79% 79%
80% 77%
74%
77% 77% 76%
69% 71%
70% 65% 66% 67% 67% 65%

60% 55%

50%
38%
40% 33%
31% 31% 30%
28%
30% 24%
26% 25%
20% 21% 19%
18% 19%
20% 14%
16%

10% 2% 4% 6%
0% 3%
5% 4% 3% 4%
7%
4%
7% 5%
2% 1% 1%
0%
es

da

nd

m
l

ts

ts

EU

ia
ta

ric

ic

in
IC

C
EN

EA

d
ke

ke

do
at

na
To

la
PE
er

Ch

In
BR
Af

er
ar

ar

St
M

AS

ng
Am

Ca
O
M

itz
n

Ki
ra

te
ed

ng

Sw
h
ha

d
ut

ni

te
op

gi

Sa

U
So

ni
er
el

b-

U
Em
ev

Su
D

Yes No No Opinion

22 | CFA Institute
 6. Survey Results and Analysis

Exhibit 22. Sustainability of US Finances: Global Survey Results

for Specific Age Groups
Do you think US government finances are sustainable,
despite running crisis-level debt to GDP ratios and budget deficits?
Unspecified 14% 82% 4%
70 Years or More 14% 84% 1%
61–69 Years 13% 86% 2%
51–60 Years 18% 80% 2%
41–50 Years 23% 75% 2%
31–40 Years 25% 71% 3%
21–30 Years 24% 72% 4%
Total 20% 77% 2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes No No Opinion

6.2. Level of Confidence in the US Government’s

Ability to Borrow to Fund Its Expenses and Interest
Obligations
Question 2: Are investors in US Treasuries losing confidence in
the US government’s ability to borrow to fund government and
interest obligations?

We asked our global membership if they believe investors in US Treasuries are

losing confidence in the US government’s ability to borrow to fund government
operations and interest obligations.

Main Learning Point:

By a large majority of 59% globally, respondents do not believe investors are

losing confidence in the US government’s ability to borrow to fund its operations
and interest obligations. Exhibit 23 shows these results.

Results for this question indicate the major dichotomy revealed in this report.
Although a large majority of respondents indicate a belief that US government
finances are not sustainable (as shown in responses to Question 1), they also
seem to believe that investors continue to have faith in the government’s ability
to borrow to fund its expenses and interest obligations (as shown in responses
to Question 2).

To better understand the opinion of our members on this question, we have

split the results for Question 2 in accordance with the professional occupation
of the respondents. The category “Treasury Investors” corresponds to the

CFA Institute | 23
The Dollar’s Exorbitant Privilege

Exhibit 23. Level of Confidence in the US Government’s Ability

to Borrow: Global Survey Results
Are investors in US Treasuries losing confidence in the US government’s
ability to borrow to fund government and interest obligations?
(N = 4,118)
No Opinion
7%

Yes
34%

No
59%

following subcategories that have been identified as possible investment

specialists whose role may involve investing in US Treasuries in some capacity:
Financial Adviser/Financial Planner/Wealth Manager, Institutional Investment
Consultant, Investment Analyst, Investment Consultant, Investment Strategist,
Portfolio Manager, Private Wealth Manager, Research Analyst, Investment
Analyst, or Quantitative Analyst. In total, 1,502 respondents fit in this
reconstituted category. Exhibit 24 shows these results.

Exhibit 24. Level of Confidence in the US Government’s Ability to

Borrow: Global Survey Results Based on Professional Occupation
of Respondents
Are investors in US Treasuries losing confidence in the US government’s
ability to borrow to fund government and interest obligations?
80%
71%
70%
62%
59% 59%
60%
50%
50% 44% 44%
40%
40%
34% 32% 33%
30%
24%
20% 16%

10% 7% 5% 6% 6% 8%
0%
Yes No No Opinion

Total Economist Regulator Professor/Academic Treasury Investors Executives

24 | CFA Institute
 6. Survey Results and Analysis

Exhibit 25. Level of Confidence in the US Government’s Ability to

Borrow: Global Survey Results for the 10 Largest Foreign Country
Holders of US Treasury Securities
90% 83% 81%
80%
70% 65% 64%
59% 60% 61%
60% 55% 57%
50% 50% 50%
50% 45%
36% 39%
40% 34% 33%
29% 29% 30%
30%
20% 17% 14%
11% 9%
10% 7% 6% 7% 6% 7% 6%
0% 0% 0%
0%
l

nd

um

nd

da

na

n
ta

nd
c

pa
ur

do
an

i
na
To

la

la

Ch
gi

bo
la

Ja
er

Ire

ng
Fr

Ca
l

Is
Be

m
itz

Ki
an

xe
Sw

d
ym

Lu

te
ni
Ca

U
Yes No No Opinion

Economists, in general, indicated the highest level of rejection of the proposition

that investors are losing confidence in the US government’s ability to borrow.

Exhibit 25 presents the results on Question 2 for respondents from the

10 largest foreign country holders of US Treasury securities.

6.3. Will the US Dollar Lose Reserve Currency Status

over the Next 5–15 Years?
Question 3: Will the US dollar lose reserve currency status over
the next 5–15 years?

We asked our global membership if they believe the US dollar will lose its
reserve currency status over the next 5–15 years.

Main Learning Point:

A 51% majority of the respondents believe the US dollar will lose reserve
currency status but only marginally, while 12% believe it will lose this status in
a material way. Approximately one-third of respondents (34%) disagreed and
believe the US dollar will maintain its current prominent position. Exhibit 26
shows these results.

On a global level, 63% of respondents were in agreement with the proposition

that the US dollar will lose reserve currency status over the next 5–15 years in
some way, either only marginally (51%) or materially (12%).

CFA Institute | 25
The Dollar’s Exorbitant Privilege

Exhibit 26. Will the US Dollar Lose Reserve Currency Status

over the Next 5–15 Years: Global Survey Results
Will the US dollar lose reserve currency status over the next 5–15 years?
(N = 4,145)

3%

34%

51%

12%

Yes, but Only Marginally Yes, in a Material Way

No, the US Dollar Will Maintain No Opinion
its Current Prominence

Regional splits show interesting results on this question, as shown in Exhibit 27.

Respondents who are the least positive about the US dollar’s capacity to retain
its reserve currency status included those from the BRICS, ASEAN (Association
of Southeast Asian Nations),8 and MENA groups, as well as India itself.

Obviously, a corollary can be established here, with renewed talks about

de-dollarization, especially since the Russia–Ukraine war started in 2022.

The age factor seems to also play a role in responses to Question 3, as shown
in Exhibit 28. In general, older respondents tend to be more pessimistic than
their younger counterparts about the US dollar’s capacity to maintain its reserve
currency status. Only 26% of the 70+ age group believe the US dollar will retain
its current prominence, compared to 38% of the 21–30 group.

8
ASEAN includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and
Vietnam. See https://asean.org/member-states/.

26 | CFA Institute
 6. Survey Results and Analysis

Exhibit 27. Will the US Dollar Lose Reserve Currency Status over
the Next 5–15 Years: Global Survey Results by Region/Market
70%

60%
60% 57%
59%
56%
55%
53% 53% 54%
52%
51% 50% 51% 51%
49%
50% 48%

40% 38%
35% 36%
34% 33%
31% 31%
29% 29%
30% 27% 28%
27%
29%
25%
24%
21%
20% 18% 17%
16% 15%
14% 13%
12% 12% 13% 12% 13%
11% 11%
10%
10%

0%
l

ts

ts

EU

es

da

nd

a
ta

ric

ic

in

di
IC
EN

EA
ke

ke

do
at

na
To

la
er

Ch

In
BR
Af

er
ar

ar

St
M

AS

ng
Am

Ca
M

itz
n

Ki
ra

te
ed

ng

Sw
h
ha

d
ut

ni

te
op

gi

Sa

U
So

ni
er
el

b-

U
Em
ev

Su
D

Yes, but Only Marginally Yes, in a Material Way No, the US Dollar Will Maintain its Current Prominence

Exhibit 28. Will the US Dollar Lose Reserve Currency Status over
the Next 5–15 Years: Global Survey Results by Age Group
Will the US dollar lose reserve currency status over the next 5–15 years? (by age group)
60% 55% 55%
51% 51% 50%
49%
50% 49%
44%
38% 39%
40% 34% 34% 34% 34%
29%
30% 26%

20% 15% 16%

12% 13% 14%
10% 12%
9%
10% 4% 4%
6%
3% 2% 3% 3% 2%
0%
Total 21–30 Years 31–40 Years 41–50 Years 51–60 Years 61–69 Years 70 Years or Unspecified
More

Yes, but Only Marginally Yes, in a Material Way

No, the US Dollar Will Maintain No Opinion
its Current Prominence

CFA Institute | 27
The Dollar’s Exorbitant Privilege

6.4. The Factors That Would Most Likely Contribute

to the US Dollar Losing Its Reserve Currency Status
Question 4: Please rank the factors that would most likely
contribute to the US dollar losing its reserve currency status
over the next 5–15 years.

We asked our membership to rank the factors that would most likely contribute
to the US dollar losing its reserve currency status, with a ranking of 1 being most
likely and a ranking of 5 being least likely.

Main Learning Point:

The top two factors ranked 1 by respondents are concerns over the ability of the
US government to continue servicing its debt (30%) and geopolitical tensions
(28%). Exhibit 29 shows the global results to this question for top rank 1
factors only.

Exhibit 29. Factors That Would Most Likely Contribute to the

US Dollar Losing Its Reserve Currency Status: Global Survey
Results for Factors Ranked 1 Only
Factor chosen by respondents as number 1
(N = 3,924)
Technological Displacement:
A Digital Currency (Crypto)
Displaces the US Dollar
5%

An Economic Decline
of the US Economy Concerns Over the
Relative to the Rest Ability of the US
of the World Government to
13% Continue Servicing
its Debt or Repaying
Outstanding Debt
30%

Geopolitical Tensions
Reduce the Number An Actual US
of Countries Willing Government Default
to Use the US Dollar on Interest or
28% Maturing Bonds
24%

28 | CFA Institute
 6. Survey Results and Analysis

The three factors chosen most often as the number one reason (i.e., Rank 1) for
the US dollar to lose its reserve currency status are, on a global basis, as follows:

● Concerns over the ability of the US government to continue servicing its

debt or repaying outstanding debt (30%)
● Geopolitical tensions reduce the number of countries willing to use the
US dollar (28%)
● An actual US government default on interest or maturing bonds (24%)

We can establish a correspondence here with the previous results on the

perceived sustainability of US government finances. The large number of
respondents who chose geopolitical tensions is also not surprising given the
international context that has been developing since 2020.

A regional prism also offers interesting insight into this question, as shown in
Exhibit 30.

As shown in Exhibit 30, respondents in emerging markets showed a markedly

higher propensity to determine that geopolitical tensions were going to be the

Exhibit 30. Factors That Would Most Likely Contribute to the

US Dollar Losing Its Reserve Currency Status: Global Survey
Results for Top Three Rank 1 Factors According to Level
of Economic Development
5 7% 7% 7%
4 19% 19% 18%
Geopolitical tensions reduce the number
3 22% 23% 17%
of countries willing to use the USD
2 25% 25% 22%
1 28% 26% 36%

5 31% 31% 31%

4 22% 21% 24%
An actual US government default on interest
3 13% 12% 14%
or maturing bond
2 10% 10% 8%
1 24% 25% 23%

5 4% 3% 5%
Concerns over the ability of the US government 4 11% 10% 16%
to continue servicing its debt or repaying 3 21% 20% 27%
outstanding debt 2 34% 35% 31%
1 30% 31% 21%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Total Developed Markets Emerging Markets

Note: How to read the chart: vertically, the distribution (total = 100%) of responses per region for each option; horizontally, the discrete
proportion of responses attributed to each rank for each option (total per row not equal to 100%).

CFA Institute | 29
The Dollar’s Exorbitant Privilege

primary factor explaining why the US dollar may lose reserve currency status.
In turn, respondents in developed markets were primarily concerned about the
ability of the US government to continue servicing its debt.

To summarize:

● The number one explanatory factor in emerging markets is geopolitical tensions

(chosen by 36% of respondents, including 46% of respondents in India).
● The number one explanatory factor in developed markets is concerns over
the ability of the US government to service its debt (chosen by 31% of
respondents, including 35% of respondents in the United States).

6.5. The Currency or System Most Likely to Displace

the US Dollar as the World’s Prominent Reserve
Currency
Question 5: If the US dollar were to lose reserve currency status,
which currency is most likely to displace the US dollar as the
world’s prominent reserve currency?

We asked our members to determine which other currency or system would be

most likely to displace the US dollar as the world’s prominent reserve currency.

Main Learning Point:

As shown in Exhibit 31, the concept of a multipolar currency system emerged as

a clear choice, with a plurality of 39% of respondents on a global basis.

Exhibit 31. Alternative Currency Most Likely to Displace

the US Dollar: Global Survey Results
If the US dollar were to lose reserve currency status, which currency is most likely
to displace the US dollar as the world’s most prominent reserve currency?
(N = 4,042)
Other
2%
No A Digital
Renminbi Opinion Currency
6% 11% 12%

New Regional
Currency Initiatives
7%
A Multipolar
Currency System
Hard Currency 39%
(e.g., gold) Euro
12% 11%

30 | CFA Institute
 6. Survey Results and Analysis

A multipolar system has been discussed in various circles for several years.
The war in Ukraine and its geopolitical, as well as economic, ramifications are
precipitating a renewed interest in how such a system may establish itself
and an interest in possible consequences for international money flows.9 The
general idea concerns whether multiple economic poles and currencies may act
as reference points for international exchanges, in lieu of the US dollar, while
enacting similar monetary stability.

We presented in previous sections several data points and statistics in an

attempt to identify whether any such trends are being developed.

While there is a clear, albeit still marginal, subsidence of the US dollar, it is not
easy to identify any other single currency likely to displace the US dollar as the
dominant reserve currency or means of exchange. That is likely why the results
of our survey show a preference for a multipolar currency system.

As shown in Exhibit 32, the second currency in importance in terms of global

reserves is the euro. The single currency of the EU represents about 20% of
global reserves, which has not moved much since the euro’s introduction in
1999. The euro captures a share approximately equivalent to the combined
share of each EU member’s currency prior to the formation of the euro.

Interestingly, despite China’s growing share of the world’s economy, the

renminbi plays a relatively small role, capturing only 6% of the global responses
to our survey question. Obviously, respondents continue to apply some

Exhibit 32. Relative Share of Principal World Currencies as a

Proportion of Global Reserves since the Introduction of the
Euro in 1999
80% 71%
70%
% Total Reserves

59%
60%
50%
40%
30% 20%
20% 18%
10% 6% 3% 5%
5%
0%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

US Dollar Euro Japanese Yen Pound Sterling

Source: International Monetary Fund, COFER database. https://www.imf.org/en/Data.

9
See Emmanuel Farhi, “Toward a Multipolar System,” Finance & Development (June 2019). https://www.imf.org/
external/pubs/ft/fandd/2019/06/pdf/new-monetary-system-farhi.pdf.

CFA Institute | 31
The Dollar’s Exorbitant Privilege

skepticism regarding the effects of China’s controlled system on foreign

exchange and monetary flows in and out of its jurisdiction.

In terms of regional variations, a few observations can be made from

Exhibits 33, 34, and 35:

● Respondents in emerging markets in general tend to disproportionately

favor a multipolar currency system, relative to the overall answers and to
developed markets.
● In particular, respondents in the BRICS (48%) and ASEAN (50%) groups
expressed the most pronounced support for a multipolar currency system.
Of note, the proportion in favor of this proposition reached 60% in India.
● Respondents in developed markets seem to be more supportive of the rise
of digital currencies (cryptocurrencies) than those in emerging markets.
● The United States and Canada were the countries where support for the
proposition that a digital currency could displace the US dollar was relatively
the strongest; this choice was the second most popular for respondents in
those countries, at 14% and 13%, respectively.
● In China, respondents showed more support for the proposition that
the US dollar would be replaced by a hard currency (18%) than by the
renminbi (15%).

Exhibit 33. Alternative Currency Most Likely to Displace the

US Dollar: Global Survey Results According to Level of Economic
Development
No Opinion 11% 12% 7%
Other 2% 2% 1%
Renminbi 6% 6% 7%
New Regional Currency Initiatives 7% 7% 8%
Hard Currency (e.g., gold) 12% 11% 15%
Euro 11% 11% 9%
A Multipolar Currency System 38% 38% 44%
A Digital Currency 12% 13% 9%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Total Developed Markets Emerging Markets

Note: How to read the chart: vertically, the distribution (total = 100%) of responses per region for each option; horizontally, the discrete
proportion of responses attributed to each rank for each option (total per row not equal to 100%).

32 | CFA Institute
 6. Survey Results and Analysis

Exhibit 34. Alternative Currency Most Likely to Displace the

US Dollar: Global Survey Results per Major Economic Regions
2%
EU 11% 36% 14% 17% 4% 10% 6%
1%
OPEC+ 12% 38% 7% 14% 12% 6% 10%
1%
BRICS 8% 48% 6% 14% 9% 7% 7%
0%
ASEAN 8% 50% 3% 14% 7% 9% 8%
1%
MENA 6% 35% 5% 21% 22% 9%
1% 0%
North America 14% 17% 12% 6% 21% 12%
0%
South America 17% 36% 6% 20% 3% 7% 10%
3%3%
Sub-Saharan Africa 6% 46% 6% 13% 14% 10%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

A Digital Currency A Multipolar Currency System Euro Hard Currency (e.g., gold)
New Regional Currency Initiatives Renminbi Other No Opinion

Exhibit 35. Alternative Currency Most Likely to Displace the US Dollar:

Global Survey Results for a Selection of Important Individual Markets
2% 0%
No Opinion 11% 13% 12% 7% 8% 10% 3%
0% 0%
Other 2% 2% 4% 2% 3% 2%
2%
Renminbi 6% 5% 7% 7% 9% 15% 13% 10%

New Regional Currency Initiatives 7% 8% 7% 6% 6% 4% 8% 5% 20%

Hard Currency (e.g., gold) 12% 9% 13% 13% 12% 18% 8% 24% 10%

Euro 11% 12% 10% 7% 9% 7% 3% 11% 20%

A Multipolar Currency System 38% 37% 34% 49% 46% 48% 60% 34% 40%
0%
A Digital Currency 12% 14% 13% 9% 8% 5% 8% 11%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Total United States Canada Switzerland United Kingdom

China India Japan Russia

CFA Institute | 33
The Dollar’s Exorbitant Privilege

6.6. Whether the United States Can Reduce

Its Debt/GDP Ratio to a More Moderate Level
Question 6: Over the next 5–15 years, do you think the US will
be able to reduce its debt/GDP ratio to a more moderate level?

We asked our membership globally whether they believe the US federal

government will be able to reduce its debt/GDP ratio to a more moderate level
over the next 5–15 years.

Main Learning Point:

The global results shown in Exhibit 36 demonstrate an overwhelming view that

this will not be the case, with a majority of 61% answering no to the question.

In this case, regional numbers did not vary that much and offer a reasonably
consistent message across world markets.

The age factor, however, appears to indicate that older respondents are more
optimistic about the US government’s capacity to reduce its debt/GDP ratio
than younger cohorts, as shown in Exhibit 37.

Exhibit 36. Whether the US Can Reduce Its Debt/GDP Ratio:

Global Survey Results
Over the next 5–15 years, do you think the US will be able
to reduce its debt/GDP ratio to a more moderate level?
(N = 4,045)
No Opinion
6%

Yes
33%

No
61%

34 | CFA Institute
 6. Survey Results and Analysis

Exhibit 37. Whether the US Can Reduce Its Debt/GDP Ratio:

Global Survey Results per Age Group
Over the next 5–15 years, do you think the US will be able
to reduce its debt/GDP ratio to a more moderate level?
70% 65%
61% 62% 62% 60%
60% 57%
54% 53%
50% 45%
37% 40%
40% 35%
33%
29% 31% 29%
30%

20%
9% 7%
10% 6% 6% 5% 6% 6%
2%
0%
Total 21–30 Years 31–40 Years 41–50 Years 51–60 Years 61–69 Years 70 Years Unspecified
or More

Yes No No Opinion

6.7. The Measures the US Government Should

Prioritize to Reduce Its Debt/GDP Ratio
The US Department of the Treasury is the national treasury and finance
department of the US federal government. In this capacity, it manages the
federal government’s spending (outlays), which are divided into three groups:

● Mandatory spending
The portion of the budget legislated by the US Congress multiple years in
advance, according to rules designed to establish the circumstances under
which individuals will receive benefits, largely consisting of spending for
Social Security, Medicare, and Medicaid
● Discretionary spending
The portion of the budget decided by the US Congress each year through
the appropriation process, with military spending, education, and health
benefits typically being the largest categories
● Net interest paid on the federal government debt
The interest paid by the government less the interest and investment
income it receives

CFA Institute | 35
The Dollar’s Exorbitant Privilege

According to the Congressional Budget Office, the federal budget for 2024
amounts to USD6.88 trillion in outlays, or 24.2% of GDP, composed as depicted
in Exhibit 38.

Exhibit 39 shows how the total US federal government spending has evolved
over time, since 1924, as a proportion of nominal GDP.

Exhibit 38. US Federal Government Budget for 2024 (USD billions)

Net Interest on
Federal Debt
USD892
13%

Discretionary Mandatory
Spending Spending
USD1,797 USD4,191
26% 61%

Source: Congressional Budget Office, “An Update to the Budget and Economic Outlook: 2024 to 2034—Executive Summary” (June 2024).
www.cbo.gov/system/files/2024-06/60039-Executive-Summary.pdf.

Exhibit 39. Total US Federal Government Spending as a Proportion

of Nominal GDP, Since 1924

43%

36%

29%

22%

15%

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Sources: TradingEconomics.com; data from US Bureau of Economic Analysis.

36 | CFA Institute
 6. Survey Results and Analysis

Question 7: Please select up to three measures that you

believe the US government should prioritize to reduce the
debt/GDP ratio.

We asked our membership to select the measures they believe the US

government should prioritize to reduce its debt/GDP ratio.

Main Learning Point:

On a global basis, a large majority (69%) of CFA Institute members selected

nonmandatory spending among the three key measures the government should
prioritize (see Exhibit 40). A majority of 52% also selected mandatory spending
as a priority target.

Interestingly, only a minority (35%) of respondents believe the government

should count on budget deficits and inflation to naturally reduce the relative
value of debt as compared to GDP. In other words, only a minority of members
agree with the idea that debt monetization should be prioritized.

Less than half of respondents (47%) agree with raising taxes to increase
revenue. Age is an interesting explanatory factor in this regard. As shown
in Exhibit 41, younger cohorts were relatively more in favor of reductions in
nonmandatory spending, while older cohorts preferred reductions in mandatory
spending.

Exhibit 40. Measures the US Government Should Prioritize

to Reduce Its Debt/GDP Ratio: Global Survey Results
Please select up to three measures that you believe the US government
should prioritize to reduce the debt/GDP ratio
(N = 4,020)

Other or nonconventional measures 10%

Count on an accelerated economic growth

41%
which will increase tax receipts

The US government should raise tax rates

47%
to increase revenue

Reductions in nonmandatory government spending

69%
(discretionary programs), e.g., defense spending

Reductions in mandatory government spending,

52%
e.g., social insurance and healthcare costs

Count on budget deficits and inflation to naturally

35%
reduce the relative value of debt as compared to GDP

0% 10% 20% 30% 40% 50% 60% 70% 80%

CFA Institute | 37
The Dollar’s Exorbitant Privilege

Exhibit 41. Measures the US Government Should Prioritize to

Reduce Its Debt/GDP Ratio: Global Survey Results by Age Group
80%
74%
72%
69% 70% 70% 69%
70%
64%
61%
60% 58% 57%
56%
54%
52% 52%
50% 47%
43%
40%

30%

20%

10%

0%
Total 21–30 31–40 41–50 51–60 61–69 70 Years Unspecified
Years Years Years Years Years or More

Reductions in Mandatory Government Spending, e.g., Social Insurance and Health Care Costs
Reductions in Nonmandatory Government Spending (discretionary programs), e.g., Defense Spending

From a regional perspective, the typical cultural differences between the EU and
the United States are also on display, as evidenced in Exhibit 42. As we have
seen in other surveys, respondents in the EU tend to be more favorable than
their North American counterparts toward raising taxes and counting on future
growth to fund deficits, while rejecting in greater proportions spending cuts as a
measure to prioritize. We saw similar results in our survey reports on the impact
of the COVID-19 crisis on capital markets,10 where EU respondents were much
more favorable to a rising role of the government in the economy than their
North American counterparts.

See CFA Institute, “Is the Coronavirus Rocking the Foundations of Capital Markets?” (June 2020).
10

https://rpc.cfainstitute.org/research/surveys/is-the-coronavirus-rocking-the-foundations-of-capital-markets.
See also CFA Institute, “COVID-19, One Year Later” (June 2021), https://rpc.cfainstitute.org/research/surveys/
covid19-one-year-later-report.

38 | CFA Institute
 6. Survey Results and Analysis

Exhibit 42. Measures the US Government Should Prioritize

to Reduce Its Debt/GDP Ratio: Regional Differences between
the EU and the United States
12%
Other or nonconventional measures 8%
10%

Count on an accelerated economic growth 35%

47%
which will increase tax receipts 41%

The United States government should raise 46%

57%
tax rates to increase revenue 47%

Reductions in nonmandatory government spending 70%

56%
(discretionary programs), e.g., defense spending 69%

Reductions in mandatory government spending, 64%

30%
e.g., social insurance and health care costs 52%

Count on budget deficits and inflation to naturally 28%

49%
reduce the relative value of debt as compared to GDP 35%

0% 10% 20% 30% 40% 50% 60% 70% 80%

United States EU Total

CFA Institute | 39
 7. CONCLUSION
Any discussion related to the global role of the US dollar and whether it should
recede over time as the world’s prominent reserve currency because of the
state of the US government’s finances leads to a conundrum or, rather, a circular
reference. On the one hand, we can assume logically that exasperating levels of
debt to GDP and a worsening budget deficit facilitated by an accommodating
Congress, coupled with an ever-expanding money supply in probable disconnect
with actual economic needs, should (and will) eventually reduce the demand for
the US dollar and, ultimately, result in a loss of its reserve currency status. On
the other hand, we can also conclude that the fact the US dollar has obviously
maintained its status as the world’s only true global reserve currency is a de
facto leadership guarantee conferred to the US government by the rest of the
world. The United States can apparently continue to accumulate deficits and
debt without consequences for its reserve status. Essentially, this is equivalent
to Bretton Woods without Bretton Woods.

We have shown a slow and perhaps gradual diminution of the US dollar’s

prominence throughout this report. At the very least, it is a reexamination
of the financial irresponsibility on display.

Therefore, the question is: What is the inflection point that may cause either
a sustained or an abrupt demise in the global status of the US dollar? More
importantly, what may be the early signals of such an inflection point?

For the time being, the US dollar has no real rivals to worry about. Ironically, this
may be just the wrong signal that the US Congress needs to start taking the
problem seriously. Its continuous failings to set anything other than temporary,
stop-gap budgets does not inspire confidence or dispel the criticism of financial
mismanagement.

Ernest Hemingway had a thing or two to say about bankruptcy. In his 1926 novel
The Sun Also Rises, a character named Mike Campbell is questioned about how
he went bankrupt. His answer was, “Two ways. Gradually, then suddenly.”

As evidenced throughout our report, a falling demand for the US dollar may
stem from various corners, whether geopolitical tensions, lack of trust in the
US government’s ability to borrow, falling demand for US Treasuries, and maybe
even an actual default as Congress grapples with its debt ceiling nightmare.
But at some point, something will clearly have to give way.

40 | © 2024 CFA Institute. All rights reserved.

 7. Conclusion

The quandary can be described as follows:

● The situation of US public finances is not sustainable.

→ However, there is no political incentive to rein in financial
mismanagement.
→ TINA lives on; there is no global rival emerging.
→ Why should anything change?

Perhaps, one way to look at this problem is to flip it on its head and approach it
from the exact opposite angle. Several respondents referred to Warren Buffett
in the comment boxes left available in the survey. When asked about his ideas
to reduce the deficit during an interview on CNBC’s Squawk Box with Betty
Quick in 2011, Buffett proposed to “pass a law that says that any time there’s a
deficit of more than 3% of GDP, all sitting members of Congress are ineligible
for reelection.”

We will see. In the meantime, the conclusion from our survey report points to
a severe need to rein in the budget deficits and bring back the ratio of debt to
GDP to historically moderate levels in order to tame any pressure building on
the US dollar.

CFA Institute | 41
The Dollar’s Exorbitant Privilege

Authors
Olivier Fines, CFA
Head of Advocacy and Policy Research, EMEA
CFA Institute
London

Urav Soni
Research Affiliate, Research & Policy Center
CFA Institute
Washington, DC

For Market Intelligence

Preethika Kannan
Senior Manager, Market Intelligence
CFA Institute
London

About CFA Institute

CFA Institute is the global association of investment professionals that sets
the standard for professional excellence and credentials. The organization
is a champion of ethical behavior in investment markets and a respected
source of knowledge in the global financial community. Our aim is to create
an environment where investors’ interests come first, markets function at
their best, and economies grow. There are nearly 200,000 CFA charterholders
worldwide in 160 markets. In the mainland of China, CFA Institute accepts
CFA® charterholders only. CFA Institute has 10 offices worldwide, and there
are 160 local societies. For more information, visit www.cfainstitute.org or
follow us on LinkedIn and X at @CFAInstitute.

42 | CFA Institute