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Triffin reloaded: The matrix of contradictions around global quasi-state money

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  • Schwartz, Herman M.

Abstract

What explains the US dollar's role in the global economy and the tensions affecting its likely persistence? Most analyses start from Triffin's dilemma, which accurately captured specific but partial tensions of a global monetary system based on essentially fixed exchange rates, gold backing for its core currency, and relatively robust capital controls. Triffin's approach, and those based on it, struggles to explain the tensions in a system with floating exchange rates and fiat money, because Triffin and successors assume a commodity theory of money, a loanable funds model for credit creation, and the "triple coincidence" of monetary, legal, and economic zones. Approaching the question from different premises - chartalist money, endogenous credit creation, and interlocked global balance sheets - enables us to see four factors behind the antinomies or dilemmas that structure the dynamics and durability of US dollar centrality. Those four factors are adequate credit creation and thus global aggregate demand growth, current account deficits for the core, domestic legitimacy in major economies, and the dollar's status as global quasi-state money.

Suggested Citation

  • Schwartz, Herman M., 2024. "Triffin reloaded: The matrix of contradictions around global quasi-state money," MPIfG Discussion Paper 24/3, Max Planck Institute for the Study of Societies.
    • Handle: RePEc:zbw:mpifgd:300666
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    Keywords

    Balance of payments; foreign debt; geo-economics; international financial system; money; power; reserve currency; Auslandsverschuldung; Geld; Geoökonomie; internationales Finanzsystem; Leitwährung; Macht; Zahlungsbilanz;
    All these keywords.

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