The Dollar Crash Is Coming by JL Yastine
Be careful what you wish for.
I’m talking about the estimated $2 trillion in U.S. corporate cash sitting in foreign banks — and the Trump-backed proposal for a special 10% repatriation tax on those profits.
The hope and belief is that a big chunk of that money will come home, giving the GOP-dominated Congress plenty of cash to spend on pet projects like a giant-sized boost on infrastructure spending. There’s no question that the tax will go through in some form, or that Congress and the new Trump administration will find plenty of uses for it.
But when it comes to what that repatriation will do to the U.S. dollar, well … read the sentence at the beginning of this article.
Let’s look at the impact on the U.S. dollar the last time Congress pulled off a major repatriation “tax holiday” back in 2005. The enabling legislation was called the U.S. Homeland Investment Act, a one-year tax break for big American multinational firms.
At the time, Goldman Sachs estimated the legislation resulted in the repatriation of some $300 billion over the course of the year. And what happened to the dollar?
First, an unsustainable surge that lasted the entire 2005 calendar year…
But when the repatriation period ended, and companies stopped converting their foreign-held currencies into dollars, so did the rally — leading the dollar to an inevitable cliff dive during the following two years.