Genius does not need to be manufactured. When the Bretton Woods system, the first international monetary system in history, was just established and was bringing prosperity to the world economy, some people magically pointed out its inherent shortcomings and predicted its "death date". It poses a problem to the whole world. This person is Triffin, a professor at Yale University in the United States and a famous international finance expert.

At the end of World War II, the United States was not only a victor militarily, but also emerged as a victor economically. At that time, it had more than 25 billion US dollars in gold reserves, accounting for about 75% of the world's total, and became an internationally powerful economic power. In this way, the United States, which is rich and powerful, "holds gold to control the princes" and establishes a monetary cooperation agreement that reflects its own will - the Bretton Woods system. One of its core contents is that the United States uses its gold reserves as a guarantee to provide U.S. dollars to countries around the world, and the U.S. dollar serves as the only international currency. The U.S. government promises that "the U.S. dollar is as reliable as gold." Countries can exchange U.S. dollars for gold at any time at the official price of 1 ounce of gold equal to $35.

What’s wrong with this monetary package? Let’s listen to a story first: There once was a daughter-in-law who was clever, virtuous and capable, and won the favor of her mother-in-law. Later, her mother-in-law asked her to take charge of the housework and cook porridge for the whole family. Due to the barren land, the grain harvested every year is very limited. However, the family's incense is extremely prosperous, and more children are imported every year. In order to keep the whole family fed, the daughter-in-law had to keep adding water to the pot. As a result, the porridge became thinner and thinner, and the family's resentment grew. Finally, the mother-in-law suspected that she had secretly carried the grain back to her parents' home, and in a fit of anger, she killed her. Kicked out of the house. This example illustrates the Triffin dilemma very well.

In the Bretton Woods system, the United States assumes two basic responsibilities. One is to ensure that the U.S. dollar is exchanged for gold at a fixed official price to maintain the confidence of various countries in the U.S. dollar; the other is to provide support for international trade. Development provides sufficient international liquidity, namely the US dollar. However, these two issues, confidence and solvency, are contradictory. Too few dollars will lead to insufficient solvency, and too many dollars will lead to a crisis of confidence. The reason is that if the United States continues to provide U.S. dollars to other countries, it can only keep its own balance of payments in deficit. The only way to fill the "big hole" left by this is to start the money printing machine and print U.S. dollar cash. . This is tantamount to adding water to the pot, resulting in more and more U.S. dollars. However, on the other hand, the balance of payments deficit means that the U.S. gold reserves will not only fail to increase, but will instead decrease due to exchange by other countries. In this way, there are more and more U.S. dollars on the one hand, and less and less gold on the other hand, which will inevitably lead to "the porridge becoming thinner and thinner." The U.S. dollar's exchange for gold will lose its guarantee, and the U.S. dollar will have a crisis of confidence. Over time, the Bretton Woods system will naturally become unsustainable. This dilemma between solvency and confidence was first proposed by Triffin, so it is called "Triffin Dilemma". In fact, if any sovereign currency serves as the only international currency, the Triffin Dilemma will exist.

Unfortunately, Triffin got it right. In the first few years after the end of World War II, Eurasian countries were in dire straits and needed to import goods from the United States. However, due to the lack of U.S. dollars, a "dollar shortage" formed. Starting in the 1950s, the U.S. deficit alleviated the problem of insufficient international solvency. However, before the mid-1950s, the U.S. dollar was still relatively scarce. Countries were still willing to accumulate U.S. dollars, and there was no confidence problem in the U.S. dollar. After 1958, the "dollar shortage" turned into a "dollar disaster", and the United States' continued balance of payments deficit caused dissatisfaction in many countries. Among them, French President de Gaulle's rhetoric was the most intense. He believed that the U.S. dollar enjoyed "excessive privileges" and that its international balance of payments deficit did not actually need to be corrected and could be made up by printing U.S. banknotes; while other countries, once When a deficit occurs, we can only take adjustment measures and suffer the pain of unemployment and reduced economic growth. We may even have to tighten our belts and save foreign exchange frugally.

The United States has always turned a deaf ear to these dissatisfactions and is unwilling to pay the price of adjusting the domestic economy to reduce the deficit in the balance of payments. It is still happy to issue US dollar bills. The reason is that the U.S. dollar can be used for international payments. Therefore, as long as the money printing machine is turned around, not only can the deficit be easily smoothed, but goods and services from other countries can also flow in.

In the late 1950s, the United States experienced a massive outflow of gold reserves and a surge in foreign short-term debt. By 1960, the United States' short-term debt had exceeded its gold reserves, and the dollar's credit foundation was shaken. In October of that year, the first post-war dollar crisis broke out, with large-scale selling of dollars and rush to buy gold. The U.S. government requests other countries to cooperate and jointly stabilize financial markets. Although countries have conflicts of interest and differences of opinion with the United States, the dollar crisis directly affects the international monetary system and is also related to their own vital interests. Therefore, countries have adopted an attitude of coordinating conflicts and easing pressure, and stabilized the dollar through a series of international cooperation. In addition to cooperative measures, the United States also used political pressure to persuade foreign governments not to exchange U.S. dollars for gold with the U.S. Treasury Department, and reached an agreement with the then West German government on this. However, some Western countries, such as the French government, are very disgusted with the pressure methods of the United States. They do not buy the United States' account at all and still demand exchange for gold, taking the lead in attacking the dominance of the US dollar.

In the mid-1960s, the Vietnam War broke out, and the United States' international balance of payments further deteriorated. By March 1998, its gold reserves had dropped to US$12 billion, which was only enough to repay one-third of short-term debt. . As a result, an unprecedented dollar crisis broke out in the gold markets of London, Paris and Zurich. Within half a month, the United States' gold reserves lost another US$1.4 billion. The price of gold in the Paris market once rose to US$44 per ounce. As a result, the U.S. government was forced to ask the United Kingdom to close the London gold market and announce the implementation of a "gold dual price system." That is, the official market between central banks of various countries still maintains the official price of US$35 per ounce, while the price of the private gold market is completely determined by The forces of supply and demand decide for themselves. By the summer of 1971, the U.S. gold reserves were less than 10 billion U.S. dollars, and the depreciation of the U.S. dollar became increasingly obvious, triggering a frenzy of capital flight that reached its peak in the summer of that year. Faced with tremendous pressure from various countries to exchange for gold, President Nixon was forced to announce the implementation of the "New Economic Policy" on August 15, 1971, cutting off the connection between the U.S. dollar and gold. The U.S. government has never answered how much gold the more than 70 billion U.S. dollars owned by other countries is worth.

The U.S. dollar is no longer pegged to gold, which is effectively the abolition of the Bretton Woods Agreement and the collapse of the Bretton Woods system. From then on, the U.S. dollar was no longer redeemable for gold, and the U.S. government no longer promised that "the U.S. dollar is as reliable as gold." The requirement for confidence in the U.S. dollar no longer existed, and the contradiction between confidence and adequacy finally disappeared. History finally ended in such a way. This costly way solved Triffin's problem.