Global Investors Diversify Assets Amid Rising U.S. National Debt

Global investors and foreign governments are increasingly distancing themselves from U.S. assets, driven by a $40 trillion national debt, the aggressive use of financial sanctions, and concerns over the rule of law during Donald Trump's second term. This shift is evident as 10-year Treasury yields recently topped 5 percent, the highest level since 2007, and the share of U.S. dollars in central bank reserves fell to 56 percent by the end of 2025. Gold reserves surpassed U.S. Treasury holdings in 2025, with prices exceeding $5,000 per troy ounce.

To mitigate risk, the central banks of France and the Netherlands relocated significant gold reserves from the Federal Reserve Bank of New York to their home countries, with France moving 129 tons to Paris. Additionally, Norway's sovereign wealth fund announced plans to reduce its U.S. Treasury holdings. To circumvent the dollar system entirely, China is leading the mBridge digital currency platform alongside Saudi Arabia and the United Arab Emirates, while Russia and India are developing a separate digital currency settlement plan for trade.

Treasury Secretary Scott Bessent has defended the credibility of the U.S. financial system, asserting that the U.S. remains the global leader. However, Bessent recently launched Operation Economic Outcast to strangle Iran's economy, acknowledging that the move could potentially "blow up the global financial system." Meanwhile, European Central Bank President Christine Lagarde warned that erratic U.S. policymaking could trigger a "global euro moment."