In a paper that Laffer read in 1966 while at Stanford, and which attracted him to the University of Chicago in 1967, Mundell countered the Triffin-ite view that if a country grows, its “balance of payments” position worsens. This au courant maxim of 1960s economics held that if a country grew more than its trading partners, failing to push its exports on a recalcitrant world market while increasing its imports excessively, that country would have to devalue its currency. A trade deficit, in this view, led to a balance of payments deficit—more home currency going abroad than foreign currency coming in. To clear the transactions in a final sense, the home currency would have to devalue. Mundell was cool to this view, as in this passage from “Growth and the Balance of Payments.”
Here, Mundell notes that as countries grow relatively, they have a greater tendency to hold money as opposed to buy goods. This leads to an increase in a demand for money within the home country, wiping out any balance-of-payments deficit.
Robert A. Mundell, International Economics (New York: Macmillan, 1968), 134.