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

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 Wed, 12/06/2017 - 16:57 Permalink

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.

J Mahoney Wed, 12/06/2017 - 17:00 Permalink

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

dirtyfiles Wed, 12/06/2017 - 17:09 Permalink

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

gcjohns1971 Wed, 12/06/2017 - 19:33 Permalink

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.Understand?