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Campanella, Miriam L.
Far-Reaching Consequences of U.S. Financial Sanctions. The Dollar Shortage and the "Triffin Moment"
Robert Triffin International, Centro Studi sul Federalismo, June 2019

The dollar’s dominance in global finance and its cross-border political power confer on the United States control over directing, gating, and influencing capital flows.
These holds derive from the U.S.’s overwhelming metrics, in any sector of the economy, but also from its far-reaching jurisdiction over the dollar’s financial infrastructures.
By threating disconnection from capital markets, and imposing large fines on third parties, U.S. administrations have achieved full compliance with these measures. Yet, the use of these measures, and the uncertainty over access to dollar liquidity, have the potential of endangering the smooth functioning of capital markets that at a some point in time will turn to sub-optimal supply of liquidity, or an outright dollar shortage. This situation epitomizes the tipping point, or the “Triffin Moment”, which predicts that new national sources of liquidity should enter the market to repair the discontinuity of the payment system, and the obstruction of capital flows. So far, the Euro and the Chinese RMB, the most appropriate candidates for delivering alternative liquidity sources, are still in a “dangling mode”, a situation only favouring the dollar dominance by default.
With expanding volumes in financial markets, and increasing geo-political tensions, emergency situations call for strong political will to endow and equip the euro and RMB to bring about the Triffin Moment.

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