Modern economics has formulated “The Impossible Trinity” to express the plight of modern central bankers, which states: No government can successfully achieve all three goals of having a fixed foreign exchange rate, free capital flows, and an independent monetary policy.

With good reason, however, many economists who previously favored greater freedom of capital movements have become less enthusiastic, and the Fund itself came around to a more neutral position. In a survey of the evidence published in May 2003, four Fund economists, including chief economist Ken Rogoff, wrote that "there is as yet no clear and

The Triffin Dilemma Unfolds

In the 1960’s, economist Robert Triffin noted that global reserve currencies have to run large persistent trade deficits, which has been coined the Triffin Dilemma. If the reserve country doesn’t supply the world with a lot of their currency, then the world simply can’t use that currency for international trade, commodity