Wealth International, Limited

Offshore News Digest for Week of November 22, 2004

Note:  This week’s Financial Digest may be found here.

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Premier Alex Scott has been both “discourteous” and “arrogant” towards the people of Bermuda, said Opposition Leader Grant Gibbons. Dr. Gibbons spoke after Mr. Scott’s impassioned speech to the Bermuda Society in London pushing independence -- just two weeks after the Throne Speech, where not a word was breathed about the issue. “It seems he’s giving different messages to different people,” Dr. Gibbons said. “He seems to be doing more talking about it in the UK than here.”

Those in living in the UK, he added, may not have sufficient knowledge of local issues and may not understand that “independence is a very low priority here”. Near the end of his speech in London, Mr. Scott stated, “Through this Government’s ‘Social Agenda’, we will reform our politics so that the voice of the people will always speak louder than the din of narrow interests -- and, in so doing, we will regain the participation and remain deserving of the trust of all Bermudians. It is our belief that from this place we will pave the road to independence.”

Dr. Gibbons responded tthat, “If he is saying they will not pursue independence until the Social Agenda is complete, well, we have heard that could be up to ten years. So why is he aggressively pushing independence now in the UK if he has to wait?” The PLP Government has been in place for six years already, he said. “If it’s taking another ten years (to implement the Social Agenda) ... people will long have given up hope.”

Link here.


International ratings agency Fitch Ratings has assigned a long term foreign currency rating of “BB+” to Panama’s $600 million bond issue, whilst also affirming a “Stable” outlook. “Dollarization, a stable financial system and the government’s considerable financial and land assets support the sovereign’s ratings,” Fitch said in a statement accompanying the announcement. The firm added that the benefits of dollarization have resulted in a long history of monetary and price stability unseen in other emerging markets, while also limiting the probability of spiraling public debt, or a balance of payment crisis which could otherwise have been brought on by a forced devaluation of the currency.

After Panama’s GDP grew by 4.1% in 2003, Fitch forecast economic growth to hit 6% this year, driven by the construction sector (which the firm noted has been encouraged by tax incentives), the Colon Free Trade Zone and the Panama Canal. The actions and stated intentions of the recently-elected government of President Martin Torrijos are also a cause for optimism according to Fitch.

Link here.


An earthquake measuring 6.0 on the Richter Scale shook the Caribbean island at around 8:40 a.m. Sunday. The quake was reported to have been centered some 31 miles west of Dominica’s northern end. Cecil Shillingford, Head of Dominica’s Disaster Services, reported that “Even as we speak there are landslides taking place and we are having lots of rain as has been the case for the past two weeks.” He also reported damages to several buildings, “some of these will now have to be demolished. The Hospital in Portsmouth has been damaged along with a number of homes.”

Several efforts were made to reach Prime Minister Roosevelt Skerrit but he has been marooned, trying to reach his constituency of Vielle Case, which according to Shillingford, has suffered badly and has been isolated due to the breaks in the roads.

Link here.

Repairs will take millions says Dominican PM.

Speaking in an interview following a lengthy meeting with emergency services officials, Dominica’s Prime Minister, Roosevelt Skerrit, said many individuals have had to evacuate their homes as a result of the severe structural damage done to many buildings and dwelling places. “Even though the people of Dominica are settling down and endeavouring to get their lives back to normal again, the situation is indeed serious and, from what I have seen, it is going to take millions of dollars to repair the damaged areas,” he said.

Skerrit said that there were over 18 landslides that has caused serious problems with the road network and “there is one village that has been totally cut off from the rest of the country and there is also another village ... that has been locked in since last week Thursday,” he said, adding there are over two and a half dozen severely damaged building, including three damaged churches.

Link here.


A Swiss diplomat says Switzerland must continue negotiations with the EU now that the two sides have signed a second series of bilateral accords. Dante Martinelli, who has spent the past five years in Brussels as head of the Swiss Mission to the EU, said the momentum must be sustained. Martinelli, who has just stepped down from his post in Brussels, conceded that the bilateral route was not easy. But he said this was the approach to the EU that the Swiss people had chosen, as an alternative to membership.

“It was the Swiss people who decided to follow this bilateral route! To do nothing would be a backwards step. In the dynamic environment of the EU, if a partner stands still the distance grows. So our goal is to keep the distance between Switzerland and the EU as small as possible, so that eventually it will disappear,” Martinelli said.

Link here.

Political reforms give Swiss voters a headache.

Voters are to decide on major reforms to Switzerland’s political system, redressing the balance of power between the federal and cantonal authorities. But the complexity of the issues at stake on November 28 appears to have overwhelmed many voters. The reforms are aimed at redefining who is responsible for a wide range of policy areas, including social security, welfare, education, transport, environment and culture. At stake is a total of SFr17 billion ($14.5 billion) in annual subsidies and payments. The proposals are also designed to promote more cooperation among the regions and redress the balance between the richer and poorer cantons. Under Switzerland’s political system, the country’s 26 cantons and the federal government share responsibilities and all have the right to levy taxes.

Supporters of the reforms say they will improve Switzerland’s federal system, making it more efficient and transparent, and bolstering the power of the cantons. Opponents argue the proposals will widen the gap between rich and poor regions, and that disabled people will lose out. The cabinet, parliament, three of the four main political parties and the business community are in favor, while the Center-left and the unions have come out against the proposals.

Link here.


For a hard-charging executive like Alberto Ferraris, being named chief financial officer of a €7.6 billion company was a career-making moment -- and he was not going to let a few nagging doubts stand in his way. Since the company was Parmalat, the Italian dairy-and-food conglomerate the U.S. S.E.C. has charged with perpetrating “one of the largest and most brazen corporate financial frauds in history,” and since Ferraris now faces charges of market rigging and issuing false information, he may wish he had heeded those doubts. But back in March 2003, he says, he knew the company had some financial problems but had no idea how bad things were about to get.

After assuming the title of CFO, Ferraris’s doubts started to pile up. First, he says, he could not understand why the company was paying so much to service its debt. The interest payments seemed far higher than warranted for the €5.4 billion in debt on the books. Even more troubling, the company would not give him total access to the corporate accounts. So he asked two trusted members of his staff to mount a quiet investigation. After calling around Parmala’qs worldwide operations, they came back with shocking news: a total debt estimate of €14 billion, more than double that on the balance sheet. “Until then, I never suspected the accounts were false,” says Ferraris.

He knew he had to go to the top. In mid-October he met with Parmalat’s founder and lifetime CEO, Calisto Tanzi. Until then, Ferraris says, he had valued Tanzi as “an excellent person, a real entrepreneur” -- a charismatic but steady leader who was so proficient at math that he always spotted calculation errors in presentations. “I expected him to say, ‘Your numbers are wrong.’” Instead, he recalls, Tanzi just shrugged. “He said, ‘Eight billion, 11 billion, 14 billion -- it’s all the same.’” Stunned, Ferraris urged Tanzi to call a meeting with the company’s banks to explain the situation. Tanzi refused, and Ferraris quit.

A few weeks later, on December 19, 2003, the biggest corporate scam in European history was exposed when Parmalat confirmed that an account it had claimed to have at Bank of America with €3.95 billion in cash simply did not exist. That was merely the first revelation in the scandal that turned Parmalat into Europe’s Enron, a morass of fraud and financial failure made all the more dramatic by the fact that the company was Italy’s eighth largest and had established itself as a global consumer brand.

In the past year, the story of Parmalat has emerged in fits and starts, as three teams of forensic accountants have combed through the company books and dozens of executives -- including Tonna, Tanzi, Ferraris and Del Soldato -- have made detailed confessions to magistrates in Parma and Milan. Using their testimonies and thousands of pages of official documents, it is now possible to piece together the key parts of the affair. Here is the inside story of how the Coca-Cola of milk managed to go sour.

Link here.


As soon as it became clear that Grand Cayman was likely to be hit, the Cayman Islands branch of Bank Julius Baer initiated its disaster-recovery plan and flew six employees to Atlanta. The U.S. city was used as a staging post while waiting to hear the extent of the hurricane’s damage and when it was clear that the plan needed to be implemented, they were flown to Guernsey within 48 hours The Guernsey team had four days, including a weekend, to get equipment ready for their colleagues and were able to use empty office space recently vacated by another company in the same building.

The switch-over was so successful that clients did not realize they were talking to their normal contacts from another jurisdiction and while technology made this possible, it was down to cooperation and hard work, said Jonathan Guillemet, head of business logistics/IT. Guernsey was originally chosen as a back-up jurisdiction because of the similarities between the businesses in both islands and the disaster-recovery plan was well rehearsed.

Link here.


Increasingly well-off consumers are driving the astonishing growth of a lot of Chinese companies -- and making their owners very rich indeed. The head of Gome Electrical Appliances, a nationwide chain whose first floor is arranged like a bazaar with makeshift booths showcasing individual brands, is Wong Kwong Yu, 35, who lands at No. 2 on the Forbes annual list of China’s richest people, with a net worth of $1.3 billion. He started Gome in 1987, when Deng Xiaoping’s economic reforms were nascent, selling local and global brands as he still does today.

In an economy where growth is steaming along at 9%, consumers are spending at an even faster rate -- retail sales should rise by 13% this year. Nimble private-sector companies are more adept than state-owned rivals at anticipating customer whims and are finding fortunes in industries such as retail, media and even finance.

The minimum wealth needed to make the top 100 list increased to $141 million from $100 million last year. The combined wealth of the 100 expanded to $29 billion from $22 billion. The list this year again reflects great tech booms and blowouts. Last year’s No. 1, NetEase founder William Ding Lei (No. 6), has had his Web-spawned wealth fall by about 40% amid worries about profits, products and government telecom policy. Back at No. 1 this year after a year at No. 2 is Larry Rong Zhijian. His Citic Pacific Group thrives on China’s burgeoning demand for power and transportation.

Link here.


In a mark of China’s growing economic confidence, the country’s central bank has offered blunt advice to Washington about its ballooning trade deficit and unemployment. In an interview with the Financial Times, Li Ruogu, the deputy governor of the People’s Bank of China, warned the U.S. not to blame other countries for its economic difficulties. “China’s custom is that we never blame others for our own problem,” said the senior central bank official. “For the past 26 years, we never put pressure or problems on to the world. The U.S. has the reverse attitude, whenever they have a problem, they blame others.”

Mr. Li insisted an appreciation of the Chinese currency would not solve the U.S.’s structural problems and that although China was “gradually” moving towards greater exchange rate flexibility, it would not do so under heavy external pressure. His comments will disappoint U.S., Japanese and European politicians. Pressure has mounted on the Chinese administration to revalue the renminbi or to increase the flexibility of the Chinese exchange rate over the past two years.

Mr. Li said China could only permit greater renminbi flexibility after creating a domestic financial infrastructure, including reformed banks and developed markets, able to cope with a more liberalized currency mechanism; considering the conditions and the wishes of neighboring Asian economies on any move towards a more flexible system; and educating people on how to deal with a new exchange rate system, teaching them how to hedge.

Link here.


Ireland has emerged as the best country in the world in which to live according to the latest quality of life index published by Economist magazine, with the Emerald Isle beating Switzerland into second place. The World in 2005 survey, produced by the Economist Intelligence Unit, judged 111 countries according to a variety of criteria, using the usual factors such as income, growth, political stability, health, job security and climate, while also taking into account other quality of life factors it called “freedom, family and community life.”

Translated to the EIU’s one-to-ten rating system, Ireland scores 8.33, ahead of Switzerland on 8.07. With the exception of Australia in 6th place, the rest of the top ten constituted countries from Europe. Meanwhile, the U.S. achieved a ranking of 13th, and the UK just managed to scrape into the top 30, achieving a ranking of 29th. Unsurprisingly, Zimbabwe scored just 3.89. “Ireland wins because it successfully combines the most desirable elements of the new with the preservation of certain cosy elements of the old, such as stable family and community life,” observed the report.

Link here.



The EU Savings Tax Directive, OECD initiative on harmful tax competition and the EU Code of Conduct on harmful tax measures are all influencing tax change -- the first moves will be hinted at in the 2005 Budget. But the island also has to keep up with developments in other jurisdictions, including Jersey and the Isle of Man.

“The fact that Jersey and the Isle of Man are going to zero-10 starts to make it imperative that we do. Most finance businesses are not here because they love Guernsey -- if we don’t fulfil their requirements, it is likely that they will move,” said Tony Mancini, head of tax at the local office of accountants PricewaterhouseCoopers. He said that international reputation was all-important. “We get queries within the PwC network internationally, asking us questions about the island’s reputation, the IMF report on Guernsey and anti-money laundering. “Respectable business says that reputation is important. The questions are increasingly being asked.”

Mr. Mancini said it was apparent that the public knew very little about the reasons for changing the tax system and the likely adoption of the “zero-10” rate for companies. “The general rate of tax will be zero and most companies would pay no tax at all. But the States still needs some tax, so 10% on some parts of the finance industry will come in. Part of the rationale for 10% is that it was felt that that was a rate which international owners who own most of the companies would be happy to bear. 10% is seen as an acceptable figure, but there’s nothing magic about it.”

Link here.


The tax code now exceeds a staggering 60,000 pages, prompting Americans to waste 6.2 billion hours just completing their returns every year. Deciphering it costs the country $203.4 billion a year, according to the Tax Foundation. Its complexities generate additional job-killing distortions throughout our economy. Indeed, the tax code is so complicated and expansive that it now touches nearly every aspect of our lives. Americans can no longer make a decision in family or in business based simply upon family or financial criteria; the tax impact is often a major factor as well.

Congress must address the code’s outrageous waste and complexity. Yet fundamental tax reform has been on the GOP agenda since 1994, and despite the passage of two major tax cuts in 2001 and 2003, the tax code has gotten more complex. It is now so irredeemably complicated that even the process of cutting taxes results in ever more complexity. That is why it is time to completely scrap the code and replace it with a system that is simple, fair, honest -- and flat.

Link here.

G.O.P. constituencies split on tax change.

Stephen Moore, the president of a conservative fund-raising group, wants to overhaul the tax code. So do Dr. Richard Land of the Southern Baptist Convention and Grover Norquist, president of Americans for Tax Reform, a conservative group. They just do not agree on how to do it. Even though it will be months before President Bush proposes an overhaul of the income tax, key Republican groups are already divided about how or even whether to proceed. Regardless of which path Mr. Bush pursues, he is likely to be pulled by conflicts between parts of his political base.

Economic conservatives share an ideological belief in flattening income tax rates and eliminating as many tax preferences as possible. And business groups want to preserve breaks for research, oil drilling, health insurance, equipment leasing and scores of other purposes. Christian conservatives want to promote charitable deductions and “family values”, and may want to defend tax breaks for married couples with children. “People are not going to give the kind of support necessary for tax reform that leaves the investor class untaxed,” said Dr. Land, who is president of the Southern Baptist Convention’s Ethics and Religious Commission. “That is not going to be politically viable.”

These differing constituencies pose a significant challenge for Mr. Bush, so much so that many Republican lawmakers are openly doubtful about whether to attempt a tax overhaul. Some Senate Republicans wonder about public enthusiasm for tax reform, despite widespread discontent with the complexity and apparent unfairness of the current tax code. Mr. Bush has offered few specifics, saying he will create a bipartisan advisory panel before the end of the year that will make recommendations within a fairly short time. While Republicans agree about the general goal of flatter income tax rates and some form of a consumption tax, they disagree sharply about the best way to accomplish this.

In the House, dozens of Republican lawmakers favor junking the income tax altogether and replacing it with a national sales tax or a flat tax. Many of Mr. Bush’s advisers, by contrast, prefer a piecemeal approach that would reduce if not eliminate most taxes on savings and investment, leaving a system that only taxes consumption.

Link here.


According to new data released last week by the IRS, the number of audits carried out on wealthy taxpayers rose by 40% in the 2004 fiscal year compared to the previous year, while the audit rate on small business has dropped considerably. The figures revealed that the total number of high income taxpayers -- defined as those earning more than $100,000 per year -- examined by the IRS increased to over 195,000, compared with a total of 139,400 in the 2003 fiscal year, as enforcement revenue reached a record $43.1 billion.

For the first time since 1999, the total number of audits of individual taxpayers exceeded 1 million, a 19% increase on last year, and 36% more than in 2002. Meanwhile, audits of large businesses -- those with assets of $10 million or more -- climbed for the first time in many years to over 9,500 (one in six) from 7,125 last year. Enforcement activities brought in a record $43.1 billion in fiscal 2004, up 15% over 2003, the agency reported. The agency said that the number of levies exceeded 2 million, a 21% increase from 2003 and triple the number in 2001. IRS Commissioner Mark W. Everson, suggested that the figures are a sign that the IRS is turning the tide in the enforcement battle, and argued that the agency is representing value for money for the taxpayer.

Links here and here.


Before 1986, it was possible (although not often worthwhile) to buy an investment that was structured to provide maximum tax deductions and credits in the year of purchase. At the end of each year, there was a mad flurry of activity by high income taxpayers to buy some of these tax shelters. In many cases, there was little or no serious due diligence about the merits of the investment. The only thing the taxpayer wanted to know was, “What’s the write-off?” I hate to admit that the government did anything sensible, but they may have accidentally helped some taxpayers to avoid putting their money into stupid investments just to save some taxes. The few “tax shelters” that are left provide little help if purchased late in the year. If you start early in the year, there are some ongoing tax benefits available from rental real estate investments, from certain oil or gas investments and from low income housing investments.

In addition, it is very difficult to generalize about year end tax planning because ideas that help one taxpayer could backfire on other taxpayers. What is useful depends on the specifics of each family, the source and type of income, whether they own a home or any rental realty, whether they have unrealized capital gains or losses, etc. An exhaustive discussion of some of the things that can be done late in the year to reduce your taxes would be almost as extensive as a complete checklist of tax avoidance methods. You might therefore want to take another look at the checklist at http://www.offshorepress.com/vkjcpa/checklist.htm to see if there are any ideas in that checklist that might be applicable in your situation.

It is my opinion (after about 35 years of experience) that tax planning is best done all year long. But for those who procrastinate, it is better to do something late in the year than to wait until the year is over. Among other issues, each dollar of federal tax that you can defer to next year will most likely also result in the deferral of another dollar for estimated taxes and some deferral of state income taxes. When I say “do something” I do not mean throwing good money into something that is worthless just to defer taxes. However, for long term tax savings, you must continue to make these same expenditures at the end of each year in order to avoid having the tax benefit for this year turn into higher taxes next year or the year after. Having made that caveat, the basic choices near the end of the year are to (1) defer income, (2) accelerate deductions and credits, (3) make exempt gifts.

Link here.

Year End Tax Planning Guides: Smartmoney.com, Adkisson Analysis, Financial Planner’s Article Library.


In an interview earlier this week, Ireland’s new Minister for Enterprise, Trade and Employment, Mícheál Martin suggested that a reduction in the Republic’s 12.5% corporate tax could not be ruled out in the next few years if the jurisdiction shows any sign of a decline in competitiveness. “Our competitors are the developed economies and we can’t lose focus on that,” he said.

Link here.


The UK’s Inland Revenue should take a more proactive stance to help speed up the recovery of tax debt, such as taking payments directly from people’s salaries or bank accounts, a House of Commons select committee report has argued. The Public Accounts Committee recommended that the Revenue utilize debt collection strategies similar to private utility firms, by using records held by other governmental departments to trace non-payers and seeking greater powers of recovery.

The report also suggested that the UK tax collector follow the example of tax authorities in other countries by employing private debt collection agencies to recover tax debts, and by allowing tax payments to be made by credit card. “The longer the debt remains outstanding the more difficult it is to collect, so it is important to get people to pay as quickly as possible,” the report concluded.

Link here.


The UK government has assured the British Virgin Islands that it is taking all steps necessary to mitigate the effects of the European Savings Tax Directive on the jurisdiction’s economy. Once implemented, countries within the EU and certain third countries and dependent territories will be required to share bank account information for tax purposes with the tax authority of an EU resident’s home state, although certain countries will instead apply a temporary withholding tax.

In a letter to Chief Minister Dr. Orlando Smith, the UK’s Paymaster General Dawn Primarolo wrote that the UK government would endeavour to use its influence in a bid to challenge misconceptions concerning the EU directive and its implementation, and will continue to push for adoption of the legislation as geographically far afield as possible. Furthermore, Primarolo pledged that Britain would press for a level playing field concerning OECD tax information sharing and other tax initiatives, whilst also bringing pressure to bear to secure the BVI’s removal from any international “blacklists” in relation to taxation.

Link here.


The IRS is planning to introduce private collection agencies starting January 2005 to help the agency recoup an estimated $120 billion in unpaid taxes. The new measure will see the around ten of the country’s largest debt collection agencies being hired, with each company taking up to 25% of the debt collected. According to the latest available data, as of September 2001, an estimated 76,686 taxpayers had outstanding tax bills in excess of $100,000. The IRS has described most of these as average taxpayers rather than users of more sophisticated tax planning arrangements.

The scale of the task dwarfs any other project undertaken by the debt collection industry in America so far. The private firms will be expected to pursue some 2.9 million cases per year, and for its first year target, the IRS has identified around $13 billion worth of debt that it considers will be the easiest to collect. According to Treasury Department projections, an additional $1.4 billion in tax revenues will be collected over 10 years through the employment of private debt recovery agencies.

However, the move is not without its critics and is being opposed by consumer groups and many lawmakers, who fear that private companies will not be as familiar with tax law as IRS employees. They warn that this may leave the system open to abuse, especially as many collectors and agents are likely to be on incentive schemes. Observers have also pointed to the failure of a pilot scheme launched in the late 1990s which eventually had to be scrapped.

Link here.



Whether politically motivated or profit-driven, investors have been paying more attention to overseas opportunities since the November 2 reelection of President Bush. Regardless of feelings about the direction of the country in the next four years, the direction of the dollar is causing many to examine foreign strategies. And the lifting of the federal debt ceiling last week by $800 billion has only sharpened the focus.

“I would look to having cash invested in many countries,” said Michael Kitces, a financial planner in Columbia, Maryland. “If you had to pick one place, try the euro or investments in other stable countries.” Other timely strategies include mutual funds that hold assets in foreign denominations, plus exchange-traded funds representing non-U.S. currencies and companies -- Barclays’s iShares dominates this type of ETF business. Yet another approach looks at individual stocks outside of the U.S., or U.S. multinationals.

Dean Harman, a financial planner in Woodlands, Texas, periodically fields questions from high-net-worth clients about transferring assets to locales considered to be tax havens. Unless the investor reports offshore income and pays U.S. taxes accordingly the IRS will consider it tax evasion. Forming a foreign corporation legally shields money from taxation in the U.S., although the federal government still expects such entities to pay up for any income earned in America. Moving the money back into the U.S. incurs additional obligations. The IRS levies taxes on repatriated funds, and often audits them, as well.

Fact-finding into tax fraud has gotten sophisticated in recent years. But not everyone believes that the system is sufficiently foolproof. “Generally, when you have money in other countries, it’s hard for the IRS to find out how much you’re earning outside the U.S,” said Mr. Kitces. “But the larger the amount of money involved, the harder it becomes to explain if it ‘disappears’ from your next tax return.”

Link here.


The traditional concept of what constitutes an OFC has been challenged and the definition broadened to include countries which do not traditionally bear this label. Although the term “offshore financial center” is often used to exclusively describe smaller financial centers, which are geographical island nations, in reality, “offshore” is a concept more appropriately defined not by whether a financial center is large or small, but by whether the financial service is provided to a client residing outside of the supplying jurisdiction.

The provision of tax-free facilities or tax neutral products for cross-border financial services to non-resident clients are very frequently and very legitimately used in large and in developing jurisdictions. Thus, according to Rajiv Biswas in his paper entitled “International Tax Competition, Globalisation and Fiscal Sovereignty”, London, Tokyo and New York control, between them, nearly 60% of the global market for offshore services. Moreover, if one considers the involvement of OECD member states and takes into account the additional activity in other OECD member states, OECD jurisdictions control 80% of the international market for such services.

In short, the largest OFCs are New York, London and Tokyo. Moreover, it is clear that greater opportunities for money laundering occur in the OECD member jurisdictions in one day than what can potentially occur in the combined total of, for example, Caribbean territories, in several years. Having identified what an OFC is in reality, if one were to take on board the “Miami Vice” connotation of OFCs, and examine whether the wholesale condemnation of Caribbean territories as unregulated pariahs is currently warranted, the results offer an insight more into geopolitics and market competition than confirm the absence of legislative and supervisory controls.

Link here.


Starting Dec. 1, residents of Western states along with Alaska and Hawaii will be able to get free copies of the reports every year from the three major credit agencies -- Equifax, Experian and TransUnion. People in the Midwest can begin ordering theirs March 1, while those in the South start June 1. Residents of Eastern states, the District of Columbia and U.S. territories are last, starting Sept. 1. The public’s access to free copies of their reports, which track the amount of debt consumers have and whether they pay their bills on time, was mandated by the Fair and Accurate Credit Transactions Act of 2003. The law, better known as the FACT Act, was designed to help Americans better monitor the reports that are used by banks and merchants to determine if they will lend to a consumer, and at what interest rate.

Consumers will be able to go to a single Web site, where they can request their reports online. Or they will be able to call a toll-free number, 1 877 322-8228. Or they can mail a request to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, Georgia, 30348. The reason the program is being launched region by region is that the credit reporting agencies have no way to gauge what public demand will be for the free reports.

Consumer advocates are urging Americans to take advantage of the new service. Some suggest consumers get all three bureau reports at once to check them for accuracy. Others advocate getting one every four months so they can monitor changes over time. Whichever strategy a consumer adopts, Liz Pulliam Weston, author of Your Credit Score, said checking a credit report is the best way to spot ID theft early and contain the damage. And checking a report also should give families a place to start if they want to improve their credit scores, which are three-digit numbers that lenders use to set interest rates.

Link here.



The United States has not issued microchip-equipped passports yet, but as the Department of State tests various prototypes, the international standards for the passports are under fire from privacy advocates who worry that the technology will not protect travelers from identity thieves. The American Civil Liberties Union has raised alarms, and an executive at one of the companies developing a prototype for the State Department called the international standards woefully inadequate.

The international standards for “electronic” passports were set by the UN-affiliated International Civil Aviation Organization, which has worked on standards for machine-readable passports since 1968. On the latest passports, the agency has “taken a ‘keep it simple’ approach, which unfortunately, really disregards a basic privacy approach and leaves out the basic security methods we would have expected to have been incorporated for the security of the documents,” said Neville Pattinson, an executive at Axalto North America, which is working on a prototype U.S. electronic passport.

As part of heightened security since the terrorist attacks of Sept. 11, 2001, all new U.S. passports issued by the end of 2005 are expected to have a chip containing the holders’ name, birth date, and issuing office, as well as a biometric identifier -- a photo of the holder’s face. The photo is the international standard for biometrics, but countries are free to add other biometrics, such as fingerprints, for greater accuracy. Privacy advocates have protested about the security standards for the passports, but Pattinson is the most prominent person involved in their creation to express concern that they could become prey for identity thieves if safeguards are not standardized. The international standards spell out ways that the passports could incorporate more protection from identity thieves, but they make those methods optional.

Links here and here.


Representative Ernest Istook, the chairman of the appropriations subcommittee with jurisdiction over the I.R.S. budget, said that a measure allowing some lawmakers and their staffs to examine Americans’ income tax returns had been inserted in a huge spending bill by a staff assistant without his knowledge. “I didn’t write it. I didn’t approve it. I wasn’t even consulted,” Mr. Istook, R-Oklahoma, said in a statement issued by his office.

The chairman of the full Appropriations Committee, Representative C. W. Bill Young, R-Florida, said in a separate statement that the provision had been written by the revenue service at the request of the committee’s staff and “was simply an attempt to exercise our constitutional stewardship of the I.R.S. budget request, with no intention to review or investigate individual tax returns.” The provision is one sentence in the 3,000-page omnibus spending bill that cleared Congress on Saturday night.

Democrats continued to complain about the tax provision. “Of course, people’s privacy would have been jeopardized,” Mr. Conrad, D-North Dakota, said at a news conference in the Capitol. It “would have provided unfettered power to chairmen of the Appropriations Committees now and in the future to assign agents to go review people’s tax returns and to reveal them to the public without any civil or criminal penalty.”

Links here and here.


Electronic “smart” tags could be embedded in £50 notes within ten years, allowing the state to invade people’s financial privacy further, warns a leading academic. Some Japanese notes are already fitted with the devices and the European Central Bank is likely to follow suit next year. America’s Federal Reserve is also thought to be interested in tagging high denomination dollar bills.

The devices, which give off radio signals, are already being introduced into clothing by major chains and are being used around the world to keep track of pets and livestock. But in a new paper, Professor Ian Angell, head of the information systems department at the London School of Economics, and Ph.D. student Jan Kietzmann warn that the tags will be “embedded” in banknotes, helping Government agencies to track private flows of money. “The state will know exactly how much cash is being carried, who is carrying it and who has carried it previously,” according to Angell.

“A radio-frequency identification -- RFID -- tag can identify each note as it passes within range of a sensor.” RFID technology has already sparked controversy as civil liberties campaigners have protested at its inclusion in consumer items such as clothes, DIY products, toiletries and even meat. The fear has been that major retail groups will use the information gathered from RFID tags as an allseeing giant version of supermarket loyalty cards.

Link here.


Next time you make a printout from your color laser printer, shine an LED flashlight beam on it and examine it closely with a magnifying glass. You might be able to see the small, scattered yellow dots printer there that could be used to trace the document back to you. According to experts, several printer companies quietly encode the serial number and the manufacturing code of their color laser printers and color copiers on every document those machines produce. Governments, including the United States, already use the hidden markings to track counterfeiters.

Peter Crean, a senior research fellow at Xerox, says his company’s laser printers, copiers and multifunction workstations, such as its WorkCentre Pro series, put the “serial number of each machine coded in little yellow dots” in every printout. The millimeter-sized dots appear about every inch on a page, nestled within the printed words and margins. “It’s a trail back to you, like a license plate,” Crean says.

The dots’ minuscule size, covering less than one-thousandth of the page, along with their color combination of yellow on white, makes them invisible to the naked eye, Crean says. One way to determine if your color laser is applying this tracking process is to shine a blue LED light -- say, from a keychain laser flashlight -- on your page and use a magnifier. If the practice disturbs you, do not bother trying to disable the encoding mechanism -- you will probably just break your printer.

Lorelei Pagano, a counterfeiting specialist with the U.S. Secret Service, stresses that the government uses the embedded serial numbers only when alerted to a forgery. “The only time any information is gained from these documents is purely in [the case of] a criminal act,” she says. John Morris, a lawyer for The Center for Democracy and Technology, says, “That type of assurance doesn’t really assure me at all, unless there’s some type of statute.” He adds, “At a bare minimum, there needs to be a notice to consumers.”

“The industry absolutely has been extraordinarily helpful [to law enforcement],” Pagano says.

Link here.



Tony Blair’s government is considering toughening already contentious anti-terrorism powers if it wins another term in office, a senior government minister said. U.K. Home Secretary David Blunkett said the government is considering allowing wiretap evidence to be used in court and establishing special terrorism courts overseen by judges without a jury. The changes would not come until after a national election expected next year, Blunkett told ITV television’s Jonathan Dimbleby Show. Blunkett said new measures could also include the use of “civil orders” barring suspects from committing certain acts, even if the acts themselves were not criminal. They could, for instance, prevent suspects from using a specified banking network or using the Internet.

The most controversial of Britain’s current laws authorizes the indefinite detention without trial of foreign terrorist suspects if they cannot be safely removed to another country. That legislation and Blunkett’s plans for a national ID card -- Britain’s first since the Second World War -- have angered civil libertarians.

Link here.

ID cards for all, and other law and order bills, dragged out in Queen’s Speech.

Of all the 36 Bills or draft Bills trailed in this week’s Queen’s Speech, the one that will directly affect the greatest number of people will be David Blunkett’s scheme for a national, compulsory identity card scheme. This will be the first time since just after the war that law-abiding citizens will be expected to carry a card that proves they are who they say they are. While it will not be an offence to be without an ID card, in practice no one will be able to drive a car, travel, or do much else unless they have one.

When Michael Howard was Home Secretary in the 1990s, he was under pressure from the Tory rank and file to introduce ID cards, but refused. The ID Card Bill is an example of how far Tony Blair and Mr. Blunkett will go to trump Mr. Howard in the field of law and order. Some people object to the cards on civil liberties grounds, but after the horror stories that emerged last week about the computer system at the Child Support Agency, the bigger question may be what system will the National Identity Register use?

ID cards will produce a clash between the Government and the Liberal Democrats, whom Labour MPs are anxious to accuse of being soft on crime. But their tough new Shadow Home Secretary, Mark Oaten, will probably avoid falling into this trap by not voicing opposition to Labour’s new measures against litter and other forms of social nuisance.

Link here.

How secure will the “secure national database” for ID card information be?

The U.K. government’s high-tech plans for ID cards using biometric technology was announced Tuesday in the Queen’s Speech, amid the traditional pomp and pageantry of the annual opening of the U.K. Parliament. Queen Elizabeth II read the government-written speech, which unveiled plans for 32 proposed laws, including the Identity Cards Bill, to be considered in the newest session of Parliament. The legislation proposes a system of ID cards that carry biometric identifiers in an embedded chip, and are linked to a “secure national database” to be created by 2010. Secretary of State for the Home Department David Blunkett proposed the new system last year.

The government is working to make the ID cards compulsory for everyone living in the U.K. by 2011 or 2012, Blunkett said in an interview broadcast by the BBC, after the Queen’s Speech. The national database will hold personal information for each person carrying the ID card. The information will include name, address and biometric information such as fingerprints, facial scans and iris scans. Blunkett said that the database is the “crucial part” of the program and will eventually be linked to the EU’s proposed registration program.

Ovum Ltd. analyst Graham Titterington agreed that the database is the key aspect of the system. “It is quite unique what the U.K. government is proposing and would be absolutely vast,” Titterington said. “A number of European countries like Belgium and Latvia have ID cards with databases of information, but those are used primarily as an entry to e-services where as the U.K. plan is primarily about law and order. Just what will be in the database and who can use it needs tying down because already, you are seeing ‘function creep’ becoming a problem,” he said.

Blunkett has repeatedly hailed the biometric ID cards as a powerful weapon in the government’s fight against identity fraud, illegal workers, illegal immigration, terrorism and illegal use of government entitlement programs such as the National Health System. The Queen echoed that sentiment in her speech. But many security experts question whether such a vast database could ever be free of errors. “By its very nature, a database of that size could never be truly clean. Just in terms of data entry, how do you ensure the accuracy of the data being entered?” Mr. Titterington said.

Link here.


Since Sept. 11, the nation’s attention has been focused on possible threats from Islamic terrorists. But home-grown terrorists have been steadily plotting and carrying out attacks in unrelated incidents across the nation, according to federal authorities and two organizations that monitor hate groups. None of the incidents over the past few years matched the devastation of 9/11 or even the 1995 bombing of the Oklahoma City federal building.

But some of the alleged domestic terrorists who have been arrested had ambitious plans. The people and groups range from white supremacists, anti-government types and militia members to eco-terrorists and people who hate corporations. They include violent anti-abortionists and black and brown nationalists who envision a separate state for blacks and Latinos. And they have been busy. “Not a lot of attention is being paid to this, because everybody is concerned about the guy in a turban. But there are still plenty of angry, Midwestern white guys out there,” says U.S. Marshals Service chief inspector Geoff Shank.

Alleged terrorist plots by U.S. citizens are not new, but many of the recent conspiracies were overshadowed by 9/11 and the hunt for terrorists abroad. Most of the foiled plots did not get very far. And few got much publicity. But there were some potentially close calls, such as the scheme by William Krar, an east Texas man who stockpiled enough sodium cyanide to gas everyone in a building the size of a high school basketball gymnasium before he was arrested in 2002. Shank, whose unit mainly searches for fugitives, including some wanted on domestic terror-related charges, led the manhunt for Clayton Lee Waagner, 48. Waagner was convicted in December of mailing hundreds of threat letters containing bogus anthrax to abortion clinics in 24 states. During his trial in Philadelphia, prosecutors documented Waagner’s ties to the Army of God, an extremist group that believes violence against abortion providers is an acceptable way to end abortion.

In May, a Brookfield, Wisconsin, man labeled a domestic terrorist by federal prosecutors received an eight-year prison sentence for interfering with Madison police radio frequencies. Rajib Mitra, 26, had blocked police radio signals and later broadcast sex sounds over police radios. His attorney argued that the transmissions were an accident. Mitra was one of the first defendants sentenced under guidelines changed after the Sept. 11 terrorist attacks. The changes, effective November 5, 2003, impose stiffer penalties for domestic terrorism. Under the previous sentencing guidelines, Mitra probably would have been sentenced to 18 to 24 months.

Mitra’s attorney, Chris Van Wagner, says his client was not a terrorist and should have received a lesser punishment. “It’s clear that [the guidelines] were put in place to punish those who seek to subvert our government and not intended to increase the punishment for people who simply engage in criminal mischief but had no terrorist angle or connection whatsoever,” Van Wagner says. “He was just a dolphin caught in a tuna net.” Mitra was charged under provisions of the Patriot Act that make it a crime to cause such public-safety problems, even if there were no monetary damages. “This is a vivid example of how the Patriot Act has been used in cases that clearly have nothing to do with terrorism and that are far removed from what Congress was concerned about when it passed the Patriot Act,” says Timothy Edgar of the ACLU.

Link here.



Mr. Speaker, Congress is once again engaging in fiscal irresponsibility and endangering the American economy by raising the debt ceiling, this time by $800 billion. One particularly troubling aspect of today’s debate is how many members who won their seats in part by pledging never to raise taxes, will now vote for this tax increase on future generations without so much as a second thought. Congress has become like the drunk who promises to sober up tomorrow, if only he can keep drinking today. Does anyone really believe this will be the last time, that Congress will tighten its belt if we just grant it one last loan? What a joke! There is only one approach to dealing with an incorrigible spendthrift: cut him off.

Increasing the national debt sends a signal to investors that the government is not serious about reining in spending. This increases the risk that investors will be reluctant to buy government debt instruments. The effects on the American economy could be devastating. Mr. Speaker, what will happen to our already fragile economy if the Federal Reserve must raise interest rates to levels unseen since the seventies to persuade foreigners to buy government debt instruments?

The only way to control federal spending is to take away the government’s credit card. Therefore, I call upon my colleagues to reject S. 2986 and, instead, to reduce government spending. It is time Congress forces the federal government to live within its constitutional means. Congress should end the immoral practice of excessive spending and passing the bill to the next generation.

Link here.


I tell you, coming back yearly to the United States is very strange. It is like watching something dead that you once cared for decompose in time-lapse photography. The country is in lockdown. I live in Guadalajara a couple of blocks from the U.S. consulate, a fortress. Big concrete stop‘em-bombs circle it, disguised as planters. Iron bars spaced a couple of inches apart rise all around. I would take a picture to show you but I would end up in Guantanamo. The Mexicans say the bars are to keep the gringos in. Really they are to keep the rest of the world out.

Fear. The world is a perilous place. Don’t drink the water. People talk funny languages and don’t act right. There is no telling what they might do. Anything can explode. Given American foreign policy, anything might. Recently I flew to Washington. As we descended into Reagan National, the captain announced over and over, sternly, that we must stay in our seats, strapped in like laboratory animals, for the last 30 minutes of the flight. If anyone stood up, the captain did not tell us, he would divert to Dulles and the stander-up would be thrown to the ground and probably taken to Guantanamo.

Fear. It was everywhere. On the subway in Washington the standard over-articulated female speech-major voice said again and again that we must be vigilant and report any strange behavior, to catch terrorists. Right, strange behavior. On an urban subway at 1:00 a.m. Got it.

Link here.


Capitalism is the most powerful economic force ever developed. The exponential economic growth made possible by private property rights and free trade is the basis for the existence of the modern world. This is no secret. Even the Communist Party of China includes “businessmen”, i.e. capitalists, as one of the four pillars of the Party. So why are so few nations even nominally capitalist? Largely because of America’s biggest welfare program: Aid to Dependent Dictators. Since World War II, U.S. foreign aid has systematically subsidized parasitic governing “elites”, from the nomenclatura of the Warsaw Pact to the kleptocrats of Africa; even the rulers of the “Axis of Evil”.

The Roman Empire extracted tribute from its subject provinces, leaving Roman citizens with a lighter tax burden (at first, anyway). The U.S. Empire instead taxes its own citizens to pay tribute to foreign ruling classes. This may be counterintuitive, but it is a highly effective Imperial stratagem. By subsidizing socialist regimes, Rome-On-The-Potomac prevents the development of competing capitalist centers elsewhere. A tiny expenditure each year to prop up a dictator can prevent the emergence of a multitrillion-dollar economy. What if every poor nation in the world had taken the route of 20th century Singapore, Hong Kong, Taiwan… or for that matter, the 19th century United States? How much power would State Department proconsuls have if every nation on Earth were rich?

Pretend that America was the “beneficiary” of foreign aid from some hypothetical supersuperpower. Let us say that whoever controlled Washington D.C. automatically received $6 trillion per year from “Aidistan”, as long as they accepted a few minor political strings. Imagine George W. in a coalition “reconciliation” government with Senator Clinton, with unlimited funds to create new government departments. Imagine Aidistanian Peace Corps volunteers crisscrossing our country, teaching the uncultured poverty-stricken Amurricans basic hygiene and condom use. Imagine Aidistanian engineers damming the Grand Canyon and building massive soccer stadiums everywhere. Imagine highly paid elite troops, equipped with ultra-high-tech foreign weapons, rounding up the troublesome, primitive, animist ethnic groups (such as Californians) and forcibly relocating them to collective rice farms in Alaska. Imagine all government agencies able to triple in size, and do it without caring about domestic tax receipts. Imagine no-fly zones over the East and West Coasts; imagine high tariffs against U.S. products in foreign markets. Price controls, public housing, socialized medicine, gun control, Drug War, all paid for by super-taxpayers from an outside power. How long would the U.S. economy last under a foreign aid regime?

Link here.


When people hear the word “fascism” they naturally think of its ugly racism and anti-Semitism as practiced by the totalitarian regimes of Mussolini and Hitler. But there was also an economic policy component of fascism, known in Europe during the 1920s and ‘30s as “corporatism”, that was an essential ingredient of economic totalitarianism as practiced by Mussolini and Hitler. So-called corporatism was adopted in Italy and Germany during the 1930s and was held up as a “model” by quite a few intellectuals and policy makers in the United States and Europe. A version of economic fascism was in fact adopted in the U.S. in the 1930s and survives to this day. In the United States these policies were not called “fascism” but “planned capitalism”. The word fascism may no longer be politically acceptable, but its synonym “industrial policy” is as popular as ever.

Few Americans are aware of or can recall how so many Americans and Europeans viewed economic fascism as the wave of the future during the 1930s. The American Ambassador to Italy, Richard Washburn Child, was so impressed with “corporatism” that he wrote in the preface to Mussolini’s 1928 autobiography that “it may be shrewdly forecast that no man will exhibit dimensions of permanent greatness equal to Mussolini. ... The Duce is now the greatest figure of this sphere and time.” Winston Churchill wrote in 1927 that “If I had been an Italian I am sure I would have been entirely with you” and “don the Fascist black shirt.” As late as 1940, Churchill was still describing Mussolini as “a great man”.

One of the most outspoken American fascists was economist Lawrence Dennis. In his 1936 book, The Coming American Fascism, Dennis declared that defenders of “18th-century Americanism” were sure to become “the laughing stock of their own countrymen” and that the adoption of economic fascism would intensify “national spirit” and put it behind “the enterprises of public welfare and social control.” The big stumbling block to the development of economic fascism, Dennis bemoaned, was “liberal norms of law or constitutional guarantees of private rights.”

Thus, it is important to recognize that, as an economic system, fascism was widely accepted in the 1920s and ‘30s. The evil deeds of individual fascists were later condemned, but the practice of economic fascism never was. To this day, the historically uninformed continue to repeat the hoary slogan that, despite all his faults, Mussolini at least “made the trains run on time,” insinuating that his interventionist industrial policies were a success.

So-called “corporatism” as practiced by Mussolini and revered by so many intellectuals and policy makers has the key element that the state comes before the individual. Webster’s New Collegiate Dictionary defines fascism as “a political philosophy, movement, or regime that exalts nation and often race above the individual and that stands for a centralized, autocratic government.” This stands in stark contrast to the classical liberal idea that individuals have natural rights that pre-exist government; that government derives its “just powers” only through the consent of the governed; and that the principal function of government is to protect the lives, liberties, and properties of its citizens, not to aggrandize the state. Mussolini viewed these liberal ideas (in the European sense of the word “liberal”) as the antithesis of fascism. “If classical liberalism spells individualism,” Mussolini said, “Fascism spells government.” The essence of fascism, therefore, is that government should be the master, not the servant, of the people. Think about this. Does anyone in America really believe that this is not what we have now?

Link here.


I remember when friends would excitedly telephone to report that Rush Limbaugh or G. Gordon Liddy had just read one of my syndicated columns over the air. That was before I became a critic of the U.S. invasion of Iraq, the Bush administration, and the neoconservative ideologues who have seized control of the US government. America has blundered into a needless and dangerous war, and fully half of the country’s population is enthusiastic. Many Christians think that war in the Middle East signals “end times” and that they are about to be wafted up to heaven. Many patriots think that, finally, America is standing up for itself and demonstrating its righteous might. Conservatives are taking out their Vietnam frustrations on Iraqis. Karl Rove is wrapping Bush in the protective cloak of war leader. The military-industrial complex is drooling over the profits of war. And neoconservatives are laying the groundwork for Israeli territorial expansion.

The evening before Thanksgiving Rush Limbaugh was on C-Span TV explaining that these glorious developments would have been impossible if talk radio and the conservative movement had not combined to break the power of the liberal media. There was a time when I could rant about the “liberal media” with the best of them. But in recent years I have puzzled over the precise location of the “liberal media”. Not so long ago I would have identified the liberal media as the New York Times and Washington Post, CNN and the three TV networks, and National Public Radio. But both the Times and the Post fell for the Bush administration’s lies about WMD and supported the U.S. invasion of Iraq. On balance CNN, the networks, and NPR have not made an issue of the Bush administration’s changing explanations for the invasion. Apparently, Rush Limbaugh and National Review think there is a liberal media because the prison torture scandal could not be suppressed and a cameraman filmed the execution of a wounded Iraqi prisoner by a U.S. Marine.

Do the Village Voice and The Nation comprise the “liberal media”? The Village Voice is known for Nat Henthof and his columns on civil liberties. Every good conservative believes that civil liberties are liberal because they interfere with the police and let criminals go free. The Nation favors spending on the poor and disfavors gun rights, but I do not see the “liberal hate” in The Nation’s feeble pages that Rush Limbaugh was denouncing on C-Span. In the ranks of the new conservatives, however, I see and experience much hate. It comes to me in violently worded, ignorant and irrational emails from self-professed conservatives who literally worship George Bush. Even Christians have fallen into idolatry. There appears to be a large number of Americans who are prepared to kill anyone for George Bush.

The Iraqi War is serving as a great catharsis for multiple conservative frustrations: job loss, drugs, crime, homosexuals, pornography, female promiscuity, abortion, restrictions on prayer in public places, Darwinism and attacks on religion. Liberals are the cause. Liberals are against America. Anyone against the war is against America and is a liberal. “You are with us or against us.” This is the mindset of delusion, and delusion permits of no facts or analysis. Blind emotion rules. Americans are right and everyone else is wrong. End of the debate.

The conservative movement that I grew up in did not share the liberals’ abiding faith in government. Today it is liberals, not conservatives, who endeavor to defend civil liberties from the state. Conservatives have been won around to the old liberal view that as long as government power is in their hands, there is no reason to fear it or to limit it. Thus, the Patriot Act, which permits government to suspend a person’s civil liberty by calling him a terrorist with or without proof. Thus, preemptive war, which permits the President to invade other countries based on unverified assertions. There is nothing conservative about these positions. To label them conservative is to make the same error as labeling the 1930s German Brownshirts conservative.

American liberals called the Brownshirts “conservative”, because the Brownshirts were obviously not liberal. They were ignorant, violent, delusional, and they worshipped a man of no known distinction. Brownshirts’ delusions were protected by an emotional force field. Adulation of power and force prevented Brownshirts from recognizing implications for their country of their reckless doctrines. Like Brownshirts, the new conservatives take personally any criticism of their leader and his policies. To be a critic is to be an enemy. I went overnight from being an object of conservative adulation to one of derision when I wrote that the U.S. invasion of Iraq was a “strategic blunder”. It is amazing that only a short time ago the Bush administration and its supporters believed that all the U.S. had to do was to appear in Iraq and we would be greeted with flowers. Has there ever been a greater example of delusion? Isn’t this on a par with the Children’s Crusade against the Saracens in the Middle Ages?

Because of the triumph of delusional “new conservatives” and the demise of the liberal media, this war is different from the Vietnam war. As more Americans are killed and maimed in the pointless carnage, more Americans have a powerful emotional stake that the war not be lost and not be in vain. Trapped in violence and unable to admit mistake, a reckless administration will escalate. The rapidly collapsing U.S. dollar is hard evidence that the world sees the U.S. as bankrupt. Flight from the dollar will adversely impact American living standards. Falling living standards and inability to impose our will on the Middle East will result in great frustrations that will diminish our country.

Link here.


On 25 September 1789, Elias Boudinot of Burlington, New Jersey, introduced in the United States House of Representatives a resolution “That a joint committee of both Houses be directed to wait upon the President of the United States, to request that he would recommend to the people of the United States a day of public thanksgiving and prayer to be observed by acknowledging, with grateful hearts, the many signal favors of Almighty God, especially by affording them an opportunity peaceably to establish a Constitution of government for their safety and happiness.”

The House was not unanimous in its determination to give thanks. Aedanus Burke of South Carolina objected that he “did not like this mimicking of European customs, where they made a mere mockery of thanksgivings.” Thomas Tudor Tucker “thought the House had no business to interfere in a matter which did not concern them. Why should the President direct the people to do what, perhaps, they have no mind to do? They may not be inclined to return thanks for a Constitution until they have experienced that it promotes their safety and happiness. We do not yet know but they may have reason to be dissatisfied with the effects it has already produced; but whether this be so or not, it is a business with which Congress have nothing to do; it is a religious matter, and, as such, is proscribed to us. If a day of thanksgiving must take place, let it be done by the authority of the several States.”

Citing biblical precedents and resolutions of the Continental Congress, the proponents of a Thanksgiving celebration prevailed, and the House appointed a committee consisting of Elias Boudinot, Roger Sherman, and Peter Silvester to approach President Washington. The Senate agreed to the resolution on 26 September and appointed William Samuel Johnson and Ralph Izard to the joint committee. On 28 September the Senate committee reported that they had laid the resolution before the president. Washington issued the proclamation on 3 October, designating a day of prayer and thanksgiving. Whatever reservations may have been held by some public officials, the day was widely celebrated throughout the nation.

Link here.

George Washington’s Thanksgiving proclamation here.
Abraham Lincoln’s proclamation establishing Thanksgiving Day October 3, 1863 here.
President Bush’s Thanksgiving Day, 2004 proclamation here.


Thanksgiving is preferable to Christmas. No denominational strings are attached to this week’s observance, to the benefit of those for whom the birth of Jesus Christ is an emblem of exclusion. Thanksgiving has not been taken hostage by the extravagance of gift-giving or the burdens of shopping. Built around the meal, the feast celebrates the exquisite tension between appetite and its satisfaction. Honoring the turning of the year, it is a first pushing back against winter’s cold darkness with the warmth and light of fireplaces, candles, the illuminations of reunion. True, Thanksgiving legends evoke the conflict between white European settlers and the native peoples who welcomed them, but even so, this holiday points more to inclusion than displacement. Generations of varied immigrant groups have identified as Americans by embracing this holiday -- and its peculiar menu.

When the president of the United States ritually commutes the death sentence of a turkey, as George W. Bush did at the White House last week, one imagines the cruel rebuke felt by the legion of unpardoned death row inmates across the country, and so the joke goes flat. Yet here, too, even wishing for universal commutation, one can affirm an attempt at joviality. Thanksgiving wants to be lighthearted, only friendly, a time of towns organized around games; of formerly dispersed families gathered at laden tables; a rare interval of authentic leisure; the most martial of nations at ease for once. A holiday, pure and simple.

What we love most is Thanksgiving’s underlying idea; that existence itself is a gift. If the holiday ritual calls for the bounty of culinary excess -- four side dishes, three kinds of pie, two forms of cranberry -- it is not to celebrate affluence but to acknowledge the accidental richness of life itself. The multiple desserts are tribute to all that we do not deserve. In taking time away from work, we are remembering that the most precious things are those that we do nothing to earn.

An attitude of gratefulness defines us at our best. It does this by pointing away from the self toward others, or toward an Other. Conventionally religious people are quick to put the name “God” on the one being thanked, and prayers come quickly to lips this week. But the feeling of sublime indebtedness, defining what is expressly human about humanity, is larger than religion. On Thanksgiving, feast of the exuberant abundance of creation, all language about any conceivable Creator falls short because creation itself exceeds our capacity to account for it. No matter, because, in being buoyed by this most oceanic of emotions, one need not know toward whom, exactly, one feels it. Let each person be God, therefore, to every other. God enough for now.

And is that not why we call it “grace” -- the gift that requires nothing of the recipient except a heart so full it overflows, becoming a well of grace for someone else. In this way grace abounds. Why not join hands at the table, then, letting a moment’s silence do the speaking, since the day itself is our way of giving thanks?

Link here.


The history books have it right in describing the Pilgrim’s first harvest in 1620 as meager, followed by a miserable winter. It is also the case that help from nearby Native Americans made for a better harvest in 1621, which led the Pilgrims to celebrate the Thanksgiving feast we all learned about as children. Yet here is the little-known part of the story: The harvest in 1622 was another failure, to the point that the remaining Pilgrims faced starvation. Why? Because during their first three years, these Pilgrims practiced “farming in common”. The farmland belonged to the colony, and so did the food; portions were rationed out.

So in the spring of 1623 the Pilgrims decided to take a calculated risk. They allocated individual plots of land for ownership among the families and members of the colony. In turn, each of the new owners was responsible for their property and for what it reaped. I am sure you can guess the outcome of private ownership and individual incentives. The harvest in 1623 was plentiful -- and that was the year when the Pilgrims chose to set aside an annual day of thanksgiving to God. In a few short years, the colony produced abundance beyond its needs, and it was equipped to begin trading the surplus. They considered this turn in their fortunes to be miraculous; with the benefit of hindsight, what they had discovered was the miraculous benefits of private ownership and free markets.

Link here.


O give thanks unto the LORD; for he is good: for his mercy endureth for ever. O give thanks unto the God of gods: for his mercy endureth for ever. O give thanks to the Lord of lords: for his mercy endureth for ever (Psalm 136:1–3)

This phrase appears in many of the psalms, but when you find the same phrase three times in a row, you can safely conclude that the writer was trying to make a point, and he thought the point was important. I know of no passage in the Bible where any other phrase appears three times in succession.

Thanksgiving Day is an old tradition in the United States. Although it was not the first such thanksgiving feast, the holiday had its origins in Plymouth Colony, in the fall of 1621, when the Pilgrims who had survived the first year invited Chief Massasoit to a feast, and he showed up with 90 braves and five deer. The feast lasted three days. There had been a thanksgiving day of prayer and a feast in Maine in 1607. The tiny colony was abandoned a year later. There had also been a thanksgiving service in Jamestown in 1610, but it did not involve a feast. The first official Thanksgiving Day was celebrated on June 29, 1676 in Charlestown, Massachusetts, across the Charles River from Boston. George Washington proclaimed a day of thanksgiving on October 23, 1789, to be celebrated on Thursday, November 27. In 1863, Abraham Lincoln officially restored it as a wartime measure. The holiday then became an American tradition. It became law in 1941.

Lincoln was a strange contradiction religiously. He was a religious skeptic, yet he invoked the rhetoric of the King James Bible -- accurately -- on many occasions. His political rhetoric, which had been deeply influenced by his reading of the King James, was often masterful. In his Thanksgiving Day proclamation, he made an important and accurate theological point.

We have been the recipients of the choisest bounties of heaven; we have been preserved these many years in peace and prosperity; we have grown in numbers, wealth and power as no other nation has ever grown.

But we have forgotten God. We have forgotten the gracious hand which preserved us in peace and multiplied and enriched and strengthened us, and we have vainly imagined, in the deceitfulness of our hearts, that all these blessings were produced by some superior wisdom and virtue of our own. Intoxicated with unbroken success, we have become too self-sufficient to feel the necessity of redeeming and preserving grace, too proud to pray to the God that made us.

This observation leads to the same question that Moses raised long before Lincoln’s proclamation: Why is it that men become less thankful as their blessings increase? Less than a decade after Lincoln’s proclamation, three economists came up with the theoretical insight that provides an answer. In the early 1870s, Karl Menger, William Stanley Jevons, and Leon Walras simultaneously and independently discovered the principle of marginal utility. Their discovery transformed economic analysis. They observed that value, like beauty, is subjectively determined. Value is imputed -- a familiar Calvinist theological concept -- to scarce resources by the acting individual. Other things remaining equal, including tastes, the individual imputes less value to each additional unit of any good that he receives as income. This is the principle of marginal utility.

This provides a preliminary solution to the original question. I call this solution the declining marginal utility of thankfulness. People look at the value of what they have just received as income, and they are less impressed than they were with the previous unit of income. They focus on the immediate -- “What have you done for me lately?” -- rather than the aggregate level of their existing capital.

Modern economic theory discounts the past to zero. Whatever you spent to achieve your present condition in life is no longer a matter of human action. The economist calls this lost world “sunk costs”. There is a major problem in thinking this way -- the problem of saying “thank you”. The child is taught to say “thank you”. He is not told to do this because, by saying “thank you”, he is more likely to get another gift in the future. He is taught to say “thank you” as a matter of politeness. I am sure that there is some University of Chicago-trained economist out there who is ready to explain etiquette as a matter of self-interest:: “getting more in the future for a minimal expenditure of scarce economic resources.” And, I must admit, people who never say “thank you” do tend to receive fewer gifts.

The problem is, we look to the present, not to the past. We look at the marginal unit -- the unit of economic decision-making -- and not at the aggregate that we have accumulated. We assume that whatever we already possess is well-deserved -- merited, we might say -- and then we focus our attention on that next, hoped-for “util” of income. As economic actors, we should recognize that the reason why we are allocating our latest unit of income to a satisfaction that is lower on our value scale is because we already possess so much. We are awash in wealth. We are the beneficiaries of a social order based on private ownership and free exchange, a social order that has made middle-class people rich beyond the wildest dreams of kings a century and a half ago.

About half of the Pilgrims who arrived in Plymouth in 1620 were dead a year later. The survivors really did rejoice at the 1621 festival. They were lucky -- graced, they would have said -- to be alive. So are we. You did not obtain all that you possess all by yourself. The might of your hands did not secure it for you. A little humility is in order on this one day of the year. Yes, even if you earned a Ph.D. at the University of Chicago.

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