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GENERAL TOMMY FRANKS DOUBTS U.S. CONSTITUTION WOULD SURVIVE WMD ATTACK
In the December edition of men’s lifestyle magazine Cigar Aficionado, the former commander of the military’s Central Command warned that if terrorists succeeded in using a weapon of mass destruction (WMD) against the U.S. or one of our allies, it would likely have catastrophic consequences for our cherished republican form of government.
Discussing the hypothetical dangers posed to the U.S. in the wake of Sept. 11, Franks said that “the worst thing that could happen” is if terrorists acquire and then use a biological, chemical or nuclear weapon that inflicts heavy casualties. If that happens “... the Western world, the free world, loses what it cherishes most, and that is freedom and liberty we’ve seen for a couple of hundred years in this grand experiment that we call democracy.” Franks then offered “in a practical sense” what he thinks would happen in the aftermath of such an attack.
Already, critics of the U.S. Patriot Act, rushed through Congress in the wake of the Sept. 11 attacks, have argued that the law aims to curtail civil liberties and sets a dangerous precedent. But Franks’ scenario goes much further. He is the first high-ranking official to openly speculate that the Constitution could be scrapped in favor of a military form of government.More on this story here.
THE TRUTH ABOUT THE U.S. WAR ON TERROR
Terrorism and Tyranny: Trampling Freedom, Justice, and Peace to Rid the World of Evil, by James Bovard, has been out for several months now. (Several laudatory reviews of the book have been included and highlighted in previous Digest pages.) For those who support the government’s “War on Terrorism”, the book will reveal, in the starkest terms, how your government failed you. For those who oppose it, this book will confirm that everything you fear is true.
Bovard asks: Should the government have suspected that al Qaeda planned to launch attacks on the U.S.? Answer: Absolutely.
In 1998, the CIA determined that Osama bin Laden was “actively planning against U.S. targets.” Also in 1998, U.S. intelligence learned that al Qaeda planned to fly planes into the World Trade Center towers. In 1999, a study for the National Intelligence Council warned that al Qaeda could crash-land planes into the Pentagon. In 2000, U.S. intelligence learned that bin Laden planned to hijack 747s. In 2001, an FBI agent warned that an al Qaeda network was training pilots in the U.S. to hijack planes. In July 2001, a National Security Council counterterrorism specialist warned: “Something really spectacular is going to happen, and it’s going to happen soon.”
What was the government’s response? As of 9/11, the CIA had only five full-time analysts monitoring bin Laden’s terrorist network. Meanwhile, the FBI had over 2,000 agents working on drug cases. And on the night of 9/11, the FBI had 10 agents wiretapping a brothel in New Orleans.More on this story here.
PATRIOT II PROVISIONS TO COME IN BY STEALTH, ONE BY ONE?
Congress approved a bill that expands the reach of the Patriot Act, reduces oversight of the FBI and intelligence agencies and, according to critics, shifts the balance of power away from the legislature and the courts. Under the Patriot Act, the FBI can acquire bank records and Internet or phone logs simply by issuing itself a so-called national security letter saying the records are relevant to an investigation into terrorism. The new provision in the spending bill redefines the meaning of “financial institution” and “financial transaction”. The wider definition explicitly includes insurance companies, real estate agents, the U.S. Postal Service, travel agencies, casinos, pawn shops, ISPs, car dealers and any other business whose “cash transactions have a high degree of usefulness in criminal, tax or regulatory matters.”
Justice Department officials tried earlier this year to write a bill to expand the Patriot Act. A draft -- dubbed Patriot II -- was leaked and caused such an uproar that Justice officials backed down. The new provision inserts one of the most controversial aspects of Patriot II into the spending bill. Intelligence spending bills are considered sensitive, so they are usually drafted in secret and approved without debate or public comment.
Chris Schroeder, a Duke law professor and former assistant attorney general in the office of legal counsel at the Justice Department, said the re-insertion shows that “people who want to expand the powers of the FBI didn’t want to stop after Patriot II was leaked. They are going to insert these provisions on a stealth basis,” Schroeder said. “It’s insidious.”More on this story here and here.
Privacy Villain of the Week: Congress’ warrantless snoop authorizers
U.S. Congressional Conference Committee, and now the House of Representatives, has passed an Intelligence Appropriations bill that gives the FBI the power to search through the consumer records of a wide variety of businesses without the benefit of a search warrant, as required by the Fourth Amendment of the Constitution’s Bill of Rights. All that remains between passage into law is the vote of the Senate and the signature of the President.
Jim Dempsey of the Center for Democracy and Technology has explained succinctly what these National Security Letters are: National Security Letters are like administrative subpoenas, in that they are pieces of paper signed by FBI agents with no judicial review, compelling disclosure of documents. They are issued in intelligence investigations, which are broader than criminal investigations.
The Fourth Amendment is a cornerstone of privacy protection in the United States. It provides for a check and balance so that the Executive Branch cannot willy-nilly search and seize the personal effects, or in this case, business data with personal information, without the permission of a judge. Today, judges and other court officers such as magistrates, are on call 24 hours a day. There is no reason to cut judges out of this process unless the FBI agents think they are up to something a judge would not approve of.More on this story here.
Senate approves the bill without a roll call vote.
A plan to give the FBI easier access to financial records from casinos and other businesses will now go to the president to sign. How much money taxpayers are providing for the intelligence work was not disclosed, and the bill was worked on in secret by members of the House and Senate Intelligence Committees.More on this story here.
ABACHA MILLIONS LIKELY TO STAY FROZEN, SWISS AUTHORITIES WARN NIGERIA
Funds placed in Swiss banks by former Nigerian dictator Sani Abacha are unlikely to be released soon. But Switzerland has assured the Nigerian government that resolving the case is a very high priority.
Abacha is believed to have deposited over SFr800 million ($615 million) of illicit funds in Swiss banks. Following his death in 1998, the Swiss government froze the funds at the request of the Nigerian authorities. Nigeria believes Abacha probably siphoned off almost SFr4 billion altogether. Now the Nigerian government is pressing to have the money returned as quickly as possible.More on this story here.
Swiss cabinet vote challenges status quo.
December’s cabinet elections will determine whether the balance of power in the Swiss government shifts further to the Right. Political analyst Hans Hirter told swissinfo he expected some changes but did not think they would necessarily signal the end of consensus politics. He expects one of the Christian Democrat ministers to stand down at the last minute in favour of the People’s Party’s Christoph Blocher.More on this story here.
WITH FRIENDS LIKE THESE ... DEPARTMENT: IMF PRAISES ISLE OF MAN’S FINANCIAL REGULATION
A report released today by the International Monetary Fund has praised the Isle of Man’s financial regulators for their “proactive” approach in achieving the required standards demanded internationally. The report confirmed that the jurisdiction has attained a high level of compliance in all major areas including banking, insurance, securities, anti-money laundering and combating the financing of terrorism.More on this story here.
Channel Islands commended by IMF for regulatory regimes.
Both jurisdictions were found to have a high level of compliance with each of the international standards against which they were judged. These included the Basel Core Principles for Effective Banking Supervision, the Insurance Core Principles of the International Association of Insurance Supervisors, and the Financial Action Task Force’s 40+8 anti-money laundering recommendations.
Guernsey was especially commended by the IMF for its comprehensive regulatory framework and supervisory structure, the continuing action taken by the authorities to protect its reputation, the high level of international cooperation displayed by the Bailiwick, the standards maintained by the Guernsey Financial Services Commission, its proactive approach to regulating trust and company service providers, and the highly developed anti-money laundering and terrorist financing framework which has been put in place.More on this story here.
Guernsey’s finance sector “Still doing well”, says GIBA chairman.
Speaking following the recent announcement by Investec Asset Management that it will be cutting 25 jobs on the Island in six months, chairman of the Guernsey International Business Association (GIBA), Robin Fuller issued assurances that the jurisdiction’s finance sector is still “doing well”. Mr. Fuller said that although the redundancies were unfortunate news for those affected, they did not indicate a wider trend.More on this story here.
UK GOVERNMENT REPEATS THREAT TO CAYMAN ISLANDS, AMENDS LAW ON OVERPAID TAX
UK Paymaster General Dawn Primarolo repeated the UK government’s threat to force the Cayman Islands to abide by the terms of the European Savings Directive by means of legislation. If the Caymans are compelled to adopt the directive, it will mean either having to exchange information with EU member states on their residents’ interest income for tax purposes, or a temporary withholding tax before eventually implementing information exchange. However, the legalities of how, or even if, the directive is to be applied in the overseas territories of member states, notably Britain and the Netherlands, remain somewhat of a grey area.
She also issued a statement in which she revealed that the UK government has amended recently introduced legislation designed to limit the time frame for repayment of overpaid tax by the Inland Revenue.More on these stories here and here.
UNITED STATES AND ARUBA SIGN TAX INFORMATION EXCHANGE AGREEMENT
The U.S. Treasury announced last week that it has signed a new agreement with the Kingdom of the Netherlands which will provide for the exchange of tax information between Aruba and the U.S. Treasury Secretary John Snow praised the close and cooperative relationship between the two countries in matters of law enforcement and tax evasion, and added that “This new tax information exchange agreement we are signing today is the ninth such agreement the United States has signed with a significant financial center in the last two years. It is the first such agreement that I will have the privilege to sign, and I do not intend it to be the last.”More on this story here.
SOUTH KOREA’S LG CARD AVERTS LIQUIDITY CRUNCH
South Korea’s largest credit-card issuer, LG Card Co, said customers could withdraw cash again later yesterday after creditors agreed to extend emergency loans, averting a liquidity crunch that threatened South Korea’s financial system. LG Card has 14 million customers, almost a third of South Korea’s population.
LG Card was forced to suspend cash advances over the weekend because of its liquidity crunch, raising the specter of a spiralling series of defaults as many South Koreans use their credit cards to pay bills and service other credit card debts.More on this story here.
HONG KONG VOTERS SNUB BEIJING AGAIN, BUT DEMOCRATIC GAIN MAY COME AT A COST
Democracy advocates have won a startlingly broad victory in local elections here, but in doing so they may have hurt their long-running effort to win more democratic freedoms for this Chinese territory. The pro-Beijing Democratic Alliance for the Betterment of Hong Kong, known as the DAB, fared badly in Sunday’s elections, losing a quarter of its seats on 18 district councils. On Monday morning, its chairman, Tsang Yok-sing, announced he wanted to step down. The party’s defeat, coupled with gains for the opposition Democratic Party, leaves Beijing without a clear standard-bearer as Hong Kong moves fitfully toward more voting rights.
Shiu Sin-por, the executive director of the One Country Two Systems Research Institute, a Beijing-backed group that has informally represented the Chinese Communist Party’s interests here for many years, said that the local voting Sunday would “make Beijing think twice or three times before they have more elections.” Political clashes pitting Beijing and its appointees here against the Democratic Party and very large segments of Hong Kong society are now likely, he warned.More on this story here.
Democrats’ strong showing in Hong Kong’s local elections sends a signal to Beijing.
What the democrats want is for Hong Kong’s chief executive, in effect its president, to be elected. The earliest this could happen under the Basic Law, Hong Kong’s mini-constitution, is 2007. But Beijing will be aware that politics will not go away in Hong Kong. When the British ran the territory it was difficult to find anyone there interested in politics. It was a stupid British idea, a distraction from making money. Hong Kong Chinese regarded China with affection, as long as they did not have to live there. Now everyone has a political view. Perhaps the British were right about something.More on this story here.
Democrats in Hong Kong and Taiwan are defying the government in Beijing.
Life would be so much easier for the Communists who rule China if it were not for those pesky democrats on its periphery. China has never been good at winning over voters in Taiwan or Hong Kong. China regards Hong Kong as a model of the “one country, two systems” formula by which it hopes to tempt Taiwan back into the Chinese fold. The Democrats want Hong Kong’s chief executive and legislative councillors all to be directly elected by 2008. By allowing this, they argue, China might persuade Taiwanese leaders not to stray too far towards formal independence. But the fear of the grumpy men in Beijing is that a more democratic Hong Kong will become more like Taiwan, run by leaders they do not trust.More on this story here.
GEORGIA’S VELVET REVOLUTION
More than a decade after it swept Eastern Europe free of Communist regimes, people power has removed another ancient relic from a former Soviet satellite. Edward Shevardnadze’s departure after 11 years as Georgia’s president was remarkable above all for its peacefulness: after three weeks of non-violent protests against fraudulent parliamentary elections, and after his supporters in government and in the armed forces had begun to desert him, he bowed to the inevitable and resigned on the night of Sunday November 23rd.
Proud Georgians will point to this non-violence to argue that their country is fundamentally different to its Caucasian neighbours, Armenia and Azerbaijan. Both of these held flawed elections earlier this year too, but the consequences were not a “velvet revolution”. That things in Georgia happened differently is a tribute partly to the vibrancy of the democratic opposition there, and partly to the fact that the West’s involvement was much greater. But it also reflects the fact that Mr Shevardnadze was already an extraordinarily weak and unpopular leader.
The country that Mr Shevardnadze leaves to Georgia’s next leader bears the marks of his weakness. It is a place where corruption flourishes and the economy stagnates. Besides its dire economic straits, Georgia is at risk of falling to pieces altogether.More on this story here.
AUSTRALIANS BEING TARGETED BY OFFSHORE SCAMMERS AGAIN
Offshore scammers are again targeting unsuspecting Australians in a spate of cold-calling schemes involving fraudulent currency and share investments. The Australian Securities and Investments Commission had experienced a surge in complaints from victims. In some cases victims were contacted by someone promising to reclaim lost dollars for a fee, he said.More on this story here.
GERMAN BANKS DENY THAT THEY IMPROPERLY BANKROLLED QUESTIONABLE TAX SHELTERS
Two German banks told a Senate panel on Thursday that they had worked closely with the accounting firm KPMG to bankroll aggressive tax shelters, but the banks denied knowing at the time that they were participating in anything questionable. According to court papers and testimony from current and former bank executives, KPMG and an investment firm, Presidio Advisors, created and marketed the shelters, but they wanted big banks to help clients finance the shelters. The banks offered loans to clients of both firms, and the money was used to generate big tax losses in the shelters. John Larson, managing director for Presidio Advisory Services, said that the firm’s fees were based on the size of the tax losses that would be generated.
The shelters are known as BLIPS, for bond linked issued premium structure, and OPIS, for offshore portfolio investment strategy. Investments or shelters that exist solely to generate losses, and that have no real business or investment purpose, are termed abusive, or illegal. Deutsche Bank said it made 56 Blips loans totaling $7.8 billion in September and October 1999. The bank earned $44 million for that.More on this story here.
Summary of IRS report on combating abusive tax shelters.
“As part of a comprehensive strategy to ensure all taxpayers pay their fair share, the Treasury Department and the IRS continue to move aggressively to combat abusive tax avoidance transactions. This multi-pronged strategy includes requiring prompt disclosure of potentially abusive transactions by taxpayers and promoters, providing more timely analyses of these transactions and publishing legal guidance as early as possible. It also involves auditing taxpayers and promoters to ensure that they have complied with their obligations under the tax rules.
“In particular, the IRS conducts promoter examinations to determine whether a promoter has complied with regulations requiring identification of potentially abusive tax avoidance transactions by registering such transactions and maintaining and providing investor lists to the IRS upon request, and to determine whether the promoter may be liable for penalties for failure to comply with the registration and list maintenance requirements. Some promoters have cooperated by giving the IRS the information to which it is entitled; however, others have not ...”More on this story here.
IRS & Treasury close contested liability trusts tax loophole.
The Treasury Department and the IRS last week issued guidance to prevent the use of trusts to accelerate deductions for liabilities that a taxpayer is contesting. The use of a trust to accelerate improperly deductions under section 461(f) is now a “listed transaction”. A taxpayer using a trust for this purpose will have to disclose it to the IRS and an advisor promoting its use will be required to keep a list of taxpayers.More on this story here.
SEC NOW INVESTIGATING HEDGE FUNDS TRADING ABUSES
As the investigation widens into mutual fund trading abuses, Securities and Exchange Commission Chairman William Donaldson said the agency’s attention is turning to the unregulated $6 billion hedge fund industry. And as part of the widening probe, regulators are set to file charges against Security Trust Company, which was cited in the original complaint that kicked off the mutual-fund trading scandal back in September. The company services third-party administrators for over 2,300 pension funds. Sources say Security Trust executed illegal late-day trades for hedge funds, including Canary Capital Partners. Late-day trading involves buying a fund at the prior day’s price.
Meanwhile, Donaldson said the SEC staff has recommended that hedge funds be required to register with the commission and provide information about their holdings. The SEC’s move to register hedge funds “gives us the right to go inside ... and see exactly what is going on. We have to anticipate more, we have to be able to look around the corner. And in this case, we are seeing that hedge funds are having an impact ... on mutual-fund shareholders.”More on this story here.
JAMES TURK SAYS GOLD READY TO BREAK OUT
Of course no one knows. But even if my timing is off by a week or two, it does not matter. What matters is that the trend for gold remains up, not only in terms of the US dollar, but also for all the major currencies of the world. This observation is key because when gold does finally breakout of its base in Swiss francs, euros, and yen, then -- as I said in my October 11th alert -- “It will be an event that every gold bull is waiting for because it will reflect a flight out of fiat national currency into the safety and security of gold.”More on this story here.
SWEEPING NEW EMERGENCY LAWS TO COUNTER TERROR TO BE ANNOUNCED THIS WEEK IN U.K.
The Civil Contingencies Bill, which covers every kind of disaster from terrorism to the weather, will be the biggest shake-up of emergency laws since the early part of the last century, replacing legislation which saw the UK through a world war and the IRA bombing campaign.
Some of the proposals in the draft version of the Bill, drawn up in the summer, have alarmed civil rights activists, notably a clause that gives the Government the power to suspend parts or all of the Human Rights Act without a vote by MPs. Once an emergency has been proclaimed by the Queen, the Government can order the destruction of property, order people to evacuate an area or ban them from traveling, and “prohibit assemblies of specified kinds” and “other specified activities”. If these rules had been in force during the Iraq war, critics say, they could have been used to to ban street demonstrations, making anyone who travelled to protest guilty of a criminal offence.More on this story here.
SERVICE WOULD ENABLE CONSUMERS TO PAY FOR MERCHANDISE USING IMPLANTED MICROCHIP
The Applied Digital Solutions CEO said he believes the company’s VeriChip -- a subdermal microchip that uses radio frequency signals to broadcast an identification number to a scanner -- could someday replace credit cards. Under Silverman’s plan, rather than swiping a bank card to make purchases, micro-chipped customers would scan themselves using special readers.
Although the biochip payment plan may strike some people as a bit X Files-ish, financial transactions using radio frequency identification, or RFID, are already commonplace in some areas. ExxonMobil’s Speedpass, for example, is a key-chain fob containing an RFID tag that is linked to the holder’s credit card; users wave the fob in front of a scanner integrated into a gas pump, and their fuel purchase is charged to their credit card account within seconds. Recently more than 400 McDonald’s restaurants in the greater Chicago area started using the Speedpass system to allow customers to more conveniently buy their burgers and fries.More on this story here.
THE RISE OF THE AMERICAN KGB
DNA profiles from hundreds of thousands of juvenile offenders and adults arrested but not convicted of crimes could be added to the FBI’s national DNA crime-fighting program under a proposed law moving through Congress. The FBI’s national DNA database holds genetic profiles from about 1.4 million adults convicted of state and federal crimes. The changes, in a little-noticed section of a bill that would authorize $755 million for DNA testing, were approved by the House of Representatives on Nov. 5. Backers say the Senate is likely to approve a similar version by early next year.
DNA database networks will soon be the de facto national ID card system. This proposed law, in addition to PATRIOT I, bodes ill for what remains of our justice system. It opens a brand new door to abuse by State agents. If you think that once that door is open, nothing bad will happen, you are not only naïve and deluded, you are smoking something that is not sold at 7-Eleven. Unlike fingerprints, DNA material is easily planted at a crime scene.
Once passed, this law will enable any State agent to arrest you for any reason, specious or otherwise, just to get DNA material from you. Once they have it, you can be freed, with all “charges” dropped. When the State needs a fall guy, all it has to do is plant one of your hairs at a crime scene. The FBI’s computer will then find the “criminal” and you will be quickly arrested, charged, tried, and convicted because, as we all know, DNA matching is virtually 100% proof positive.
PATRIOT I already enables State agents to search your home at any time, giving them plenty of opportunities to gather new DNA material that will then mysteriously appear at a crime scene. It will not matter who your attorney is, how much money you make, or what your alibi is, you will be convicted and sent to prison if/when the State targets you. Welcome to the Soviet Union, comrade!More on this story here. (Original news item here.)
SURVEILLANCE POWERS OVER PUBLIC COMMUNICATIONS SOUGHT BY NEW ZEALAND GOVERNMENT
The Telecommunications (Interception Capability) Bill, approved by a parliamentary select committee last week, would allow authorities to intercept and record every type of public communication, ranging from emails sent from internet cafes to calls received in hotel rooms. The bill will force communications companies to have equipment available to intercept any contact, once a search warrant has been issued.
Council for Civil Liberties chairman Michael Bott said the bill gave the state an “unprecedented right to snoop.” “New Zealanders should be very concerned, this is another case of eroding the democratic rights of law-abiding people to go about their lives,” he said. “The government tells us it’s only the criminals who have something to fear, but that’s a lame excuse, if that’s really the case there would be no problem with having cameras in everyone’s bedrooms either.” Bott said surveillance targets would have no idea they were being monitored until they were arrested.More on this story here.
BIOMETRIC CARDS WILL NOT STOP IDENTITY FRAUD
Under the proposal unveiled by U.K. home secretary David Blunkett every resident would have to carry an ID card containing biometric information, such as an iris scan. Cards could then be checked against a central database to confirm the holder’s identity. But Simon Davies, an expert in information systems at the London School of Economics and director of Privacy International, says the system would not stop people getting extra cards under different names. If he is correct, it could have far-reaching implications.
The problem, says Davies, is the limited accuracy of biometric systems combined with the sheer number of people to be identified. The most optimistic claims for iris recognition systems are around 99% accuracy. This is acceptable for relatively small databases, but the one being proposed will have some 60 million records. This will mean that each person’s scan will match 600,000 records in the database, making it impossible to stop someone claiming multiple identities. Even if they already had one or more records in the database, these would be swamped by the hundreds of thousands of false matches. Davies sees no prospect of improvements to the technology solving the problem.More on this story here.
Draft ID card bill makes it to Queen’s speech.
A draft bill to introduce ID cards in the UK found its way into the Queen’s Speech. She said: “My government will take forward work on an incremental approach to a national identity cards scheme and will publish a draft Bill in the New Year.” Short but not, for those concerned about privacy and civil liberties, so sweet.More on this story here.
F.B.I. SCRUTINIZES ANTIWAR RALLIES
The FBI has collected extensive information on the tactics, training and organization of antiwar demonstrators and has advised local law enforcement officials to report any suspicious activity at protests to its counterterrorism squads, according to interviews and a confidential bureau memorandum.
F.B.I. officials said in interviews that the intelligence-gathering effort was aimed at identifying anarchists and “extremist elements” plotting violence, not at monitoring the political speech of law-abiding protesters. The initiative has won the support of some local police, who view it as a critical way to maintain order at large-scale demonstrations.
But some civil rights advocates and legal scholars said the monitoring program could signal a return to the abuses of the 1960s and 1970s. The abuses of the Hoover era, which included efforts by the FBI to harass and discredit Hoover’s political enemies under a program known as Cointelpro, led to tight restrictions on FBI investigations of political activities. Those restrictions were relaxed significantly last year, when Attorney General John Ashcroft issued guidelines giving agents authority to attend political rallies, mosques and any event “open to the public”.More on this story here and here.
RUSH LIMBAUGH GUILTY OF “STRUCTURING”?
Limbaugh was absent from his radio show for five weeks after announcing he was entering a drug rehabilitation program because of his addiction to prescription painkillers. Law enforcement sources in Palm Beach County, Florida where Limbaugh owns a $24 million oceanfront mansion, previously confirmed that a criminal investigation into a prescription drug ring involved the conservative radio commentator. His former maid, Wilma Cline, reported supplying him with OxyContin and other painkillers.
Authorities learned two years ago during an investigation of U.S. Trust bank in New York that Limbaugh withdrew cash 30 to 40 times from his account at amounts just under the $10,000 bank reporting requirement. Limbaugh told listeners the report was misleading and said that he had the bank bring cash to him at his New York office “maybe four times, if that many”. Otherwise, he said he obtained cash from a bank in Florida, where he was living. Further, he said his bank advised him to make withdrawals that were less than $10,000 as a way to lessen the bank’s paperwork. It can be a federal crime to structure financial transactions below the $10,000 limit to avoid the reporting requirement.More on this story here.
Rush loved the rush.
Rush Limbaugh is back on the streets ... er, radio ... after about five weeks in rehab. Rush was a major-league pill-popper, and had been broadcasting for years under the influence of controlled substances. I have no problem with Rush doing the illegal drugs of his choice. It is his body -- he owns it, not the Drug Enforcement Administration. The fact that he was able to show up for three hours a day for his radio show is further proof -- not that any more is needed; Freud, for instance, was a serious cokehead -- that it is as possible to operate as normally on many controlled substances as it is on nicotine and caffeine. The main problem with drugs is their illegality. Perversely, Rush has always been a drug warrior. Rush has the gift of gab. But he has never been either a clear thinker, or intellectually honest.
The discovery of Rush’s liking for opiates makes him a hypocrite, as well as an insufferable blowhard. He served a useful purpose (and was often quite funny) when Clinton was in office. But for the last three years, he has been nothing but an unconscionable flack for the Republican Party, reflexively supporting anything they do or say. My guess, therefore, is that Rush will not be arrested for buying and doing illegal narcotics, as if he were a black, or some white trailer-park trash. He is entirely too well wired with the Republicans.More on this story here.
WHAT HAS MADE THE USA WHAT IT IS: DEMOCRACY OR THE CONSTITUTION?
Some people seem to think that once free elections are held in Iraq, democracy will exist and everything will be just fine and dandy from there on out. This rather widespread belief stems from a misunderstanding or ignorance of our own country and its history. It is not the elections that have given us the country we all cherish. It is the Constitution and the general consensus that everyone must obey it. That is the key difference between the United States and many other countries in the world.
There have certainly been differences in interpretation, sometimes powerful differences. Still and all, to a remarkable degree, the American people have maintained their devotion to the basic charter of government. This allows our elections to be less than life-or-death matters. We are comfortable in the belief that no matter who is elected, that person will be bound by the chains of the Constitution and therefore unable to uproot our society. On the one occasion when that was not so, we had secession and war. The price of that war was so fearful that, since then, Americans have been careful to keep their differences within the bounds of debate.More on this story here.
Scottish Historian Professor Alexander Tyler, circa 1787, on the decline and fall of the Athenian Republic:
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, (which is) always followed by a dictatorship.”
PHILISOPHICAL DIVIDE: LIBERTARIAN VS. CENTRALIST UNDERSTANDINGS OF “CONSERVATISM”
The libertarian conservative understanding of virtue begins with its source -- the individual and the voluntary community into which he is embedded. It emphasizes that virtue comes from the free growth of organic cultural institutions, freedom, authority structures outside of the State, such as the Church and the Family, and from the decentralization of power into distinct units who are able to maintain separate ways of life.
The centralist conservative understanding of virtue stands in stark opposition to the libertarian understanding. This conception holds that a virtuous leader, especially a State leader, is required to impel his subjects to virtue – that virtue comes from the top-down, from control, authority within the central State. For the centralist conservative it is the leader of the community, nation, etc. who alone knows the truths of the world and has to keep the people on the steady path to keep them from outside dangers. The leader sends goodness, security, and righteousness down from above. Starting to sound familiar?
These rival understandings do not begin with modernity, however, for they reach far back into antiquity. The centralist conservative ideals reach from perhaps the beginnings of States themselves, and at least to ancient Egypt where the Ruler was seen as both head of the State and of the Religion -- where the ruler himself was divine, and therefore the source of moral truth. The modern libertarian conservative understanding, however, is fundamentally Judeo-Christian and Greco-Roman. There exists on this conception an independent divinity to which the ruler too is subject. The source of all authority exists outside and prior to the State on this account -- the State is subject to the same rules as the rest of us. These two understandings are as important today as ever.More on this story here.
COLLECTING COINS AS A WAY TO PARTICIPATE THE PRECIOUS METALS MARKET? USE GRADED COINS.
Collectible coins on average -- but not uniformly by any means -- follow the trends of the precious metals markets themselves. While the percentage price moves can be comparatively large, the market is far less liquid, as shown by the large bid-ask spreads that characterize the market. If you do choose to buy collectible coins gather a lot background knowledge first (always a good idea). In the U.S. market “investment-grade” coins are almost all certified by the Professional Coin Grading Services (PCGS) or the Numismatic Guaranty Corporation (NGC). Independent third party assessments of a coins’ physical condition, backed by a guarantee, have provided a climate where collectors, dealers, and investors could participate in the coin market with confidence.More on this story here.
MARC HARRIS FOUND GUILTY IN 16 COUNTS OF FINANCIAL FRAUD
Marc Harris was convicted Monday of 16 counts of tax evasion, money laundering and conspiracy to commit fraud in connection with offshore schemes to dodge the IRS. Harris, 38, faces seven to nine years in prison when sentenced Feb. 6. He was convicted in 16 of the 30 counts federal prosecutors had charged him with.
The convictions mark an ignominious end for a financial prodigy who became a CPA at age 18, was named distinguished alumnus by his alma mater North Carolina Wesleyan and once bragged of managing $1 billion in assets. He also managed to elude irate clients and prosecutors for 13 years while enjoying a bon vivant lifestyle that included Herms suits and Jaguar cars in Central America.
At the request of U.S. authorities, the Nicaraguan government expelled Harris in June. He was returned to Miami to stand trial in connection with two cases of tax evasion, in which the principals had been clients of Harris and turned state’s evidence against him. They contended he masterminded the schemes. Harris portrayed himself as an accountant who helped small companies legitimately reduce their tax liabilities through foreign subsidiaries, in the manner of big multinationals.
“This [trial] is just the tip of the iceberg with Marc Harris,” said Daniel Marchant, publisher of Offshore Alert, a Miami-based moneylaundering-investigative newsletter, which ran an exposé of Harris in 1998.More on this story here and here.
LOW TAX IS SHRINKING IRELAND’S UNDERGROUND ECONOMY SAYS STUDY
The OECD study compared 21 countries and found that Ireland’s black economy will account for 14.8% (€13 billion) of GDP next year. In 2002, the same study forecast a level of 15.6% of GDP for this year. The validity of the findings have been questioned by many groups in Ireland however and some have argued that the definition of the black economy used in the study is too wide. For instance, the chief executive of the Chambers of Commerce Ireland John Dunne has estimated a figure nearer 10%, though he said the real level could be lower.More on this story here.
CANADA WILL CONTINUE TO CUT FEDERAL TAXES, SAYS MANLEY
In a speech given in New York on Tuesday, Canadian Finance Minister John Manley said that the federal surplus allows room for further tax cuts in the years ahead, despite the country’s somewhat fragile economic state. “We’ve introduced the largest tax reduction program in Canadian history, a multi-year initiative that will be complete by the end of this year,” Mr. Manley boasted. “This tax reduction plan has created a distinct Canadian advantage, with an average federal-provincial corporate tax rate now below that of the US and expected to fall even further in the future,” he claimed, although without specifying exactly where taxes were to be cut.More on this story here.
Ontario’s new Liberal government to dispense with tax cuts.
Defying Canad’qs federal tax-cutting agenda, the incoming Liberal government of Ontario is to cancel legislation containing corporate tax cuts and personal tax credits, citing the need to restore the Canadian province’s public finances to health.More on this story here.
ADVICE ON THE SOUTH AFRICAN FOREX AMNESTY
Some people prefer to live dangerously. On the eve of next week’s original deadline for the forex amnesty, they still ask whether they should take a chance or declare funds they had expatriated in contravention of tax and exchange control regulations. The chances of being caught for non-declaration are better than excellent. The period for amnesty applications has been extended to the end of February, partly because advisers are buckling under their work loads and partly because of the complex schemes on which they must advise. Apparently, all sorts of grey areas are being uncovered.More on this story here.
PREDICTED EU ECONOMIC GROWTH LESS THAN HALF THAT OF US NEXT YEAR
The OECD is due to publish its twice-yearly economic outlook on Wednesday but some details were leaked to the Italian newspaper La Repubblica at the weekend. The OECD confirmed that they were broadly in line with the forthcoming figures. According to La Repubblica, the OECD has revised down its forecast for EU growth from 2.4% to 1.9% for 2004. However, it raised its expectations for the US from 4% to 4.2% for the same period. Recent data from the EU have been relatively upbeat, and the region is widely thought to be over the worst of its economic problems. However questions remain about the sustainability of its economic recovery.
La Repubblica also published details of the OECD’s projections for public finances in its member countries. It said the US budget deficit was likely to be 5.1% of gross domestic product in 2004. That was still less than the projected figure for Japan, which was expected to see a budget deficit of 6.8% next year. In comparison, the eurozone was expected to post a 2.6% budget deficit.More on this story here.
Future of euro stability pact questioned.
The euro area’s “stability and growth pact” was supposed to stop irresponsible member states running excessive budget deficits, defined as 3% of GDP or more. Chief among the restraints was the threat of large fines if member governments breached the limit for three years in a row. For some time now, no one has seriously believed those restraints would hold. In the early hours of Tuesday November 25th, the euro’s fiscal straitjacket finally came apart at the seams.
Both Germany and France ran deficits of more than 3% of GDP last year and will do so again this year. Both expect to breach the limit for the third time in 2004. Earlier this year the EC, which polices the pact, agreed to give both countries an extra year, until 2005, to bring their deficits back into line. Under the pact’s rules, the commission’s prescriptions have no force until formally endorsed in a vote by the euro area’s finance ministers, known as the “eurogroup”. And the votes were simply not there.
Coming in the thick of this delicate constitution-making, the stability pact chose an awkward time to die. But at least the constitutional discussions next month give the EU an early opportunity to rethink its fiscal rules.More on this story here.
OECD cuts forecast of growth for Mexico.
In its Economic Outlook on Mexico, the OECD lowered its 2003 forecast of gross domestic product growth to below 2% from 2.5% and reduced the 2004 forecast to about 3.5% from 3.9%. But it added much would depend on the speed of the US recovery and how it translated into demand for Mexican exports, which are dominated by sales to the US.
The survey praised Mexico’s efforts to contain inflation, keep the current account surplus manageable and promote stability. But it pointed out that official estimates of GDP growth had been lowered to 4% in the coming years -- “too slow for a country with low levels of income and productivity and high rates of population growth”. While the government’s efforts to put public finances on an even keel are praised, the OECD says much remains to be done. Not least, it says, the current tax take of some 11-12% of GDP could reasonably be raised by 2 percentage points in the medium term.
It adds that the failings of the judicial system and “high perceived levels of corruption” are seen as barriers to investment, as are red tape and labour laws that prove a disincentive to mobility and investment. The report notes that the equivalent of one-tenth of Mexico’s population -- some 10 million people -- lives and, for the most part, works in the US.More on this story here.
BOB DOLE SAYS FREE MARKETS IN TROUBLE IN RUSSIA AND CHINA (SAYS NOTHING ABOUT THE U.S.)
The recent arrest of a leading Russian businessman on charges ranging from tax evasion to theft of state property is being been seen as a battle with major consequences for the future of democracy and the rule of law in Russia. Less noticed has been a similar struggle in China, where Yang Rong, an entrepreneur who used his own funds to create the first Chinese company traded on the New York Stock Exchange, has faced both expropriation of his private property and a trumped-up threat of arrest for getting on the wrong side of provincial authorities. The parallels in the two cases, each arising in a country where private property rights are still evolving, are instructive.
The situation in Russia and the Chinese province’s treatment of Yang Rong send a very powerful negative signal to U.S. businessmen and outside investors. The message is clear: Despite all of the progress each country has made, politics is sometimes more important than the rule of law and protection of private property. Foreign investors must take this into account because the decisions by the powers that be in Russia and China have enormous implications for the future climate for investment and rule of law in both countries.More on this story here.
ADVICE FOR EXPATRIATING BRITS
More than 150,000 Britons will have left for a new life overseas by the end of 2003. While selling up, hopping on a plane and enjoying La Dolce Vita in warmer climes sounds attractive, there is much to consider before taking the plunge. Key issues include liability for UK tax after the move, what to do with property in the UK and how to manage savings and investments.More on this story here.
BRITAIN THREATENS VETO ON EU (IT CAN PASS REPRESSIVE LAWS ALL BY ITSELF, THANK YOU)
Britain is ready to veto proposals for a new constitution for the European Union rather than give up vital national powers over defence, foreign policy and taxation. The tougher stance was signalled by the Government last night after talks at Lancaster House between Tony Blair and President Jacques Chirac of France failed to resolve deep differences over the proposed European defence capability.
Chancellor Gordon Brown launched a fresh assault on Brussels, blaming it for producing “wasteful” red tape. He told business leaders that Britain would resist the EC’s proposals to harmonize rates of company taxation and VAT. In a tactical move aimed at warning the Italian EU presidency, the Foreign Office official made clear government concerns that its “red lines” -- a demand for unanimity in decision-making on taxation, social security, judicial co-operation and the EU budget arrangements -- were at risk of being crossed.
With the negotiations on the European constitution entering a critical phase -- and demands growing in Britain for a referendum -- the Government is deliberately raising the stakes ahead of the summit of European leaders next month. Mr. Blair’s position continues to be constrained by US objections to the creation of any structure that gives the EU an operational planning headquarters outside Nato’s HQ in Belgium. George W. Bush refused to soften this position in public on his visit last week.More on this story here, here, and here.
THE BRITISH REICH
Claire Short, who resigned from the UK Cabinet shortly after the Iraq war, told a TV interviewer that her erstwhile Leader had “swallowed the whole argument of the American neo-Conservatives.” There will be few who argue with this assessment, whether from among the members of that sinister coterie which surrounds President Bush and fills his head with Apocalyptic visions of his role in history, or from among the hundreds of thousands of good British folk who have taken to the streets over the past year to protest Blair’s rush to war at the Imperator’s side.
More damning still, Ms. Short -- who, after all, must know the Leader very well indeed -- went on to declare: “He wants to be sort of messianic, and say everything’s about moral principle. He likes to be sort of right-wing, and he’s quite shallow ... He’s just taken this in, hook, line and sinker.”
A messianic leader who counters every argument through an appeal to his own inner voices and his unique moral compass? Does this not have an uncomfortable ring about it, calling to mind another “man of ideas” who, once he had risen to head another great country in Europe, led it inexorably to tyranny, barbarity, and -- at length -- utter ruin? But, no, we exaggerate, surely?More on this story here.
RON PAUL ON REPUBLICAN SOCIALISM
Congress worked late into the night this past weekend to pass a Medicare prescription drug bill that represents the single largest expansion of the federal welfare state since the Great Society programs of the 1960s. The new Medicare drug plan enriches pharmaceutical companies, fleeces taxpayers, and forces millions of older Americans to accept inferior drug coverage -- while doing nothing to address the real reasons prescription drugs cost so much.
The financial impact of this legislation on taxpayers cannot be overstated. Government projections that the drug program will cost $400 billion over the next decade cannot be trusted, as existing Medicare programs cost 4 times more than estimated when they were created. The likely cost is at least $1 trillion over 10 years, and much more in following decades as the American population grows older. The Medicare “trust fund” is already badly in the red, and the only solution will be a dramatic increase in payroll taxes for younger workers. The National Taxpayers Union reports that Medicare will consume nearly 40% of the nation’s GDP after several decades because of the new drug benefit -- 40% of the nation’s entire private-sector output! Clearly this new Medicare spending will bury our great-grandchildren unless we rethink the wisdom of ever-increasing entitlement programs.More on this story here.
CONGRESS GROVELS FOR THE WTO
Although it was scarcely reported in the press, an extraordinary event took place in Washington earlier this month. Pascal Lamy, The European Union trade czar, visited with influential members of Congress for the express purpose of determining whether a new tax bill is being crafted to his satisfaction. If Mr. Lamy -- a member of the French Socialist Party -- is unsatisfied with the changes made to our tax code, he threatens to unleash a European trade war against U.S. imports. In effect he is a foreign bureaucrat acting as a shadow legislator by intervening in our lawmaking process.
This unseemly saga stems from our participation in the World Trade Organization. Since America first joined the WTO in 1994, Europe has objected to how we tax American companies on their overseas earnings. The EU took its dispute to the WTO grievance board, which voted in favor of the Europeans. After all, it is not fair for high-tax Europe to compete with relatively low tax America; the only solution is to force the U.S. to tax its companies more. The WTO ruling was clear: Congress must change American tax rules to comply with “international law.”
Sadly, Congress chose to comply. We scrambled to change our corporate tax laws in 2001, but failed to appease the Europeans. They again complained to the WTO, which again sided with the EU. So we’re back to the drawing board, working overtime to change our domestic laws to satisfy the WTO and the Europeans. This outrageous affront to our national sovereignty was of course predictable when we joined the WTO. During congressional debates we were assured that entry into the organization posed no threat whatsoever to our sovereignty. But this was nonsense.More on this story here.
US trade legislation may beat EU tariff deadline.
The United States is aiming to complete the replacement of legislation allowing export subsidies to manufacturers before the EU imposes retaliatory tariffs in March next year, says US Commerce Under-Secretary Grant Aldonas. It is also becoming more likely that the Bush administration will be forced to act on steel tariffs after the US lost its appeal at the WTO and Japan announced this week that it would follow the EU and impose counter measures on imports of US steel.More on this story here.
THE CONSTITUTION CON
I have always said that there is nothing wrong with this country that going back to the Constitution could not fix. It has long been my contention that, though liberals insist the Constitution is a “living” document intended to “evolve with the times”, the Founding Fathers wrote what they meant and meant what they wrote. It turns out I was kind of right, but completely wrong.
On Day Two of the 2003 Freedom Summit, one of the featured speakers was well-known pro-freedom author, Boston T. Party. Having long been an admirer of his, I could not wait to hear his speech. But in his opening remarks, Boston said that he was tired of those “whiners” who kept saying, “I just wanna go back to the Consti-tooooooo-shun!” Well, since I’m one of them, I was just a little offended by that remark. But what he said next was so shocking that it literally suspended time between one breath and the next. “Folks, we’re living under the Constitution right now!” I sat there with my mouth open, considering dozens of things I might say to refute his assertion, and that is when it struck me with the force of a lightning bolt: Boston is right.
After years of lamenting the state of affairs under US law and wishing for a return to the Constitution, I realize that my wish was actually granted long ago. There is no need to hope for a Constitutional government or a Constitutional set of laws. That is exactly what got us into this mess in the first place, and exactly how we are living right now. I have a new hope now, and that is this: I want to return to the Constitution as it was presented.More on this story here.
“NATIONAL SERVICE” IS A NICE NAME FOR “INVOLUNTARY SERVITUDE”
The government owns you. In principle there is no limit to how much of your earnings it may claim. And even here, in the Land of the Free, lots of people like it that way. They don’t call themselves Communists or Fascists, but they accept the basic premise of collectivism: that government should have as much power as possible over the individual. Millions of people depend on the taxing of their fellow citizens for their income, jobs, medical care, and other benefits. So the taxpayer spends several months a year working for the government.
In other words, the taxpayer is enslaved. Taxation at this level is a form of “involuntary servitude,” though the courts -- an arm of the government itself -- refuse to acknowledge this. Chattel slavery has been abolished, but state slavery has replaced it. That is, the taxpayer is not the personal property of an individual, but he is effectively the “property” of more impersonal forces.
This is not enough for some people, who, no matter how much power the government has, think we still have too much residual liberty. Here is David Broder, senior columnist of the Washington Post, reflecting on Veterans Day: “There are many reasons to wish that the United States had a system of national service that offered all young Americans the bonding experience that many men and some women of previous generations found through membership in the armed forces.” This is a bland call for the “involuntary servitude” ostensibly banned by the Thirteenth Amendment. That is what “national service” really means.More on this story here.
Ron Paul on the crime of conscription.
A plan for “universal liability to serve” once again is raising its ugly head. The dollar cost of the current war is already staggering, yet plans are being made to drastically expand the human cost by forcing conscription on the young men (and maybe women) who have no ax to grind with the Iraqi people and want no part of this fight. Hundreds of Americans have already been killed, and thousands more wounded and crippled, while thousands of others will experience new and deadly war-related illnesses not yet identified.
Unpopular wars invite conscription. Volunteers disappear, as well they should. A truly defensive just war prompts popular support. To get more troops, the draft will likely be reinstated. The implicit prohibition of “involuntary servitude” under the 13th Amendment to the Constitution has already been ignored many times so few will challenge the constitutionality of the coming draft.
It is said that the 18-year-old owes it to his country. It just as easily could be argued that a 50 year-old chicken-hawk, who promotes war and places the danger on innocent young people, owes a heck of a lot more to the country than the 18-year-old being denied his liberty for a cause that has no justification.More on this story here.
UK GOVERNMENT MAY DAMPEN PROPERTY MARKET BOOM WITH LAND TAX
The UK government’s current review of the housing market discusses ways to help supply meet demand and iron out the recent patterns of boom and slump. One possible outcome that may be pursued is the imposition of a land holding tax on developers designed to encourage them to build on it more quickly, and thus help meet the demand for homes which has driven house prices up dramatically in the past couple of years. However, developers are unlikely to take to such a proposition, and the industry claims it already contributes around £5 billion per year in taxes to the government.More on this story here.
EC REPORTS ON EFFORTS TO REMOVE CROSS-BORDER TAX OBSTACLES
The Commission reports that the tax obstacles it identified in 2001 still largely exist. It therefore confirms its commitment to the two-track strategy it presented that year for a series of legislative proposals and initiatives to address specific tax obstacles, as well as for work on a more wide-ranging long-term solution of allowing companies to use a single company tax base (taxable profits) for all their EU-wide activities. The latter is in the Commission’s view ultimately the only means to overcome the tax problems in the Internal Market in a systematic way.More on this story here.
SLOVAK PRESIDENT VETOES NEW FLAT RATE OF INCOME TAX
The President of Slovakia, Rudolf Schuster, has blocked a key economic reform which would introduce a 19% flat rate of income tax. Prior to this development, the law was due to take effect on January 1, 2004 after parliament approved the measures last month. However, the assembly has the power to over-ride the President’s veto if 76 of the 150 legislators support the measure. The President has argued that the proposals will be detrimental to Slovakia’s low income workers and pensioners.More on this story here.
RESULTS OF PRIVATE BANKING SURVEY RELEASED
A survey recently conducted by PricewaterhouseCoopers has suggested that times are currently hard for the world’s private bankers, with slow-growing customer wealth, and client fears over service levels, confidentiality, and national initiatives such as tax amnesties, all combining to make a dent in their profits.
According to the results of the survey, which looked at the situation in over 70 countries, many private banks are counting on annual growth of between 5% and 10% over the coming years. However, PwC private banking expert, Bruce Weatherill suggested that they are unlikely to get it. With specific regard to the Swiss situation, Mr. Weatherill cited problems with maintaining acceptable levels of banking secrecy in the face of international pressure.More on this story here.
Swiss private bankers in battle for new clients.
Switzerland’s private banks face surging global competition, regulatory assaults on banking secrecy, and a growing number of wealthy investors unhappy with “average returns”. “Private banking clients are not happy,” Bruce Weatherill told swissinfo. “They aren’t feeling very good about the investment community, they’re very worried about what’s happening to their wealth, and they’re worried about confidentiality and tax amnesties,” he said.
The irritability of private banking clients -- often defined as “high-net worth individuals” worth more than $500,000 (SFr650,000) -- is matched by the fact that the industry is becoming more competitive and international. “There is a war for new clients,” Weatherill said. For most of Switzerland’s private bankers, the findings will not come as a surprise.More on this story here.
GARY NORTH ON THANKSGIVING
Thanksgiving Day is an old tradition in the United States. It really did have its origins in Plymouth Colony, in the fall of 1621, when the Pilgrims who had survived the first year invited Chief Massasoit to a feast, and he showed up with 90 braves and five deer. The feast lasted three days.
About half of the Pilgrims who arrived in Plymouth in 1620 were dead a year later. The Indians really did save the colony by showing the first winter’s survivors what to plant and how to plant it in the spring of 1621. The Pilgrims really did rejoice at that festival. They were lucky -- graced, they would have said -- to be alive. So are we. Ludwig von Mises wrote somewhere that Charles Darwin was wrong. The principle of the survival of the fittest does not apply to the free market social order. The free market’s division of labor has enabled billions of people to survive who would otherwise have perished.
So, give thanks to God on Thursday, even if your only god is the free market. You did not obtain all that you possess all by yourself. The might of your hands did not secure it for you. A little humility is in order on this one day of the year.More on this story here.
The real first Thanksgiving.
Not the one celebrated by the Pilgrims who, as stated in their own Mayflower Compact, sailed to the “Northerne parts of Virginia” in 1620. (There was no Massachusetts colony yet.) That came years after a thanksgiving celebrated further south in Virginia on the north bank of the James River in early December 1619. The charter for the new Berkeley Plantation commanded that the day of the safe arrival of the settlers “...shall be yearly and perpetually kept holy as a day of thanksgiving...”
They had a great deal for which to give thanks. Certainly high on the list was safe arrival in Virginia. They were also lucky to have arrived in a colony in which a miniature Parliament called the General Assembly had just been established the previous summer. This was literally the introduction of representative government into European America. Another thing for which those settlers could be thankful was that the deadly “common storehouse” (socialist) system had lost favor and was rapidly being replaced by private ownership of land for the common man. Ralph Hamor described the classic failure of socialism in Virginia. “For formerly, when our people were fed out of the common store and labored jointly in the manuring of the ground and planting corn, glad was the man that could slip from his labor. Nay, the most honest of them in a general business would not take so much faithful and true pains in a week as now he will do in a day.”More on this story here.
AN ANARCHIST’S 2003 HOLIDAY GIFT GUIDE
“Despite its utter folly and futility,” wrote the great Mencken, “we still cling to the custom of exchanging Christmas presents, just as we cling absurdly to the stiff-bosomed shirt, the backless piano-stool, the novels of Charles Dickens, the loose rug ... political oratory ... and all the other lingering relics of an extinct and inferior civilization.”
So it is with some sense of folly and futility that I offer my second annual list of gift-giving suggestions to help you shop for that lovable anti-statist in your life.More on this story here.
PRICE INFLATION HAS NEVER DISAPPEARED
Some of you may have seen forecasts that the American economy is headed toward price deflation in the last three years. You may be new to all this. These predictions may seem like the latest and greatest. Actually, they are quite ancient, as economic forecasts go. J. Irving Weiss predicted imminent price deflation in 1967. His prediction was made at the very first gold investment conference, sponsored by Harry Schultz. According to the Inflation Calculator of the Bureau of Labor Statistics, it would take over $5.50 to purchase what $1 purchased in 1967. Mr. Weiss’s prediction was wrong. But he never changed his mind.
His son, Martin Weiss, continued the same theme after his father retired. In 1982 he was sure that deflation was imminent. Today, it would cost $1.91 to buy what $1 bought in 1982. As recently as 2002, he was quoted as saying: “Debt is dangerous. Deflation is worse -- it destroys the ability of borrowers to pay back debts. Throw the two into the same pot, and the resulting explosion can blow up the ‘strongest’ economies, sabotage the most ‘astute’ central bankers, and destroy the wealth of the ‘smartest’ investors.” Mr. Weiss has at long last abandoned the Weiss family forecasting heritage -- he warns that inflation is barreling down upon us, as quoted in a November 14 column in The Daily Reckoning.
Are we facing price deflation? Hardly. Are we facing the FED’s willingness to reduce the rate of economic recovery in an attempt to keep price inflation from escalating, thereby threatening the market for government bonds? I think so. So, it has shrunk the money supply. It will do what it can to delay the collision between monetary inflation and price inflation. Right now, it is betting that price inflation is a greater short-term threat than deflation is.More on this story here.
LOOKING AT GOLD
Gold briefly passed $400 an ounce on Wednesday and that might make many investors finally take notice, although gold has been in a bull market since April 2001, rising more than 50% in that time. But after two weeks of tiptoeing around $400 an ounce, gold has still not managed to breach this important psychological level convincingly. While this stuttering does not mean that gold cannot go higher, analysts say, it is a warning to investors getting in now to temper their expectations. Investors should not expect gold to repeat its recent history and rise another 50%, the analysts say.
But among the gold producers and the gold faithful who have lived though dark times -- the fall from over $800 an ounce in 1980 -- there is no worry: gold, which has been trading over $390 an ounce since Nov. 12, is surely going higher. Even Ian C. MacDonald, manager for precious metals at the New York branch of Commerzbank and a bear on gold for 15 years, said, “The scary thing is we don’t know how high this price can go.”
Investors attracted by the $400 headline could benefit by taking note of what is pushing the price of gold higher and considering whether these forces have the momentum to keep the rally going. It is also not a bad idea to listen to those analysts who argue that a small amount of gold in a portfolio, something under 5 percent, can be an effective way to diversify, regardless of the outlook for gold.
The chief argument for gold recently has been the weakness of the dollar. An analyst at a big hedge fund, who insisted that he not be quoted by name, put the argument bluntly. “I don’t think supply and demand matter,” he said. “What matters is the esteem people have for paper money and what we are seeing here is a flight to hard assets -- gold.”More on this story here.
Other commodities rise in price as well.
Gold prices on Wednesday jumped to the highest level since March 1996 after strange fumes hospitalized six New York City subway workers, fueling fears of fresh terror attacks on the United States. In other featured commodity trade, oil prices rose on a surprisingly sharp drop in U.S. stockpiles. Copper and lumber gained on more upbeat news about the U.S. economy, and corn closed higher on slow farmer sales and hopes for an export boom. The futures market was jumpy before Thursday’s U.S. Thanksgiving holiday and Friday's day off for New York exchanges.More on this story here.
The euro is worth $1.20 for the first time in its history.
The euro’s rise since February 2002 should not be taken as a great vote of confidence in the economies of the euro area. It is, instead, the flipside of the dollar’s fall. What is pulling the dollar down? For one thing, America is currently spending over $500 billion more per year than it produces. To finance this unprecedented current-account deficit, it needs to attract about $2 billion of foreign capital every business day. Much of that capital comes from Europe. Of course, one reason the dollar has fallen so sharply against the euro is that it cannot fall freely against Asia’s major currencies.
Some see Asia’s official purchases of dollars as part of a grand bargain: Asia ploughs its savings into America, and America, in return, remains open to the products of Asia’s export industries. But protectionist pressures rising in Congress raise worries that America may fail to keep its side of the bargain. If so, the central banks of Asia, the dollar’s most loyal customers, may threaten to switch, or at least spread their allegiance to euros. That would put intolerable pressure on the dollar.More on this story here.
CHINA’S GDP EXPECTED TO EXCEED $1.3 TRILLION THIS YEAR
Officials with the National Statistics Bureau said that this year’s GDP is expected to break a new record of 11 trillion yuan or over $1.3 trillion, with an economic growth rate of 8.5%. They said China’s economy continues to grow rapidly in spite of complicated international situations, the outbreak of SARS and frequent natural disasters. Meanwhile, China’s foreign exchange reserve hopes to hit a new high of $400 billion this year. And the industrial production growth rate has also reached the highest level since 1995. The country’s import-export volume will also exceed that of last year.More on this story here.
World recovery underway, says OECD.
The Paris-based organization said the “strong momentu”q already achieved in Asia, North America and the UK is evidence of this recovery. It predicts the world’s largest economy, the United States, will grow by 4.2% next year, up from 2.9% this year, while Japan and the Euro area will both register 1.8% growth in 2004. The OECD’s outlook follows the release earlier this week of U.S. data showing the U.S. economy is growing at its fastest rate in almost 20 years, with annualized GDP growth of 8.2% in the third quarter.More on this story here.
EXPORTS LIFT SWISS ECONOMY
The Swiss economy has begun to show signs of recovery, posting its first positive quarterly growth in a year. The State Secretariat for Economic Affairs (Seco) said the upturn was mainly fuelled by a boost in exports. The economy grew by one per cent in the third quarter of 2003. Seco expects growth to accelerate next year to reach 1.5%.
Meanwhile, unemployment recently hit a five-year high and is currently running at 3.8 per cent. The government expects the level to peak early next year, then begin to drop as the economy improves. The Swiss National Bank slashed interest rates to near-zero levels in March in a bid to control the rising Swiss franc and avoid a so-called double dip recession -- a recession followed by a short recovery followed by another recession.More on this story here and here.
Swiss personalities stump for EU membership.
Dozens of Swiss personalities from the world of politics, business and culture have launched a campaign for Switzerland to seek European Union membership. The group says EU membership would allow Switzerland to better defend its interests in Europe, and has called on the government to begin talks with Brussels next year.
The group argued that Switzerland was having to adopt European legislation, without actively participating in the lawmaking process. Similarly Switzerland was becoming ever more dependent on the EU, while not having a say in EU policies, it added. The Swiss People’s Party -- which recently won the biggest number of seats in parliament -- is strongly against closer integration with the EU.More on this story here.
LUXEMBOURG TO AMEND LAW ON TAX EXEMPT HOLDING COMPANIES
Luxembourg’s Ministry of Finance has recently published draft legislation designed to amend the law with regard to tax-exempt “Holding 29” companies as a result of international pressure. Under the terms of the new law, which the government hopes to put in place by January 2004, the holding companies will only be permitted to receive 5% of their dividends from low tax entities. If they receive more than this from a low tax entity (which for the purposes of the draft law is defined as an entity taxed at a level below 11%), they will lose their tax exempt status.
International tax partner with Ernst & Yound in Luxembourg, Marc Schmitz explained that: “It will become difficult to use holding companies to repatriate profits from tax haven companies via dividends.”More on this story here.
ECOFIN MINSTERS DISCUSS LATEST EU TAX DEVELOPMENTS
At the latest session of the Council of Economic and Finance (Ecofin) ministers in Brussels tax issues such as VAT simplification, company tax and the parent-subsidiary directive were discussed by the ministers. Taxation Commissioner Fritz Bolkestein also categorically denied any suggestion that the Commission had any intention to propose harmonization of company tax rates. On the contrary, he affirmed that the Commission supports fair tax competition, and pointed out that a single tax base for companies would increase comparability between Member States’ tax rates and so favor competition.More on this story here.
OECD “PRUDENCE” WARNING FOR UK
Gordon Brown was told by the OECD to raise taxes or cut planned spending if he was to avoid breaking his fiscal rules. Making its point by using the chancellor’s favourite word, the rich countries’ think-tank said it would be “prudent” to tighten fiscal policy. The OECD added to warnings that Mr Brown is in danger of breaking his “golden rule”: that the government should borrow only for investment, not to fund current spending.More on this story here.
MESSY EUROPEAN TAX LAWS PROVOKE THE CAYMAN PEOPLE
UK Chancellor of the Exchequer Gordon Brown is threatening the imposition of the Savings Tax Directive, an EU law designed to curb tax evasion, which requires banks automatically to disclose to EU tax authorities details of interest paid to EU residents. It is a messy law, a product of German, French and Italian concern that car bootloads of cash are disappearing into Luxembourg and Swiss bank accounts. But the curb on bank secrecy has failed because a compromise was needed to bring non-EU Switzerland on board. It was agreed that bank secrecy states (Austria, Luxembourg, Belgium and Switzerland) can avoid automatic disclosure if they impose a withholding tax on EU depositors.
Jersey and the Isle of Man have grudgingly agreed. But Cayman is still resisting and a deputation of islanders arrives next week in London, threatening legal action. Cayman could declare independence, but that may not be necessary. Apparently the Swiss have spotted a loophole: the directive applies only to deposits by individuals, and a massive offshore corporate restructuring is already under way.More on this story here.
POLL FINDS BERMUDANS LARGELY OPPOSED TO THE PROPOSED SALE OF BANK OF BERMUDA
Islanders are largely opposed to the proposed sale of Bank of Bermuda to global banking giant HSBC, according to a poll conducted at the weekend for the Bermuda Sun. Just 33.7% of the people polled between November 20 and 23 expressed support for the proposed sale, while 42.2% opposed the deal and 24.1% were undecided.
Pollsters did not ask respondents their reasons for opposing the deal, but after hearing the results yesterday, shareholder Katherina Harlow, who is hoping to organize dissenting shareholders to vote against the deal, said people are genuinely concerned about what it will mean for Bermuda when a foreign entity buys the bank in its entirety. Anne Kast, president of Kast Investment Management, says that no matter the polls results, the sale will go through.More on this story here.
GUIDANCE ISSUED BY IRS & TREASURY ON REPORTING OF FOREIGN DIVIDENDS
The Treasury Department and the IRS issued guidance on information reporting on dividends from foreign corporations under the provisions of the Jobs and Growth Tax Relief Reconciliation Act of 2003, which provides for a 15% (5% for taxpayers in the 10% and 15% tax brackets) tax rate for certain dividends received by individuals.
By reducing the rate of tax for individuals on certain dividends, the 2003 Act reduces the double tax on dividends. Notice 2003-79 provides guidance for persons required to prepare Form 1099-DIV and other information reporting with respect to dividends from foreign corporations and for individuals receiving such forms.More on this story here.
EASY-TO-OBTAIN SUBPOENAS CAN UNLOCK YOUR INTERNET PRIVACY
When the Recording Industry Association of America started issuing subpoenas to Internet service providers last summer, the move unnerved computer users who had downloaded hundreds of tunes to their hard drives. But if you do not use music file-sharing sites, you have nothing to worry about, right? Wrong. The same law that allows the RIAA to find out who is illegally sharing Johnny Cash tunes also lets anyone -- including abusive spouses, online stalkers, and blackmailers -- find out personal information (perfectly legally in many cases) about people that they have corresponded with on the Internet.
The Digital Millennium Copyright Act (DMCA) allows copyright holders to seek damages from anyone who steals copyrighted material. But the RIAA by itself cannot get the names of the file-sharers. The organization only knows the file sharer’s IP address at the time of the alleged violation. Using those two pieces of information, however, the RIAA can file a form with a federal court clerk, and have the clerk issue a subpoena -- a legal demand for information from the suspected music pirate’s ISP -- to find out the name, mailing address, phone number, and e-mail address of the copyright violator.
Thanks to section 512(h) of the DMCA, literally anyone can walk into a federal courthouse, fill out a form alleging that they are the victim of a copyright violation, and walk out with a legal document in hand that gives them the right to ask an ISP for a customer’s contact information. The law requires only that you have a “good faith belief that someone violated your copyright,” says Sarah Deutsch, vice president and associate general counsel for Verizon, one of the ISPs fighting the RIAA’s subpoenas against Internet users. No judge reviews the request, and the clerk issues the subpoena on the spot.
And in fact someone could technically argue that an online acquaintance has violated their copyright. Every e-mail you write is copyrighted automatically, so an enemy could claim that you forwarded their e-mail message without their permission and thus violated their copyright.More on this story here.
MISTRIAL IS DECLARED IN TAX WITHHOLDING CASE
Jurors in Fort Worth, Texas failed to reach a verdict Tuesday in the trial of a Texas businessman who has not withheld taxes from his workers’ paychecks since 2000, the second significant setback in four months for the federal government in tax cases. The defendant, Richard M. Simkanin, 59, who says he is a citizen of the Republic of Texas and not of the United States, was returned to jail, where he has been held since July, until a new trial begins in Federal District Court.
In August, Vernice Kuglin, 58, a Federal Express pilot, was acquitted on six counts of tax evasion. She testified that she wrote letters asking the IRS what law required her to pay taxes. Her lawyer said the letters, which were not answered, showed that Ms. Kuglin lacked criminal intent. The acquittal does not excuse the taxes owed by Ms. Kuglin, which the IRS is trying to collect.
Mr. Simkanin made similar arguments when he testified at his one-day trial on Monday. Before he stopped withholding taxes from workers at his Arrow Custom Plastics in Bedford, Texas, Mr. Simkanin obtained written opinions from a lawyer and a certified public accountant that he was not required to withhold, his lawyer, said. “He sincerely believes he does not have to withhold,” said his lawyer, citing a Supreme Court standard for acquittal of tax evasion.
William Cohan, a lawyer in San Diego who has defended many tax protesters, said that “the statutes that impose filing requirements read like gobbledygook to the average person,” making convictions difficult. He said “the policy of the IRS is to retaliate against people who challenge their authority instead of saying, ‘Here’s the law.’”More on this story here.
REPUBLICAN FEARMONGERING AT ODDS WITH THEIR RESULTS
The Republican National Committee has shown what President George W. Bush’s re-election campaign will be about: fearmongering. The essence of the RNC’s first commercial was that if you do not re-elect Bush, the big, bad boogeyman will get you. You should remember that it was on Mr. Bush’s watch that the big, bad boogeyman got us on September 11, 2001. So far as we know, Mr. Bush didn’t have a clue. You should also remember that two years later, the Bush administration has: (1) failed to identify and capture the anthrax killer; (2) failed to capture or kill Osama bin Laden, the actual boogeyman who got us; (3) failed to capture or kill Saddam Hussein; and (4) failed to capture or kill Mullah Omar of Taliban fame.
Worse, rather than going after the terrorists who actually attacked us, Mr. Bush has invited all of the world’s terrorists to attack us by declaring war on them and has gotten us bogged down in two guerrilla wars. Whatever happened to the peace dividends? You certainly cannot find them in our $400 billion military budget.
All we have to do is cut the apron strings from Israel and pull our troops out of the Middle East, where they have no business being anyway, and Middle East terrorism directed toward us would evaporate overnight. The secret of the game afoot is that Mr. Bush has no desire to win the war on terrorism. What he wants is perpetual war, because that means perpetually enhancing the power of government.More on this story here.
MEDICARE FRAUD -- REFORMING OUR WAY TO BANKRUPTCY
This is what the Bush administration has reduced me to: The other day, I was rooting for a Ted Kennedy filibuster. Of course, the Massachusetts senator and I had different reasons for opposing the Medicare bill championed by President Bush and Republican leaders. Kennedy claimed the bill “cynically uses the elderly’s need for prescription drugs as a Trojan horse to reshape Medicare,” calling it “a calculated program to unravel Medicare, to privatize it and to force seniors into the cold arms of HMOs.”
I wish the Republicans were that smart. If the Prescription Drug and Medicare Improvement Act of 2003 is a Trojan horse, it is made of solid titanium, with a tiny opening through which the soldiers of reform are unlikely to escape. The essence of the Medicare bill is a reckless expansion of a program that was bound for bankruptcy even before the Republicans decided to steal an issue from the Democrats by pushing a huge new prescription drug entitlement.More on this story here.
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