This entire system is rigged against your prosperity

 On January 26, 1841, two years into the First Opium War between China’s Qing Dynasty and the British Empire, Commodore Sir Gordon Bremer hoisted the British flag above Possession Point in Hong Kong.

At the time the island’s population numbered less than 10,000. Most were illiterate fishermen.

Hong Kong was also devoid of any meaningful natural resources except for well-placed geography.

So when the war ended in 1842 and British diplomats formally annexed Hong Kong into their empire, they turned it into a free port almost immediately.

This means that no taxes were charged on goods traded in Hong Kong—an anomaly back then.

Governments routinely squeezed trading posts for tax revenue, taking a cut of all goods shipped through the port.

Governments still do this today, charging custom duties and other taxes on imported goods crossing their borders.

As a free port, Hong Kong immediately attracted entrepreneurs and speculators from all over the world to set up their operations.

People were attracted to the low tax environment, and the fact that the imperial government bureaucrats were over 5,000 miles away.

Trade quickly flourished. And as commercial activity grew, the island prospered and rapidly became more developed.

People migrated to Hong Kong based on the premise that, just like in America, they could work hard and make a life for themselves.

Within 20 years the population had increased over ten-fold. And it kept growing.

Hong Kong became a boomtown, earning a reputation as a swashbuckling paradise for risk-takers.

This freewheeling, Wild East attitude paid off.

Today Hong Kong is one of the wealthiest places in the world, with a GDP per capita and standard of living that outpaces most of the West.

It’s modern and advanced; the city skyline is beautiful– there are 50% more skyscrapers here than in New York City.

Taxes in Hong Kong are still among the lowest in the world.

Yet the government is awash with cash and regularly sends surpluses back to its citizens.

They maintain almost unparalleled financial reserves.

And instead of having to pay interest on debt, Hong Kong generates substantial income from interest and investment gains on its huge pool of savings.

Hong Kong is far from perfect. But this illiterate fishing village did pretty well for itself. And it’s not hard to figure out why: freedom.

“Freedom” is an often-misunderstood word.

As G. Edward Griffin, author of the wonderful book The Creature from Jekyll Island told us over the weekend, people think that they’re free as long as they’re not in jail.

And while that may be true, it doesn’t scratch the surface of what it means to be free.

Freedom also means being able to make mistakes… to take risks… and either suffer the consequences of bad decisions or enjoy the rewards of good ones.

This has been a huge part of Hong Kong’s success. And it used to be part of America’s as well.

This isn’t rocket science. The Universal Law of Prosperity is very clear– in order to build wealth you have to produce more than you consume.

But the more rules, regulations, and taxes there are, the more difficult it is to produce.

This is precisely the economic problem in the Land of the Free today.

They’ve created a political system that churns out 80,000+ pages of regulations each year, making people less free and more encumbered to produce.

And these regulations require more government, which can only be funded by more debt and more tax revenue.

Yet at the same time, their monetary system of ultra-low interest rates encourages people to spend money and go into debt.

This system makes the US, and most Western countries, easy to be a consumer. But it’s becoming more difficult to be a producer.

They reinforce this early, sending police to shutter children’s lemonade stands who didn’t apply for a permit. Or calling Homeland Security on teenagers selling snow-shoveling service door-to-door.

This entire system is rigged against the Universal Law of Prosperity.

And when all the incentives make it easier to consume than produce, it’s not hard to figure out where this destructive path will ultimately lead.

Simon Black

March 1, 2016

Hong Kong