Trump Tax Cut Proposal Could Be Big Boost for Bitcoin

Trump Tax Cuts Could Be Boost for Bitcoin

Although the price of Bitcoin just surpassed the $1300 mark this week, it may already be time to look for even higher values in the near future. With the recent announcement that bitcoin would be accepted by a majority of Japanese businesses, the price of bitcoin surged. In addition to this overwhelming show of support for Bitcoin in Japan, President Trump is preparing to put forth his proposal for cutting US taxes trump’s proposal is said to be one of the largest tax cuts in recent memory and while the pros and cons are debatable, one thing that is pretty concrete is that it bodes well for Bitcoin.

How Bitcoin benefits from fiat despair

Economic uncertainty, deficit, inflation and capital reduction are not usually words one wants to hear on their daily news. The exception is if you hold Bitcoin as a part of your financial portfolio. From a macroeconomic perspective, the health of a nation’s currency affects the economy of other large countries; sort of like a butterfly effect, but for the most part, as a general rule, people in England, Russia or Brazil could care less what happens to the American Dollar. Why should they? It does not usually make a noticeable impact upon their lives.

However, since Bitcoin is a decentralized global currency, it is just as much important to an American as it is to a Spaniard, German or Ethiopian person. As we have been watching the Japanese 10-year yields fall to 0% for the first time since 2007, Bitcoin prices have gone up as a direct result. With negative percentages expected, due to the amount of money Japan’s government continues to print, Bitcoin is becoming the equivalent of Gold, Silver and other commodities; security.

Tax cuts could actually hurt the economy

Back in the United States, while the situation is nowhere near as dire as it is in Japan, President Trump’s new tax cut proposal could provide a big boost to the value of Bitcoin in the coming months. The Japanese effect on the value of bitcoin should come as no surprise, as it is Bitcoin’s largest exchange market, holding over 41% of the global market share. The US closely follows Japan as the second largest holder of market share with almost 31%. In short, this means that any uncertainty about the dollar will most likely cause more people to purchase bitcoin, as security against the economic instability that could be a result of the proposed tax cuts.

While the Dollar is currently doing well, in comparison to the last 10 years, the massive tax cut could spell the beginning of another downward trend. If passed, it would be the largest rewrite of the American tax code since 1986. While lower taxes are usually welcomed, Trump’s tax proposal is a bit much. Under the proposed bill there is just too much being cut too fast. In addition, not a single source has been offered up to replace the money that will be lost. In order for the tax cut to work, it would need to spark massive, lasting economic growth that most economists say is unlikely.

Understanding the subtle effects of the tax cut

The proposed law, among other things, would lower the corporate tax rate from 35% down to 15%. However, there are no tax hikes in other areas to make up this 20% loss in revenue to the government. This will equate to the US Government losing trillions of dollars over the next ten years which would balloon government debt. Even though the corporate tax cuts would only be temporary, they could increase deficits well beyond the 10 years in which they would be in effect.

On an even more subtle level, the budget deficits caused from the tax cuts can very well crowd out private borrowing and can manipulate interest rates and capital structures. This would lead to either Higher taxes in the long run, high inflation and quite possibly both. In addition, since the deficit would have been caused by tax cuts, instead of the government spending money on infrastructure or business grants, there is no short period of stimulus as a result. Trump’s entire proposal hinges on massive economic growth due to surplus business capital that the tax cuts would free up for many businesses. That is a large gamble and it faces house odds.

Putting it in perspective

Whenever the government increases its financing in any capacity, it makes it relatively more difficult for businesses to raise capital in any capacity. The reason is because the government is going to need that money replaced, one way or another. They will turn towards government bonds, which will cause a large portion of Individuals to invest in that arena. This will reduce the total amount of investments within the private industry sector. So, the potential capital stock of the economy are reduced and businesses must look for ways to grow with less capital fund availability.

In addition, interest rates are directly affected by government securities since bonds are considered to be extremely safe investments. This causes virtually every other financial instrument to offer higher interest rates in order to compete. Enticing people away from secure government bonds equates to a higher interest rate offered. This function is used regularly by the Federal Reserve in open market operations to adjust interest rates within the bounds of monetary policy.

To give a very comparable example: it is the 4th quarter of the Superbowl. Peyton Manning is the Quarterback and Denver is down by 4. There are 3 seconds left and the ball is on the opponents 40 yard line. Yes, it’s Peyton Manning and that is the only reason that there is even a chance that there will be a game winning “Hail Mary” pass. However, it is still not a favorable bet. If he completes it, he wins the big game and celebrates. If not, no one would belittle him for trying. This is not Football, Donald Trump is not Peyton Manning and the US economy is not a game.

In the end Bitcoin is the best bet

So, while there may be a chance for success, it is slim. People know this. While there can be a possibility of other proposals and laws that stimulate growth, there is no guarantee. People know this. Bitcoin is an easily obtained asset that can provide the security people desire. People know this.

As we have seen recently, Bitcoin will benefit from any type of economic instability. People in America who are directly impacted by an uncertain economic situation will look for a tangible asset to protect against any economic uncertainty. Bitcoin will be the security that they seek. And there are so many possibility to spent and live on this cryptocurrency, i.e.: Bitcoin Gambling, Prepaid Visas or Master Cards, ATMs etc. So as zou see there are manz possibilities to spend Bitcoin.

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