It’s Triffin’s World… We’re (Still) Just Living In It

“[There are] absurdities associated with the use of
national currencies as international reserves.”

– Economist Robert Triffin to the Congressional
Joint Economic Committee, October 1959

 

April 17, 2025 — We begin “en media res,” in the middle of the story…

The stock market is tumbling.

Since April 2nd – “Liberation Day” by Trump’s decree – the major indexes are down across the board.

The tech-heavy Nasdaq is getting the worst of it—down 10% and in correction territory. Utopian AI-fueled retirements appear in the distance as a vanishing mirage.

“Why?” pundits cry. “Why?”

“Own goal!” Wall Street analysts accuse, referring to a defender in the world’s most popular sport, soccer, who scored a goal against his own team by mistake.

“Trump is an evil fascist,” the crowd of protestors cordoned-off in a nearby square. “A billionaire who wants to keep all the money to himself and his billionaire golf buddies!”

Cue suspenseful, atmospheric music as the title credits roll…

“Wait a minute,” we think to ourselves, and pause the tape. We have a feeling we missed something in the beginning of the story.

So we rewind and start things over from the beginning.

We start small, with a simple analogy…

Imagine running a lemonade stand. But instead of just quenching your neighborhood’s thirst, you’re pumping out pitchers for the whole planet. It seems like a perfect business at first, but there’s a catch.

The catch? To keep the thirsty masses happy, you’ve got to keep borrowing lemons, sugar, and cups from them … borrowing more and more every time. Eventually, you owe them so much that you can’t even afford your own lemonade anymore.

Welcome to Triffin’s World.

The economic equivalent of a dystopian blockbuster, except this one is stuffed with stuffed suits and pricey dinner plates in place of grumpy T-Rexes genetically engineered back from the dead.

This new story starts back in 1944, when the world was still picking shrapnel out of its boots from World War II…

Back then, the big brains gathered in a cozy little place called Bretton Woods. They made a deal: the U.S. dollar would be the global reserve currency.

That meant everyone doing international business—buying oil, shipping containers of sneakers, dealing in soybeans—would do it in dollars. On paper, we became the planet’s banker, its trusted middleman.

But in reality? We signed up for an open tab at the global diner, and now we’re being handed the check.

Enter Robert Triffin, a Belgian economist with a knack for spotting monetary landmines. He pointed out the trap before we even fell into it. The world needs dollars to function—lots of them.

But the only way to get them out there is for America to run trade deficits. That’s economist-speak for buying more from the world than we sell to it. We ship dollars overseas in exchange for TVs, iPhones, and plastic Christmas trees. They get the dollars they need. We get… hollowed-out towns, shuttered factories, and TikTok videos about how to flip sneakers for rent money.

Stephen Miran, in his recent essay “A User’s Guide to Restructuring the Global Trading System,” doesn’t mince words: Triffin’s World is a trap. One that keeps the dollar strong—but strong like a bouncer who never lets your own team into the club. A strong dollar makes American goods expensive. That’s great for foreign shoppers, but terrible for our workers. We become a nation of consumers instead of producers, floating on debt and imported stuff. It’s not just unsustainable. It’s borderline suicidal for any country that wants a future that isn’t rented.

So what do you do when the rules are rigged against you? You break them.

That’s the emerging logic from Washington, where tariffs are back in fashion. Not the polite, diplomatic kind. No, these are blunt-force tariffs—economic brass knuckles designed to make Chinese factories flinch and bring global supply chains to heel. And it doesn’t stop there. If you want to claw your way out of the Triffin trap, you’ve got to do more than slap on tariffs. You’ve got to reindustrialize. That means making stuff again—cars, batteries, steel, the works.

Which brings us to the unexpected plot twist suggested by Miran’s script: What if China built a factory here? Like, right here. In Memphis. Or Savannah. Or Charleston. Not as an act of charity—but as a trade deal side effect.

Picture this: Chinese capital, American workers, and a shared interest in keeping the whole system from flying off a fiscal cliff.

Memphis? It’s a logistical beast. Trains, trucks, riverboats—it’s practically Amazon Prime for raw materials. Savannah? It’s got a booming port and a growing EV industry. Charleston? Already home to auto manufacturers, tax incentives, and a population that knows how to work a factory floor. In a weird twist of global irony, our best shot at economic sovereignty might come with a “Made in China” investment tag.

But don’t pop the champagne just yet.

The dollar is already wobbling. Since January, it’s dropped over 9% against other currencies. And it’s not just investors cashing in gains. It’s big foreign asset managers bailing out. According to The Economist, the flight from the dollar is about fear—fear that America, once the rock of global finance, is now looking more like a rickety carnival ride run by part-time operators with Twitter addictions.

Why the panic? Try a $5.8 trillion budget expansion. Try debt at 100% of GDP. Try tariffs implemented like someone threw darts at a spreadsheet. Toss in political drama, fiscal incontinence, and a growing sense that the adults left the room several decades ago, and you’ve got a currency system starting to buckle under its own contradictions.

The Federal Reserve—our central bank—is stuck in a Kafkaesque corner. If it bails out the system, it stokes inflation. If it doesn’t, markets spiral. Jerome Powell tried to assure folks the Fed was on the case, doing its job, fulfilling its mandate during a speech at the Economic Club of Chicago yesterday. His confidence wavered ever so slightly. Once his voice cracked, a tepid rally in the stock market turned negative fast.

If the Fed tries to act responsibly, well, there’s now the risk the president will get the Supreme Court to overturn the 1935 law that stipulates the Fed must remain independent of the political whims of the day. Without the stalwart backing of the Fed, what’s a global investor to think about the shares priced in dollars in his trading account?

The dollar’s reserve status might be a privilege, but right now it’s a poisoned chalice. The more we cling to it, the more hollowed out we become. We can either embrace the pain of reindustrialization now, or watch our economy slide into a full-blown currency crisis later.

Triffin was right. In an essay called “Gold and the Dollar Crisis” published in 1960, he argued the world we built wasn’t sustainable. More than half a century later, we’re finally getting around to addressing the paradox. The only question left – for the markets and the world –  is whether we have the political guts, the strategic vision, and the economic courage to tear it down and rebuild something better—before the world decides they’ve had enough of our lemonade stand.

—Addison Wiggin

P.S. from Addison: A leading member of the Trump team, Scott Bessent, the new Secretary of the Treasury, has his work cut out for him. The political challenge? Rebalance trade, reshore manufacturing, and wean the American consumer off their addiction to cheap goods made in China. The financial challenge? Roll over $28 trillion in U.S. debt this year alone—without spooking the bond market or torching the dollar.

We’re all too aware of Triffin’s World. And have assembled the Grey Swan Investment Fraternity for the very purpose of helping our members invest, survive and thrive through the “chaos” of tariffs, trade wars and monetary adjustments needed to keep the lemonade open.

In the meantime, tomorrow is Good Friday and the markets are closed. By tradition, so  will be, too. See you next Monday in the Swan Dive!

Add your thoughts to the mix here: addison@greyswanfraternity.com