A strong devaluation of the U.S. dollar is not a new theme. In fact, it has been overstated to the point of boring believers and hurting anyone who tried to trade it.
Gold is coming back but suffered a brutal winter for 2 years. And of course, there’s the 2018 crypto bear market. That price action beat the libertarian right out of investors.
In 2019, the U.S. political situation has likely caused a permanent top in the Dollar — and the catalyst hit the tape today.
This morning, Bernie Sanders announced his candidacy for President. Also, Elizabeth Warren suggested a tax on Americans with over $50 million to fund child healthcare. And of course, there’s the Green New Deal advocated by Congresswoman Alexandria Ocasio-Cortez. The Green New Deal would retool the U.S. economy, using printed money in an attempt to halt climate change. The presumed economics behind these people and policies are based on a new monetary theory called MMT.
MMT or Modern Monetary Theory pushed for a Fed that is no longer independent. That would allow the Federal government to issue a directive for unlimited printing of money to fund government projects. According to this theory, the inflation that would come from an increased money supply would be controlled via intense taxation.
At present, the top U.S tax rates is near 30 percent. What people may not realize is the top tax rate has been as high as 90 percent from the end of WWII to the mid-1960s. As recently as 1982, the top tax rate was 70 percent.
You would have to assume under an MMT regime, the top tax would return to the 70 percent level.
To give you an idea of how popular this theory has become, Google searches for MMT have exploded.
Printing money combined with high tax rates is a looming reality that has the potential to ignite a major move in the Dollar and crypto.
Today, the Dollar Index ETF (UUP) has rolled over and is likely forming a head and shoulders top formation (Figure 1). Gold is ripping higher (not shown). Total crypto market cap has reached a massive inflection point from two different Fibonacci tools (Figure 2). The implication of this analysis is that total crypto market cap can accelerate as it climbs higher.
Bottom Line: The decline in the Dollar at the hands of monetary policy error has begun. What seems strange is what a hard sell that is. This is the moment the crypto universe has been waiting for. In our view, the slow creeping bid in Bitcoin (BTC) and crypto is a prelude to an explosion higher that could see Bitcoin (BTC) rally 40 percent.
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