Welcome back to the 1st Law Newsletter.

The Triffin Dilemma

The Triffin Dilemma describes how being the global reserve currency naturally and inevitably results in a trade deficit and tons of debt. Being the global reserve currency means that your currency is strong, coveted, and necessary for international trade. Thus, all other countries want it.

In order to maintain the status as global reserve currency, the US has been exporting dollars by selling debt. In return, the US has been importing cheap goods. Cheaper than they could make themselves since their currency is too valuable. The US has offshored production to countries with weaker dollars in order to help these countries rebuild using US dollars. This all happened because after WWII, the US was the only nation still well off enough to provide foreign aid. By selling US debt, the US has helped the rest of the world rebuild since WWII.

No country wants the to be the global reserve currency. It might be nice for a little while, but its a trap in the long term. The country becomes severely indebted and loses independence due to not doing any of its own manufacturing. Now that Trump wants to reindustrialize the US and being production back onshore, the US needs to impose tariffs on imports in order to make US products more financially competitive. In the longer run, they need the US dollar to get weaker so their exports become more competitive globally.

So what? The US dollar may be the last currency with global reserve status that is ‘owned’ or controlled by any one country. It is increasingly likely that the world moves to a neutral currency to conduct global trade that does not give excess power to any one nation.

Ideas from the Money Matters podcast.

Random Thoughts

I always have reasons for my actions, even if those reasons are not immediately understood.

Having a traditional career is overrated. Doing the same thing for years, until you progress to a position where you just manage other people doing the same thing… I am more interested in learning and stacking new skills, evolving every few years, and keeping things fresh. Always learning and always building myself. This way, I can have a career being myself, not being something or somebody else. I want a career in incredible life experiences, not in a single profession.

Quote to go

Thanks for reading!

Lucas