The fiscal problem with Trump’s ‘America First’
An opinion piece by John D Mueller in the Wall Street Journal points out the Triffin Dilemma in President Trump’s “America First” policy.
Robert Triffin, a Belgian-born Yale economist, introduced the concept in 1959. The Triffin Dilemma is the situation in which a country whose currency is used as a foreign-exchange reserve currency faces the problem of having to balance that global responsibility against maintaining low unemployment and steady economic growth at home. There are inherent conflicts of interest between the domestic and global economic objectives.
America benefits tremendously from its ability to print dollars at no cost, which is equivalent to an interest-free loan, as well as the ease in raising capital due to strong demand for supposedly risk-free US government bonds. However, given that there’s no free lunch, these benefits come at a price. That is, America would have to refrain from any economic policy by which it would unilaterally benefit without taking into account its impact on the rest of the world relying on the dollar as a reserve currency.
In short, Trump’s “America First” is an inward-looking policy that relinquishes America’s role as the most important reserve-currency country in the world. It’s an irresponsible stance that can only diminish America’s leading global economic status or even the role of the dollar as a reserve currency in the future.
America cannot have its cake and eat it too.
Anan Pakvasa
