"The dollar is our currency, but it’s your problem." – John Connally, U.S. Treasury Secretary, 1971
A Collision Course With Reality
Money makes the world go ‘round—or at least, dollars do.
You might have noticed a certain buzzword making its rounds in financial circles, the kind of term that gets tossed around at cocktail parties by people who want to sound smarter than they are.
Enter Triffin’s Dilemma, the economic paradox that explains why the United States has had to flood the world with dollars for decades, whether we like it or not.
But here’s the thing—most people who bring up Triffin have no clue what it actually means.
It’s like name-dropping a book you never read.
So, let’s break it down. What is it? Who’s actually stuck dealing with it? And more importantly, is this the Achilles’ heel of the U.S. dollar, or just another wrinkle in its long history of dominance?
Buckle up, because we’re diving deep into the forces that could reshape the global monetary order.
What the Hell is Triffin’s Dilemma?
Robert Triffin, a Yale economist born in Belgium, called his shot back in the 1960s.
His theory was simple but devastating: if a country’s national currency is also the global reserve currency, it has to keep running trade deficits. That means sending more of its money abroad than it takes in.
Sounds fine in theory, but in practice, it’s a ticking time bomb. A country issuing the global reserve currency must provide enough liquidity for the world to function.
But doing that requires endless deficit spending, which weakens the very foundation of that currency.
Eventually, the needs of the domestic economy and the needs of the global economy come into direct conflict.
The U.S. has been living this reality since World War II. Back then, the dollar was backed by gold under the Bretton Woods system—every $35 in U.S. currency could be swapped for an ounce of gold.
But then came the Vietnam War, President Lyndon Johnson’s "guns and butter" spending spree, and a trade deficit ballooning like a Thanksgiving parade float.
Foreign governments, led by France’s Charles de Gaulle, began calling the bluff and redeeming their dollars for gold.
By 1971, the jig was up.
Nixon shut the gold window, taking the U.S. off the gold standard and launching the world into the fiat currency era. Triffin’s Dilemma wasn’t solved—it just got a new lease on life.
The Dollar’s New Superpower
If the U.S. had stopped running deficits after 1971, the world would have faced a dollar shortage that could have cratered global trade.
Instead, Washington pulled a judo move—if you can’t stop the trade deficit, turn it into a feature rather than a bug.
Enter the petrodollar system.
By 1973, the U.S. had brokered a deal with Saudi Arabia: they’d price oil in dollars, and in return, the U.S. would provide military protection. The deal ensured global demand for dollars stayed strong, giving the U.S. a stranglehold on international finance.
Other oil-producing nations followed suit, and suddenly, the U.S. could run massive trade deficits without the usual consequences.
Think of it as the world’s best credit card with no spending limit and no interest rate. As long as other countries needed dollars to buy oil, they had to keep buying U.S. Treasuries to park their excess cash.
The U.S. could print money, export inflation, and fund everything from social programs to military adventures with seemingly no repercussions.
At least, until now.
The Breaking Point?
Fast forward to 2025, and the cracks in the system are showing.
The U.S. national debt has topped $35 trillion, the trade deficit hit $1 trillion in 2024, and Trump’s "America First" economic policies are making dollar liquidity scarcer than an affordable house in California.
Foreign countries need dollars to trade and pay off their debts.
But Trump’s tariffs and cuts to foreign aid mean fewer dollars are flowing out.
Meanwhile, global dollar-denominated debt—the so-called Eurodollar market—sits at a staggering $12 trillion, meaning a lot of international borrowers are short on greenbacks.
If Trump continues tightening the screws, a massive dollar squeeze could ensue, leading to a cascading debt crisis in emerging markets.
Triffin’s Dilemma says you can either flood the world with dollars or starve the global economy.
Right now, it looks like we’re choosing starvation.
But what if this ‘crisis’ isn’t a crisis at all? What if, instead of collapsing, the dollar is about to become even more powerful?
The answer lies in a controversial theory that has some of the world’s top investors rethinking everything they know about global finance.
The Milkshake Theory: Dollar Doom or Dominance?
Some say this is the beginning of the end for the dollar. De-dollarization efforts are picking up steam—China, Russia, and even Saudi Arabia are looking for alternatives.
CBDCs, gold-backed trade settlements, and bilateral currency swaps are making headlines.
But here’s the kicker: dumping the dollar isn’t painless. Every attempt to move away from it comes with massive collateral damage.
That’s the essence of Brent Johnson’s Dollar Milkshake Theory—the more countries try to ditch the dollar, the more painful the process becomes, driving demand for dollars even higher.
If foreign countries can’t access dollar liquidity, their financial systems risk imploding, forcing them right back to the U.S. financial system.
It’s a trap—one that keeps reinforcing itself. The world built a system around the dollar, and escaping it won’t happen overnight.
What Happens Next?
Here’s the million-dollar question (or should we say, the trillion-dollar question?): can the U.S. keep this game going?
There are three ways this could play out:
Business as Usual – The Fed prints more dollars, swap lines are opened, and the U.S. continues running deficits to provide liquidity. This would avoid a short-term crisis but fuel long-term inflation.
The Great Dollar Crunch – The U.S. pulls back on deficits and foreign aid, triggering a credit crisis abroad. The dollar spikes, crushing emerging markets.
A Slow but Painful Shift – A genuine move toward de-dollarization, but at a cost. Expect financial instability, higher U.S. borrowing costs, and painful adjustments worldwide.
Regardless of the path forward, Triffin’s Dilemma remains unsolved.
The U.S. dollar is still the linchpin of global finance, and despite efforts to dethrone it, the alternatives aren’t ready for prime time.
For now, we’ll just have to wait and see which domino falls first. Stay tuned.
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