In March 2009, Chinese central bank Governor Zhou Xiaochuan caused a brief stir in the currency markets by suggesting that a dollar-based international monetary system was inherently unsustainable. “Issuing countries of reserve currencies are constantly confronted with the dilemma between achieving their domestic monetary policy goals and meeting other countries’ demand for reserve currencies,” he wrote. “They may either fail to adequately meet the demand of a growing global economy for liquidity as they try to ease inflation pressures at home, or create excess liquidity in the global markets by overly stimulating domestic demand.”

This problem—known widely as the “Triffin dilemma” after the economist Robert Triffin, who articulated it in 1960—was at the heart of the Bretton Woods international monetary system, which collapsed in 1971 when President Nixon ended the dollar’s convertibility into gold. It went into hibernation during the so-called “Great Moderation,” the period from the mid-1980s until the early part of the current decade—a period during which US inflation and economic volatility were persistently modest. But it never disappeared. After 9/11, the Federal Reserve experimented with years of negative real interest rates and allowed credit to balloon. With much of the developing world pursuing a deliberate policy of dollar reserve accumulation in the wake of the Asia crisis of the late 1990s, aggressive Fed policy was transmitted globally through the managed exchange rates necessary to build the reserves. The world enjoyed the monetary rush, at least until 2008. Since then, it has been taken on a wild ride that’s included a commodity boom, financial collapse, a mad dash to no-yield Treasury bonds, and whipsawing capital flows. The world has spun from dollar glut to famine to glut again, with the Fed all the while making it clear that it saw no “dilemma.” Every government was free to dial the macroeconomic thermostat up or down as it pleased—with the Treasury’s caveat that they should not fiddle with the exchange rate.

The rest of the world doesn’t buy it: the 2008 crisis has reinforced the view that only massive dollar reserves can preserve a nation’s autonomy in a crisis. Most importantly, China doesn’t buy it. And with so-called global imbalances being fundamentally a huge imbalance between China and America, resolving this stalemate without another economic crisis is crucial.

China’s position, curiously, would have jibed well with the US position during the Bretton Woods negotiations of 1944. Then, the United States was adamant that only fixed exchange rates were compatible with a stable, multilateral trading regime – the rebuilding of which was a top US priority. And the dollar was to be the reliable anchor of the system, with reliability deriving ultimately from a solemn US commitment to redeem dollars for gold at a fixed price of $35 an ounce. China has pointed out that it began its dollar peg way back in 1994, and sustained it through the Asia crisis, even as speculative pressure mounted for a devaluation. Not incidentally, the United States strongly supported the peg back then: “China, by maintaining its exchange rate policy,” pronounced Treasury Secretary Robert Rubin in May 1998, “has been an important island of stability in a turbulent region.” So the difference is not actually one of principle between the two countries; the United States has, in fact, been fine with fixed exchange rates, provided that the other guy’s currency appears overvalued.

China’s position on imbalances is also the same as the US position at Bretton Woods: the debtor should bear the burden of adjustment. In the present context, that means tighter US monetary and fiscal policy, as would be required under a classical gold standard (that is, the United States sends a dollar to China, China redeems it for gold, US gold stocks fall, policy tightens to draw gold back, imbalances fall). But now that the United States is a massive debtor, rather than the creditor it was at Bretton Woods, it rejects the logic of debtor adjustment.

So where does this stalemate leave us? The United States seems happy to continue the game of chicken, reckoning that as long as China refuses to appreciate its currency, it has no choice but to continue to gobble up low-yielding dollar debt. Despite warnings from Governor Zhou and other top Chinese officials that it will seek alternatives, the United States doesn’t believe China has any. A move by China to diversify into other currencies would slam the purchasing power of its huge stock of dollar assets. China would not cut off its nose to spite its face.

But there are alternatives. One that China, India, and others have been pursuing is building up their stock of gold reserves. Swapping dollars for gold, rather than other currencies, can sidestep, at least temporarily, an undesirable exchange-rate shift. And gold would probably do at least as nicely as dollars in a crisis.

But the more worrying alternative is the one China is already pursuing with Brazil and Russia: trading without dollars. If countries could avoid having to use dollars in trade, the US government would be compelled to be more prudent in printing, borrowing, and spending them. But the only way for China and others to conduct trade without an internationally accepted currency, like the dollar, is to balance it bilaterally with their partners. This would mean systematic trade discrimination, and the beginning of the end of the multilateral trading system built up painstakingly since the 1950s. We would be going back to the immediate post-WWII period, when the trading system had transmogrified into a contentious web of bilateral barter. In those days, it was a dollar shortage that destroyed multilateral trading. Tomorrow it may be a dollar glut that does it. There is no escaping the Triffin dilemma.

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