Bitcoin will solve Triffin’s dilemma

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As the United States sees wealth disparities increase due to the dollar’s status as a global reserve currency, Bitcoin offers an alternative.

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“The Triffin’s Dilemma or Triffin’s Paradox is the conflict of economic interest that arises between short-term national goals and long-term international goals for countries whose currencies serve as global reserve currencies. This dilemma was identified in the 1960s by the Belgian-American economist Robert Triffin, who stressed that the country whose currency, being the world reserve currency, foreign nations wish to hold, must be ready to provide the world with a additional supply of its currency. to meet the global demand for these foreign exchange reserves, resulting in a trade deficit. – Wikipedia

The United States, due to its position as the world’s reserve currency, suffered the effects economist Robert Triffin predicted in the 1960s.

Due to the need to supply the world with dollars, the United States has persisted in providing a constant flow of dollars to the world for the past 80 years, especially in the last 50 years after the abolition of the gold standard by President Nixon.

Below, the domestic trade balance since 1960:

With floating fiat currencies, there was a global incentive for countries to depreciate their local currencies against the dollar to stimulate economic growth and export markets.

The artificial supply that was placed on the US dollar has been fantastic for capital markets in the United States, as foreign capital that has been invested in treasury bills has also purchased US stocks and real estate, fueling the great secular boom in assets observed over the past 40 years.

The Federal Reserve and the US Federal Government are stuck. If they wish to remain the world’s reserve currency, then the status quo of the ever-growing disparity between the haves and have-nots will persist, and domestic manufacturing will continue to move to cheaper regions with weaker currencies (and therefore, cheaper labor).

Reserve currency status can be seen as a blessing and a curse. On the one hand, the United States has been able to make its ‘paper money’, the dollar, the country’s main export for the past four decades, while still being able to purchase basic commodities. and durable goods to other countries.

On the other hand, due to the inability of the current account deficit to correct itself (i.e. the dollar weakens considerably), the American working class continues to bear the brunt of the burden. damage.

Triffin’s dilemma? Bitcoin corrects this.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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