Let’s revisit what is wrong with the international monetary and financial system. Stephen Miran, chair of the US Council of Economic Advisers, claims that we live in ‘the world of Triffin’ (Hudson Bay Capital 2024; see also Bénassy-Quéré 2025). That would be a neo-Triffin world, since Belgian–American economist Robert Triffin warned in 1960 (Triffin 1960) about the danger of US external IOUs overtaking the US gold stock in an era of US current account surpluses (Bordo and McCauley 2017).

In any case, Miran claims:

1. Central banks buy dollars to hold down their currencies and to run surpluses on trade in goods and services.
2. Central banks hold their dollars in US Treasury securities.
3. The US dollar is overvalued and the US runs current account deficits.
4. US manufacturing shrinks and US workers have fewer good jobs.
5. Eventually US external deficits undermine US safety and the dollar as reserve currency.

Gillian Tett in the Financial Times (2025a) considers proposals to tax capital inflows into the US (which cumulate into claim 2 above). You can ask whether such proposals would work (McCauley 2025).

A prior question needs to be asked: do we, in fact, live in the Triffin world? The idea that foreign officials are imposing trade deficits on the US is the rationale offered for proposals for the US Treasury to swap century bonds for Treasury notes held by foreign officials (Financial Times 2025b), or to tax their Treasury holdings. Does this rationale hold water?¹

From 2003 until 2014, the observed flows of goods, services, and finance across the US border gave support to – or at least were consistent with – Miran’s claims 1 through 3 above.²The US current account deficit averaged 3.9% of US GDP. At the same time, foreign official inflows into all US investments averaged 2.5% of US GDP. You could say that foreign officials accounted for two-thirds of the financing of the US current account deficit. This was twice the one-third share of official financing observed during the most comparable period of a generally depreciating dollar in 1985-1994 (Bordo and McCauley 2017).

Figure 1 We’re not in Triffin land anymore

Note: 2009 foreign official inflow excludes $47.6 billion SDR allocation accounted as inflow and outflow.
Source: US Bureau of Economic Analysis; authors’ calculations.

From 2015 on, things changed. The dollar began to rise substantially against other currencies. After a modest but surprising weakening of the Chinese yuan renminbi against the dollar in August 2015, capital streamed out of China. Chinese reserves fell by about a trillion dollars in short order. Global foreign exchange reserves, mostly held in dollars, hardly grew from a local peak of $12 trillion in mid-2014 to the most recent observation of $12.4 trillion at end-2024.³ Over this period, global reserve managers have concentrated on buying gold, not dollars.

Accordingly, foreign official inflows into US investments all but dried up. In 2015-2024, the US current account narrowed to an average of 2.8% of US GDP. At the same time, foreign official inflows collapsed to an average of just 0.16% of US GDP. For ten years it has not been possible to blame US external deficits on dollar buying by foreign officials: official flows have played only a bit part in financing the US current account.

Figure 2 US foreign official inflows as a share of US current account deficit

Source: US Bureau of Economic Analysis, authors’ calculations.

In like manner, the footprint of foreign officials in the US Treasury bond market has been shrinking for over ten years. At the peak after the Great Financial Crisis, foreign official holdings reached a share of no less than 40% of the Treasury securities held outside the Fed. Many fretted about the dire effects of a ‘safe asset shortage’. Now the share has fallen to 16%, about the level during the Asian Financial Crisis 27 years ago. Now there is talk of a ‘global bond glut’ (Schnabel 2025, see also Bénassy-Quéré 2025).

Figure 3 From ‘safe asset shortage’ to ‘global bond glut’: Foreign official share of Treasury securities

Are we in Triffin land anymore? Certainly not. You can argue whether we ever were (Bordo and McCauley 2019, Bordo 2019). But for the last ten years, you cannot argue that foreign official dollar buying required US external or fiscal liabilities to snowball.

References

Bénassy-Quéré, A (2025), “Is the international monetary system ‘unfair’?”, 19 March.

Bordo, M D (2019), “The imbalances of the Bretton Woods System between 1965 and 1973: US inflation, the elephant in the room”, VoxEU.org, 7 June.

Bordo, M D and R McCauley (2017), “Triffin: dilemma or myth?”, BIS Working Paper 684.

Bordo, M D and R McCauley (2019), “Triffin: Dilemma or Myth?”, IMF Economic Review 67: 824–851.

Fahri, E and M Maggiori (2017), “The new Triffin Dilemma: The concerning fiscal and external trajectories of the US”, VoxEU.org, 20 December.

Financial Times (2025a), “Tariffs on goods may be a prelude to tariffs on money”, 13 March.

Financial Times (2025b), “About all this ‘Mar-a-Lago Accord’ chatter”, 21 February.

Gourinchas, P-O, H Rey and E Farhi (2011), Reforming the International Monetary System, CEPR Press.

Hudson Bay Capital (2024), A User’s Guide to Restructuring the Global Trading System.

Kimura, T and T Nagano (2017), “Exorbitant privilege and the Triffin dilemma through FX swaps”, VoxEU.org, 30 May

McCauley, R (2025), “Will a ‘user fee’ on US Treasuries actually work?”, Financial Times, 25 February.

Obstfeld M (2025), “The U.S. Trade Deficit: Myths and Realities”, BPEA Conference Draft, 27-28 March.

Schnabel, I (2025), “No longer convenient? Safe asset abundance and r*”, Keynote speech at the Bank of England’s 2025 BEAR Conference, London, 25 February.

Triffin, R (1960), Gold and the dollar crisis: The future of convertibility, Yale University Press.