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A ‘Pennsylvania Plan’ To Cope With America’s ‘Explosive Debt’
There's still nothing like a consensus on whether Donald Trump, through word and deed, is inviting c
“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.”
I think that the old dinosaurs John Taylor and I have been the only ones here to countenance the US going down the road of capital controls to try and fund the budget deficit as foreign buyers step away.
It’s not just “third world” nations who have resorted to this. In the years following WWII those nice civilized people in the UK had some pretty draconian rules forcing individuals to a report to the government when withdrawing even modest amounts of money from one’s bank accounts. As I recall, they were forced to explain the purpose of the withdrawal. (This is from memory – British readers please feel free to politely correct me on this.)
Anyway, it’s likely that foreign holders of US assets are taking a first step towards reducing their holdings of US assets by adding currency overlays = selling dollars forward. It makes sense. It’s a first step that can easily be reversed if Trump veers yet again It also reduces the threat of catching negative attention in the White House. This may be why data has yet to confirm outright selling by those sneaky foreigners.
Good comment
I thought the current admin is supposed to be conservative – as in go slowly and carefully when dealing with change. Their approach to the economy is anything but. If nothing else the GFC and the pandemic have demonstrated that the economy doesn’t do well with big shocks to the system. And then there are always the unintended consequences along with the unknown unknowns that are Donald’s brain farts.
I’m confused. How would the US government pressure domestic investors e.g. pension funds etc to buy more long-dated Treasuries? And what would investors then buy less of . . . private equity/debt? Public equities?
JL – Good point on the potential collateral damage to our job-creating private equity and private credit firms!
But stepping back, hasn’t the GOP always shrilly complained about the “crowding out” risk from deficit spending?
Here’s WTW’s report on Fortune 1000 pension fund allocations. Data from 2023 but I doubt allocations change fast.
https://www.wtwco.com/en-us/insights/2025/04/2023-asset-allocations-in-fortune-1000-pension-plans
Looks to me like these pension plans are already pretty heavy on fixed income.
Insurance companies, another large institutional investor class, are almost entirely in fixed income.
Banks ditto. With eSLR, will be more so.
Interestingly, CalPERS is heavy on equities, as is my state’s PERS. I suspect state public employee retirement plans, being less well funded that Fortune 1000 plans, are living further out on the risk scale.
The big investor flow we always talk about is, of course, retirement plans – 401s 403s and IRAs. These are, I think, heavy in equities. I see little chance of the Goverment successfully pressuring plan participants to reallocate majorly to Treasuries.
https://www.ebri.org/docs/default-source/pbriefs/ebri_ib_606_k-xsec-30apr24.pdf
As I recall banks and insurance companies are mostly in fixed income to accommodate regulatory requirements. They have promises to keep. So do pension funds, but not the same ones.
What an absolute, unnerving mess of a plan.