China Eliminates Taxation For Foreign Companies Investing in China

China has responded to global competition that is exploding in the wake of the Trump Tax Reform. While domestic news in the USA continues to bash the tax reform on class warfare, the rest of the world is trying to come to terms with what Trump has set in motion. China’s response is to allow foreign companies complete tax-free business on any profits they reinvest in China upping the stakes. Their position was stated by the Ministry of Finance and it is designed to ‘foster the growth of foreign investment, improve the quality of foreign investment, and encourage foreign investors to continuously expand their investment in China.’ The tax exemption applies retroactively from January 1st, 2017 beating Trump at his own game once more. Foreign companies who have paid taxes in China for 2017 will be refunded.

This post was published at Armstrong Economics on Dec 30, 2017.

The Rise of the West

Throughout almost the entire span of human history, material privation and chronic insecurity were the norm. Not even those at the peaks of social status and political power could enjoy the creature comforts and consumer delights that “poor” people take for granted in the West today. At times, certain populations fared somewhat better – in ancient Greece and Rome, perhaps, and in China during the Sung Dynasty (960 – 1279) – but those cases were exceptional.
As late as the 14th century, the Chinese probably enjoyed the highest level of living of any large population. Recall the amazement with which Europeans greeted Marco Polo’s account of China in the latter part of the 13th century, even though, as Polo declared on his deathbed, he had not described the half of what he had seen.1
As the Middle Ages waned the Europeans began to make quicker economic progress, while the Chinese lapsed into economic stagnation. Even more remarkable, the economic energy of Europe began to shift away from the great commercial centers of northern Italy and toward the periphery of civilization in northwestern Europe. The barbarians, it seemed, had somehow stumbled onto the secret of economic progress. Henceforth, despite many setbacks, the western Europeans – and later their colonial cousins in North America as well – steadily pulled ahead of the human pack. By the 18th century they had far surpassed the Chinese, not to speak of the world’s more backward peoples, and until the late 20th century the gap continued to widen.
How did the West succeed in generating sustained economic progress? Historians and social scientists have offered various hypotheses, and so far no single explanation has gained general acceptance. Nevertheless, certain elements of an answer have received wide agreement. The growing individualism of Western culture, rooted in Christian doctrine, seems to have contributed significantly.2 In addition, the political fragmentation of the European peoples in the high Middle Ages and the early modern period – a political pluralism with hundreds of separate jurisdictions – fostered the institutional and technological experimentation by which entrepreneurs could discover how to make labor and capital more productive.

This post was published at Ludwig von Mises Institute on 2017/12/29.

Housing Bubble 2.0: U.S. Homeowners Made $2 Trillion On Their Houses In 2017

Americans who are lucky enough to own their own little slice of the ‘American Dream’ are about $2 trillion wealthier this year courtesy of Janet Yellen’s efforts to recreate all the same asset bubbles that Alan Greenspan first blew in the early 2000’s. After surging 6.5% in 2017, the highest pace in 4 years according to Zillow data, the total market value of homes in the United States reached a staggering all-time high of $31.8 trillion at the end of 2017…or roughly 1.5x the total GDP of the United States.
If you add the value of all the homes in the United States together, you get a sum that’s a lot to get your mind around: $31.8 trillion.
How big is that? It’s more than 1.5 times the Gross Domestic Product of the United States and approaching three times that of China.
Altogether, homes in the Los Angeles metro area are worth $2.7 trillion, more than the United Kingdom’s GDP. That’s before this luxury home on steroids hits the market.

This post was published at Zero Hedge on Fri, 12/29/2017 –.

US Dollar Has Worst Year since 2003, Defying the Fed

Where will it go from here?
Today is another down-day for the US dollar, the third in a row, capping a nasty year for the dollar, the worst since 2003. In 2017, the dollar dropped 7% against a broad basket of other currencies, as measured by the Trade Weighted Dollar Index (broad), which includes the Chinese yuan which is pegged to the US dollar. It was worse than the 5.7% drop in 2009, but not as bad the 8.5% plunge in 2003.
Here are the past four years of the dollar as depicted by the Broad Trade Weighted Dollar Index, which tracks 26 foreign currencies. The index is updated weekly, with the last update on December 26, and has not yet captured the declines of past three days:

This post was published at Wolf Street on Dec 29, 2017.

Hong Kong Ship Seized After Transferring Oil To North Korea

Just days after we showed satellite images which indicated that Chinese ships were trading oil with North Korean ships in a blatant violation of UN Security Council sanctions, South Korea said Friday that it was holding a Hong Kong flagged ship suspected of doing just that.
The Lighthouse Winmore is believed to have “secretly transferred” about 600 tons of refined petroleum products to the North Korean ship, the Sam Jong 2, in international waters in the East China Sea on Oct. 19, according to Bloomberg and the Associated Press.

The Hong Kong vessel had previously visited Yeosu port on Oct. 11 to load up on Japanese oil products and departed the port while claiming its destination was Taiwan. Instead, it transferred the oil to the Sam Jong 2 and three other non-North Korean vessels in international waters

This post was published at Zero Hedge on Fri, 12/29/2017 –.