Wednesday, January 14, 2009

The Triffin Dilemma of supplying the world’s reserve currency

Global imbalances & the Triffin dilemma-John Kemp

First noted by Yale economist Robert Triffin. In a famous warning to Congress in 1960, Triffin explained that as the supplier of the world's reserve currency the United States had no choice but to run persistent current account deficits...The United States is not the first country to discover the perils..The United Kingdom experienced chronic instability during in the 1918-1939 period in part because the large outstanding "sterling balances" overseas. Maintaining sterling's convertibility into gold and the integrity of the sterling area required.."mutually assured destruction" (the United Kingdom would be forced off gold and the Dominions would find the value of their sterling holdings cut)...The United States and China are now locked in a similar embrace.

Posted by mountain goat @ 01:03 PM (1301 views)
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15 thoughts on “The Triffin Dilemma of supplying the world’s reserve currency

  • mg, this seems to follow on from your post last night where questions remained unanswered?
    7. troy said…excuse my ignorance, but hasn’t this got something to do with compound interest?

    and the fact that the debt is ~created~ but the interest comes out of the economy so it just keeps getting worse?

    was it crunchy that kept going on about this?

    Tuesday, January 13, 2009 05:40PM Report Comment

    8. mountain goat said…Stillthinking – I understand it in the way of running a business. Taking on debt is necessary to expand a business. To increase your profit you may decide to increase your turnover (GDP). You may need to borrow to expand your factory for example. So long as your turnover and profit does increase then it is worth borrowing. But if your profit does not increase then taking on more debt hurts the business. As our economies have borrowed more and more the GDP has increased, but GDP hasn’t gone up proportionally. So that is why “it took $1.50 of debt to generate $1 of GDP for the two decades of the 1960s and 1970s, and then it averaged $2.50 to generate $1 of GDP in the period from 1982 to 1997. Starting in 1997 the debt really took off and this economy wound up taking a little more than $3.50 to generate just $1 of GDP in 2008.”.

    Tuesday, January 13, 2009 05:46PM Report Comment

    9. Malct said…troy @ 5.40pm

    When they create the debt based money supply they do not create the interest.

    Therefore no matter how successful a business, country or economy is, wealth is always drained out of the system.

    Therefore the money supply will always reduce unless replaced by more debt based interest baring funds

    Some-one has to borrow.

    Wining is not an option in this game at least not for the majority and not long term.

    The current process under way is simply acute wealth extraction.

    Tuesday, January 13, 2009 08:04PM Report Comment

    10. stillthinking said…Thanks.

    Wednesday, January 14, 2009 09:55AM

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  • mountain goat says:

    Troy – sorry the reason I did not try to answer you is because I don’t know. Do you want to elaborate on your question? Maybe someone else has an answer?

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  • thanks mg

    do you think malct or crunchy have or point about interest and the drain on the economy?

    because if so it would seem we’re all pi$$in into the wind!

    what is little professor going on about? I’m confused.

    malct doesn’t post much but crunchy is everywhere.

    What is going on?

    overnight it got weird.

    17. little professor said…Oh and malct, your repeated posting of

    78. Malct said…and Merry Xmas to you crunchy

    Wednesday, December 24, 2008 03:32PM The Times: Bailiffs get power to use force on debtors

    doesn’t fool anybody. First of all that was the first appearance of malct since you started posting – strange how all he had to say was happy xmas to you. Also, that malct posted as Malct, i.e. without logging in.

    Everyone knows the original malct account got banned due to relentless NWO-headedness, and you have created this new account called crunchy. It’s still unmistakeably the same guy. Just don’t insult our intelligence by pretending otherwise. Phdinbubbles had you pwned when he caught you stating “this is why I have been banging on about the NWO in so many of my posts” when in fact the crunchy account had never mentioned NWO in its short history.

    Wednesday, January 14, 2009 12:13AM
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    44. crunchy said…Little Professor I have been up checking malct posts. He does not fit my profile. Thank f//k

    1 he longs to be liked.
    2 he is submisive, very.
    3 he sounds much younger than I
    4 he is like a wild puppy dog perhaps living with mummy.
    5 he is not as lazy in he’s writting as I
    6 he is no where near as defensive or aggresive about putting hes ideas across in arguements.

    The person who posted under Malct is a wind up merchant. I noticed one other post but cant locate it.
    I did wonder why Malct did not post in defence of me being mistaken for him. That I thought was low.
    You are correct about the maclt and Malct name I did not notice. I am writing this crap so when you ring me I will not have to go through it again. and it is on the record in black and white.

    Please ring me. Do not mistake me for this person. You will be a mile out.
    Personally If I were banned from anywhere I would consider it a favour and move on..

    Wednesday, January 14, 2009 05:52AM

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  • mountain goat says:

    Yes replace “The United States and China are now locked in a similar embrace” with “Crunchy, Malct and Little Professor locked in a embrace” wrestling style.

    I agree the interest on debt makes it unproductive to hold. Then there is the danger of deflation for debt holders. They have to pay back the debt taken when asset prices were high (this is what is killing home owners who bought in the last 5 years). That is why they desperately want to keep inflation +ve.

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  • 3. troy said…thanks mg

    do you think malct or crunchy have or point about interest and the drain on the economy?

    As I understand it, when the government (treasury) print money they are not liable for the interest. i.e. from their position they can spend, devalue, spend, devalue ad infinitum without ever paying interest on the money “borrowed”. Everyone else has to pay for the devaluation in savings.

    Then again I might be talking about something completely different to crunchy. It’s difficult to tell – he is so cryptic I don’t have the time for it sometimes.

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  • @troy(&crunchy/malct)
    “was it crunchy that kept going on about this?”

    Probably ๐Ÿ™‚

    “9. Malct said…troy @ 5.40pm”
    “78. Malct said…and Merry Xmas to you crunchy”

    Strange that the only bloggers Malct seems to address these days are troy and crunchy. Could it be you’re all the same person? Don’t mind if you are or not – please don’t be offended, but you do seem to be quite similar!

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  • 6. phdinbubbles

    What a wolly. If you could figure out who Malct was you would be intelligent.

    If he was banned why am I posting. Idiot.

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  • @crunchy

    LoL ๐Ÿ™‚

    Malct’s the chief illuminati in charge of the NWO – everyone knows that.

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  • phdbubble – steady on mate – I at least know who I am! I was asking mg if he could clarify the point about interest and the leaking bathtub! a issue a friend was arguing about down the pub. I thought I remembered one or the other mentioning it here.

    I’m not sure inbreda’s point above is the same thing either.

    regarding IDs, looking again at the overnight post by lp it seemed to get a bit nasty – may be that he and crunchy will sort it out soon.

    but someone posted as malct on another thread, I simply asked mg if he could explain what was going on as there seems to be some history ~ strange people. wish I’d kept quiet now.

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  • mountain goat says:

    good to be considered one of the strange people ๐Ÿ˜‰

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  • crunchy

    I don’t have a password and have moved on having been banned six times (re-instated five times)
    webmasters kindly allow some posts through but usually too late to be useful.
    I’m sorry for the hassle you have had and not offended by your bizarre profile of me above glad it was so off the mark, my grandchildren think it’s hilarious. btw I don’t ever remeber mentioning the NWO but there again they used to say that p4ac, s2r1 and I were all the same person last spring.

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  • mg ~ not you silly ~ the other lot

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  • stillthinking says:

    Great post mountain goat.

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  • 8. phdinbubbles said…@crunchy

    LoL ๐Ÿ™‚

    Malct’s the chief illuminati in charge of the NWO – everyone knows that.

    Crunchy aka Maelct The conspirloons on this site are growing. Maltg is a genius. He does not post yet is the talk of the town. Great stuff. How do you do that mate. Knock three times if you are out there LOL.

    HPCmalct.com.

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  • 11. Malct said…crunchy

    I don’t have a password and have moved on having been banned six times (re-instated five times)
    webmasters kindly allow some posts through but usually too late to be useful.
    I’m sorry for the hassle you have had and not offended by your bizarre profile of me above glad it was so off the mark, my grandchildren think it’s hilarious. btw I don’t ever remeber mentioning the NWO but there again they used to say that p4ac, s2r1 and I were all the same person last spring.

    Wednesday, January 14, 2009 03:55PM

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