Triffin: dilemma or myth?

This paper starts by analysing what Triffin actually argued and his impact on policy-makers at the time. His revival of the interwar hypothesis of gold scarcity and the consequent threat of deflation was enormously influential. The paper then compares the position of the United States after World War II to that of the United Kingdom before World War I. It appears that the position of the Bank of England at the turn of the century was no better than that of the United States when Triffin wrote. The paper poses the question of whether the breakdown of the Bretton Woods system that Triffin predicted could have been avoided by a different set of feasible policies in the United States in the 1960s and the 1970s.

The paper then proceeds to a critical review of subsequent (mis-) interpretations and extensions of Triffin:

• “Current account” or “bastard” Triffin: the hypothesis that the reserve role of the dollar has forced the United States to run a current account deficit. This is the most popular current rendering of Triffin, which is not only anachronistic but is also debatable in its own terms.
• Fiscal Triffin: the hypothesis that a demand for safe assets will either remain unsatisfied, with adverse consequences, or will, because focused on US Treasury securities, force the US fiscal policy into an unsustainable trajectory.
• Generic Triffin: the hypothesis that there is only an accidental convergence of the interest of the national issuer of an internationally used currency and the broader global interest.

The paper concludes with an assessment of the legacy of Triffin.