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Why are we hearing of the ‘Triffin Dilemma’ all of the sudden?

February 1, 2013

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.

Bloomberg, the dying Fed and the birth pangs of the new Gold Standard
The US Empire is Not the Money Power!
Germany, the Money Power’s Golem in Europe

  1. Dugan King permalink

    Returning to the gold standard is a return to phase one of the Central Banking Cartel’s fractional reserve system a.k.a. counterfeiting the public credit.   

    They are apparently crashing the dollar on purpose and this will take many currencies down at the same time.  

    What we really need is to eliminate Central Banking and the fractional reserve system entirely and level the economic playing field with alternative, locally managed mediums of exchange interconnected through an international clearing house.  

    A single one world currency will most certainly result in global tyranny.  

    Money issued as a credit instead of a debt, with a monetary standard established by fixing a global value for one hour of basic labor is the logical and honest answer to this monetary nightmare.  A free labor market simply cannot compete with a slave labor market when it comes to pricing goods. That is the primary cause of trade imbalances.  

    Time is money.  It is a much better standard than gold, which is monopolized by the dishonest Rothschild Central Banks.  A level economic playing field will lift all boats.   Dugan King


    • right from the horse’s mouth itself name789. It’s not like we’re making anything up, we’re just picking up on their relays……

      • (In 1988 the Canadian Intelligence Service re-published “Get Ready for the Phoenix”; where was mentor Makow [and his interest in the subject] in those days ?)

        • I don’t know. But I’m pretty sure you don’t want to know what I was up to at the time….

          • What were you doing at the time?

          • I was interested in the subject, so I was a subscriber to Canadian Intelligence Service (monthly news-letter), and read the article then

            Mentor Makow only became interested in the subject when Rense told him there is money in it, and the internet makes it easy (to copy other people’s work, bullshit the ignorants and milk them)

            You, in 1988, were a future drug-induced hippie

  2. The Triffin Dilemma or maybe more accurately; the Triffin Paradox, is a very real conflict of interest as it pits the monetary needs of a sovereign nation against the needs of international finance. The U.S. has inexplicably run a trade deficit for close to 40 years which would be impossible for any other nation to endure. —

    The conflict is a powerful indictment against the central banking scheme that oppresses most of the world today. Henry C K Liu explains the paradox:

    Central banking insulates monetary policy from national economic policy by prioritizing the preservation of the value of money over the monetary needs of a sound national economy. A global finance architecture based on universal central banking allows an often volatile foreign exchange market to operate to facilitate the instant cross-border ebb and flow of capital and debt instruments. The workings of an unregulated global financial market of both capital and debt forced central banking to prevent the application of the State Theory of Money (STM) in individual countries to use sovereign credit to finance domestic development by penalizing, with low exchange rates for their currencies, governments that run budget deficits.

    For a short time, dollar hegemony may have benefited the U.S. but over the long haul it has gutted the nations once powerful manufacturing base. And it has also damaged the economies of most participants struggling to secure dollar reserves. Liu goes on to explain:

    By making STM inoperative through the tyranny of exchange rates, central banking in a globalized financial market robs individual governments of their sovereign credit prerogative and forces sovereign nations to depend on external capital and debt to finance domestic development. The deteriorating exchange value of a nation’s currency then would lead to a corresponding drop in foreign direct or indirect investment (capital inflow), and a rise in interest cost for sovereign and private debts, since central banking essentially relies on interest policy to maintain the value of money. Central banking thus relies on domestic economic austerity caused by high interest rates to achieve its institutional mandate of maintaining price stability.

    The alternative, never discussed, is to replace central banks with some form of national banks. Again, I’ll rely on Liu to explain:

    A national bank does not seek independence from the government. The independence of central banks is a euphemism for a shift from institutional loyalty to national economic well-being toward institutional loyalty to the smooth functioning of a global financial architecture. The international finance architecture at this moment in history is dominated by US dollar hegemony, which can be simply defined by the dollar’s unjustified status as a global reserve currency. The operation of the current international finance architecture requires the sacrifice of local economies in a financial food chain that feeds the issuer of US dollars. It is the monetary aspect of the predatory effects of globalization.

    Hegemony exploits all foolish enough to follow such a regime. It is nothing more than nation states becoming client states to the international bankers in giving up their sovereignty. Central banks are franchises of the ruling corporation (BIS) much like McDonald’s franchises restaurants around the world.

  3. REN permalink

    Dr. Michael Hudson in his book, “Super Imperialism” also discusses how dollar hegemony works. Deficit spending on the Vietnam War allowed surplus dollars to accumulate in central banks. Dollars found their way to central banks, and from there they could either buy American goods, or buy Gold, or buy TBills. European central banks bought gold rather than balancing trade with purchase of goods. Because after all, if American goods were bought, then that would be fewer goods bought from Europe by Europeans. Europeans rightly felt that deficit dollars spent in Europe would harm their economy with demand spending causing inflation. Nixon felt that America was shouldering the burden against Communism, and dared Europe to buy American goods instead of American Gold. He closed the gold window, and ultimately Europe blinked, and started buying TBills. The TBill economy was born, along with the Washington Consensus.

    Deficit spending on some 800 military bases and various wars causes dollars to flood into those countries with military installations. Those dollars then find their way to central banks, then return to U.S. usually to buy a TBill, then go on to the military industrial complex in U.S., then may vector back to Europe/Asia/Middle East. The countries of the former Soviet Union find themselves surrounded with American military installations. Those countries without American military bases, need to acquire dollars to underpin their currency and to buy oil. To do this, they must export goods and services in a race to the bottom. This hollows out main street American industry as the American middle class are thrown into competition with desperate exporters.

    If there are not enough dollars on hand in foreign economies, private banks and financial sharks (like Goldman Sachs) will do a bear raid, and bust out an economy. The Ruble Collapse, Mexican Peso Collapse, Asian Currency Crises were all cases of bear raiders shorting currencies of countries that did not have enough dollar reserves to repay their dollar loans. In a desperate bid to acquire dollars, the foreign currency is thrown onto the exchange market, where it is then attacked by shorting bear raiders. After the currency has collapsed, usury financial predators will then swoop in and buy up the country cheap using dollars they can pop into existence from a private usury bank.

    Another method is pumping and dumping an economy with flows of dollars, and then retracting the flows, hence causing depressions and allowing the country to be bought up cheap. “Confessions of an economic hit man” describe this process.

    The clear lesson is that a Sovereign Country should never allow its debt to be denominated in a foreign currency. Next to having no usury, the number 2 prime directive would be: DO NOT DENOMINATE YOUR DEBT IN A FOREIGN CURRENCY.

    All hyperinflations are due to money exchange value collapsing, where the currency cannot be defended. For example, in Weimar they could not acquire enough hard currency to pay for Versaille debts. Allies (France and England) in turn needed dollars from Germany to pay inter-ally debts to Washington. Washington in turn, did not allow Germany to export goods to acquire needed dollars.

    Dollar hegemony and Washington Consensus are making the world seek out alternatives. Putin especially does not want to be surrounded, and hence formed the BRICS. Already, bourses and trading mechanisms are being created such that goods may be traded outside of the dollar system.

    Japan was recently invited to the BRICS, but declined. My guess is her security relationship with the American Military was more paramount.

    Keyne’s bancor scheme is actually a good idea. It prevents foreign currencies from circulating in economies. Think of it as a floating currency that intermediates all others. The real question is who controls the bancor system, the people and their elected representatives, or private money power? The bancor system design can exist as a creature of the law and be open and transparent. Politicians would wrangle over trade imbalances and exchange rates under clearly defined rules. Keynes was thwarted by the usual suspicious money power agents at Bretton Woods. With a Bancor system, China would find it impossible to engage in mercantilist imbalance of trade and Yuan manipulation. Washington would find it impossible to engage in dollar hegemony.

    • DO NOT DENOMINATE YOUR DEBT IN A FOREIGN CURRENCY. That’s a key point, thanks for this reminder!

      The problem with the bancor is like you said: who controls it. It’s quite clear that it’s a globalist unit of account, just like the ECU before EMU and the Euro. A portal to full blown World Currency. The US was not ready to be incorporated at the time: the twenties had already shown the US was not interested in the League of Nations and they were certainly not going to forgo the spoils of war. After all had been said and done the US controlled 50% of the World’s economy in 1945. It took 70 years and countless wars and an incredible number of trillions sucked into black budgets to bring the US to the pathetic state it is in now, almost ready to bow down and take its place among the serf nations…….

      • REN permalink

        I will agree that if we have NO USURY, then it would be possible for currencies to be held in other countries, and said currency would not grow unnaturally and exponentially. In that case we would not need a bancor system, as the debts would be manageable. But it seems most people cannot wrap their mind around the concept of zero interest. With positive interest, we should have some sort of third circulatory system, like a bancor, to isolate debts and debt compounding. Some history of the negative effects of debts:

        Sparta borrows Gold at interest from Persia, builds a Navy and attacks and defeats Athens. Athens is put on the debt hook and ultimately goes broke to Persia. Alexander the Great ascends to the throne, finds his treasury empty and takes on Persia and the rest of the near Eastern world…for the gold. The loss of the Gold flows were due to usury borrowing across international boundaries.

        The Jews are kicked out of England and allowed to take their “floating currency” with them, and Henry finds he cannot be paid taxes, as there is no money. He invents the Talley Stick System. France kicks out their Jews about 15 years later with the same deal, France keeps the land, and the Jews take their floating currency – gold. France then cannot recieve taxes, as the money supply has collapsed. Phillip then sacks the Templars and acquires their Gold.

        International debts do that, the usury grows and becomes untenable. Weimar’s hyperinflation was a function of the three way trade imbalance. Germany borrowed credit from wall street by exchanging a bond. That credit ultimately paid the triangular flow of debts, until it couldn’t any more, and then hyperinflation. The FED kept rates low in the U.S, to help out Europe, but ultimately it caused too much credit and then the 1929 crash.

        In modern times we have Greece issuing bonds to European banks (mostly German). The bond is swapped for new Euro Credit money, then Euro is spent into the Greek economy. Said Bond is rolled over with compounding usury until it becomes unpayable (war or collapse).

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