Reference Message Network reported on May 20 that according to the "Japan Economic News" released on May 19, an article titled "The World Without Basic Currency - The 40th Anniversary of the Plaza Accord: The U.S. Is Deeply Embroiled in the 'Triffin Dilemma'" was published. The content is as follows:
Imitating the "Plaza Accord" signed by developed countries in September 1985 to jointly address the issue of a high-valued US dollar exchange rate, there is an atmosphere within the Trump administration for rebuilding monetary and trade order.
As the basic currency, the US dollar brings both benefits and burdens to the United States, and at present, the United States is passing on its dissatisfaction to the entire world. In today's era where globalization far exceeds what it was 40 years ago, the situation of "the United States against the whole world" has reappeared. Will the future be a world without basic currency?
On April 25, more than ten major financial institutions' heads, including Citadel Investment Group, one of the largest hedge funds in the United States, successively entered the Eisenhower Executive Office Building located in the West Wing of the White House. Their visit was none other than Stephen Miller, Chairman of the White House Council of Economic Advisers (CEA).
Implementing multilateral coordinated intervention measures, artificially manipulating the exchange rates of the US dollar, Japanese yen, and euro to prevent the appreciation of the US dollar - Miller first proposed this idea, which is referred to by the outside world as the "Plaza Accord 2.0" or the "Mar-a-Lago Accord." Financial executives could not but respond to the call of this key figure who has been the head of CEA since March. A financial industry insider privately revealed: "Mr. Miller makes me feel a bit dangerous." The uncertainty of what will happen next has made market participants hesitant.
The United States has shifted from free trade to protectionism with tariffs as weapons, pressuring allies such as Japan and Europe to increase military spending.
In addition, the Trump administration openly advocates currency devaluation to promote the birth of the "Plaza Accord 2.0." If we consider issues from the perspective of "defending the status of the US dollar as the world's basic currency," it will be easy to understand how lacking in common sense the Trump administration is.
The key to understanding this issue lies in the "Triffin Dilemma," a term that Miller likes to use. The basic currency is widely used overseas. Due to increased demand, its price becomes higher. When a country's currency value is too high, its export competitiveness decreases, leading to a trade deficit. The more global prosperity relies on the deficits of the hegemonic country, the greater the demand for the basic currency, thus forming a spiral structure of further currency appreciation of the country.
In other words, the obligation undertaken by the issuing country of the basic currency to maintain international stability and its own stable economic growth are theoretically irreconcilable. Economist Robert Triffin proposed this theory in the 1960s, which happens to correspond to the current predicament faced by the United States today.
To maintain the status of the US dollar as the primary settlement, investment, and reserve currency, the United States must continuously provide sufficient dollars to the outside world. The chronic twin deficits (trade deficit and fiscal deficit) of the United States ensure the stability of this structure.
Forty years ago, the United States, suffering from twin deficits, signed the "Plaza Accord" with several countries including Japan and Europe. Today, the evolution of twin deficits is strikingly similar to the situation before the "Plaza Accord" was reached.
The difference lies in scale. In 1985, the US trade deficit was only $120 billion, while in 2024, it has surged to $1.2 trillion. The US fiscal deficit has also risen from $210 billion to $1.8 trillion. The rapid process of globalization has led to a quantitative leap in expansion.
From a long-term perspective, security is a more serious issue. The status of the basic currency is inseparable from national security. Miller believes: "Economists do not pay enough attention to national security." Miller's argument is that the concentration of capital leads to the appreciation of the US dollar, weakening the export competitiveness of the United States, thereby weakening American manufacturing. The decline of industries such as steel, automobiles, and shipbuilding not only occurs in the United States but has also become a security shortcoming for the entire West.
The United States is already unable to protect its allies and hopes they will bear their due responsibilities to jointly protect the US dollar as a common asset of the West. This unprecedented tariff war can also be seen as America's painful lament.
Ironically, actions originally taken to defend the US dollar ultimately backfire on the dollar itself. The most likely scenario for the US dollar to lose its status as a basic currency stems from the trust crisis caused by the US government's tariff war and debt expansion.
"Stay away from the dollar" has become a hot topic in London's financial district. On the 16th, Moody's downgraded the US sovereign credit rating. As a result, among all major rating agencies, the US no longer holds the highest rating.
In order to escape the huge dilemma, the United States and the US dollar are embarking on a path that may lead to self-destruction. This reckless gamble will leave no one untouched. (Translated by Liu Lin)
Original article: https://www.toutiao.com/article/7506429622532227610/
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