In yesterday's Easter Homily, I mentioned an oft offered truth: the US buck is the global reserve currency, and for that reason we have to run a current account deficit against the Rest-of-World economies. The alternatives: 1) forsake reserve currency status or 2) forsake the deficit. Both ways be dragons.
So, as I'm sipping my coffee and reading my dead trees NYT, I find yet another reason to hate Neil Irwin. The piece is a cute Baby Econ essay on international trade (but, CarNation and BananaLand? sounds a bit racist, dontcha think?), and worth the read on its own. But what really frosts my cookies is that the reserve currency problem has a name:
There's even a name for this: the Triffin dilemma. In the mid-20th century, the economist Robert Triffin warned that the provider of the global reserve currency would need to run perpetual trade deficits to keep the world financial system from freezing, with those trade deficits potentially fueling domestic booms and busts.
The key idea is that if a President Trump or any other future leader really wants to reduce our trade deficits in a major way, that leader is going to have to rethink the very underpinnings of global finance.
Damn you, Neil Irwin!!