Take care that which you desire.
I'm referring to the estimated $2 trillion in United states corporate cash being placed in foreign banks - along with the Trump-backed proposal for a special 10% repatriation tax on those profits.
The hope and belief is always that a huge slice of those funds should come home, giving the GOP-dominated Congress a great deal of cash to spend on pet projects like a giant-sized boost on infrastructure spending. There's no question that the tax could go through in many form, or that Congress plus the new Trump administration will see a good amount of purposes of it.
But in regards to what that repatriation will do to the Usa dollar, well... browse the sentence at the outset of this post.
Let's consider the influence over the Usa dollar the final time Congress pulled off a primary repatriation "tax holiday" last 2005. The enabling legislation was known as the United states Homeland Investment Act, a 1-year tax break for big American multinational firms.
Back then, Goldman Sachs estimated the legislation resulted in the repatriation of some $300 billion during the period of the entire year. And what happened on the dólar
First, an unsustainable surge that lasted your entire 2005 calendar year...
However when the repatriation period ended, and corporations stopped converting their foreign-held currencies into dollars, so did the rally - leading the dollar to an inevitable cliff dive over the following a couple of years.
We are able to certainly argue in regards to the Federal Reserve's efforts to raise rates (making the dollar more pleasing to investors and raising its value relative to other currencies) and rein within the surging United states real estate investment boom and overinflated economy.
However the Fed began raising rates in earnest in mid-2004 (from 1% to 1.25%), and didn't stop for a couple of straight years up until the fed fund rates hit 5.25% in mid-2006. At that time, the dollar was already six months to a major decline. And also the major stock exchange indexes wouldn't finally roll over until October 2007.
The point is that this repatriation of even a tiny amount of corporate America's current $2 billion in offshore cash will have a profound impact, using a tremendous surge in the need for the dollar as companies sell yen, euros and yuan to purchase dollars instead.
A parabolic dollar surge is one thing that we've warned about for a while as being a prelude to the brutal economic collapse.
In essence, it would be the very last climactic dollar-buying frenzy after nearly two decades of too many Fed-induced digital dollars chasing the "same exact, same old" overpriced stocks, overpriced bonds and overpriced property.
Wouldn't it be ironic (and tragic) in the event the very thing that signaled a hoped-for resurgence from the Usa economy (the billions in presumed infrastructure spending) was the very thing that wrecked it instead?