Word: triffin
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...Robert Triffin is a little man, a bantam really, but he is a giant in international finance. He looks out on the world with sad, soulful eyes, and while he often does not like what he sees, he usually has ideas for setting matters right. Among many other things, he is now propagating a plan for getting some green back into America's fading dollar...
...countries often equate a country's political might and will with the strength of its money. Every time the dollar declines, concern rises abroad about America's power and capacity for leadership, and worries grow about the future of the West's free economies. It troubles Triffin that Washington's policymakers, many of them his friends and former students, do not seem to recognize these dangers. Their dollar-defending moves have been weak and tentative, and their rather cavalier philosophy seems to be: Let the dollar fall-that will help America's trade balance...
...fact, the drop aggravates America's inflation. Not only do imports cost more, but U.S. exporters also collect more dollars for their products abroad, and so they sometimes conclude that they can increase their prices at home too. As more American goods flood Europe, Triffin hears the cries rising for protectionism. Americans often overlook the fact that the U.S. enjoyed a $7 billion surplus in trade with Western Europe last year. Because the dollar has become grossly undervalued, many American goods are "cheap" in world markets, and the U.S. is often looked upon abroad with the same suspicion that...
Like most moneymen abroad, Triffin argues that the U.S. should use foreign currencies to buy up many more dollars in world markets than it has done so far. The Treasury does not have enough foreign funds to do this, so Triffin urges an expansion of the old idea of currency swaps...
Europeans are so eager for America to defend the dollar, Triffin argues, that they would willingly make the additional loans. Indeed, he believes that in return for propping the dollar, America could extract a quid pro quo, notably persuading the reluctant West Germans and Japanese to expand their economies in order to enhance world recovery. "It is in the interest of all governments to intervene to lift the dollar," Triffin says persuasively. "The problem simply cannot be left to the tender mercies of the speculators...