Triffin's Dilemma and The Mar-a-Lago Accords

The New World Order Coming to Our World Now - Article #103

In this 15-minute article, The X Project will answer these questions:

• I. Why this article now?

• II. What is Triffin’s Dilemma?

• III. What fundamental economic issues are driving the need for global trade reform now?

• IV. How can tariffs be used to restructure trade policy?

• V. What are the National Security Implications of Trade Policy?

• VI. What are the “Mar-a-Lago Accords”?

• VII. How does Gold Balance International Trade?

• VIII. How High Could Gold Prices Reach?

• IX. What does The X Project Guy have to say?

• X. Why should you care?

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I. Why this article now?

This past week, I listened to the latest edition of MacroVoices, which I always do. Eric Townsend’s guest was Jim Bianco, a respected favorite of mine, and the topic was global-order-shattering: The Mar-a-Lago Accords.

I also read my weekly edition of Luke Gromen’s Tree Rings Report, in which Gromen brought my attention to Dan Oliver’s latest missive, “Gold Revaluation,” published at Myrmikan Research. Oliver’s piece expounded extensively on the topic I raised in Section IV of my article last week, “Gold Prices Made New All-Time Highs - Again!” (Note: I introduced Dan Oliver a few months ago when I re-published his article, “Stagflation and War: The 1970s Redux - Myrmikan Research Article by Daniel Oliver.”

But Bianco and Oliver were weaving different strands of the same tapestry, so I dug deeper as usual. Both of them referenced Stephen Miran’s paper published in November 2024, A User’s Guide to Restructuring the Global Trading System, and so I had to read that also.

Who is Stephen Miran? He is a Senior Strategist at Hudson Bay Capital and an economics fellow at the Manhattan Institute for Policy Research. He previously served as a senior advisor for economic policy at the U.S. Department of the Treasury, where he contributed to fiscal policy decisions during the pandemic recession. Before his government role, he spent a decade as an investment professional. Miran holds a Ph.D. in economics from Harvard University and a B.A. from Boston University, bringing extensive expertise in financial markets, economic policy, and trade dynamics. He is President Trump’s Chairman of the Council of Economic Advisors (CEA) nominee.

I am writing this article now because I think everyone should know what I learned from the articles, papers, and interviews I referenced above. Of course, I know that not everyone has the time or the interest to do so., which is why The X Project exists. The X Project curates, summarizes, distills, and synthesizes knowledge & learning at the interseXion of economics, geopolitics, money, interest rates, debts, deficits, energy, commodities, demographics, & markets - helping you know what you need to know.

II. What is Triffin’s Dilemma?

Triffin’s dilemma is an economic paradox that arises when a national currency, such as the U.S. dollar, also serves as the global reserve currency. Belgian-American economist Robert Triffin identified this issue in the 1960s, highlighting an inherent contradiction between a country’s domestic economic policy and the global demand for its currency.

The core problem for a currency to function as a global reserve is that there must be a steady supply of it in international markets. This typically requires the issuing country—historically, the U.S.—to run persistent trade deficits, supplying dollars to the rest of the world. However, chronic deficits can weaken confidence in the currency’s stability, leading to long-term inflationary pressures and the risk of devaluation.

This creates the paradox of stability and instability. If the U.S. prioritizes domestic stability, it may restrict the outflow of dollars by running a balanced trade account or a surplus. However, this would reduce global liquidity, potentially triggering deflationary pressures worldwide and slowing economic growth. On the other hand, if the U.S. prioritizes global liquidity, it must keep running deficits, eroding trust in the dollar over time and raising concerns about its long-term purchasing power.

The dilemma remains relevant today, particularly as discussions arise over de-dollarization and the shift to alternative reserve assets (e.g., digital currencies, central bank reserves in gold, or a basket of global commodities). Despite criticisms, the U.S. dollar remains dominant because of its liquidity, stability, and the depth of U.S. financial markets. However, persistent trade deficits and our unsustainably growing national debt have risen to crisis levels, and the new administration believes it was voted into office and has a clear popular mandate to resolve this dilemma.

III. What fundamental economic issues are driving the need for global trade reform now?

The central issue identified in Miran’s paper is the persistent overvaluation of the U.S. dollar, which distorts international trade balances. The strong demand for U.S. dollar reserves by foreign governments and institutions has artificially inflated the currency's value, making American exports less competitive while making imports cheaper. This dynamic has significantly impacted the U.S. manufacturing sector, leading to job losses, factory closures, and economic stagnation in many industrial regions. The overvalued dollar has also contributed to economic imbalances that undermine long-term growth and national security.

A major contributor to this issue is the Triffin Dilemma, which states that as long as the U.S. dollar serves as the world’s reserve currency, the U.S. must run persistent trade deficits to supply global markets with reserve assets. This creates a cycle in which the U.S. economy is forced to rely heavily on financial services and debt issuance rather than on tradeable goods production. As global GDP grows, the burden of supplying reserve assets increases, exacerbating these imbalances. This system is unsustainable in the long run and necessitates policy intervention.

Additionally, foreign nations, particularly China, have manipulated their currencies and engaged in unfair trade practices to maintain their trade surpluses with the United States. The Chinese government, for instance, has been accused of artificially devaluing the yuan to maintain a competitive edge, leading to significant trade distortions. The paper suggests that any reform to the global trading system must address these structural currency misalignments and impose countermeasures against currency manipulation.

Lastly, national security concerns are intertwined with economic policy. The paper argues that the erosion of the U.S. industrial base, facilitated by an overvalued dollar and unfair trade practices, has left the country vulnerable to geopolitical threats. A robust manufacturing sector is essential not only for economic prosperity but also for national security, as industrial capacity is crucial for defense production and technological advancements.

IV. How can tariffs be used to restructure trade policy?

Tariffs have been a longstanding tool for trade policy and were effectively used during the Trump administration’s trade negotiations with China in 2018-2019. The paper suggests that tariffs can serve multiple purposes: they generate government revenue, protect domestic industries from unfair competition, and force trading partners to engage in more equitable practices. However, their implementation requires careful calibration to avoid unintended economic consequences.

One of the main concerns with tariffs is inflation. Critics argue that tariffs raise consumer prices, but the paper highlights that currency adjustments often offset these effects. When tariffs were imposed on Chinese goods in 2018-2019, the Chinese yuan depreciated, which mitigated much of the inflationary pressure on American consumers. This suggests that a well-structured tariff policy, accompanied by currency adjustments, can be implemented without significant inflationary consequences.

Another key function of tariffs is their role in national security. The U.S. can strengthen its domestic industrial base by imposing targeted tariffs on strategic industries such as semiconductors, pharmaceuticals, and steel production. This ensures that critical supply chains remain within the country, reducing dependency on foreign nations, particularly adversarial states. The paper argues that trade policy should closely align with national security policy to create a more resilient economy.

Moreover, tariffs provide leverage in trade negotiations. By imposing conditional tariff rates that vary based on a country’s trade and security cooperation with the U.S., the administration can incentivize allies and trading partners to adopt fairer trade practices. A tiered tariff system could penalize nations manipulating currency or failing to open their markets to American goods while rewarding those engaging in reciprocal trade agreements.

V. What are the National Security Implications of Trade Policy?

Trade and national security are deeply interconnected. A strong domestic industrial base ensures the country can produce critical defense goods, such as semiconductors and pharmaceuticals. Dependence on foreign nations for these supplies can create vulnerabilities, especially in conflict.

Miran’s paper highlights the risks of overreliance on adversarial nations, particularly China, for key materials. A disruption in the supply chain—whether due to political tensions or trade disputes—could weaken national security. As a result, trade policies should prioritize securing domestic supply chains and reducing reliance on geopolitical rivals.

Tariff policies and strategic trade agreements should be designed to incentivize the production of critical goods within the U.S. Additionally, partnerships with allies that share national security concerns can help create reliable trade networks. Strengthening domestic production of essential goods ensures that the country remains prepared for future challenges.

Further, economic security plays a role in broader geopolitical stability. Nations with strong domestic industries and trade policies that support national interests are better positioned to navigate global tensions and maintain economic independence.

VI. What are the “Mar-a-Lago Accords”?

The Mar-a-Lago Accords, as described by Jim Bianco in his recent interview, represent a bold and unconventional restructuring of global economic and security arrangements under the Trump administration’s second term. The initiative is centered around three central pillars: tariffs as a tool for revenue and leverage, creating a U.S. sovereign wealth fund to monetize underutilized national assets, and a controversial revaluation of America's long-standing global security commitments. These policies address the United States’ mounting national debt—now at $36 trillion—while reinforcing Trump's vision of an "America First" economic and geopolitical strategy. The Mar-a-Lago Accords can potentially reshape international trade, financial markets, and the global security order in a way comparable to historical agreements like the Bretton Woods System and the Plaza Accord.

The first and most widely publicized pillar of the Mar-a-Lago Accords is a renewed emphasis on tariffs. Trump has historically viewed tariffs as a dual-purpose tool: one, as a means of economic coercion, and two, as a revenue-generating mechanism. This approach was recently illustrated in U.S. dealings with Mexico and Canada, where tariff threats were used as leverage to extract policy concessions on border security and fentanyl control. Trump’s new vision, however, takes tariffs beyond a mere negotiating tactic. He has floated the idea of an External Revenue Service (ERS), a new government agency tasked with collecting tariff revenue, positioning tariffs as an alternative to income taxation. The underlying strategy here is to reduce reliance on internal taxation by shifting the burden to foreign producers exporting to the U.S. While this policy has been widely criticized for its potential inflationary impact on domestic consumers, Trump’s stance is that the benefits—both in terms of revenue and bargaining power—outweigh the risks.

The second major component is the U.S. sovereign wealth fund, a radical departure from traditional economic policy. Unlike typical sovereign wealth funds—such as those of oil-rich nations like Norway or Saudi Arabia, which invest surplus revenues—this fund seeks to monetize U.S. assets that have historically been overlooked. The prime example Bianco discusses is gold revaluation. The U.S. government holds approximately 8,000 tons of gold, currently valued on the books at a nominal $42 per ounce, far below its market price of nearly $3,000 per ounce. Revaluing this gold alone could theoretically unlock $800–900 billion in assets for the sovereign wealth fund. There is also speculation about including Bitcoin, with the U.S. government potentially transferring the 207,000 BTC seized in fraud investigations (worth approximately $12 billion) into the fund. However, Bianco warns that such moves are more about balance-sheet manipulation than genuine wealth creation, as no new resources are acquired—only their valuation changes. Critics argue that leveraging these assets to take speculative positions, such as acquiring companies like TikTok, turns the sovereign wealth fund into a government-run hedge fund, which could create significant financial instability.

The third and most controversial aspect of the Mar-a-Lago Accords is the proposed restructuring of America’s post-WWII global security commitments. For 80 years, the U.S. Navy has patrolled global trade routes, providing security that enables free commerce. In return, America has demanded political and ideological alignment from its allies. However, Trump argues that this arrangement is unfairly skewed against the United States, as other nations have benefited from U.S. military protection without financial compensation. His administration’s new policy would demand that NATO allies increase defense spending to 5% of GDP and participate in a debt swap program. Under this plan, countries holding U.S. treasuries would be forced to exchange them for non-marketable, zero-coupon, century-long securities—effectively writing off interest payments on a portion of U.S. debt. The proposal amounts to a financial "cram-down" on America’s allies, with the implicit threat that failure to comply could result in diminished U.S. security guarantees. This approach has alarmed many geopolitical analysts, who fear it could fracture NATO, push European nations toward alternative security arrangements (such as deals with Russia or China), and introduce widespread instability into global trade systems.

Jim Bianco suggests that the Mar-a-Lago Accords could be one of the most consequential financial and geopolitical shifts since the Bretton Woods Agreement (1944) or the closing of the gold window (1971). The underlying theme of the plan is Trump’s belief that the burden of America's financial crisis should shift from American taxpayers to foreign entities, reversing decades of globalization policies that, in his view, have hollowed out U.S. industries. However, the risks are immense. If European allies reject the security debt swap, Trump could retaliate with harsh tariffs, potentially triggering a trade war and a breakdown of long-standing alliances. Meanwhile, the sovereign wealth fund raises concerns about speculative government investing, mainly if it involves volatile assets like Bitcoin. While supporters see these measures as bold solutions to an unsustainable debt crisis, critics view them as a dangerous gamble with the global economy. Whether the Mar-a-Lago Accords lead to economic revitalization or financial chaos remains to be seen. Still, one thing is clear: Trump is thinking on a scale far beyond mere policy tweaks—he is attempting to rewrite the rules of global finance and security.

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• VII. How does Gold Balance International Trade?

• VIII. How High Could Gold Prices Reach?

• IX. What does The X Project Guy have to say?

• X. Why should you care?

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VII. How does Gold Balance International Trade?