Overcoming the Triffin dilemma today: A plan for a stable international financial architecture
The essential message Triffin tirelessly sent to economists and policymakers is that once a national currency is used as foreign reserve by many other countries, asymmetries are resulting that create biases in the policy-mix of the issuer of reserves not only by exempting it from external monetary discipline, but also by provoking significant spillovers on global liquidity conditions, which tend to become suboptimal and unmanageable. He warned that this feature exposes the global economy to unnecessary costly, instability risks. More precisely Triffin viewed these spillovers as symptoms of systemic incoherence, leading him to the conclusion that an International Monetary System based mainly upon a key-currency such as the dollar contains what he called a “built-in destabilizer” i.e. an endogenous generation of global monetary waves that constitute a systemic cause for recurrent global crisis.
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