Best Day For The Dollar Since January: Here's Why

The Bloomberg dollar index has surged, rising as much as 0.8% higher against all G-10 peers, its biggest advance since Jan. 26, and is on track for its first weekly gain since early July.

The move has been largely attributed to the "stronger-than-expected employment and wage gains", although as several banks commented shortly after the payrolls report came out, "everything is in place for a classic short-squeeze."

However, the real reason why the dollar is spiking today is following comments from Gary Cohn who said that he’s “confident” tax reform can be accomplished by year-end and together with House Ways and Means Committee Head Brady, underscored that another Homeland Investment Act, or HIA2, plan to repatriate offshore dollars is coming:

• *BRADY: GOVT SET TO DELIVER `PRO-GROWTH" TAX REFORM THIS YEAR


• *BRADY: GOVT POISED TO ACT ON TAX REFORM FOR 1ST TIME IN 31 YRS


• *CHIEF GOP TAX WRITER: JOBS REPORT SHOWS TOO MANY STILL HURTING


• *REP. KEVIN BRADY: JOBS REPORT SHOWS `STEADY PROGRESS"


• *COHN: ECONOMIC GROWTH WILL HELP PAY FOR TAX REDUCTIONS


• *COHN: WE"RE WORKING FOR MAJOR TAX REDUCTIONS


• *COHN: WE ARE COMMITTED TO AS LOW A RATE AS POSSIBLE FOR COS.

As a reminder, the original Homeland Investment Act of 2004 provided for a one-time tax holiday in 2006 on the repatriation of foreign earnings by US corporations. Back then, companies repatriated €300b in 2005, 5x more than in preceding years. As a result, the DXY was up 12.2% in 2005. While the dollar was generally favored by interest rate differentials, and also some of the repatriation would have been dollars held in offshore accounts that would not have required an FX component to them, the HIA provided a significant USD bid.

As several banks, most notably Citi notes, Democrats are under pressure to support HIA while tech companies, which are major donors to the party, are one of the major beneficiaries of repatriation.  There are anecdotal reports in DC of intensive lobbying of Democratic lawmakers taking place by these firms, which would suggest that even if the Fed disappointed in the next few months, HIA 2 alone could provide a much needed tailwind to the USD.

And, in an amusing tangent, so far the White House response to today"s data has been "very disciplined and professional" with Trump also sounding more polished in his WV rally last night. This has prompted various analysts to concludes that Generally Kelly is getting a grip, which is also dollar bullish.

That said, not everyone is convinced, and CIBC’s Bipan Rai saying that “today’s number is just a short-term vehicle to express intraday dollar trading rather than a shift in strategic view.” Though, he adds, the USD is due for a “corrective snap back."

The Criminalization Of Financial Independence

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

Independent enterprises are a source of political and financial independence... and any independent class is dangerous to the ruling elites.

Just as the "war on drugs" criminalized and destroyed large swaths of African-American and Latino communities, the "war on cash" will further criminalize the few remaining avenues to financial independence and freedom. The introduction of "entitlement" welfare in the 1960s generated a toxic dependency on the state that institutionalized worklessness, a one-two punch that undermined marriage and family in America"s working class of all ethnicities.

The "war on drugs" launched in the 1970s turned millions of American males into felons with severely restricted rights and opportunities in mainstream America.

Now we see the same destructive pattern repeating with "disability" being the new "welfare" and "legal" synthetic heroin (oxycotin etc.) being the new street-smack that lays waste to entire communities. Once you"re dependent on the state for disability and synthetic smack, you are owned by the government, lock, stock and barrel.

When the temptation to sell your $3 Medicaid prescription for synthetic smack for a quick $1000 becomes too much to resist, bang, you"ve got a one-way ticket into the Hell of America"s criminal "justice" system. Do you see the pattern? Offer the blandishments of "free money" and nearly free synthetic smack, and the vulnerable populace is quickly reduced to a dependent state of worklessness and addiction.

Needless to say, an addicted, ill, workless populace that is herded into the grinder of the criminal justice system isn"t going to create any political resistance. They have their hands full just trying to stay alive and avoid being sucked into the voracious maw of the criminalization meat grinder.

This is the context for the upcoming "war on cash" and the criminalization of financial independence. Every conventional means of remaining financially independent of the state-cartel-banking system is being restricted and criminalized, the better to herd everyone into centrally controlled institutions.

Those attempting to escape the political-financial pen are threatened with the other pen--the penitentiary.

Any form of resistance draws punitive criminal sanctions. If you attempt to resist the unfettered search of your property, your resistance is instantly criminalized.

If you resist the seizure of your property on some trumped up charge, your resistance is instantly criminalized.

If you resist being hassled for "driving while black," your resistance is instantly criminalized.

If you resist being shunted off public spaces while staging a political protest, your resistance is instantly criminalized.

Three charts help explain the criminalization of financial freedom. Wages as a percentage of economic activity (GDP) have been falling for decades. Wage earners are under pressure, and this generates dissatisfaction that eventually finds political expression. This is dangerous to the ruling elites, so criminalizing dissent, resistance and financial independence become essential tools to cow and control the masses.

Independent enterprises are a source of political and financial independence--and any independent class is dangerous to the ruling elites. The "solution" to the ruling elites is to crush independent enterprises with burdensome regulations that carry punitive penalties, raise junk fees (licensing fees, permits, etc.) to levels that make it difficult to remain compliant, and criminalize cash-only and home-based enterprises.

No wonder new business growth is a shadow of its former robustness. If you try to launch a legally compliant enterprise, the costs crush all but the most successful. Any less than fully compliant enterprise has been criminalized.

The upper 20% of wage earners are the tax donkeys that must be corralled so they can"t escape higher taxes. Whatever wealth they"ve accumulated must also be available for taxation, for this reason: as the super-wealthy sequester their immense wealth in legal tax dodges such as philanthro-capitalist foundations, this leaves the lion"s share of taxes to be paid by the upper-middle class / professional / technocrat / entrepreneur tax donkeys.

The coming War on Cash is also designed to bring in black-market cash from the bottom 40% who use cash businesses as a tax avoidance tactic. The state will leave no stone unturned in its campaign to close off any escape routes--except of course for those available to the super-wealthy and corporations which contribute the big bucks to the politicos" re-election campaigns.

There won"t be any legal assets that will not be exposed to taxation. As for precious metals--imagine a "wealth tax" that is first imposed on millionaires. Who will say that "taxing the rich" is a bad idea?

Then the definition of "rich" will be adjusted downward. Anyone owning gold is "rich," correct? So laws will be passed requiring all forms of wealth must be declared.

Anyone who fails to declare their wealth and pay a "wealth tax" on it will face punitive criminal charges.

The "wealth tax" will start small, and high up the food chain. Then it will quickly move down to include everyone with any assets of any kind. If you reckon this farfetched, check back in 2020, if not sooner.

The problem isn"t taxation per se--it"s preserving the freedom to become financially and politically independent that"s increasingly at risk. Once it becomes too complicated, costly and onerous for a working class household to start and operate an enterprise, small-scale capitalism is dead--strangled by the state at the behest of self-serving bureaucrats, elites and corporate cartels.

In Setback For Government, Swiss Voters Reject Plan To End Low Taxes For Multinational Corporations

In a setback for government efforts to abolish low tax rates for thousands of multinational firms while encouraging them to stay, the Swiss voted overwhelmingly against an overhaul the country"s corporate tax system. Swiss broadcaster SRF said voters rejected the tax plans by about 60% to 40%. As Reuters notes, Switzerland has been in the European Union"s firing line for years because Swiss cantons have a special tax status for foreign companies that means some pay virtually no tax other than an effective federal tax of 7.8%, an incentive to incorporate and stay on Swiss soil.

In 2014, the country agreed with Brussels to abolish this status because it allowed some foreign firms to pay far lower tax on overseas earnings - an attractive perk for around 24,000 multinationals looking to lower their tax bills, Reuters reports. To offset the introduction of higher tax rates the government proposed giving companies tax breaks on research and development in Switzerland, profits from patents developed there and deductions for excess company equity. In addition, many cantons said they would also reduce corporate tax rates for all companies to reduce the fiscal burden and dissuade multinationals from leaving.

Those backing the government say the reforms struck a balance between abolishing the tax breaks criticized by Brussels and new measures that will keep Switzerland competitive. Most Swiss citizens, however, , disagreed.

After parliament approved the measures last year, critics gathered the 50,000 signatures needed to trigger Sunday"s referendum, which can overturn the parliamentary vote. The No campaign was led by a coalition including the Social Democrats, Greens, trade unions and church leaders who feared the public would bear the brunt of reduced company tax revenue through cuts in public services or higher personal taxes.

While most Swiss recognize the country needs tax reform to avoid being blacklisted as a low-tax pariah, the new measures proposed to help companies offset the loss of their special status breaks had created deep divisions.

"It is so clear that you can already say the measure will fail," political analyst Claude Longchamp of the gfs.bern research and polling institute told SRF around half an hour after polls closed.

As Reuters adds, "the stakes are high for Switzerland, already coming to terms with the end its long-cherished tradition of banking secrecy. If multinationals pull out, the economy could suffer."

Furthermore, the changes also come at a time U.S. President Donald Trump is considering slashing corporate taxes - even if the plan is still missing much if any clarity - and Britain has hinted it could cut its rates when it leaves the EU. As such, a corporate tax hike could come at a time of global tax upheaval, which would make it even more attractive for domestic companies to "invert" themselves out of Switzerland and to more welcoming venues.