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This article has been automatically translated from Dutch. Click here to see the orginal article including all links to sources.
Trump’s historic ‘Big, Beautiful Bill’ was approved this week by the House of Representatives. But what will the consequences be? Supporters call it an economic reset that should drive strong growth. Opponents point to rising inequality and see it as a ticking time bomb. Among them is none other than top investor Ray Dalio, who fears “large and painful disruptions.” Also in this weekly briefing: China is taking new steps to benefit from de-dollarization, and the Financial Times published a strikingly bullish article about silver. Read on!
Republicans in the House of Representatives approved President Donald Trump’s ‘Big, Beautiful Bill’ on Thursday. The bill passed by a narrow margin: 218 in favor, 214 against. Two Republicans sided with the unanimous Democratic opposition. The proposal spans nearly 900 pages. CNBC summarized it as follows: “The bill represents a fundamental shift in U.S. government spending priorities: investments in green energy and social safety nets are being rolled back, while tax cuts, defense spending, and immigration enforcement are being expanded.”
Donald Trump (source: White House)
Lower taxes while the country is trying to reduce its budget deficit may seem contradictory at first glance. This Trump plan was previously part of his dispute with Elon Musk. According to opponents, the budget deficit will rise to 8 percent of GDP as a result of this plan, and the national debt will increase by $4 trillion. The new plans are also said to primarily benefit the wealthier part of the population, at the expense of lower-income groups.
Ray Dalio’s response to Trump’s plan (Source: X.com)
Renowned investor Ray Dalio has also voiced strong criticism of the plan. The U.S. national debt is currently about six times larger than annual government revenue. He now expects this to increase to 7.5 times over the next ten years. According to him, this would mean a national debt of $425,000 per American household. The interest and repayment obligations on that debt will continue to rise and will put pressure on other government spending.
He ultimately sees large-scale money creation, coupled with a depreciation of the dollar and artificially low interest rates, as the most likely way out for the U.S. government. As a result, not only the currency and interest rates, but even the entire financial system will come under pressure — especially since the U.S. Treasury market forms the backbone of the global capital markets. According to Dalio, large and painful disruptions are very likely unless the budget deficit is significantly reduced.
Are Dalio and the Democrats right about Trump’s plan? From Trump’s camp, Treasury Secretary Scott Bessent has stepped forward to defend the plan. According to him, Trump primarily stands up for the working class, and the benefits of his policies mainly go to these “working Americans.” As evidence, he cites the growth in real wages for blue-collar workers.
Real wage growth blue-collar work (source: White House)
Bessent also emphasizes the growth that the plan is supposed to stimulate. In an interview, he says he expects massive economic growth from this plan and believes the U.S. will become the best destination for capital in the world. He is certain that the economy will grow faster than the national debt. “President Trump’s agenda is a growth agenda: trade, taxes, and deregulation. Once we pass the One, Big, Beautiful Bill and have tax certainty, economic growth will surge to levels unseen since the post–World War II period.”
Well-known libertarian economist Daniel Lacalle is also positive about the plan. On X, he says that the Big Beautiful Bill is significantly better than people may have been led to believe. He sees the plan as a true economic reset. He points out that it represents the largest spending cut in American history and expects higher growth, employment, and consumption as a result of tax cuts and deregulation.
According to him, many of the analyses regarding the growing national debt are incorrect and exaggerated because they fail to take sufficient account of that growth. “I think this is a bill that starts the process of bringing the economy back to the private sector… back to sanity and to the logic of economic freedom, opening the economy to the private sector, bringing more investment instead of constantly curbing the private sector…”
Who will be proven right? We’ll continue to follow it for you.
As confidence in the U.S. dollar declines, China is trying to promote the use of the yuan. According to CNBC, China is increasingly developing ways for foreign institutions to make use of its currency. Beijing is said to be pursuing active policies to challenge the dollar’s dominance. The governor of the Chinese central bank, Pan Gongsheng, reportedly spoke at a meeting last week about “how the excessive reliance on a single sovereign currency can be reduced.”
100 Chinese Yuan banknote (source: Shutterstock)
The Chinese want to establish a center for the internationalization of the existing digital yuan and stimulate the trade of yuan-based currency futures. Three major Chinese exchanges recently announced that foreign institutional investors will gain access to 16 additional futures and options contracts listed on the Chinese mainland. Earlier this year, dozens of other futures contracts had already been opened up to foreign investors. Work is also underway on a proposal to allow foreign currencies to be used as collateral in transactions settled in yuan. This would further strengthen the yuan’s international role.
Currently, the Chinese yuan accounts for 2.89 percent of global payments by value. The U.S. dollar remains by far the number one at 48.46 percent, followed by the euro at 23.56 percent. China’s strict capital controls and relatively opaque system obviously don’t help, although the country now seems to be taking steps in a different direction. According to The Diplomat, these moves should not be seen as a direct attack on the existing system but rather as the construction of a parallel one.
In the June 20 weekly briefing, we wrote about Christine Lagarde, who also wants the euro to take market share from the U.S. dollar. According to her, this would require further European integration and common debt issuance. At the same time, gold — in the context of central bank reserves — currently seems to be the big winner of de-dollarization. Paul Buitink discussed this topic with Jeroen Blokland in this week’s podcast. In the episode, Jeroen says that he does not yet have confidence in the yuan, but that a potential gold backing could change that.
This week, The Financial Times published an opinion piece titled: “Silver: the precious metal ready to outshine gold.” The article highlights silver’s industrial use in growing sectors such as green technology (solar panels), electronics, and defense. Around 60 percent of annual global silver production is now used by industry — a ten-percentage-point increase compared to ten years ago. According to a forecast by the Silver Institute, demand for silver in 2025 will exceed supply for the fifth consecutive year.
In the end-of-April monthly update, Frank Knopers explained why he is slightly less enthusiastic about silver than about gold, and which caveats should be considered regarding the above analysis. Watch it back here and make your own assessment!
