Why did the Bretton Woods System face a 'liquidity problem' in the 1960s known as the Triffin Dilemma?
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Correct answer: The U.S. had to run deficits to provide global liquidity, which undermined faith in the dollar
The Triffin Dilemma stated that the system required the U.S. to supply dollars to the world through deficits, but those same deficits made the dollar appear weak. Eventually, the amount of dollars held abroad far exceeded the U.S. gold supply.
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More Bretton Woods System questions
- The Bretton Woods System was designed to avoid the 'beggar-thy-neighbor' policies of the 1930s, which included:
- Which of the following was a major criticism of the Bretton Woods institutions by developing 'Global South' nations?
- What role did the General Agreement on Tariffs and Trade (GATT) play alongside the Bretton Woods System?
- How did the Marshall Plan interact with the early Bretton Woods System?
- The term 'adjustable peg' in the context of Bretton Woods meant that:
- Why did France, under Charles de Gaulle, famously challenge the Bretton Woods System in the 1960s?