Biagio Bossone is an advisor to international organizations (including AfDB, BIS, IMF, IOSCO, World Bank), government agencies and financial institutions
In a recent Vox column, Michael Bordo and Robert McCauley argue convincingly that we are no longer in ‘Triffin land’. They are responding to the revival of the Triffin dilemma by Stephen Miran, Chair of the US Council of Economic Advisers. Accordingly, the US, as issuer of the global reserve currency, must supply safe dollar assets to the rest of the world – at the cost of running persistent current account deficits that erode its industrial base and ultimately its financial sovereignty.
Miran’s core thesis is familiar: foreign central banks buy US dollars to suppress their own exchange rates and accumulate trade surpluses. These dollars are then recycled into US Treasury securities, keeping the dollar overvalued, draining US manufacturing, and leaving American workers with fewer good jobs. Over time, these sustained external deficits are said to jeopardise the dollar’s reserve status and US national security.
This argument has intuitive appeal, especially in a time of rising economic nationalism. But it also relies on a view of global monetary dynamics that no longer holds. Bordo and McCauley show that foreign official institutions are no longer the dominant financiers of US deficits. From 2015 to 2024, while the US ran an average current account deficit of 2.8% of GDP, foreign official purchases of US assets averaged just 0.16% of GDP – a sharp decline from the 2000s.
Indeed, the share of US Treasury securities held by foreign central banks has fallen dramatically, from over 40% after the global financial crisis to just 16% at the end of 2024. This empirical reality decisively undercuts the claim that the US is still operating under a Triffin-style constraint in which supplying the world with safe dollar assets necessarily undermines its external position.
But there’s a deeper story. Even if foreign central banks were still accumulating US Treasuries at scale, the Triffin framework would still be ill-suited to today’s global financial system. Insights from Borio and Disyatat (2011) help explain why.
In their analysis, the real drivers of global liquidity and financial instability are not current account imbalances or official flows, but the sheer scale and structure of gross capital flows – enabled by a highly elastic and privately intermediated global financial system.
Thanks to the rise of elastic finance, private intermediation, and vast gross flows, we are not just out of Triffin land – we are in an entirely different world
The Triffin dilemma, then and now
Robert Triffin’s original concern, articulated in the 1960s, was that a reserve currency country must run current account deficits to supply liquidity to the rest of the world. But these deficits, over time, undermine confidence in the reserve currency’s long-term value. Triffin’s warning came true in 1971, when the US suspended convertibility of the dollar into gold, ending Bretton Woods.
Miran’s modern retelling of this story replaces gold convertibility with global confidence in the dollar’s role as a safe asset. His narrative holds that demand for dollars by surplus countries leads to structural overvaluation of the dollar, a hollowing-out of US industry, and eventual geopolitical and financial risk. In this view, the dollar’s dominance is a Faustian bargain: America gets to finance itself cheaply, but only at the cost of external dependence and internal decline.
While this framework echoes long-standing concerns about the costs of reserve currency status, it is increasingly detached from the architecture of modern global finance.
What Bordo and McCauley get right
Bordo and McCauley challenge the causal logic at the heart of Miran’s argument. They show that today’s US current account deficits are not being financed primarily by foreign central banks. Instead, private actors – especially institutional investors operating through financial hubs like Luxembourg, Ireland, and the Cayman Islands – have become the principal buyers of US assets. These investors respond not to macroeconomic reserve motives but to financial returns, risk appetite, and regulatory arbitrage.
This decoupling of the current account from official capital flows undermines the empirical foundation of the Triffin-style story. If foreign central banks are no longer major players in financing US deficits, then the idea that America’s external position is a by-product of official reserve accumulation loses much of its force.
But the case against Triffin goes deeper than data. The very mechanisms of global liquidity creation have changed.
Elasticity replaces scarcity
In Triffin’s world, reserve assets were scarce and issued by the state. In our world, liquidity is elastic and largely created by the private sector. Borio and Disyatat argue that the dominant dynamic in modern global finance is not the recycling of surpluses through official channels, but the proliferation of gross capital flows through leveraged financial institutions.
This is especially true in the dollar-based international monetary system, where banks, asset managers, and shadow banking entities engage in collateral transformation, maturity mismatches, and synthetic leverage to create dollar-denominated assets. These practices expand global liquidity far beyond what current accounts or central bank balance sheets would imply1.
As a result, dollar liquidity is no longer constrained by the US current account or by official demand for Treasuries. Instead, it is produced through repo markets, FX swaps, offshore dollar loans, and the reuse of collateral. This means that financial vulnerability today is more likely to emerge from overabundant liquidity, asset price inflation, or credit misallocation – rather than from reserve shortages.
Gross, not net
Another key insight from Borio and Disyatat is the importance of gross capital flows. Much of the debate about external imbalances still hinges on net flows – the difference between what a country saves and what it invests. But gross flows – the total volume of financial claims and liabilities moving across borders – are often an order of magnitude larger, and more destabilising.
Before the 2008 crisis, for example, European banks borrowed heavily in US dollar wholesale markets to invest in US mortgage-backed securities. These flows dwarfed the US current account deficit, and they were driven by funding arbitrage – not trade imbalances. Yet they played a decisive role in creating systemic fragility.
Current account balances, by contrast, tell us little about the complexity and concentration of financial risks. A country can have a balanced current account and still be a source of global instability. Conversely, a country with a persistent current account deficit – like the US – can remain a safe haven, as long as it offers deep markets, legal protections, and political stability.
The real threat isn’t external
Miran worries that persistent US deficits will eventually undermine the dollar’s reserve role. But this fear is misplaced. The real threat to the dollar’s dominance does not come from external imbalances. It comes from internal instability in the dollar-based financial system.
In Triffin’s time, the concern was that the US could not simultaneously provide global liquidity and maintain domestic confidence in its currency. Today, the concern is that global financial markets may produce too much liquidity – through leverage, opacity, and the illusion of safety – only for that liquidity to evaporate in a crisis.
In this context, the vulnerability is not that the US ‘must’ run deficits, but that the financial system might overproduce dollar claims that collapse when risk perceptions shift. This is what happened in 2008, and again in 2020 when the US Federal Reserve had to intervene to backstop global dollar liquidity.
Conclusion: not in Triffin land – and not going back
Bordo and McCauley are correct: the Triffin dilemma, in its classic form, no longer describes the dynamics of the US external position or the workings of the international monetary system. But we can go further. Thanks to the rise of elastic finance, private intermediation, and vast gross flows, we are not just out of Triffin land – we are in an entirely different world.
Miran’s concerns about US manufacturing and national competitiveness are real. But framing them in terms of a revived Triffin dilemma misdiagnoses the problem and risks distracting from the real sources of vulnerability: an overly elastic global financial system prone to boom-bust cycles, and a domestic policy regime that has underinvested in workers, innovation, and industrial capacity.
We no longer live in a world where the reserve status of the dollar hinges on the US current account. We live in a world where that status hinges on the credibility of US institutions, the depth of its markets, and the robustness of the infrastructure that underpins the global dollar system.
We have not just left Triffin land – we have moved beyond its map entirely.
Endnotes
1. This perspective resonates with the ‘circuitist’ approach to financialised economies, which conceptualises the economy as a circuit in which banks create money endogenously by lending into production and financial activities at circuit-start, and financial intermediaries allocate income-generated savings to fund investment at circuit-closure (Bossone 2001).
References
Bordo, M and RN McCauley (2025), “Miran, we’re not in Triffin land anymore”, VoxEU.org, 7 April.
Borio, C and P Disyatat (2011), “Global imbalances and the financial crisis: Link or no link?”, BIS Working Paper.
Bossone, B (2001), “Do banks have a future? A study on banking and finance as we move into the third millennium,” Journal of Banking & Finance 25(12): 2239-2276.
This article was originally published on VoxEU.org.