Apr

12

Bessent 's most recent public comments about Treasuries seem to me the best answer to the suggestion that "they" want to debase the dollar:

In his remarks to the American Bankers Association on April 9, 2025, Bessent criticized the current regulatory framework, noting that leverage capital restrictions, such as the Supplementary Leverage Ratio (SLR), can become overly restrictive. He pointed out that these rules sometimes treat Treasuries—the safest assets—as if they carry significant risk, requiring banks to hold additional capital against them. Bessent suggested that regulators should reconsider this approach, hinting at reforms that could allow banks to hold Treasuries with less punitive capital requirements. He emphasized the need for a regulatory system that supports economic growth and questioned why "the safest asset in the country" faces such constraints under current leverage rules.

The question to be asked about "the dollar" is the one Hamilton and Willing tried to answer: who will own the Treasuries IOUs? Since the Americans had no savings, Hamilton thought the answer would have to be foreigners. Willing was clever enough to realize that Treasuries could become the savings if banks gave up the fantasy that deposits could be lent. The banks had to be discounters of each others' notes and dealers in personal loans/commercial paper. They could accumulate Treasuries as capital and leave leveraging to private capital (Astor became, by far, the richest man in the country by being Fannie and Freddie for his own and others' properties).

I doubt that Bessent, of all people, has any plan for the exchange price for the dollar any more than Willing had any belief that the BUS (which owned half the capital of the entire country) could set the discount rate. As he said yesterday, “Up 10 down 5 is not a bad reaction.”


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1 Comment so far

  1. Jeffrey Watson on April 14, 2025 5:56 pm

    I like a cheaper dollar, it’s good for the grains

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