A lot of the increase in global debt has come from emerging market (EM) economies, especially China. In fact, a record amount of EM debt has accumulated during the past decade, mostly in dollars. A large portion of that debt is therefore denominated in U.S. dollars.
That's why I've long argued that the first shoe to drop in the next crisis would likely be EM debt.
Borrowing is not a problem when dollars are cheap. Low interest rates mean the cost of servicing that debt is low.
The problem starts when the Fed raises rates or the dollar strengthens, even temporarily. The more the dollar rises, the more EM currencies and related markets fall. Dollar-denominated debt then becomes too expensive to repay or service as the dollar rises relative to EM currencies. Before long default becomes the only viable option.