Wealth International, Limited

December 2004 Selected Offshore News Clips

(Especially noteworthy articles’ headings highlighted in gold.)


December 1, 2004 could well go down in history as yet another important milestone for America’s bubble-prone economy. No, I am not referring to the 162-point surge in the Dow Jones Industrial average that occurred on that day. Instead, my focus is on two widely overlooked statistical reports put out by U.S. government statisticians -- the latest tallies on home prices and personal income. Collectively, these reports paint a worrisome picture of an asset economy that has now truly gone to excess. As was the case in early 2000 when Nasdaq was lurching toward 5000, denial is deep over the potential downside of yet another post-bubble shakeout. That is what worries me the most.

The just-released report on U.S. house prices for the third quarter of 2004 was a shocker -- an 18.5% annualized surge from the second quarter and a 13.0% increase from year-earlier levels, according to the tabulation of the Office of Federal Housing Enterprise Oversight (OFHEO). That represents a stunning acceleration from the 9.8% Y-o-Y increase of the second quarter and pushes nationwide house price appreciation to a 25-year high. It is an even larger rise in real, or inflation-adjusted, terms. The surge over the past year is now running nearly five times the 2.7% annualized increase of the non-housing components of the CPI.

According to the latest OFHEO tally, house-price inflation over the past year has run at double-digit rates in 25 out of 50 states plus the District of Columbia. In six states -- Nevada, Hawaii, California, Rhode Island, Maryland, and Florida --- home prices increased by 20%, or more, over the past year. Housing is an asset class that is just as prone to excess as are stocks, bonds, currencies, or commodities. If it feels like a bubble, acts like a bubble, and looks like a bubble, it probably is one.

Link here.


It is a credit to book buyers that Thomas Wood’s new work has turned out to be one of the fastest selling titles in the history of the Conservative Book Club. The book in question is The Politically Incorrect Guide to American History by this historian at Suffolk Community College and adjunct scholar of the Mises Institute. The title is also a bit misleading. Nor do I find the thesis or argument particularly “conservative”, if by that you mean Bush-style nationalism and cultural agitprop.

On the contrary, this is an amazing piece of scholarship -- compressed scholarship, to be sure -- that reflects vast reading in the best libertarian and Austrian scholarship available, a wonderful short history of the United States, revisionist in all the best ways, that integrates history, politics, and economics (the author is well schooled in the Austrian tradition). He begins in the Colonial period to give an account of David Hacket Fischer’s thesis about the four tribes that settled the Americas. The subject headings give the thesis and each is followed by a fast and energetic argument. So it goes throughout the book: the Constitution, the roots of big government, the Civil War, reconstruction, the robber barons, World War I and II, Hoover, the Great Depression, all the way up through the Clinton years, and all in 245 pages. In each section he chooses the best of the modern up-to-date information about each period.

The pace is remarkable. He shows that the Constitution was never understood to be a permanent union, that big government caused the North-South conflict, that Alexander Hamilton’s friends were racketeers, that the U.S. did not have to enter WW I, that Hoover was a big government conservative, that FDR made the Depression worse, that there really were Communists in government, that FDR made WW II inevitable, that the Marshall Plan was a flop, that the Civil Rights movement increased social conflict and made everyone worse off, that unions made workers poorer, that the 1980s were not really the decade of greed, that Clinton’s wars were aggressive and avoidable, and that his personal issues were a major distraction from the real problems of the 1990s.

The thesis of the book completely brushes off the naïve and ridiculous mainstream view of the main theme of American history that it is the story of one long, unrelentingly glorious march of the state from “people’s revolution” of 1776 through the ratification of the Constitution through the latest war on terror. Woods will have none of this prattle. Let me just assure you no matter how much you think you know about the history of American liberty vs. the American government, you will learn from him.

Link here.


As the House and Senate in this week’s “lame duck” session wrangle over differences on immigration and Pentagon authority in the intelligence overhaul bill, civil libertarians should be very concerned about another section of the bill that many members of both bodies seem to agree on. The intelligence bill seeks to end the “sunset” clause of what experts say is one of the most privacy-harming sections of the USA PATRIOT Act, allowing it to be extended permanently without congressional review. This is the section of the bill supposedly designed to fight money laundering by forcing businesses to conduct even more routine customer surveillance. And it does so even though the 9/11 Commission report casts heavy doubt on the effectiveness of know-your-customer type programs at fighting terrorism.

Title III of the PATRIOT Act required a broad category of businesses defined as “financial institutions” to set up anti-money laundering programs similar to those already in existence for banks. From the definitions of the PATRIOT Act and other statutes, These “financial institutions” specifically include auto dealers, jewelry stores, travel agencies, and financial service providers, as well as any other type of business the Treasury Department regulators deem to have a connection to money laundering. Like the banks, these new businesses are being forced to report transactions that meet an arbitrary and secretive definition of “suspicious activity,” which regulators have sometimes defined to mean anything that deviates from a customer’s normal transactions.

To assuage privacy concerns, the writers of the PATRIOT Act’s Title III put in a clause called section 303 that put the provisions up for congressional review “on and after” Jan. 1, 2005. While not as strong as the sunset clauses contained in other parts of the law up for review next year, it does create a procedure to repeal Title III if just one House or Senate member introduces a joint resolution. If introduced, the repeal legislation receives “expedited consideration”, ensuring it will receive a vote and not be bottled up in committee. But even this mild privacy safeguard will be killed if the intelligence bill in its current form passes. The bill clause’s title makes its intentions clear. It is called “Repeal of Review”.

Links here and here. The USA PATRIOT Act lets the feds spy on your finances. But does it help catch terrorists? -- link.


One of Delaware’s cherished traditions -- the corporate tax shelter -- is under siege. So far, 12 states and the District of Columbia have passed laws aimed at Delaware investment holding companies, which have allowed corporations to shield investment and royalty income from other states’ taxes. Now, Delaware is fighting back with a strategy that state officials hope will add hundreds of jobs and tens of millions of dollars to the First State’s economy while preserving Delaware’s reputation as a corporate tax haven.

Under a law adopted this year by the General Assembly, businesses can shield themselves from taxes in other states as they can with the Delaware holding companies. Where the new law differs, however, is that the businesses have to add jobs or increase spending on services provided by Delaware bankers, lawyers and accountants. The job and spending requirements have a dual purpose: benefit Delaware’s economy and bolster the company’s argument for tax exemption in other states.

Holding companies exist almost solely on paper, with perhaps a semiretired, part-time accountant in a small office serving as the only Delaware officer of the “corporation”. Sometimes, the holding companies do not directly employ anyone, but instead rely on Delaware firms specializing in corporate services to provide a part-time employee. Delaware holding companies have become targets for legislators and tax collectors in other states, who attack the tax shelters as “sham transactions” and “shell corporations” whose only purpose is tax evasion. Delaware officials believe the new tax-savings vehicles, called headquarters management corporations, woill not be as susceptible to challenge because they will have “economic substance” -- jobs and real estate -- behind them.

Link here.


Many trust in God, but where money is concerned a bank is safer, and, when settled by trust deed, as discrete as a prayer. That is why millions use the City of London and English trusts to plan their finances. The sophistication and adaptability of the English trust has created an industry and made London a center for managing other people’s money. Unfortunately, the trustee can also provide discretion for a cast of (more) dubious characters. Tax evaders, drug barons, money launderers and, some would have us believe, terrorists find these legal arrangements useful. Trusts are amoral, the duties of the trustee are to act not saintly but discretely, and in the financial interest of the beneficiaries. That means keeping your beneficiaries out of the eye of authorities, such as the taxman and anyone else interested in prying into their affairs.

Not surprisingly, a lot of people have it in for trusts and the secrecy they provide. A host of regulations seeks to throw light into dark corners, forcing “know your client” rules not just on bankers, lawyers and trustees but on estate agents and casino operators, too. The EU is now debating the Third Money Laundering Directive and should you fall into one of the occupations listed immediately above, you should feel a bit nervous.

Draft article 19 of the directive requires that you rat on your client. You must blow the whistle, not just if you know your client to be a money-launderer and not just if you have reasonable grounds to believe he might be. Under the Third Directive you must shop him if you suspect something. This is dynamite for any profession in the business of dealing with a client’s money, because it transforms a relationship of trust into one of suspicion. It imposes a duty on you to know your client and what he is up to.

You might think the discomfort of lawyers is trivial when the prize is capturing drug barons and terrorists. But these regulations have little to do with catching crooks. They are about shifting responsibility from government to the private sector. The banks are worried; this is no longer a matter of keeping a list of dodgy dictators but a major forensic intelligence job, a task that might test the resources of MI6. And it will not stop money- launderers. Sani Abacha, the late Nigerian dictator, did not deposit his bag of swag in London banks under his own name. The purpose of this directive is not to fight crime but to deflect further embarrassment -- to shift blame from government and, above all, to mollify the rednecked regulators in Washington, the source of the hysteria over terrorist financing.

Link here.


During these past 7 years our commentaries have addressed a broad range of issues (but always within the context of the offshore financial services industry) and although some of the issues were fleeting, others are perennial. It was felt appropriate in this issue to look at some of these evergreens. During a recent conference in Panama at which I spoke, I discussed the progress so far made in bridging the gap between Panama and the OECD in relation to international tax harmonization, a subject also covered in the September issue of the OPQ. In May, 1998, the OECD said that a campaign should be launched to stamp out tax havens and a target of 7 years was set in which to achieve this. With just a few months remaining before the target date is reached, it will be clear to readers of the OPQ and others that the OECD was overly optimistic. Despite, admittedly, some significant success, the OECD has, to quote Robert Browning, let its reach exceed its grasp.

Offshore financial services are important to Panama. During the last 5 years, for example, some 1500 companies per month on average have been registered and in the last 3 years revenue from this source has earned the country $67 million Reconciliation with the OECD remains a distant goal especially when Panama is commonly seen as a pure Cayman-style tax haven whereas it has a tax system under which local operating companies, for example, pay income tax of 30%; ironically, the equivalent corporate rate in Ireland is only 12.5%. Sovereignty has helped Panama in its dealings with the OECD. No developments have caused me to waver in this conviction. Quite the opposite.

In centuries past the Catholic church amassed a fortune from wills which left money for prayers to be said for the souls of the departed. In today’s world, salvation can concern temporal matters as well, and needs the intercession of not just prayer if one has assets offshore. A lot of personal wealth is held in companies registered offshore, but what happens to the assets when the owner dies? Although Plato contends that nothing in the affairs of men is worthy of great anxiety, I can guarantee that not getting your affairs in order before your rendezvous with death can cause great anxiety for those left behind. If a will exists, it will be either a domestic or an offshore one -- there may be both kinds. In any case, control of the deceased’s offshore assets will pass to his executor upon his demise. If there is no special offshore will covering the company assets, there will be a delay while the domestic will is dealt with and the executor obtains the court’s authority to represent the deceased’s estate (a grant of probate or its equivalent) in the place where the will is registered. The ensuing passage of time might impact on the operations of the offshore company managing the assets. Then there is intestacy which is the worst-case scenario.

Very often, the far-sighted company owner has established either a trust or a foundation. A trust, among other things, is a will with all the extras, you could say, but without the need for probate. Usually a special offshore trust has been created to set out clearly the manner in which the offshore company assets are to be managed and how they are to be dealt with after the owner’s death. Offshore foundations are popular, especially in Panama which has particularly attractive laws concerning them. It is the civil code equivalent of the common law trust and performs the same functions. It is more akin to a company, however, except that instead of having shareholders, the foundation has beneficiaries. The frequent failure to cover the contingency of death, either onshore or offshore, is what I describe as the Achilles’ heel of estate planning. Some common sense from the Book of Common Prayer says it all: “We have left undone those things which we ought to have done; and we have done things which we ought not to have done”.

But even with intestacy avoided and a plan of succession in place, that does not mean that anxiety will not follow. The actual (though disguised) case below clearly shows why. So look for experience in a practitioner. Fly with a pilot who has taken off, flown and (especially) landed in all kinds of extreme weather than with one who has always enjoyed smooth conditions. That applies, of course, to domestic and offshore pilots.

Link here.


I am a Panamanian resident and a foreign investor. My wife is a Panamanian and I have three Panamanian children. I am the developer of Valle Escondido residential development and resort in Boquete. Valle Escondido is a unique residential development in Panama because it focuses on bringing foreigners to Panama to retire. Most of the retirees are from North America, although a fair number are from Europe and Panama as well. The project began about three years ago, and consists of about 200 homes. As of this writing we have approximately 50 homes completed. We will construct another 150 over the next two to three years.

The fact that we are nearly sold out, in such a relatively short time, clearly demonstrates the dynamic attraction Panama has to the foreign market. It has been powerful enough to attract foreigners to leave their own countries and come live in Panama permanently. As a pioneer, among the first foreigners to develop in the interior of Panama, we have had to overcome a number of unnecessary obstacles. Under some circumstances, these obstacles could have ended the project. My purpose in sharing this information is not to point fingers at the guilty. It is instead to suggest ways the government could help facilitate the minimization of these obstacles for foreigners who invest here.

My presentation focuses on three main issues. First, the economic significance of this type of foreign investment and how it relates to tourism. Second, examples of the difficulties facing foreign investors from both government and the private sector. Third, what the government can do to facilitate this type of foreign investment.

Link here.


The intelligence agency overhaul given final approval by the Senate also reorganizes the way the states grant driver’s licenses, a change that civil liberties advocates and some security experts say could have far-reaching consequences. Issuing driver’s licenses has always been mostly a state function, but the new law requires the federal Department of Homeland Security to issue regulations on what documentation a state must require before it can grant a license. It also requires that the licenses be “machine readable”, which will probably be accomplished through a magnetic stripe or a bar code or both.

The printed format of the piece of plastic will still be under state control. But to a person equipped with a reader, that will make little difference, because Washington will set the minimum national requirements for the machine-readable data. The federal government will gain control through airport checkpoints and other places where federal agencies demand identification. After a phase-in period, the government will refuse to accept licenses that do not comply with the standard. The same rules will apply to photo identification issued by states to nondrivers.

“We’re really looking at a national ID system,” said James C. Plummer Jr., a policy analyst at Consumer Alert. “Basically, each state might have the name of the state written in a different font on the front, but there will be a magnetic stripe on the back containing virtually identical information.”

At the American Civil Liberties Union, Greg Nojeim, associate director of the Washington legislative office, said, “Licenses that purport to meet the federal standard will become the gold standard.” But Mr. Nojeim and others say they may not be nearly as secure as some people assume, because the “source documents”, including birth certificates and Social Security numbers, are so easily faked. “It’s a garbage-in, garbage-out situation,” he said. “The same people who manufacture fake driver’s licenses today will be manufacturing fake national driver’s licenses tomorrow,” Mr. Nojeim said, although the price will increase, he predicted.

Link here.


As the incidence of online identity theft has steadily climbed in recent months, banks and online retailers have struggled to stay on top of the problem and to protect their customers, whose personal financial information and online account details are coveted by criminals. But as problems like phishing scams change from e-crime phenomenon to endemic online threats, technology companies -- both large and small -- are bringing products and services to market that they claim can end, or greatly reduce, the threat of online identity theft. These are some of the technologies aimed at curbing online identity theft.

Link here.


Michael Hausfeld has built a career pushing the boundaries of American law. In the 1990s his firm wrung a $176 million settlement out of Texaco, then the most ever in a race discrimination case. A leader in Holocaust litigation, he obtained $8 billion from Swiss banks and German industry and government. His firm is now lead counsel in the largest class action in history, representing 1.5 million current and former female Wal-Mart employees.

Now the 58-year-old lawyer is building an international network of plaintiff lawyers in such diverse places as Great Britain, India, Panama and South Africa. The goal: to export U.S.-style litigation tactics, including contingency fees and class actions, throughout the world. In coming months, he says, he and allied lawyers in various countries plan to file antitrust, product liability, securities and human rights cases. Hausfeld’s plan should terrify corporations already reeling from the U.S. plaintiffs’ bar. But he says his plan is for the defendants’ own good. By hooking up with foreign law firms he can offer corporate defendants a settlement that will stick in other countries. Now a corporation that settles in the U.S. might still get socked with billions of dollars’ worth of claims abroad.

Cold comfort maybe, but he is already naming targets. Parmalat and Marsh & McLennan look ripe for securities actions in the U.K. His British partner firm, Irwin Mitchell, is looking for potential Vioxx claimants against Merck. In India Hausfeld and a partner are investigating filing a claim related to the cleanup of the site of the 1984 Bhopal disaster. And in South Africa Hausfeld and U.K. human rights lawyer Martyn Day are exploring an environmental suit against Anglo American.

Hausfeld is tapping into a trend suggesting U.S.-style litigation is already spreading, particularly in the E.U. But Hausfeld is fighting immense procedural differences among countries. In the U.K., for instance, each member of a class must be identified, a policy that prevents lawyers from dreaming up cases where there are few identifiable victims. Even some of Hausfeld’s simpaticos wonder whether U.S.-style litigation will ever take root overseas. At least in the U.K., America’s “compensation culture” is frowned upon. Elsewhere people have not historically thought of private litigation as a remedy. Meanwhile Hausfeld is planning to exploit the differences in legal systems.

Link here.


The U.S. government has sent the impressionable Youth of America an unmistakable signal: Do not, under any circumstances, break any sporting records after adding 18 pounds of muscle at age 36. If you do, Uncle Sam will use the awesome powers at his disposal -- grand jury inquisitions, illegal leaks, even the State of the Union address -- to humiliate you in public and pressure your union to accept year-round random urine testing, even if you will never be charged with breaking a single law.

In 2001, the San Francisco Giants’ Barry Bonds, one of the five best players ever to wear a baseball uniform (he has won an unprecedented seven Most Valuable Player awards, including the National League’s last four), broke Mark McGwire’s single-season home run record, with 73, far surpassing his own previous high of 49. Unluckily for him, he did so in a media market inhabited by an ex-jock IRS agent, Jeff Novitzky, who did not appreciate Bonds’s famously surly attitude.

Sespite Congressional huffing and puffing, the unprescribed use of drugs, anabolic steroids, that are playing an increasingly important role in the treatment of breast cancer and HIV had been very low on the feds’ things-to-enforce list. Until 2001, when Bonds broke the home-run record ... and George W. Bush took over the White House. Bush, a former minority owner of the Texas Rangers, has a classic baseball owner’s mentality when it comes to employee drug use: Players should be granted the same privacy as racehorses, in order to Protect Our Kids. The use of the ultimate Bully Pulpit, the 2004 State of the Union Address, should come as no surprise. By then, IRS agent Novitzky had long established that the Bonds-implicating BALCO case would be more about the pressure of negative publicity than the assembling of a viable criminal case.

The federal justice system should be about apprehending serious criminals, not “sending messages” to schoolchildren by abusing the grand jury process to compile and illegally leak publicly damaging information about non-criminals. There is such a thing as the presumption of innocence, no matter what you read in the sports pages. As it stands, Barry Bonds has not even been formally accused of violating a single baseball rule, let alone federal law. President Bush has indeed “sent a message” to the kids of America: We can make you look guilty, even when you have never been charged. It is a rough lesson, but they might as well start getting used it.

Link here.


Illinois is either heaven or hell, depending on how you look at it. Madison County and neighboring St. Clair County, two southern Illinois counties with populations of no more than 260,000 each, took the No. 1 and No. 2 spots as the worst places for companies to be hauled into court, according to a report released by Washington-based American Tort Reform Association (ATRA). On the other hand, if you are looking to sue a business for doing you wrong, then Madison and St. Clair counties might be the place to go. The ATRA’s study looks at how corporations view their treatment by select state courts.

Given that the survey addresses corporate views, it is hardly scientific or unbiased. And trial lawyers say the study misrepresents crucial facts about the lawsuits brought and the results that ATRA considers outlandish. The goal of the report, said ATRA president Sherman Joyce, is to help foster fair treatment at courts around the country. “This report really focuses on the most egregious problems,” he said. And what makes places like Illinois and South Carolina stand out, added Joyce, are provisions allowing almost anyone to sue there. Accusers and accused do not need to reside in these states, nor does the underlying injury have to occur there.

The report -- sure to be embraced by litigation reform advocates and derided by trial lawyers -- comes at a crucial time. President Bush has made it clear that tort reform, which refers to civil lawsuits brought by individuals claiming injury, will be a top legislative priority in his second term. Bush singled out medical malpractice cases, which reform advocates say are driving up health care costs and driving doctors out of business. With Republicans firmly in control of Congress and various state legislatures around the country, tort reform advocates are optimistic that key initiatives they support will become law.

Link here.


Lots of people today claim we are living in a Mommy State. We are children to be scolded, smacked, ordered around. Wear your seatbelt, lose weight, be nice to everyone. It is worse than annoying. It can drive you batty. It is like being in kindergarten all your life, or being forced to sit at the little kid’s table during Thanksgiving when you are 35 years old. I am also reminded of Bizarro World, where the cars have square wheels. Things there do go, but they do not go very well. They do not go very far, either, before they break down. There is a lesson in that.

There is truth to the theory about Mommy. I do not think it goes far enough, though. Mommy is now insane. These days we are supposed to not think bad thoughts. Orwell called this “thought crime”. God forbid one of those thoughts slips out. You could end up in the pillory. Now, we have got kids expelled from school for bringing nail clippers or aspirin. Little boys cannot draw pictures of tanks or airplanes. Point a finger and say “bang” and you might be arrested. A 5-year-old boy giving a 5-year-old girl a kiss on the cheek will end up in therapy for sexual harassment.

The loons at the airports confiscate cigarette lighters and Medal of Honors (got points on it, you know). I am comforted by the fact terrorists will not hijack the plane by lighting up a Bic and threatening to hurl a Medal of Honor like a shuriken. I have got a theory about all of this. The State is a Monster. It just wants to keep growing and growing like the Blob. If the government would do its job you would hardly even notice it was there. When the government goes beyond those minimal functions then it turns into the State. All that hectoring and irritating it does -- for our own good, of course -- is bad enough. But somewhere along the line, it just goes plain nuts. It gets too big and then it gets wacky. It never seems to end. And just how big can it get before collapsing? If it does, that means taking us with it. We are not going to have jackboots in America. We are going to have Mommy, meddling, suffocating, irritating, enraging, always petty, always there, everywhere

Link here.


The central thesis of this article is that the ability to raise taxes has always been dependant upon taxing authorities having access to information about the affairs of their taxpayers and that recent developments in extracting information from tax havens has put taxing authorities in an unprecedentedly strong position to successfully tax cross-border transactions. I will trace a short history of tax havens, demonstrate how they have operated in the modern era with such effect and describe the response of the developed nations to what they saw as a serious threat to their revenue base. Finally, I will look at the result of these developments and what it means for cross-border tax planning going forward.

Words like “know your client” and “source of funds” are the catch phrases of modern international banking. Opening a bank account in Hong Kong in the name of a British Virgin Islands company is a near impossibility particularly if the shareholders and directors are not in Hong Kong. If the company is owned by a trust, it is a double nightmare. If you want your company to send money to another company, you may have to tell the bank why. If your company receives in its bank account substantial sums of money or even regular payments, you may need to tell the bank what the money’s for and exactly where it came from. If the bank is suspicious about the transaction, i.e., if they form a reasonable suspicion that the money they are dealing with is somehow linked to, say, tax evasion, they are in most places duty-bound to report the transaction to their local agency and the bank officer commits a criminal offence if they tell you that they have made a report.

The tax collectors are in the best position they have been in for a long time, possibly since Ancient Roman times. They have never had so much access to so much information and information is power in the hands of the tax collectors just as it is with anyone else. This means that cheating on taxes is more dangerous than ever and it means that legitimate tax planning requires more care than ever. But the good news is that in the cross-border context in particular, there is still lots that can be lawfully done to achieve what most people consider to be an acceptable rate of tax. Zero tax is often, but not always, an overly ambitious goal these days.

The careful use of corporate vehicles, trusts and partnerships still allows for significant and entirely legitimate reduction in exposure to income, capital gains and inheritance taxes. The use of life insurance and retirement schemes is becoming increasingly popular in shielding income from tax in high tax countries whilst at the same time allowing for tax efficient inter-generational wealth transfers. The old approach of meeting tax circumstance with guile is finished; the smart money now meets tax circumstance with strategy.

Link here.


Britain’s highest court ruled that the British government cannot indefinitely detain foreigners suspected of terrorism without charging or trying them, and called the process a violation of European human rights laws. A specially convened panel of judges in the Law Lords ruled 8 to 1 in favor of nine foreign, Muslim men who have been in detention, most of them in Belmarsh Prison in London, for as long as three years. The prison has been called “Britain’s Guantanamo” by human rights groups.

In its powerfully worded decision, the court said that the government’s “draconian” measures unjustly discriminate against foreigners since they do not apply to British citizens and constitute a lopsided response to the threat of a terrorist attack. The judges deemed it a clear violation of the European Convention on Human Rights, a declaration that complicates the British government’s strategy on combating terrorism. The ruling by the Law Lords, a panel of senior judges who sit in the House of Lords and act as the country’s highest court, parallels a June decision by the United States Supreme Court that said “a state of war is not a blank check for the president.”

Using the sharpest language of the nine judges, Lord Leonard Hoffman, said the case was one of the most important decided by the court in recent years. He went on to say that the government’s actions posed a greater threat to the nation than terrorism. “The real threat to the life of the nation, in the sense of a people living in accordance with its traditional laws and political values, comes not from terrorism but from laws such as these,” Lord Hoffman wrote. “That is the true measure of what terrorism may achieve,” he added. “It is for parliament to decide whether to give the terrorists such a victory.”

The ground-breaking decision removes one of the government’s crucial anti-terrorism tools and muddles its ability to deal with suspected foreign terrorists. It also forces Prime Minister Tony Blair, his cabinet and the Parliament to either modify the law, or release the men and do away with the law altogether. The law must be renewed next year and is scheduled to expire in 2006. Until the government makes that decision, the detainees will remain in prison. Human rights groups said the law made a mockery of democracy. It also infuriated the Muslim community, since it appeared to be aimed only at Muslims.

Links here and here.


For the local poor people, the Dominican Republic is a country of queues. In every sizable town we passed through, people were waiting in lines, holding propane tanks in the hopes they would be one of the lucky few who would have them filled that day. It seems the Dominican government had neglected to pay the Venezuelan government for the gas the latter country has been selling them. No gas, no cooking. If you are a person of some means, of course, you never wait in line. The propane man comes to your home regularly and fills your tanks, no problem. This disparity between rich and poor is typical throughout Latin America. It is something each new governmental administration promises to address, but they never seem to get far.

So why do I, and so many foreigners who live in the DR, believe in the future of this country? Despite its recent economic ups and downs (more about that in a minute), there are signs that the country’s middle class is growing. I met many local people, well educated and articulate, who are working as secretaries, salespeople, tour guides, drivers, and employees for companies large and small. Most work in tourism-related fields as that industry is the country’s biggest source of revenue. These people love their country, believe in its future, and are champions of the less fortunate. They see progress and opportunity around every corner.

In 2000, the Dominican economy captured the attention of the international community and was acclaimed as having the fastest-growing economy in all of Latin America and the Caribbean. From 1996 to 2000, the president of the DR was Leonel Fernandez. During his time in office, the economy grew by over 7% a year, led by tourism and duty-free assembly plants, making clothes, and other goods for the U.S. In 2002 and 2003, under the new leadership of left of center President Hipólito Mejía, things turned sour. A banking crisis put the economy into a tailspin. Inflation has been pushed to 35%. Electricity blackouts, frequent enough in the DR, occur even more often now.

President Mejía responded by imposing a 5% tax on exports and tourism, a 2% import surcharge, and a tax on financial transactions. But receipts have been lower than expected since businessmen are reluctant to pay more taxes as long as the government fails to cut its spending. Two months ago, Leonel Fernandez was reelected as president. One of the major reasons for his victory was that while he was president from 1996 to 2000, the country prospered. Mr. Fernandez promises to tidy up government finances.

The economy already looks like it will recover -- although it is still struggling with political and economic issues. Protests and riots still erupt with volatility at times -- most often in Santo Domingo, the capital. But in tourist areas, including the tranquil Caribbean-kissed shores of La Romana and Punta Cana, and along the northern shore from Puerto Plata to Sosúa and Cabarete, all is peaceful. No one wants to jeopardize tourism, the country’s top source of revenue. Most accommodations are all-inclusive resorts and are among the least expensive in Latin America and the Caribbean, making this island truly a bargain destination.

Link here.


The year 2005 is now less than two weeks away. It might be the year what is left of Constitutional government in America faces its greatest test yet. The specific day most likely to live in infamy in 2004 was December 7. That was the day our ex-Trotskyite controlled Congress passed the so-called National Intelligence Reform Act of 2004 (S.2845) -- also called the Intelligence Reform and Terrorism Prevention Act of 2004 -- another of those multi-thousand page tomes all but unread by the vast majority of those who signed it. The Intelligence Reform bill was put together ostensibly in response to recommendations by the 9/11 Commission. One thing we can be sure of: this horrid bill contains things those in power have wanted for years, the things Claire Wolfe once called “land mine legislation”, some of which were beaten back by public outrage in the pre-9/11 world. A de facto national ID card, for example.

That is right. The National Intelligence Reform Act orders the Department of Homeland Security to begin issuing “uniformity regulations” requiring that all driver’s licenses and birth certificates meet certain federalized standards, along with biometrics for “security” purposes. The provisions can be found in subsections 7212 and 7211 of the bill respectively. States will be ordered to include personal information about every individual, and this information will be used to build a huge federal database -- giving unelected federal bureaucrats access to your information. What is left of your privacy will become a thing of the past in 2005. The bill directs the Department of Homeland Security to establish separate standards for national ID used to board airplanes. It is just possible that as a result of this legislation, the feds will see themselves as having a green light to begin setting up road block check points. Below we will encounter reason to believe an “internal passport” to travel freely in this country is in the works. If this runaway train is not stopped, be prepared to have to “show your papers”, just like the cannon fodder that populated the former Soviet Union and Nazi Germany.

The only sensible measures in the bill were the ones that were dropped. These were measures that blocked states from issuing driver’s licenses to illegal aliens and limited appeals for illegal immigrants facing deportation. I have long believed that our porous borders are a recipe for disaster on multiple fronts. I will wager money that if another terrorist attack occurs on American soil, we will be able to trace the perpetrators’ movements back to our Southern border. The basis for questioning the sincerity of our political class in wanting to protect the American public from terrorism is actually quite solid.

The National Intelligence Reform Act is not specific in what it is requiring Homeland Security to do. So we do have some wiggle room, and it is at least conceivable that a massive outcry might yet thwart our headlong rush into Sovietization. This places a large onus on the American public. Unless you want your children to look back on 2005 as the year the “old America” simply ceased to exist.

Link here.


Tomatoes, lettuce, corn, broccoli, onions, squash, basil, oregano --- these are just some of the vegetables and aromatic herbs being grown chemical-free on small plots of land at Montes de Oro in the Aranjuez River Basin of Costa Rica’s Central Pacific region. Here, Leonel Sibaja, an agro-conservationist, has succeeded in transforming his unproductive field into a plot of fresh, fertile land, brimming with colors, smells, and tastes all which provide his family’s sustenance. Leonel’s family, along with another 52 campesino families, have benefited from the introduction of new conservation techniques promoted by the Aranjuez Agro-ecological Association.

This initiative is sponsored by the Worldwide Fund for Nature (WWF) and the Kenco coffee firm, founded in 1923 by a group of coffee growers and now one of the UK’s leading coffee brands. For the past four years, farmers, teachers, students, and housewives have all benefited from this project to promote sustainable production techniques in an area of some 605,600 acres (940 square miles) in the middle and upper basin of the Aranjuez River, which drains into the Gulf of Nicoya on Costa Rica’s Pacific coast. Historically, this area has been long affected by soil erosion, water pollution, monoculture, unemployment, and land under-use and over-use. The project, which has benefited some 3,000 people, has brought about a change in local attitudes and in their relationship with the countryside.

“I was a beginner, I didn’t know where to start, but they gave me a hand and now I have one of the most exemplary farms in this area,” explained William Cubero, who is very proud of how he has transformed a site that was totally degraded by cattle ranching into a fertile organic coffee farm. Now, coffee, often referred to as “green gold”, grows prolifically thanks to practices such as shade manipulation and spring water harnessing, as well as using windbreaks and hillside ditches to help filter the water and control excess runoff. But the success of William Cubero’s harvest does not only lie in the application of these techniques. Like other local farmers, Cubero displays modesty, enthusiasm, and drive, combined with a clear vision of the need to conserve the beauty of the natural landscape.

Link here.


In October, the Maryland U.S. District Court handed corporate taxpayers a victory when Judge William Quarles ruled against the IRS in a case involving a Black & Decker Corp. tax shelter. In essence, the court ruled that a tax shelter can be valid if it has “economic substance” even when the company’s sole motivation for entering the transaction is tax avoidance. The decision seemed to stun everyone except the B&D lawyers who had argued for it, as it shot down one of the IRS’s favorite arguments: Transactions solely motivated by tax avoidance lack economic substance and therefore must be discounted on the basis that they are “shams”.

The precise details of the B&D transaction might affect only certain companies. In 1999, the year after B&D used the tax strategy, Congress in effect shut down the shelter. But the court’s “novel views” with regard to the issue of economic substance as a gauge of a valid tax shelter will have “huge implications” for corporations in the future, noted Robert Willens, a tax specialist with Lehman Brothers Inc.

Historically, courts have used a two-pronged test based on the 1985 Rice’s Toyota v. Commissioner decision to determine whether such transactions are shams. One part of the test requires that arrangements have a non-tax-related business purpose. The other requires that they have economic substance. Courts have defined “economic substance” as a material economic effect on the parties involved in the transaction. (In Maryland’s fourth U.S. district, where the case was decided, the definition hinges on the “reasonable possibility of profit,” according to the judge’s decision.)

Many jurisdictions have held that a transaction has to clear both test hurdles to get a tax break. Quarles and other judges, however, have opined that passing either prong of the test is enough to sanction the transaction as valid for tax purposes, rather than deeming it a sham. “It might not be right in light of past cases, but [the Maryland U.S. District] court read Rice’s Toyota to mean that a transaction had to fail both prongs of the test” to be considered a sham, according to Christopher Rizek, a tax attorney with Caplin and Drysdale.

Link here.


While enjoying Christmas, good food and drink with family and friends in the warmth and comfort of your home, take a moment to remember the falsely imprisoned. Think about how your own family would handle the grief, because wrongful imprisonment can happen to you. In a just published book, Thinking About Crime, Michael Tonry, a distinguished American law professor and director of Cambridge University’s Institute of Criminology, reports that the U.S. has the highest percentage of its population in prison of any country on earth. The U.S. incarceration rate is as much as 12 times higher than that of European countries.

Unless you believe that Americans are more criminally inclined than other humans, what can explain the US incarceration rate being so far outside the international mainstream? I can think of the following reasons: In order to prove that they are “tough on crime” politicians have criminalized behavior that is legal elsewhere, and many innocent Americans are in jail. There is enormous evidence backing up both reasons. America’s privatized prisons have to be fed with inmates in order to maintain their profitability. Prosecutors need high conviction rates to justify their budgets and to build their careers. Taken together these two facts create powerful incentives to put people away regardless of crime, innocence or guilt.

Government routinely breaks the laws. So says Judge Andrew P. Napolitano in the current issue of Cato Policy Report and in his book, Constitutional Chaos: What Happens When the Government Breaks Its Own Laws. Judge Napolitano reports on cases of torture, psychological abuse, and frame-ups of innocents that he discovered as the presiding judge. Any American naïve enough to trust the police and prosecutors should read what Napolitano has to say. Torture has become routine in American prisons. The goal of the torturers is guilty pleas and false testimony against innocent defendants. The torturers succeed. Napolitano reports that “fewer than 3 percent of federal indictments were tried; virtually all the rest of those charged pled guilty.” Does anyone seriously believe that the police are so efficient that 97 out of 100 people indicted are guilty?!

The cherished code, “you are innocent until proven guilty”, no longer holds in America. You are guilty when charged. You will be tortured or abused and threatened with more charges until you agree to a plea bargain. The U.S. criminal justice system is bereft of justice and accountability In America, criminal “justice” operates like a Stalin-era street sweep in which hapless citizens instantly became “enemies of the people” simply by being arrested.

Link here.


The world is getting smaller. The Internet, cheap transportation, the spread of free and open markets, and surging education of the masses are steadily eroding the last vestiges of economic autarchy. This increased integration presents a fundamental practical challenge to the sovereignty of nations. Policies that are possible in an isolated island state can be impossible in our new and mostly democratic world of nomadic capitalists. This metamorphosis has created heightened demand for international cooperation, a demand that has been the midwife to the birth of organizations that are rapidly becoming a haphazard world government.

At the birth of the United States, Alexander Hamilton wondered whether men “are forever destined to depend for their political constitutions on accident and force.” Today, it is not reason, but accident and force that are carving the contours of the global political environment. The feckless and corrupt actions of the United Nations in recent years provide a case study in how harmful attempts at world government can be when they go wrong. It is necessary that citizens and leaders of the U.S. develop a theory of international cooperation that can provide a guide to future global associations. This theory must address several specific questions. What areas of human endeavor are likely to require international cooperation in order to enable efficient outcomes? What types of international organizations should the U.S. join, and when should it be willing to partially cede its sovereignty to such bodies?

Two strands of economic research provide a natural starting point for this discussion. First, the public choice literature has examined extensively which services should be offered by local governments and which should be offered by national ones. The extension to world governments is straightforward. Second, specialists in industrial organization have developed a quite broad understanding of the functioning of cartels. Coalitions of countries often face the same challenges that coalitions of firms do. A synthesis of these two literatures provides a valuable guide to the problem of world government.

An international body with a wide agenda and authority will inevitably be a tempting takeover target for countries with welfare and regulatory states that are so large that they could not prosper under global competition. The best defense against such an outcome is to spread the global authority as thinly as possible. Absent rational design in our global government, we may stumble into a world that poorly provides valuable international public goods because the global agencies pursue both worthy and questionable objectives. As the world becomes smaller, the promise of competition rises, as does the threat of government cartels.

Link here.


A UBS bank executive once deliberately gave bad service to a client in South America, mailing him incorrect statements and refusing his phone calls in the hope he would close his account. The Swiss bank had discovered the client ran an illegal business and feared direct confrontation would give him a chance to cover his tracks. It kept up the atrocious service for six months. “In the end, he was so annoyed, he moved his account to one of our competitor banks. Ten minutes after he moved it, I called up the anti-money laundering man just to let him know,” said John Cusack, Zurich-based managing director of group compliance at UBS.

Banks face fines and jail for officials if they are found to have done too little to stop money laundering or financing of militant groups. They are now developing elaborate screening systems to check on clients, and on their employees. Some banks such as J.P. Morgan Chase Bank have established elaborate systems for screening. Others are fast putting them into place, and industry minds have been further concentrated by the embarrassing experience of the world’s largest financial services firm, Citigroup. In September, Japanese regulators revoked Citigroup’s private banking licence, citing manipulative sales and lending practices, and lax controls against money-laundering. The bank fired three top New York executives over the scandal, including vice chairman Deryck Maughan.

J.P. Morgan Chase has a global team that screens the background of its 200,000 employees worldwide, and performs a similar audit on vendors and business partners. Every month the team trawls through the biographical data of hundreds of people, their spouses and business partners, checks litigation records, bankruptcy filings, criminal records, media reports, regulatory filings and other human resource databases. “It is very important in this day and age to know exactly who’s working for you, working with you or doing business with you,” said Singapore-based Tim McNulty, head of a 30-member Asia-Pacific Global Corporate Security team at J.P. Morgan.

Link here.


A prime piece of evidence linking human activity to climate change turns out to be a product of poor mathematics, says Richard Muller, physics professor at the University of California, Berkeley, where he teaches a course called “Physics for Future Presidents”. Progress in science is sometimes made by great discoveries. But science also advances when we learn that something we believed to be true is not. When solving a jigsaw puzzle, the solution can sometimes be stymied by the fact that a wrong piece has been wedged in a key place.

In the scientific and political debate over global warming, the latest wrong piece may be the “hockey-stick”, the famous plot, published by University of Massachusetts geoscientist Michael Mann and colleagues. This plot purports to show that we are now experiencing the warmest climate in a millennium, and that the earth, after remaining cool for centuries during the medieval era, suddenly began to heat up about 100 years ago -- just at the time that the burning of coal and oil led to an increase in atmospheric levels of carbon dioxide.

Unfortunately, discussion of this plot has been so polluted by political and activist frenzy that it is hard to dig into it to reach the science. But now a shock: Canadian scientists Stephen McIntyre and Ross McKitrick have uncovered a fundamental mathematical flaw in the computer program that was used to produce the hockey-stick. In his original publications of the stick, Mann purported to use a standard method known as principal component analysis, or PCA, to find the dominant features in a set of more than 70 different climate records. McIntyre and McKitrick obtained part of the program that Mann used, and they found serious problems. Not only does the program not do conventional PCA, but it handles data normalisation in a way that can only be described as mistaken. Now comes the real shocker. This improper normalization procedure tends to emphasise any data that do have the hockey-stick shape, and to suppress all data that do not.

McIntyre and McKitrick first submitted a critique of Michael Mann’s study to Nature, the monthly scientific magazine, in January this year. After extensive discussion, last March, Nature asked them to revise it from its original length of 1,900 words down to 800 words. This was resubmitted on April 9. They did not hear back from Nature, but when they inquired about delays in publication, were told that Nature had not heard back from its reviewers. On August 4, Nature advised that their shortened submission would not be published. The main reason was that the issues raised were “too technical” to resolve in the now 500-word space available. The authors commented, “Readers may share our surprise that the matters raised are ‘too technical’ for consideration in a science journal.”

Link here.


At the heart of the Christmas story rests some important lessons concerning free enterprise, government, and the role of wealth in society. Let us begin with one of the most famous phrases, “There’s no room at the inn.” This phrase is often invoked as if it were a cruel and heartless dismissal of the tired travelers Joseph and Mary. Many renditions of the story conjure up images of the couple going from inn to inn only to have the owner barking at them to go away and slamming the door.

In fact, the inns were full to overflowing in the entire Holy Land because of the Roman emperor’s decree that everyone be counted and taxed. Inns are private businesses, and customers are their lifeblood. There would have been no reason to turn away this man of aristocratic lineage and his beautiful, expecting bride. In any case, the second chapter of St. Luke does not say that they were continually rejected at place after place. It tells of the charity of a single inn owner, perhaps the first person they encountered, who, after all, was a businessman. His inn was full, but he offered them what he had: the stable. There is no mention that the innkeeper charged the couple even one copper coin, though given his rights as a property owner, he certainly could have.

It is remarkable, then, to think that when the Word was made flesh with the birth of Jesus, it was through the intercessory work of a private businessman. Without his assistance, the story would have been very different indeed. People complain about the “commercialization” of Christmas, but clearly commerce was there from the beginning, playing an essential and laudable role. And yet we do not even know the innkeeper’s name. In two thousand years of celebrating Christmas, tributes today to the owner of the inn are absent. Such is the fate of the merchant throughout all history: doing well, doing good, and forgotten for his service to humanity.

It was because of a government decree that Mary and Joseph, and so many others like them, were traveling in the first place. They had to be uprooted for fear of the emperor’s census workers and tax collectors. And consider the costs of slogging all the way “from Galilee, out of the city of Nazareth, into Judea, unto the city of David,” not to speak of the opportunity costs Joseph endured having to leave his own business. Thus we have another lesson: government’s use of coercive dictates distorts the market.

Moving on in the story, we come to Three Kings, also called Wise Men. Talk about a historical anomaly for both to go together! Most Kings behaved like the Roman Emperor’s local enforcer, Herod. Not only did he order people to leave their homes and foot the bill for travel so that they could be taxed. Herod was also a liar: he told the Wise Men that he wanted to find Jesus so that he could “come and adore Him.” In fact, Herod wanted to kill Him. Hence, another lesson: you cannot trust a political hack to tell the truth.

Link here.


Since the September 11 attacks, real (inflation-adjusted) spending on defense has increased 23%, even when excluding the whopping $250 billion bill for the wars in Afghanistan and Iraq from the count. Even without those supplemental expenditures, the U.S. budget for national defense is an eye-popping $421 billion for fiscal year 2005, according to Chris Hellman of the Center for Arms Control and Non-proliferation. Many taxpayers assume that the ballooning budgets mean greater security, but the facts tell a different story.

Most conservatives often wrongly assume that the military and other security agencies spend money more effectively than governmental departments that administer social services. Unfortunately, the same incentives operate when the government manufactures guns as they do when it provides butter. For instance, although food stamp and public housing programs are ostensibly designed to benefit the poor, the biggest recipients of their welfare are probably the respective large agricultural corporations and housing contractors that profit from them. Similarly, most of the recent defense budget increases have little to do with fighting terrorists and more to do with providing welfare for politically connected defense contractors. These weapons makers, with the help of their congressional representatives, have cashed in on the post-9/11 climate of fear that has gripped the nation.

Congressional representatives know that highly organized recipients of government largesse will vote and contribute to political campaigns more than the dispersed, unorganized payers of the bill. So government programs -- whatever their nature -- essentially transfer wealth from the less politically connected to the more politically powerful. Many conservatives agree with such “public choice” analyses on domestic programs but naively believe that all government spending on defense is for legitimate purposes of national security. This is hardly the case. The defense budget is rife with weapon systems that are unneeded, perform poorly, or were designed to fight the now defunct Soviet Union.

The average taxpayer -- whether a hawk, a dove, or somewhere in between -- should ask how these white elephants are contributing to countering the main threat—al Qaeda. They do not. They merely provide welfare for constituent industries and unions that are far from poor. In fact, buying these unneeded systems takes money away from less glamorous, but more urgent, security needs-for example, armor for personnel and vehicles. Merely throwing wads of cash at the politicized security bureaucracies does not ensure that the troops or the nation is protected.

Link here.


An old saying claims that the rich get richer. But recent advances in online investing now allow people of modest means to tap into investment options traditionally reserved for the wealthy. Separately managed accounts -- customized portfolios based on models by one or more managers -- are hot investment vehicles with a Rolls Royce connotation. Their minimum investment runs from a hundred grand to half a million, with hefty fees paid to the investment adviser and managers. Less affluent investors have watched this luxury ride wistfully, from a distance. Now they can bum a ride. Foliofn, a company that sped the automation of portfolio management, is forming alliances to offer consumer products with the benefits of separately managed accounts. Unlike mutual funds, the underlying assets allocated in SMA models are owned by the individual investor. The investor can decide to refuse a manager’s buys and sells, adjusting as desired for personal tax strategies or feelings about particular companies.

Foliofn began as an online service empowering individuals to, for all practical purposes, run their own private mutual fund by filling a “basket” with up to 50 stocks or other securities. Investors can go online to rebalance the basket, buying and selling stocks without paying commissions, only a monthly or annual membership fee. Current annual fees are $200 for one basket, $100 for additional ones. Folio has no account minimums and allows fractional share ownership, so investors can trade in exact dollar amounts. Prices are kept low in part because Folio’s technology allows it to first try to match up buys and sells in-house, between member investors, reducing the share price bid-ask spread.

Investors can make up to 200 no-commission trades per month per basket; trades are executed at the close of two daily windows. Trades executed at other times, or exceeding the 200 maximum, cost extra. Entire baskets can be rebalanced or traded in entirety with a click. Those wanting to try their hand running their own fund can create folios from scratch or can begin with one of Folio’s 75 “ready-to-go” baskets. They include the conventional, like the best or worst 30 stocks of the prior year, and sectors such as technology, software, internet, biotech or aerospace companies with the largest market capitalizations. One basket picks companies that manufacture golf equipment and manage golf courses. Social issues, such as tobacco-free, environmentally responsible or labor-friendly criteria, underpin some baskets.

Among available research features is market information compiled by Zacks Investment Research. All dividends and short- and long-term capital gains and losses are tracked and can be downloaded into tax software. The company sees SMAs as the next logical move, and recently allied with TheStreet.com’s Jim Cramer, a former hedge fund manager. For an additional $30 a month, investors get online “action alerts” allowing them to follow any stock and cash allocation changes Cramer is making on his “Plus” investments portfolio, which usually carries around 20 stocks. But Folio is careful to offer no recommendations on tax strategies or securities selections.

Link here.


The U.N.-ordered probe into oil-for-food corruption is being seriously hampered by an elaborate system of ghost firms set up around the world to cover the tracks of bribes to Saddam Hussein as he cheated the $60 billion program, a top investigator said. Some front companies in this global oil trading center and elsewhere that dealt with Saddam have been liquidated or have hidden ownership, complicating the search for evidence of financial improprieties, said Swiss criminal lawyer Mark Pieth -- one of three commission members leading the probe headed by former U.S. Federal Reserve chairman Paul Volcker.

Major oil trading companies and individuals -- from American businessmen to French, Chinese and Russian politicians -- are suspected of benefiting from lucrative Iraqi oil contracts that involved kickbacks, according to the independent panel’s initial findings. Those who profited may have hid behind a web of fiction by making transactions through ghost firms that exist mostly on paper, said Pieth.

Despite the thin trail, Pieth said he was confident investigators would ultimately trace the funds back to those who may have made illicit profits -- or allowed Saddam and his regime to profit illegally -- during the oil-for-food program, which existed from 1996 until 2003. “It is a problem. Yes, of course it is, but on the other hand we also have means of finding the beneficial owners,” Pieth said. “There is usually a file, if the banks have done their job.” Pieth said national authorities and banks in Switzerland and other nations where front companies handled oil-for-food deals should have their own records of who was behind the firms.

Link here.


Modern cartoons, the ones I used to watch on Saturday morning, just plain stink, with the exception of Spongebob Squarepants. But I still watch those old Warner Brother’s Merrie Melodies and Looney Toons, those exuberant and wonderful ones created by that genius, Chuck Jones. Thank God for modern technology and DVDs. They are why I can tell modern cartoons to go away, get lost, I do not have any use for you.

My view is that all good artists are basically anarchists, or conservatives in the true sense, or a combination of both. It is the bad artists (if you can call them artists), like Karl Marx and Adolph Hitler, who are the socialists. I sometimes wonder if the fact they were frustrated artists was not part of their problems, and therefore ours. Marx wanted to be a poet, and Hitler an architect. Neither had enough talent. These bad artists are the main reason Saturday morning cartoons are so crummy: they are socialist and boring, especially when they are about Evil Capitalists Polluting the Planet, for example. It is bad art in the service of bad political science.

Those Merrie Melodies and Looney Toons ... now those are wild, jubilant, anarchistic stories! They are the best cartoons ever made. There is nothing in any of them about the wonders of the State and how it can take care of you from cradle to grave. Any of the characters who appear to have even a vague resemblance to a politician is treated as a buffoon, like Foghorn Leghorn, or insane, like Marvin the Martian. One of the things, among many, that impresses me about these cartoons is that there really are no purely evil villains in them, be it Yosemite Sam or the Tasmanian Devil or Marvin. They might be more nuts than sane, even if they appear sane (like Marvin), they might even be frothing-at-the-mouth lunatics (like Sam or the Devil) but none of them are pure evil, which is how people are in real life, even if we like to comfort ourselves with such simplistic views.

There are no real heroes, either. Bugs Bunny is a perfect example of perhaps the oldest archetype of all, the Trickster, but he is no Superman or Batman. He is just a smart-aleck rabbit who has to outsmart those stronger or crazier than he is. I find his attitude in dealing with the State to be the best one: it is stronger than any one individual, so you have to outsmart it. Bugs may not exactly be a hero, but you could call him wise. He does not really seem to be afflicted with any of the Seven Deadly Sins -- he does not hate, or rage, or envy, unlike Sam and Taz or Daffy, all of whom seem more than a tad angry, or Marvin, who is a walking example of hubris. As for Bugs, his Trickster archetype would not have lasted for thousands of years if there was not wisdom in it.

Link here.


Thomas Woods’s superb new book has already achieved fame as the first Austrian-inspired book to be on the New York Times bestseller list in many years. It also delivers much more than it promises. Woods offers his book as a guide to “those who find the standard narrative or the typical textbook unpersuasive or ideologically biased”. This suggests that Woods has principally students in mind as his audience, but many others will benefit from reading the book. Woods displays a remarkably broad knowledge of the latest specialized research on various episodes of American history. This permits him, again and again, to raise illuminating points that will instruct even knowledgeable readers.

The book is no mere compilation of surprising facts. Woods has rather organized his account around a central theme. Americans have, from the colonial period to the present, flourished so long as they lived in a free economy, accompanied by a government strictly limited in powers. But throughout much of our history, the efforts of Americans to live freely have confronted a formidable enemy: the Leviathan state. Woods shows that the federal government, far from being the protector of the rights of minorities, has been the main obstacle on the path to liberty. But, one might object to this account, was not the American settlement conceived in sin? How can one say that Americans always sought to live freely when the earliest Puritan settlers began their “free” society by theft of Indian lands?

Woods meets this initial challenge head on. The Puritans did not steal from the Indians. They bought land from various tribes, in willing and beneficial exchange. “[W]hile the king had issued colonial land grants, the Puritan consensus ... was that the king’s charter conferred political and not property rights to the land, which Puritan settlers sought by means of voluntary cession from the Indians. The colonial government actually punished individuals who made unauthorized acquisitions of Indian lands” (p. 8). This is one of the many myths today passing for American history that his stimulating book helps to correct.

Link here.


Year’s end is the time for big thoughts, so here are mine. The most significant socio-political shift in our time has gone almost completely unremarked, and even unnoticed. It is the dramatic shift of the red-state bourgeoisie from leave-us-alone libertarianism, manifested in the Congressional elections of 1994, to almost totalitarian statist nationalism. Whereas the conservative middle class once cheered the circumscribing of the federal government, it now celebrates power and adores the central state, particularly its military wing. This huge shift has not been noticed among mainstream punditry, and hence there have been few attempts to explain it -- much less have libertarians thought much about what it implies. My own take is this: the Republican takeover of the presidency combined with an unrelenting state of war, has supplied all the levers necessary to convert a burgeoning libertarian movement into a statist one.

The remaining ideological justification was left to, and accomplished by, Washington’s kept think tanks, who have approved the turn at every crucial step. What this implies for libertarians is a crying need to draw a clear separation between what we believe and what conservatives believe. It also requires that we face the reality of the current threat forthrightly by extending more rhetorical tolerance leftward and less rightward.

The 1994 revolution failed of course, in part because the anti-government opposition was intimidated into silence by the Oklahoma City bombing of April 1995. The establishment somehow managed to pin the violent act of an ex-military man on the right-wing libertarianism of the American bourgeoisie. It was said by every important public official at that time that to be anti-government was to give aid and support to militias, secessionists, and other domestic terrorists. It was a classic intimidation campaign but, combined with a GOP leadership that never had any intention to change DC, it worked to shut down the opposition. In the last years of the 1990s, the GOP-voting middle class refocused its anger away from government and leviathan and toward the person of Bill Clinton, culminating in a pathetic and pretentious campaign to impeach him.

This event crystallized the partisanship of the bourgeoisie, driving home the message that the real problem was Clinton and not government; the immorality of the chief executive, not his power; the libertinism of the left-liberals and not their views toward government. The much heralded “leave us alone” coalition had been thoroughly transformed in a pure anti-Clinton movement. The right in this country began to define itself not as pro-freedom, as it had in 1994, but simply as anti-leftist, as it does today. There are many good reasons to be anti-leftist, but let us revisit what Mises said in 1956 concerning the anti-socialists of his day. He pointed out that many of these people had a purely negative agenda, to crush the leftists and their bohemian ways and their intellectual pretension. He warned that this is not a program for freedom. It was a program of hatred that can only degenerate into statism.

A positive agenda of liberty is the only way we might have been spared the blizzard of government controls that were fastened on this country after Bush used the events of 9-11 to increase central planning, invade Afghanistan and Iraq, and otherwise bring a form of statism to America that makes Clinton look laissez-faire by comparison. The Bush administration has not only faced no resistance from the bourgeoisie -- it has received cheers. And they are not only cheering Bush’s reelection; they have embraced tyrannical control of society as a means toward accomplishing their anti-leftist ends. After September 11, the very people who once proclaimed hated of government now advocate its use against dissidents of all sorts, especially against those who would dare call for curbs in the totalitarian bureaucracy of the military, or suggest that Bush is something less than infallible in his foreign-policy decisions. The lesson here is that it is always a mistake to advocate government action, for there is no way you can fully anticipate how government will be used. Nor can you ever count on a slice of the population to be moral in its advocacy of the uses of the police power.

If you follow hate-filled sites such as Free Republic, you know that the populist right in this country has been advocating nuclear holocaust and mass bloodshed for more than a year now. The militarism and nationalism dwarfs anything I saw at any point during the Cold War. It celebrates the shedding of blood, and exhibits a maniacal love of the state. The new ideology of the red-state bourgeoisie seems to actually believe that the U.S. is God marching on earth -- not just godlike, but really serving as a proxy for God himself. Along with this goes a kind of worship of the presidency, and a celebration of all things public sector. It longs for the state to throw its weight behind institutions like the two-parent heterosexual family, the Christian charity, the homogeneous community of native-born patriots.

Paul Craig Roberts is right: “Even Christians have fallen into idolatry. There appears to be a large number of Americans who are prepared to kill anyone for George Bush.” And, “Like Brownshirts, the new conservatives take personally any criticism of their leader and his policies. To be a critic is to be an enemy.” In short, what we have alive in the U.S. is an updated and Americanized fascism. Why fascist? Because it is not leftist in the sense of egalitarian or redistributionist. It sees the state as the central organizing principle of society, views public institutions as the most essential means by which all these institutions are protected and advanced, and adores the head of state as a godlike figure who knows better than anyone else what the country and world’s needs, and has a special connection to the Creator that permits him to discern the best means to bring it about.

The American right today has managed to be solidly anti-leftist while adopting an ideology -- even without knowing it or being entirely conscious of the change -- that is also frighteningly anti-liberty. This reality turns out to be very difficult for libertarians to understand or accept. For a long time, we have tended to see the primary threat to liberty as coming from the left. But we must also remember that the sweep of history shows that there are two main dangers to liberty, one that comes from the left and the other that comes from the right. Europe and Latin America have long faced the latter threat, but its reality is only now hitting us fully.

What is the most pressing and urgent threat to freedom that we face in our time? It is not from the left. If anything, the left has been solid on civil liberties and has been crucial in drawing attention to the lies and abuses of the Bush administration. No, today, the clear and present danger to freedom comes from the right side of the ideological spectrum, those people who are pleased to preserve most of free enterprise but favor top-down management of society, culture, family, and school, and seek to use a messianic and belligerent nationalism to impose their vision of politics on the world. There is no need to advance the view that the enemy of my enemy is my friend. However, it is time to recognize that the left today does represent a counterweight to the right, just as it did in the 1950s when the right began to adopt anti-communist militarism as its credo.

“Right wing” sentiments from 10 years ago are today regarded by the right as treasonous. What should this teach us? It shows that those who saw the interests of liberty as being well served by the politicized proxies of free enterprise alone, family alone, Christianity alone, law and order alone, were profoundly mistaken. There is no proxy for liberty, no cause that serves as a viable substitute, and no movement by any name whose success can yield freedom in our time other than the movement of freedom itself. We need to embrace liberty and liberty only, and not be fooled by groups or parties or movements that only desire a temporary liberty to advance their pet interests.

There has never in my lifetime been a more urgent need for the party of liberty to completely secede from conventional thought and established institutions, especially those associated with all aspects of government, and undertake radical intellectual action on behalf of a third way that rejects the socialism of the left and the fascism of the right. Indeed, the current times can be seen as a training period for all true friends of liberty. We need to learn to recognize the many different guises in which tyranny appears. Power is protean because it must suppress that impulse toward liberty that exists in the hearts of all people. The impulse is there, tacitly waiting for the consciousness to dawn. When it does, power does not stand a chance.

Link here.
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