November 2004 Selected Offshore News Clips

(Especially noteworthy articles’ headings highlighted in gold.)

RFID IN PASSPORTS COULD LEAD TO IDENTITY THEFT

Personal privacy is fast becoming a thing of the past. And helping secure its demise is a technology called Radio Frequency Identification (RFID). RFID systems typically consist of a small tag containing a microprocessor, a small amount of memory, and an antenna. An RFID device communicates with an external system using radio waves. These external systems can then, in turn, be connected to networks of computers, enabling rather sophisticated information processing of the collected data. The core application of RFID systems is to enable the tracking of objects and people. The beef industry, for example, was an early adopter of RFID technology, using it to monitor the movement of cattle from grazing to slaughter. Governments also are planning to use RFID, in this case to monitor the movement of people by embedding RFID technology into our principal systems of identification.

The most recent news on this front came from the U.S. State Department, which revealed that it would begin including RFID devices into all new passports starting around the middle of next year. The State Department says the idea is to make passports more difficult to forge, and to ensure that the bearer of the document matches the identification. This means that each RFID device, in each passport, will contain at least the name, address, and birthplace of the holder, along with a digital photo. The first set of devices, equipped with 64 kilobyte, of memory, will likely be capable of storing additional information, as required.

Immigration and border officials will no longer need to physically swipe the document through a reader. Instead, since the RFID device uses radio waves to communicate, the passport only needs to come within reasonable proximity of a listening device in order for the information to be read. And herein lies the chief problem, as identified by privacy advocates. Without requiring the passport to be physically handled in order to retrieve information, just about anyone will be able to read your passport contents, remotely, and without your knowledge. It all seems like a massive recipe for disaster.

CONGRESSMAN RON PAUL INTERVIEW FROM 2002 IS JUST AS TIMELY TODAY

An interview that took place in Congressman Ron Paul’s congressional office in Washington in February 2002 is as timely today as it was when it was done, and given the political events in the last 2 1/2 years, maybe it is even more so. This article is a chapter in my upcoming book on the importance of character, in which about a dozen notable people talk about the development of their character, values and perspective on life. In addition to that main theme, I asked each person to provide me a quotation that summarized themselves, their view of life, or had special meaning to them which I have placed at the beginning of their respective chapter.

Everything in the first part of the article, up to the “Editor’s Commentary” is composed only of Ron Paul’s words, organized into a chronological and topical order. The commentary is my comments. Any incidents I report were given to me from other sources. For example, Ron did not tell me about the election shenanigans. But then, given his character, he would not would he? I decided to include these in my commentary because they shine a light on Ron’s character and give us further insight into this fascinating and admirable man.

ALDERNEY IS STRICTLY FOR THOSE WHO WANT PEACE AND QUIET

With 2,400 residents, Alderney is the third largest of the Channel Islands. It has 20% income tax and no VAT, stamp duty or inheritance tax. Yet there are no gin-palace Sunseeker yachts in the bay or fake-tanned lotharios driving Ferraris. Instead, Alderney is small-island life at its smallest. The place is as quirky as the people. Alderney’s main street is cobbled and there are no parking meters in sight. The train service consists of two 1938 former London Underground carriages. The airport departures and arrivals hall is like an entrance hall in a house. And, sitting next to you on the tiny aircraft may well be a box of cabbages destined for the greengrocer.

Eccentricities aside, Alderney is ruggedly beautiful and has well-preserved period homes. It has escaped the planning free-for-all of Jersey and Guernsey, where fields of bungalows and houses spoil the views. Instead, most of Alderney’s 2,000 acres are designated Green Belt, allowing the island’s farmland landscape to dominate. Even extensions to Alderney’s 1,100 homes -- mostly Victorian and Georgian -- cannot exceed 15% of existing floor space ... although exceptions to the no-development rule are found in some of the 12 grey-and-pink-granite forts encircling the coast, built in the 1840s to protect the Channel Islands from the French.

OFFSHORE: ITS PLACE IN THE SUN

Are offshore financial centers receiving more than their fair share of attention? According to Peter Harwood, head of Ozannes’ corporate department in Guernsey, most certainly. “The offshore centers have been under the cosh now for a number of years,” he told the recent Legal Week breakfast roundtable on Offshore Financial Centers (OFCs) in the 21st century. “There has been a constant stream of international auditors coming to the islands to look at us.”

The roundtable, held in association with Ozannes and chaired by Harwood, met on 14 October to consider the position of the offshore financial centers in a changing world. With many governments and NGOs keen to crack down on criminal financing in the wake of 9/11 and on commercial wrongdoing following the Enron scandal, the financial regulation of the OFCs has become an increasingly pressing issue.

Not everyone was convinced that the scrutiny under which the OFCs were finding themselves was justified. While the offshore jurisdictions were a popular target for the financial watchdogs, Harwood said, noone was looking in the same way into the regulatory system of onshore jurisdictions such as Delaware in the U.S., which was popular with a mass of US companies due to its less than stringent regulatory regime. By the same token, is it any longer possible to define in simple terms what was meant by an “offshore center”? Is London, for example, offshore?

SOME FREE ADVICE TO DEMOCRATS

Democrats will begin to discuss just how the heck they managed to lose this one. The economy is fairly stagnant, the war in Iraq is going badly, everyone knows that Al-Qaeda is going to strike hard here in the near future, and Bush’s approval ratings have stayed below 50% for more than a year. In other words, the Republicans generously had set the table for Democrats, only to find that once again those jackasses had decided to eat at McDonald’s. No doubt, one person who will be listening to this concession speech is Hillary Clinton, who certainly is going to be a candidate in 2008. I have some advice for Democrats who believe that Hillary is The Answer: Don’t even go there. If you think that the Christian fundamentalists crowded the polls to stop Kerry, just wait until Hillary is on the ballot. Entire congregations of fundamentalist and evangelical churches will line up at the voting booths.

The Democrats have a much deeper problem than the incompetence of their presidential candidates. After all, Bill Clinton steamrolled a couple of Republicans on his way to serving two terms, and that was with one hand (and Ross Perot) tied behind his back. No, the problem is not charisma or the lack thereof. Instead, every Democrat wants to emulate the party’s Big Hero, Franklin D. Roosevelt. Let me suggest a new hero for Democrats, a person whose integrity could not be challenged, and who governed as well as any president in the last century: Grover Cleveland. In my opinion, Cleveland was the last great U.S. president, a man who took his duties to “protect and defend” the U.S. Constitution to heart. He governed as a true liberal, recognizing the dangers of the overreaching state.

Between taxes, government spending, regulation that grows faster than a cancer cell and the expansion of the categories of “white collar crime”, the amazing thing is not that we have relatively low growth and high unemployment, but that this economy creates any wealth at all. It is testament to the institution of private property (which is quickly disappearing in this fair land) and the relentless drive of entrepreneurs -- the same ones that the political classes want to have consigned to the dungeons. Cleveland was mindful of how government can choke a healthy economy.

Most Democrats today consider Franklin D. Roosevelt to be the standard of the party, just as Republicans like to call themselves the “party of Lincoln”. As far as I am concerned, you can let them have Lincoln and Teddy Roosevelt. The closest thing that Republicans can have as heroes are Warren G. Harding and Calvin Coolidge, but even in their best moments they could not compare to Cleveland as defenders of freedom and men who understood the predations of the state. But FDR is NOT a hero. How can a man who extended the life of this country’s worst economic calamity, the Great Depression, be anything but a villain? Here is someone who openly assaulted the U.S. Constitution and made mockery of liberty.

Just think how people might have reacted to John Kerry quoting Cleveland, and promising to protect the rights of individuals. Instead, we got someone who tried to out “law-and-order” the Republicans. Just as the Republicans cannot outdo the Democrats on promoting the welfare state (although the Republicans are trying to do just that), Democrats cannot successfully run on expanding the police state. Yes, going to such a platform and embracing Grover Cleveland would mean that there would be major cracks in the current coalitions that keep the Democrats together. But let’s face it; the Democrats no longer are a real political party. Democrats are a hodgepodge of the very wealthy (from inherited wealth), the educated elite, the very poor, minority groups, rabid environmentalists, feminists, and the American Trial Lawyers Association, which funds this whole unwieldy operation.

A coalition is not a political party. Cleveland presided over a real political party, one whose members believed in individual rights, the sanctity of private property and contract, limited government, and principles of non-intervention abroad. That this organization was hijacked first by William Jennings Bryan in 1896 (running on a platform of silver-based inflation, a reminder of the days that even inflationists wanted “sound” money as compared with Alan Greenspan today) and the warmongering Woodrow Wilson in 1912 does not take away from what the Democrats once believed.

Democrats, go back to your roots. Let the Republicans have Leviathan. If you choose liberty, private property, and a real rollback of the state, you will win election after election. In fact, you will become a real political party again. In the aftermath of this latest election loss, remember this one important point: you never will win national elections trying to out-Republican the Republicans. No, you can win if and only if you once again become real Democrats.

ALL TAX SHELTERS ARE NOT ILLEGAL, COURTS TELL IRS

For the third time in less than a month, the government this week lost a multimillion-dollar case in which a federal judge concluded that a deal that saved a company large sums of taxes had a legitimate business purpose and thus was not an illegal tax shelter. In two of the cases, the judges specifically told the IRS that if it has a problem with the outcomes, the solution lies with Congress, not the courts.

In the most recent case, a U.S. district judge in Connecticut determined that an arrangement by which General Electric Co., through subsidiaries and partnerships, shifted $310 million in income to two Dutch banks that do not pay U.S. taxes was not a sham and, as a result, GE was entitled to a $62 million tax refund. GE, which through its GE Capital subsidiary owned a large number of commercial airplanes that it leased to airlines, contributed those planes, along with some cash, to a partnership in which the Dutch banks participated. The banks got a large share of the rental income that would have been taxable to GE, and GE, the judge noted, got to “re-depreciate” the planes for tax purposes.

However, the judge held that the arrangement was a real business deal, since it helped GE accelerate income from the leases on the planes, as well as save on taxes. “In short,” wrote Judge Stefan R. Underhill, “the transaction, though it sheltered a great deal of income from taxes, was legally permissible. Under such circumstances, the IRS should address its concerns to those who write the laws.”

Also, the U.S. Court of Federal Claims in Washington ruled that Coltec Industries Inc. deserved an $82.8 million refund, as its actions did not represent sham transactions, as the IRS had claimed. The IRS said that they lacked economic substance even though they technically followed the tax code. Judge Susan Braden wrote that “where a taxpayer has satisfied all statutory requirements established by Congress, as Coltec did in this case, the use of the ‘economic substance’ doctrine to trump ‘mere compliance with the code’ would violate the separation of powers” clause of the U.S. Constitution.

LIBERTY YET LIVES

Not for the first time in world history, U.S. voters on November 2 faced a choice between two varieties of statism, two forms of central planning, two types of duplicity, two approaches to rule by the central state. One won, one lost. In this, our times are not unlike the 1930s, when during a crisis just about everyone believed that there were only two political options worth pursuing. You were either some variety of communist (a.k.a. socialist, Bolshevik, Troskyite, etc.) or some variety of fascist (a.k.a. corporativist, national socialist, new dealer, etc.). To reject the idea of government control and centralization, it was believed, was to stand outside the main current of history.

In the presidential election, one central plan wanted to soak the rich, the other wanted to spend now and pay later. One had a plan for national life at home, and the other had a plan for the whole world. One emphasized bread and the other circuses, one wanted unilateral war while one wanted lots of consultations and more troops before doing the same thing, but neither knew or cared anything for the great tradition of thought which gave birth to this nation or which built the prosperity of our times.

The missing piece in all of this is the forgotten liberal tradition, which affirms the dignity of all human life, believes in the rights of all, and fights for freedom against the never-ending attempts by government, all government everywhere, to restrict and destroy it. The liberal tradition believes that individuals and society can work out their own problems in the absence of top-down management. It denies to government any role in managing the nation or the world. It embraces private property, cherishes freedom of association, and sees peace as the mother of civilization.

The great intellectual strain of this liberal tradition spans 500 years and longer, and his survived every onslaught from left and right, and will continue to do so. It is the liberal tradition to which we owe the world’s prosperity and well being, all technological innovations, and improvements in health, housing, nutrition, and information distribution. The liberal tradition will continue to thrive, but with no help from the elites in power.

That this tradition is not represented as a political option is not particularly surprising. As Mises wrote in 1929, “government is essentially the negation of liberty”. This is why “A liberal government is a contradictio in adjecto. Governments must be forced into adopting liberalism by the power of the unanimous opinion of the people; that they could voluntarily become liberal is not to be expected.” But elections such as this one present an opportunity for learning. We learn, for example, who the true friends of liberty are, and how to distinguish them from the partisan hacks who are glad to sell out in exchange for getting and staying close to those in power. That is a pretty good description of just about everyone in DC who works to have “good relations” with the party in power. This is a tendency you find on the left, right, and center, and even among supposed libertarians.

We have also learned something about the nature of liberty’s most formidable enemies of today as versus most of the 20th century. In 1989–1990, the party of liberty was witness to the thrilling fact that socialism around the world had collapsed like a house of cards. The ghastly intellectual tradition that had given rise to the bloody communist experiment suffered a blow from which it is not likely to recover. How pathetic is the soft leftism of today’s mainstream Democrat. Kerry went from place to place seeking dependents for the state among minorities, the aging, public employees, union workers, and anyone else looking for a favor from government. He dutifully invoked those tired soft-left themes about all the wondrous things government will do at home if we could just soak the rich a bit more. His domestic program looked ridiculous. We know these issues hurt him among swing voters because it was precisely on these grounds that the Bush camp ridiculed his entire domestic program. If there is a silver lining to the election, it is in the defeat of this program, once again.

However, it is about time that the friends of liberty realize the main threat to liberty in our time in our country comes not so much from the left but from the militarist and imperialist right, which has shown itself uninterested in fiscal discipline, peace, civil liberties, constitutional restraints on power, decentralist decision-making, privacy, or freedom of association. Pillars of Western law and justice have been broken and tossed aside by this regime, under the guise of national emergency and security against threats real and imagined.

In the end there was no great choice to be made. Voters were being asked to choose between two forms of central planning, one domestic, tired, and uninspiring, and another international and promising to conquer ever more countries until the whole region and world bent the knee. One plan required higher taxes and more economic regimentation, and the other required higher debt and more death. At brief moments during the campaign, the regime trotted out the old rhetoric about how Bush was for freedom and for you, whereas his opponent was for the government. This goes beyond cynical. After all, here is an administration that inflated government spending at a rate that compares only to Lyndon Johnson at his Keynesian worst. One form of central planning has been defeated but another form has raised its ugly head. It too must be fought, and on principled grounds.

But the party of liberty is so much better off today than it was in the 1930s. Our intellectual foundation is far stronger. Ours is an international movement with brilliant writers and activists in most all countries of the world, and in all sectors of society. With allies from all walks of life, from many countries, and with passion for truth, the party of liberty works for and joyfully anticipates liberation from despotism -- left, right, or center.

$500 MILLION FROZEN IN I.R.S. CRACKDOWN IN DOCTORS’ TAX CASE

A federal judge has temporarily frozen more than $500 million in assets owned by thousands of doctors and dentists who bought abusive tax shelters run by a San Diego investment company, the Justice Department announced. The action, one of the largest of its kind, is rare and part of an effort by the I.R.S. to clamp down on tax shelters it considers abusive. About 4,000 doctors and dentists across the nation bought tax-reduction plans in recent years from the company, Xelan, (allegedly) evading $420 million in taxes, not including interest and penalties, a statement from the Justice Department asserted. The I.R.S. is auditing the returns of several hundred doctors and dentists who used the tax shelters.

Xelan had set up several types of plans aimed at helping doctors and dentists lower their tax bills. The government is focusing on two of them, one involving a charity administered by Xelan and the other, disability insurance, which the company said would allow investors to defer taxes on income for seven years. The I.R.S. maintains that the plan was not insurance but a taxable deferred-compensation program. The I.R.S. says that it found some two dozen instances of doctors using the charity to make “contributions” to their children’s college tuition.

Judge Thomas J. Whelan of Federal District Court in San Diego issued the order temporarily freezing the assets after the Justice Department asked him to do so. The order, which also directs Dr. Guess and six other Xelan executives to turn in their passports and not destroy any company records, is in effect through Nov. 18, when the judge will consider whether to extend it. The Justice Department hopes to have the temporary freeze made permanent, so that the assets will be available to cover tax bills. A Justice Department lawyer said that about $50 million of the assets was in various bank accounts in San Diego, while about $505 million was in investment accounts at the Vanguard Group, the giant mutual fund firm.

HOW TO LOSE MONEY

Wall Street is full of “experts” that tell investors sure-fire ways to get rich in the market. Day-trading, buy and hold, trend trading, no-loads mutual funds, buy the dips, blue chip stocks and on and on and on. There are a zillion different ways to make money according to the experts. But few want to tell you what NOT to do. Here are the Top 15 ways we have seen people lose money in the market. Many of these strategies overlap and many investors employ more than one at a time. Of course, they are not guaranteed to lose you money, but I am sure if most investors work at it, they can find a way.

1. Do nothing.
2. Change strategies often.
3. Hold onto losers.
4. Act with the crowd on news.
5. Buy hot/trendy/theme stocks.
6. Ignore fundamentals.
7. Focus on costs at the expense of quality.
8. Read everything you can on investing (and suffer information overload).
9. Chase yield.
10. Let taxes determine when you to sell.
11. Don’t know what you own.
12. Ignore cycles.
13. Don’t have a bear market strategy.
14. Try to buy at the bottom, wait to sell at the top.
15. Avoid professional advice.

A READER’S GUIDE TO EXPATRIATING

So the wrong candidate has won, and you want to leave the country. Let us consider your options. Given how much the United States as a nation professes to value freedom, your freedom to opt out of the nation itself is surprisingly limited. The State Department does not record the annual number of Americans renouncing their citizenship -- “renunciants”, as they are officially termed -- but the IRS publishes their names on a quarterly basis in the Federal Register. The IRS’s interest in the subject is, of course, purely financial. Since 1996, the agency has tracked ex-Americans in the hopes of recouping tax revenue, which in some cases may be owed for up to ten years after a person leaves the country. In any event, the number of renunciants is small. In 2002, for example, the Register recorded only 403 departures, of which many (if not most) were merely longtime resident aliens returning home.

The most serious barrier to renouncing your citizenship is that the State Department, which oversees expatriation, is reluctant to allow citizens to go “stateless”. Before allowing expatriation, the department will want you to have obtained citizenship or legal asylum in another country -- usually a complicated and expensive process, if it can be done at all. Would-be renunciants must also prove that they do not intend to live in the U.S. afterward. Furthermore, you cannot renounce inside U.S. borders; the declaration must be made at a consul’s office abroad.

Those who imagine that exile will be easily won would do well to consider the travails of Kenneth Nichols O’Keefe. An ex-Marine who was discharged, according to his website, under “other than honorable conditions”, O’Keefe has tried officially to renounce his citizenship twice without success, first in Vancouver and then in the Netherlands. He did succeed in breaking the law, since mutilating a passport is illegal. It says so right on the passport.

INFORMAL LENDERS IN CHINA POSE RISKS TO BANKING SYSTEM

The Wenzhou “stir-fry” is not a dish you eat. But it is giving indigestion to Chinese regulators and could prove troublesome to many investors worldwide -- from New York money managers, Pennsylvania steel workers and Midwestern farmers to miners in Australia. Here in this freewheeling coastal city at the forefront of capitalism in China, the dish is prepared when a group of wealthy friends pool millions of dollars worth of Chinese yuan and put it into a hot investment like Shanghai real estate, where it is stirred and flipped for a hefty profit.

The friends often lend each other large amounts on the strength of a handshake and a handwritten IOU. Both sides then go to an automated teller machine or bank branch to transfer the money, which is then withdrawn from the bank. Or sometimes they do it the old-fashioned way: exchanging burlap sacks stuffed with cash. The worry for Chinese regulators is that everyone in China will start cooking the Wenzhou stir-fry and do it outside the banking system. In the last few months, borrowing and lending across the rest of China is looking more and more like Wenzhou’s. The growth of this shadow banking system poses a stiff challenge to China’s state-owned banks, already burdened with bad debt, and makes it harder for the nation’s leaders to steer a fast-growing economy.

The problem starts with China’s low interest rates. More and more families with savings have been snubbing 2 percent interest on bank deposits for the double-digit returns from lending large amounts on their own. They lend to real estate speculators or to small businesses without the political connections to obtain loans from the banks. Not only is the informal lending rate higher, but the income from that lending, because it is semilegal at best, is not taxed. For fear of shame, ostracism and the occasional threat from thugs, borrowers are more likely to pay back these loans than those from the big banks.

Tao Dong, chief China economist at Credit Suisse First Boston, calculates that Chinese citizens withdrew $12 billion to $17 billion from their bank deposits in August and September. The outflow turned into a flood last month, reaching an estimated $120 billion, or more than 3 percent of all deposits at the country’s financial institutions. If the bank withdrawals are not stemmed in the months ahead, Mr. Tao warned, “this potentially could be a huge risk for financial stability and even social stability.”

THE UNITED STATES: A HAYEKIAN SOLUTION

What do you do with a state -- a highly centralized and militarized state -- that has unconstrained hegemonic ambitions and is a proven threat to its citizens and other nations around the world? This is a question that has vexed liberally minded thinkers for centuries. In particular, much to the sadness of any real American, it is a question that many people at home and around the world are asking about the U.S., especially since the election revealed explosive political divisions inside the country. We live in a country where slightly-less-than-half is bitterly opposed to the slightly-more-than-half who currently control the levers of power and are determined to use them in ways that designed to teach the minority and the rest of the world a thing or two about American power.

No short-term solution seems possible but at some point in the future, something will have to be done to restrain the problem. The goal should not be so much punitive as preventative. What to do? Let us turn to history. An analogous situation confronted the world after the end of the Second World War, in an issue that came to be called the German Problem. The problem was how to deal with a nation that had, in its history, contributed so brilliantly to science, art, literature, and world prosperity, but which was burdened by a very troubled political history that had made it a threat to peace. The problem stemmed from a conviction that it was not the particular regime as such, or even the individuals who were running the show, but that the structure of the German state attracted dangerous individuals. The existence of a highly centralized and heavily militarized government, lording over a country of people who see themselves as somehow set apart and superior to other peoples in the world, is itself an occasion of sin.

F.A. Hayek dealt very deftly and humanely with the subject in an introduction to a 1946 book entitled The German Question, by Wilhelm Ropke (the author himself had his book banned by the Nazis and found refuge in Geneva, along with Ludwig von Mises). In Hayek’s view, it was best to find a solution that would lead to the safety of the German people and the safety of the world, and one compatible with human rights and the good of all nations. His plan was return Germany to her true self before the centralization and aggrandizement of the state that began with Otto von Bismarck and saw its fulfillment in the rise of Hitler. He sought to reclaim the proper heritage of Germany as “a decentralized and truly federal structure” along the lines of what existed from the middle ages through the middle of the 19th century. He sought to restore the Germany before the second German Reich as a way to prevent a fourth from emerging. To be successful such a policy would need to be supplemented by the enforcement of complete free trade, external and internal, for all these German states.

Then and today, it is generally assumed that prosperity goes together with centralization and consolidated government. Hayek was arguing that, despite appearances, the opposite is more likely true. As for the US today, we see very similar pressures toward militarism, protectionism, and a kind of national belligerence that regards all nations of the world as naturally destined to live under the civilian administrators of the master people. Americans are burying their heads in the sand on this point, but the rest of the world is mighty alarmed. We need a Hayekian solution to the U.S. We need small states trading with each other. Moving the U.S. from a unitary state to a region of a large number of small and independent states would permit prosperity to continue developing without fueling the expansion of an imperial central state. The idea of breaking up the United States might sound radical, but it is, in fact, an entirely reasonable proposal that would be best for Americans and best for the world.

U.S. GOVERNMENT: WE SEIZE SERVERS, YOU CAN’T COMPLAIN

The U.S. is attempting to block efforts to find out who seized Indymedia’s servers in London last month. The Government has filed a motion in San Antonio District Court opposing the Electronic Frontier Foundation’s motion to unseal the court order which resulted in the seizures, and arguing among other things that unsealing would “seriously jeopardize” an “ongoing criminal terrorism investigation”. We have of course only the U.S. Government’s word on that, as the foreign country which actually wanted the information checked the no-publicity box, and the U.S. would like to keep it that way.

The implications of the rest of the Government’s arguments are, however, more interesting than the use of the T-word as an all-purpose cloaking device, which is no more than par for the course these days. Primarily, the Government argues that the parties asking for the court order to be unsealed -- in effect the proprietor of the sites and the owner/operator of the specific servers taken from the premises in London -- have no standing to ask this.

The vast majority of web site ‘owners’ (inverted commas introduced courtesy U.S. Gov) should have no trouble at all figuring out where they would stand in such a scenario. You operate a web site which is hosted by an external company, and an unidentified agency of an unidentified government has the power to take data which you own, but which is situated on hardware hosted by the external company, and according to the U.S. Government, it has nothing to do with you, only the external company has the standing to complain. One could speculate why, given the need to maintain some form of ongiong relationship with the FBI, a hosting company might not think it a particularly good idea to complain.

ANTIGUA GETS A PIECE OF THE ACTION

What are the odds that a tiny nation like Antigua and Barbuda could take on the United States in an international dispute and win? Though it seems a long shot, that is what has happened so far as the World Trade Organization expounded on its March ruling that the U.S. violated international trade treaties by prohibiting Americans from gambling over the Internet. It ordered the U.S. to bring state and federal law into conformity with its international commitments.

The U.S. says it will appeal the ruling, which is based on a densely worded 273-page opinion -- not counting exhibits -- on the grounds that Internet gambling is a threat to its sovereignty and an invitation to organized crime. “Gambling has been one of the staple activities of organized crime syndicates,” the U.S. says. “Law enforcement authorities in North America have seen evidence that organized crime plays a growing part in the remote supply of gambling, including Internet gambling.”

Thus, the U.S. law on gambling may be summarized as follows: Americans may gamble in state-sponsored lotteries nearly everywhere, they may gamble at racetracks, they may gamble on slot machines installed to subsidize faltering racetracks, they may gamble nearly everywhere in Nevada -- especially Las Vegas, they may gamble in Atlantic City, they may gamble on Indian reservations and on permanently docked riverboats and on cruises to nowhere. But they must not gamble through the Internet because that activity would promote crime. Under U.S. law, Americans are not allowed to place bets with online casinos in the tiny island nation of Antigua and Barbuda, for instance. Antigua says this is an unfair trade barrier; the U.S. calls it a legitimate exercise of state and federal lawmaking.

WHAT WILL HAPPEN TO ARAFAT’S MILLIONS?

In his four decades as Palestinian leader, Yasser Arafat has run a murky financial empire that includes far-flung PLO investments in airlines, banana plantations and high-tech companies, and money hidden in bank accounts across the globe. Jaweed al-Ghussein, a former PLO finance minister, said it was worth $3 billion to $5 billion when he quit in 1996. No one will say how much it is worth now -- some estimates say as little as a few million. Palestinians fear that what is left will disappear or be pocketed by Arafat cronies.

Arafat has long resisted proper accounting for the funds, which include Arab payments to the PLO in the 1970s and 1980s, and Western aid to his self-rule government, the Palestinian Authority, after interim peace deals with Israel in the 1990s. Arafat lived frugally, but needed large sums to maintain loyalties. He would register investments and bank accounts in the names of loyalists, both to buy their support and protect the holdings from scrutiny and seizure, said al-Ghussein. Only Arafat had the full picture, he said, and it is not clear whether he left a will or financial records.

Arafat never divulged his finances. Pressed at a February meeting with leaders of his Fatah movement, he cut them short, saying “there are no assets”, according to one participant. Mohammed Rashid, Arafat’s financial adviser, denied his boss was rich. However, Forbes magazine ranked him No. 6 on its 2003 list of the richest “kings, queens and despots”, estimating he was worth at least $300 million. Shalom Harari, a former top Israeli intelligence official, said Arafat may have stashed away up to $700 million, part of it for an emergency such as a new exile, especially with Israel threatening to expel him.

REMEMBRANCE DAY

“If any question why we died, Tell them, because our fathers lied.” -- Rudyard Kipling

At precisely 11 a.m., on the 11th day of the 11th month, London took time to catch its breath. “We remind you to observe two minutes of silence in honor of Remembrance Day,” came the announcement over the office loudspeaker. No one said a word. The phones stopped ringing. Even the tappety-tappety of keyboards ceased. In the distance, we heard the faint bells of St. Paul’s. For whom did the bells toll? It was precisely this hour on this day of this month in 1918 that bloodiest war in human history came to an end.

The armistice had, of course, been agreed upon days in advance. On that day, soldiers all knew the war was coming to a close. Who would want to catch the last bullet? A reasonable man would have sat it out that day, for there was nothing to be gained and much to be lost. And yet, Max Hastings, writing in the British press, reports that the fighting was particularly brutal on the 11th of November 1918, with more casualties than usual.

But then, war -- like markets, politics and team sports -- has a logic of its own. It is a public spectacle, not a private one. Masses of people are stirred up -- mobs, groups, and crowds -- to do the most remarkable and preposterous things. What man, on his own, would consider walking across open ground while people tried to kill him? Or asking his rich neighbor down the street to give him a portion of his income? Or telling the boys down at the pub that they can no longer smoke cigarettes on the premises?

Privately, an investor buys a business only after a thorough and reasonable study of it, after he has figured out how much it is worth to him. He will pay that much and not a penny more. But the same man, acting as a member of the great mass of investors, will buy a company, in the form of a publicly-traded stock, with hardly a moment’s forethought. Crowds, mobs, masses, and collections of men do not think. They do not analyze. Instead, they only feel and act, and make public spectacles of themselves.

When we open our eyes and look at today’s economic picture ... we cannot help wanting to go behind the screen to see where the wires lead. One thing leads to another. But it all seems to lead back to the Wilson period ... and the biggest public spectacle of all -- World War I. In the period, 1913-18, everything changed. The Fed was created. An income tax was laid on. A whole generation of European men was practically wiped out. Nearly every major government in Europe fell ... and every major combatant, except the United States, went bankrupt. And so, on this Remembrance Day, we wonder: What is it we are supposed to remember? Why had so many young men died?

Blame the fathers who lied, says Kipling, whose own son was killed in the war.

YOUR NEXT TAX HIKE

A few days after the election President Bush made it clear he sees no reason to back down on any of his promises -- including the one to make his tax cuts permanent. Yet Bush’s resoluteness aside, there are people like Robert Gordon, president of investment firm Twenty-First Securities, musing that when it comes to taxes, the news from now on is likely to be unpleasant. “I wish there were a derivatives market in tax rates. I’d buy higher rates and make a fortune,” says Gordon. It will take some time, he says, “but tax rates will go up. The question is not if, but when.”

The current 15% top tax on dividends and long-term capital gains is the lowest for gains since 1933 and the lowest for dividends since 1916. The 35% top rate on salary and other ordinary income is well below its historic average. But danger signs are evident. In the short term millions of Americans face a federal tax hike, already programmed into the tax code, from the alternative minimum tax. Without any new legislation, that is, the AMT burden for middle-class taxpayers is in for a huge expansion between 2005 and 2006. And over the long haul, tax increases seem all but inevitable, what with the growth of Medicare costs, the approaching bulge in Social Security recipients and the demonstrated inability of even a conservative Republican Congress and President to control the urge to spend.

Gordon suggests investors take a cue from Microsoft, which is parting with $32 billion of its cash hoard in a special dividend next month. “Make hay while the sun shines,” he counsels. The sun will continue to shine for a while, at least for people who can escape the AMT. Here is a guide to how and when you may be asked to pay more.

EMPIRES AS AGES OF RELIGIOUS IGNORANCE

Especially now with the U.S. election results, many pundits appear rather taken aback by the increasing evidence of George W. Bush’s “faith-based” presidency -- his “true-believer” confidence that if you just “believe,” all things are possible. Those who have this faith believe they can transcend the reality that circumscribes the actions of those who lack such belief. In his October 17th New York Times article, “Without a Doubt,” Ron Suskind recounts a conversation with a senior Bush adviser in the summer of 2002, who noted that people such as Suskind were “in what we call the reality-based community.” When Suskind attempted a reply, the adviser replied, “That’s not the way the world really works anymore. ... We’re an empire now, and when we act, we create our own reality. ... We’re history’s actors ... and you, all of you, will be left to just study what we do.”

This “arrogance of power” is right out of the imperial doctrine of Theodore Roosevelt, which was once called “pure act”, or in a larger sense, the “action principle” of fascism. Clearly, any empire’s administration believes that it is not constrained by the reality of the same “Law” that applies to the rest of society. But, what is perhaps most significant in the events recounted by Suskind and in the election results is not President Bush’s confident, unquestioning faith that he is “God’s instrument,” but the blind faith of his fundamentalist followers. What is less understood is that all of the great empires in history have been characterized by a decline of reason and an increase in super-naturalist faith, combined with a belief in the empire with the emperor holding God’s “mandate” on earth.

As Western Civilization emerged out of the ruins of the western part of the Roman Empire, we evolved to America on the periphery of the European core -- pragmatic, Calvinist, fundamentalist (certainly not showing much influence of such natural-law thinkers as Thomas Aquinas), with America believing itself an exception to history (a messianic vision often shared by the periphery). Given that historical context, American writers began to talk as early as 1828 of some U.S. leaders as Caesars. While the Founders sought to separate the State and religion, we never quite had a theocracy, but rather a state where formal governmental leaders were heavily influenced by religious ones. And so, with the growing corrupt, corporate-state empire based in America today, religionists have put themselves forward as one of the key corporate entities in that structure, and the fundamentalists have found their man in George W. Bush.

The decline of the U.S. empire has been evident for some decades now. With the plurality of those who voted in the recent presidential election saluting “Hail George”, let us observe that the presidency of George W. Bush may well mark the acceleration of that process.

Living in a fantasy world.

In the West, the best-known story about a “perfect” world is that of the Garden of Eden. I find it interesting there is an angel with a flaming sword preventing us from returning to it. There is wisdom to our being barred -- or actually, to our barring ourselves. The story may be just a myth, but myths that last millennia always have great truth in them; in this case, there is no perfect world, one without evil. We are barred from it by our flawed human nature. The only place a perfect world exists is in fantasy, in our imaginations. That is important, so important I use recognition that fact as one way to distinguish between those who want to rule others and those who do not.

Generally, those who want to rule others are leftist, and those who do not are true rightists. The true right barely exists today, except for some libertarians, paleo-libertarians, and paleo-conservatives. The idea that “neo-conservatives” are right-wing is a complete joke. Perhaps Robert Heinlein said it best: “Political tags -- such as royalist, communist, democrat, populist, fascist, liberal, conservative, and so forth -- are never basic criteria. The human race divides politically into those who want people to be controlled and those who have no such desire. The former are idealists acting from highest motives for the greatest good of the greatest number. The latter are surly curmudgeons, suspicious and lacking in altruism. But they are more comfortable neighbors than the other sort.”

A true “conservative” understands that for all the good in human nature, it is still corrupt, still fallen. Problems can be ameliorated, but never completely eradicated. Leftists, on the other hand, have a hard time understanding the fact that there is no perfection. As the late Erik von Kuehnelt-Leddihn commented, leftists do not merely misunderstand human nature, they “don’t understand it at all.” In my opinion, it is because they are lost in their fantasy worlds of perfection, one they believe attainable through what they think are their god-like abilities. The word “hubris” accurately describes such a viewpoint, a viewpoint which involves the belief that humanity can -- and should -- be shoveled around like gravel. In dwelling in the fantasies created by their monstrous egos -- another name for hubris -- Karl Marx and his followers tried to remove evil and bring perfection to the world, and instead bought catastrophe. In trying to bring harmony, they instead brought butchery.

All attempts by humans to bridge the unbridgeable chasm between the fantasy world of Perfection and the real world of Imperfection create not a Heaven on earth, but a Hell. It is the source of the archetypal horror story: chaos intruding into the natural order, evil attacking good. This is what happens when people commingle fantasy and reality. Every attempt in history has borne out the truth that the fantasy of a perfect society should stay only in our minds. During the 20th Century, those attempts cost the lives of up to 200 million people.

I believe much of today’s world is based on fantasy. As such, I think the modern world is overwhelmingly “leftist”. They want a return to the Garden of Eden, utterly ignoring that flaming sword. Rightists are the same way in wanting a perfect world, but they understand it cannot be done. They content themselves with working towards a better world, and in trying to make their lives better. They understand the comment about raging about the speck in someone else’s eye while ignoring the log in their own.

Unfortunately, a leftist cannot tell the difference between fantasy and reality. In their minds, it is always somebody else’s fault, and that someone else is going to pay for it but good. One of the most dangerous examples today are the neo-conservatives, who in my view are leftists who live in a very dangerous fantasy world, one they believe they can impose on reality, no matter how many millions of pieces on the chessboard get knocked off or destroyed. Just as bad as the neo-conservatives are the Evangelicals, who want the perfect world -- the Utopia -- in which Jesus comes back and ends the world. This is why they are allied with the neo-conservatives. Is this attempt to bring Heaven on earth -- through war and slaughter -- not a left-wing fantasy? Has not religion always considered the attempt to bring Heaven to earth one of the greatest blasphemies?

Using history as a guide, I believe it is possible to predict the future, not specifically, but in a general way. There will be no “draining of the swamp” in the Middle East. There will no “end to evil”. We are now involved in wars which will accomplish nothing except to make us the focus of the hate of those we attack. Such are the end results of a world based on fantasy. It is a very old problem, and one that probably will always be with us.

AIRLINES ORDERED TO EXPOSE DATA

Homeland security officials accidentally revealed that the Transportation Security Administration will soon officially order America’s airlines to turn over a month of passenger data to test a new passenger screening system. The final rule ordering the airlines to provide data on all June 2004 domestic flights will be issued formally on Monday by the TSA. The airlines must comply by November 23.

The TSA announced in late September its intention to order all 72 domestic airlines to turn over the passenger records -- which can include credit card numbers, phone numbers, addresses and health conditions -- in order to stress-test a centralized passenger screening system called “Secure Flight”. Currently, passengers are screened by the airlines, which check itineraries against a set of watch lists provided by the government. The TSA hopes to reduce the number of people flagged incorrectly by performing the checks itself using data fed to it by the airlines and a centralized terrorist watch list.

Over 500 citizens and organizations commented on the order, most expressing opposition to the planned test and the system itself. Civil liberties advocates strongly opposed the order, citing privacy concerns and the proposed use of commercial credit databases to verify passengers’ identification. The airline industry’s response, published after the comment period officially ended, was less visible, but was not much more supportive than most of the other comments. The airlines prefaced their criticism by saying they wanted to work with the TSA, but went on to contend that the order would be expensive and would force them to choose between complying with an American anti-terrorism program or rejecting European privacy laws -- which could potentially prevent them from flying there.

THE OFFSHORE LIFE OF A SOVEREIGN INDIVIDUAL

“George Spelvin” had figured out how to live the “good life” in the U.S.A. (as much as the law now allows), with his own unusual versions of ironclad asset protection and personal and financial privacy. But in time as freedoms diminished, George concluded greener pastures beckoned offshore. So he made the leap and now lives in the Republic of Austria, where he is exploring new opportunities in his continuing journey toward individual sovereignty. George left the U.S. to get away from, among other threats, the PATRIOT Act, snooping financial police and property confiscation by civil forfeiture. Austria, with far greater respect for privacy, seemed a logical choice. And he likes Austria’s historic respect for property rights. No one there can be deprived of property unless it was wrongfully acquired and then, only after conviction in a criminal proceeding with proof of guilt beyond a reasonable doubt.

George is smart enough to know that an American who obeys U.S. tax laws cannot escape all tax obligations by going offshore. George knows that the U.S., unlike most other nations, imposes taxes on its citizens, no matter where they live. But before he left the good old USA, George sat down with his tax advisors and did some serious planning to avoid legally the extremely high Austrian income taxes, as well as reduce (to the max) his U.S. tax obligations.

With proper planning, George will pay Austrian income tax only on income that he actually brings into Austria. He arranged to have a foreign corporation he controls pay his salary to meet his expenses and any Austrian tax on that income is credited against his U.S. tax obligations. In addition, and happily for George, he probably will not have any U.S. income tax obligations because, for a U.S. person living offshore, the first $80,000 of income earned offshore is tax-free under U.S. law. George’s foreign corporation, his employer, also can pay for his medical and dental insurance and contribute to an IRS-qualified pension or profit-sharing plan -- all U.S. and Austrian tax free.

George loves Austrian privacy. Browsing the Internet (just as he did in the United States, using up-to-date firewall, virus protection and “anonymizing” software) he came across the website for the Austrian Post. He was somewhat surprised to read, “Postal secrecy is irrevocable… the contents of your letter shipment cannot be re-routed, stored or recorded.” U.S. mailmen can double as government spies. A friend of his revealed that someone she knew was being audited because Austrian tax authorities suspected he was under-reporting income. “Why don’t the tax collectors just get a copy of his bank records to check income,” George asked, innocently. “Nein! They can’t,” she said, “He must give them permission, and he won’t. And they don’t have enough evidence against him to go to court and force the bank to lift bank secrecy and disclose the information.”

“At last,” George thought to himself, “I’ve found a truly civilized country.”

PIONEER OF SHAM TAX HAVENS SITS DOWN FOR PRE-JAIL CHAT

Jerome Schneider, the nation’s best-known seller of fraudulent offshore banks, said in an interview that he had helped hundreds of rich Americans evade taxes, including actors, celebrities and business owners. Mr. Schneider, who pleaded guilty in February to conspiring to help his clients evade the tax laws, said that he expected “every single one” of his clients to be prosecuted or sued for the taxes they evaded. He said clients sought to evade taxes on incomes ranging from $100,000 to $40 million, though most were from a third to half a million dollars.

Mr. Schneider, 53, spoke in a cramped hotel room here under the watchful eye of three IRS criminal investigators, who said nothing but smiled broadly at times as he answered questions and named clients and associates. The IRS set up the interview with Mr. Schneider but did not interfere with it. Under the terms of his agreement with the government to plead guilty, Mr. Schneider may not make any public comments about his former clients “without prior consent of the government.” In return for his cooperation, he is expected to serve no more than 24 months in prison.

Mr. Schneider said he always reported his full income to the I.R.S. and never personally used an offshore bank to hide income. Clients paid as much as $60,000 to “acquire” an offshore bank, which consisted of nothing more than pieces of paper to create the appearance of legitimate business activity, he said, confirming the accusations in the government indictment. “Every one of my clients knew full well what they were getting into, including the potential to be prosecuted,” he said, detailing how they signed contracts, were advised by lawyers and were told that if tax authorities ever caught onto them they could go to prison. “They understood that,” he contended.

Mr. Schneider, 53, who lives in Vancouver, British Columbia, was the picture of a successful businessman, dressed in a knit shirt, gray wool slacks and black loafers, his graying hair clipped short, his face framed by horn-rimmed glasses. He began the interview by describing his conduct in terms of helping people, but when pressed he said, “Yes, I am a criminal.” Asked about the millions of dollars he earned setting up offshore banks, he replied, “It is gone, all gone.” Since he has held himself up as the world’s leading expert on hiding money offshore, how could one know for sure if Mr. Schneider really is broke? The IRS agents listening to the question put their hands to their mouths to repress grins.

THE SOUND ECONOMY OF 1929

Sunday, October 24, was the 75th anniversary of Black Thursday, the worst day of the 1929 Wall Street crash. Looking back from 2004, one is struck by how reasonable was 1929’s stock market valuation, how sound was 1929’s U.S. and world economy. At the peak of the 1929 bubble the market’s P/E ratio was 13.5 times. Radio Corporation of America, that era’s premier glamour stock -- its Cisco or Google -- sold for a princely P/E ratio of 28 times. The entire stock market had a total valuation of around 85% of GDP, compared with 180% of GDP at the peak of the 2000 bubble and about 95% of GDP today.

In the economy as a whole, GDP had increased by 15.3% in the 4 years to 1929, almost 4% annually, while inflation had hovered around zero. The U.S. ran a persistent trade surplus, but had a healthy savings rate, and a substantial Federal budget surplus, even after tax cuts, throughout the late 1920s. In the corporate sector, balance sheets were strong. Brokers’ loans, so frequently cited as an immediate cause of the collapse, totaled less than 10% of the value of outstanding stocks; 86% of the increase in bank credit in the 4 years to 1929 went to this dubious purpose, but that was still less than 8% of GDP.

Domestically, therefore, the U.S. economy of 1929 was less overvalued and far better balanced than that of today, with President Calvin Coolidge and Treasury Secretary Andrew Mellon’s fiscal and economic policies having been enormously superior to those of either President Bill Clinton or President George W. Bush. Internationally, the picture was less serene. Nevertheless, internationally as well as domestically, economies in 1929 seemed to be in decent shape, and there was no obvious reason why recovery should not continue. The U.S. stock market was only modestly overvalued, and any crash, being smaller in terms of GDP, should have had a much less deflationary effect than the relatively larger drops we have seen in 1987, 2000-02 or 1990s Japan. So what went so terribly wrong, and what can we learn from the disaster that followed? That, ladies and gentlemen, there is not the slightest reason why it cannot happen again.

IT IS THE DOLLAR, NOT DISGUST, DRIVING INVESTORS OVERSEAS

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.”

WHAT ACTUALLY CONSTITUTES AN “OFFSHORE FINANCIAL CENTER”?

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.

PRIVACY ACTIVISTS PROTEST ELECTRONIC PASSPORTS

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.

VISITING A VERY STRANGE COUNTRY

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.

YEAR END TAX PLANNING

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.

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

AID TO DEPENDENT DICTATORS

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?

AMERICA’S HEARTFELT HOLIDAY

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?

WEB WON’T LET GOVERNMENT HIDE

Given the government keeps tabs on the world using armies of agents, algorithms and wiretaps, how can a citizen compete? Try a browser. Governments at every level these days are providing less information about their inner workings, sometimes using fear of terrorism as an excuse. But it is precisely times like these that mandate citizens’ rights to check the efficiency of their government and hold those who fail accountable, open government advocates say. The government itself will not make it easy, so an increasing number of websites and data crunchers are stepping in to provide information about the inner workings of government.

For starters, there is Google’s little-known government specific search engine. Those proficient with crafting search terms can find Attorney General John Ashcroft’s office number, gee-whiz nanotechnology movies and NASA’s Microgravity Man comic strip. One can even find homeland security alerts about truck bombs (PDF) and the intelligence needs of the FBI. Another trove of information is George Washington University’s National Security Archive, which contains thousands of documents acquired through patient Freedom of Information Act requests. And there is CoolGov, a blog devoted to ferreting out quirky tidbits such as videos of airline crashes.

Those interested in the nitty-gritty of how and why the government hides information can subscribe to Stephen Aftergood’s Secrecy News listserv, which is part of his work as the director of Federation of American Scientists’ Project on Government Secrecy. Aftergood, who publishes a couple times a week, has built up an archive of previously unpublished reports created for Congress and information about the CIA’s ongoing opposition to the publication of its budget.

THE CONSEQUENCES OF SURRENDERING LIBERTY TO GOVERNMENT SECURITY

Recently it was reported that Senator Ted Kennedy was prevented from flying on commercial airlines because his name appeared on the federal government’s no-fly list. Now comes a report that another well-known American, commentator Cal Thomas, has also appeared on the no-fly list and consequently is harassed every time he attempts to board planes. For Thomas, that is about a three-times-a-week occurrence.

Senator Kennedy had direct access to the private telephone number of Homeland Security Director, Tom Ridge, so that he could demand that his name be removed. Yet, even knowing the head man took the powerful Senator three weeks to get off the list. Cal Thomas does not have such access, so like the rest of us, he suffers while trying to get uncaring, mindless, faceless federal bureaucrats to act and remove his name.

His story is a warning for what the rest of us face if Congress enacts National ID card legislation that is now on a fast track to passing as the result of massive pressure to fully implement the recommendations of the 9/11 Commission. Listen carefully, America. This is your future. [Ed: Think the all-time classic dark comedy Brazil.] In his column detailing his experience being targeted for constant baggage inspections and body searches, Thomas tells of the horrors of dealing with a government behemoth like the Transportation Security Administration.

Take a look around you, America. Our nation is becoming less efficient, less productive, less secure and less educated than any time in our history. What is the common denominator in this equation? Government has gotten involved in more and more of our everyday routines.

ALEXANDER THE NEOCON

There are two things a moviegoer should know about Oliver Stone’s Alexander. First, it is blinding awful -- literally. Ten minutes into it one of my contact lenses fell out, right as a one-eyed Val Kilmer came charging into a snake-handling Angelina Jolie’s boudoir. The less said the better. If you are thinking of seeing it, don’t. Go see Seed of Chucky instead. Jennifer Tilly vs. killer dolls will not be any campier than Alexander and Jolie’s take on the conqueror’s mother as Cruella DeVille.

The second thing worth knowing is that Alexander is mildly interesting as a document of left-wing Bushism. War, slaughter, and all that goes with world conquest are all right, as long as they secure such goods as improved literacy and the mixing of different races and cultures. This is a perfectly natural companion, by the way, to libertarian Bushism, or liberventionism, which says that a bit of bloodshed is perfectly fine as long as it secures open markets and the free flow of people and goods. There is a line about that in the movie too.

For all that Stone has done to discredit the conspiracy theory -- which is saying something -- Alexander gets the history right ... mostly. Where Stone has embellished the story he is guilty not so much of distortion as bad taste. What a shame, because the left-neocon Stone does have at least a rudimentary grasp on Alexander’s politics, if not his character. The “civilizing” mission of the conqueror was something Alexander’s propagandists played up at the time and perpetuated long after his death. It is part of his enduring appeal to megalomaniacs of all stripes. By force of arms he changed the political culture, and indeed the culture generally, of the known world, East and West. He did what liberventionists and multicultural imperialists alike long to do. Alexander is any would-be world-shaper’s role model. If the whole thing sounds familiar, well, it goes to show that Karl Marx was not always wrong. History has no laws, but the human race as a whole never learns much from its mistakes, so history does repeat itself, the first time as tragedy, the second and farce. And it keeps getting more farcical every time.

“THE CHINA PRICE”: THE THREE SCARIEST WORDS IN U.S. INDUSTRY

In general, it means 30% to 50% less than what you can possibly make something for in the U.S. In the worst cases, it means below your cost of materials. Makers of apparel, footware, electric appliances, and plastics products, which have been shutting U.S. factories for decades, know well the futility of trying to match the China price. It has been a big factor in the loss of 2.7 million manufacturing jobs since 2000. Meanwhile, America’s deficit with China keeps soaring to new records. It is likely to pass $150 billion this year.

Now, manufacturers and workers who never thought they had to worry about the China price are confronting the new math of the mainland. These companies had once held their own against imports mostly because their businesses required advanced skills, heavy investment, and proximity to customers. Many of these companies are in the small-to-midsize sector, which makes up 37% of U.S. manufacturing. The China price is even being felt in high tech. Chinese exports of advanced networking gear, still at a low level, are already affecting prices. And there is talk by some that China could eventually become a major car exporter.

Multinationals have accelerated the mainland’s industrialization by shifting production there, and midsize companies that can are following suit. The alternative is to stay at home and fight -- and probably lose. Ohio State University business professor Oded Shenkar, author of the new book The Chinese Century, hears many war stories from local companies. He gives it to them straight: “If you still make anything labor intensive, get out now rather than bleed to death. Shaving 5% here and there won’t work.” Chinese producers can make the same adjustments. “You need an entirely new business model to compete.”

America has survived import waves before, from Japan, South Korea, and Mexico. And it has lived with China for two decades. But something very different is happening. The assumption has long been that the U.S. and other industrialized nations will keep leading in knowledge-intensive industries while developing nations focus on lower-skill sectors. That is now open to debate. “What is stunning about China is that for the first time we have a huge, poor country that can compete both with very low wages and in high tech,” says Harvard University economist Richard B. Freeman. “Combine the two, and America has a problem.” How much of a problem? That is in fierce dispute.

SOVIET CANADA: TROTSKY’S TRIUMPH

Back in November of 1975, a lawyer in Newfoundland told me of his recent trip to the USSR. One of his observations startled me: “The Soviet Union,” he said, “is becoming more like us in the West, and we are becoming more like them. In a few decades, we’ll have become Marxist and they’ll have gone capitalist.” Naturally, I humoured him. I avoided making sudden moves. You never know what can set one of those wacko lawyers off. Today, 28 years later, history has proven him right. Canada and the United States are thoroughly Sovietized, and Russia and the former Soviet Republics have become showcases of “wild west” entrepreneurial capitalism, complete with organized crime gangs. The symptoms of sovietization are manifesting themselves in all aspects of Canadian society.

As in the USA, for example, government agents swarm in Canadian airports, where they harass and intimidate travellers in the name of “safety” and “anti-terrorism”. Everywhere, one is constantly being asked to produce identification, and for no better reason than to verify that, “Your papers seem to be in order...” In an increasing number of businesses, employees are required to wear special identification cards on belt-like ribbons round their necks. It reminds one of nothing so much as the ear tags which replaced the branding of cattle.

There surely has never been a more brainless, incompetent bureaucracy than the Canadian federal government in history. The vast hallways of all levels of government are lined with offices which are empty except for 9:30 to 11:45 in the morning and 1:30 to 3:15 in the afternoon, except on Fridays, when it is impossible to find any of the taxpayer financed memo writers after 1:00 p.m. In Canada, the people sheepishly accept all this crap, and we never even had a Stalin to terrorize us into submission. But then you do not have to train sheep to be sheep. People here like the “nanny state”, as it saves them from having to think for themselves. I no longer believe that a significant number of Canadians are at all interested in living in ... Peace and Liberty.

HURRICANE IVAN’S AFTEREFFECTS MEAN TAX-FREE EARNINGS FOR MOBILE CANADIANS

An ill wind that devastated a tropical tax haven last September has created employment opportunities for mobile Canadians. People like Pam Larson, Freya Palesch and John Bird are fleeing Vancouver’s soggy winter to earn tax-free dollars in the Cayman Islands, which sit in the sunshine several hundred kilometers due south of Florida. For Larson and Palesh it will be a return to waitressing work they lost last September when Hurricane Ivan damaged 95% of the buildings on Grand Cayman and killed two residents. All three were recruited by Paul Storey, former manager of a Vancouver pub, whose new posting as manager of three restaurants on Grand Cayman’s famous Seven Mile Beach was dramatically put on hold as he waited at Toronto’s Pearson Airport last September for a connecting flight that never came.

Ivan was one of the most powerful hurricanes in the Caribbean in the last 100 years and left devastation on an unprecedented scale. Thousands lost their homes and many of their possessions while almost every building on the main island suffered water damage from a 5-meter storm surge driven by 300 km/h winds. While Storey was hiring servers and bartenders, he is now also looking for carpenters and drywallers and other trades desperately needed for reconstruction. Would-be islanders can learn more at Storey’s website.

Earnings are received tax-free because there is no income tax on the three Cayman Islands, which the U.S. CIA discreetly describes as “a thriving offshore financial center”. Because of the crisis, authorities in the British Overseas Territory are fast-tracking work permits and have relaxed requirements to little more than a police check. Temporary workers should realize that taxes not demanded in the Caymans will be required back in Canada unless they sever all connections with the home country and stay away for at least two years. One upside of Hurricane Ivan is that Seven Mile Beach got piles of new white sand. Larson, 22, and Palesch, 30, say they cannot wait to get back.

WORSE THAN ASHCROFT: GONZALES HELPED WRITE THE PATRIOT ACT AND SUPPORTED TORTURE

I do not approve of filibustering presidential nominees, no matter who is president, because the Constitution, along with the Federalist Papers, makes clear that the whole Senate is to give advice and consent to these presidential nominees. But if I were a senator, I would be sorely tempted to filibuster Alberto Gonzales. The Democrats, still shell-shocked by their second loss to Bush, and by the size of the Hispanic vote for the president, are not likely to filibuster Gonzales. But since Gonzales will be more dangerous to our liberties than Ashcroft, I will begin here to show how low the standards have become for the chief law enforcement officer of the nation. Maybe at least the American Bar Association and the Association of the Bar of the City of New York will stand up against Gonzales.

I must credit National Public Radio’s Nina Totenberg, an experienced analyst of constitutional law and a reporter who never stops digging to get to the core of Gonzales’s ominous record as White House counsel. On November 11, she pointed out, “Gonzales was responsible for developing the administration’s policies on the treatment of prisoners; for developing a new definition of torture to allow more aggressive questioning of prisoners. He developed the policy that allowed the indefinite detention of American citizens deemed to be enemy combatants without [being charged] or [having] access to counsel. ... The Supreme Court, though, rejected that [Gonzales] theory ... Top legal brass in the army, air force, and navy say that Gonzales deliberately left them out of developing policy on the treatment of prisoners because he knew they would oppose.”

There is a lot more about Alberto Gonzales that will prepare you for what to expect for the next four years from the Justice Department. In a January 2002 memorandum to George W. Bush, he emphasized that this new war on terror “renders obsolete Geneva’s strict limitations on questioning of enemy prisoners and renders quaint some of its provisions.” Gonzales also told George W. Bush that in denying these “detainees” -- many of them now held at Guantánamo for nearly three years without charges -- prisoner of war status under the Geneva Conventions, the president did not have to worry about being held accountable by the courts. As commander in chief, his actions were unreviewable.

Alberto Gonzales, moreover, will not in the least disturb John Aschroft’s beloved USA Patriot Act, because Gonzales helped write it, and he wholly agrees with his patron, the president, that nothing in it should be changed despite the act’s “sunset clause” that allows Congress to review sections of the act by December 2005. Those who know Gonzales, however, keep saying he is a nice guy.

BEFORE YOU FLEE TO CANADA, CAN WE TALK?

I moved to Canada after the 2000 election. Although I did it mainly for career reasons -- I got a job whose description read as though it had been written precisely for my rather quirky background and interests -- at the time I found it gratifying to joke that I was leaving the U.S. because of George W. Bush. It felt fine to think of myself as someone who was actually going to make good on the standard election-year threat to leave the country. Also, I had spent years of my life feeling like I was not a typical American and wishing I could be Canadian. I wanted to live in a country that was not a superpower, a country I believe to have made the right choices about fairness, human rights and the social compact.

So I could certainly identify with the disappointed John Kerry supporters who started fantasizing about moving to Canada after Nov. 2. But after nearly four years as an American in the Great White North, I have learned it is not all beer and doughnuts. If you are thinking about coming to Canada, let me give you some advice: Don’t.

Although I enjoy my work and have made good friends here, I have found life as an American expatriate in Canada difficult, frustrating and even painful in ways that have surprised me. As attractive as living here may be in theory, the reality is something else. For me, it has been one of almost daily confrontation with a powerful anti-Americanism that pervades many aspects of life. When I have mentioned this phenomenon to Canadian friends, they have furrowed their brows sympathetically and said, “Yes, Canadian anti-Americanism can be very subtle.” My response is, there is nothing subtle about it. The anti-Americanism I experience generally takes this form: Canadians bring up “the States” or “Americans” to make comparisons or evaluations that mix a kind of smug contempt with a wariness that alternates between the paranoid and the absurd.

Part of what is irksome about Canadian anti-Americanism and the obsession with the U.S. is that it seems so corrosive to Canada. Any country that defines itself through a negative (“Canada: We’re not the United States”) is doomed to an endless and repetitive cycle of hand-wringing and angst. The rush to make comparisons sometimes prevents meaningful examination of the very real problems that Canada faces. Ultimately, Canadian anti-Americanism says more about Canada than it does about the U.S.

I do not intend to apply for Canadian citizenship, because experiencing the anti-Americanism I have described has been instructive. Living here and coping with it has forced me to confront my own feelings about America. And it has helped me discover what I do value about it: its contradictions, its eccentricities, its expansive spirit, all the intensity and opportunity of a deeply flawed, widely inconsistent, but always interesting country. Perhaps I am a typical American, after all.