Why are we hearing of the ‘Triffin Dilemma’ all of the sudden?
Left: Robert Triffin
Recently many commentators have been starting to talk about the Triffin Dilemma, which states that there are dangers for the dollar in her role as international reserve currency.
Triffin formulated this issue in the 1960s, when the dollar was still backed by Gold. It’s no longer relevant these days. It is circulated as a meme to further the agenda of the dollar’s demise and the advent of a new currency order.
Wiki: “This dilemma was first identified by Belgian-American economist Robert Triffin in the 1960s, who pointed out that the country whose currency foreign nations wish to hold (the global reserve currency) must be willing to supply the world with an extra supply of its currency to fulfill world demand for this ‘reserve’ currency (foreign exchange reserves) and thus cause a trade deficit.“
The basic rationale is clear: Triffin says the nation offering the reserve currency must allow a trade deficit to export its currency to those who need it.
This is indeed the case under a Gold Standard, as was the case back then, when the US Dollar was convertible to Gold. For foreigners only. The whole idea of a Gold Standard is to have a constant supply. It cannot be printed and what is exported cannot be used at home.
The Triffin Dilemma is basically an explanation for the fact that the US was bled dry of its Gold in the post War years, until Nixon finally ended the one sided transfer.
However, today’s dollars are printed at will and the Fed most certainly does not have any problems providing all the dollars the world will ever need. Quite the opposite, actually: the day is not long before trillions of dollars that are no longer needed (because the dollar is losing its reserve currency status) will be repatriated. It will be interesting to see how the Fed intends to mop those up.
Furthermore, the Triffin Dilemma automatically assumes that a trade deficit is the only way of getting the money into international circulation. But this is nonsense: the Fed is well capable, and does so routinely, of ‘lending’ out massive sums to its international banker buddies, who see to it the money leaves the US asap.
So the Triffin Dilemma does not look very relevant these days. Why then this sudden mini hype? The answer is in the same wiki entry:
“In the wake of the financial crisis of 2007–2008, the governor of the People’s Bank of China explicitly named the Triffin Dilemma as the root cause of the economic disorder, in a speech titled Reform the International Monetary System. Zhou Xiaochuan’s speech of 29 March 2009 proposed strengthening existing global currency controls, through the IMF.
This would involve a gradual move away from the U.S. dollar as a reserve currency and towards the use of IMF special drawing rights (SDRs) as a global reserve currency.
Zhou argued that part of the reason for the original Bretton Woods system breaking down was the refusal to adopt Keynes’ bancor which would have been a special international currency to be used instead of the dollar.”
It is hard to imagine a more outright and blatant promotion of world currency than this one by China’s Central Banker.
Here we see why we were earlier discussing that ‘the US Empire is not the Money Power‘.
The Money Power owns the dollar and through it the US Empire. But it’s done with the dollar as reserve currency and with the Empire too.
Zhou is doing their bidding by resisting the Empire, while promoting world currency, while his ‘national interest’ (in Machiavellian terms) would be to promote the Yuan as an alternative.
Wiki goes on to report on how the Triffin Dilemma meme was picked up by ‘economists’ and promoted by CFR outlet ‘Foreign Affairs’ and the rest is history.
This story certainly fits the wider picture of how the dollar’s status is changing rapidly. Yesterday we discussed several other memes that are promoting the same agenda. Here’s an article by Ambrose Pritchard-Evans, I linked to it earlier, but this guy is an important framer of the debate and he’s basically saying the Gold Standard is a done deal and that it’s just a matter of working out the details. He’s also talking about the Triffin Dilemma.
The future is today and it seems things are moving even faster than we may think.