Dodd-Frank Prods Morgan Stanley PDT.exit()

Morgan Stanley will close its PDT group and revive it in the shape of PDT Advisors by the end of 2012. It expects the full staff of 60 to join the new firm.

Dodd-Frank Prods Goldman to GlobalMacro.exit()

Global Macro trades everything under the financial sun: currencies, stocks, interest rate products, and will now shut down in deference to the Volcker Rule, one component of Dodd-Frank approaching in July 2011. Last year, Goldman also shut down its Principal Strategies Group run by Pierre Henri Flamand, who then started Edoma Capital (reported to have raised over $1bn).

Question Marks over the Dominance of the USD

For 100 years, the American dollar has been the world's dominant financing currency, recently challenged by the Euro. In the last 10 years, the dollar has fallen to 60% of FX reserves held globally with Euros at 25%, 15% in other currencies. If the renminbi becomes fully convertible and dispenses capital controls it would become the world's third global currency. Capital controls limit the flow of money into and out of a country. China allows inflow in the context of FDI (i.e. long-term investors) whereas it restricts the purchase of Chinese financial assets. Restricting purchase of currency to restrict purchase of financial assets, restricts the appreciation of the currency. Capital controls can be seen as an alternative to quantitative easing and intervention.

Should the US sell ultra-long (100 year) bonds?

The longest bond issued by the US Treasury has a maturity of 30 years and the average maturity of outstanding debt is 5 years (59 months).

However, the TBAC (Treasury Borrowing Advisory Committee) has discussed selling "ultra-long" maturity bonds with up to 100 year maturity, to exploit low borrowing costs. Who would invest in such low-yielding paper? It is argued long-term investors like pension funds and insurance companies...but wouldn't they also want to see a return?

France, China and the UK have sold 50 year debt.

The benefits to the US Treasury would also include diversification of its investor base beyond the largest investors, foreign central banks, thus "reducing funding risk".

In Lehman news, it has been reported that Bernanke on 14 Sept 2008 wrote in an email: $12bn plus Fed liquidity support would not be enough (to keep Lehman afloat). On 9 Sept 2008, the Liquidation Gameplan was distributed, highlighting: "Lehman is bigger and more global than Bear Stearns".