Global capital 'great escape', is your wallet ready?
If the bill just passed by the United States is enforced continuously, the fiscal situation over the next ten years is likely to look like this: spending $7 trillion each year while only bringing in $5 trillion, resulting in an additional $2 trillion spent each year, with deficits accounting for 6%-7% of GDP. In simple terms, the government earns $5 but spends $7, leading to an ever-growing gap. Debt is skyrocketing, now at $35 trillion, roughly 100% of GDP, and in ten years, it could exceed $50 trillion, accounting for 130% of GDP, meaning each of the 130 million American households would bear $425,000 in debt - a tremendous pressure.
The more debt there is, the scarier the interest becomes; currently, paying interest alone exceeds $1 trillion annually, accounting for 20% of income. In ten years, it could surpass $2 trillion. Adding the principal for rolling over debt, the total debt cost could rise from the current $10 trillion to $18 trillion, making the expenditure increasingly unjustifiable.
At this point, the U.S. government basically has three options: cut spending, raise taxes, or lower interest rates. Why does Trump keep pushing the Federal Reserve to lower interest rates or even intervene? Because for every 1% increase in interest rates, the fiscal pressure increases, which is not just a minor issue of economic growth, but a significant financial hole.
However, if they rely on printing money to suppress interest rates, the real yield on U.S. debt is artificially lowered. Global pension funds, insurance companies, and other long-term investors value not just the interest spread, but also credit. Once the credit of U.S. debt is repriced, its status as a global asset pricing anchor may be shaken, affecting not just the United States, but the entire global capital market.
Why does Musk oppose this? He is not concerned about the current deficit, but about the risks this policy poses to the pricing of risk and the anchoring of credit in the U.S. system. In the short term, it can stimulate market sentiment, release liquidity, and benefit risk assets; but in the long term, unsustainable fiscal policies and credit overextension can have more severe consequences.
If a crisis does break out, assets like gold, which do not require government backing, will certainly benefit the most. As for Bitcoin, there could be two scenarios: if investors value its decentralization, it may be as sought after as gold; but if it becomes too closely tied to the U.S. government, it could also face skepticism.
