By all appearances, a ghost from the 1980s is pacing the corridors of the White House once more. The phrase “Plaza Accord 2.0” is being quietly whispered, evoking memories of the 1985 deal that saw developed nations—most notably Japan—agree to manipulate exchange rates to arrest the dollar’s unsustainable ascent. Back then, the goal was to recalibrate an unbalanced global trade regime. Today, it’s more about salvaging a faltering grip on an increasingly polycentric world.
The latest murmurings took shape behind the closed doors of the Eisenhower Executive Office Building on April 25. The attendees weren’t foreign dignitaries or even high-profile government officials but the heads of financial behemoths such as BlackRock, Citadel, PGIM, and Tudor. All eyes were trained on Stephen Miran, the new and rather embattled chairman of the Council of Economic Advisers.
What little has trickled out of that meeting suggests that Miran floated the idea of coordinated currency interventions targeting not just the dollar, but the yen, euro, renminbi, and others. Whether he dubbed it the “Mar-a-Lago Agreement” or something less theatrical, the intent was clear: an engineered depreciation of the dollar to reclaim America’s vanishing economic competitiveness.
In many ways, this conjured resurrection is not just policy nostalgia. It’s panic. The dollar has been under pressure ever since President Trump declared a so-called Liberation Day in early April. His camp, buoyed by populist bravado and economic illiteracy, has taken a wrecking ball to free trade orthodoxy and turned tariffs into tools of coercion, not calibration. Washington is now pressurizing allies to up their defense budgets while talking down its own currency. What is framed as the protection of the dollar is, in fact, a slow-motion erosion of its credibility.
Miran, for his part, appears obsessed with the “Triffin Dilemma,” an idea formulated in the 1960s by Belgian economist Robert Triffin. Put plainly, for the United States to sustain its role as the purveyor of the world’s reserve currency, it must continually live beyond its means. Its deficits are therefore not a flaw but the very fuel of global liquidity. The more the dollar is demanded globally, the stronger it becomes, thereby undermining U.S. exports and widening the trade deficit. What makes the dollar indispensable, according to this paradox, also makes it unstable.
This economic Catch22 isn’t merely theoretical. It’s baked into America’s DNA. For decades, America has upheld the dollar’s supremacy not through virtue but through voracity. It has sustained its privileged position by nursing a twin affliction: a cavernous fiscal deficit and an ever-widening current account gap. In 1985, those deficits stood at $120 billion and $210 billion, respectively. In 2024, they’ve grown tenfold to $1.2 trillion in trade and $1.8 trillion in budgetary red ink. Welcome to the high-stakes casino of globalized finance, where the house still pretends it’s in control, even as the walls tremble.
But the stakes are no longer just economic. As the original Plaza Accord demonstrated, currency realignment was as much about geopolitics as balance sheets. Back then, the U.S. strong-armed Japan into appreciating the yen, triggering decades of economic stagnation in Tokyo and redirecting the global manufacturing spotlight to China. Today, the geopolitical chessboard has shifted, but Washington still leans on the same playbook—just with fewer allies and less subtlety.
At the 1944 Bretton Woods Conference, John Maynard Keynes proposed a supranational currency called the “Bancor.” The United States blocked it, insisting that the dollar, anchored to gold, become the global standard. That era is long gone, but the institutional inertia lingers. Now, the very success of that arrangement has turned into its undoing. The dollar’s strength, sustained by habit more than fundamentals, has become a liability. It hollows out U.S. manufacturing, undermines job growth, and reduces the currency’s long-term attractiveness, especially when paired with reckless fiscal policy and an ever-expanding debt ceiling.
And so the circle completes: American policymakers, unable or unwilling to address domestic structural deficiencies—underinvestment in infrastructure, educational decline, and a selfserving financial sector—look for external scapegoats. The dollar is too strong? Blame China. The trade deficit too large? Punish Europe. Domestic industry in decline? Slap on tariffs and start a trade war. This reflexive projection is not just misguided, it’s dangerous.
Financial centers around the world are beginning to hedge their bets. In London, the talk isn’t about Plaza 2.0 but about decoupling from the dollar altogether. Sovereign wealth funds in the Gulf are reportedly diversifying away from greenbacks, unnerved by both depreciation risks and U.S. political volatility. On May 16, Moody’s stripped the United States of its last pristine AAA credit rating, citing fiscal deterioration and political dysfunction. For the world’s supposed safe haven, that’s an unprecedented blow that signals a tipping point in global perceptions of U.S. stability.
At the same time, BRICS countries are laying foundations for alternatives. In late May, the bloc announced the rollout of a blockchain-based payments infrastructure, dubbed BRICS Pay, to facilitate cross-border transactions in local currencies. Although far from a single unified currency, it marks a concrete move to reduce reliance on the dollar in bilateral trade.
None of this, however, suggests the dollar’s swift dethronement. The alternatives—euro, yuan, or a digital BRICS currency—remain fragmented, constrained by political dysfunction or lack of trust. But the erosion is cumulative. A century of monetary primacy is being whittled away by hubris, complacency, and the mistaken belief that dominance is a given, not a privilege.
The Trump camp’s crude assumption that devaluing the dollar will automatically restore America’s industrial base is yet another delusion. Comparative advantage depends on more than exchange rates. It’s about innovation, institutional strength, and supply chain integration. Germany, after all, runs a robust export surplus with a strong euro. Devaluation may boost headline figures temporarily, but it won’t bring back lost factories or rebuild atrophied skills.
Meanwhile, the European Central Bank has been slashing interest rates—they’re now down to 2 percent—in an attempt to stimulate growth across the eurozone. Yet the euro has appreciated over 10 percent against the dollar in the past four months, complicating the ECB’s efforts. Even as Europe positions itself as a stable monetary anchor, its exporters are beginning to feel the pinch. This is a telling sign that the dollar’s decline is not a panacea but a sign of deeper volatility in the global system.
In fact, over-reliance on currency manipulation and protectionism merely underscores Washington’s inability to offer a coherent long-term vision. As global economic power tilts eastward and southward, the idea that Washington can engineer another Plaza-type consensus seems anachronistic. The world has changed. Its financial architecture—tied together by trade, capital flows, and digital infrastructure—is far more complex, and far less willing to kowtow.
This first appeared in FPIF.
