New CFA Institute Survey Highlights Investment Industry’s Concerns over Soaring U.S. Government Debt

• Investment professionals say the U.S. debt-to-GDP ratio is not sustainable and not being addressed.
• Both presidential candidates lack policy proposals to reduce the deficit.  
• Dollar’s position as the global reserve currency could be in question.

A new survey report published today by the CFA Institute Research and Policy Center highlights significant concerns among investment professionals about the sustainability of U.S. government finances and its reliance on unfunded budget deficits.

The survey, “The Dollar’s Exorbitant Privilege – CFA Institute Global Survey on the US Debt and the Role of the US Dollar,” reveals the insights of more than 4,000 investment professionals worldwide concerning the United States’ high debt-to-GDP ratio, budget deficits, and the continuing prospects for the U.S. dollar as the leading global reserve currency. 

Sheila Bair, former Chair, Federal Deposit Insurance Corporation and founding Chair of the CFA Institute Systemic Risk Council, notes in her foreword to the survey report:

“Unfortunately, in the 21st century, the U.S. 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.”

Nearly 80 percent of investment professionals surveyed for the report expressed serious concerns about the sustainability of U.S. government finances and the reliance on unfunded spending. Nearly two-thirds believe the U.S. dollar will lose its reserve currency status over the next 5-15 years.

Olivier Fines, CFA, Head of Advocacy for EMEA, CFA Institute said:

“The survey results are unequivocal. They signal great concern about the lack of fiscal discipline in the world’s largest economy and the potential implications for the role of the U.S. dollar as the preeminent reserve currency, on which global financial stability is still dependent.” 

“The United States enjoys unparalleled financial advantages from the dollar’s reserve currency status, including lower borrowing costs and larger deficits without immediate repercussions. Higher borrowing costs, difficulty financing government deficits, and reduced investment in the U.S. economy, are just some of the potential consequences if reserve currency status is lost.” 

“While investment professionals currently still trust the U.S. government to repay its debts, our survey findings suggest that trust may be running out. Something will have to give if U.S. government debt is to be brought back to historically moderate levels.”

Key Findings:

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

Paul Andrews, Managing Director for Research, Advocacy and Standards at CFA Institute comments:

“Despite historically high leverage and poor budget control, U.S. government-backed treasury securities remain the preferred safe haven for liquidity, repayment, and vast cash reserves in global commerce. This is quite a privilege.” 

“While its reserve currency status grants the United States distinct advantages, it also imposes the responsibility to act judiciously to preserve economic resilience and trust across the international markets. It is unfortunate that at present, both major party candidates lack policy proposals to reduce the deficit.”

“Investment professionals worry that trust is but a few errant policy moves or geopolitical missteps away from a broad and lasting disruption across the financial world. Geopolitical tensions, falling demand for U.S. treasuries, and potentially an actual debt default as Congress grapples with its debt ceiling, could all act to reduce global trust in the U.S. dollar.” 

The survey report, “The Dollar’s Exorbitant Privilege – CFA Institute Global Survey on the US debt and the Role of the US Dollar,” is available at: https://rpc.cfainstitute.org/en/research/surveys/2024/the-dollars-exorbitant-privilege

Notes to Editors

The survey underlying the report, “The Dollar’s Exorbitant Privilege – CFA Institute Global Survey on US debt and the role of the US Dollar,” was conducted in July 2024 and incorporates the views of 4,243 investment industry professionals from markets including the United States, Canada, Switzerland, United Kingdom, China, Germany, Hong Kong SAR, Australia, Singapore and India.