Wall Street Warns Tim Geithner That The Dollar Is Starting To Lose Its Reserve Status

Tyler Durden's picture

The Treasury's Borrowing Advisory Committee, chaired by such luminaries as JPMorgan and Goldman Sachs, which according to some (and by some we mean anyone who cares about such things) is the brains behind the decision-making process of US debt issuance has released its quarterly minutes, in which it has issued one of the most stark warnings about the fate of the US Dollar to date. While it is now a daily occurrence for China and Russia to bash the dollar, for the most part still powerless to provide an alternative (but rapidly gaining), the same warning coming from Jamie and Lloyd has to be taken far, far more seriously. Which is precisely what happened today. As Bloomberg reports, "The Treasury Borrowing Advisory Committee... said the outperformance of haven currencies and those from emerging nations has aided in the debasement of the dollar’s reserve status, according to comments included in discussion charts presented ahead of the quarterly refunding. The Treasury published the documents today. “The idea of a reserve currency is that it is built on strength, not typically that it is ‘best among poor choices’,” page 35 of the presentation made by one committee member said. “The fact that there are not currently viable alternatives to the U.S. dollar is a hollow victory and perhaps portends a deteriorating fate.”"

But, wait a second... Isn't Ben Bernanke debasing the dollar precisely for the benefit of the members of the TBAC? And considering that he has done such a tremendous job, is it a little hypocritical to be taking the USD devaluation in one hand, and complaining about it with another? Perhaps someone less jaded than us can answer. As for another important question looming over the US, namely the so called imminent US downgrade, the TBAC has spoken: "None of the members thought that a downgrade was imminent." Which means that both S&P and Fitch have now been bribed with enough peas to keep their mouths shut. The status quo wins again.

Some other interesting observations:

  • Primary Dealers expect a much smaller fiscal deficit in 2011 than either the CBP or OMB, at $1358BN compared to $1480BN and $1645BN respectively. Which means, if wrong, that Dealers will be on the hook to purchase up to $300 billion more debt than currently modelled. Will they be able to handle this extra load?
  • PDs expect 2011 Marketable Borrowing to be between $980 and $2055 Billion. A rather wide range
  • Bills as a percentage of the portfolio have plunged to decade lows, while coupons are at decade highs
  • From the previous bullet point, the PDs expect the average maturity of debt to continue to increase. We disagree considering the hundreds of billions in Bills that will have to be reissued to make up for the 2 month non-rolling fiasco
  • There is $1.8 trillion in debt refinancing needs in 2011; Just over $1.4 trillion in 2012, and just under $1.1 trillion in 2013. Good luck rolling all of this debt.

The TBAC's conclusion is actually rather spot on:

  • The benefits of extension do not come for free. Historical analysis suggests that shorter term funding has at many times been both cheaper and the volatility costs have not been high
  • Recent cycles of rising rates have not lasted long enough for maturity extension to pay off
  • It is possible, however, that “this time is different” because
    • Nominal rates are much closer to the zero bound than previous periods
    • Deficits are very high historically and rising interest expense less acceptable
    • Concentrated foreign ownership creates less reliable demand
    • The benefits of funding attributable to being the reserve currency may be fading
  • While this presentation has focused exclusively on average maturity, a topic for future study is the impact of the distribution of maturities on total interest expense

That indeed would be an interesting analysis

Full must read presentation:



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Cdad's picture

Wall Street Warns...

Huh?  Wall Street represents perpetual dollar selling...which threatens the US dollar as reserve currency status.  This one is rich.

We will never get out of this with these same crooks at the helm.  There is simply no way the US can normalize as long as this banking cartel remains intact.

We are so screwed.

redpill's picture

The fact that there are not currently viable alternatives to the U.S. dollar..."


My stack of gold and silver looks pretty viable to me, bitchez.

Ahmeexnal's picture

This post is a half lie.

The dollar is gaining in real terms.

Anyone not holding dollars will be crushed.

But please make sure the dollars you hold are pre 1964 dimes, quarters, halves and dollar coins only.


SilverRhino's picture

Argentum and Aurum work just fine bitchz

bernorange's picture

The cited Bloomberg article also states:

"The U.S. currency’s portion of global currency reserves dropped to 60.7 percent in the period ended March 31, the least since March 1999, International Monetary Fund data showed. It was 61.5 percent in the fourth quarter of 2010. The euro’s share rose to 26.6 percent, from 26.2 percent, while the yen was unchanged at 3.8 percent of the total. A category the IMF calls “other currencies” rose to 4.7 percent from 4.4 percent and is up from 3.6 percent in the first quarter of 2010."

I'm going to go out on a limb and guess that gold is counted under "other currencies".

Doc Occ's picture

"Winter is coming!"  --Lord Eddard Stark from A Game of Thrones

We have reached the point of diminishing returns from all of these "stimulus" Ponzi schemes:  U.S. QE & "TARP" for the termite-infested and rotting TBTF banks; EU bailouts of peripheral debtor nations; Japanese roads/bridges to nowhere; half-empty Chinese buildings and malls, etc. 

Most everyone is beginning to realize it, except for the die-hard Keynesian "bank-government" cabals.  Why do we listen and allow bank and investment executives to take government posts over and over again?  It's like a rotating army of foxes guarding, nay--grooming and cultivating the hen house.

Slowly, but surely, the appetite for even more Ponzi schemes is reaching an end:  economically and politically.  Unfortunately, this house of cards will fall and fall hard.  There is no longer a soft landing.  We only have the spectres of hyperinflation or massive debt deflationary collapse.

"You know nothing, Geithner, Bernanke, Trichet!"  --adapted from A Game of Thrones

P.S.  Gold is good if we go the hyperinlationary route; not so good in a deflationary spiral.  Always good are steel and food.  Ask the Lannisters.

BaBaBouy's picture


QE3 = More Fiats Money For Sacks ...


More Food Stamps for the US Sheeple ...

Crisismode's picture

Consolation Prize - - -

The Euro will tank about 7 days before the USD does.


"The way Europe is operating right now, it's what I called recently 'cognitive dissonance,'" or "basically doing the same thing thinking they're going to get a different outcome," Scott Minerd, CIO of the fixed-income firm Guggenheim Partners, said in an interview on CNBC Tuesday.

Hey, we've got our very own Cognitive Dissonance here on ZH.

What do you think of them using your Trademark, CD?

Crack-up Boom's picture

As I'm certain ZH's CD knows very well, Scott Minerd misused the term "Cognitive Dissonance".  What he meant was "insanity" - doing the same thing over and over, but expecting a different result.   "Cognitive Dissonance" means something very different.

Reptil's picture

And that's the kicker:
Wall Street runs up debt, creates impossible position, creates atmosphere of fear (TBTF), the Gov. bails them out, Wall Street pockets that cash, instead of putting it into the economy, the economy tanks, because there's a loss of production capabillity, the end of consumerism, and now the homeowners have to pay the banks AGAIN, while everything except Stocks depreciates, the dollar is unable to grow out of the debt, and then Wall Street warns the Gov. at first and then is kind enough to lend the Gov. that money. All of this, while the banks charge the Gov. (and taxpayer) interest, in all the different transactions, all in imaginary money, in bank computers.

All while the various characters hop from Gov. to Bank position. (since they're the experts and know best)

Same trick they're now trying to pull in Europe: A classic "fast-change trick". A triple one actually.

Wanna play?




eureka's picture

So does this mean that in order to save USD as world currency Jamie & Lloyd will tell Bernank to not print?

Hahahahaha, auw my tummy, hahahahah...

Snidley Whipsnae's picture

Nah... Jamie and Lloyd want to be on record as saying 'We warned ya'...

cranky-old-geezer's picture

It's a "gentleman's" game called Loot America.

problemfixr's picture

Get serious.  Didn't you read the article?  JPM and Goldman Sucks are at the helm.  Lighten up a bit.

SheepDog-One's picture

This is like Mayor McCheese warning about the poor nutritional value of McDonalds food!

Logans_Run's picture

The more things change, the more they stay the same...that is, until they don't! Got Gold?

OldPhart's picture

Ya know, with all the theft of infrastructure wire, houses being stripped, and items such as manholes being stolen for scrap value; does anyone care to predict when we start seeing wholesale grave looting for gold teeth, jewelry, etc?

HelluvaEngineer's picture

Cdad, looks like the 'ole burrito is gonna rally for a few more days.

macholatte's picture



When we walk away from global warming, Kyoto, when we are irresponsibly slow in moving toward AIDS in Africa, when we don't advance and live up to our own rhetoric and standards, we set a terrible message of duplicity and hypocrisy.
John F. Kerry

We didn't become the most prosperous country in the world just by rewarding greed and recklessness. We didn't come this far by letting the special interests run wild. We didn't do it just by gambling and chasing paper profits on Wall Street. We built this country by making things, by producing goods we could sell.
Barack Obama

We're in a giant car heading towards a brick wall and everyone's arguing over where they're going to sit.
David Suzuki

Capitalists are no more capable of self-sacrifice than a man is capable of lifting himself up by his own bootstraps.
Vladimir Lenin

Capitalism is the legitimate racket of the ruling class.
Al Capone

I rob banks for a living, what do you do?
John Dillinger


NumNutt's picture

Uh ok, and your point is.....

Tim White's picture

They want the pensions, IRA's, & 401K's & for us all to eat cake...

Freddie's picture

The C*** S***kers on Wall Street helped finance Hope & Change.  F them!

financeguru500's picture

Aren't these the same banks that needed bailouts just a few years ago?

Buckaroo Banzai's picture

"But, wait a second... Isn't Ben Bernanke debasing the dollar precisely for the benefit of the members of the TBAC? And considering that he has done such a tremendous job, is it a little hypocritical to be taking the USD devaluation in one hand, and complaining about it with another? Perhaps someone less jaded than us can answer."

It's not hypocrisy, it's called deliberate deception. These people are out to destroy the world monetary system and replace it with a One World Fiat Currency. Step One of that plan is destroying the dollar.

These arrogant shitbags are pretty sure they can do this without anyone noticing what is really going on, and to their credit, they are mostly correct.

Ghordius's picture

Hey, Grand Plans are for people that can restrain themselves. They don't plan ahead, they are banksters treating every next bonus as their last.

They are vampires explaining to their victim that she should excersise more, eat more healthy food, vitamins, the works....

hedgeless_horseman's picture




“The idea of a reserve currency  elected officials is that it is built they are elected on their strengths, not typically that it is they are ‘best among poor choices'...”


More theory meets reality.

r101958's picture

They always have had a firm grasp of the obvious (well, most of the time....ok, some of the time).

Cognitive Dissonance's picture

“The fact that there are not currently viable alternatives to the U.S. dollar is a hollow victory and perhaps portends a deteriorating fate.”"


You don't need an alternative. You simply need to stop the debasement and back it with something more stable than madmen who own a printing press. Say.....um....let me see, I have it right here on the tip of my tongue.

I got it.........GOLD.

Earl of Chiswick's picture

Now you wouldn't be talking your book, would you?

Cognitive Dissonance's picture

Talking my pocketbook. Is that what you mean?

My 'book' is set up long the madmen's eventual destruction of all fiat. And has been that way for nearly 10 years.

Bob Paulson's picture

More people make their trades based on what Cognitive Dissonance says than Jim Cramer.

tsx500's picture

he's talking common fucking sense, first of all.   also economic history.

Crack-up Boom's picture

You're right, but they're deliberately defining the problem so that gold isn't one of the solutions.   

Cognitive Dissonance's picture

Of course. That's how you steer and eventually win an argument.

Just ask Ron Paul, who is always shut out of the meaningful debates later in the game. Lie, then refer to your lie as the truth. Then have other people print the lie as the truth. Bingo, instant "truth' quicker than powdered Kool-Aid mixed with water.

macholatte's picture

A lie told often enough becomes the truth.
Vladimir Lenin

If you tell a big enough lie and tell it frequently enough, it will be believed.
Adolf Hitler

A lie gets halfway around the world before the truth has a chance to get its pants on.
Winston Churchill

There's only two people in your life you should lie to... the police and your girlfriend.
Jack Nicholson


SheepDog-One's picture

1 world currency is their 'viable solution'.

SheepDog-One's picture

Imprison the worlds Maniacal Monetizers! Problem SOLVED!

LawsofPhysics's picture

More financial terrorism from the financial sector and the proprietary trading desks of the primary dealers.  These assholes are chomping at the bit to buy real assets for pennies on the dollar.  Fuck them.  A strong dollar is fine with me (at least until it is all converted into physical PMs or real assets for my business).

baby_BLYTHE's picture

I thought he said the US was pursuing strong dollar policies?

Whalley World's picture

Yes B.B. as in strong like Stinky Cheese!

Cheesy Bastard's picture

I agree with your sentiment even if I am not completely comfortable with your metaphor. :)

glokk26L's picture

Trading dollars for toilet paper..... winning!

Troublehoff's picture

Toilet Paper has been rising steadily against the USD.

We need a USD/TLP pair

hognutz's picture

Hell, the price of gasoline/oil has been warning for awhile.....

TruthInSunshine's picture



This Administration wants a strong dollar, and this is a very important principal in crafting policy.

--President Barack Obama

I am seeking to ensure that the U.S. dollar remains strong.

--Timothy F. Geithner

I understand that prices on food, oil, and well, just about everything are soaring. It's Geithner's f*cking fault that the Federal Reserve Noteski is turning into confetti.

-- Ben S. Bernanke. Press conference.