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Triffin Paradox

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Submitted By spirit09
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“HOLD YOUR POCKET OPEN” Inc., or
The small recipe for the GLOBAL ECONOMIC CRISIS
WHAT’S THE PROBLEM? (No brainwashing )
The Triffin dilemma (or the Triffin paradox) is a theory that when a national currency also serves as an international reserve currency, there could be conflicts of interest between short-term domestic and long-term international economic objectives. This dilemma was first identified by Belgian-American economist Robert Triffin in the 1960s, who pointed out that the country whose currency foreign nations wish to hold (the global reserve currency) must be willing to supply the world with an extra supply of its currency to fulfill world demand for this 'reserve' currency (foreign exchange reserves) and thus cause a trade deficit.
The use of a national currency (i.e. the U.S. dollar) as global reserve currency leads to a tension between national monetary policy and global monetary policy. This is reflected in fundamental imbalances in the balance of payments, specifically the current account: some goals require an overall flow of dollars out of the United States, while others require an overall flow of dollars in to the United States.
The Triffin dilemma is usually used to articulate the problems with the U.S. dollar's role as the reserve currency under the Bretton Woods system, or more generally of using any national currency as an international reserve currency.
There was a solution to the Triffin dilemma for the U.S.: reduce the number of dollars in circulation by cutting the deficit and raising interest rates to attract dollars back into the country. Some economists believe both these tactics, however, would drag the U.S. economy into recession (!!! NO WAY, OF COURSE).
Source: Wiki

Suny Lewin Institute – Google Img Cache / Federal Reserve Bank of St. Louis. (2012).

HOW TO EARN ON THIS?
Seigniorage is the difference

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