This week, U.S. Eastern Time, the House of Representatives has passed the 'Bigger and Better' bill (actually the Bigger and Better Tax Deal), although this bill has not completed all legislative processes, but from the current pace, it is basically set, the short-term policy direction is very clear, core can be summed up in one sentence: tax cuts stimulus + re-absorption + winning votes.
So what core impacts should we traders focus on? Here I briefly mention three points:
1. The core of this bill is to 'win votes' rather than 'save the economy'
Let’s make it clear: this is not a true structural reform bill, but a political move to gain votes for the presidential midterm elections.
Its design essentially has two lines:
Tax cuts: lowering corporate income tax, increasing local tax deduction limits, providing business owners and high-net-worth individuals with more burden relief;
Increase expenditure: increase investment in border security and military spending, indirectly enhancing national security and shaping national image;
Cutting welfare: reducing social security expenditures for the middle class and below, such as marginalizing low-income and health insurance programs.
To put it bluntly: 'reducing the poor to subsidize the rich'. Loosening restrictions for those who can create GDP, sacrificing a portion of social equity in exchange for growth and the superficial prosperity of capital inflow.
2. Impact on gold and dollar: short-term fluctuations, long-term divergence
The impact of this bill on two types of assets should be viewed separately:
1. Gold:
Before the bill's implementation, market expectations drove a wave of gold price increases, the technical high point around 3350 has already been reached;
After implementation, it belongs to 'positive benefit realization', with minor negative impacts expected in the short term, and fluctuations or slight adjustments are likely;
But the long-term logic still favors positivity, why? Because U.S. debt will continue to expand under this bill, although the dollar credit system stabilizes in the short term, the long-term deficit worsens, and the demand for safe-haven assets always exists.
2. Dollar:
In the short term, it belongs to 'first fall then rise'.
Because tax cuts + capital attraction will draw global hot money back into the U.S. market, restoring confidence in dollar liquidity;
Especially when the tax burden within the U.S. is lowered, more factories are opened, and employment remains stable, foreign capital is more willing to flow back;
But the backlash is: this is using future debt to overdraw current growth. In the medium to long term, it still faces fiscal hard wounds.
3. The larger strategy behind the bill: hot money inflow, dollar backing, wealth redistribution
You can understand it this way:
In the short term, it is 'American self-rescue': pulling up the short-term economy through tax cuts + welfare cuts, superficially creating a recovery atmosphere to attract capital inflow.
In the medium term, it is 'vote harvesting': playing a populist + capital card, helping the president attract more voters and paving the way for re-election;
In the long term, it is 'credit extension': the Federal Reserve essentially needs to maintain the global monetary hegemony of the dollar, requiring more fiscal support and national credit backing, this kind of bill is 'short-term blood transfusion, long-term overdraft'.