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LITIGATION THREAT AN OPPORTUNITY AND OBLIGATION FOR PLANNERS
The litigation news for 2003 should be extremely troubling to all those at risk. According to an annual survey published by Lawyers Weekly, the 10 largest verdicts in 2003 to individual plaintiffs totaled a staggering $1.3 billion. This represents a 200% increase over 1997. Clearly, the litigation explosion continues, and provides an opportunity for the astute advisor to be involved in asset protection strategies. In fact several leading lawyers have asserted that asset protection is an affirmative duty of today’s advisor and simply takes such concepts as incorporation, the LLC, family limited partnerships, any form of insurance purchase -- all of which are forms of asset protection -- and extends them more powerfully.
True asset protection involves utilizing multiple strategies from the continuum of available approaches and structures, both domestic and international. Selecting an offshore jurisdiction for nominal ownership of assets places the title to these assets outside of the reach of the US courts. Additionally, if actual assets are located offshore, they are completely out of the reach of the US justice system. Other domestic asset protection strategies can be integrated with the offshore asset protection trust to provide a reasonable degree of protection, although at a lower level of safety.More on this story here.
HOW BRITAIN AND THE U.S. KEEP WATCH ON THE WORLD
From the National Security Agency’s imposing headquarters at Fort Meade, Maryland, ringed by a double-chain fence topped by barbed wire with strands of electrified wire between them, America “bugs” the world. Nothing politically or militarily significant, whether mentioned in a telephone call, in a conversation in the office of the secretary general of the United Nations, Kofi Annan, or in a company fax or e-mail, escapes its attention. Its computers -- measured in acres occupied by them rather than simple figures -- “vacuum the entire electromagnetic spectrum”, homing in on “key words” which may suggest something of interest to NSA customers is being conveyed. Its junior partner is Britain’s Government Communications Headquarters.
The collaboration between the two agencies offers many advantages to both. Not only does it make monitoring the globe easier, it solves tricky legal problems and is the basis of the Prime Minister’s statement yesterday that all Britain’s bugging is lawful. The two agencies simply swap each other’s dirty work. GCHQ eavesdrops on calls made by American citizens and the NSA monitors calls made by British citizens. Bugging the world is not the problem. The problem is avoiding drowning in a sea of information.More on this story here.
END OF THE 100-YEAR BEAR MARKET IN COMMODITIES AT HAND
I think commodities will turn out to be a fantastic place to invest for the rest of this decade. Returns in commodities should easily beat stocks and bonds for the next five years. It happened in the 1970s and it will happen again. What I like even more about commodities is that nobody is interested in commodities... yet. Go to MSN’s MoneyCentral, or Yahoo’s Finance page, and try to get a quote on gold or oil, and you will see what I mean. Nobody cares yet. Nobody has commodities as part of their portfolio asset allocation yet... and I love it! As Jim Rogers said in his book Adventure Capitalist, “when Merrill Lynch starts trading commodities again, it’s time to get out.”
After bottoming in late 2001, commodity prices (as measured by the CRB Index) have soared by 40%. But long-term, commodities are the cheapest they have been in 100 years. Right now, you have got two camps of investors out there when it comes to commodities... those that do not want to buy because commodity prices have fallen for 24 years, and those who do not want to buy because commodity prices have risen 40% in the last two. Now where is the camp that is willing to buy? There really isn’t one, yet.
What happens when commodity prices fall this dramatically over such a period of time is predictable. Now demand has arrived, but there is not enough supply. And where has this demand come from? China. For the moment, China is booming, and its appetite for raw materials and commodities appears insatiable. But I will not bite on the direct China plays, many of which will eventually disappear. Instead, I am playing the China story through commodities. They will participate handsomely in China on the way up, and be just fine on the way down -- when China’s bust comes again (and that may not be until the second half of this decade), producing exceptional returns in the process.Link here (scroll down to Steve Sjuggerud piece).
HUBRIS AND SCAPEGOATING
Hubris is conceit, arrogance, grandiosity, the belief that one is god-like and can transcend human limitations, usually through violence. Sophrosyne can be described as understanding the limitations and imperfections of human nature, of “knowing yourself”, of doing nothing in any great excess. It is a type of humility, if humility is understood as an awareness of the flaws inherent in people. Hubris always leads to scapegoating, which the psychiatrist M. Scott Peck correctly identified as the “genesis of human evil”. He was right, but did not point out it is based on hubris, and that scapegoating always leads to human sacrifice. Scapegoating requires splitting groups into pure good and pure evil, into grandiose and devalued. That splitting -- indeed that belief -- in pure good and pure evil automatically leads to scapegoating and human sacrifice. In the 20th century, the best-known practitioners of scapegoating and human sacrifice were the Nazis and socialists, but all societies do it.
Scapegoating and human sacrifice, which is always through violence, will never create a better society. Yet all societies continue to try it, to no avail. None are even aware of what they do. All approve of it and consider it a good thing. In the US, you can see this scapegoating and sacrifice in any election. You need look no farther for a nation that claims it is good, has God on its side, has a leader who believes God chose and talks to him, and who believes he has the right to murder thousands of innocent people on the other side of the world. By scapegoating and sacrificing them the United States shall be made “whole”. In Atlas Shrugged, Ayn Rand’s heroes withdraw into Galt’s Gulch to await the destruction of all evil through violence and death. Then, they plan on returning to a fresh, new world. It works in fiction. In real life it would not.
The first step is overcoming hubris, scapegoating and human sacrifice is to be aware of them, and to understand they never work for any society that tries it. If it did work, then there would not be millennia after millennia of war. As long as this law -- if it is a law -- remains hidden, it cannot be dealt with. And until it is dealt with, the human race will do as it always does.More on this story here.
THE APRIL 15 KABUKI DANCE BEGINS: IRS WARNS AGAINST “DIRTY DOZEN” SCAMS
Deducting the entire amount of your wages and calling it “a necessary expense for the production of income” is one of the new tax scams the government has seen this year. Taxpayers should steer clear of this and other tax scams, the IRS said Monday. The agency warned consumers that they might face fines and even prison time for participating in fraud or tax evasion. The new scheme is called the “claim of right” doctrine, a misinterpretation of tax law that sees taxpayers trying to deduct the entire amount of their wages. It ranked second to the misuse of trusts promoted as a way to reduce income, gift or estate taxes.
Another scam making this year’s list of questionable and illegal schemes that taxpayers should reject is religious corporations (“Corporation Soles”) -- the participant incorporates as the leader of a one-person, phony religious organization, then claims exemption from taxes as a nonprofit, religious organization. Also among the schemes warned against are hiding income using offshore transactions and improper home-based business deductions.More on this story here and here.
HOW TO ENSURE THAT YOUR PRIVATE CONVERSATIONS STAY THAT WAY?
News that Kofi Annan and other senior UN figures may have been routinely bugged by US or British security services has caused a huge political row around the world. But it will also have caused alarm among other people in the public eye who deal with sensitive information -- or anyone, indeed, who values their privacy. If the secretary general of the UN cannot prevent his private conversations from being listened to by all and sundry, who can? It seems if someone wants to listen to what you are saying badly enough, there is very little you can do to stop it.
According to security experts, the most common listening device remains the electronic bug. But government agencies such as the CIA and MI5 have far more advanced systems at their disposal. Powerful uni-directional microphones can pick up conversations through open windows. If the window is closed, radio waves or a laser beam can be bounced off the glass. The vibrations detected can be translated into speech. But potentially the most powerful tool for the modern spy is the mobile phone. Mobiles that double as listening devices can be bought over the internet.
Intelligence is a constant battle between the bugger and the bugged, says Michael Marks, of surveillance-equipment supplier Spymaster, and “at the moment the buggers probably have the upper hand”.More on this story here.
EUROPE HAS CAUGHT TAX-CUT FEVER
A new wave of tax competition is sweeping Europe, one that could yield equally impressive results for the global economy. The genesis of this supply-side renaissance is a bit murky, but leaders in Ireland and Russia deserve considerable credit. It was Ireland, for instance, that resisted EU pressure for harmonization and enacted a 12.5% corporate-tax rate. This dramatic reform, accompanied by reductions in tax burdens on personal income and capital gains, has turned the “sick man of Europe” into the Celtic Tiger. Equally important, however, these reforms have prompted corporate tax rate reductions in many other European nations.
On the other side of Europe, Russia decided to junk its “progressive” tax system and replace it with a 13% flat tax. This new system took effect in 2001 and already has boosted economic growth and tax compliance. Slovakia repealed its old tax code -- including a top tax rate of 38% -- and replaced it with a 19% flat tax for both individuals and businesses. The death tax was abolished and the government is implementing a social-security system based on personal saving accounts. Estonia enacted legislation to lower its flat tax rate to 20% by 2007 from 26% today. But then the other two Baltic nations -- Latvia and Lithuania -- adopted their own flat-tax systems, followed by Russia’s 13% flat tax. And now that so many other countries are cutting tax rates and enacting low-rate flat taxes, the Estonians suddenly had to lower the rate of their flat tax lest they lose business to neighboring jurisdictions.
This is why tax competition between nations is so important. It encourages governments to adopt better tax law to keep jobs and capital from migrating across national borders. This process is very unpopular with the OECD and ED, but these international bureaucracies are representing the interests of uncompetitive welfare states such as France and Germany. Fortunately, it appears that France and Germany are voices of the past.More on this story here.
ARMIES OF CONSUMERS: 1776’S SECRET WEAPON?
In February 1766, taken aback by the violent reaction to the Stamp Act, its latest attempt to impose taxes on the restive American colonies, Britain summoned Benjamin Franklin to Parliament in London. The interview, which lasted several hours, was less than friendly. The Americans, Franklin reminded his interrogators, were voracious consumers of British goods, buying them at a rate that far exceeded the colonies’ staggering population growth. But this lucrative spending habit, he warned, should not be taken for granted.
A month later the Stamp Act was repealed. And American trade in British goods continued at a galloping pace. But Franklin’s words represented a turning point in the struggle for independence, says T. H. Breen, the William Smith Mason professor of American history at Northwestern. Americans, he argues, had discovered a political weapon without which the Revolution might not have been successful: consumerism.
Is it possible that a signature attribute of contemporary America -- and a trait for which it is frequently criticized -- lay at the heart of its most inspiring foundational achievement? This is the startling implication of Mr. Breen’s new book, The Marketplace of Revolution: How Consumer Politics Shaped American Independence. In his account, the self-sufficient yeoman farmer of Jeffersonian lore is nowhere to be found. Even before America was a nation, Mr. Breen insists, it was a society of consumers.More on this story here.
WHILE WE FRET OVER THE PATRIOT ACT, THE BUSH ADMINISTRATION IS AFTER MUCH BIGGER GAME
As everyone knows, “everything changed” on September 11, 2001, perhaps most worrisomely the rule of law. Indeed, among all the national-security measures taken since that fateful day -- including two major foreign wars and the establishment of the Department of Homeland Security -- none has been more controversial than the USA Patriot Act. Personally shepherded through Congress by Attorney General John Ashcroft, it authorizes the kinds of things that send shivers down civil libertarians’ spines: invasions of personal privacy, restrictions on financial transactions, racial and ethnic profiling, blurring the line between foreign intelligence and domestic law enforcement, and punitive registration requirements for immigrants and visitors. And that is just a partial list.
Yet the hue and cry raised over the Patriot Act has distracted most of us from the Bush administration’s far more dangerous assault on another class of liberties, which might be called “threshold rights”. After all, the Patriot Act can be rolled back if the people decide that the government has overreached or the emergency has receded, and some provisions of the act have automatic expiration dates. But threshold rights -- fair elections, open and publicly accountable government, judicial review of executive action, the right of the accused to a public jury trial, separation of powers among the three branches of government, and the rights to free expression and free association -- are structural, and therefore changes to them are more enduring. Once threshold rights are stripped away, the only thing that stands between any of us and arbitrary imprisonment is the good will of the president, the attorney general, and the secretary of defense.More on this story here.
OUR SHADOW LEGAL SYSTEM
There is a deeper-held reason why we believe that Martha Stewart should be a free woman today. We hold that the federal criminal system that convicted her is an abomination to justice and is the destroyer of those precious “Rights of Englishmen” that this nation inherited from Great Britain (and especially the famed jurist William Blackstone) more than two centuries ago. What exists today in the federal courts is nothing less than a shadow justice system, an evil twin of the common law that served us so well for so long, a system that keeps the trappings of common law, but is more like Stalin’s Soviet Union than Blackstone’s England. Born of political expediency and of the Progressive Era of the late 19th and early 20th centuries, the federal criminal system is nothing less than a mechanism that permits prosecutors to do an end run around the Constitutional protections that the framers of that document believed were the natural rights of individuals.
Writers have found time and again that the system is utterly corrupt because there are almost no safeguards against federal investigators and prosecutors who step out of bounds. One of us spoke on the telephone recently to one of the prosecutors (who allegedly tried to frame one of his targets) named in a 10-part 1998 series on federal prosecutorial misconduct, and it was clear from our conversation that he believed he could do what he wanted, when he wanted, and that he was above the law.
The “Rights of Englishmen” are now dead. The federal courts have the looks and trappings of that once-magnificent system of laws that was part and parcel to the very meaning of the United States of America. But while it may seem that the modern system is a continuation of that system we inherited from Great Britain, the system inside is rotten. It does not protect citizens from the state; instead, it gives the state all of the weapons (federal prosecutors like to call them “tools”) it needs to declare everyone a criminal.More on this story here.
BAHAMAS FINANCIAL PROFESSIONAL: PRIVACY BASICALLY GONE, AND FORGET ABOUT IT COMING BACK
s the gradual dissipation of banking secrecy continue to make traditional offshore structures less attractive, more emphasis needs to be placed on crafting transparent, tax compliant structures in order to maintain the edge The Bahamas currently has in the region in private wealth management, president of the newly formed Bahamas International Insurance Association said.
Hywel Jones firmly believes that secrecy as the world knew it has gone, never to be returned, in banking as well as every other area of one’s life. “There has been a major erosion of personal privacy,” Mr. Jones said. “It’s not just the changes in the Bahamian laws it’s computers... it’s everything. Global privacy has gone down and it’s never going to be the same again.” Mr. Jones said that this reality along with the continued changes in the American and Canadian tax laws are making traditional offshore structures less attractive to the country’s target market. His suggestion for continued survival of The Bahamas’ financial services sector is the development of offshore structures that are tax compliant and transparent.More on this story here.
ALL THE MONEY SPENT ON SECURITY SINCE 9-11 HAS DONE LITTLE TO MAKE US SAFER
Terrorist attacks are very rare. So rare, in fact, that the odds of being the victim of one in an industrialized country are almost nonexistent. And most attacks affect only a few people. The events of September 11 were a statistical anomaly. Even counting the toll they took, 2,978 people in the US died from terrorism in 2001. That same year, 157,400 Americans died of lung cancer, 42,116 in road accidents, and 3,454 from malnutrition.
One problem with securing the nation is the scope of the threat. Terrorists can attack airplanes, sports stadiums, water reservoirs, power plants, chemical storage facilities - the possibilities are endless. If you want to defend targets, you have to defend them all. Protect half the reservoirs and the others will still be at risk. Even defending against a specific threat is very difficult. Security is only as strong as its weakest link; three locks on the front door do little good if the back door is open. Likewise, the air transportation system is only as secure as the country’s most insecure airport.
Many of the security measures we encounter on a daily basis aim pinpoint the bad guys by treating everyone as a suspect. But that creates a problem similar to the one you see when airport security screeners waste their time frisking false alarms. Terrorists are so rare that any individual lead is almost certainly a false one. So billions of dollars are wasted with no assurance that any terrorist will be caught.
The only effective way to deal with terrorists is through old-fashioned police and intelligence work -- discovering plans before they are implemented and then going after the plotters themselves. More damage was done to al Qaeda by disrupting its funding and communications than by all the guards and ID checks in the US combined. Most of the government’s measures are bad trade-offs: They require significant sacrifices without providing much additional safety in return. And there is far too much “security theater” -- ways of making people feel safer without actually improving anything. Our money would be better spent tracking down terrorists abroad than on enforcing intrusive measures at home.More on this story here.
A STUDENT OF THE MARKET WARNS OF A RESUMPTION OF THE SECULAR BEAR MARKET
The behaviour of equities, the yield curve, credit spreads, and metal prices have followed a similar pattern through the climax of each boom in history. From this, we assembled seven of the most reliable series into our Boom Indicators, which reached their most positive reading in December, 1999. By the end of January, 2000, enough had reversed for us to issue a warning on the longevity of the boom. The rest, as the saying goes, is history. And that history says that a lengthy contraction has followed every bubble as it occurred in the senior economy. In some cases, the initial phase was intense and completed in a minimum of 3 years. We thought this would make the first three years following 2000 rather straightforward, which it was for stocks, the yield curve and credit spreads.
As things turned out, almost 3 years was the count by October, 2002. However, manias often enjoy a restoration of the Good Stuff in the third year out. Such was the case for the extravagances of the Nikkei 1989, Gold 1980, the Dow 1929, and stocks following the 1873 bubble. Our view is that the senior indexes are as “overbought” now as they were “oversold” in October, 2002. With that background, our outlook follows:
1.) The secular bear market in equities will resume; 2.) With consumers approaching exhaustion from their aggressive buying of grand cars and median homes, the economy will begin a severe recession; 3.) The cyclical bull market in industrial commodities is close to culminating; 4.) Junk credit spreads, which have enjoyed an outstanding run since the 2002 panic, have reversed towards adversity (wider spreads of junk vs. sound credit instruments); 5.) Once the high was in for the stock mania in the first half of 2000, it became automatic that gold shares would end their secular bear and begin a secular bull market, which continues; 6.) Any increase in the gold/silver ratio -- recently at 62 -- will signal a pending liquidity crisis.
Before the 1970s, there were only two widely known financial extravaganzas. One was the “South Sea Bubble” of 1720 and “The Crash” of 1929. By the mid-1970s, enough research was completed to conclude that financial manias were a regular phenomenon and the “missing” ones could be found by thorough research and the next in the future would be set up by the end of the “old” era of inflation. As things turned out, there were 3 “missing”, which made 1929 #5 and 2000 became #6. Participants in the 1720 mania were remarkable as on the first go they designed, with the action in metals, credit spreads, and the yield curve, all of the component patterns that have been so faithfully replicated each time around.
By way of wrapping up, it is appropriate to review the items common to the post-bubble condition. The “big picture” has evolved to the pending resumption of the post-bubble contraction and the “close-up” concludes that selling the stock market now is technically equivalent to buying gold the week after the low at 103 in 1976. As we noted at the top in 2000, “The karma of the marketplace is about to overwhelm the dogma of policymaking.”Link here.
ADVICE TO EU: RECONSIDER THE SAVINGS TAX DIRECTIVE
High-tax nations like France and Germany hope fellow members of the EU will vote this June to approve a directive governing the taxation of interest payments. This savings tax directive (STD) is designed to slow the flight of capital to low-tax jurisdictions and would require all EU nations -- and selected non-EU jurisdictions such as Switzerland and the United States -- to participate in a savings tax cartel. If the STD is implemented, nations will have two choices:
1.) Collect information about interest payments made to nonresident investors from EU nations, and then provide that information to the tax authority of the investor’s government so it can be taxed; or 2.) Impose a withholding tax on interest payments to nonresident investors from EU nations, and then provide the lion’s share of the money to the tax authority of the investor’s government.
High-tax governments think that the STD will help them track down money that their citizens have deposited in places like Luxembourg and Austria, but this naively assumes that the money will no flow someplace else. In reality, financial capital is extremely mobile, and a few clicks of a computer keyboard are all that it takes for investors to shift their funds to a safer environment. EU officials think they have solved this problem by requiring the participation of Switzerland, Monaco, Andorra, San Marino, Liechtenstein, and the United States. They even require EU nations to compel their territories to participate, thus roping “offshore” jurisdictions such as the Cayman Islands into the cartel. This sounds like good news for revenue-hungry politicians, but they shouldn’t count their chickens before they hatch. They may have grandiose dreams of having more money to spend, but there are three reasons the STD probably will not work -- and one big reason why it will backfire if it does work.More on this story here.
BRAIN-READING TECHNOLOGY BECOMES NEW TOOL IN COURTS
Now it may be impossible for even the best liars to conceal their crimes. The latest technology in forensic science uses details known only to investigators and the criminal to prove a suspect’s guilt or innocence. Developed by Harvard-trained Lawrence Farwell, brain fingerprinting uses brainwaves to measure what Farwell calls the “a-ha” of recognition. Traditional lie detectors rely on reading emotional reactions such as sweating or heart rate as a suspect is asked questions. The problem is that well-practiced liars can control these reactions before the polygraph has a chance to detect them. That is not a possibility in a brain fingerprint test, says Farwell, chief scientist and founder of the Seattle, Washington-based Brain Fingerprinting Laboratories.
The technology may sound like science fiction, but it has been tested by the FBI and used as evidence in U.S. courts. According to Farwell and his brain wave results, accused killer Terry Harrington did not have the details of the 1978 murder he was convicted of stored in his brain. An Iowa judge allowed the new technology into evidence in Herrington’s appeal in 2003 -- and now he is a free man. In Missouri, J.B. Grinder confessed and was sentenced to life in 1998 after Farwell’s test revealed he did have special knowledge of the 1984 rape-murder of which he was accused.More on this story here.
THE LATEST OFFSHORE PILOT QUARTERLY IS OUT
The always entertaining and interesting publication comments on the Cayman Islands, and now Turks & Caicos Islands, “tussles” with the British government over implementation of the European Union Savings Tax Directive; the OECD’s tussle with Switzerland and four other European offshore jurisdictions (Andorra, Monaco, Luxembourg, Liechtenstein) over the same directive; and how offshore centers are bearing the blame for activities of corrupt corporate officers, whereas the roles and rules of, e.g., Delaware are strangely overlooked.More on this story here.
WHAT NAT KING COLE WOULD HAVE TOLD MARTHA STEWART
Nat King Cole was unquestionably one of the best, if not the best, crooners of his day. The unique record shape of the Capitol Records Building in Hollywood, has been called, the “House that Cole Built”. He was financially successful, ranking with the richest in Hollywood.
His complicated financial affairs, as might be expected, caught the attention of the federal government at times. His attorney instructed him to tell the feds, if they contacted him: “I will sing for you, but if you want to talk, you will have to talk with my attorney.” This lawyer told all his clients that they must never talk to a government agent under any circumstances, and if they did, he would withdraw from the case and they would have to find other counsel to represent them. This was not an idle threat -- in at least one case he did just that. Martha could have told the feds, “I will bake you a pie.”
It is hard to believe that Martha Stewart had not, in her long career in big business dealings, been similarly advised by the many high-powered, and high-priced, attorneys she must have dealt with over the years. Not just once, but maybe many times. On the same score, she must have been told that to act as your own attorney, is to have a fool for a client, and a legal quack for an attorney. Martha certainly must have heard those pieces of horse sense. When the victorious prosecutor spoke to the media on the courthouse steps, he said the case was all about lies. He was only half right; the other half of the case was about stupidity.More on this story here.
IRS “EXAM” IS SOMETHING NO TAXPAYER CARES TO TAKE
The IRS estimates that millions of Americans and corporations are underpaying their taxes or avoiding them altogether to the tune of $200 billion to $300 billion annually. But because of chronic underfunding and outdated computer systems, it is having trouble keeping our national coffers full. And its main weapon against tax cheats -- the threat of the dreaded tax audit -- just is not what it used to be.
Last year, the IRS audited 849,296 individual taxpayers. While this was a jump of 14% from the previous year, it was well short of the 1.2 million audits or “exams”, as the IRS politely calls them, performed in the mid-1990s. That was before Congress, responding to cases of IRS abuses and property seizures against taxpayers, restructured the agency, shifting auditors into customer service jobs. Seeking to counter that image in the midst of tax season and an election year, IRS Commissioner Mark Everson announced last week that audits, criminal investigations and collections are all on the upswing.
One way the IRS is trying to have it both ways is with its new, nearly ouch-less random audits, not to be confused with the old random “audits from hell” last endured in 1988 under the Taxpayer Compliance Measurement Program. The intent of the National Research Program, as the new random examination process is called, is to gather information so the agency can better focus attention on noncompliance hot spots. For tax year 2001, the IRS is reviewing a small, statistically valid sampling of returns, only 50,000 out of 132 million individual returns filed. There will be four types of audits aimed at five major targets, including offshore credit-card users, high income non-filers, and “abusive” schemes and promoters.More on this story here and here.
FBI EXTENDS WIRETAP WISH LIST TO BROADBAND INTERNET ACCESS PROVIDERS
A far-reaching proposal from the FBI, made public Friday, would require all broadband Internet providers, including cable modem and DSL companies, to rewire their networks to support easy wiretapping by police. If approved as drafted, the proposal could dramatically expand the scope of the agency’s wiretap powers, raise costs for cable broadband companies and complicate Internet product development. Legal experts said the 85-page filing includes language that could be interpreted as forcing companies to build back doors into everything from instant messaging and voice over Internet Protocol (VoIP) programs to Microsoft’s Xbox Live game service. The introduction of new services that did not support a back door for police would be outlawed, and companies would be given 15 months to make sure that existing services comply. Because the eavesdropping scheme has the support of the Bush administration, the FCC is expected to take it very seriously.
The proposal surprised privacy advocates by reaching beyond broadband providers to target companies that offer communications applications such as instant-messaging clients. “I don’t think it’s a reasonable claim,” said Marc Rotenberg, director of the Electronic Privacy Information Center. “The FCC should seriously consider where the FBI believes its authority... to regulate new technologies would end. What about Bluetooth and USB?”
As encryption becomes glued into more and more VoIP and instant-messaging systems, eavesdropping methods like the FBI’s Carnivore system become less useful. Two VoIP providers said last month that their services currently offer no easy wiretap route for police, because VoIP calls travel along the Internet in tens of thousands of packets, each sometimes taking completely different routes.More on this story here.
CONFEDERATES IN THE BOARDROOM AN INVALUABLE RESOURCE FOR FREEDOM ADVOCATES
The Freedom Right tends to convert very few people to its causes. Those who are converted tend to be very intelligent, but not in high places of cultural or political leadership. In other words, we do not have mass appeal. There are some signs that the movement is growing, but will it grow large enough to affect change before it is too late? The stumbling block is that our arguments may be the most well-reasoned out there, but people still are not convinced. Our agenda do not “feel” right to people. Put simply, we are not speaking to the real-life experiences of most people. We may be appealing to reason, or even to faith, but not really to human nature.
Mike Tuggle’s Confederates in the Boardroom bridges this gap, and thus provides us with an invaluable resource for further scholarship and, more importantly, activism. In a brief (the main text is 157 pages) work, Tuggle introduces General Systems Theory and how it applies to human identity and political organization.
How will Tuggle’s ideas influence our movement? He gives us a framework that is less rigid and doctrinaire. People do see their own happiness as tied to societal happiness, and expect others to share that vision. They see themselves as part of something greater than themselves, something they love. And for most Americans, that love is still for the flag and for the government in Washington, D.C. it represents. They believe in the system, thinking that it is not perfect but that it has served them well. Tuggle’s unstated lesson is to understand this and to remember to empathize with people this way. His stated lesson is that this centralized, top-down form of organization, does not conform to the way nature -- the way a system -- works. Tuggle’s book deserves a wide reading, both within the freedom movement and throughout the larger society. Buy it, read it, and lend it on to a friend who believes that the federal government should do more for the common good.More on this story here.
U.S. THREATENS ACTION AGAINST ONLINE GAMBLING
Federal prosecutors have begun a wide-ranging effort to curb the growing popularity of online gambling in the United States by quietly threatening legal action against American companies that “aid and abet” Internet casinos and sports betting operations based outside the country.
The investigation comes as millions of Americans have turned to their home computers to place sports bets and play casino games. Using credit cards or other electronic payment methods, players can place wagers with the Internet casinos, most of them in Costa Rica, the Caribbean or the Isle of Man. In trying to crack down on Internet gambling through American companies that provide support services, particularly advertising and marketing, the government may find itself on shaky legal ground, the industry, its lawyers and some independent legal analysts say. The reason, analysts say, is that broadcasters and marketers could well be within their First Amendment rights in advertising on behalf of Internet casinos.More on this story here.
PUBLIC ADMINISTRATION IS ECONOMIC CHAOS
Ludwig von Mises’s 1944 book Bureaucracy applies his insight concerning economic calculation to delineate the difference between bureaucratic management and profit-and-loss management in the free market. The implications of his argument are far reaching, for it shows that all types of public administration lack the ability to conduct their affairs in an economic rational manner. The entire text is made available here through a leasing arrangement with Libertarian Press.
Commenting on Europe’s history: It would be a mistake to ascribe the frustration of European bureaucratism to intellectual and moral deficiencies of the personnel -- in all these countries there were many good families whose scions chose the bureaucratic career because they were honestly intent on serving their nation. It was an outcome of the unavoidable weakness of any administration of public affairs. The lack of standards which could, in an unquestionable way, ascertain success or nonsuccess in the performance of an official’s duties creates insoluble problems. It kills ambition, destroys initiative and the incentive to do more than the minimum required. It makes the bureaucrat look at instructions, not at material and real success.More on this story here.
MARCH ISSUE OF ESCAPE FROM AMERICA MAGAZINE IS OUT
Sample articles from this issue include:
Is There Trouble In Paradise (New Zealand)?: Do not visit, immigrate or retire to New Zealand thinking you will find a paradise on earth. New Zealand is a real country with real problems. The most hopeful reality I experience daily about New Zealand as a nation and Christchurch as a city, is that it is big enough to have all the hells of the first world, but small enough to be creative in attempting to solve them.
A backwards glance at America from Argentina: It has been a year since I temporarily set aside my search for a country to return to San Francisco. I still had slight misgivings about my desire to live abroad. Was I running from something? I would give the States one last chance. No go. Like Ayla in Clan of the Cave Bear, I set out again in search of my tribe.
A Critical Look At South Africa: Politics, economics, opportunities, and places to live are given a once-over.
Panama Again: The publication of The Memoirs of Manuel Noriega prompts some retrospection from someone who witnessed the events to book refers to, often at closer range than he would have liked. Panama’s entangled history vis a vis the U.S. provides further proof that the only thing worse than a failed CIA operation is a successful one.Issue table of contents here.
GRUMPY OLD MEN VS. ELITE OLD GUYS
It hit me late last night as I watched George Soros being interviewed... there are the Grumpy Old Men... and then there are the Elite Old Guys. The Elite Old Guys are the investors you would REALLY want to have on your side. The Grumpy Old Men are the folks that have been bearish their whole lives. There are thousands of these guys -- smart and poor -- because they never stepped up to the plate to buy. Then there are the Elite Old Guys -- and these are the guys worth listening to. To carry any credibility with me, you have to have said both “buy” and “sell” in your investment life.
Sounds simple, I know. But you would be amazed how short the list of Elite Old Guys is -- the list of investors that are concerned about making money rather than being proven right. Let us take a look at the most credible investors on Wall Street -- that small handful of Wall Street old-timers that have actually survived horrible bear markets, that bought stocks heavily when prices were low and nobody was willing to buy, and are still around today and are still relevant.
Richard Russell is 79 years old. He has written his Dow Theory Letters newsletter since 1958. He is incredibly bearish today. He has nearly all his assets in tax-free municipal bonds. But he is no Grumpy Old Man. When nobody believed stocks could go higher, Russell put all his assets AND all the money he could borrow into the stock market in 1958. He held tight through 1966, then sold it all, catching one of the great runs in stocks in history. Today, he sees the big money in gold and gold shares, his largest position outside of his bonds.
Then there is David Dreman. Last week, I read the original 1980 version of his book, Contrarian Investing Strategies. In the 1960s he was frustrated with how expensive stocks were compared to the 1930s, 1940s and 1950s. But then 1980 came. Stocks were cheap, and Dreman became a mega-bull, saying in his book... “Since the 1930s [with the exception of the 1974 market] stocks have never been as totally washed out as they are today...the stock market appears cheap by nearly every historical standard.” These days, Dreman manages billions of dollars and writes a column for Forbes. He has been recommending financials and smoking stocks.
George Soros, the most successful investor alive -- including Warren Buffett -- needs no introduction. Lately, the 74-year-old’s biggest trade is betting against the U.S. dollar -- by buying other currencies and gold. John Neff called the bottom in stocks on the cover story of Barrons in September of 2002. His personal portfolio is loaded with homebuilders... interesting to note.Link here (scroll down to Steve Sjuggerud piece).
CHOICEPOINT WATCHING PEOPLE ON BEHALF OF UNCLE SAM
ChoicePoint’s business is the gathering and selling of information about people. Huge electronic files the firm compiles contain far more data about Americans than is available at any government office. In fact, it is illegal for a government agency to collect most of the data ChoicePoint maintains on private citizens. Thus an unusual alliance has grown between government, whose appetite for information about potential security risks has risen, and a company whose acumen in assembling personal information has made it the supplier of choice for many federal agencies.
For years, the FBI, IRS, Defense Department, Social Security Administration and about three dozen other federal agencies have called on ChoicePoint to identify tax evaders by uncovering hidden assets, root out medical benefits fraud and help track down criminal suspects. ChoicePoint won accolades in 2003 for leading federal and local officials to the Washington snipers, by mining name and license plate data the company owns to identify the suspects.
As you move through life, you leave traces of yourself that never disappear. You register a car, apply for insurance, apply for a job, get a blood test, open a bank or credit card account, buy a home, move into an apartment, get arrested, get paroled, buy a boat, file a tax return, get married, get divorced, have a baby, get a library card. These movements leave marks in the form of records. A record might be a seemingly innocuous bit of information you wrote on a form. ChoicePoint and other collectors scoop up these pieces of information. They buy the data -- sometimes from each other -- or obtain it from public sources, such as court and property records. Then, when their customers ask, ChoicePoint blends the pieces into a picture of you.More on this story here.
WILLIAM GRAHAM SUMNER ON WAR AND PEACE
William Graham Sumner, e.g., in The Conquest of the United States by Spain and Other Essays was remarkably prescient about the vast bloodletting and worldwide anarchy that was to come in the 20th Century, the bloodiest in recorded history. And given our current government’s contempt for the constitution, its failed and amateurish foreign policies, the baneful influence of neoconservative living room militarists, an endless and futile drug war, and the efforts to infuse our secular, generally tolerant society with strands of religious absolutism, Sumner long ago predicted that long after he and his generation were gone, the nation would have a vastly strengthened and centralized government, unaccountable bureaucracies, unbridled militarism and its alliance with arms makers and what retired Marine Colonel James A. Donovan once aptly described as a “blind enthusiasm for military actions.”
Nothing is more worthwhile recalling today than his excoriation of American imperialism, which speaks directly to our times. Imperialism, Sumner argued, led to chauvinism, an aggressive outgrowth of mindless patriotism manufactured by the arrogant truculence of men and women relying on emotional sloganeering and threats against dissenters and traditional civil liberties. Who can disagree with Sumner’s credo that, the 20th century would bring a “frightful effusion of blood in revolution and war?”
More than all else, his importance lies in the fact that he anticipated the lethal rise of false utopianism, highly sophisticated mass propaganda techniques, two world wars, concentration camps and gulags, religious and nationalistic hatreds that have murdered many millions of human beings in the 20th century and threaten to reoccur in this century. Sadly, though, Sumner (1840–1910) has been largely forgotten. Shortly before his death he wrote, “I have lived through the best years of this country’s history. The next generations are going to see war and social calamities. I am glad I don’t have to live on into them.”More on this story here.
CREATE YOUR OWN TAX-FREE OFFSHORE COMPANY -- YEAH ... SURE
Get some advice and think twice before buying into this promotion: An offshore auction allows you to buy and sell over the internet in a Jurisdiction that charges no taxes on the profits you make. With an offshore debit card you can bring the funds home with no paper trail.
“Zauction Offshore makes setting up your own offshore company unnecessary, in order to buy and sell in a tax haven. You do it on the internet. No matter where the goods changes hands, the sale did not happen in a high tax jurisdiction. People could do most of their buying and selling online. ... [Zauction] is the world’s first of its kind tax haven auction site. The closer we get to April 15th in the USA the more popular this site is destine to get. Why? Because you can buy/sell, make a profit, and decide for yourself what you intend to do about income tax.
“The website takes advantage of an offshore currency called E-gold. What is E-gold? It is ... the ownership of gold used to buy and sell over the internet. ... E-gold is 100% backed by gold. That is the only currency allowed on Zauction Offshore. No paper trail, when you buy and sell.
“Fred Michaeis is the director of Zauction Offshore Inc. This offshore auction is incorporated in the island nation of Antigua. The site is hosted on a server in Hong Kong. E-gold is the only currency that the auction will accept. There are revolutionary reasons that you should be interested in going to the trouble to convert your fiat money into E-gold currency and use this auction. Why? Well, the USA monetary system is trillions of dollars in debt, and if you use the US dollar, sooner or latter, someone is going to levy a tax on you and expect you to pay it.”Complete press release here.
THE RUNNING DOG LAW ENFORCERS OF THE STATE
On June 17, 1999, in Shawville, Quebec (about 70km north of Ottawa), Lynn Wilson was harassed by a woman inspector from the Quebec Office de la langue française (OLF, the government bureau in charge of “protecting” the French language in the province), relatively to her shop’s English-only signs. The confrontation ended with several townspeople following the language cop around. Ms. Wilson was charged with refusing to provide information to the language cop, and has just been acquitted.
The defendant’s lawyer, Mr. Brent Tyler, was later interviewed and publicly told the Quebec government that they should now “call off the dogs.” The precious OLF bureaucrats found this “offensive,” and have complained to the Quebec bar. Mr. Tyler claims that he did not really mean that the OLF bureaucrats are dogs. All this is very funny. Or is it?
Even if they are often nice, girl-next-door types of people, bureaucrats must realize that they are morally responsible for their collaboration in destroying our traditional liberties. If they do not understand, we are completely justified to “denormalize” them (as the feds want to do to smokers and their suppliers). In fact, it is a social responsibility, if there is such a thing. Hippolyte Taine, the 19th-century conservative philosopher, compared the state to a guard dog “that must remain chained up in its kennel.” It is urgent to chain up the dog.More on this story here.
ALL OUR LIVES ARE ON FILE, FOR SALE
Every time you visit an Internet site, apply for credit or send in a product registration card, you leave behind bread crumbs of information that are swept up, compiled and stored by people you do not know. Hundreds of companies are selling and swapping information -- everything from your phone number to what you buy at the supermarket -- and storing it in databases to be cross-referenced again and again.
Much of the information is publicly available or handed over willingly by you. But even those who believe this data should be accessible agree its aggregation is cause for concern. As companies race to become market leaders in the multibillion-dollar information industry -- capturing the attention of Wall Street along the way -- they are creating bigger, faster, more precise databases about you. Equally troubling, privacy experts agree, is people’s ignorance of who is collecting their data and where the information is stored.
To understand the data mining business, it is helpful to understand who is working to acquire your information and what they do with it. Here is a glimpse of four such players. Every day, an army of paid workers like Pam Mosley fan out to the courthouses of America. While more courthouse clerks are putting data online directly, much still has to be hand-collected...More on this story here.
SURVEY REVEALS LEADING TRUST JURISDICTIONS
According to a recently completed survey of City of London lawyers, jurisdictions which have traditionally led the field as preferred locations for the establishment of trust arrangements continue to be the top choices, despite increasing regulation. The results of the survey, sponsored by legal firm Bailhache Labesse revealed that when recommending jurisdictions in which to establish a trust, 87% of the 100 lawyers questioned chose Jersey, 81% Guernsey, 49% Bermuda, 42% Cayman Islands, 36% New Zealand, 12% Isle of Man, 10% Singapore, 9% British Virgin Islands, 9% Mauritius and 9% others.
Asked to identify the factors that influenced their choice of jurisdiction, the respondents to the survey selected the maturity of the legal system (62%), the regulatory regime (56%) and political stability (51%) as the top three. Although confidentiality was cited by 74% of respondents as an important concern, the survey results pointed to an increasing awareness that total confidentiality is no longer achievable.More on this story here.
ARE WE SERFS?
This year is the 60th anniversary of the publication of one of the 20th century’s most influential books, Friedrich Hayek’s The Road to Serfdom. Milton Friedman, speaking at a recent conference, said that at the time that Hayek wrote his book, most political policy rhetoric was pro-socialist, not only in England where Hayek then lived, but in America as well. Yet actual policy was very free market oriented. Today, Friedman noted, the rhetoric is more often pro-free market even though the policy reality in both America and Europe is overtly socialist. Following Ludwig von Mises, Hayek denied that piecemeal regulation could exist in the long run without becoming totalitarian and yet, it clearly does; and not just in the United States. How is this outcome possible? If we really are in a car with Hayek, traveling along the road to serfdom then, like the child in the back seat, we are compelled to ask, “why aren’t we there yet?”
Perhaps it depends on one’s definition of serfdom? Even though there is not total central planned control of the American economy, there is enough piecemeal control to make most of us think twice about not obeying the state. For some libertarians, this is more than enough to vindicate Hayek’s argument. We Americans have become but timid shadows of our individualist forerunners, always ready to bow down and comply, not even rhetorically willing to challenge, most of the time, the status quo our governments have arranged for us. This is no small, trivial development for it is the people themselves who, ultimately, are going to reverse -- or not -- this endless march into total government.
But the glass may well be half full rather than half empty. A significant -- and growing -- number of people do not accept the status quo as being the most desirable economic arrangement. It is especially heartening that, due to access to new and varied information sources, it is the young in America who have rediscovered our earlier political tradition and who, despite the state’s best efforts, somehow have managed to resist believing in the statist tide that has swept the nation since World War II. If it is true, as all the blithering candidates from all parties routinely claim, that “Our children are our future,” then perhaps we will turn out all right after all. We will never exit from it, but we will also probably never reach the end of Hayek’s road.More on this story here.
WTO SAYS U.S. HAS NO JURISDICTION OVER ANTIGUA BASED ONLINE GAMBLING
Antigua and Barbuda has won a World Trade Organization ruling in a finding that U.S. legislation criminalizing online betting violates WTO commercial services accords. Antigua filed a complaint with the WTO about a year ago concerning the United States’ position effectively banning Internet gambling. The U.S. position has slashed revenue in Antigua, which developed online gambling to boost an economy whose main income, tourism, suffered after a series of hurricanes. Some gaming observers say the ruling may have limited affect on the longstanding position of the U.S. government that Internet gambling is illegal.
The ruling -- which only applies to Antigua and not to other Internet gambling jurisdictions worldwide -- comes as federal prosecutors have threatened legal action against such media companies as Clear Channel and the Discovery cable network for doing business with online gambling sites. Experts also are unsure how the WTO, which has the authority to impose sanctions against the United States, could enforce the ruling.
Before the U.S. prohibitions, Antigua’s Internet gambling industry employed 5,000 people in the country in 119 companies. That dropped over three years to 1,000 people in 30 companies as a result of the ban. “The U.S. is under an obligation to repeal their laws, but they will probably appeal and delay for as long as possible,” Sir Ronald Sanders, Antigua’s ambassador to the WTO, said in a telephone interview from London.More on this story here, here, here, and here.
TERROR WAR’S LEGAL COST
The Bush administration believes that habeas corpus is a luxury that the US cannot afford in its war against terror. Habeas corpus is the legal principle that is the foundation of Anglo-American freedom. It prevents the government from picking up a person and holding him indefinitely without charge. Joseph Stalin and Adolf Hitler were not constrained by habeas corpus. They were able to declare millions of people “enemies” and send them off to death camps. People were declared enemies because of their class and race, or simply because someone with the power to put their name on a list did not like them or coveted their wife or property. In the Soviet Union many people disappeared in “street sweeps” conducted by secret police under pressure to show results by arresting more “enemies”.
The Bush administration’s attempt to legally suspend habeas corpus in The Patriot Act was rebuffed by House Judiciary Committee chairman James Sensenbrenner. Now the Department of Justice (sic) and the Department of Defense are trying to assert the power to suspend habeas corpus by bureaucratic decree. The Bush administration claims the power to declare suspected terrorists “enemy combatants” and to hold them indefinitely without bringing charges, presenting evidence or permitting suspects contact with attorneys or any outside persons. The US Department of Justice (sic) recently told the US Supreme Court that “the Court owes the executive branch great deference in matters of national security and military affairs.” If the Court fails to preserve habeas corpus, the ancient right dating to the Magna Carta in 1215 will be vitiated.
There is more than one legal road to tyranny, and prosecutors and police are making sure all roads to tyranny are open. On March 22 the Supreme Court argued a case that will determine whether Americans still have the right to remain silent. The Supreme Court requires police to read your Miranda rights to you, but if you choose to remain silent, Nevada prosecutors will indict you for “obstructing an officer.” The pendulum has swung away from the rule of law. Arbitrary government power has made a comeback.More on this story here.
COUNTERTERRORISM (BY GOVERNMENT) IS IMPOSSIBLE
At last the topic of 9-11 has shifted onto productive ground. Thanks to the efforts of former counterterrorism official Richard Clarke, some thought is being put into the government failures behind the attacks. “Your government failed you,” he says. Precisely, and in many more ways than he or anyone else at these hearings is willing to say.
Here is the problem. The core failure goes way beyond anything the current government managers -- however inept, distracted, or corrupt -- can correct. If you tell your dog to make you dinner, for example, you can observe later that the dog failed to do so, and have great regrets about this. But what you learn from this experience and how you proceed are the crucial questions. Does the dog need better tools, more scoldings, and a professional trainer? Better to observe that the dog is not the right one for the job. In the same way, the government is not the right one for the job of providing security for the American people.More on this story here.
9/11: 80 MINUTES OF UNILATERAL DISARMAMENT
Nineteen young Arab men reportedly armed with some really, really sharp razor blades wreak mass destruction in the homeland -- that is what government wants us to buy into. My reaction: you have got to be kidding! Your evidence had better be good, very, very good. Nineteen guys from the Middle East up against our Goliath Department of Defense with all its fancy hardware and (pretty damned capable!) personnel and the score? David 100, Goliath zip. Total humiliation for our military. C’mon! Goliath stutters and stumbles around for 80 minutes, doing his best Hamlet, and never gets it together? The skies over America totally undefended? In the biggest assault on the United States since Pearl Harbor? Even at Pearl, a couple of guys got up in the air, didn’t they? Agreed, government is incompetent but, pardon my prejudice, nineteen low-tech losers did all this? Really!? It is quite a story. And yet it is sacrilege to ask any challenging question about this story, government’s involvement or its holy war on terror, consecrated by the lives lost on 9/11.
Ask and you are in the cross hairs of the Bush slime machine. Ask former Treasury Secretary Paul O’Neill, former ambassador Joseph Wilson, or former counter-terrorism chief Richard A. Clarke, the latest in a growing line of former, now-critical government officials, what a nasty bunch this Bush group is. Therefore, I come to praise David Ray Griffin, a professor of philosophy of religion at Claremont School of Theology in southern California, for his enormous courage in writing The New Pearl Harbor: Disturbing Questions about the Bush Administration and 9/11.
Most importantly, The New Pearl Harbor puts all the tough issues into a dispassionate, scientific package. It follows the evidence where it leads and to put it mildly, finds the shifting government explanations wanting, preposterous for the most part. It is a rare book that can make a major difference in history. Yes, Griffin builds on the work of hundreds of other investigators but he is the first to put it all together in a coherent and well-written analysis.More on this story here.
IMPORTANT NEW BOOK ON GOING OFFSHORE AVAILABLE ONLINE
Protecting Our Legacy: A 21st Century Approach to Wealth Preservation & Restoring Liberty, by Ronald Holland, is a new online -- and soon to be published print -- book is not the usual “go offshore for all the wrong reasons” kind of book. Rather he presents an objective look at the potential benefits and risks to affluent investors when they invest offshore in major money centers. He also makes the case why terrorism threats against the United States and American markets make it prudent and necessary today to diversify outside these markets, the dollar and American financial institutions.
He urges existing and new offshore investors to be compliant, follow the reporting and disclosure rules and do their own due diligence on foreign products and financial firms in order to build safe, protected wealth outside their home country jurisdictions. He further describes the attacks on confidentiality and privacy since 9/11 and makes the unusual case that investors and offshore financial institutions need to go even further in know your customer and client rules than required by the US Patriot and Homeland Security Acts in order to protect financial institutions and clients.
Ron makes that case that offshore diversification and wealth preservation planning is far more important in this new century of lost privacy, reportable, transparent structures and full disclosure than ever before due to old traditional risks to wealth, new government and regulatory threats and the new terrorism threat to markets and financial institutions.Book begins here.
WHO DO YOU BELIEVE?
John Templeton is maximum bearish on the housing market. Jim Rogers expects a long, deep decline in the dollar. Warren Buffett is negative on stocks, bonds, and the dollar. George Soros foresees a bond market rout. Bill Gross expects a recession at least as deep as in the early 1980s. On the other hand, President Bush and the U.S. Congress are certain we are only one good employment report away from everlasting prosperity -- it must be true because Alan Greenspan said so.
Clearly, we have a difference of opinion here. Templeton, Rogers, Buffett, Soros, and Gross versus Bush, Congress, and everyone else in Washington, D.C. This is a hard call. One group wants return on capital and interest on principal. The other group is interested in returning to the capital and has no principles. Nevertheless, conventional wisdom is that politics trumps economics.
In a historical sense politics does prevail -- until the situation becomes unsustainable -- and then economics returns with a vengeance. Whether it is John Law and the Mississippi Company three hundred years ago, the rising sun of Japanese stocks and real estate fifteen years ago, or the sovereign bonds of Argentina last week, when bubbles reach unsustainable levels it does not matter whether the politicians want to keep them inflated. They pop.
All it will take to pop this bubble is a meaningful upward shift in the yield curve. In an economy addicted to easy credit, cheap credit, and excess credit, there is no way that increasing interest rates can be other than excruciating. Greenspan is hoping that some smooth and slow deflation of the multiple bubbles in the economy can be brought about by a very gradual, very well-telegraphed increase in rates when the time comes. Financial history says otherwise.Link here.
IF YOU HAVE BEEN SCAMMED IS IT THEFT, OR AN INVESTMENT LOSS?
If you have been sc have been robbed by Enron, WorldCom and other corporations caught in fraud and accounting scandals will not get any sympathy -- or tax deductions -- from the IRS. Your money was not stolen if you lost it in an investment bought on a public stock exchange, the Treasury Department warned. What is not clear is what will happen to investors who have been scammed, by pyramid or ponzi schemes or South Florida’s notorious boiler-room operations. Those sorts of issues, attorneys said, have to be well-documented and may end up in tax court for a final decision.More on this story here and here.
UTOPIA AND REALITY
I occasionally receive e-mails from readers who label me “utopian”. I think of myself as a realist, preferring to focus my attention on better and worse ways of accomplishing ends, mindful that our visions of the “ideal” will be forever changing and beyond our grasp. Focused experience is a far better teacher than abstract reasoning. I believe that drinking a quart of orange juice each day is better for your health than drinking a quart of Scotch. I believe that a market economy is far more conducive to our material well-being than is a socialistic system. I believe that respecting the lives and properties of others is a better way of living in society than is a life of predation; that contractual undertakings with others produce a better life for all than does confiscation or conscription. I know how the violent methods of the state are destructive of life, and that peaceful behavior is life-sustaining. Above all else, my experiences inform me that social systems grounded in politics, with its use of force, produce worse consequences for humanity than do those that are free of coercion.
If I reject murder, rape, robbery, mayhem, and warfare as ways of dealing with others, does that qualify me as a utopian? Am I a hopeless visionary if I insist on not trespassing the interests of others as I pursue my own interests?
Those who criticize me for alleged visionary tendencies are, more often than not, themselves the defenders of the most pervasive of utopian schemes: constitutional democracy. Most Westerners have an unquestioning attachment to the belief that political power can be limited by the scribbling of words on parchment! A belief in constitutional government remains nothing but a collection of undigested reveries. Like the gullible soul who purchases stock in a non-existent gold mine and hangs onto his investment lest he admit to himself that he was bilked, most of us are fearful of confronting the inherent dishonesty of the idea of “limited government”. We prefer a new illusion: there is some “outsider” who can be elected to the presidency, and who will go to Washington and “clean up” the place. What is more utopian than the current tunnel vision mindset that, whatever the problem, the state can resolve it? Utopians are those who believe they can allow others to have coercive power over their lives and property and, at the same time, limit the exercise of such power. It is time for decent, intelligent, thoughtful men and women to move beyond the daydreams of our ancestors and confront the modern world as realistically as we can.More on this story here.
HOW TO DISAPPEAR
A little tidbit on skip-tracers, we do it because there is an adrenaline rush in what we do. What is even better is I get to bill my client and make some money. As we say in my office, “It’s all about the Benjamins.” If your name comes across my desk and the money is right you are in the hunt. I will spend my day finding your mistakes, be it through the utility company, the cable TV Company, or that collect call from Cabo San Lucas to your sister Edith. I have found many a person from Boston to Bali. Usually I find them because of the littlest mistake they made before they departed or while basking in the sun. Let me share a few, some thoughts for you to think. The woman from Beverly Hills who called her doctor asking for her medical records to be shipped to Anquilla. A gentleman from New Jersey who stole money from his company and hid in the Dominican Republic and had Barnes & Noble change his shipping address to his beach front condo. The list goes on and on.
To skip-tracers it is a game we get paid to play. We can make as many mistakes as we want the one you make is the one that most likely lead us to you. Sit back, take some notes and understand the game from my point of view. Take your time, do your research and enjoy the beach.More on this story here.
THE OECD POT IS CALLING THE STAINLESS STEEL OFFSHORE FINANCIAL CENTER KETTLES BLACK
Those of us who work in the offshore world have long known that the best of the offshore financial centres (OFCs) now have far better standards of know your customer and anti-money laundering controls than the main OECD member countries. But the OFCs are still routinely treated as “the usual suspects” by the liberal media and Western governments whenever terrorist financing, money laundering and organised crime are on the agenda.
A recently-released IMF report confirms that, on average, the OFCs are more in compliance with international supervisory standards for financial services than other jurisdictions assessed by the IMF. The IMF reports that OFCs have a higher rate of compliance with the Basel Core Principles in the areas of cross-border banking, information disclosure requirements and, significantly, in prudential regulations and requirements. And in the area of money laundering prevention 76% of the offshore jurisdictions were in compliance with the Basel Core Principles compared to only a 45% compliance rate for onshore jurisdictions.
Post-9/11 studies showed that the OFCs play little to no part in terrorist’s financing operations. And all of the major money laundering scandals of the last 10 years have substantially occurred in Russia, Western Europe (mainly London and Switzerland) and New York. Meanwhile the OFCs have been subjected to enormous expense and inconvenience in the last four years to defend themselves against the OECDs unwarranted attack.More on this story here.
PASSPORT SAFETY, PRIVACY FACE OFF
The International Civil Aviation Organization, or ICAO, is completing new passport standards this week, setting the groundwork for all passports issued worldwide to include digitized photographs that a computer can read remotely and compare to the face of the traveler or to a database of mug shots. Supporters hope the system will banish fake passports and help fight terrorism. But critics say the standards will enable a global infrastructure for surveillance and lead to a host of national biometric databases, including ones run by countries with troubling human rights records.
The ICAO has already settled on facial recognition as the standard biometric identifier, though countries may add fingerprints or iris scans if they wish. The standards body will vote whether to adopt radio-frequency ID chips, such as those used in Fast Pass toll systems, as the standard method of storing and transmitting the digitized information.
Barry Steinhardt, director of the American Civil Liberties Union’s technology and liberty program, warned that such a biometric passport would soon become ubiquitous in Americans’ daily lives. “In Europe, it has already morphed into more than a passport, and countries are already considering using it as a national ID card,” Steinhardt said. “This incredibly rich document will overtake the driver’s license as the preferred form of identification.”More on this story here and here.
SCOPE OF ATTORNEY-CLIENT PRIVILEGE IS NARROWING FAST
Solicitor-client privilege is a fundamental common law right necessary for the proper administration of justice. As the Canadian Supreme Court said, it must be “as close to absolute as possible if it is to retain relevance.” Nevertheless, we see an increasing tendency on the part of governments to erode the scope of the doctrine through statutory rules. Legal privilege is essentially a rule of evidence relating to a client’s confidential communications with her lawyer. Legal advice from a lawyer to his client is confidential and permanently protected from disclosure unless the client chooses to waive the privilege.
The purpose of privilege is to allow individuals and businesses to obtain legal advice from their lawyers in confidence. Sound legal advice and advocacy serve public ends. A lawyer can render such advice only if she is fully informed of the client’s business. Unfortunately, with concerns of money laundering, terrorism and tax evasion, governments are increasingly called upon to balance between competing public ends. In doing so, however, they are prone to overreach.
For example, in money laundering legislation, the government went to the extreme of requiring lawyers to clandestinely inform on their clients to a central government agency. In tax law, privilege covers solicitor-client correspondence, opinion letters, tax plans, business structures and agreements. However, the privilege is not absolute.More on this story here.
THE NEOCONS ARE BIBLICALLY GROUNDED
The new conservatives, or neocons, are a powerful group in Washington, D.C. They are credited as being the driving force, through neocon and Deputy Defense Secretary Paul Wolfowitz, to suggest to George W. Bush that the US needed to start a war in Iraq. After thousands of dead and horribly wounded Iraqis, 600 dead and well over 2,000 mutilated and wounded Americans, the American people are still faithfully marching down the road the neocons put them on. Where did the neocons’ ideas originate? What is their driving and sustaining force?
All the leading neocons, from Irving Kristol and his son William Kristol, to Paul Wolfowitz, Abram Shulsky, and Richard Perle, either studied under, or independently studied, the teachings of Leo Strauss. The neocon movement is definitely made up of Straussians. Leo Strauss was a German Jewish scholar who immigrated to the US in 1938. Seeing how the Weimer Republic could not stop the National Socialists, he turned against secular democracy. After arriving in the US, he became a professor at the University of Chicago, where Wolfowitz and Kristol became his students and disciples.
Believing that progress is bad because it moves beyond early superstitions and myth, such as the Bible, Strauss taught an unnatural reverence for the past. Strauss thought that most people are incapable of living their lives without a belief in a God who would punish them for disobedience, and reward them for obedience. In order for the people to know what this God demanded of them, Strauss, being a student himself of the Twelfth Century influential Jewish leader Rabbi Maimonides, believed the best bet was to use the Hebrew Bible. The cornerstone idea that the Jewish religion through the Hebrew Bible should be used to control the sheep is what motivates and holds together the Jewish and Christian neocons. It is the driving force that sparks increasing and unquestioned US support for Israel, no matter what the cost is to the US and the rest of the world.
In the book of Isaiah we read “... the nation and kingdom that will not serve thee shall perish; yea, those nations shall be utterly wasted." George Bush, the faith-based president, obviously takes this quote as Biblical truth. It was probably in the forefront of his tiny brain when, as the executive director of the 9/11 commission said, he started the war in Iraq for Israel’s security. Superstitious Christians, such as Pat Robertson, accept the Hebrew Bible as the word of God. Wanting to please the Judeo-Christian God, Robertson believes the borders of Israel should be extended to borders dating back to 950 BC -- which encompasses the better part of modern-day Syria, and went from the Euphrates River all the way down to Cairo. Based on Robertson’s ideas, American youth, and the youth of any country that is foolish enough to be sucked into taking part in these neocon wars, better be prepared for much more sacrifice and dying.More on this story here.
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