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(Especially noteworthy articles’ headings highlighted in gold.)
THE IRS VS. THE BILL OF RIGHTS
To get an idea of what it is like to tangle with the IRS, imagine having to fight Mike Tyson -- with both hands tied behind your back. The IRS is the most feared government agency, and with good reason. Americans who run afoul of this bureaucratic behemoth have little chance of surviving unscathed.
In large part, this is because the rules are rigged against taxpayers. We have to provide information to the IRS, even though the Bill of Rights supposedly protects us from self-incrimination. We are guilty until we prove ourselves innocent, even though our Constitution -- at least in theory -- guarantees the presumption of innocence. And heaven forbid you scribble a little message in the margins of your tax return: The IRS has the power to fine you for exercising your right to free speech.
Yet even with the playing field tilted in its favor, the IRS wants more power. Because some taxpayers have had the unmitigated gall to challenge this Darth Vader-like bureaucracy, the IRS is targeting lawyer-client confidentiality. More specifically, the agency has filed summonses against a number of law firms, accounting firms and other professional tax advisers demanding that they reveal confidential information about their clients. Why? Because the IRS suspects their clients are seeking to exploit “loopholes” in order to lower their tax bills. And even though tax avoidance is not against the law, IRS officials want to use these firms as deputy tax collectors.More on this story here.
UNDERSTANDING THE USES OF WILLS, LIVING TRUSTS, BYPASS TRUSTS
Q: Which is better, a living trust or a bypass trust? I own my home and a few stock investments.
A: I think what you are really asking is whether a living trust or a will is better. But before I answer that, it is important to note the differences between living and bypass trusts. A living trust is a revocable trust created while a person is alive. It is simply an ownership arrangement where property is held in the name of a trustee rather than in the name of the person who really owns the property.
A bypass trust is typically an irrevocable trust created when a married person dies, and it can be created by a living trust or by a will. It is not “better” or worse than a living trust because the two are very different from each other.
If you want your heirs to avoid probate, a living trust is the way to go. If you are disabled or elderly, you can benefit from a living trust now because you can name a person or trust company to manage your financial affairs. If you are wealthy and want privacy, a living trust can avoid public disclosure of your property. Placing the out-of-state property located in a living trust can avoid an expensive probate proceeding in another state. A living trust may make it harder for the unhappy heir to win a lawsuit contesting the estate dispersion’s terms.More on this story here.
CATO INSTITUTE: MORE SURVEILLANCE EQUALS LESS LIBERTY
Now that two years have passed since the trauma of the September 11 catastrophe, it is a good time to take a step back from the politics of the moment and take stock as to how our policymakers have responded to the threat posed by terrorism. Sending American soldiers to Afghanistan was a decisive move by President Bush -- because it was going right to the root of the problem, which is Osama bin Laden, his elite henchmen and his training camps.
The war on the home front also has been aggressive but in many ways misguided. The assumption has been that there was simply too much liberty and privacy in America -- and that federal law-enforcement agencies did not have enough power. To remedy that perceived problem, policymakers rushed the USA Patriot Act into law. The Patriot Act was designed to reduce privacy and increase security. It has succeeded in at least reducing privacy.
Financial privacy is essentially gone. The feds have turned banks, brokerage houses, insurers and other financial institutions into state informers. Those firms must notify the Treasury Department about “suspicious” transactions, and the government can subpoena your checking-account records even if there is no evidence of wrongdoing. Even though the feds were notified about several of hijacker Mohammed Atta’s financial transactions before September 11, no action was taken. But in the logic of the public sector, that failure means the government was hobbled by insufficient money and insufficient power. Thus, the Treasury Department is now engaging in more surveillance.More on this story here.
HOW GOVERNMENTS MANIPULATE THE GOLD MARKET -- A PRIMER
After gold trading closed in New York on October 3 $13.70 lower from the previous day, a Reuters article gave the following reason for gold’s rout: “Gold tumbled 3.5 percent in New York on Friday as the first rise in U.S. payrolls in eight months lifted anxiety about economic growth and undermined the safe-haven case for bullion days after it had hit seven-year highs.”
Their point of view sounds plausible I suppose, though I think the recent seven-year highs in gold are far more telling about gold’s prospects than any one month’s economic data. But regardless of whether Reuters conclusion makes economic sense or not, the payrolls data was released at 8.30 a.m., and gold’s sell-off did not start until 12.10 p.m. Therefore, did we see a delayed knee-jerk reaction to the data? Or was some other factor at work?
In my view, it was clearly the latter. It is now becoming a well-known “secret” that governments are trying to manage the gold price by actively intervening in the gold market, and last Friday’s trading was a good example of their fiddling with the free-market process. Here are some pointers for everyone interested in learning how governments intervene in the gold market.More on this story here.
THE MYTH OF INSUFFICIENT GOLD
One of the standard arguments against a gold standard is this: “There’s not enough gold to facilitate all of the transactions in a free market economy.” This is an old criticism. It was a lot more popular before the desktop computer industry started cutting prices every year, while increasing product quality. These days, people expect falling prices in desktop computers. What if they expected price cuts in all other industries?
If you have ever wondered what would happen if a relatively fixed supply of above-ground gold were the primary medium of exchange, this essay may help clarify things.
Most people have no conception of what you are about to read. They are not interested. They do not know that their futures will depend heavily on the answers to these questions that will be adopted by the Federal Reserve System’s policy-makers. They think, “I cannot be bothered with monetary theory.” Therein lies your investment opportunity.More on this story here.
EXPECT TERRORIST ATTACKS ON GLOBAL FINANCIAL SYSTEM SAYS CONFERENCE SPEAKER
FREDERICTON, NEW BRUNSWICK: A successful terrorist attack on America’s financial infrastructure could bring the US and global economies to a standstill, and the real surprise is that it has not been attempted yet. “We’ve gone after al-Qaeda’s finances, and it would strike me that in a sense, we can expect retaliation in kind,” Dr. Phil Williams said during his keynote address at the annual conference of the Centre for Conflict Studies at the University of New Brunswick in Atlantic Canada.
Williams says the attack, when and if it comes, would likely focus on what he calls key nodes in the US financial infrastructure: Fedwire and Fednet. Fedwire is the financial funds transfer system that exchanges money among US banks, while Fednet is the electronic network that handles the transactions. The system has one primary installation and three backups.
“You can find out on the Internet where the backups are. If those could be taken out by a mix of cyber and physical activities, the US economy would basically come to a halt,” Williams said. If the takedown were to include the international funds transfer networks CHIPS and SWIFT then the entire global economy could be thrown into chaos.More on this story here.
AMERICANS’ FINANCIAL PRIVACY AND PROPERTY RIGHTS PLACED AT RISK BY PATRIOT ACT
The Justice Department recently revealed that the Patriot Act is being routinely used to prosecute a wide array of non-terrorist offenses. While many Americans assumed that the Patriot Act only concerned terrorists, the reality is that the act poses a grave threat to (all) Americans’ financial privacy and property rights.
The Patriot Act makes it far easier for the feds to vacuum up Americans’ financial records without a warrant. Banks are now required to gather far more information on their clients -- their background, their sources of income, their financial behavior, etc. Money Laundering Alert, a pro-government newsletter, described one financial provision of the Patriot Act as a “dream-come-true information gathering tool for U.S. agencies,” extending a “welcome mat to the CIA, National Security Agency and other U.S. counterparts” to look at the new financial information on American citizens and others.
The Justice Department is exploiting powers gained via the Patriot Act to confiscate millions of dollars from foreign banks operating in the United States in cases with no terrorist connections or allegations. The Justice Department used the Patriot Act to confiscate the bank accounts of Canadian telemarketers accused of fraud.
The Patriot Act creates other new pretexts to seize private property. In 1998, the Supreme Court ruled that the Customs Service’s routine confiscation of money from international travelers who failed to declare their cash to the government “violates the Excessive Fines Clause [of the Eighth Amendment of the Bill of Rights] if it is grossly disproportional to the gravity of a defendant’s offense.” The Patriot Act effectively overturned the Supreme Court decision by creating a new crime of “bulk cash smuggling.”More on this story here.
NEW GLAMOUR FOR GOLD
Gold, the ultimate old-economy asset, is close to its highest price since 1996 and is capturing broader interest than it has for most of the last 20 years. That leaves two major questions for people who are thinking of investing in gold: how to do it, and whether to do it at all after the recent run.
Many financial planners encourage owning gold even when they expect and hope that it will lose value. It is the just-in-case component of a portfolio: a hedge against war, inflation, deflation or some other social, political or economic upheaval. To them, the question is how much to own. With the price of oil rising, the Middle East in turmoil and other global trouble spots threatening to erupt, there is no dearth of prospective events to hedge against.
“It depends on the specific investor, what assets they own and their financial goals,” said Robert Cox, a commodity adviser at Citigroup Private Bank in New York. “What percentage of gold is appropriate is particular to an individual -- normally 2 percent to 3 percent of one’s assets -- but I believe some investors like to have more in a volatile economic environment. Certain people feel safer holding more physical assets.”
Fund managers who specialize in precious metals naturally advise holding gold and its close relatives in more wholesale quantities. Charles de Vaulx, a manager of several portfolios, including a gold fund, for First Eagle Funds in New York, says the firm’s mainstream funds typically have 5 to 7 percent of their assets in gold, or in mining shares or other proxies for gold. That would have amounted to dead money for most of the 1980’s and 90’s, when gold lost as much as 70% of its value. But Mr. de Vaulx, whose investment style is to buy out-of-favor assets, said, “When we see the way Alan Greenspan tries to keep the bubble going, and considering that stocks around the world are not that cheap, even after a three-year bear market, it’s a good, cautious policy on our part.”More on this story here.
SNOOP SOFTWARE GAINS POWER AND RAISES PRIVACY CONCERNS
Rick Eaton is the founder of TrueActive, which makes a computer program that buyers can install on a target computer and monitor everything that the machine’s user does on the PC. Spying with software has been around for several years but Mr. Eaton decided that one new feature in his program crossed a line between monitoring and snooping. That feature is called “silent deploy”, which allows the buyer to place the program on someone else’s computer secretly via e-mail, without having physical access to the machine. To Mr. Eaton, that constituted an invitation to install unethical and even illegal wiretaps. He made the change, he said, “so we could live with ourselves.”
Such principles seem almost quaint in a market where the products seem to grow more powerful and intrusive all the time. Other makers of “snoopware” -- as opposed to the software known as “spyware” that many businesses use to monitor the activities of Web site visitors and to send them pop-up ads -- enthusiastically pitch their products’ ability to be installed remotely. They typically skirt the ethical and legal issues with fig-leaf disclaimers and check-off boxes where buyers promise not to violate the law.
Privacy experts are not buying such arguments. Marc Rotenberg, who heads the Electronic Privacy Information Center in Washington, contended that selling software that can tap people’s communications without their knowledge violated the Electronic Communications Privacy Act. “I don’t think there’s any question that they are violating the federal law,” he said. The disclaimers, he said, “fail the straight-face test.”
There are more than a dozen snooping programs on the market, and their makers say they are used legally by employers to monitor workers’ Internet use, by parents to follow their children’s online wanderings, and by husbands and wives to catch cheating mates. The programs include “key loggers” that capture keystrokes, and can record what is onscreen, even turn on a computer’s Webcam -- and get the information and images back via the Internet.
And so a new market has emerged: criminals are using such programs on public computer terminals at copy shops and libraries to harvest credit card numbers, computer passwords and personal financial information. A New York man, Juju Jiang, recently pleaded guilty to planting monitoring software on computers at branches of Kinko’s.More on this story here.
Brokerage teen hacker charged.
The Securities and Exchange Commission last week began civil and criminal proceedings against a teenager who allegedly broke into someone else’s brokerage account to dump his falling stock options. Van Dinh, 19, of Phoenixville, Pennsylvania, is accused of disguising a key logger program (called The Beast) as a new stock-charting tool, which he promoted in chatroom for investors. The program enabled him to monitor the computer activity of anyone who ran the malware. Using this trick, Dinh allegedly obtained the login and password of a TD Waterhouse broker and placed orders for 7,200 soon-to-be worthless Cisco stock option contracts.
According to the SEC’s civil complaint, Dinh avoided a potential $37,000 loss on the Cisco options using the ruse. The investor (whose home PC was compromised) contacted the authorities when he found his account had been cleaned out to pay for worthless stock options. Dinh, despite using a variety of tricks in an attempt to cover his tracks, was located within a few days.More on this story here.
COMING CURRENCY DEVALUATION?
Cliff Droke says it is coming
After repeated warnings from currency analysts and market advisors (including the author) that the U.S. currency system is on the verge of becoming a blocked, two-tier system we now have confirmation that the country is one step closer to realizing this. When fully implemented, the new U.S. dollar will mean a “banana republic” type currency and across-the-board devaluation.More on this story here.
Cliff Droke rebutted
The last time the government changed its currency’s look -- the significant change being Franklin and the presidents getting larger heads -- the government spent something like $35 million to let the public know the new bills were for real. When you enjoy the privilege of printing the world’s reserve currency, which is redeemable in nothing, it is very important that you keep the public informed as to the latest design on your bills!
Half of Droke’s article quotes Lawrence Patterson, who, according to Droke, “authored the 1994 monograph titled Currency Recall, which accurately forecast the new multicolored notes.” Droke failed to mention that the recall, which Patterson wrote about nearly ten years ago, has yet confirm his forecast.
If Americans are “stuck” with the new currency, then foreigners are stuck with using the old greenbacks. Interestingly, the old bills will no longer be printed, which means that the supply of greenbacks cannot grow around the world. The primary benefit of being able to print the world’s fiat reserve currency is that foreigners really are stuck with it. Is the US about to give up the lofty privilege of buying the world’s goods with cheaply printed paper? Not hardly.
Supposedly, Patterson sees the value of the new dollar being cut as much as 50%, when convertibility to the old greenbacks is suspended. While I agree that the dollar will probably suffer horribly over the next few years, the loss will more likely come from the Fed’s excessive printing and our fedgov’s reckless spending. Everyone holding dollars, Americans and foreigners, will share the loss.
This article is dangerous not only because it is inaccurate, but it scares the hell of most readers. When the last big changes in our paper money were made, the same apocalyptic warnings rapidly spread through the precious metals industry--and without the benefit of the Internet. But, we still have a “one-tier” money system, and it will remain that way for a long time. Our fedgov will do nothing deliberately to cause the world to lose faith in the dollar. You can count on it.
Finally, the really bad thing about Droke’s article is that telemarketers will use it to convince their victims to buy overpriced numismatics and collectibles. Telemarketers will use Droke’s article to burn more victims.Full rebuttal here. (Scroll down to “Commentary”. The commentary is dated October 10, 2003.)
It’s here! The New Color of Money. Safer. Smarter. More secure!
The New Color of Money Web site is your source for information about the U.S. government’s latest redesigns to (ed: Did they mean to say “designs on”?) your currency.Site here.
RUSSIA TO PRICE OIL IN EUROS IN SNUB TO US
Russia is to start pricing its huge oil and gas exports in euros instead of dollars as part of a stragetic shift to forge closer ties with the European Union. The Russian central bank has been amassing euros since early 2002, increasing the euro share of its $65 billion foreign reserves from 10% to more than 25%, according to the finance ministry. The move has set off a chain reaction in the private sector, leading to a fourfold increase in euro deposits in Russian banks this year and sending Russian citizens scrambling to change their stashes of greenbacks into euro notes.
German officials said Chancellor Gerhard Schroder secured agreement for the change-over on oil pricing from Vladimir Putin, the prime minister, while on a trip to Russia this week. The two leaders have forged a close personal bond and are both keen to check American economic and diplomatic power.
A switch to euro invoicing would not affect the long-term price of oil but it could encourage Middle Eastern exporters to follow suit and have a powerful effect on market psychology at a time when the dollar is already under intense pressure. Russia boasts the world’s biggest natural gas reserves and is the number two oil exporter after Saudi Arabia. If the dollar were ever displaced by the euro, it would lose the enormous freedom it now enjoys in running macro-economic policy. Washington would also forfeit the privilege of exchanging dollar notes for imports, worth an estimated 0.5% of GDP.More on this story here.
WHEN THE CREDIT CHECK IS ONLY THE START
In the old days, way back when faxing seemed innovative, selecting the right tenant for a vacant apartment usually required a building owner or manager to phone the previous landlord, talk with the applicant’s employer, scan letters of recommendation, closely study the standard credit report and, sometimes, simply sit across the table and look the prospect in the eye. These days, when far more than a would-be tenant’s creditworthiness and job history can immediately be scrutinized, that process seems somewhat archaic.
A handful of new national companies -- estimates range from a half dozen to two dozen -- are attempting to revolutionize tenant screening. Landlords who subscribe to these services can mouse-click into utility bill records, eviction proceedings, bankruptcy and tax lien files. They can check national criminal databases, sex offender lists, the Treasury Department’s Web site of suspected terrorists, drug traffickers and money launderers. They can even -- at least through one company -- examine previous landlords’ assessments of a tenant’s habits: noisy? destructive? litigious? drug using?
Privacy rights advocates are concerned. They worry about “mixed files”, instances where someone is denied a place to live because their name is similar to someone with a blemished record. They worry about identity theft, about who inputs the information and who has access to it. They worry about incomplete records from housing court, indicating that a case has been filed but not disclosing the outcome, or even that it was the tenant who sued the landlord -- where even if the tenant prevails in a suit that information becomes a part of the screening services and the tenant ends up blacklisted.More on this story here.
MONEY LAUNDERING BUCK STOPS IN US
Since the incidents of September 11, 2001, the US has launched a special drive to ferret out the sources funding for terrorism. Yet, its actual policies work to the contrary. It is, in fact, the single most important money laundering destination in the world.
There are two important types of money laundering. One concerns money which derives from business internationally accepted as being criminal -- such as narcotics or terrorism. The other concerns funds from activities, such as tax evasion, recognised as criminal only in a particular country. Yet money concealed in the business of narcotics or terrorism is laundered in much the same way as illegal flight capital. In their movement and concealment, the funds of such international crime are generally indistinguishable from capital flight.
Since the business of private banks and tax havens is managing flight capital, it is simplest to conceal money from drugs and gun-running in the same places. So, to really curb any particular sort of money laundering, it is necessary to act against all of it. But the US maintains the contradictory policy of seeming to campaign against money laundering involved in international crime while encouraging the other. As the result of the close connection between these two businesses, America loses the power effectively to act against any corrupt or criminal business, including the proceeds of international crime.More on this story here.
SHINING A LIGHT ON THE “SECRET LAW” OF THE IRS
The most subversive minds in global taxation work out of a squat, austerely appointed office building in Arlington, Virginia. Their ranks include the sober-suited, the leather-clad, and the body-pierced. Their mission is to serve as the eyes and ears of tax lawyers everywhere, exposing to public view the “secret law” of the Internal Revenue Service. They are the men and women of Tax Analysts -- self-described “tax geeks” and self-appointed watchdogs over the IRS.
Over the past 30 years, Tax Analysts, a not-for-profit publisher of bulletins and journals, has forced or is challenging the IRS to own up to the following: 1) That the agency compiled a web of internal memorandums and nonpublic rulings that gave its officers an edge when auditing taxpayers, 2) That it is considering sharing taxpayer information with other agencies in an effort to combat terrorism and corporate malfeasance, and 3) That it should disclose details of a private agreement allowing the Rev. Pat Robertson’s Christian Broadcasting Network to retain its tax-exempt status, even after it helped finance Robertson’s 1988 presidential campaign.
In a city riven by partisan bickering, Tax Analysts’s publications are regarded by tax lawyers, regulators, and congressional staff as the epitome of hard-nosed impartiality. While trade publications often criticize government agencies, few are prepared to mount the kind of prolonged legal struggle Tax Analysts has waged to pry information from the IRS.More on this story here.
New I.R.S. chief plans to focus on enforcement, vs. “customer service”.
Those businesses and wealthy individuals who for years have gotten away with cheating on their taxes will no longer slip past the IRS, the new commissioner, Mark W. Everson, said in his first interview since taking office in May. “Clearly in an effort to do better on the customer service side we poached from law enforcement,” he said. “Now there needs to be a re-centering of the agency.”
As he spoke, IRS agents in Chicago were serving a summons on a major law firm, Sidley Austin Brown & Wood, for the names of its tax-shelter clients. The firm said it was cooperating with the IRS and hinted that it no longer recommended tax shelters, saying it would advise “our former clients” of the summons so they “will have the opportunity to seek relief from the court.”More on this story here.
WILL THAT BE (MICRO)CHIPS WITH EVERYTHING?
A couple of months ago, I mentioned RFID chips, and their potential for becoming something of a nightmare for those wishing to preserve their privacy (see RFID: Receiving You Loud and Clear). The emerging World Police State seems to be jumping into this technology with both feet. The EU is proposing a satellite road tolling system using Galileo, the European Space Agency’s satellite-based global navigation system, comparable to the GPS and the GLONASS systems run from the United States. Galileo is set to be fully operational in 2008, although initial launches are scheduled to begin as soon as next year. The primary use of the EU’s £4 billion Galileo satellite will be to track trucks and cars and bill their owners for road usage.
The UK, according to a document released by its very own totalitarian government, expect to have personalized microchips on every vehicle by the year 2007, which is not all that far away. Those who like to believe that Mr. Blair’s Cool Britannia is not totalitarian should answer for themselves the questions posed on the UK Liberty website such as: Why do nearly 1000 different public authorities have the power to keep you under covert surveillance, without proper scrutiny? Why does the Government want to share more of your personal data between thousands of bureaucrats, without your knowledge or consent? Why should your local council be able to read your telephone or e-mail records? Why do we have more CCTV cameras than almost anyone in the world -- and yet no adequate law to regulate and make sure it is not misused?
Returning to the chip, each one would contain the registered owners’ name and address, MOT (Ministry of Transport’s roadworthiness certificate) status, details of insurance, registration number, make of vehicle and colour, tax status, and MUCH, MUCH, More!, as advertisers might phrase it. Roadside scanners would be used to monitor passing vehicles and enable the police to collect unprecedented amounts of information about everyone’s movements. This computer bank will be linked ultimately with the EU which has a plan to track all vehicles within the EU all the time.More on this story here.
BREAKING UP WITH BILL
Microsoft is not a monopoly. The fact that it does a very good job of hooking the technologically clueless makes it an astute competitor, not an antitrust violator. It is, nevertheless, an evil empire, and moreover, one that is antithetical to human freedom. Whereas Microsoft once represented freedom of choice, it now does everything in its power to reduce one’s freedom to choose. It does not give one the ability to choose to update one’s software or not -- you can update now or you can update later, but you VILL UPDATE, HEIN! Security holes and bugs abound, but Microsoft whispers soothing lies and insists that there is nothing to worry about, drop $50 on Norton Anti-Virus and everything will be fine.
Even more disturbing are the routine violations of privacy that Microsoft abets and sometimes demands. Microsoft is paving the easy path, promising more ease-of-use, a calmer, happier computing experience, and all that you need to do in return is turn off your brain, hand over every detail of who you are, what you do and with whom you do it, then slide down the user-friendly interface to Hell.
One week ago, after wrestling with a nasty virus that took down my entire ISP, I had had enough. It was the first virus I had ever encountered despite never using anti-virus software, and it was the last straw as well. It was not just the virus, or the thrice-weekly crashes, or the forced upgrades or even the massive, bloated resource hog that Microsoft Office has become. It was the realization that Microsoft is building the Great Eye That Never Sleeps, which, in combination with your government identification number, will be used to track you, verify you and determine if you are a properly obedient little wage-serf. As Chuck D says, I rebel with a raised fist. And, I might add, a solitary finger.More on this story here.
TURKS & CAICOS: DON’T HURRY, BE HAPPY
I have been on Grand Turk Island just two days and already know about a dozen people and several dogs by name. I have met the Turks and Caicos Islands governor, appointed by Her Majesty Queen Elizabeth II, while eating at an outdoor burger joint. I have heard lots of local gossip about total strangers, including one I later happen to meet, and feel a little embarrassed to know what I know.
I knew Turks and Caicos was going to be a friendly, laid- back place the minute I set eyes on it. Uptight people, after all, do not paint their Supreme Court building pink. Maybe we citizens of the United States could all be a little less intense about the controversial issues of the day if we painted our highest court a whimsical pastel color. Make the justices wear polo shirts and straw hats.
And to think that this is the capital of a group of nearly 40 islands and keys just 575 miles off the U.S. coast -- a mere 80-minute plane ride from Miami. It is a miracle -- and some say a tribute to the benevolent incompetence of elected officials -- that these coral-rich islands are not covered with high-rise hotels and time-shares.More on this story here.
RON PAUL OPPOSES $87 BILLION REQUEST FOR OCCUPATION AND REBUILDING OF IRAQ
“Mr. Speaker: I rise in opposition to this request for nearly $87 billion to continue the occupation and rebuilding of Iraq and Afghanistan. This is money we do not have being shipped away on a foreign welfare program. The burden on our already weakened economy could well be crippling.
“Those who argue that we must vote for this appropriation because ‘we must succeed’ in Iraq are misguided. Those who say this have yet to define what it means -- in concrete terms -- to have ‘success’ in Iraq. What is success in Iraq? How will we achieve success in Iraq? How will we know when we have succeeded in Iraq? About how long will ‘success’ take to achieve and about how much will it cost? These are reasonable questions to have when we are asked to spend billions of taxpayers’ dollars, but thus far we have heard little more than nice-sounding platitudes.
“We have established a troubling precedent that no matter how ill-conceived an intervention, we must continue to become more deeply involved because “we must succeed.” That is one reason we see unrelated funding in this supplemental for places like Liberia and Sudan...
“While we expend American blood and treasure occupying a country that was not involved in the attack on the US, those who were responsible for the attack most likely are hiding out in Pakistan -- a military dictatorship we are now allied with and to which this supplemental sends some $200 million in loan guarantees...”Complete speech here.
THE MARKET CRASH OF ‘87 -- RARE BUT HARDLY UNIQUE
Sixteen years ago today, the Dow Jones industrial average fell 22.6%, its worst one-day percentage decline since its creation in 1896. Many investors are now inclined to dismiss the drop as an aberration. But new research has found that one-day price swings as big as the one in 1987 are not extraordinary. While they are rare, their average frequency over long periods is predictable.
The frequency of huge daily gains and losses in the stock market has presented a perennial challenge to historians because these big moves are more frequent than would be expected if the market adhered to what is known as a normal, or Gaussian, distribution. In such a statistical pattern, sometimes also referred to as a bell curve, outliers -- percentage changes that deviate significantly from the average -- are extremely rare. For several years some researchers have suspected that the markets follow another pattern -- a power law distribution, which predicts more outliers than a normal distribution. Power law distributions are widely recognized outside the investment arena. Earthquakes follow them, for example.
In their study, the researchers not only confirm that the stock market adheres to a power law distribution but also derive a formula that predicts how often a particular percentage change is likely to occur. They have tested the formula in global stock and currency markets of varying sizes. Their findings imply that crashes are an inherent feature of markets and that investors are fooling themselves if they believe that another crash of 1987’s magnitude will never occur.More on this story here.
THEIRS FOR THE TAKING: SENSITIVE CREDIT DATA
Sensitive personal financial information belonging to Massachusetts Governor Mitt Romney recently ended up on sale online for $125, exposing the inner workings of a credit reporting network that operates largely on an honor system and is rarely policed. As part of a story on the vulnerability of personal financial data, The Boston Globe purchased Romney’s TransUnion credit report -- listing his credit card accounts, credit card numbers, credit limits, and payment history -- from a Colorado company calling itself Goldshield Inc.
It was not hard to do. On its website, Goldshield asked: “What are you looking for?” On sale were Social Security numbers ($30), unlisted telephone numbers ($85), telephone billing information ($95), vehicle information ($65), credit reports ($125), and credit card billing statements ($125). Everything a thief would need to steal an identity. All the information was sold with no questions asked. John Strange, who identified himself as the president of Goldshield, said he could obtain a person’s credit report or a credit card billing statement without anyone knowing about it.
Mary Culnan, a professor of management at Bentley College in Waltham, Massachusetts who specializes in privacy issues, said the Goldshield incident illustrates the pass-the-buck mentality of the credit reporting industry. She said the industry is dominated by three national credit bureaus -- TransUnion, Equifax, and Experian -- but has a soft underbelly of resellers. When one link in the credit reporting distribution chain fails to fulfill its responsibilities, critics say, the entire system collapses.More on this story here.
CATO’S LETTERS ON LIBERTY AND PROPERTY
On November 5, 1720, the first letter from Cato (pseudonym for John Trenchard and Thomas Gordon, honoring Cato the Younger, whose dedication to principles of liberty led him to oppose Julius Caesar) appeared in the London Journal. Many more followed, reflecting the ideas of John Locke, soon making it England’s most influential newspaper, and leading to collections of Cato’s Letters that were, according to Clinton Rossiter “the most popular, quotable, esteemed source of political ideas in the colonial period.”
As one of the letters said, “it is and has been the great design of this paper to maintain and expose the glorious principles of liberty, and to expose the arts of those who would darken or destroy them...” That theme was what made it so important to our heritage as Americans.
According to Ronald Hamowy, “From its first publication in the 1720s through the revolutionary era that ended the century, its impact on both sides of the Atlantic was enormous. Its arguments against oppressive government and in support of the splendors of freedom were quoted constantly and its authors were regarded as the country’s most eloquent opponents of despotism...[and] frequently served as the basis of the American response to the whole range of depradations under which the colonies suffered.” It is worth revisiting Cato’s Letters’ devotion to liberty, its central theme, which so powerfully influenced our founding as a nation.More on this story here.
TRIUMPH OF THE PYGMY STATE DELAWARE
What would Martians make of Delaware? The corporate laws of this tiny state, home to just one third of one per cent of Americans, govern more than half of all publicly owned companies in America. Its expert judges, handpicked by the state’s governor, give the nation’s most important and closely watched rulings on corporate policy. Incorporating business in the state, moreover, is a franchise which Delaware has dominated for nearly a century.
America’s recent corporate scandals have wreaked havoc with other institutions empowered to regulate the nation’s errant businessmen: the Securities and Exchange Commission (SEC) lost a chairman, as did the New York Stock Exchange -- and both have lost plenty of prestige. Yet Delaware has escaped, once again, untouched. Even as Americans choke with disgust at monstrous executive pay, corporate looting and spineless boards, no one in power suggests that supposedly business-friendly Delaware should be stripped of its authority. This particular pygmy, it seems, plays a very fine game indeed.
As it must. More than one-quarter of state revenues come from its corporate franchise tax -- about $3,000 a year for every household. Revenues from shareholder litigation and all those rich resident lawyers concentrate minds further. The legislature, Delaware’s powerful state bar association and its judiciary are all hypersensitive to anything that might damage the state’s attractiveness to companies. One explanation for Delaware’s success is that its power is, in reality, something of an illusion; that America’s federal authorities, either directly or by threatening action, in effect set policy; and that Delaware has learned to toe the line.More on this story here.
OPEC 30 YEARS LATER: STILL HOLDING CUSTOMERS OVER A BARREL
On October 17th 1973, Saudi Arabia and several of its oil-rich neighbours voted to cut off oil supplies to America. Two days later, Libya said it would also cut supplies to America and raise the price of oil to other countries from $4.90 a barrel to $8.25 a barrel. Arab frustration at Israel’s military victory that month came to a peak on October 21st when Dubai, Qatar, Bahrain and Kuwait cut off supplies too. OPEC, founded in Iraq in 1960 to promote the interests of producer nations, had finally found its muscle.
The Arab embargo has become a symbol of the political chaos and economic troubles endured by the West during the oil shocks of the 1970s. A casual observer of the energy business today might find little changed from that tumultuous autumn of 30 years ago. Once again there is talk of scarcity and crisis. The Middle East is again on the brink of chaos, not only because of Arab countries’resentment over America’s support for Israel, but also because of its military occupation of Iraq. And, after years of weakness in the 1990s, OPEC has sprung back to life. Although oil prices have remained around $30 a barrel for some time, and western economies are anaemic at best, the cartel shocked the market last month by voting to cut its output even further.
If so many things remain unchanged, is the power of OPEC to bring western economies to their knees one of them? The answer to that is complicated: OPEC’s power was enhanced by stupid policies pursued by western governments, then reduced by wiser policies of energy conservation, and now is making an alarming comeback.More on this story here.
THE FEDERALIST HAS THEIR SAY ON THE PATRIOT ACT
Conservative e-journal The Federalist recently released a position paper on the USA PATRIOT Act. Agree or disagree with their premises and reasoning, it is worth reading. It concludes:
Clearly, as is any case of federal expansion, the threat to liberty is an inherent problem. Furthermore, even if the Patriot Act is not abused by its inceptors in the present administration, could the Act be abused by subsequent governments? This is no small question, and points to the central danger posed by this legislation: A broad interpretation of the Patriot Act could, in some instances, exceed the law’s mandate to combat terrorism. If it is to continue to exist as a useful, constitutional tool of law enforcement and national security, the Patriot Act must constantly be subjected to meaningful scrutiny and refined in ways that maximize its effectiveness while minimizing its potential for abuse. That said, the 2001 USA Patriot Act is a bold and timely piece of legislation, in keeping with the constitutional values of our nation’s history, and essential to our nation’s future. It is hoped that the proposed 2003 national security legislation will follow in this same vein, and further refine existing law to combat the war on terror while preserving the liberty for which we fight.More on this story here.
THE NEW DIAMOND AGE
Put pure carbon under enough heat and pressure -- say, 2,200 degrees Fahrenheit and 50,000 atmospheres -- and it will crystallize into the hardest material known. Those were the conditions that first forged diamonds deep in Earth’s mantle 3.3 billion years ago. Replicating that environment in a lab is not easy, but that has not kept dreamers from trying. Since the mid-19th century, dozens of these modern alchemists have been injured in accidents and explosions while attempting to manufacture diamonds.
Recent decades have seen some modest successes. Starting in the 1950s, engineers managed to produce tiny crystals for industrial purposes -- to coat saws, drill bits, and grinding wheels. But this summer, the first wave of gem-quality manufactured diamonds began to hit the market. They are grown in a warehouse in Florida by a roomful of Russian-designed machines spitting out 3-carat roughs 24 hours a day, seven days a week. A second company, in Boston, has perfected a completely different process for making near-flawless diamonds and plans to begin marketing them by year’s end. This sudden arrival of mass-produced gems threatens to alter the public’s perception of diamonds -- and to transform the $7 billion industry. More intriguing, it opens the door to the development of diamond-based semiconductors.More on this story here.
EDITOR OF PRIVACILLA.ORG TALKS ABOUT THE BANK SECRECY ACT
Privacy is a subjective condition that individuals enjoy when two factors are in place -- legal ability to control personal information, and exercise of that control consistent with one’s interests and values. Most importantly, privacy is a subjective condition. It is personal. That means that my sense of privacy is my own, and yours is yours.
The Bank Secrecy Act is implicated by that first factor: power to control information. By requiring banks to retain certain records about customers, the BSA denies consumers the power to control personal information that their financial institutions may hold or derive. The BSA prevents banks from offering consumers privacy on the terms they may want it. And the BSA’s reporting requirements take things quite a bit further. Here, personal information is transferred to a government agency, which is not bound by contract or accountable to any higher authority if it makes new, unanticipated disclosures or uses of data.
There are a variety of ways that governments deprive citizens of privacy, and the Bank Secrecy Act has elements of each. First, it is anti-privacy law. It says to consumers and financial institutions, “You may not get together and agree to keep financial arrangements private.” Second, it is a surveillance program: the government is peering in on people’s lives without their consent or participation. Finally, BSA reports go into a public record, and specifically a database. This causes the information to be uniquely persistent, transferable, copyable, and usable.More on this story here.
GARY NORTH: GOLD IS A POLITICAL METAL
When I imply that there is a war against gold, gold bugs with silver hair nod in agreement. When I say that the government is opposed to the public’s using gold coins in exchange, gold bugs understand exactly. They see that the war on gold is a war of government officials against private owners of gold. When I say that gold is a political metal, I mean more than the obvious fact that gold has political ramifications. I mean something more significant. I mean that gold has always been intertwined with politics, that gold, alone among metals until the success of the Manhattan Project added uranium to the list, has been the uniquely political metal.
Political rulers throughout recorded history have asserted a monopoly over money. They have argued that the State possesses legitimate authority over the creation and distribution of money. Because gold and silver have been widely used as money metals, the State has asserted control over the monetary uses of these two metals. This is the origin of the war against gold.More on this story here.
GOLD IS MONEY -- DEAL WITH IT!
Two paradigms are at war in the gold world. The dominant set of received beliefs, those that shape the way most of us look at gold, is the “gold as commodity” paradigm. This view, with few exceptions, is held by all the major players -- official sources, the media, analysts, the miners, and even a lot of gold bugs who ought to know better. The commodity paradigm appears consistent with actual experience over the past 30 years. It is no wonder the dissident message cannot get through. Under the governing paradigm, our allegations of official intervention make no sense. Why would central banks try to hold down the price of a mere commodity?
Enter the challenger paradigm, struggling to get a hearing. Call it “gold as money”. It is a minority position, to say the least. Such is the power of the commodity paradigm. Yet the monetary paradigm has the distinct advantage, in my view, of being true.
The commodity paradigm is false in its conception, and false in its particulars. It is false in its conception because it did not arise as the result of a “paradigm shift”, in which the monetary paradigm was displaced by a newer model better able to account for anomalies. Rather, it arose as spin designed to put lipstick on a pig, namely, the default by the United States on its obligation to redeem its currency in gold. Prior to August 15, 1971, the US Dollar was convertible, at some level, into gold. After that date it was not. The link between gold and the reserve currency was severed for the convenience of the United States. In connection with this default, the commodity paradigm was hatched as propaganda, to serve as suppressing fire for a raid on the global treasury.More on this story here.
LIBERAL HYPOCRISY ON THE UNPATRIOTIC PATRIOT ACT
Republican-haters complain about this legislation. And they would be right to do so, except for their own movement’s shortcomings in this controversy. First, many liberals grievances against the Patriot Act are, primarily, a cynical ploy to win popularity contests in the public eye. Hence the gleeful implication that all right-wingers agree with the Patriot Act.
Worse is the Democrats’ hypocrisy on the Constitution. Welfare-state liberal policies continually violated individual property rights since 1890. So it is silly for liberals to invoke the fourth amendment, as it its chief purpose was always to protect private property.
Liberals complain now, but the truth is that the administration of Bill Clinton -- the same president who claimed his own privacy was infringed upon -- planned to implement a policy of spying on book purchases in the year 2000. The only nationally-famous person who publicly denounced this was non-liberal reporter John Stossel. Leftists thanked him by launching a smear campaign against him for his other disturbingly-accurate stories. Liberal activists shriek at the Bush administration for spying on bank records and book purchases, while they were conspicuously silent when the Clinton administration asked Congress to approve these very measures.More on this story here.
WHY PURCHASE REAL ESTATE IN NICARAGUA?
Our answer, is “Why Not?” Located in the heart of Central America, Nicaragua is an exceptional country with its spectacular lakes, towering volcanoes, friendly people and legendary towns filled with cultural richness. The country beckons foreigners to come and see all it has to offer. Some foreigners have already gotten wind of the country’s potential. A recent article in USA Today states that over 5,000 Americans currently call Nicaragua their home.
At present, Nicaragua can perhaps be most seriously considered the land of opportunity of all the countries in Central America. The country is ripe for investment because it is so underdeveloped. The government, in particular the Nicaraguan Tourism Institute, is bending over backwards to lure investors with the most aggressive incentive-filled law in Latin America.
People who missed out on the best real estate buys in Belize and Costa Rica can still take advantage of great bargains in Nicaragua. In Nicaragua you can purchase your own “piece of paradise” for a fraction of the cost you might pay in the U.S., Canada or even Costa Rica.More on this story here.
WARNING: UNCLE SAM AND HOLLYWOOD WANT TO ROOT THROUGH YOUR PC
Big Brother and Big Entertainment are both trying to shut down computer privacy, but for different reasons. BB says it needs to eliminate computer privacy to fight the “War on Terror”. BE wants to end it to eliminate theft of copyrighted materials over the Internet. They are now acting in concert -- a frightening trend.
You might be thinking, “But I’m not a terrorist ... I don’t do anything illegal or suspicious on my PC ... I don’t have anything to hide.” But consider ... Have you ever looked on a search engine for word pairs such as “offshore” AND “privacy?” Have you ever visited a Web site that might be a target of a government investigation; e.g., one that explores “alternative views” of current events? Have you ever received a message or browsed to a Web site that someone -- anyone -- might believe to be indicate that you are breaking the law -- any law, such as an online pornography or gambling site?
Sun Microsystems CEO Scott McNealy spoke the truth when he announced in 2001, “You have zero privacy”. But there is no reason to accept his proposed “solution” to this truth -- to “get over it”. There is a great deal you can do, right now, to protect your PC privacy from inquisitive investigators, nosy ISPs and remote attacks by the copyright police. Here are some suggestions:More on this story here.
OPINION: HUMAN RIGHTS TO REMEMBER
How has September 11th changed America’s approach to human rights? Dangerously, suggests Harold Hongju Koh, but perhaps only temporarilyMore on this story here.
SAVING THE DOLLAR FROM DESTRUCTION
Never before in recent history have monetary and fiscal policies been as “stimulative” as today, and yet, the American economy remains weak and vulnerable. The Federal budget deficit for the 2003 fiscal year was posted at $555 billion, some six percent of GNP; it may continue to rise in coming years when new tax reductions add their weight. The Federal Reserve has opened its flood gates and reduced all interest rates to their lowest levels since the 1950s. Its basic rate now stands at just one percent, permitting the stock of money in all its forms to soar at frightening rates. Government and Federal Reserve officials are convinced that this combination of stimuli is bound to facilitate an annual growth rate of 3.75 to 4.75 percent, just like that of the late 1990s.
The fact that this opinion is widely held by many officials and economists is no evidence that it is accurate; indeed, in our age of inflation and economic manipulation, an official pronouncement is more likely to be political than sensible. With the gates wide open, the rush of liquidity is bound to inflict serious harm not only on the American economy but also on global conditions. The Fed’s utter disregard of the market rate of interest, which guides the efficient employment of all factors of production according to consumer choices, is bound to do great harm to the economic structure. It causes severe maladjustments and imbalances which market forces sooner or later are bound to correct.
Record-low interest rates encourage present consumption and generate massive debt. In just five years, total financial as well as nonfinancial American debt has surged by 51% or $10.9 trillion to more than $32 trillion, three times the annual GNP. At present interest rates, federal government debt alone commands charges of $300 billion a year, or more than $1,000 per man, woman, and child. It may be no concern for officials and politicians. But it frightens this observer.More on this story here.
DECONSTRUCTING THE JUSTICE DEPARTMENT’S PATRIOT ACT WEBSITE
The Department of Justice has launched a website, http://www.lifeandliberty.gov, to defend the PATRIOT Act. As more and more people are raising concerns about the broad powers granted to the Justice Department -- powers it does not need and is not using to fight terrorism --- the Department is spending time and money on a public relations campaign, including a website and a tour of the country by the Attorney General to talk to law enforcement officers.
But just as Attorney General Ashcroft has done in his speeches around the country, the website fails to engage on the substantive criticisms of the PATRIOT Act, instead touting provisions that no one objected to at the time the legislation was enacted and that no one has been objecting to since. Where the website does address controversial aspects of the law, it provides misleading, incomplete and, in some cases, incorrect information. Following is CDT’s analysis of the claims made on that website.More on this story here.
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