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(Especially noteworthy articles’ headings highlighted in gold.)
IS TRAVELING ANONYMOUSLY A RIGHT?
Is the right to travel anonymously a necessary part of the First Amendment freedom to assemble? This is the key question in a case filed by John Gilmore against the demand that airline passengers traveling within the US be required to show photo ID before being allowed to board a plane.
Most of us, when presented with airline security, just try to get through as fast and unnoticeably as possible. Gilmore, Agnostic love him, is the opposite; he was refused carriage by British Airways recently for declining to take off a button that read “Suspected Terrorist”. You can argue that Gilmore acted like a nut, that BA is not American and therefore not subject to the First Amendment, that a plane is private property belonging to a business, that an airline captain has absolute discretion, and that intransigence is not a rational response to easily unnerved staff. But there is a principle here: do we surrender all our rights when we become airline passengers? If not, which ones do we have?
By now Gilmore surely needs no ID beyond his name, sandals, and tie-dyed socks for them to know who they have got there. But the fact is that you do not really need to know who he is anyway when he is sitting next to you. You just want to know he is not going to blow up the plane or stab you with the pin from the back of his button.More on this story here.
Gilmore v. Ashcroft lawsuit home page here.
MEET THE “TRANSHUMANISTS” BEHIND THE PENTAGON TERROR CASINO
If there was an other-worldly feel to the news last week that the Pentagon was investing in an online futures exchange to reward [the prediction of] terrorist atrocities, then the following few days have been even stranger. While we have seen economists and pundits rush to the defense of the aborted “terror casino”, very few commentators have examined the curious ideological motivations behind the ill-fated Policy Analysis Market, which at times appear determined to outdo any occultist. The phrase “not of this world” might spring to mind as you read on.More on this story here.
EVERBANK’S OFFERINGS CROSS ALL BORDERS
Yields on bank deposits are stuck at their lowest levels in decades, but one bank is going out of its way to seek higher returns for account holders -- to the other side of the world, in fact. Everbank, a division of First Alliance Bank of Florida in Jacksonville, calls itself a branchless bank, serving clients only by mail, phone and the Internet. It has offered a wide range of savings accounts and certificates of deposit denominated in foreign currencies, including the euro, British pound, Swiss franc and more exotic fare like the New Zealand dollar and Chinese renminbi since 2002. For most CDs, there is a $10,000 or $20,000 minimum investment and a fixed term of three or six months, stretching to nine or 12 months in some instances.More on this story here.
ARGENTINA DID NOT FALL ON ITS OWN
The fantasyland that Argentina represented for foreign financiers came to a catastrophic end early last year, when the government defaulted on most of its $141 billion debt and devalued the nation’s currency. A wrenching recession left well over a fifth of the labor force jobless and threw millions into poverty.
An extensive review of the conduct of financial market players in Argentina reveals Wall Street’s complicity in those events. Investment bankers, analysts and bond traders served their own interests when they pumped up euphoria about the country’s prospects, with disastrous results.
Wall Street firms assert that their enthusiasm for backing Argentina’s borrowing was motivated by a sincere, if misplaced, optimism about the country’s economic strengths. But critics contend that the same forces that fueled the U.S. tech-stock frenzy were at work in Argentina, in effect causing economic globalization to play a cruel trick on the country.More on this story here.
HOW INTERNATIONAL LIFE INSURANCE CAN HELP YOUR TAX PLANNING
Generally, if you put your money in a bank, mutual fund or one of the many other methods of earning interest to increase your capital wealth, the governments of many countries will tax that income and other increments to your capital. This tax is frequently applied whether you actually received that additional income or not, i.e., you may be liable to pay taxes on those earnings, even if you decide to leave the money wherever it is in order to compound the earnings potential of your capital.
Except, that is, for the earnings within a life insurance policy. Simply put, this means that, in many countries, there is no tax payable on the accumulation of income and earnings within life insurance policies, unless and until the owner of the policy receives those earnings. Even then, there are many ways to reduce the tax liability of those earnings, depending on how the physical receipt of the income is structured.
If the income is taken in the form of a payment to your beneficiary(ies) in the event of your death, those monies are generally sheltered from inheritance and estate taxes. Moreover, as noted previously, an offshore policy gives the policy owner the flexibility to decide where such proceeds should be paid.
The benefits offered by offshore life insurance include:
GULLIVER UNBOUND: CAN AMERICA RULE THE WORLD?
America is unique in time and space. Others might be able to defy the US, but they can neither compel nor vanquish it -- except in the meaningless sense of nuclear devastation that will be mutual. The sweep of its interests, the weight of its resources and the margin of its usable power are unprecedented. This Uber-Gulliver packs a threefold set of uniquely big muscles -- military, economic and cultural -- and there is nothing on the horizon of political reality that suggests the speedy demise of his hegemony.
History and theory suggest that this cannot last. In the international system, power will always beget counter-power, usually by way of coalitions and alliances among the lesser players, and ultimately war, as in the cases of Napoleon, Wilhelm II, and Adolf I. Has this game already begun? The answer is “No, but”.More on this story here.
A MORE PERFECT EUROPEAN UNION
Europeans will soon consider a proposed constitution for the European Union that is very different from the U.S. Constitution. The United States is the oldest and largest surviving constitutional republic -- a nation that has experienced a larger increase in area, population, and income; absorbing people of more diverse racial, ethnic, and language backgrounds than any other contemporary nation. So Europeans are well advised to understand and consider those characteristics of the U.S. Constitution that provided the political and legal framework for the American success story.
Several characteristics of the U.S. Constitution have contributed to its relative success and survival as a body of foundation law. The preamble, for example, describes the objectives of the Constitution in only 52 words of forceful, declaratory, and quite general prose, which, by itself, provides no authority for any specific political decision. The main text, in only seven articles, describes the powers authorized to the several branches of government and the powers denied to the federal government or the states as few, brief, and well defined. All residual powers are reserved to the states. And the Bill of Rights, with one exception, is a list of the rights of individuals against the state, not a list of claims by individuals on services to be provided by the state; the one exception is the right to a trial by jury. All residual rights are reserved to the people.
The proposed EU constitution is very different in several dimensions.More on this story here.
HARRY BROWNE ASKS “WHAT HAPPENED TO THE U.S. ECONOMY?”
It is no secret that the American economy is ailing. But few people realize that it has been ailing for about 30 years. When World War II ended, there were a few years of transition to peacetime, and then the economy returned to normal. From 1949 through 1973, economic growth (as measured by the estimated Gross Domestic Product) averaged 4.0% per year. But from 1973 through 2002, the growth was only 2.7% per year.
From 1949 through 1973, the median income rose an average of 3.1% per year. Since then the increase has been only 0.2% per year -- barely any gain at all. If the earlier trend had continued, the typical American family’s income today would be more than twice as large as it is.
What is so special about the year 1973? What happened then to cause the economy to slow down?
Actually, nothing. No unusual event occurred that year. It is simply that 1973 appears to be when the weight of government finally made a significant difference on the economy. Government spending and regulation reached the point that they were causing visible problems.More on this story here.
NEW DATABASE LINKS RECORDS, PERSONAL DETAILS IMMEDIATELY
Police in Florida are building a new counter-terrorism database designed to give law-enforcement agencies around the country a powerful new tool to analyze billions of records about both criminals and ordinary Americans.
Organizers said the system, dubbed “Matrix” -- short for Multistate Anti-Terrorism Information Exchange, enables investigators to find patterns and links among people and events faster than ever, combining police records with commercially available collections of personal information about most American adults. It would let authorities, for instance, instantly find the name and address of every brown-haired owner of a red Ford pickup in a 20-mile radius of a suspicious event.
The state-level program, aided by federal funding, is poised to expand across the nation at a time when Congress has been sharply critical of similar data-driven systems on the federal level, such as a Pentagon plan for global surveillance and an aviation passenger-screening system.More on this story here.
INTERESTING WEB SITE: “OVERLAWYERED.COM”
From the site: “Overlawyered.com explores an American legal system that too often turns litigation into a weapon against guilty and innocent alike, erodes individual responsibility, rewards sharp practice, enriches its participants at the public’s expense, and resists even modest efforts at reform and accountability.”
Recent lead stories include: “Britain’s most senior judges have demanded an end to ‘the culture of blame and compensation’ in a landmark ruling which decrees that individuals must take responsibility for their own actions. The Appellate Committee of the House of Lords has used its judgement in a compensation case to brand Britain’s growing U.S.-style claims system as an ‘evil’ that interferes with civil liberties and freedom of will.”
And: “Theodore J. Kaczynski, the onetime UC Berkeley math professor better known as the Unabomber, wants the federal government to return all his stuff -- including one of his bombs -- that the FBI confiscated when he was arrested in his tiny Montana cabin seven years ago.”More on this story here.
MARC HARRIS -- ANATOMY OF AN OFFSHORE SERVICE PROVIDER GONE BAD
So you want to know what might happen to your assets when you send them offshore? Consider those persons who chose to do business with the Marc Harris Organization. Few people had ever heard of the Marc Harris Organization prior to the spring of 1997. It was at that time that the very well-dressed and well-manner Marc Harris began showing up at offshore seminars pitching the use of his full-service Panamanian offshore service provider.
At prices which were probably 1/3 to 1/2 of the going rate, the Marc Harris Organization provided everything from trust services and company formations, to offshore mutual funds and annuities, to offshore insurance company and bank formations. They also offered tax services, and through a variety of tactics detailed in the “Harris Matrix” (essentially, a list of strategies) could create enormous bogus paper losses for U.S. companies, while actually moving millions of dollars offshore to be controlled by the tax-evading business owner.
The Marc Harris Organization was an immediate success, and they were soon -- in total numbers of employees (~150) -- one of the largest, if not the largest offshore service provider in the world. Very quickly, the Marc Harris Organization made arrangements to “back office” many other offshore service providers, and had offices in most of the major offshore jurisdictions.More on this story here.
Link to the now-defunct company here.
TOKYO STOCK MARKET RALLY FOR REAL?
After falling to two-decade lows in April, the benchmark Nikkei 225 climbed more than 30% by early July, not bad for a market that many people considered on the verge of collapse. The big question, though, is whether the market will ignite again after investors return from summer vacations. During this rally, unlike those that fizzled in 2001 and 2002, optimists clearly outnumber the pessimists.
The reasons are as varied as they are familiar. Household names like Toshiba and Honda Motor, as well as top-notch makers of steel and machinery, are still trading well below their all-time peaks. Most of them are exporters and are benefiting from a pickup in the American economy and from China’s booming expansion. Their products continue to hold their own against foreign competition in important markets.
Hit by years of slow growth and deflation, many companies have also been closing factories, trimming payrolls and cutting other costs. This has increased profit margins for nonfinancial companies on the first section of the Tokyo Stock Exchange to 5.1%, on average, a record high, according to JPMorgan Fleming Asset Management. The profit margins, though below levels in the United States and Europe, should continue rising as sales grow.
Japan’s stock indexes, at least when compared with other major markets overseas, are also cheap. After years of brutal losses, many foreign fund managers that track Morgan Stanley Capital International indexes had sold all their Japanese holdings. Given the collapse of many mini-rallies during the past few years, a heavy dose of skepticism is not unwarranted. The biggest time bomb remains the banks. There is also the risk -- confirmed in years past -- that corporate Japan will slow its restructuring efforts once sales pick up.More on this story here.
YOUR CELLPHONE IS A HOMING DEVICE
Don’t want the government to know where you are? Throw away your cell, stop taking the subway, and pay the toll in cash.
If you purchased a new cellphone over the past 18 months or so, odds are that one of the features listed in small print on the side of the box was “E911 capable”. Or, as in the case of a recently-purchased Motorola, “Location technology for piece [sic] of mind.” Perhaps you asked the salesman to explain the feature, and he replied that it means that cops can home in on your phone in case of an emergency.
What your salesman probably failed to tell you -- and may not even realize -- is that an E911-capable phone can give your wireless carrier continual updates on your location. The phone is embedded with a Global Positioning System chip, which can calculate your coordinates to within a few yards by receiving signals from satellites. GPS technology gave U.S. military commanders a vital edge during Gulf War II, and sailors and pilots depend on it as well. In the E911-capable phone, the GPS chip does not wait until it senses danger, springing to life when catastrophe strikes; it is switched on whenever your handset is powered up and is always ready to transmit your location data back to a wireless carrier’s computers. Verizon or T-Mobile can figure out which manicurist you visit just as easily as they can pinpoint a stranded motorist on Highway 59.
So what is preventing them from doing so, at the behest of either direct marketers or, perhaps more chillingly, the police? Not the law, which is essentially mum on the subject of location-data privacy. As often happens with emergent technology, the law has struggled to keep pace with the gizmo. As things stand now, the only real barrier to the dissemination of your daily movements is the benevolence of the telecommunications industry. A show of hands from those who find this a comforting thought? Anyone?
The legendary hacker zine Phrack recently published a how-to guide on building a GPS-jamming device.More on this story here.
JURY ACQUITS PILOT WHO QUESTIONED LIABILITY FOR INCOME TAX
A federal jury in Memphis has acquitted a FedEx pilot on six counts of tax evasion after she testified that she wrote letters asking the Internal Revenue Service what law required her to pay taxes but never received a response. The verdict brings into question the I.R.S. practice of ignoring such questions, which it regards as frivolous because the first words of the Internal Revenue Code are “a tax is hereby imposed”.
The pilot, Vernice Kuglin, 58, filed a withholding statement on Dec. 30, 1995, directing that no taxes be withheld from her pay. From 1996 through 2001 she earned $920,000 as a pilot for FedEx, but no taxes were withheld, she said. Normal withholding for the period would have been about $250,000.
“The questions I have asked are what section of the Internal Revenue Code makes me liable for the individual income tax and what law requires me to fill out the Form 1040” tax return, she said. The lead defense lawyer, Lowell H. Becraft Jr. of Huntsville, Ala., said he built the defense around the absence of response by the I.R.S. to Ms. Kuglin’s letters.
The acquittal does not relieve Ms. Kuglin of the obligation to pay the taxes. Joe Murphy, the federal prosecutor in the case, indicated in court that the government intended to pursue collection in a civil action. In February 2002, a Tax Court judge dismissed Ms. Kuglin’s claims of I.R.S. irregularities in determining she owed taxes for 1994 and 1995, but declined an I.R.S. request to impose penalties on her for filing frivolous actions to delay collection.More on this story here.
THE RE-MONETIZATION OF GOLD
If gold is to be re-monetized, then this must mean that it has been de-monetized. But isn’t gold money? No, gold is not money. It has not been money for Europeans since 1914, when the commercial banks stole it from depositors at the outbreak of World War I, and central banks then stole it from commercial banks before the war was over. Gold has not been money for Americans since 1933, when Roosevelt unilaterally by executive order stole it from the public.
I realize that old-time gold bugs go around saying “gold is the only true money” and similar slogans. These slogans reflect a lack of understanding of either gold or money. They are comforting slogans, no doubt, for someone who bought gold coins at twice the price that they command today, and held them for a quarter of a century at no interest while all other prices doubled or tripled. If he had instead made down payments on rental houses, he would be a whole lot richer. But the fact is, gold is not only not the only true money, it is not money at all. When you can walk into Wal-Mart and buy whatever you want with a gold coin or gold-denominated debit card, then gold will be money. Not until then.
The question is: Will it ever again become money? This is the most important of all monetary questions.
The bankers hate gold as money. Gold as money acts as a restraint on their profits, which are derived from creating money “out of thin air” and lending it at interest. Gold as money acts as a barrier to the expansion of credit money. The public initially does not trust the bankers or their money apart from the right of redemption on demand. Depositors initially insist on IOU’s for gold coins. So, the bankers partially submit to gold, but only grudgingly.
To keep from facing their day of judgment -- redemption day, when the public presents its IOU’s and demands payment -- fractional reserve bankers call on the government. They persuade the government to create a bankers’ monopoly, called a “central bank”, which stands ready to intervene and lend newly created fiat money to any commercial bank inside the favored cartel that gets into trouble with its depositors. By reducing the risk of local bank failures, the central bank extends the public’s acceptance of a system of unbacked IOU’s, called “an elastic currency” when members of the banking cartel create it, and called “counterfeiting” when non-members of the cartel create it. Then why do central bankers use gold to settle their own interbank accounts? Because central bankers don’t trust each other.
Gold is an inflation hedge. There has been inflation since 1980. But gold has not risen in price since 1980 for many reasons: the gold bubble of 1979, the continuing de-monetization of gold by central banks, the steady sell-off of gold by central banks, the central banks’ gold leasing programs (disguised sales), and dollar supremacy internationally. The third factor, dollar supremacy, is looking shaky. Gold is not a deflation hedge whenever it is not monetized, and it has not been monetized for generations. But, in the midst of deflation, there is a possibility of the re-monetization of gold. I regard this as a distant possibility.More on this story here.
TURNING LAWYERS INTO GOVERNMENT SPIES
When will the first lawyer be arrested, indicted and sent to prison for failing to help the government convict his client? You can bet it will be soon. Once the Securities and Exchange Commission, Internal Revenue Service and U.S. Department of Justice (sic) complete their assault on the attorney-client privilege, they will rush to make an example of a lawyer, lest any fail to understand that their new role in life is to serve as government informants on their clients.
Just as government bureaucrats used the terrorist attacks of Sept. 11 to assault the Bill of Rights and our constitutional protections, they are now using “accounting scandals” and “tax evasion” to assault the attorney-client privilege, a key component of the Anglo-American legal system that enables a defendant, whether guilty or innocent, to mount a defense against the overwhelming power of the state.
The sacking of the attorney-client privilege can only produce a nightmare. Many white-collar crimes and securities regulations are so vague and arcane that no one knows for sure what they mean. Their meanings are usually argued out in settlements or trials. What will happen now is that any attorney who fails to guess in advance the regulator’s interpretation of the regulation can be charged with helping his client commit fraud.More on this story here.
Book review of Paul Craig Roberts’ The Tyranny of Good Intentions: How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice here.
A YAWNING TRADE GAP COULD SWALLOW THE U.S. RECOVERY
After a year and a half of fits and starts, the U.S. economy finally seems on its way to a real recovery. Heading into the second half, consumers are spending more freely. Businesses are loosening up their capital budgets, and skimpy inventories and rising orders are lifting industrial activity. Sounds promising, right?
But there is a catch. True, the outlook for U.S. demand is the brightest in years, as tax cuts, lower interest rates, healthier financial conditions, and reduced uncertainty work their magic. But overall demand is getting little help from outside the U.S., and much of the pickup in American spending is going to imports. The question: Can the U.S. be the locomotive for world growth without derailing its own recovery?
Stronger U.S. demand amid stubborn global weakness is almost certain to cause the trade deficit to balloon further. A widening trade gap, which subtracts from real gross domestic product, may rob the economy of that extra dollop of growth so crucial to capital spending and hiring -- the two requirements for a lasting recovery.More on this story here.
PACIFIC REGION’S NATIONS GATHER TO FIGHT RISING TIDE OF WORRIES
As well as Australia and New Zealand, 14 of their Pacific Island neighbors will take part in the Pacific Islands Forum in Auckland this week. Leaders of some of the smallest and most vulnerable countries in the world will meet New Zealand Prime Minister Helen Clark and her Australian counterpart, John Howard, to grapple with regional challenges such as failures of governance, security, people smuggling, gun control, population growth, HIV/Aids, ethnic tensions, and growing gaps between the rich and the poor. A look at the nations and some of the issues facing them.More on this story here.
IRWIN SCHIFF FACES JUSTICE DEPARTMENT
Irwin Schiff, the nation’s best-known proponent of the idea that people are not required to pay income taxes, has put that provocative question to Lloyd D. George, a federal district judge who held a hearing here on Thursday on a Justice Department request that Mr. Schiff be put behind bars for civil contempt.
On June 16, Judge George issued an injunction ordering the 75-year-old Mr. Schiff, who has twice gone to prison for tax offenses, to stop promoting his “zero tax return”, which he says allows anyone to legally list no income and so pay no taxes. At least 5,100 such returns have been filed in recent years, the IRS says, costing the government $51 million in taxes and tying up law enforcement resources needed to pursue the filers.
Judge George also ordered Mr. Schiff to stop selling his $38 book, The Federal Mafia: How the Federal Government Illegally Imposes and Unlawfully Collects Federal Income Taxes. Judge George found the book to be false commercial speech that incites people to evade taxes, although, contrary to Mr. Schiff’s assertion that the book had now been banned, the court did not prohibit its sale by people unconnected to him.
Five days later Mr. Schiff certified to the court that he was obeying the injunction, which also required him to post it prominently on his Web site. But the Justice Department says he has flouted the order, noting that he continues to assert on that site that zero income tax returns are legal. In addition, he provides only a link there to the injunction.More on this story here.
KURT RICHEBÄCHER DISSES THE U.S. ECONOMIC “RECOVERY”
Mr. Greenspan has been hailing the wonderment of the U.S. economy’s new resilience, both to the bursting of the stock market bubble and to the various shocks from terrorists and the Iraq war. But the cause is obvious. What, for the time being, has prevented a deeper and longer recession in the United States is more and more of the very same consumer-borrowing–and-spending bubble, which has been propelling U.S. economic growth over the past several years.
Yet two things have changed. The first one is the collateral behind the consumer borrowing and spending binge. Rising stock prices have been replaced by rising house prices. The second is that it needs more and more rampant credit and debt creation to master just marginal GDP growth. Our highly critical assessment of the U.S. economy’s performance during the past two to three years, in fact, finds its major justification in the atrocious discrepancy that has developed between extremely promiscuous monetary and fiscal stimuli and their extremely poor economic effects.
Between 2000 and 2002, the federal budget has swung from a surplus of $295 billion into a deficit of $257 billion, heading for a $400–500 billion deficit in 2003. During the same two years, total nonfinancial credit zoomed $2,520 billion and financial credit by another $1,879 billion, both adding up to $4.4 trillion. What was the effect of this credit and debt deluge on the economy? GDP during these two years grew in real terms by $248 billion and in nominal terms by $621 billion. To us, this is an outright policy disaster.More on this story here.
THE DIVISION OF LABOR ... AND GOLD
A few years ago, everyone maintained an inventory of food. Only a fool would have trusted completely in his ability to buy what he wanted when he wanted it. But now we all seem to have an unshakeable faith in the division of labor ... and the supply channels upon which our lives depend. If it is no longer necessary to keep an inventory of food, does it make sense to store cash? Is gold, the ultimate store of value, no longer necessary?
The human animal, whether dressed by Kenzo or Benetton, is still subject to the same hard-wired instincts that beset and enabled his ancestors. And not just his close kin in the human species -- but the entire line of evolutionary tissue, from the lowest amoebic bacteria to the most highly refined matron in the 16th arrondissement of Paris. This animal, whose collective wisdom priced gold at $825 an ounce two decades ago, now considers it worth only $280 [and today, $355]. But, an investor’s view of what things are worth is not a consequence of rational, computer-like analysis. An investment may be worth $15 one day and $30 the next -- without any real change in the underlying asset. An ounce of gold is still the same element, occupying the same position in the periodic table that it did when George W. Bush was at Yale. It is not gold that has changed.
Our guess: when something has retained value for thousands of years, it is not likely to give it up anytime soon.More on this story here.
IRS ABUSE REPORTS PREPARED FOR THE UNITED STATES CONGRESS
“Warning: These IRS Abuse Reports start mildly and slowly. After a while, these reports build into such a crescendo of sickening horror, criminal destructiveness, and unbearable evil that a sedative may be required to read them all.”More on this story here.
IRS Class-Action Announcement here.
WHEN LEGAL PRIVILEGE HAS A COMMON INTEREST
The doctrine of legal privilege is easy to define, but not always easy to obtain. Privilege flows from the right of a person to obtain skilled advice about the law. The rule is one of fundamental justice. A person cannot properly obtain legal advice if he or she does not have confidence in the sanctity of communications -- untrammelled by any apprehension of disclosure -- with the legal adviser. Thus, privilege flows from the lawyer’s duty of confidence and the client’s right of privacy.
The law presumes solicitor-client privilege to exist in communications between a lawyer and his or her client. Thus, the onus is on the person who wishes to dislodge the privilege to show that it no longer applies in the particular circumstances. A person can lose solicitor-client privilege by waiving it or disclosing the privileged document to third parties. For example, disclosure of privileged documents to an accountant may result in loss of privilege, unless the accountant is an agent of the lawyer. Governments are the prime detractors of the rule of client confidences.More on this story here.
SWEDEN LOOKS SET TO VOTE NO IN A REFERENDUM ON JOINING THE EURO
When does it make sense to join a currency union? Nobel laureate economist Robert Mundell argued long ago that small, open economies, tied together by trade and investment, should adopt a single money. Sweden’s voters seem less impressed than the Nobel committee. On September 14th, the people of this small, open economy, tightly bound to Europe by trade and investment, will vote in a referendum on joining the euro. Few think it optimal. Many do not care for it at all.
A poll by Sifo, released last Friday, showed that 49% of Swedish voters want to keep the krona (crown) and only 34% are happy to see it disappear. On Monday, Gallup announced similar results. The “no” campaign has been gaining momentum since the end of last year, feeding on fears that the euro will bring price hikes and welfare cuts.
Swedes are whole-hearted internationalists but, as Swedish economist Lars Calmfors puts it, they are “half-hearted and unreliable Europeans”. Sweden joined the European Union less than a decade ago and has stayed out of the euro until now -- not by negotiating a formal opt-out, as Britain did, but by deliberately missing the Maastricht treaty’s entry criteria year after year. Still, many thought that Sweden would warm to the euro once it was in circulation. Instead, familiarity has bred contempt.More on this story here.
THE FUTURE OF U.S. ESTATE TAX LAWS
Irv Blackman has two predictions: 1.) The estate tax will not be repealed in 2003; 2.) If the Republicans do not kill the estate tax, the next time the Democrats get control in Washington, the estate tax will be reincarnated -- as it has been three times before. A better bet is that the $1 million unified credit (the first $1million of your estate escapes tax) will be raised. The exact single amount or multiple amounts is a guessing game. Larger unified credits will be phased in over a period of years. The outcome of the estate-tax-change game will be driven, as George F. Wills puts it, by “knowns, unknowns and unknown unknowns.”
For planning purposes -- the disposition of your wealth, business succession, asset protection and your family’s future -- there is a clear, straight and certain road. Steve Leimberg’s Estate Planning newsletter says it perfectly, “Our task as professionals -- regardless of the current or even future of this -- should be to make clients aware of the urgency and significance of action, even if there is no estate tax!”More on this story here.
TOTAL SURVEILLANCE EQUALS TOTAL TYRANNY
In the name of fighting terrorism a new kind of government is being implemented in Washington, D.C. We are witnessing the birth of a powerful multi-billion dollar surveillance lobby consisting of an army of special interest groups, Washington lawyers, lobbyists, and high-tech firms with wares to sell.
The personal rights of American citizens, protected until now by the Bill of Rights, are the farthest thing from their minds as they seek to fill their pockets while enabling government to monitor and control our lives to a degree unheard of prior to September 11, 2001. This army seeks riches as it pushes for laws and regulations to spy on and control the lives of law-abiding Americans.
The Government Electronics and Information Technology Association (GEIA) reports that there are more than 100 federal entities involved in forging the largest conglomeration of government-private contractor interests since the creation of the Pentagon. GEIA represents hundreds of corporate members seeking to cash in on the Homeland Security citizen-surveillance-spending spree. A key objective of the association is to win a piece of the action for the creation of national ID cards for travelers.
For those of you who feel the government is just doing its job to defeat terrorism, I am very sad to tell you that our government is not being honest with us. Terrorism is the excuse, not the motivation, for the massive drive toward Big Brother.More on this story here.
Home page of American Policy Center, “a grassroots, activist think tank”, here.
U.S. WANTS FOREIGN LEADERS’ LAUNDERED ASSETS
Federal officials have developed a plan to seize financial assets laundered into the United States by foreign leaders whom they suspect of public corruption, with a jailed former president of Nicaragua as the first target.
The effort reflects an aggressive new strategy to try to trace “dirty” money in the United States to its foreign roots, in part by using expanded powers granted to the government under the USA Patriot Act.More on this story here.
ART FOR INVESTMENT’S SAKE
Investors in fine art have often kidded themselves that they are making better returns -- and getting more pleasure -- from the Van Gogh on the boardroom wall than from the equities in their corporate pension fund. Up to a point this seems to be true. An index of fine-art sales tracked since 1952 shows paintings generally outperforming the S&P 500 index (see chart). But woe betide any investor forced to sell at the wrong time. Prices of fine art fluctuate even more wildly than stocks, and transaction costs can be prohibitive, with combined commissions paid at public auctions by both buyer and seller of some 25%, to say nothing of the spread between bid and offer in a private sale.
Art has not been considered a mainstream asset class because of the opacity of the market, the dearth of financial information and general illiquidity. Moreover art, unlike equities, bonds or property, produces no income. It is also at the mercy of fickle public taste. Will this ever change? Michael Moses at New York University’s Stern School of Business thinks so.
The main attraction of the art market, apart from the pleasure of having the works around, is its low correlation with other financial assets and its diversifying effect on an investment portfolio. Despite the recent collapse of many financial markets, the fine-art market has stayed buoyant over the past three years, though market volumes have fallen. This year some top art even fetched record prices. But prices for top art can fall from great heights too. Van Gogh’s “Portrait of Dr Gachet”, bought by a Japanese businessman in 1990 for $82.5 million at the height of Japan’s stockmarket (and Impressionist-buying) bubble, has since sold for one-eighth of the price.More on this story here.
ASHCROFT’S LACK OF CREDIBILITY
Attorney General John Ashcroft has launched a publicity campaign to save the USA Patriot Act, a misnamed piece of legislation if ever there was. It should be called the Anti-Bill of Rights Act. Ashcroft is out on the hustings because opposition to the Patriot Act, passed hurriedly in the aftermath of the Sept. 11 attack, is itself coming under attack. More than 134 local governments have passed resolutions denouncing it. The American Civil Liberties Union is challenging a portion of it in federal court.
Ashcroft is denying that the federal government has or will abuse the broad authority the bill grants. If you believe that, you are naive. Let us dispose of the first false argument: The Patriot Act is necessary to prevent another terrorist attack. In the second place, the Patriot Act will not protect America from another terrorist act.
The problem with trusting government not to abuse its power is this: Well-intentioned intellectuals might draft the legislation and issue executive orders, but when actual enforcement comes along, it is done by cops, who, as a rule, are not usually intellectuals or political philosophers or constitutional lawyers. No, just plain cops who, God bless 'em, tend toward tunnel vision and tend to see the world as easily divided into good guys and bad guys. Federal cops in particular have a bad reputation for believing unreliable and dishonest paid informants. They have destroyed many innocent lives because of it.
In Iraq, the American occupational authority is virtually a dictatorship and can do anything it wants to anybody. But has it been able to stop terrorists? No. People who ask you to trade freedom for security are con artists. They will take your freedom away, but they don’t provide you the promised security.More on this story here.
COURT IN WORLD OF JURY SERVICE
The ability of jurors to judge evidence in complicated fraud and murder cases has recently been questioned by Parliament. At the same time, reporter John Higginson was a juror on a £7-million fraud case lasting 10 weeks ...
The defendant, William Cook, aged 78, a Canadian accountant, was accused by the Crown of conspiring to defraud by offering a monthly interest of between 10 and 35% on investments in a high-yield programme during 1999 with no aim of paying it back. The fraud took place, with many people losing their life savings -- this was not contested. But Mr Cook’s defence was he was duped by fraudsters into letting one or more of them use his account to launder money.
Being a juror was one of the most important things I have ever done and we were all acutely aware of those, including our own Government, who felt we were not up to the job.More on this story here.
TWO KINDS OF GOLD STANDARDS
The British economist, John Maynard Keynes, is famous for one aphorism, “In the long run, we are all dead,” which he applied to the operations of the price system, and one phrase: “barbarous relic,” which he applied to the gold standard. He believed that the free market needed to be policed by bureaucrats to be made efficient. He also believed that the gold standard’s restriction of State power is a great evil.
Keynes’ hostility to the traditional gold standard is shared by all inflationists and statists. It places temporary limits on the government’s ability to create fiat money and thereby spend without taxing directly. I say “temporary”, because the traditional gold standard is a promise made by a government. It is made to be broken later, during an emergency that is declared by the government. It is ultimately paper gold. It is a misuse of the people’s trust.
The gold standard made possible much of the civilization of the ancient world, until gold was abandoned in the third-century by the government of Rome. Then classical civilization disappeared in the West. But in the Eastern Roman Empire (Byzantium), a reliable gold coinage lasted for over a thousand years. When the costs of maintaining Rome’s war machine and its bread and circuses at home grew too great for direct taxation to fund them, the government began to debase its coins. This debasement paralleled the decay of the Roman Empire.
Is the traditional gold standard really a relic? Yes. It becomes a relic in every empire, as surely as there was gold at the beginning of that empire. No nation honors the requirements of a State-run gold standard: the free convertibility of the State’s money into gold.
In the twentieth century, the State persuaded the masses to accept its IOU nothings. The result has been a vast expansion of state power and state debt, coupled with a vast depreciation of money’s purchasing power. This will not be reversed until the debt system overwhelms the monetary system (deflation), or the state’s official money is abandoned by the public (inflation).More on this story here.
THE REPLACEMENT FOR PATRIOT ACT II WOULD INCREASE FEDERAL POWERS
Sen. Orrin Hatch, R-Utah, reportedly plans to introduce legislation in September to further expand federal police powers. The Hatch bill, entitled the Victory Act (Vital Interdiction of Criminal Terrorist Organizations Act), is seen by some to be a substitute for the so-called Patriot Act II -- the Domestic Security Enhancement Act of 2003 -- which was leaked and caused a furor in Congress as well as among liberal and conservative civil liberties groups. A draft copy of the Victory Act has been posted on the Web (www.libertythink.com).
The draconian Patriot Act II would have empowered the federal government to conduct secret arrests, collect DNA samples from anyone suspected of terrorism and allow the government to take away an American's citizenship. Despite its comforting title, the June 27 draft of the Victory Act contains similar provisions.
The ironically named Victory Act would not be a victory for freedom loving people. It is really a wish list for those who want more federal police power.More on this story here.
SIX DEGREES OF VIRUS INFECTION
What I wanted to write is a clever little piece about the epidemiology of computer viruses, but it turned out to be too complicated. With the biological equivalent, you can make valid predictions about whether you are at risk: you traveled on a plane with someone infected with SARS, or a kid at your kid’s school has chicken pox and may have infected your kid and, since you never had it, you. But I am in all sorts of address books, as evidenced by the number of “Hi - here’s my new email address” messages I get from people I have never heard of. Unlike the physical world, I am closer, in viral terms, to people I barely know. The addresses of my closest friends, with whom I correspond frequently, usually are not in my (non-Outlook) address book, because I know them by heart. Sobig extracted email addresses from Web caches on people’s hard drives and all sorts of other obscure locations. None of the hundreds of copies I got came from anyone I know.
The rise of such techniques means that any sort of epidemiology is nearly meaningless. For the future, it is probably much more important to assume that everyone is at risk and ask what we are going to do about a situation that is escalating so far out of control. It is morbidly funny: people used to talk about convergence as this great thing coming towards us, and they meant broadcasting, computers, and telecommunications. In fact the convergence we are getting is spam and viruses. The problem is that all the choices on offer to combat this marriage are bad.More on this story here.
BIG CEO RAISES TIED TO LARGEST LAYOFFS
Chief executives of companies that had the largest layoffs and most underfunded pensions and that moved operations offshore to avoid U.S. taxes were rewarded with the biggest pay hikes in 2002, on average, a new report has found. While the median CEO pay increase was 6% in 2002, median pay rocketed 44% for chiefs of the 50 companies that announced the biggest layoffs in 2001, according to the report. The study, released Monday by United for a Fair Economy in Boston and the Institute for Policy Studies in Washington, used methodology that some companies criticized as misleading. Still, the report may add to the furor over executive pay.
Carol Bowie, director of governance research at the Investor Responsibility Research Center in Washington, said the study “demonstrates the flaws in how some incentive pay plans are constructed.” Many plans “are fairly short-term in nature and all of these things -- layoffs, underfunded pensions and going offshore to avoid taxes -- can pump up short-term results,” Bowie said.More on this story here.
DIAMONDS ARE A RUSSIAN’S BEST FRIEND
“A kiss on the hand may be quite Continental, but diamonds are a Russian’s best friend”, Marilyn Monroe might have sung if she were around today. For jewelry stores are springing up all over Moscow as the country’s new rich try to outsparkle each other. At least, that is the official version. For, as every billionaire knows, diamonds are also a useful way of moving money around the world without the authorities noticing, especially given the current paranoia about “money laundering”. As the old saying goes, “Have you ever tried to swallow $10,000?”
Not even the terrorist attacks of September 11, which hit the luxury goods market, have managed to put a real damper on the diamond trade. In spite of the Sars outbreak and the war in Iraq, the world’s biggest producer of rough diamonds, De Beers, recently sparkled with a 34% rise in first-half profits to $414 million while its sales and marketing arm sold $2.9 billion worth of gems, a 2.75% rise.More on this story here.
COSTS OF THE SURVEILLANCE STATE
The implementation of public video surveillance is a direct result of the inefficiencies of state law enforcement. As a result, instead of loosening regulations and allowing individuals to purchase protection for themselves from private agencies, the state is attempting to account for its own incompetence. Of the many absurd features of the adoption of public video surveillance, there are three notable injustices that will arise.
First, how will government decide where the cameras will be placed? Obviously the purpose of the tactic is to aid the ineffectual law enforcement in high crime areas, but whose property will be in the eye of the lens? Clearly, this is just another instance of subsidization, some benefit at the expense of others.
Secondly, which of the state’s personnel will view the footage and judge how such footage can be used? Further, who is to determine the legitimacy or conclusiveness of evidence caught on tape? Could someone smoking a cigarette be accused of smoking dope, or could someone sipping a milkshake in their car be accused of drinking and driving?
Finally, who or what will set limits on the usage of the cameras? When will usage go too far? What ludicrous, illegitimate new laws condemning victimless crimes will be passed for individuals to uphold once personal activities on private property have been publicized? These chief issues surrounding the implementation of public surveillance merely scratch the surface into what such measures would certainly bring about.
Although it is difficult for many to admit, public law enforcement is characterized by the same traits that are exhibited in all government provided goods and services.More on this story here.
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