THE title is a deliberate intrigue, meant to evoke the inevitability of both Fallout and Fallin — a duality often at play in real-life events, particularly those with global repercussions. Fallout symbolises the aftermath: the economic tremors, unintended spillovers, and long-term disruptions that trail major geopolitical or financial decisions. Fallin’, on the other hand, captures the decline — whether of dominance, stability, or prestige — that shadows systems whose foundations are beginning to erode. In the case of countries dumping US government bonds, both forces are not only at play, but they are also fast-tracking.
What we’re witnessing is more than a shift in investment strategy. It’s a recalibration born out of mistrust of US fiscal discipline, of its geopolitical detachment, and of the dollar’s neutrality as the world’s reserve currency. Underneath it all is something more consequential: the slow disintegration of the financial framework that has underpinned global commerce since the end of World War II. The pace of that disintegration appears to be accelerating.
Understanding Bonds and What’s Being Dumped
To appreciate the magnitude of this shift, one must first understand the structure of bonds — specifically US Treasuries. A bond is defined by two constants: face value and coupon value. These remain fixed until maturity. The interest yield is calculated as:
Yield = CV / FV
This yield is locked in if held to maturity. However, in the open market, bond prices fluctuate due to supply and demand. When a country sells a large volume of US bonds, the supply spikes, prices drop, and the yield, effectively the borrowing cost, rises.
Currently, the US pays roughly $950 billion in interest annually on its $36.2 trillion national debt. About 20 per cent of that debt is foreign-held, meaning over $200 billion in interest payments goes to other countries every year. For these nations, US bonds are not just safe; they’re lucrative.
So, when countries begin dumping these bonds and shifting the proceeds into gold or other assets, they voluntarily relinquish a steady and significant income stream. Since gold yields no interest or dividend, such moves are often more political than economic, signalling protest but incurring financial loss. For nations dependent on external earnings, this shift borders on self-inflicted damage.
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The cornerstone cracks
FOR decades, US Treasuries were the undisputed cornerstone of global financial security. Their appeal lay in three things: unmatched safety, reliable returns, and high liquidity. Countries like China, Japan, Switzerland, and Saudi Arabia bought Treasuries to store value, protect against market volatility, and earn stable income. This demand allowed the US to borrow cheaply, funding everything from wars to stimulus cheques without triggering inflation or investor flight. That era of what former French president Valéry Giscard d’Estaing called the US’s ‘exorbitant privilege’ is now under threat.
The turning point came with the Western response to Russia’s invasion of Ukraine. The US and allies froze nearly $300 billion of Russian central bank reserves held in Western banks. While politically justifiable, the decision shattered the illusion of neutrality in global finance. Sovereign reserves were no longer sacrosanct — they could be frozen or seized based on geopolitics.
The message was loud and clear: US financial instruments, once seen as apolitical safe havens, could now be weaponised. That spooked capitals from Riyadh to Beijing.
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Decline in trust, rise in yields
COMPOUNDING the anxiety is America’s own fiscal trajectory. The US is running a national debt of $36.2 trillion and counting, nearly 20 per cent of which is held by foreign creditors. Moody’s has downgraded US Treasuries from their once-gold-standard AAA rating to AA1, citing fiscal vulnerabilities. Treasuries, once the benchmark for predictability, now carry risks that central banks, especially those in emerging markets, are increasingly reluctant to bear.
As a result, we’re seeing a global retreat. China has steadily pared down its holdings. Russia has exited the market entirely. Saudi Arabia is diversifying its reserves. Even Japan, long the largest foreign holder of US debt, has begun to reduce exposure.
But these moves aren’t just about reducing dollar dependency. They signal a broader desire for strategic and monetary autonomy, freedom from the leverage implicit in US-centric finance.
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Alternatives and their limits
TO THIS end, countries are exploring alternatives. Central banks are hoarding gold, forging regional currency arrangements, and experimenting with digital currencies. Bilateral trade agreements in local currencies, once fringe, are now tools of economic signalling.
Yet none of these alternatives are perfect. Gold, for instance, offers no income, limited liquidity, and no practical use in trade. Digital currencies are in their infancy. BRICS-issued bonds lack trust, scale, and a legal framework for enforcement. And regional instruments, while growing in popularity, don’t yet offer the depth of US financial markets.
Crucially, US Treasuries remain the most secure, liquid, and convenient tool for macroeconomic stabilisation. Unlike physical assets like gold, Treasuries are held digitally, registered under the owner’s name, and protected by US law and the full faith and credit of the US government. Their resilience and transparency give them unique advantages, especially during crises.
In fact, when markets panic, capital still flows into Treasuries, not gold, not yuan bonds, and not BRICS paper.
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Ripples and risks
THE growing disinterest in US bonds is already having consequences. As demand weakens, the US must offer higher yields to attract buyers — raising its cost of borrowing. This pressure spreads quickly across the domestic economy, inflating interest rates for consumers, corporations, and local governments.
Globally, the impact is sharper. For emerging markets that rely on dollar-based loans, rising yields can trigger recessions, capital flight, or even defaults. The dollar’s dominance means even small tremors in Treasury markets can unleash global financial stress.
More broadly, the global community’s economic dependency and strategic vulnerabilities were vividly exposed during the recent wave of unilateral impositions of tariffs by President Donald Trump. The episode highlighted how even large economies remain tethered to US decisions, with few mechanisms to push back effectively. The same asymmetry is at play with Treasuries: dumping them may signal discontent, but it doesn’t change the structure of global finance overnight.
And the US isn’t immune. A weakening dollar may help exports but drives up import costs and fuels inflation. For foreign central banks, it erodes the real value of dollar reserves, intensifying the incentive to diversify. This creates a feedback loop: less demand for Treasuries begets more selling, which raises yields, increases volatility, and deepens uncertainty. If confidence in US Treasuries continues to erode, the fallout could be profound — hitting equities, commodities, and sovereign bonds worldwide.
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The hidden opportunity
PARADOXICALLY, the waning appeal of Treasuries might force Washington into long-overdue fiscal reform. Deprived of cheap credit, the US may finally be compelled to balance budgets, scale back spending, and rebuild financial credibility. Market discipline, rather than political will, may be the force that restores stability. If debt servicing starts to crowd out essential spending on defence, infrastructure, or social programmes, the pressure to act will be unavoidable. That moment of reckoning could be painful but necessary.
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Strategic realignment, not severance
STILL, the countries offloading US bonds aren’t fully exiting the system; they’re repositioning within it. The global economy remains tethered to the dollar. The US financial system, its capital markets, tech ecosystem, and regulatory framework are deeply embedded in global commerce.
The fantasy that BRICS currencies could displace the dollar in global trade remains just that — a fantasy. The dollar isn’t just a medium of exchange. It’s the ticket for participation in the modern financial and technological order. One cannot dump Treasuries and simultaneously expect unrestricted access to US capital, IP, or defence guarantees.
So far, Treasury dumping hasn’t caused widespread disruption — a testament to the strength of global institutions and the resilience of the dollar. But the underlying discontent is real, and the structural stress is mounting.
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Conclusion: a measured path forward
TREASURIES are not just financial instruments — they are geopolitical assets. Holding them signals alignment with a US-led order. Selling them in protest may feel empowering, but it risks higher domestic borrowing costs, currency instability, and diplomatic consequences.
Crucially, US Treasuries remain the most secure, liquid, and convenient tool for macroeconomic stabilisation. Unlike physical assets like gold, Treasuries are held digitally, registered under the owner’s name, and protected by US law and the full faith and credit of the US government. Their resilience and transparency give them unique advantages, especially during crises. In fact, when markets panic, capital still flows into Treasuries — not gold, not yuan bonds, and not BRICS paper.
Wholesale rejection of US bonds is not a path to sovereignty; it’s a path to disorder. The smarter route is strategic diversification. Regional currency pacts, credible digital alternatives, and commodity-pegged instruments can reduce risk without undermining global stability. But these require long-term trust, cooperation, and credible enforcement, rare commodities in today’s fractured world.
In short, we’re not witnessing a clean break but a messy, slow-motion realignment. The forces of fallout and fallin’ are in motion, but their trajectory depends on the choices made now by Washington, by Beijing, and by every capital caught in between.
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ÌýDr Abdullah A Dewan is a former physicist and nuclear engineer at the BAEC and professor emeritus of economics at Eastern Michigan University, USA. Acknowledgement: This piece is inspired by an accomplished heart surgeon, Dr Masoom Siraj of Ibrahim Cardiac Hospital and Research Institute, Dhaka, who asked me to explain the potential pitfalls of dumping US bonds on the global economy.