Is Tax "Reform" Good For The US Dollar? How About Gold?

Tyler Durden's picture

Authored by Mike Shedlock via,

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

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

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.

For further discussion of the "non-reform", please consider Tax Bill Analysis: Spend Your Extra $100 Wisely.

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takeaction's picture

Gold and Silver are Dead....I screwed up on that..($$$$$ doing nothing,,) ..and I think I missed the Bitcoin boat...but I am going to dump $30K in gold and roll the dice on a few Bitcoins.  I also missed the stock market run up....Fuck You guys always preaching doom and gloom.  World ending...blah blah.. At least I got one thing right...lots of Rentals.

I don't blame you guys...I blame myself for listening.

Canadian Dirtlump's picture

I'll keep stacking silver if for no other reason than fuck everything.

takeaction's picture

I have 20,000 ounces I will sell

ParticularlyStupidHumanoid's picture

I'll cut you a deal at 1/2 melt.

Clock Crasher's picture

could always buy back the same 20,000 ounces at 9.99 silver

same boat btw. 

ParticularlyStupidHumanoid's picture

Gold. Gold is better than silver. Silver's good too, though.

MonetaryApostate's picture

Silver is actually a highly used commodity, goes in all computer boards too, & that's because of it's electricity flow is very high.

I'd be surprised if a shortage isn't announced some time in the near future considering JP Morgan is sitting on a dragon hoard of it..

ParticularlyStupidHumanoid's picture

> literally had no impact

> but beware!!111

Peacefulwarrior's picture

Gold is exciting when Governmnents begin collapsing...

ParticularlyStupidHumanoid's picture

Syria is collapsing. Venezuela is collapsing. Zimbabwe is collapsing. Palestine is collapsing.

earleflorida's picture

you forgot to mention australia and spain

0valueleft's picture

We believe narratives that best leverage our current positions. Morons say never and tend to fully capitulate at the worst moments, but you're in the game thinking things through for yourself and taking action. That's more than most.

Endgame Napoleon's picture

Yeah but they say governments seize the gold when economies collapse, whereas only the programmers have control of the BitCoin. You people with money to burn on something other than necessities should get a little of both.

Pumpkin's picture

Lucifer is the god of this world, don't take up much stock in any of it.

J Mahoney's picture

Yep, right on! The RSV (Revised Sprott Version) says---Lay not up for yourselves Bitcoin upon the earth, where moth and rust consume, and where thieves break through and steal.... only the bible could have predicted the $50 million electro-heist today

J Mahoney's picture

Maybe with all the fake economic news out there and geopolitical turmoil --- This time will be different --- where have I heard that one before?

Cant imagine who is buying Bitcoin now that we have the first "electro-heist" of 50 million --- bet it goes down tomorrow like a prostitute at a Democrat fundraiser

ParticularlyStupidHumanoid's picture

Bitcoin keeps going up because of people like you, who incorrectly assess the issue, and dump their bitcoin, creating a huge dip. Will I buy this dip? Of course I will!!!

Clock Crasher's picture

No.  we need a face ripping rally on the CME for about a month.  

Bitcoin should be good for 15, 16, 17, maaaybe 20,0000 then full on liquidation of shmucks and the entierty of their accounts. 

dirtyfiles's picture

I believe in Gold...I believe that make the difference...real value vs.mass media yelled in your brain the end gold always win ..good luck

actually this Friday may good day for gold...will see

RagaMuffin's picture

None of the other "tax" cuts targeted repatriation did they? If it is in the $trillions, Mish may have missed the boat................

therover's picture

Tax reform my balls. They ain't reforming shit where it counts. 

RagnarDanneskjold's picture

1982 Reagan tax cut left off because it destroys the average.

gcjohns1971's picture

Tbills are the basis of the dollar.

When interest rates rise, more tbills can be sold, and, all things being equal, and counter to expe tations the value of the dollar FALLS.

But in practice it rises because higher rates means more defaults.  Defaulted money ceases to exist. Contracting money base means fewer dollars per unit of real stuff...value of the dollar rises.

So how does that work?

Govt issues till and sends to FED.

FED enters TBILL as ASSET & creates equal and opposite entry to uability sheet called "US Federal Reserve Note a.k.a. 'dollar'".  Govt spends "Dollar" for current expenses.

But what happens when The govt receives taxes?

Govt receives tax.

"Tax payment" meets equal and opposite entry called "TBILL principal payment" at FED. A line is drawn through both and they both cease to exist.

Less dollars in existence.  Same real goods in existence.  Dollar value rises.

Stated differently,All things being equal the value of the dollar parallels tax receipts.

And:   All things being equal the value of the dollar parallels interest rates.