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Is Tax "Reform" Good for the US Dollar?

Let's investigate what happened after the last 3 major tax reforms. Another "reform" is on deck.

I picked up this idea from Holger Zschaepitz, @Schuldensuehner, who made the following Tweet, posting a chart from Bloomberg.

 

In the following chart, I add a key piece of legislation that someone inadvertently overlooked.

Tax Reform vs US Dollar 1986-Present

https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/CbTSXb6lnUWRR85pNJkiTA

Key Dates

US Dollar Synopsis

  • Following the 1986 legislation, the dollar fell about 22% over the next six years.
  • Following the 2001 legislation and continuing with the 2003 legislation, the dollar fell about 37% over the next seven years.

What's Next?

The Senate version of the bill is likely to add over $1 trillion to the deficit, while not even cutting taxes beyond 2027.

A bill that adds so much to the deficit is not US dollar supportive, to say the least.

However, one cannot view these things in isolation. How the dollar reacts also depends on events in the Eurozone, China, and Japan, as well as Fed interest rate policy.

Global Currency Debasement

Global currency debasement is underway.

Things may be even crazier elsewhere, so a decline in the dollar is not guaranteed.

A Driver for Gold

Sooner or later, competitive currency debasement will matter.

Gold is likely to be the primary beneficiary.

I wish I could tell you when this matters in a major way.

Gold vs. Faith in Central Banks

https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/bRye9oCqlUmlyJOYb4VAAw

 

Amazing Non-Reform Act of 2017

I have a suggestion for the name of the pending legislation: The Amazing Non-Reform Tax Act of 2017.

By Mike Shedlock

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