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The new national security plan from the White House is not a normal policy paper. It feels more like a message that the world should prepare for bigger spending and bigger debt. This plan signed by President Donald Trump puts strong focus on an America First idea. It asks for major changes in how the United States and its allies spend money on defense and how they prepare for global risks.
The plan tells NATO partners to raise defense spending to five percent of their total economic output. This is more than double the old level. It also asks Japan and South Korea to spend more on their own defense. The document says these countries must build the strength needed to protect the region and hold back threats. It also says the United States will increase its presence in the Western Pacific and keep strong pressure on Taiwan and Australia to do more.
This kind of plan needs a lot of money. To pay for it countries will need to borrow more. That means more bonds in the market. When bond supply rises yields also rise. Higher yields make borrowing more costly for governments and for companies. This makes it harder for central banks to cut interest rates. Even if they try the effect may not be very strong because heavy borrowing can keep yields high.
Many advanced countries are already deep in debt. If they borrow even more the risk of a fiscal crisis becomes higher. On top of that the plan says the era of mass migration is over. This means the United States may not bring in low cost labour like before. If the labour supply stops rising fast wages may stay high. This can add more pressure on inflation.
When the world moves toward bigger spending higher debt and higher inflation people look for safe assets. Gold has already shown strong performance this year. It has climbed by a large margin even with yields staying high. Bitcoin is often called digital gold but this year it did not match that idea. It is slightly down for the year while gold is way up. People still see gold as a safer place during times of high inflation.
There is a rate cut expected next week. The central bank may lower rates by twenty five basis points. This would bring the main rate to about three point five percent. But if countries begin a long period of higher military spending and higher borrowing deeper rate cuts may not happen soon. Higher bond supply may keep yields strong even if rates fall.
This new security plan shows a future where spending grows debt grows and inflation risk grows. Gold benefits from such a world. Bitcoin still has to prove if it can act like digital gold. The next year will show if it can rise in a world shaped by bigger budgets and higher risks.
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