Skip to main content

Hong Kong & the brave new world

John Mauldin's weekly E-letter, dated June 22, 2006 and entitled, "Goldilocks or Micawber?", brings us the recent thoughts of the GaveKal research team. What interests me about this latest missive is the section that is found under the heading, "Honk Kong Adapts to the Brave New World".

The authors begin their topic with a brief discussion of Hong Kong's recent tax debate. They believe that by looking to move towards a consumption tax model, Hong Kong's government is demonstrating its ability to think and adapt to new economic realities. The GaveKal team then outlines a future in which individuals and companies migrate towards low-tax/efficient service jurisdictions that will compete for their "business".

As an increasing number of companies move to the 'platform-company' model, or as people leave the big companies to work for themselves or smaller entities, it is likely that the top talent will want to work (or at least be taxed!), in low tax environments.

This economic reality should lead to a structural decline in tax receipts in the countries which do not adjust to this new model. In the new world towards which we are rapidly moving, income taxes will becoming increasingly voluntary and governments will have to get their pound of flesh through property and consumption taxes instead.

This is good news. Over time, it should lead to more efficient (i.e., downsized) governments all over the Western World. The platform company business model should end up killing off the Welfare State.

Reading this, I am reminded of some of the arguments presented in The Sovereign Individual, by Davidson and Rees-Mogg. The competitive government scenario, imagined by both sets of authors, seems to contradict the prevailing trend towards international unification on all fronts (common currencies, legal and political framework, armies or "peacekeeping forces", etc.). Or maybe these types of jurisdictions are encouraged to create their niche, given a world of oversized, tyrannical government.

It would be nice if this proved to be a triumph of the optimists. More than that, it may be essential to ensure any meaningful existence of liberty.

Popular posts from this blog

Seth Klarman: Margin of Safety (pdf)

Welcome, readers! Signup for free email updates at the Finance Trends Newsletter . Update: PDF links removed due to DMCA notice. Please see our extensive Klarman book notes below. New visitors, please check the Finance Trends home page for all new posts. Here's something for anyone who has been trying to get a look at Seth Klarman's now famous, and out of print, 1991 investment book, Margin of Safety .  My knowledge of value investing is pretty much limited to what I've read in Ben Graham's The Intelligent Investor (the book which originally popularized the investment concept of a "Margin of Safety"), so check out the wisdom from Seth Klarman and other investing greats in our related posts below. You can also go straight to Ronald Redfield's Margin of Safety book notes .    Related posts: 1. Seth Klarman interviews and Margin of Safety notes     2. Seth Klarman: Lessons from 2008 3. Investing Lessons from Sir John Templeton 4.

Slate profiles Victor Niederhoffer

Slate's recent profile of writer/speculator, Vic Niederhoffer has been getting some attention from traders and finance types in recent days. I thought we'd take a look at it here too, to offer up some possible educational value from Vic's experiences with trading and loss. Here's an excerpt from Slate's profile of Victor Niederhoffer : " I've enjoyed getting your e-mails. It sounds like you've thought a lot about being wrong. Well, the reason you contacted me, to call a spade a spade, is that I'm sort of infamous for having made a big, notorious, terrible error not once but twice in my market career. Let's talk about those errors. The first was your investment in the Thai baht, which pretty much wiped you out when the Thai stock market crashed in 1997. I made so many errors there it's pathetic. I made one of my favorite errors: "The mouse with one hole is quickly cornered." That is key. There are certain decisions you make in li

Moneyball: How the Red Sox Win Championships

Welcome, readers . T o get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter .   The Boston Red Sox won their fourth World Series title of t he 21st century this we ek. Having won their first Se ries in 86 years back in 200 4, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it? Quick background: in late 2002, team own er and hedge fund manager, John W. Henry (with his partners ) bought the Boston Red Sox and its historic Fenway Park for a reported sum of $ 695 million. Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship. This brings us to one of my fav orite scenes from the 2011 film , Moneyball , in which John W. Henry (played by Ar liss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pi