Tags: skarica | dollar | gold | deficit

Tax Cuts Mean Stronger Dollar Now, Dollar Crash Later

By    |   Thursday, 16 Dec 2010 11:46 AM

We all know the big talk around Washington is the recent tax cut deal. The idea is simple: The politicians want to spur the economy to grow. They think this will put more money into the pockets of people who they will spend it, which in turn will create economic activity.

That would lead to new hiring. Tax revenues would increase and thus cut the deficit. I am not saying this will happen, but that is the idea.

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However, consumers continue to deleverage. Rather than spend, they will probably use any money they get to pay off debt. In all probability, the tax cuts it will cause a blip in economic activity the first half of next year, but in late 2011 and early 2012 the reality of higher deficits will set in.

By 2012, you will see the effect of austerity programs in Europe begin to take hold. You will see deficits shrink there.

By then, the attention will turn to the United States and the lack of progress on the deficit. The bond market — which has already started to weaken over worries over the tax plan — will really come under pressure, as will the dollar.

My advice is to use any strength in the dollar in the coming months as a selling opportunity.

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DavidSkarica
We all know the big talk around Washington is the recent tax cut deal. The idea is simple: The politicians want to spur the economy to grow. They think this will put more money into the pockets of people who they will spend it, which in turn will create economic...
skarica,dollar,gold,deficit
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2010-46-16
Thursday, 16 Dec 2010 11:46 AM
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