The Triffin Dilemma Again

Tiny changes in the American monetary policy can have dramatic effects on the rest of the world because of dollar’s double role of national and international currency. This is the Triffin dilemma. The paper shows how it works through three examples: price of commodities, dollarization, and the international financial position of the US. And it makes a proposal to solve these issues, creating a more stable monetary system. In particular, it suggests the creation of an international monetary system of block regional currencies. Globalization and regionalization should be the two forces leading towards the new monetary system. The US and Europe should consider to adopt the same currency through a system of fixed exchange rates (global currency). This currency should perform its duty of anchor of the system, reducing global imbalances and gyrations in price of commodities. Developing countries, by contrast, should create regional monetary unions (regional currencies), preserving the real exchange rate as shock absorber, but gaining in terms of time consistency and credibility.