Wealth International, Limited

Offshore News Digest for Week of December 8, 2003


The American people have not seen widespread bank runs since 1933. In that object at least, the Federal Deposit Insurance Corporation has succeeded. But at what cost? To insure deposits is to invite bad banking -- and worse; it is to foster reckless speculation and unsound investments, help make inflation permanent instead of intermittent, obstruct the curative powers of economic contractions, and divorce freedom from responsibility.

More on this story here.


In his most recent book, On the Unseriousness of Human Affairs, James V. Schall contends that man is not now and cannot be master of all, but in his mad drive to be so has inverted the rational order of human affairs. Where once man might have pursued the simple pleasures of the virtuous life in a fallen world, modern man will not be content with anything less than the creation of heaven on earth, a material paradise where the problems of economics and politics have all been consumed by the end of history. Schall not only denies that such a thing is possible, but that the very pursuit of such perfection is dangerous and contrary to what man was created for: for happiness and for contemplation of the “higher things”, the things over which man has no control.

Throughout history, Americans in general have been remarkably immune to the pride and the temptations of bringing heaven to earth. Generally skeptical of messianic visions like Marxism, fascism, and utopian socialism, Americans have largely shrugged off the frantic claims of ideologues that all can be made perfect if we are only willing to abandon ourselves to the pursuit. In other words, Americans have been reluctant to embrace only the serious things. Reading Schall’s words, it is difficult to see how we can continue to tell ourselves that this is not the road down which American civilization is now headed.

More on this story here.


Mexicans seem to regard laws as interesting concepts that might merit thought at some later date. There is much to be said for this. The governmental attitude seems to be that if a thing doesn’t need regulating, then don’t regulate it. Life is much easier that way.

If a law does not make sense in a particular instance, a Mexican will ignore it. Where I live it is common to see a driver go the wrong way on a one-way street to avoid a lengthy circumnavigation. Since speeds are about five miles an hour, it is not dangerous. The police do not patrol because there is not enough crime (in my town: the big cities are as bad as ours) to justify it. It works. Everybody is happy, which is not a crime in Mexico.

More on this story here.


It has been a long time coming. But after years of false starts, security systems based on biometrics -- human characteristics such as faces, hand shapes and fingerprints -- are finally taking off. Proponents have long argued that because biometrics cannot be forgotten, like a password, or lost or stolen, like a key or an identity card, they are an ideal way to control access to computer networks, airport service-areas and bank vaults.

But biometrics have not yet spread beyond such niche markets, for two main reasons. The first is the unease they can inspire among users. Many people would prefer not to have to submit their eyes for scanning in order to withdraw money from a cash dispenser. The second reason is cost: biometric systems are expensive compared with other security measures, such as passwords and personal identification numbers. So while biometrics may provide extra security, the costs currently outweigh the benefits in most cases. In the wake of the terrorist attacks of September 11th 2001, however, these objections have been swept aside.

More on this story here.


At present, Australian law does not include any provisions in either the civil or administrative codes which deal with the creation, marketing and selling of tax shelters or tax avoidance plans. However, under new legislation which the government hopes to have in place by January 1 2004, civil courts will be able to impose penalties up to A$550,000 (US$400,000) or double the amount received by the promoter from selling an abusive tax shelter.

More on this story here.


Argentina’s economy is showing signs of life after the battering it received in 2001-02. Shops are looking forward to their best Christmas in three years and tourism is booming. Even in the less glamorous neighbourhoods of Buenos Aires long-shuttered businesses are starting to re-open. Out in the pampas, farmers are buying new tractors and trucks, and market towns are buzzing with life.

Three things have helped the appearance of recovery along. One is simply the depth of the hole into which the economy fell. Even if growth continues at its current brisk rate, GDP will not return to its 1998 level until 2005. Unemployment is down from its peak of 21.5% last year, but is still at 15.6%. Second, macroeconomic policy has been more effective than critics admit. Third, the government has focused on boosting domestic consumption at the expense of the demands of foreign creditors, banks, and privatised utilities. This is controversial, but has arguably made economic sense -- it has certainly made political sense for President Néstor Kirchner.

More on this story here.


The continued IRS attempts to retaliate against me can only serve to expose an entire income taxing apparatus that, on the surface, portrays itself as a friend of truth and defender of justice, but in reality belies much more sinister actions and goals. My legal team has informed me of a virtual laundry list of government misdeeds in this case, some of which I recognized myself and others only experienced legal minds can recognize. Nonetheless, the implications are so profound that I myself was shocked.

Don’t miss upcoming email alerts that will show you why, despite the short-term euphoria my IRS accusers are basking in their efforts to discredit and silence me, we are so enthused about what lies ahead.

More on this story here.


Vlad the Victorious.

The most powerful man in Russia just got more powerful still. On Sunday Russians went to the polls to choose representatives for the state Duma, the lower house of parliament. The results were stunning. United Russia, a broad tent of politicians allied to the immensely popular president, Vladimir Putin, won 37% of the vote. The two liberal, pro-western parties did not even gain enough votes for a single seat in this part of the election, which was decided by national lists. Ultra-nationalists, who mostly vote with Mr. Putin and are led by the demagogic Vladimir Zhirinovsky, made a strong showing at under 12%. The Motherland, another pro-Kremlin party outside United Russia, managed 9%.

Mr. Putin called the poll “another step in strengthening democracy”. Hardly. A parliament dominated by pro-Kremlin parties (parties, indeed, created by the Kremlin) and devoid of ideology apart from various degrees of nationalism is far from the democratic ideal. The opposition is dying off fast: the once-strong Communists also slumped, coming second with just 12.7% of the vote. The election itself seems to have been more or less clean, especially by old Soviet standards. However, the state-owned media made clear its biases -- candidates opposed to Mr Putin got far less television airtime than the president’s supporters. Use of government resources also favoured pro-Kremlin parties.

For the trounced liberal parties reckoning lies ahead. They have clearly failed to make themselves appealing to Russian voters in the 12 years since the Soviet Union collapsed. Recently, they have been hurt by their support for big business, especially amid the popular crackdown on Yukos. But their defeat may contain the seeds of a much-needed rethink and relaunch.

More on this story here.

Russian regression?

The Russian parliamentary election, in which Vladimir Putin’s United Russia party (which seems to stand mainly for “we’re in power and handing out favors, so keep us in power”) got 37.1% of the vote -- which could translate into a working majority with coalition parties in the Duma and maybe even a two–thirds majority to amend the constitution so Putin can run for a third term -- has caused a certain amount of discomfort in the West. Much of the discomfort is probably warranted, but most of those who have expressed it seem to have trouble diagnosing the real problem.

What most Western observers tend to do is to conflate the term “democracy” with civil and decent governance. In fact, however, what they are often referring to are institutions and habits of thought that tend to moderate, even to put the brakes on pure democracy or raw democracy. In the United States, for example, the Bill of Rights was not designed to be subject to majority rule. Most of America’s founders, in fact, would have told you they opposed democracy, at least as they understood the term. What Russia lacks, then, is not so much democracy as such -- the election came off, although turnout was down, perhaps reflecting a certain burgeoning cynicism -- but the intermediating institutions that keep democracy from being two wolves and a sheep voting on what is for dinner.

Russia lacks what we call a civil society. A civil society is not an inevitable development in a democracy; in fact it is rather rare. And its function in society is to blur democracy, to stem the majoritarian impulse, to provide ways other than having political influence, PR, or being part of the majority to find both personal fulfillment and a way of making a living.

More on this story here.

Russia’s “controlled democracy” strikes back.

The tectonic plate shift in Russian politics, which occurred in parliamentary elections Sunday would make Russia diplomatically more prickly and less hospitable to foreign investment. There are three winners and two losers in the elections. The greatest winner is President Vladimir Putin. The second and third winners are socialist/nationalist newcomer Motherland, led by former communist party economic guru Sergey Glazyev and former Duma’s Foreign Affairs Committee Chairman hard-liner Dmitry Rogozin, and rabble-rouser Vladimir Zhirinovsky’s “Liberal Democrats”. The big losers are the democratic and free market forces, and the business community.

More on this story here.

After the Russian elections.

The Duma that results from the elections is a democrat’s nightmare: three parties whose only ideologies are an almost slavish loyalty to President Vladimir Putin and varying degrees of nationalism, plus one made of the dregs of seven decades of totalitarian rule. The two liberal parties were always small and their democratic credentials were often dubious; but, if ineffectual, they were at least loud. For the next four years, parliament belongs to Mr Putin and to those around him. True, that was nearly the case before. And the liberals are much to blame for their own defeat. The shock of it may trigger a needed renewal. But, given Russia’s history, it is not a good sign for the future.

To some, all this confirms the suspicions that rather than being a flowering of democracy, the 1990s were just a momentary lapse of Russia’s normal authoritarianism. The elections have overturned a big assumption about Russia’s democratisation. This was that as a middle class emerged, it would start to adopt democratic values and demand them from its leaders. A huge popular groundswell desired the fall of the Soviet Union, after all, and if those people were at first too busy surviving the aftermath to worry about democracy, prosperity would soon fix that. The 1990s did little to improve most Russians’ lives, but under Mr. Putin stability has returned, the economy has grown and a true middle class is appearing. So why did they not vote as they were meant to?

More on this story here.

Anatoly Chubais is being tolerated by the Kremlin, for now.

The question that Russians ask about Anatoly Chubais these days is, “will he be next?” When Mikhail Khodorkovsky, the boss of Russia’s biggest oil firm, Yukos, was arrested in October after a four-month-long series of probes into his firm and associates, other Russian business magnates prudently kept their mouths shut or muttered vaguely that it did not affect them. Not so Mr. Chubais. As he repeated this week: “We believe that the actions undertaken of late in regard to Yukos are serious signs indicating a change of course in the country, and they are dangerous signs. We think it affects the fundamental principles of the Russian state and economy.”

This is not just a royal “we”. Most of Russia’s business “oligarchs” made their money in similar ways to Mr Khodorkovsky, grabbing state assets in the complex and legally murky privatisations of the mid-1990s. Some think that as long as they do not wield too much political influence -- as Mr Khodorkovsky did, to his cost -- they and their money will be safe. But many fear that the move against Yukos marks the start of either a more interventionist industrial policy or, worse still, an attempt by a few high-placed government officials to grab assets for themselves.

More on this story here.


Since the Bank Secrecy Act was enacted in 1970, the clear focus of the Act has been to assist the government in fighting money laundering, and more recently after 9/11, to help fight terrorism. Initially, banks were encouraged and are now required to establish guidelines and procedures to identify potential money laundering schemes in order to file Suspicious Activity Reports (SARs) with the government. One of the most important tools used by banks to expose criminal activity has been to adopt “Know Your Customer” (KYC) guidelines that help detect suspicious activity by account holders.

The Government’s efforts to encourage banks to freely file SARs include safe harbor provisions that were developed to insulate banks from liability for filing a SAR. Additionally, financial institutions are prohibited from informing the account holder of the filing of a SAR or the contents of such a report. Importantly, the safe harbor provisions do not insulate a bank from claims by third parties alleging the bank failed to follow Bank Secrecy guidelines such as KYC policies or for decisions not to file an SAR.

Certainly, those familiar with the banking industry are aware that to “Know Your Customer” does not mean the bank is responsible for evaluating how an account holder, corporate or otherwise, chooses to spend its money. However, what a jury or even a Judge may believe a bank’s duty is, particularly in light of broad based KYC policies, is not clear.

More on this story here.


One night I was half-watching a black-and-white, early 1960s episode of The Andy Griffith Show, when, all of a sudden, the homespun wisdom of Griffith as Sheriff Andy Taylor touched on today’s heated debate over how to balance individual privacy with security. Andy responded to a suggestion by his deputy Barney Fife by saying: “You can’t ask a private citizen to become a police spy. It’s too dangerous. Something could go wrong.” The statement jolted me, and I thought, if only Sheriff Taylor had been there to offer this profound piece of advice to the Republicans and Democrats writing the USA PATRIOT Act.

Title III of the act, which contains provisions to counter money-laundering, requires a host of private businesses to become “police spies” on their customers. These little-known provisions of the much-talked about law draft a substantial number of private-sector employees as citizen soldiers in the war on terrorism as well as on the broadly-defined crime of “money laundering”. Do you think I am exaggerating when I say “citizen soldiers”? Well, I am only using the very terminology of one of the chief defenders of these provisions

The PATRIOT Act also redefines the term “financial institution” to include a broad swath of businesses. The law gives the Feds the authority to apply “know your customer” requirements to securities firms, insurance companies, real estate brokers, auto dealers, jewelry stores, as well as any other business the government finds has “a high degree of usefulness in criminal, tax, or regulatory matters.” But what Title III requires of these businesses is more than just complying with search warrants or subpoenas. They must actively monitor their customers, report transactions over a certain amount and also file “suspicious activity reports” on certain transactions that deviate from customers’ normal patterns. Failure to report “suspicious activity” can result in civil or criminal penalties set by the Patriot Act.

More on this story here.


U.S. banks have firmly established themselves as the biggest users of offshore financial centers after leading a migration of money into the traditional tax havens in recent quarters, the Bank of International Settlements (BIS) said. U.S. banks accounted for $601 billion, or one third of all offshore claims, with most of the money going to the Cayman Islands and Jersey.

More on this story here.


Last Tuesday Jersey witnessed the largest mass-demonstration in its history, in protest at rising taxes and unemployment. These are partly due to mismanagement by the island's government, but they are also signs of the damage done to the economy by the British Government’s attempts to force its “associated territories”, such as the Channel Islands and the Cayman Islands, into complying with an EC directive aimed at closing down “tax havens”. As “Crown dependencies”, the Channel Islands are not run by the British Government; nor do they belong to the EU; nor do they meet the international criteria for “tax havens”. Only a fifth of the Caymans’s banking business is with EU clients.

The shabby story of how the British Government has ridden roughshod over the rights of these small nations goes back to 1998, and a proposed EU tax on investment interest (the so-called “withholding tax”), designed primarily to stop rich Germans salting away their cash in Luxembourg banks. The UK Government was terrified of the damage this would do to the City of London and, as an alternative to the tax, it agreed to bring pressure on its “associated territories” to end their banking secrecy, so that EU tax officials could see who made deposits there.

Singapore, Dubai and other countries which still have secrecy rules are rubbing their hands.

More on this story here.

UK says it will not impose direct rule on Caymans over EU tax directive.

The British government will not resort to the drastic measure of imposing direct rule on the Cayman islands in order to force the jurisdiction to adopt the provisions of the European Savings Tax Directive. Kate Joad, of the Governor’s Staff Office also said that “The British government has consistently given the message that it is seeking less, not more, constitutional responsibility for the Territories.” However, despite of the protests of the Cayman government, it seems that the UK government is intent on seeing the provisions of the Directive imposed in the Caribbean jurisdiction, most likely through legislation.

More on this story here.

Anguilla questions UK’s commitment to modernization of Overseas Territories constitutions.

Tensions over the appointment of Bermuda’s new Chief Justice will not be the only fireworks at this week’s Overseas Territories Consultative Council (OTCC) meeting in London. The leader of Anguilla is set to clash with Britain after accusing London of being out of step with the international community for allegedly curtailing the island’s moves to modernize its constitution. The three-day meeting which began yesterday is focusing on the changing role of governors in Overseas Territories (OTs).

More on this story here.

Falklands show new vitality under self rule.

Councillor Mike Summers from the Falkland Islands government gave a speach about “constitutional evolution in the (U.K.) Overseas Territories, using the Falkland Islands as a case study.” He talked “principally about the drivers and key events stimulating constitutional change in the Falklands (whether formal or informal), the effect that change has had on the Islands themselves, how this affects our relations with the United Kingdom and, importantly in the circumstances of a disputed sovereignty claim, how it affects relations with our neighbours in Argentina.”

Among his conclusions is that “colonialism is well and truly dead. We no longer feel as though we are a colony, and the UK does not act towards us as though we were [vs. Argentine claims that the Falklands are a colonial relic].”

More on this story here.

UK Foreign Secretary Jack Straw: “We cannot offer an ever-increasing autonomy.”

Britain cannot keep giving Overseas Territories an “ever-increasing degree of autonomy” or London will not be able to meet its international obligations, Mr. Straw said yesterday. Speaking at the end of the Overseas Territories Consultative Council (OTCC) meeting in London, Mr. Straw said Britain would continue to partner Overseas Territories which wanted to keep the link to the UK, but a balance had to be struck between greater autonomy and adherence to international obligations.

“We all want a balanced relationship, with Britain guaranteeing security and defence to the territories on the one hand; and on the other, the territories developing further as well-governed small island economies where the rule of law and internationally accepted standards are observed,” Mr. Straw told the delegates, including Premier Alex Scott. “Many think our partnership is split into external affairs handled by the UK and internal affairs by the territories. But the world today is so interconnected that the boundary between internal and external issues is more and more difficult to draw.”

More on this story here.

Row over Bermuda Chief Justice now in Straw’s hands.

Premier Alex Scott warned Britain that to appoint a non-Bermudian Chief Justice against the will of Government would be a “regressive step”. Mr. Scott “forcibly” told Overseas Territories Minister Bill Rammell that Government wanted Bermudian Norma Wade-Miller as new Chief Justice rather than Governor Sir John Vereker’s choice of Englishman Richard Ground. After the meeting, Mr. Scott told The Royal Gazette he had discovered the views of the Premier carry less weight with Britain than he had thought.

The row has blown up after Sir John ignored Mr. Scott’s recommendations and is believed to have backed current Turks and Caicos Chief Justice Mr. Ground, supposedly because he has more experience of commercial law. The protests from Bermuda have been so strong that Mr. Rammell is passing on the difficult decision to Foreign Secretary Jack Straw.

More on this story here.

Zimbabwe quits the British Commonwealth -- time to ask what the club is for.

In a new twist on Groucho Marx’s adage that he would not like to be a member of a club that would have him as a member, Robert Mugabe has angrily withdrawn Zimbabwe’s membership of the Commonwealth. The move came in response to developments at the weekend, when the club of mainly former British colonies decided at its summit in Nigerian, to continue the southern African country’s suspension indefinitely. Zimbabwe had been suspended last year following a presidential election marred by violence and vote-rigging. Despite all the evidence that things have got worse, not better, Zimbabwe’s Commonwealth neighbours in southern Africa had lobbied for its reinstatement at the summit. But they failed in this, and in a linked attempt to unseat Don McKinnon, the Commonwealth’s secretary-general and a New Zealander, whom they see as a representative of what they call the “white” Commonwealth. But if the Commonwealth cannot even agree on the suspension of a country that has so egregiously departed from the club’s avowed aims of democracy and human rights, then what purpose does it serve?

Some criticize the Commonwealth for being little more than a talking shop, but it is a talking shop that poor countries seem to like. For former colonies, it is the most important global organization that the United States does not dominate. And though Britain’s Queen Elizabeth is the head of the Commonwealth, Britain has no special status. It is one of the few international bodies in which a tiny country like St Lucia has the same standing as G7 members like Britain and Canada. Individuals join clubs because of the people they will rub shoulders with. Why should heads of government, and the countries they represent, be any different?

More on this story here. Related story here.


The benefits of an offshore financial center being located in a sovereign state.

Being familiar with the process behind both the drafting and promulgation of legislation in a British dependent territory, it is clear to me that while the future direction of offshore financial services in British dependencies might be uncertain, the power that the British government has to influence the direction is not. The first issue of this newsletter in 1997 commented that there was something very reassuring about an offshore financial services center located in a sovereign state. Events since then have only reinforced that opinion.

A joy named “Sue”.

Tort, a private or civil wrong or injury for which the court provides a remedy, has become sheer torture and the Council of Economic Advisers in 2002 reckoned that America’s tort system absorbed 1.8% of GDP ($180 billion a year). It has been said that America has a liability crisis on its hands with over 15 million cases being processed annually, just in state courts. The consequences of today’s litigation epidemic in America has, like internet spam, hampered the smooth flow of commerce; it has made businessmen fearful in some cases and overly cautious in others. There seems to have been a general acceptance, endorsed by court decisions, that the likelihood of someone being completely responsible for their actions is only just slightly more feasible than Martians landing on earth.

The infamy of the Internal Revenue Service is being overtaken by the terror of tort which has become a strong motive behind creating offshore structures. Besides a war on terror there is now a war on error. Mclawsuits abound and taxes can become a small price to pay for insulating assets. Worryingly, many American judges, rather than interpreting the laws, appear to be sidetracking legislators and creating them from the bench. Is it any wonder that offshore trusts and foundations are so popular?

More on this story here.


Former President Arnoldo Aleman, dogged by corruption allegations for years, was convicted of embezzling millions of dollars from his impoverished country and sentenced to 20 years in prison. Aleman, a conservative who returned from exile under the leftist Sandinistas to rebuild Nicaragua’s ruling party, was also barred from serving in Nicaragua's legislature and fined $10 million.

It was the culmination of current President Enrique Bolanos’ anti-corruption campaign that quickly placed the current leadership at odds with Aleman and members of the party. Bolanos was Aleman’s hand-picked successor. Judge Juana Mendez described how Aleman and senior administration officials formed corporations in Panama, where public funds from Nicaragua were laundered and mixed with political donations.

The ruling appeared to counter fears that the judicial process had been compromised after Mendez decided to release Aleman from jail to a house arrest in November. The U.S. State Department had called Aleman’s release “a politically manipulated decision” and said that the Nicaraguan judicial system was “widely recognized as corrupt and politicized.” The Nicaraguan Supreme Court warned the United States to stay out of its business. The United States then suspended assistance to Nicaragua’s judiciary.

More on this story here.


Surely, stronger American growth should be pushing the dollar higher, not lower? That is what happened during the late 1990s. But the problem this time is that, if domestic demand grows much more strongly in America than in its main trading partners, America’s already large current-account deficit swells further because it imports more. America then needs to borrow even more from the rest of the world to finance that deficit. And the real cause of America’s growing taste for imports, of course, is not unfairly cheap production in Chinausually named as the culprit -- but its low saving, the result of rampant household borrowing and a huge federal budget deficit. So long as these persist, it will take an even bigger fall in the dollar to correct America’s external deficit.

In Europe a weak dollar is feared and resented. Politicians and businessmen worry that America’s gain will be their loss, and that their own firms will become less competitive as a result. And yet a rising euro need not be bad news for Europe. A stronger euro not only should make it easier for the European Central Bank to cut rates while holding inflation down, it also should make such reductions imperative because the rise in the euro itself is equivalent to a tightening of monetary conditions.

More on this story here.

US dollar may face renewed pressure.

The recent decline in the US currency, particularly against the euro and yen, has been long awaited by many economists, who say it could help to rebalance the global economy and reduce the large US current account deficit. And though the slide has been quite rapid, it has also been relatively smooth, raising hopes that the transition to a lower dollar can be managed without disruption and volatility. The euro rose as high as $1.217 on Friday. The slide in the dollar in recent months has come despite a string of economic data releases showing increasing strength in the US economic recovery. Analysts say that a series of tactical incentives for market participants is likely to put the dollar under further pressure in the weeks ahead.

In a recent speech, Alan Greenspan, said that at some point the willingness of foreign investors to continue funding the US current account deficit would diminish. But he said that the flexibility of the US economy and financial markets was likely to ease the transition. Mr. Greenspan referred to a Fed study in which the average current account deficit in rich countries since 1980 had risen to 5 per cent -- the present level of the US deficit -- before foreign investors balked at funding it. “Although the large majority of episodes were characterised by some significant slowing of economic growth, most economies managed the adjustment without crisis,” he said.

More on this story here.

The disappearing dollar.

Those who follow financial markets may be familiar with the term “strong-dollar policy,” which is used by Bush administration officials and Federal Reserve Chairman Alan Greenspan himself. However, if we judge Fed policy by Mr. Greenspan’s actions rather than his words, it appears we have a weak-dollar policy, a policy that erodes the value of your personal savings. The “strong-dollar policy” is nothing more than an empty political slogan. The inescapable truth is that the value of the U.S. dollar has fallen over 30% in the past year, which to most people would not seem indicative of strength. There are several reasons for this decline, but the single biggest factor has been Mr. Greenspan’s relentless increase of the money supply. There are roughly $16 trillion in worldwide use today, $5 trillion more than when Greenspan became Fed chair. The law of supply is immutable: When dollars are abundant they are also cheap.

Ultra-cautious investor Warren Buffett is trading heavily in foreign currencies for the first time, demonstrating his lack of faith in the dollar. His predicament is simple: He holds billions of dollars, and cannot afford to sit by and watch the value of those dollars drop another 30%. By taking a position against the U.S. dollar, his actions speak volumes. Unlike Warren Buffett, most Americans are stuck with their U.S. dollars.

More on this story here.

As dollars ship out, foreign cash heads home.

Just when US investors are finally going global, the rest of the world appears to be going local, deciding their own country is the best place for their money. US investors have been putting money into global equity funds and American Depositary Receipts for months now, as they discover the benefits of investing offshore after a decade of US growth.

Meanwhile, the decline in the US dollar and geopolitical concerns have made the US a less attractive destination for overseas dollars. Foreign money flowing into the US stock market has slowed to a trickle and much of it appears to be heading back to its native lands rather than looking for fresh opportunities elsewhere. Clark Winter, the chief global investment strategist at Citigroup’s private bank, says: “We are seeing now the biggest mass repatriation of money to occur in some years.”

He believes that the remarkably strong stock market rises throughout Asia, Africa and the Middle East this year were due mainly to this trend -- a view backed up by the fact that most of the countries seeing big rises are closed to foreign investors or offer only limited access. The Saudi Arabia stock market, which is closed to foreigners, has risen by 73% this year due to inflows from Saudis living both in and outside the country. Oman and Bahrain have likewise seen sharp rises in their markets. The Brazilian stock market has risen by more than 100% over the past year, as have African stock markets such as Ghana, Kenya and Zimbabwe, all of which have limits to foreign investment. Malaysia, Thailand and the Philippines have likewise risen despite foreign limits. Meanwhile, the withdrawal of foreign money from the US has extended to real estate.

More on this story here.

After gains, foreign stocks may still be cheap.

As strong as the stock market has been this year in the United States, many foreign markets have done even better, helped by the weak dollar, which fell to a five-year low against the euro last week. Americans have taken notice and are on course to invest more money abroad than in any year since 1993.

If the past is an accurate guide, this wanderlust may be untimely. The enthusiasm for foreign investment a decade ago turned out to be a mistake, as comparatively weak American markets took off and handily beat most other markets throughout the 1990’s. Many professional investors are convinced, however, that history is not repeating itself. They glimpse opportunities abroad for owning cheaper companies with higher growth prospects. At the very least, they say, foreign investment is a way to avoid putting all eggs in one basket.

Alan Brown, the London-based chief investment officer of State Street Global Advisors, said the case for investing abroad rests not only on the merit of stocks in different regions but also on the currencies in which they are based. “The dollar has been declining and, in my view, is likely to continue to decline,” he said. “That will increase returns on foreign markets.”

More on this story here.


Speaking before a packed house in Zurich, Marc Faber, known affectionately as “Dr. Doom” for swimming against the tide of conventional economic wisdom, said he believed that the dollar would fall in terms of its purchasing power over time, while wealth would grow in Asia. He was not particularly optimistic about the future of the Swiss economy.

Elaborating further he said: “We have very significant imbalances. In the United States the debt level is rising very rapidly and generating some, what I would call, artificial growth but it doesn’t produce capital spending or net capital spending. The capital spending occurs largely in Asia, specifically in China, and the production is also in Asia.

“In other words we have these continuous, very large trade and current account deficits of the US and as a result we have wealth accumulating in Asia. This is reflected in the rising foreign exchange reserves of central banks in Asia and also of rising asset prices and in some cases rising currencies.”

More on this story here.


In a move to boost revenue, global accounting firm Deloitte Touche Tohmatsu proposed that the government offer a “tax amnesty programme” to let taxpayers pay outstanding taxes without being penalized. “The programme not only can allow them to come forward and pay back taxes, it can also encourage them to file taxes properly in future,” said the accounting firm's tax services partner, Joseph Wong. The programme could boost the government’s tax revenue and therefore ease its deficit, which Deloitte estimates at HK$75 billion this fiscal year, said the firm’s national chief knowledge officer.

More on this story here.


Entrepreneur Jon Carson needed four programmers for his latest venture, pronto. The numbers for experienced American programmers doing the specialty work he required: $80,000 a year, with benefits adding an additional $5,000 to $10,000 per programmer. The number for the services from India: $40,000 per programmer. As he thought more about his decision, Jon realized he had a valid business reason to hesitate: As the head of a startup that had been going for less than a year, he was not at all certain he should take the risk of having essential work done at a far-off location by people he did not know, and with whom he could communicate only via e-mail and phone. Still, there was that matter of nearly $200,000 in annual savings.

And then Jon had a brainstorm. What if he offered Americans the jobs at the same rate he would be paying for Indian programmers? He placed some ads in The Boston Globe, offering full-time contract programming work for $45,000 annually. (He had decided that it was worth adding a $5,000 premium over the Indian workers in exchange for having the programmers on site.) The result? “We got flooded” with resumes, about 90 in total, many from highly qualified programmers having trouble finding work in the down economy, Jon says. His decision: “For $5,000 it was no contest.” American it was.

The implications of Jon’s approach are potentially mind-bending. What if other companies begin taking the same approach -- offering Indian-style wages to American workers? On the positive site, we could begin to solve our job-creation problems. But on the negative side, America’s standard of living would inevitably decline. There is only one way to find out for sure how it all might shake out, and that is for other executives to replicate the experiment.

More on this story here.


The rational choice argument for the Welfare State goes as follows. A rational individual will choose to insure against catastrophic contingencies that cannot be insured on the private insurance market for reasons of adverse selection or moral risk. These contingencies, insurable only by the state, include catastrophic illnesses, long-term unemployment, and a host of disabilities assigned by the lottery of birth. In order to compensate for these disabilities, other social policies are needed, such as free education. This sort of theory is perhaps best exemplified by John Rawls’s A Theory of Justice, but it is more or less implicit in most contemporary arguments for the Welfare State.

The rational-choice justification for the Welfare State is faulty if only because it does not hold for risk seekers. A risk seeker may well prefer the chance of being very rich and the risk of poverty, to expensive security. You only need one such individual to invalidate the claim that the Welfare State would be chosen unanimously by rational individuals. But there is another, more important, reason why the rational-choice approach to politics does not support the Welfare State: even for a risk neutral individual or for a risk averter, the Welfare State has costs that will often dwarf its benefits.

The problem is not just that, in order to be a welfare fountain for some, the Welfare State has to be a taxing vampire for others, but also that it must monitor and control the populace in a way that necessarily imposes costs on anybody who does not like to be monitored and controlled, and that such powers increase the risk of tyranny. The Welfare State cannot, in any meaningful way, assume responsibility for the welfare of the population without knowing much about its subjects, without imposing ID numbers and papers, without systems to detect need and abuse, and without secondary laws meant to protect its wards from imposing costs on the system (like people who drink, who are obese, and so on and so forth). In the process of redistributing income and the pleasures of life, the state necessarily becomes more and more powerful. As Bertrand de Jouvenel puts it, “The more one considers the matter, the clearer it becomes that redistribution is in effect far less a redistribution of free income from the richer to the poorer, as we imagined, than a redistribution of power from the individual to the State.”

More on this story here.


No institution has worked more consistently to obliterate property rights than the federal courts, making certain political groups very happy. Thus, it is no surprise that Democrats on Capital Hill are blocking the confirmation of a judge to the U.S. Court of Appeals for the District of Columbia Circuit who -- wonder of wonders -- believes in property rights. Justice Janice Rogers Brown of the California Supreme Court has been disparaged by one Democrat as “the love child of Ayn Rand and Lyndon LaRouche.” Just what makes Justice Brown so horrifying? It must be statements like; “Where government moves in, community retreats, civil society disintegrates, and our ability to control our own destinies atrophies.” In that same speech Brown went on to say, “The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible.”

Unlike other judges, Brown typically upholds property rights against government regulation -- interference which, she believes, has helped turn “democracy into a kleptocracy.” The big worry is that with judges like Brown, the courts might work to unravel the myriad of New Deal laws that have, since enactment, trampled property rights and hamstrung the economy. An example of Justice Brown’s clear and biting prose: “Judicial activism is real and it has produced many jurists who see themselves less as judges than philosopher-kings ready to rule and dispense their wisdom to the great unwashed masses.”

More on this story here.


Of the thousands of people referred by the FBI and other federal investigators to prosecutors in connection with terrorism since Sept. 11, 2001, only a handful have been convicted and sentenced to long prison terms, according to an analysis of Justice Department figures published Monday. The analysis, carried out by statisticians and long-time law enforcement observers, found that in the two years after the Sept. 11 attacks about 6,400 people were referred to prosecutors in connection with terrorism or terrorist offenses.

But of the 2,681 cases that had been wrapped up by the end of September 2003, some 879 were convicted of a crime and less than half of those -- 373 -- were sent to prison. Five received sentences of 20 years or more, which was actually fewer than in the two years before Sept. 11. The figures analyzed have been repeatedly cited by administration officials to justify their contention that the government is winning the war against terror.

The American Civil Liberties Union said the report “punctures the hype that the Justice Department and government have used to justify the Patriot Act and other measures they say are need to fight terrorism.” But the FBI said the report’s data was “taken out of context,” and challenged the methodology of the analysis, saying it led to “misleading and unfounded conclusions ...”.

More on this story here.


A massive project, called US-Visit, will replace a patchwork of disparate immigration databases and paper-based files and will require that almost all visitors be digitally fingerprinted and photographed. The system was developed to fulfill a 1996 congressional mandate for a comprehensive immigration entry-exit program, and immigration officials hope it will help prevent visa fraud, deter terrorists and keep visitors from overstaying their visas. It is no small task. In 2002 alone, the government recorded 200 million border crossings by nonresidents.

Although the multiyear, multibillion-dollar contract for rolling out the system to all airports, land entries and seaports and for stitching together disparate databases has not yet been awarded, members of Congress are already scrutinizing the effort. Sen. Joe Lieberman (D-Connecticut) accused the Department of Homeland Security of breaching federal law by failing to issue a required report on the program’s privacy impact. US-Visit’s privacy impact statement is still being drafted in close collaboration with Homeland Security’s chief privacy officer, Nuala O’Connor Kelly, who disputes the contention that the report is late or even that it is required for the project since no data is captured on American citizens.

More on this story here.


The database -- frequently used by law enforcement, credit agencies and private investigators -- was accessible through a simple search form on the Web and contained millions of names, social security numbers, phone records and public records such as residential histories, confirmed LocatePlus.com, which provides the database service.

Public access to the database underscores the danger inherent in placing such information on the Internet: Even the smallest slip-up can lead to a data leak. “It is a little disturbing, to say the least,” said Alfred Huger, senior director of engineering for security software firm Symantec. “Uncontrolled access like this, to this level of information, makes identity theft trivial.” Security analysts at Symantec discovered the glitch when someone posted the address of the database to an Internet relay chat room. Symantec notified the FBI and CNET News.com. Soon after, LocatePlus was notified of the incident.

More on this story here.


Corporate scandals cost New York state $13 billion in the last 2 years.

A report from the state Comptroller said scandals on Wall Street and in the accounting and energy industries took a $2.9 billion bite out of the state’s economy, cut tax revenues by $1 billion and reduced the state employees’ retirement fund by $9 billion. He determined the state’s cost by taking a fraction of the $35 billion nationwide loss that the Brookings Institution blamed on the scandals in a 2002 report. He said the state’s economy is about 8.4% of the national economy.

More on this story here.

No prohibitions against investing IRA assets offshore.

Collectibles such as artwork and antiques are resticted. [However, investing in a company or partnership that invests in artwork, etc. can probably be done if structured properly.]

More on this story here. US tax and regulatory restrictions on offshore fund investing primer available here (PDF file).

How protected are your retirement assets against creditors?

When seeking to protect your retirement assets, a number of factors come into play. Unless the judgment creditor has an automatic right to pursue retirement assets, a creditor’s ability to reach these funds depends on whether the Employee Retirement Income Security Act (ERISA) applies to the plan holding the assets.

When a non-ERISA plan is involved, creditors can access a participant’s plan assets unless there is a state law that prevents them from doing so. Non-ERISA plans include individual retirement accounts (IRAs), simplified employee pension (SEP) plans, nonqualified deferred compensation plans, phantom stock plans, stock bonus plans, and tax-qualified retirement plans in which only the owner (and possibly the owner’s spouse) is the beneficiary.

With ERISA retirement plans -- such as profit-sharing plans, money purchase plans, defined benefit plans, and 401(k) plans, retirement benefits are protected from creditors during the period retirement assets are held in trust. However, when the participant’s interest in the trust is in payout status, things change.

More on this story here.


An interesting rumination cum analysis on the current state of the U.S. economy and financial markets by Gary North.

More on this story here.


It took Ireland around 10 years to develop itself to deal with EU institutions. Malta cannot afford this timeframe and it is important that the focus is placed on core areas of interest to Malta and Gozo and build up alliances with some of the existing and new member States. These are among the major considerations that came out of a fact finding mission by the Chamber of Commerce and Enterprise and the Federation of Industry to analyze how Ireland prepared itself to exploit the full benefits of EU membership.

More on this story here.


Marcos Kyprianou defended the government’s decision to partially lift banking confidentiality, after critics argued that the measures, intended to root out tax evasion, were too severe. George Hadjianastasiou, chief of the Commercial Bankers Association, had said that the government’s policy was too heavy-handed and warned that capital will eventually flee the island as a result.

Kyprianou criticized the banks for being uncooperative towards the Inland Revenue when the latter requested information on accounts for tax purposes, and assured them that the information sought by the tax department is being used solely for purposes of investigating tax evasion. The minister also suggested that a proposed tax amnesty, offering a reduced 5% tax for those revealing details of undeclared accounts, would be impossible without at least a partial lifting of bank confidentiality.

More on this story here.


John Manley announced fresh amendments to the Income Tax Act designed to limit the tax benefits associated with charitable donations, which the government says are being abused by marketers of tax shelter schemes. The proposed amendments are in response to concerns over so-called “buy low, donate high” schemes in which a taxpayer is encouraged to donate property to a charity claiming a value far in excess of its acquisition costs.

More on this story here.


Top officials from around the globe signed the first worldwide anti-corruption treaty Tuesday, a move that may open banks in money havens to more scrutiny and allow some poor countries to recover billions of looted dollars. John Ashcroft was among the first to sign the U.N. Convention Against Corruption, a pact that requires countries to aid in investigations and return money to wherever it was stolen or embezzled from.

The convention, expected to be signed by some 125 nations over the next three days, will put both rich and poor nations on a more equal footing when it comes to tracing and returning scandal-tainted money that often winds up in wealthy banking capitals. Of most interest to the United States are provisions requiring other countries to open up money laundering investigations, expedite extraditions and prevent the establishment of phantom banks with little legitimate business.

While the pact does not require countries to repeal banking secrecy laws, it does require safeguards so that politicians can be held accountable for their acts and banking records can be examined. The treaty got significant support in the developed world, and requires signatories to fight theft in the corporate sector and punish domestic companies that pay bribes in other nations.

More on this story here.


The Justice Department said nearly 2,000 bogus misconduct complaints against I.R.S. agents were filed as part of a long-running fraud by a group that calls itself a Christian ministry to obstruct the federal income tax laws, in papers filed in a court in Florida. The DoJ claimed that the false complaints were made to intimidate tax agents. The complaints cited the 1998 I.R.S. Reform and Restructuring Act, which requires the firing of tax agency workers who commit improper acts known as the “10 deadly sins”. Some complaints also asserted that I.R.S. agents had committed crimes.

Named as leaders of the plan were Milton Hargraves Baxley II, a lawyer in Gainesville, Florida; Eddie Kahn, a lecturer in Sorrento, Florida; Mr. Kahn’s wife, Kathleen; and Bryan Malatesta, a certified public accountant in Cleburne, Texas. Mr. Kahn, who tells clients that no law requires the payment of taxes, runs Guiding Light of God Ministries, which he transformed in August from American Rights Litigators.

The Justice Department lawsuit seeks an injunction barring the leaders and an associate, David Lokietz, from promoting tax evasion and obstructing enforcement of the tax laws. It said that the government would suffer irreparable harm if an injunction was not granted and that the defendants would suffer no harm by being required to obey the law. The lawsuit is the first instance of the government’s saying an organized plan exists to fabricate complaints for profit.

More on this story here.


Relatives of Elian Gonzalez sued six members of the Immigration and Naturalization Service for storming into their house and seizing the boy on April 22, 2000. Elian, 6 at the time, had washed ashore on an inner tube after his mother drowned while trying to make it from Cuba to Florida. He was returned to his biological father in Cuba after the raid.

“We are doing this so everyone knows what happened that night,” said Lazaro Gonzalez, Elian’s great uncle, through an interpreter at a news conference. “There was no reason for them to enter our home so violently and take Elian in a violent way.”

More on this story here.


Traditional political foes in Fremont County, Wyoming have set differences aside to seek freedom, they say, from an oppressive outside force: The federal government. Specifically, the USA Patriot Act and its offspring have stirred the ire of area environmentalists, Quakers, libertarians and staunchly conservative People for the West leaders alike.

The group’s resolution spells out their fundamental concerns that the USA Patriot Act and the rules that enact it threaten “constitutionally guaranteed civil rights and liberties ... essential to our democratic republic.” If Fremont County Commission passes the resolution, the commission would endorse and amplify the concerns of the group. Moreover, it would formally ask Wyoming Republican Sens. Mike Enzi and Craig Thomas and Rep. Barbara Cubin to advocate for “the repeal of the USA Patriot Act and other laws and regulations which unconstitutionally infringe on rights and liberties” and take a lead in congressional action to prohibit passage of the Domestic Security Enhancement Act, also known as “Patriot II”.

Outspoken Libertarian Dennis Brossman sees the law as the jack boot of authoritarianism. “All of it is so egregious. Things like where they monitor everybody’s transactions and monitoring any group for any reason. It can be something as benign as the beef growers. It infringes or endangers 6 or 7 of our basic 10 amendments,” he said. “With this thing everybody is a Huey Newton or a Randy Weaver.”

More on this story here.

Toledo, Ohio joins list of Patriot act snubbers.

The Toledo City Council voted 10-2 to express its opposition to the USA Patriot Act and to send a letter to President Bush and U.S. Attorney General John Ashcroft informing them of that fact. Council weighed in on the federal anti-terrorist law after first rejecting a tougher resolution that would have “requested” city police to refuse to participate in investigations deemed in violation of the Constitution.

More on this story here.

New activist network slams growing abuses under Bush.

Key U.S. civil liberties and social justice groups marked International Human Rights Day Wednesday by launching a new “US Human Rights Network” dedicated to raising awareness about international human rights standards and focusing attention on the US failure to enforce them. More than 50 groups, ranging from the American Civil Liberties Union to the New York-based Center for Economic and Social Rights, said they had agreed to join forces to address what they said was “the alarming rate of human rights violations in the US” particularly as it pursues its “war on terrorism”.

More on this story here.


A new era of activism by state governments has arrived. Unhappy with what is happening in Washington, governors, legislatures and state attorneys general are leading a charge to set the national agenda on issues from health care to pollution control to securities regulation. The new initiatives are largely liberal challenges to conservative policies adopted in Washington by the Republican-controlled Congress and White House. The activist states, mostly in the North and West, have the pharmaceutical industry, Wall Street and other institutions on the defensive in a way that threatens to undermine interest groups’ political success in the nation’s capital.

Conservatives have traditionally supported states’ rights and limits on federal powers. But as liberals now enjoy success in the states, many conservatives are rethinking their devotion to states’ rights. “States are trying to pre-empt Congress on national issues, and it’s quite dangerous,” says Michael Greve, director of the federalism project at the American Enterprise Institute, a conservative think tank in Washington, D.C., that promotes limited government. Greve says that states are trying to tax and regulate businesses outside their borders.

States have been influencing national policy for more than a century. “It’s an old story,” says Timothy Conlan, a professor at George Mason University and an expert on state and federal relations. “What’s different today is that the sides have flipped. You didn’t have conservatives making these complaints when liberal Democrats were dictating the agenda in Washington.” States’ rights gained the most attention in the 1950s and 1960s, when Southern states trying to preserve racial segregation fought federal actions to enforce civil rights measures.

More on this story here.


The era before and after WW I has always been of keen interest to me. As a student of historical trends and cycles, I believe that this period represents a profound turning point in human history. Simply put, WW I was the Götterdämmerung of Western Civilization. Almost all of the horrors of the 20th Century can be laid at the doorstep of that bloody, hideous, and pointless war. The Western World was riding high in 1900. Europe and the overseas Western nations were the undisputed centers of learning, science, industry, and culture. But after four years of the terror of trench warfare, which consumed the best men of an entire generation, the West began a downward spiral which continues to this day.

My fascination with this period drew me to Barbara Tuchman’s book The Proud Tower, A Portrait of the World Before the War. It is broken down by chapters describing each of the major nations of the Western World in the decades before the Great War. Each chapter seemed to be more profound than the next. But the one concerning the United States, aptly titled “End of a Dream,” left me flabbergasted. In a nutshell, it relates the story of a man who has since largely been lost to history, but who should be prominent in the hero gallery of every true American: Maine Congressman Thomas B. Reed.

The passing of Thomas Reed from power marked a crucial crossroads in the path to Empire. It was perhaps the last time that a man who believed in our beloved Republic occupied one of the most powerful positions in our government. Tragically, the current leadership is populated almost exclusively by militarists, cowards, and cynical opportunists.

More on this story here.


DETROIT: U.S. District Judge Gerald E. Rosen has ordered FBI agents and federal prosecutors to appear Friday at an unusual hearing after the government acknowledged it failed to turn over to the defense a potentially significant piece of evidence. A letter from a notorious convicted drug dealer, Milton “Butch” Jones, raised questions about the government’s key witness in the trial of four Metro Detroit men accused of forming an underground cell to support terrorism.

Justice Department attorneys will acknowledge at the hearing that its prosecutors erred, senior law enforcement officials told the AP. The officials said the Justice Department is concerned about how Rosen will rule. A federal official said that the Justice Department believes the two prosecutors in the trial were told by a superior to turn over the letter from Jones to the defense, but they did not do so. A ruling tossing out the conviction would be a major embarrassment for the Bush administration.

More on this story here.


Forcing reluctant witnesses to testify at secret court hearings is an acceptable practice in the fight against terrorism and does not violate anybody’s rights, federal lawyers argued in Ottawa. “There is a moral and civic duty on all citizens to aid in enforcing the law,” Justice Department counsel Bernard Laprade told the Supreme Court of Canada. “Parliament has created a most reasonable regime. ... There is no constitutionally protected right to refuse to assist police.” The high court is grappling with whether the secret proceedings, allowed under anti-terrorism legislation passed two years ago, violate the Charter of Rights.

More on this story here.


Since Christoph Blocher’s Swiss People’s Party announced that he would run for a cabinet seat, opponents have been warning that he is too hardline and divisive to be a member of Switzerland’s consensus government. Parliament nevertheless elected him on Wednesday.

Christoph Blocher’s election to the Swiss cabinet has rattled much of the Swiss establishment and is likely to complicate relations with the European Union. Blocher, the outspoken leader of his party’s Zurich branch, replaces the Christian Democrat minister, Ruth Metzler. Blocher is known for his opposition to the EU and his hardline attitude on asylum. His presence in the cabinet, along with the conservative Radical, Hans-Rudolf Merz -- who was also elected on Wednesday -- is expected to push the government further to the Right.

More on this story here, here, and here.

Swiss neutrality looking like retreat from the world.

When the stridently nationalist Swiss People’s Party emerged from recent elections as the strongest parliamentary force, many wondered whether its ascendancy signaled a kind of retreat into Alpine redoubts. As the continent around it advances ever more toward integration and expansion, Switzerland has come to resemble a blank spot in the great design, stubbornly resisting all appeals to be woven into the European fabric and clinging to an avowed neutrality that helped shield it during World War II.

“Here as elsewhere, this nation-state that was thought to have died in the 1990’s is raising its head again,” said Gian Trepp, an author and historian in Zurich. “Switzerland is in a deep crisis about its place in Europe and the world.” Nothing personifies that quite so much as Blocher, who has used his money to fund eye-catching -- and often offensive -- political campaigns to exploit unease among Swiss troubled by twin fears of illegal immigrants and European pressures for change. In the land of clockwork precision, even the trains have stopped running on time. In response, Blocher has offered a vision of Switzerland’s returning to its old values of robust independence and prosperity.

More on this story here.


The Singapore financial services division manager for a British recruitment firm is finding it impossible to meet booming demand for the secretive, pinstripe-suited private bankers. Unlike managers, accountants and tax planners, private bankers do not come ready made out of colleges. So banks have had to resort to poaching.

While giants such as UBS and Citigroup are expanding, a host of newer players are also being drawn to the region, which, according to a Merrill Lynch/Cap Gemini Ernst & Young report, will be an $8.0 trillion market for high net worth individual wealth by 2007 against $4.8 trillion in 2000. The 67% growth in the region will outstrip the 39% growth to $10.4 trillion seen for North America and the 46% rise to $12.3 trillion seen for Europe over the same period, the report says. Robust economic growth in Asia, led by China, and changes to European banking secrecy and tax laws are expected to drive the growth of the wealth-management industry in regional offshore centers such as Singapore and Hong Kong.

More on this story here.


Hong Kong business leaders are encouraging firms in the territory to take swift advantage of the economic partnership deal with China next year, before the Chinese leadership begins to close similar economic arrangements with other Asian trading partners such as Japan and South Korea. In comments underlining the importance that the CEPA agreement may have for the city’s firms, the Group Managing Director of Li & Fung said: “On the services side, we think that CEPA and the WTO opening measures for the Chinese consumer market are as important for Hong Kong as the 1979 Deng Xioaping opening of the manufacturing sector to Hong Kong.”

More on this story here.

Hong Kong heading onto path of sustainable growth, say economists.

A poll of eight finance houses in Hong Kong has found that the territory’s economy is expected to grow by around 5% next year, as a regional trade recovery lays the foundation for a more sustainable economic recovery. However, other observers have warned that Hong Kong’s long deflationary cycle will continue to eat into growth rates, and have suggested that the city will not truly emerge out of its long economic malaise until deflation is defeated.

More on this story here.


Thanks to recent tax and legal changes, many large international investments funds are now taking Australia more seriously as a place to do business, according to the Australian Venture Capital Association Limited. AVCAL has suggested that investment firms such as large US and European-based pension funds could pump up to $1 billion per year -- compared to about $100 million per year currently -- into the Australian venture capital sector over the next five years as a result of the new changes.

However, although the government’s move last year to cut capital gains tax for foreign investors through venture capital limited partnerships has made the country a much more attractive option for overseas investment, venture capitalists warn that the changes need “massive marketing” to ensure the country remains on the international investment map.

More on this story here.


Headline-grabbing mega-fines from the Financial Services Authority, Britain’s financial regulator, are beginning to resemble buses. Nothing, and then... The latest to feel the lash is Abbey, fined £2.3 million for poor controls in checking for money-laundering. Abbey sometimes took as long as four months to report suspicious customer behaviour to the authorities, when its findings should have been passed on immediately. Abbey branches were left to review their own money-laundering checks, and controls were poor across the whole bank, the FSA said yesterday.

The only thing that has mitigated an even greater fine for the laxness appears to be that Abbey discovered the problem itself and brought it to the regulator’s attention. Even with this mitigating factor, Abbey’s fine is the biggest for improper controls on money-laundering and the second biggest the FSA has levied at all.

More on this story here and here.


Mark Fay, a citizen of the Irish Republic, left three items of luggage with Group 4 Security in Luton, Bedfordshire, in July 1993, telling staff they contained his parents’ mortgage documents. Suspicious security men inspected the bags and found £390,790 in used Bank of England and Bank of Scotland notes. Group 4 contacted police who were waiting for Mr. Fay when he returned six weeks later to collect the luggage. He refused to answer questions about the cash and police suspected him of money-laundering, but decided there was not enough evidence to prosecute.

Mr. Fay was told he would not be charged, but when he asked for his money back, police refused. In May 1994,he launched a court action in Luton demanding police return the bags which he claimed contained £421,000 from a deal in which he was paid in cash for cattle hides. As the case has played out, an Appeal Court judges has ruled that police be given permission to dispose of the money, which now with interest amounts to about £500,000, ultimately because Mr. Fay was not willing to give police answers to “legitimate questions”.

More on this story here.


Enactment of a TIEA Bill will help to boost the tourism industry by allowing United States taxpayers to deduct Bahamian convention expenses from their taxes, parliamentarians heard Wednesday. Debate on the TIEA, designed to facilitate the exchange of information necessary for the administration of Bahamian and United States tax systems was opened by Attorney General and Minister of Education, Alfred Sears. Urging passage of the legislation, he said the Act would fulfil an obligation made to U.S. authorities in 2002.

It was brought out that requests for information under a TIEA would be narrow, focused on individual taxpayers, and based on facts that suggested that the taxpayer was evading taxes. Any request made would have to: Specify the name of the U.S. tax payer; the tax period in question; the nature of the information being sought and its relationship to the tax period; the person and location of the information in The Bahamas, and a declaration that the information was relevant or material to the administration of a criminal tax matter for any request received prior to the first of January 2006 and for both criminal and civil matters after the first of January 2006.

More on this story here.


When U.S. citizens register to vote, the registration form generally asks for a name, address, birth date, phone number and party affiliation. Some states request other information -- such as race, driver’s license, Social Security number and mother’s maiden name. But the forms do not say what states plan to do with that information./

Unknown to many voters, election officials sell the information to political parties and candidates, as well as to data collectors, who combine it with census data, purchasing histories, credit reports and magazine subscription lists. In this way, George Bush and Wesley Clark can know the marital status, income level, race and even religious affiliation of voters they want to target for their campaign messages. They can also know whether a voter owns an SUV or subscribes to Soldier of Fortune magazine and buys lacy underwear from Victoria’s Secret. So can anyone else who buys the lists.

Nearly half of all states, according to a new study, do not prohibit marketers from obtaining voter records. And even states that restrict commercial usage cannot prevent the data from getting into the hands of marketers -- or anyone else, for that matter.

More on this story here.

A vending machine for voter data.

Aristotle International, one of the nation’s largest commercial distributors of voter data, used a website to sell the lists, which contain details about registered voters from nearly every state. The data includes birth dates, home addresses, phone numbers, race, income levels, ethnic backgrounds and, in some cases, religious affiliations. Although voter-registration data is a matter of public record, more than 22 states have laws restricting the purchase or use of voter lists. Yet Aristotle, based in Washington, D.C., sold lists online to anyone who wanted to buy them.

Aristotle’s site asked only for a name, the state where the buyer resided, an e-mail address and a phone number. Fields for mailing address and company name were optional. By registering first as Condoleezza Rice and then as Britney Spears, a Wired News reporter purchased two lists containing data on about 1,700 California voters and 900 South Carolina voters.

More on this story here.


Just forget about buying and owning gold and other precious metals in privacy, as you have been able to do until now. A new intelligence spending bill (HB 2417) has reportedly just passed Congress and is awaiting the President’s signature by December 13, 2003. Tucked inside that bill is a provision that allows the FBI to serve so-called “national security letters” on a broader range of “financial institution”. National security letters require these institutions to reveal their customers’ private financial as well as general information, including “tangible things”.

It is no news that banks have been conscripted to spy on you. But this recent measure redefines “financial institutions,” [a term] that was previously limited to banks, credit unions, and savings and loan organizations. Now the definition also includes brokers and dealers registered with the Securities and Exchange Commission, investment bankers, operators of credit-card systems, insurance companies, dealers in precious metals, stones, or jewels, licensed senders of money, telegraph companies, airplane and boat dealers, Realtors and estate closings, and the U.S. Post Office. By this change, Congress has surreptitiously expanded the scope of businesses upon which so-called “national security letters” can be served by the FBI in order to obtain financial records without any prior court order.

More on this story here.


A proposed new airline passenger screening system, called CAPPS II, that would use private databases to identify risky passengers is facing delays amid heightened scrutiny from industry and government agencies. The system would require passengers to give extra information, such as date of birth and home phone number, when making a reservation. A computer would then verify that information against mammoth consumer databases. Passengers would also have their names checked against watch lists of wanted criminals and suspected terrorists. Those whose data cannot be verified or whose name matches a name on a wanted list would face increased scrutiny and could be kept from boarding or arrested. The plan would replace the much-criticized current system that flags passengers based on whether they pay with cash, fly one way or have a name similar to one on government watch lists.

But before the new system takes off, it first has to satisfy critics in Congress, researchers from the U.S. General Accounting Office, concerned air travel industry groups and even the European Union. The GAO has met with various civil liberties groups that oppose the project, asking questions about the effectiveness and quality of data in the commercial databases to be incorporated in CAPPS II. The agency’s investigative tactics have led some opponents of CAPPS II to believe that the resulting report will be harshly critical.

More on this story here.


The UK Passport Service in January will launch a six-month trial of biometric technology. The trial, which will involve 10,000 volunteers, is billed by the UK government as the first step in its compulsory ID card plan. The UKPS will test facial, iris, and fingerprint recording and recognition in an attempt to determine which process is the least invasive for passport holders, a spokesperson for the Home Office says. The trial will also help determine how the technology works on a broad scale, what the costs will be, and how well people will accept the technology, she says.

More on this story here.


The corporation sole is an entity recognized in some states and is an entity designed basically to allow religious groups to operate without the strict formalities of the typical business corporation. However, scam artists are now touting it as a vehicle that provides asset protection and tax freedom to ordinary citizens. In the words of M.A.S.H.’s Colonel Potter, “Horsehockey”.

To debunk some of the scam babble contained in the e-mail you may receive from corporation sole scammers: (1) Corporations sole provide NO (i.e., zero, zip, nada) asset protection over an above what a typical corporation provides, which is not much. (2) Corporations sole provide NO asset protection to the owners of the corporation sole other than possibility containing the liability of the church -- and mind you it is difficult to see how a church could have liability -- within the entity. (3) Corporations provide NO asset protection to the non-church of the owners, i.e., tort liability, debt liability, whatever. (4) The corporation sole does NOT help its owners save taxes.

More on this story here.


Under the current system, the United States year after year imports goods from the rest of the world for consumption and pays for them with dollars. The dollars are then used by foreign central banks to purchase debt instruments from either the Fed or the private sector, in addition to U.S. stocks and real estate. Where these are treasury securities, they are created out of nothing, requiring no savings by any American consumer.

Under this arrangement, Americans are now freed from the ponderous burden of saving and the onerous requirement of first producing in order to later consume. Their consumption is offset by a growing indebtedness of the private sector and the Fed to foreigners. This state of affairs is unsustainable, and will come to an end with a deep fall in the exchange value of the dollar relative to other currencies. That is the argument of a provocative new book, The Dollar Crisis: Causes, Consequences, Cure by Richard Duncan.

The Dollar Crisis traces the flow of dollars into Japan and Asia, which suffered their own asset price bubbles in the 1980s and ‘90s respectively. As dollars enter foreign banking systems in exchange for exports to the U.S., they increase the monetary base, which leads to more a domestic credit expansion. The recycling of these dollars back into America drives a series of asset price booms here. Duncan writes, “Consequently, [America’s trading partners] acquisitions of U.S. dollar-denominated stocks, corporate bonds, and U.S. agency debt have helped fuel the stock-market bubble, facilitated the extraordinary misallocation of capital, and helped drive U.S. property prices higher.”

Duncan forecasts a “New Paradigm Recession” following the collapse of the dollar, which he compares to the Great Depression of the 1930s. The New Paradigm Recession will emerge out of the continuing U.S. downturn (which Duncan views as only a warm-up for the real thing) as the U.S. economy can no longer service the massive debt load that exists in the consumer, corporate, and government sectors. The recession, when it comes, will be global in scope. It must come, Duncan argues, because of the unsustainability of current trading patterns and exchange rates.

More on this story here.


Prices have risen (and thus yields have fallen) across the board in the market that used to be called “high-yield”, but cannot be any more because it is not. This year, the junk-bond market, to use its more colloquial though perhaps more accurate moniker, has returned some 22%, better even than the effervescent S&P 500, which is up by 21%. To be sure, the case for being bullish on junk is decent enough, and not because of the amount of money being thrown at the market. Default rates on junk bonds in America have fallen sharply, from 9.8% in 2001 to 7.4% last year, and to about 5.7% in the 12 months to the end of November, according to S&P.

Supported by higher yields than the meager ones available elsewhere, loose monetary policy and a growing economy, many pundits in the junk community are predicting another bumper year next year. Not all of them, however. In a talk this week, William Kourakos, the head of leveraged finance at Morgan Stanley, asks: “Have we reached the top of the mountain?” Quite possibly, is the short answer. Spreads are at record lows, and though conditions are still positive, Mr. Kourakos has looming concerns. To which cautious view Buttonwood would like to add his twopennyworth.

Although credit conditions have been so loose, S&P is still downgrading far more non-investment-grade companies than it is upgrading: 73% of its ratings actions are still downgrades. Which is worrying when yields have been chased so low, and investors are now so badly rewarded for taking risk. The slowdown in America that followed the puncturing of the bubble was not a normal one, and nor is the recovery, heady though it is. Quite possibly, the Fed will have to put rates up sharply if the dollar goes into freefall, or put them down again, if currency movements allow it, should the recovery run out of steam. The junk-bond market will lose either way.

More on this story here.


You have heard this all before, maybe even lived it: Man buys Internet stock. Stock soars. Man buys many more shares. Man becomes a paper multimillionaire, looks in the mirror, sees an infallible genius smiling back. A year later, man is wiped out, grappling with debt and deep depression, and now he sees an idiot every time he shaves. It was a tale oft told after the NASDAQ implosion of 2000 wreaked its equal opportunity havoc on geniuses and imbeciles alike. Still, it was not supposed to be told by 10th-generation Orthodox Jewish Torah scholars, who almost by definition are supposed to put material losses far below spiritual gains on the ladder of emotional importance.

In a few short years, Rabbi Benjamin Blech, 70, turned a relatively small nest egg of around $50,000 into $7 million and then into nothing -- ashes to ashes, dust to dust, in the blink of a financial eye. The trusts he was setting up for Yeshiva University and for his four children and nine grandchildren were all gone. O.K., he had not put the house in danger, his pensions were intact, and he still had a professor’s salary from Yeshiva University. But his ego was shattered and he was embarrassed to look his wife in the eye. “Don’t anyone tell me that money means nothing -- it means a lot,” he said. “And the pain of losing it exceeds by 10 times the joys of making it.”

It took him the better part of a year to claw his way out of the depression that had engulfed him -- and to this day, he is loath to utter the name of the stock that did him in, calling it simply his “Titanic”. But finally, poorer in money but richer in wisdom, Rabbi Blech went back to doing what a rabbi is supposed to do best: guide his flock through spiritual travails. And, since he no longer has a congregation -- he retired 10 years ago -- the best way to do that seemed to be to write a book. The result: Taking Stock: A Spiritual Guide to Rising Above Life’s Financial Ups and Downs.

More on this story here.


The more one reads and absorbs of history, the more difficult it is to pronounce categorical judgments on men or ages. This prudential restraint does not augur a plunge into desultory relativism. My point is that those who content themselves with superficial bluster about the benightedness of the past, or fancy history as an unbroken line of glorious progress, must also resign themselves and their age to the kind of sneering dismissal they pronounce on the past.

In broad stokes, my contention here is that our age, to an extent unlike any before it, has set itself up as the measure of historical Man. Great success in the material arts we certainly have had, which success has in part blinded us to our quite severe deficiencies. Most ironic, perhaps, is our blind iterative tendency: the Puritan and the monarch and the inquisitor, though hated as historical figures, are resurrected in new garb and lent the strength of modern prejudice.

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In my “day job” I am an information systems security specialist. My job is to be a professional paranoid. My clients pay me to think up ways that an individual might compromise sensitive data, and then to mitigate against that risk. This ranges from physical security to network security to procedural security. I have been doing this kind of work for something like ten years, now, and I don’t mind saying that I am good at what I do.

In my capacity as a professional paranoid, I have occasionally turned my mind to notions of more general physical security. I have marveled at the occasional stupidity of America’s few terrorists. From a tactical perspective, Timothy McVeigh was a low-grade moron. Someone with my training would have bombed a much larger building and never been caught. Since September 11, the FedGov has used the claim of terrorists insinuating themselves into every fabric of American life to justify all manner of draconian “security” measures. As to the “security” of these measures, in my professional opinion, they are worse than useless.

In any case, there are no terrorists in the United States, and the proof of this is simple. There is nothing -- literally NOTHING -- preventing the devious terrorists the FedGov claims exist from performing such acts as planting a bomb in the middle of the evening lighting ceremony at Mount Rushmore every day. And yet, such acts never occur. Not today, not yesterday, and not ever. Terrorists are not stupid -- the ease with which they took advantage of the way the FedGov immorally disarms airline passengers proves this. If they wished to plant a bomb in the middle of the evening lighting ceremony at Mount Rushmore, they would have done it long ago.

How can we account for this discrepancy? How can there exist terrorist in the United States -- each capable of coming up with schemes far more nefarious than my paranoid musings -- and yet, no terrorist acts of this type have ever been committed? The answer is simple: there are no terrorists. If there were, we would see their acts every day. Terrorists in the United States are a stark, raving, paranoid fantasy -- at best. More likely, it is a cold, calculated attempt on the part of those in power to terrify Americans into rash actions that they otherwise would never take. There is no war on terrorism because there are no terrorists in the United States. There is a war on your freedom, being waged from the office of the President, his cronies and accomplices all through Washington, DC, and in every Federal building in every town and city in America.

More on this story here.
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