There’s still nothing like a consensus on whether Donald Trump, through word and deed, is inviting capital flight or otherwise discouraging foreigners from investing in US assets.

I think he is. I think casting doubt on US security guarantees (just this week, he suggested NATO’s mutual defense clause admits of more than one interpretation), undermining the rule of law domestically (there are too many examples of that to count by now) and behaving capriciously towards America’s closest allies (whether that means slapping them with draconian tariffs or threatening to annex them), is to compel a rethink among foreign investors vis-à-vis the wisdom of maintaining enormous Overweights in US equities and particularly Treasurys.

The problem with that thesis is simple: There aren’t a lot of good alternatives for US assets. In some contexts, and for some investor types, there are no alternatives at all.

Whatever your opinion on this oh-so-urgent debate, most observers agree that, given America’s twin deficit “problem” (with the scare quotes to acknowledge that not everyone views deficits as problematic for the US), this is a bad time for a US president to set about deliberately galling an international community which helps fund its fiscal position.

Even if you think, as I generally do, that deficit doomsaying’s asinine for the issuer of the world’s reserve currency and the country whose “debt” doubles as the preferred vehicle for recycled savings and the collateral which makes the world spin, America’s so-called “golden credit card” and all the “exorbitant privileges” it affords the US Treasury, is a byproduct of the global architecture Trump’s in the process of dismantling. So, falling back on the “deficits don’t matter” excuse is, in this context, an exercise in question-begging.

One way around the thorny question of foreign sponsorship for the US long-end is to shift more of the burden for absorbing Treasury duration onto domestic investors. If you ask Deutsche Bank’s George Saravelos, that’s exactly what the Trump administration’s in the process of doing. Or trying to do.

In a new note, Saravelos describes what he calls “the Pennsylvania Plan,” a “policy shift driven and coordinated” by Scott Bessent with the aim of sourcing new buyers of Treasurys and helping Trump “deal with America’s explosive debt.” (The plan’s name comes from the Treasury Building’s address.)

The plan has two parts, the first of which is a recognition that because foreigners are already sitting with record exposure to US sovereign duration risk, they’re unlikely to be enthusiastic buyers of more, particularly given “the withdrawal of America’s global geopolitical and economic leadership” and deteriorating fiscal position. The reality of reduced UST duration appetite across foreign investors should be “accommodated,” not denied, Saravelos suggested, adding that the Trump administration’s support for USD stablecoins backed by T-bills “should be seen in that context.”

The second part of the plan is a multi-pronged effort to incentivize domestic absorption of the Treasury duration risk foreigners no longer want to bear. There are different ways of going about that. One is to give banks the regulatory relief they’re after, which here means eSLR modifications including those proposed by the Fed on Wednesday and a possible permanent exemption of Treasurys from the leverage ratio math. Another, Saravelos wrote, is favorable tax treatment for long-dated Treasurys.

But, he went on, “incentives may only go some way in increasing domestic absorption.” If carrots don’t work, sticks might be necessary, where that means the US government could impose upon certain domestic investor cohorts requirements related to longer-term Treasurys. “Pushing retirement plans to absorb more government debt is a common approach in many countries and there are plenty of pension savings in the US,” Saravelos said.

To be sure, Deutsche Bank didn’t present this strategy as a panacea. Indeed, Saravelos said it’s merely a way to buy time. Note that it’d have ramifications for US monetary policy. For example, the Fed could find itself engaged in a near constant effort to manage the yield curve, which would need to stay steep enough that the enormous maturity mismatch implied by a domestic buyer base that’s forced to load up on long-term bonds didn’t manifest in a system-wide insolvency crisis (i.e., an SVB moment for everybody.) “The greater the extension of the domestic US savings pool into long duration fixed income, the bigger the pressure on the Fed to keep the yield curve steep and avoid an inversion,” as Saravelos put it.

Ultimately, his view is that recent events inside the Beltway as well as Fed rhetoric (i.e., Bowman and Waller) nodding in the direction of a July rate cut and Trump’s obsessive pressure campaign on Jerome Powell, are “foreshadowing a potential major change in the US macroeconomic policy mix in coming years.”

That change, Saravelos said, summarizing, will be defined by “a strategic re-allocation of US Treasury ownership from foreign to domestic investors, rising domestic financial repression, a major push for dollar stablecoins, growing pressure on the Fed to cut rates and a materially weaker USD.”