08/09 Update – How to prepare if the U.S. dollar loses its reserve status; Trump as the dialectic change agent 

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-We discuss the probable changes to Federal and state public finance and tax polices if the dollar loses its reserve status.
-Corporate income taxes as a percent of government revenue has been falling for decades. Government tax policies across the board have helped to enhance asset prices.
-Changes to tax policies such as the long-term fall in effective corporate income tax rates, the defined contribution plan that encouraged stock ownership, the large cap gain exclusions in owner-occupied real estate, and the 1031-tax free exchange of investment real estate, could all come under attack as the government attempts to increase tax revenue.
-The government will need to increase tax revenue, since the U.S. will need to begin relying more heavily on internal sources for funding. Many relying on passive income (myself) could lose out.
-Labor intensive employers lose out under the current tax regime, and find it profitable to offshore capacity. If the USD loses its status, this would need to change as employers would be forced to bring productive capacity home.

Look for a change if the dollar loses its reserve status

-While this would benefit many previously disenfranchised workers, these large employers will lobby the government to reduce their tax and cost burdens of hiring workers. Payroll taxes may fall, but the costs and responsibilities of the usual employer benefit menu of healthcare, child day care, retirement plans, tuition assistance, etc., will shift to the government.
-New Mexico already places a sales tax on services, and this could expand around the country as the states will need to increase their own revenue if the Feds can no longer easily transfer money to the local level. We could see Federal surcharges on all sorts of transactions.

An ever-increasing employer cost; If the USD loses its reserve status, look for a single-payer system to emerge, which just shifts healthcare burdens to the government. How else will labor intensive businesses make money back home?

-If the USD loses its status, look for taxes of all kinds to increase markedly. They would then be on par with the former Commonwealth nations and Britain; perhaps even as high as the EU. These revenue streams would fund all the social programs that used to be the “burden” of the employer.
-While we could see a reverse of the trend in the chart below, a sharp shift to socialism would effectively reduce the costs of hiring by the large employers.

-On the surface, if the USD lost its reserve status, stock prices would fall. Dollar-based assets would lose their allure as a way to park cash, but a weaker dollar could enhance the profits of firms with heavy exposure outside the U.S. Large firms around the world with large international exposure would be sought out as a way to mitigate currency fluctuations.
-Since overseas dollars would flow back home, many costs of life here will rise much higher. Price to income multiples of real estate and rent levels will rise to levels observed in the former Commonwealth. There would be little means for the U.S. to export its inflation.
-In the long run, the U.S. would be much better off if the dollar lost its reserve status. Its industries would be much more competitive and would hire more people domestically. The U.S. has effectively lost out with its currency being the global reserve. No other nation, including China, is willing to engage in the destructive policies that the U.S. needs to embark upon to make the USD the global reserve currency.
-Trump is the change agent that has served the globalists well. By conflating a polarizing and unstable man with nationalism, the elites have conditioned the demoralized population to “throw the baby out with the bath water” and elect a previously unelectable candidate team who will throw the nation under the bus. The demoralized people will rejoice as they burn the flag and the nation to the ground.

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