Podcast

Triffin Dilemma: Quick Part 2 - E227

Triffin and trade deficits, why Lyn Alden's Triffin-style premise is incorrect.

Hopefully this episode helps you understand the argument people are making and if it holds water next time the invoke the Triffin Dilemma.

After last episode, Lyn Alden said:

My article separates capital account triffin vs current account triffin, and references the same BIS paper.

The podcast doesn't address the arguments of my article, and attributes arguments to me that are actually the opposite of my position. Not sure he read my article.

My article separates capital account triffin vs current account triffin, and references the same BIS paper.

The podcast doesn't address the arguments of my article, and attributes arguments to me that are actually the opposite of my position. Not sure he read my article.
— Lyn Alden (@LynAldenContact) February 28, 2021

I respect Lyn and appreciate her content. I've wanted to react to this very article for several months now, but never got around to it. Apologies if I'm misunderstanding the premise of her arguments.

In this episode, I attempt to clear up why I think she is using a Triffin-style premise and my problem with the Triffin dilemma in general. I've noticed people using Triffin-style arguments even more in the past couple of weeks, and it is very important that we have the tools to evaluate if this is the proper framework from which to build an understanding of the financial system.

I quote heavily from Lyn and the BIS in this episode, drilling down the essense of the problem with the premise of deficits being the basis for foreign reserves of the dollar. Short answer, they aren't. There's very little evidence that deficits matter to foreign reserves at all, or that they play more than a very small role. The single most important source of foreign reserves is the eurodollar market.

If we clear our minds of the role of deficits, then what is the argument for the unsustainability of the USD system? Well, it boils down to the end of a gigantic global credit bubble enabled by the Pax Americana.

Hope this helps clarify.

Stay tuned for the next episode on NFTs and fungibility. It will be a satisfying episode.