Frank Schmid · 30 October 2026

The Dynamics of Safe Asset Status: A Dynamic Simulation of United States Hegemony, Transition, and Multipolarity

1Introduction

What the paper asks and answers: fiscal deterioration alone does not end United States safe asset status; joined with institutional erosion it produces a run at 2043, with debt at 380 percent of GDP by 2055.

2043
Run year under Institutional Erosion
380
Debt, percent of GDP, Institutional Erosion, 2055

2Literature Review

Three literatures set the frame: information insensitivity and coordination on the demand side, strategic supply of safe assets, and the fiscal arithmetic of sustainability.

3The Model

Two games joined by five feedback channels, with the Nurkse instability index linking market shares to coordination noise.

N=100⋅(s(1)+s(2))⋅(1−s(1)−s(2)s(1)+s(2))N \;=\; 100 \cdot \bigl(s_{(1)} + s_{(2)}\bigr) \cdot \left(1 - \frac{s_{(1)} - s_{(2)}}{s_{(1)} + s_{(2)}}\right)

The Nurkse instability index over the two largest issuer shares (the paper’s equation 6): near zero under hegemony, 100 under an even duopoly.

Figure 1: Cournot equilibrium shares of safe-asset supply at t = 0 (2025).

Figure 1: Cournot equilibrium shares of safe-asset supply at t = 0 (2025).

4Calibration

The starting state is hegemonic: approximately 92 percent United States supply share, a Nurkse index of approximately 12, and a convenience yield of approximately 54 basis points against the 73 basis point ceiling.

92
United States supply share at t = 0, percent
12
Nurkse instability index at t = 0
54
Convenience yield at t = 0, basis points
73
Convenience-yield ceiling, basis points

5Scenario Analysis

Terminal states at 2055 across five scenarios: four end with status intact; Institutional Erosion runs at 2043.

ScenarioDebtCap.Ovh.r − gInv. $σStatus
Congressional Budget Office Baseline24116180+2.80800.131Safe
Fiscal Consolidation521750−2.78840.129Safe
Institutional Erosion380150230+6.83540.121*Run at 2043
European Union Fiscal Union23616175+2.69800.173Safe
China Opens Capital Account24116180+2.80800.131Safe

Summary results at 2055 (the paper’s Table 4): debt, capacity, and overhang in percent of GDP; r − g in percent; the dollar invoicing share in percent. *Erosion σ falls back to approximately 0.12 after the run because the United States collapses as a supplier, restoring hegemonic structure.

Debt at 2055 by scenario, percent of GDP; each bar carries its printed value.

r − g at 2055 by scenario, percent; the one negative value stands below the zero line, drawn in amber.

Figure 2: United States debt trajectories across scenarios, 2025–2055.

Figure 2: United States debt trajectories across scenarios, 2025–2055.

6Sensitivity Analysis

The feedback parameters set the timing of the run, not its occurrence; the Monte Carlo brackets the run year at 2036 through 2049 between the tenth and the ninetieth percentile.

2036
Run year, tenth percentile, Monte Carlo
2043
Run year, median, Monte Carlo
2049
Run year, ninetieth percentile, Monte Carlo
Figure 7: expected run year across the (σ₁, λ) parameter grid, Institutional Erosion scenario.

Figure 7: expected run year across the (σ₁, λ) parameter grid, Institutional Erosion scenario.

Figure 8: Monte Carlo distribution of realized run years over 10,000 draws.

Figure 8: Monte Carlo distribution of realized run years over 10,000 draws.

7Critical Assessment

The Cournot–Nurkse–σ cascade is the model’s contribution; cyclical dynamics and private safe assets lie outside it.

8Conclusion

Status is more resilient than the fiscal trajectory suggests and less resilient than the There-Is-No-Alternative (TINA) effect suggests.