Mish's Global Economic Trend Analysis

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2012 Export Growth by Country; China and US at Top of List; World Trade Slowdown; Rebalancing at Glacial Pace Posted: 15 Feb 2013 06:21 PM PST Inquiring minds are looking at charts from the New York Times that show U.S. Trade in 2012 Outpaced Many Other Countries. In 2012, United States exports of goods rose 4.5 percent from 2011, a faster rate of growth than that of 10 other major countries but well below the growth rate of Chinese exports. American imports rose 3 percent, but the trade deficit in goods was virtually unchanged. In six of the last seven years, the growth in American exports outpaced that of imports. The United States gained in exports despite declines in trade with some major European trading partners. Global Export Growth Export Growth Perspective A little perspective helps as the trade deficit chart from the New York Times shows. The US had a trade deficit over $700 billion in 2011 and 2012. That is down from $800 Billion+ between 2006 and 2008 but it is certainly noting to brag about. World Trade Slowdown Please consider In World Trade Data, Signs of a Slowdown, a related article by New York Times columnist Floyd Norris. WORLD trade slowed last year, as major countries like Japan and Germany shipped exports that were worth less than those in 2011. The United States bucked the trend to some extent, but the 4.5 percent increase in exports was far smaller than the 15.8 percent jump in 2011. Import totals can provide an indication of economic woes, as declining incomes cause consumers to buy less, including fewer items from abroad. Imports fell in Germany, France and particularly Italy. This week, the European Union reported that the euro zone economy declined in the fourth quarter — the third consecutive fall. Germany's economy, which had been growing slowly, also shrank. Exports plunged in all countries during the crisis, but the trends since then have varied. German exports in 2012 were 3 percent lower than in 2008, while French exports were off almost 8 percent. Japanese and British exports were about 2 percent higher. The United States, by contrast, reported exports of goods in 2012 that were up 20 percent from 2008, and Brazilian exports were 23 percent higher. Those gains pale next to those of developing Asian economies. South Korean exports in 2012 were 30 percent higher than in 2008, while China bolstered its shipments by 43 percent. Indian exports were 50 percent higher. Rebalancing at Glacial Pace To the extent there is any global rebalancing (if at all), the pace is certainly glacial. In regards to Europe in particular, I see no evidence at all. For details, please see ... German Trade Surplus Hits Five-Year High; Rebalancing the Wrong Way Europe à l'Hollandaise; Socialists Who Wrecked France, Demand the Same for Rest of Eurozone Wealthy French Eye Belgian Tax Breaks (Everyone in France Should Do the Same) Top 1% Received 121% of Income Gains During the Recovery, Bottom 99% Lose .4%; How, Why, Solutions Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Wealthy French Eye Belgian Tax Breaks (Everyone in France Should Do the Same) Posted: 15 Feb 2013 11:38 AM PST The inheritance tax in France is 45%, in Belgium it's 3%. France has a wealth tax, Belgium doesn't. Wealthy French have known and used these loopholes for quite some time, but appeal of such schemes is on the rise following massive tax hikes of president Francois Hollande. Please consider Wealthy French eye Belgian tax perks. For decades, Thierry Afschrift's boutique tax law practice was among the best-kept secrets of Belgium's wealthy elite, his name passed discreetly between the landed gentry and industrialists in Brussels' leafy suburbs seeking shelter from the kingdom's Byzantine tax laws. But in the past five months, Mr Afschrift's phones have been ringing off the hook from another clientele altogether – wealthy Frenchmen seeking to set up private foundations in Belgium to protect their family fortunes from onerous taxes imposed by President François Hollande. "We have loads of people coming every day asking us questions about setting up foundations," Mr Afschrift said from his office on Brussels' upmarket Avenue Louise. Other Belgian tax lawyers say they have been receiving around 10 calls a day from France inquiring about private family foundations. The key to Belgian foundation law is that it permits the patron to hand over all assets to children as a gift, taxed at only 3 per cent instead of France's 45 per cent inheritance tax. It also avoids France's annual wealth tax, a levy that does not exist in Belgium. To top it off, the foundation's benefactor retains full control of the assets while alive and can set disbursement terms for after their death. "It is a very good tool to transfer assets gradually and assure the children don't squander that family's accumulated wealth," says Manoël Dekeyser, one of Belgium's most prominent tax attorneys. "If the children want the money to play at the casino, the foundation's manager can block them from doing so, if he has been instructed to do so by the parents." Said one lawyer, who asked not to be named to protect his firm: "Unfortunately, Arnault brought greater attention to the foundations system than we would have hoped. "I would have preferred to keep it very discreet. Rich people know how to find us. They don't need to read it in the Financial Times." Arnault Effect Bernard Arnault is the owner of fashion and champagne house LVMH and reputedly Europe's richest man. French actor Gérard Depardieu stirred up tax debate with a threat to seek Belgian citizenship to avoid Hollande's new top tax rate of 75% on millionaires. Depardieu, who has been in around 200 films, says he's moving to Belgium to avoid paying a new 75 percent tax on the superwealthy. The move has divided the country and has focused attention on the Socialist government's controversial new tax policy. The uproar began just before Christmas, when it came to light that Depardieu bought a home in Nechin, a drab Belgian village less than a mile over the French border. Depardieu admitted to establishing a foreign residence to escape new French tax rates. "It's pathetic really," Prime Minister Jean Marc Ayrault said earlier this month. "Paying taxes is an act of patriotism and we're asking the rich to make a special effort here for the country." Depardieu shot back at Ayrault in an open letter published in a major Sunday newspaper, Le Journal du Dimanche. "I am leaving because you consider success, creativity and talent grounds for sanction," the actor wrote. Depardieu said he has paid more than $190 million in taxes over the last four decades. He said he no longer recognized his country and offered to surrender his passport if he was, indeed, so pathetic. Hollande's Tax Hikes Backfire Based on the Financial Times article as well as actual moves by the super-wealthy, it appears Hollande's tax policies have already backfired. For every dime collected, a flood of middle-class and wealthy French are setting up foundations to avoid inheritance taxes and shelter current income as well. Indeed, any French citizen with an estate to pass on should investigate setting up a private foundation in Belgium to avoid onerous inheritance taxes. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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