Repatriation of US companies overseas profits

[SmallCap]

With US companies set to repatriate some % of their ~3.5 Trillion of overseas cash and holdings, what impact will this have on the markets and the economy?

 

I was just reading an article which stated that this would contribute to a strengthening of the dollar, which puzzled me because I would have expected it to be an inflationary event because there would be more domestic cash chasing the same amount of domestic assets. And maybe 3.5 trillion isn't significant in a monetary basis but why would it strengthen the dollar?

 

I think I am missing something here.

[rb]

With US companies set to repatriate some % of their ~3.5 Trillion of overseas cash and holdings, what impact will this have on the markets and the economy?

 

I was just reading an article which stated that this would contribute to a strengthening of the dollar, which puzzled me because I would have expected it to be an inflationary event because there would be more domestic cash chasing the same amount of domestic assets. And maybe 3.5 trillion isn't significant in a monetary basis but why would it strengthen the dollar?

 

I think I am missing something here.

Because that inflationary event will be neutralized by the Fed by hiking rates.

[rb]

Also repatriation is more of an accounting term. In reality that money is already in the US. So there's nothing really to repatriate. What'll happen in reality is just changing ownership of treasuries.

[Cigarbutt]

1st part:

 

I'll try to paraphrase rb here. :)

 

Here's a simplified and somewhat cynical cycle:

 

-US multinational has overseas profits held in US treasuries.

-US multinational sells the debt and sends (electronically) funds to the US (with Uncle Sam collecting a tax commission).

-US multinational returns funds to shareholders (with CEO collecting an option commission).

-Shareholders buy goods made overseas.

-USD makes it to the foreign central bank who buys US treasuries.

 

Voilà!  "What'll happen in reality is just changing ownership of treasuries."

 

But isn't this devised for the benefit of the american worker?

 

2nd part:

 

A relevant historical is what happened after the tax holiday repatriation of 2005.

This was studied and submit the best balanced link I could find (do you believe in bipartisan work?):

https://www.hsgac.senate.gov/imo/media/doc/RepatriatingOffshoreFundsReportOct202011wExhibitsFINAL.pdf

Most conclude that between 60 and 90% of repatriated funds were "returned" to shareholders.

Whether this is good or not depends on your perspective.

Some suggested that "incentives" could have been used to "help" firms invest in domestic capital investments and jobs.

 

I wonder about the opinion of the forgotten man.