Bitcoin (BTC) Fixes Extra Global Reserve Currency Dilemma – Triffin Paradox

Yuri Molchan

Prominent analyst PlanB stated that Bitcoin can solve the Triffin paradox, in which America is running a growing deficit while creating a surplus at the same time

Founder of and host of a podcast on finance and investments, Preston Pysh, has mentioned the Triffin Dilemma (Triffin Paradox) in his recent tweet – a major economic problem that has been recently becoming more and more relevant in connection to the USD being the global reserve currency.

Prominent analyst and stock-to-flow model creator ‘PlanB’ stated that Bitcoin can fix this important problem.

The Triffin Dilemma

The Triffin dilemma was formulated by Robert Triffin back in the early 1960s. It says that in order for countries to make foreign reserves in USD, the US has to run constantly growing deficits. However, this would gradually undermine trust in the US dollar as a reserve asset. To restore it, the US must run a surplus at the same time.

To solve this dilemma, Triffin suggested an option of introducing a special international currency that would not be pegged to USD or gold. In 1969, the IMF started emitting Special Drawing Rights (SDR) – XDR.

It is neither a currency nor a bond. It is not used in wide circulation by private parties. Its value is calculated based on the major global currencies in the IMF basket which is constantly reviewed. Yet, it does not solve the problem of the population losing trust in USD.

‘Bitcoin fixes it’, here’s how

Prominent analyst and inventor of the stock-to-flow model, PlanB, stated in the comment thread that Bitcoin can indeed solve the Triffin dilemma.

This has previously been stated many times, since unlike USD or any other fiat there are only 21 mln Bitcoins programmed to be put in circulation. With each new halving, the amount of new BTC going into circulation gets cut in half. This makes Bitcoin a deflationary currency. The next (third) BTC halving is to take place on May 12. 

Central banks about to roll out CBDC

As reported by Reuters, a group of central banks is about to start creating a CBDC (central bank digital currency) in order to solve the setbacks in the financial system brought on by the COVID-19 pandemic. Another obvious goal is to stop the population from using paper banknotes or coins since, as was recently proven in China, virus germs can easily spread on paper money. However, this idea had been floating around even before COVID-19 broke out.

“Yet even before the virus hit, central banks of Britain, the euro zone, Japan, Canada, Sweden and Switzerland and the Bank for International Settlements were already due to meet this month to pool findings on plans for digital cash.”

The article states that the CBDC could be rolled out within the next three years.

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