Impact of the Great Beautiful Act on the Market

Now that the budget bill has passed Congress, if the U.S. government continues to follow this policy, we can predict the fiscal situation for the next ten years, with annual expenditures close to $7 trillion and revenues of about $5 trillion, which means an annual new deficit of about $2 trillion, with the deficit as a percentage of GDP hovering around 6-7%.

In simpler terms, for every $5 earned by the U.S. government, it must spend $7. This means that debt will continue to rise.

This also implies that U.S. debt will keep climbing. The total debt is currently nearing $35 trillion, roughly equivalent to 100% of GDP and seven times the annual income. Following this trend, in ten years, debt could exceed $50 trillion, accounting for 130% of GDP, which translates to a debt burden of $425,000 for each household (calculated based on approximately 130 million households).

Moreover, the rise in debt not only means more borrowing but also higher interest expenses. Currently, interest payments alone exceed $1 trillion annually, making up about 20% of fiscal revenue. With the scale of debt continuing to expand, interest expenses could potentially exceed $2 trillion within ten years. This estimate does not even include the principal that will need to be refinanced over the next decade; the total debt service cost is projected to rise from $10 trillion to $18 trillion.

This will gradually compress fiscal space. The U.S. government has almost three paths to choose from:

1. Reduce spending

2. Increase the tax burden

3. Lower interest rates

It is precisely due to this fiscal pressure that Trump has continuously insisted on the Federal Reserve lowering interest rates, even intervening in monetary policy, because for future governments, a 1% increase in interest rates brings not just an impact on economic growth, but also real fiscal pressure, and that pressure will only grow.

However, if the path of printing money to suppress interest rates is taken, it would mean that the real yield on U.S. debt will be artificially depressed. For global long-term funds, such as pensions, insurance, and sovereign funds, this is not just a matter of interest rate differentials but a matter of credit. Once the credit of U.S. debt is repriced, its position as a global asset pricing anchor will be shaken, ultimately impacting not only the U.S. itself but also the economic system of global capital markets.

This is also why Musk has repeatedly voiced opposition. His concern is not just the current deficit itself, but how this path is weakening the core mechanisms of the capital market, affecting risk pricing and credit anchoring in the U.S. system. In the short term, it does stimulate investor sentiment and release liquidity, benefiting risk assets. But in the long term, unsustainable fiscal conditions combined with credit overextension could lead to even more serious consequences.

If such a situation really erupts, then gold, which does not require government backing, will yield the most, while for $BTC, there may be two paths: if investors pay more attention to its decentralized properties, it may be as popular as gold, but if it becomes highly tethered to the U.S. or even the U.S. government, it may also face skepticism.