In February next year, President Obama has to decide whether to renew the Bush Tax cuts or to let them expire.

Let’s see what will happen in either case:

If he lets the tax cuts expire, he will have lied to the U.S. public by now imposing taxes on them which did not exist in for the past 10 years.

And while the spin doctors in the media will try to couch the fact by saying these tax cut roll backs will only affect the rich, I can almost assure you that you and I will see the effects of such tax cuts in our annual tax bills too.

If he does not let the tax cuts expire and renews them, he is ensuring that the deficits will rise as the tax revenues will not increase while the spending will continue.

The value of these tax cuts varies by different estimates. Some calculate the value of these tax cuts at about $980 Billion (yes friends, that is a Billion with a “B”). But that’s before you count the interest on such cuts because the tax cuts were funded by deficits.

So conservatively, we can expect that the tax cuts cost the U.S. Treasury about $1 Trillion over the past decade.

With the new health care reform bill going to cost about $1.1 Trillion over the next few years, we could see a rescue for the U.S. dollar if Obama lets the tax cuts expire. And if that happens, we will have direct confirmation that “by not raising taxes in any form,” he didn’t really mean the wealthy. In other words, he lied.

On other the other hand, if he renews the tax cuts, we will see another tidal wave of deficit spending that could send the dollar in to a long-term tailspin.

So while I can not tell you which way the events will unfold, I am quite sure we are in for a dollar ride when February rolls around next year. Strap in and hold on for dear life!

I foresee severe head winds for the U.S. Dollar next year and it may start early in February!

- Hopium

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