What will become of the USA in connection with the Triffin Paradox?

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

Most people in the world love money. In particular, many are very curious about how much the neighbors get, and the question of the incomes of those in power is breaking all popularity records. At the same time, it is interesting to note that Russian emperors also received wages for their hard work, starting with Paul I.

Taking care of the family

The first emperor who decided that the activities of the rulers in the Russian Empire should be regularly paid was Paul I. Despite the fact that in modern historiography his personality is considered far from the best side, in reality he was an intelligent and calculating person. It was the love of order that made him pay close attention to the amounts received by himself and his relatives from the treasury. The fact is that before him, the great dukes, kings, and then the emperors, if necessary, simply demanded to give them the necessary amount of money. Paul I rightly decided that it was too wasteful, and on November 17, 1796, he signed a decree "On the annual release of money for the Imperial family." From that moment on, the amounts given to Paul I and his numerous relatives, although large, were strictly regulated. The emperor and his wife received 500,000 rubles a year. Monarch children were allocated amounts depending on seniority. The heir to the throne, Alexander I, who later led the conspiracy against his father, had 200,000 rubles a year, his wife was given 100,000 rubles. The rest of the sons, according to the decree, were given 100,000 rubles each, and their spouses - 70,000 rubles a year. The emperor's daughters received the least - 60,000 rubles each.

What could be bought with the tsar's salary?

To understand whether Paul I put a lot or a little for himself and his family, you need to look at the prices of the 18th century? According to historical documents, a stone house in St. Petersburg, consisting of three rooms, a kitchen and a stable, could be rented for only 8 rubles a year. And, for example, a ram cost 1 ruble. 70 kopecks. The salaries of ordinary people were also low. A public service clerk, in the modern sense of an office worker, earned only 20 rubles a year. Against this background, the money assigned by Paul I to support himself and his family looks truly colossal! However, the emperor's children could spend their "salary" with great reservations. The emperor's decree said that until the age of 16, the money of the heirs to the throne was controlled by their parents. After coming of age and up to 25 years old, they had the right to receive money from the treasury in their hands, but again they could spend it only by agreement with their parents. Only when the children of the emperor were a quarter of a century old did they manage their own salaries on their own. Moreover, if the daughter of the emperor got married, she was entitled to 1 million rubles, after which payments were stopped altogether.

The budget is not rubber - it must be cut

Subsequently, Alexander III decided to change the size of the maintenance of the imperial family in the direction of decreasing it. Preventing opposition from relatives, he prepared a new document in secret from the family. The fact is that by 1884, 40 people from the family of the emperor were already on the support of the state. At the same time, Alexander III, in conversations with court officials, complaining about the extravagance of Paul I, noted that the imperial family would soon go around the world with such expenses. The new spending plan was announced on July 2, 1886. The document was named "Regulations on the Imperial Family". From that moment on, the payments were tied to the degree of kinship of the "dependent" in relation to the emperor. For himself and the Empress, Alexander III set a salary of 200,000 rubles a year. Until the age of 16, his children began to receive only 33,000 rubles. The heir's maintenance was 100,000 rubles, and his children were entitled to 20,000 rubles. In general, Alexander III cut the family income by almost three times. Only the dowry for the daughters remained at the same level - 1,000,000 rubles. Oddly enough, but a family revolt did not happen, the royal relatives agreed with the changes.

The salary of the imperial family did not change until the reign of Nicholas II. Only in 1906, the State Duma limited the maintenance of the Ministry of the Imperial Court to the amount of 16,000,000 rubles a year. However, this money was quite enough to pay wages to the royal family in the position of Alexander III.

Discussion of the tendencies of de-dollarization of the world economy prompted the idea that “in order for the Triffin paradox to stop killing industry in the United States, the United States needs to de-dollarize the world economy. On the other hand, if the de-dollarization process begins, there is a great risk of drowning in the abyss of its consequences."

Do you know something about the Triffin paradox? So I don’t know. Let's find out together …

pictured by Robert Triffin (right)

So, in 1945, the Bretton Woods Agreement arose in the world. Within this international monetary system, the currencies of the world's leading countries were pegged with firm exchange rates to the US dollar backed by gold ($ 35 per troy ounce).

After World War II, the monetary systems of the countries of Europe and Japan were destroyed, so the provision of their currencies with US dollars was a forced step (they did not have enough gold of their own).

The Bretton Woods system, although it played a positive role in the post-war recovery of the world economy, had internal contradictions. The fundamental problem of the system is expressed in the Triffin paradox, according to which it is impossible to rigidly peg the national currency to gold and at the same time use it to support international trade.

The paradox is as follows: “The emission of the key currency must correspond to the gold reserves of the issuing country. Excessive emission, not backed by the gold reserve, can undermine the convertibility of the key currency into gold, which will cause a crisis of confidence in it. But the key currency must be issued in quantities sufficient to provide an increase in the international money supply to service the growing number of international transactions. Therefore, its issue should be carried out regardless of the size of the limited gold reserves of the issuing country."

In other words, issuing large quantities of dollars undermined confidence in its gold content, but since the dollar became collateral for other currencies, it was necessary to print it (for foreign exchange reserves of other countries). Hence, we can conclude that the collapse of this system was inevitable.

Actually, with the topic of "providing gold", everything is clear for a long time - the system broke down and collapsed a long time ago. But all this talk is now in line with the collapsing market discussion for the dollar.

So, according to Swift data released on Tuesday, the single European currency, which lost first place as the most used currency for global transactions five years ago amid the European debt crisis, is gaining momentum in the calculations. SWIFT confirms: dollar settlements decline

Net purchases of Treasury bonds by foreigners from January to August 2018 amounted to $ 78 billion, which is half of the same period a year earlier, although the US government is increasing the amount of government debt to cover the growing budget deficit.

Foreigners now account for only 41% of the US federal government's Treasury bonds outstanding, according to the US Treasury Department. This is at least 15 years, although back in 2013 the figure was 50%.

Everyone is trying to predict what will happen if the calculations in dollars are curtailed even more and all this mass rushes back to the United States.

As I understand it, there are two options:

1)

- There won't be such a big demand for dollars. A lot of goods that were previously supplied to get the coveted bucks on the US market will no longer be delivered there. And the standard of living in the United States will plummet. And there they are already used to eating in 3 throats. It will hurt. Very painful. Perhaps there will be a revolution.

- All bucks from the world economy will start returning to the United States. And they will try to exchange them for something of value that is in the United States. America will go wild with inflation. Perhaps amers will refuse to accept dollars from other countries. If this happens, all trade relations with America will collapse, because they refuse to accept back their dollars. Who the hell would they give up then?

- Most likely, the de-dollarization of the world economy will plunge the United States into an unimaginable crisis, which they may not survive.

2)

- Nothing threatens the United States, there are no real reasons for the crisis. Their debt in digital terms is huge, but if we compare it with the volume of the economy: national debt = the volume of annual GDP.

- Yes, $$ will be exchanged for other currencies, but it is impossible to buy more than the US produces from them, so either get in line or invest in the US economy. And the money invested in the US economy will be withdrawn from circulation (returned to the Fed Reserve), while maintaining the stability of the system. What is Trump now and is actively preparing "partners".

Yes, not only the United States will have to shrink, but also the Europeans, the Japanese … the whole world will have to re-create trade (regional) associations that compete with each other. This century will be in struggle, add here the already underway transition to the next technological order and it becomes clear that those who cannot hold out now will lag behind - they will fail very much in comparison with the leading countries.

- That is, having created $ 100 out of thin air, the FRS pays $ 6 as dividends, and $ 94 goes to the US budget. Now this money needs to be returned as an investment in the United States, effectively closing other import methods. It turns out that having once created $$ out of thin air, they will now extinguish them by investing in the US economy.

Which option do you see as the most plausible?