what is the old thesis that casts doubts on the dollar on

According to the double dilemma published in the book Gold and the Dollar Crisis, how the globe needs dollars for its commercial (and economic) functioning, United States, as a single issuer, “It is doomed to chronic deficits due to increased dollar issuance”, explained a BBC article based on the European study.

Robert triffin

Belgian economist Robert triffin sowed strong opinions on the US currency

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In their search for different supporters on the dilemma situation, the media turned to Evi Pappa, associate professor of economics at the Carlos III University in Madrid, who said: “In 1959, Triffin presented to Congress his’ double dilemma ”: Yes. Eliminating their “trade deficit” would deprive the world economy of “the international liquidity necessary for the expansion of world trade”.

Four decades later, Triffin’s claim is back on the table for discussion due to the incursion of Bitcoin, Dogecoin, Ethereum, and Ripple, among others, and their ability to ‘decentralize’ the economy.

“In a nutshell, Triffin argued that there are conflicts and difficulties when a national currency becomes an international public good,” Pappa argued.

While professor of economics at IESE, Javier Díaz-Giménez assured that the American country has a unique privilege, “what is called an exorbitant privilege”, he declared.

“The planet has dollars and uses them to buy and sell. For the United States, this is an advantage, because they can run deficits without weakening the currency, ”he added.

In this sense, the US trade deficit increased by 17.6% in 2020, which was predicted almost 60 years ago by Henry H. Fowler, United States Secretary of the Treasury from 1965 to 1968: “Providing reserves and trade for the whole world is too much for one country and one currency.”

“In other words, since he is the issuer of the reserve currency, The United States has the exorbitant privilege of borrowing at unsuspected limits without submitting to the macroeconomic discipline that corresponds to it “, meanwhile, said economist Miguel Otero Iglesias in an article by the Royal Institute of Elcano.

“The Triffin dilemma works differently today because there is a US deficit trend that can cause the dollar to devalue. It would be the contemporary form of this famous dilemma ”, underlined the Colombian economist Jose Antonio Ocampo.

“So when there is a devaluation of the dollar, there are a lot of people overseas who lose resources, because, say, their dollars are worth less in their local currency. Generally, when there is a depreciation of the dollar due to all these financial phenomena, there is also a depreciation of the Latin American currencies ”, States.