Core Viewpoint - The article highlights an overlooked hidden debt crisis related to the excessive expansion of dollar "hidden debt," which has reached a global balance of $98 trillion by the end of 2024 [3][14]. Group 1: Hidden Debt and Its Mechanism - Hidden debt primarily refers to the dollars raised by banks and enterprises through "foreign exchange swaps" [4]. - Foreign exchange swaps are essentially interest rate derivatives used to exchange local currency for foreign currency and then swap back at an agreed rate after a certain period [5]. - This mechanism is commonly used by multinational companies to mitigate exchange rate risks or for short-term borrowing [5][6]. Group 2: Scale and Risks of Foreign Exchange Swaps - The scale of foreign exchange swaps has grown significantly, with $98 trillion in dollar debt being hidden from balance sheets due to current accounting rules [15]. - Ignoring off-balance-sheet debt can lead to underestimating leverage levels, which poses risks similar to an individual ignoring personal loans while continuing to borrow [15][16]. - Approximately 80% of foreign exchange swap funds are due within one year, with 30% being overnight contracts, creating a cycle of short-term debt pressure [18]. Group 3: Systemic Risks and Historical Context - The reliance on short-term borrowing through swaps can lead to a liquidity crisis if economic conditions change, as seen during the 2008 financial crisis and the 2020 COVID-19 pandemic [21][22]. - Historical precedents indicate that concentrated dollar debt maturities can trigger systemic risks, necessitating emergency liquidity measures from central banks [22]. Group 4: Current Market Conditions - As of March 2025, major Japanese banks are in a precarious position with foreign currency deposits less than loans, indicating potential risks if dollar liquidity issues arise [23][24]. - Despite the increasing likelihood of dollar interest rate cuts, market uncertainties persist, suggesting that a short-term liquidity crisis could still occur [26][27]. - The article advises holding more funds in safe-haven assets rather than risky financial assets during this uncertain period [28].