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It's Triffin's World… |
STOCKS MANIC
Under the surface of the U.S. financial system… |
Enter Robert Triffin, a Belgian economist with a knack for spotting monetary landmines. He pointed out the trap before we even fell into it. The world needs dollars to function—lots of them.
But the only way to get them out there is for America to run trade deficits. That’s economist-speak for buying more from the world than we sell to it. We ship dollars overseas in exchange for TVs, iPhones, and plastic Christmas trees. They get the dollars they need. We get... hollowed-out towns, shuttered factories, and TikTok videos about how to flip sneakers for rent money.
Stephen Miran, in his recent essay “A User’s Guide to Restructuring the Global Trading System,” doesn’t mince words: Triffin’s World is a trap. One that keeps the dollar strong—but strong like a bouncer who never lets your own team into the club. A strong dollar makes American goods expensive. That’s great for foreign shoppers, but terrible for our workers. We become a nation of consumers instead of producers, floating on debt and imported stuff. It’s not just unsustainable. It’s borderline suicidal for any country that wants a future that isn’t rented.
So what do you do when the rules are rigged against you? You break them.
That’s the emerging logic from Washington, where tariffs are back in fashion. Not the polite, diplomatic kind. No, these are blunt-force tariffs—economic brass knuckles designed to make Chinese factories flinch and bring global supply chains to heel. And it doesn’t stop there. If you want to claw your way out of the Triffin trap, you’ve got to do more than slap on tariffs. You’ve got to reindustrialize. That means making stuff again—cars, batteries, steel, the works.
Which brings us to the unexpected plot twist suggested by Miran’s script: What if China built a factory here? Like, right here. In Memphis. Or Savannah. Or Charleston. Not as an act of charity—but as a trade deal side effect.
Picture this: Chinese capital, American workers, and a shared interest in keeping the whole system from flying off a fiscal cliff.
Memphis? It’s a logistical beast. Trains, trucks, riverboats—it’s practically Amazon Prime for raw materials. Savannah? It’s got a booming port and a growing EV industry. Charleston? Already home to auto manufacturers, tax incentives, and a population that knows how to work a factory floor. In a weird twist of global irony, our best shot at economic sovereignty might come with a “Made in China” investment tag.
But don’t pop the champagne just yet.
The dollar is already wobbling. Since January, it’s dropped over 9% against other currencies. And it’s not just investors cashing in gains. It’s big foreign asset managers bailing out. According to The Economist, the flight from the dollar is about fear—fear that America, once the rock of global finance, is now looking more like a rickety carnival ride run by part-time operators with Twitter addictions.
Why the panic? Try a $5.8 trillion budget expansion. Try debt at 100% of GDP. Try tariffs implemented like someone threw darts at a spreadsheet. Toss in political drama, fiscal incontinence, and a growing sense that the adults left the room several decades ago, and you’ve got a currency system starting to buckle under its own contradictions.
The Federal Reserve—our central bank—is stuck in a Kafkaesque corner. If it bails out the system, it stokes inflation. If it doesn’t, markets spiral. Jerome Powell tried to assure folks the Fed was on the case, doing its job, fulfilling its mandate during a speech at the Economic Club of Chicago yesterday. His confidence wavered ever so slightly. Once his voice cracked, a tepid rally in the stock market turned negative fast.
If the Fed tries to act responsibly, well, there’s now the risk the president will get the Supreme Court to overturn the 1935 law that stipulates the Fed must remain independent of the political whims of the day. Without the stalwart backing of the Fed, what’s a global investor to think about the shares priced in dollars in his trading account?
The dollar’s reserve status might be a privilege, but right now it’s a poisoned chalice. The more we cling to it, the more hollowed out we become. We can either embrace the pain of reindustrialization now, or watch our economy slide into a full-blown currency crisis later.
Triffin was right. In an essay called "Gold and the Dollar Crisis" published in 1960, he argued the world we built wasn’t sustainable. More than half a century later, we’re finally getting around to addressing the paradox. The only question left – for the markets and the world – is whether we have the political guts, the strategic vision, and the economic courage to tear it down and rebuild something better—before the world decides they’ve had enough of our lemonade stand.
—Addison Wiggin
P.S. from Addison: A leading member of the Trump team, Scott Bessent, the new Secretary of the Treasury, has his work cut out for him. The political challenge? Rebalance trade, reshore manufacturing, and wean the American consumer off their addiction to cheap goods made in China. The financial challenge? Roll over $28 trillion in U.S. debt this year alone—without spooking the bond market or torching the dollar.
We’re all too aware of Triffin’s World. And have assembled the Grey Swan Investment Fraternity for the very purpose of helping our members invest, survive and thrive through the “chaos” of tariffs, trade wars and monetary adjustments needed to keep the lemonade open.
In the meantime, tomorrow is Good Friday and the markets are closed. By tradition, so will be, too. See you next Monday in the Swan Dive!
Add your thoughts to the mix here: addison@greyswanfraternity.com
How did we get here? Find out in these riveting reads: Demise of the Dollar, Financial Reckoning Day, and Empire of Debt — all three books are now available in their third post-pandemic editions. You might enjoy one or all three.
(Or… simply pre-order Empire of Debt: We Came, We Saw, We Borrowed, now available at Amazon and Barnes & Noble or if you prefer one of these sites: Bookshop.org, Books-A-Million or Target.)
Please send your comments, reactions, opprobrium, vitriol and praise to: feedback@greyswanfraternity.com
Sent to: diansastroxz.forex@blogger.com |
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