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AMERICA DRIFTS RAPIDLY TOWARD A POLICE STATE
Did you know that under the terms of the new Patriot Act prosecutors will be able to seek the death penalty in cases where “defendants gave financial support to umbrella organizations without realizing that some of its adherents might eventually commit violence”? So, if someone unknowingly gave money to a charity that was connected to a terrorist group, he could be executed. Or, that the Senate Intelligence Committee is fine-tuning the details of a bill that will allow the FBI to secretly procure any of your personal records without “probable cause” or a court order giving them “unchecked authority to pry into personal and business matters”? Or, that on June 29, President Bush put “a broad swath of the FBI” under his direct control by creating the National Security Service (aka the “New SS”)? This is the first time we have had a “secret police” in our 200 year history. It will be run exclusively by the president and beyond the range of congressional oversight.
The American people have no idea of the amount of energy that has been devoted to stripping them of their constitutional protections and how stealthily that plan has been carried out. It has required the concerted efforts of the political establishment, the corporate elite, and the collaborative media. For all practical purposes, the government is no longer constrained in its conduct towards its citizens – it can do as it pleases. The campaign to dismantle the Bill of Rights has focused primarily on the key amendments, the 1st, 4th, 5th, 6th, 8th and 14th. These are the cornerstones of American liberty and they encompass everything from due process to equal protection to free speech to a ban on the “cruel and unusual” treatment of prisoners. Freedom has little tangible meaning apart from the safety provided by these amendments.
At present, there is no reason for the administration to assert its new powers. That would only dispel the widely-held illusion of personal freedom. But, the existing climate of “well being” will not last forever. The poisonous effects of war, burgeoning budget deficits, and inflation indicate that darker days lie ahead. The middle class is stretched paper-thin and disaster could be as close as a hike in interest rates. The new repressive legislation anticipates the massive political unrest that naturally follows a tenuous and volatile economic situation. Is this why Congress has rubber stamped so many of the administration’s autocratic laws, or does Bush simply “hate our freedoms”?
America is undergoing its greatest metamorphosis. It has been severed from its constitutional moorings and is drifting towards a police state. Americans still seem blissfully unaware of the fundamental changes to the political system. The cloak of disinformation and diversion has successfully obscured the perils of our present course. The country is slipping inexorably towards the Orwellian nightmare, the National Security State.Link here.
C.S. LEWIS’S DESCENDENT MISSES OUT ON NARNIA FILM MILLIONS
The family of C.S. Lewis will miss out on the lion’s share of the multi-million-pound royalties from films based on his Chronicles of Narnia. The first movie, The Lion, the Witch and the Wardrobe, opens in London next month amid expectation that a cycle of Narnia films will take over from the Lord of the Rings trilogy as the “must see” Christmas movie for years to come. It will also compete with the films of the Harry Potter books. A new biography of Lewis, who died on November 22, 1963, the day of John F. Kennedy’s assassination, claims £50 million has been paid for the film rights. But the money will not go to his surviving relatives. Just as the late JRR Tolkien, Lewis’s friend and fellow Oxford don, surrendered the film rights to his Lord of the Rings books – he received £105,000 to settle a tax bill – Lewis’s two stepsons, David and Douglas Gresham, sold their rights to his estate in the 1970s.
The first Narnia film has been shot in New Zealand – also the backdrop for the Tolkien films – by Andrew Adamson, who directed the Shrek movies, and it is being distributed by Disney. Aslan, the computer-generated lion in the film, is voiced by Liam Neeson. A screen adaptation has already been written for Prince Caspian, the second book in the 7-title Narnia series. If all the books are filmed, they could easily eclipse the £1.6 billion global box office takings of the Rings movies. The initial signs of “Narniamania” include a 40-fold increase in the sale of the book on which the film is based. There are to be 33 books by academics exploring themes such as Lewis’s use of fantasy as an allegory for the struggle between Christianity and evil.
There are few clues to the ultimate destination of the money. The C.S. Lewis estate is run by an Australian accountant living in Ireland and a Swiss lawyer who report to two shareholders – trusts based in the tax havens of Liechtenstein and Jersey –— and send royalties to a company registered in Singapore. Douglas Gresham, 60, is billed as co-producer of the new movie but he is a salaried employee of the C.S. Lewis Company. His brother David, 61, has largely ignored the Lewis legacy. He has converted to Judaism and has traveled widely, studying different languages and cultures.
Michael White, author of the new biography, CS Lewis, said, “Douglas sold his share of the estate so he will not be receiving the vast fortunes you might expect. He must be kicking himself now. “When Lewis died his estate was worth under £38,000. But the estate has sold the film rights for £50 million. It will also get a cut of the profits from lucrative merchandising deals.” Walter Hooper, 74, who was Lewis’s secretary in the last few months of his life and became his literary editor after his death, said at his home in Oxford, “I really don’t know where the money will end up.”Link here.
PAYPAL NAMES NAMES AS IRS CHASES TAX EVADERS
PayPal, the internet money-transfer arm of eBay, will disclose the identity of customers who may be using the service to evade paying U.S. taxes. The IRS is demanding records of customers using Paypal through offshore accounts in all tax havens, including Jersey, Guernsey, Isle of Man, Gibraltar and other UK dependencies. According to the IRS, PayPal’s services have proved very attractive to tax evaders and the problem is growing. Customers can buy goods from eBay and many other shopping websites, pay for them from untaxed income held offshore and get the goods sent to their home address. Tax authorities are also concerned that PayPal can be used to “launder” untaxed money between an individual’s offshore and domestic accounts.
The IRS said, “Because the elements necessary to transfer money require only two email addresses attached to two bank accounts and/or credit or debit cards, PayPal’s structure not only allows persons with monies held in a foreign account to purchase goods and services, it also allows a person with assets secreted in a foreign country to repatriate them to their own domestic bank account without going through traditional banking methods such as a bank-initiated wire transfer.” The IRS is the first domestic tax agency to take action against tax evaders using PayPal.Link here.
ATTACKS ON WEALTHY CREATING AN ECONOMIC BOMB THAT IS TICKING DOWN FASTER
The top-earning 1% of U.S. taxpayers pay one third (34.3%) of all federal individual income taxes collected, while earning only 16.8% of all federally taxable individual income. They are facing frivolous lawsuits in phenomenal numbers, simply because our lax tort laws make them easy targets of opportunity. They are in more danger of government seizure (forfeiture) of their private property than ever before in our history, due in part, to the Patriot Act. The top-earning 1% of U.S. taxpayers are also leaving the USA at the highest rate in history.
An insidious, creeping cancer is eating away at our economy. Not only the Income Tax, but other legislative and regulatory attacks on wealth are forcing many of the people who pay the lion’s share of taxes, to leave the U.S. and because of some of that legislation, they are taking their wealth with them, thus, very disproportionately reducing the tax and investment base in the U.S. The percentages cited above are not some bureaucrat’s pie-in-the-sky projections, but rather, they are totals of actual IRS receipts, that are released every year, about 18 to 24 months after the close of a the tax year.
Since the publication of an earlier version of this article in 2000, more oppressive legislation, aimed squarely at the top-earning 1% has made matters even worse. This is presenting a problem for the top-earning 1%. But, before you start shedding crocodile tears for those poor top income earners, remember that these people are almost all problem solvers. To them, this is only a speed bump. To you and me, it is quite a different issue. You see, it is the wealthy’s legitimate and justified response to the problems being created for them that represents a ticking time bomb presenting an even more serious threat to the remaining 99% of taxpayers. If you make less than $295,495 per year, then that is you.
The wealthy are being systematically backed into a corner by our government. Everything for which they have worked so hard, is now being threatened by the same government, whose job it is to protect citizens from just those types of abuses. Should we then be surprised if the top-earning 1% of taxpayers, facing an untenable situation, take the only legal route left open to them, even if such a response threatens the very fabric of the U.S. economy? I think not. Their response is really quite simple. Since most of those who leave, are seeking privacy, they avoid leaving many trails, but the Census Bureau estimated that in 2003 roughly 370,000 U.S. citizens and permanent residents quietly left the United States permanently.Link here.
THE THEME OF EMPIRE OF DEBT IN A NUTSHELL
Many years ago, when the United States was still a modest republic, American presidents were likewise available to almost anyone who wanted to shoot them. Thomas Jefferson went for a walk down Pennsylvania Avenue, alone, and spoke to anyone who came up to him. John Adams used to swim naked in the Potomac. A woman reporter got him to talk to her by sitting on his clothes and refusing to budge.
But now anyone who wants to see the president must have a background check and pass through a metal detector. The White House staff must approve reporters before they are allowed into press conferences. And when the U.S. head of state travels, he does so in imperial style; he moves around protected by hundreds of praetorian guards, sharpshooters on rooftops, and thousands of local centurions. Today, the president cavalcades around Washington in an armored Cadillac. The limousine is fitted with bullet-proof windows, equally sturdy tires, and a self-contained ventilation system to ward off a biological or chemical attack. The Secret Service employs over 5,000 people: 2,100 special agents, 1,200 Uniformed Division employees, and 1,700 technical and administrative wonks. Everywhere the president goes, his security is handled – by thousands of guards and aides, secure compounds, and carefully orchestrated movements. …
In Empire of Debt: The Rise Of An Epic Financial Crisis, Bill Bonner and Addison Wiggin – the team that brought you the international bestseller Financial Reckoning Day – reunite to provide the first in-depth look at how the American character has shifted to accommodate its new imperial role; how we have abandoned the private virtues of personal liberty, economic freedom, and fiscal restraint; and how the government has gained control of public life and the economy. The result has been, among other horrors, unfettered deficit spending, gluttonous consumption, and fearless military adventurism. All the while, the nation slouches ever more precipitously towards bankruptcy.Link here.
YOU BET YOUR HOUSE: HOME PRICE FUTURES ARE COMING
Worried that the value of your home may fall? You can bet on it. If you do not, maybe your mortgage company will. The Chicago Mercantile Exchange, a financial marketplace dealing in the value of everything from interest rates and foreign currencies to pork bellies, has committed to offer trading next year in a category many consumers take personally: U.S. home prices.
Housing-price futures, based on the median home price in each of 10 U.S. cities, are not being tailored for individual homeowners. But they may provide some protection for mortgage companies, home builders and anyone else with a large stake in residential real estate if housing values slide – while giving other investors a way into a lucrative market. The novel investment product is set to debut in April 2006, based on a final go-ahead given by the Merc earlier this fall after months of exploratory work.
While unusual, it will not be the most exotic contract offered by the world’s largest futures exchange. That distinction has been held for 6 years by weather futures, which are based on regional temperature indexes and enable utilities and others with a lot riding on the weather to hedge their risk. The concept of real estate futures has been discussed since the early 1990s, but it took a boom in housing prices to propel it to reality. Home values appreciated 65% nationwide from 2000 through 2004 and more than doubled in some areas. U.S. residential real estate was valued at $18.6 trillion at the end of last year – more than the amount in stocks. The price run-up has meant a huge increase in wealth. A negative sales forecast from home builder Toll Brothers this week sent stocks falling by fueling fears of an economic slowdown. Recent signs of cooling may have only fueled interest in protecting the market.
Investors will be able to trade contracts electronically based on median home prices in Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco or Washington D.C. – or a composite index of the 10 cities. The indexes were developed by the real estate research firm Fiserv Case Shiller Weiss. Those who are optimistic that prices will continue their double-digit rise can buy contracts, making a profit if the increase exceeds their costs by the expiration date. Investors who want to soften the potential blow of a decline, on the other hand, can buy versions of the contracts called put options that will pay them money if the price drops, ensuring that they recoup some of their lost house profits. That strategy is akin to taking a short position in a stock, according to Felix Carabello, Merc associate director for alternative investments. But “instead of shorting IBM, you’re shorting your house.”Links here and here.
WAKE UP AND SMELL THE FASCISM
Comparisons of Hitler, Mussolini, Franco, Suharto, Pinochet … and Bush yielded this list of 14 “identifying characteristics of fascism.”
1.) Powerful and Continuing Nationalism
2.) Disdain for the Recognition of Human Rights
3.) Identification of Enemies/Scapegoats as a Unifying Cause
4.) Supremacy of the Military
5.) Rampant Sexism
6.) Controlled Mass Media
7.) Obsession with National Security
8.) Religion and Government are Intertwined
9.) Corporate Power is Protected
10.) Labor Power is Suppressed
11.) Disdain for Intellectuals and the Arts
12.) Obsession with Crime and Punishment
13.) Rampant Cronyism and Corruption
14.) Fraudulent Elections
(Links to many related articles are included.)Link here.
PRIVATE BANKERS ARE CRAWLING OUT OF THE WOODWORK TO CATER TO MILLIONAIRES
Last year Capco, a consulting firm headquartered in Belgium, produced a startling report entitled “The Emerging Crisis in U.S. Banking Profitability”, which convincingly argued that the mainstream commercial and individual banking business was about to enter a prolonged dry spell of price competition and compressed profit margins. The report, though, missed one bright spot: banking services for prosperous customers. Merrill Lynch and Capgemini count 8 million people in the world with a net worth in excess of $1 million. That number will grow rapidly as the emerging middle classes of India and China become prosperous and as new wealth is amassed in Latin America, the Middle East and eastern Europe. Their collective net worth of $25 trillion is growing at 6% a year, says Boston Consulting Group. “The banking revenues generated by this very wealthy group of clients comes to over $250 billion a year,” says Clive Bannister, head of HSBC Private Bank. Putting that in perspective, private bankers are generating roughly the same fees as investment bankers.
Scorpio Partnership, a consulting firm in London, studies 120 wealth managers, from Swiss-style private banks to U.S. brokerages like Merrill Lynch. The very rich and their bankers suffered like everyone else in the downturn of 2000 and 2001 but have since resumed their accumulation of assets. Pretax profits at the banks in Scorpio’s universe increased 30% last year, while fee-generating assets under management for affluent individuals increased 13%, to $6 trillion. There are 16 banks each managing over $100 billion in rich people’s assets. New money (net of departures) flowing into Scorpio’s benchmark banks was $42 billion last year – a remarkable 62% jump.
Serving the ultrawealthy is easier said than done. It usually takes two years of cultivating a prospect before the private banker sees a dime. Once the millionaire is hooked, however, a relationship manager might find him a structured derivative for his finances, a boarding school for his teenage son or medical treatment for a brother. He could restructure the customer’s holdings, acquire an apartment for the mistress or go shopping for jewelry with the wife. One prominent American patriarch instructed his private banker in New York to buy a gold hoard and physically store it in Zurich – a hedge against a dirty bomb in the U.S. “Private bankers,” explains Fidelis Goetz, chief executive of Credit Suisse in North Asia, “join a unique circle of trusted people – the priest, the personal physician, the lawyer – surrounding the individual. Sometimes we know more about him than his spouse.”Link here.
AN ENEMY OF THE STATE
According to a printout from a computer controlled by the FBI and the U.S. Department of Justice, I am an enemy of the state. The printout, shown to me recently by a friend who works for Justice, identifies me by a long, multi-digit number, lists my date of birth, place of birth, social security number, and contains more than 100 pages documenting what the Bureau and the Bush Administration consider to be my threats to the security of the USA. It lists where I sent to school, the name and address of the first wife that I had been told was dead but who is alive and well and living in Montana, background information on my current wife and details on my service to my country that I have not even revealed to my wife or my family.
Although the file finds no criminal activity by me or members of my immediate family, it remains open because I am a “person of interest” who has “written and promoted opinions that are contrary to the government of the United States of America.” And it will remain active because the government of the U.S., under the far-reaching provisions of the USA Patriot Act, can compile and retain such information on any American citizen. That act gives the FBI the authority to collect intimate details about anyone, even those not suspected of any wrongdoing.
My file begins on September 11, 2001, the day of the terrorist attacks on New York and Washington. A Marine guard standing post at the Navy Yard in Washington jotted down the license number of my Jeep Wrangler after I was spotted taking pictures of armed guards at the locked-down military facility. That night, I found a card stuffed under my door from Agent John Ryan of the Naval Criminal Investigative Service. I chuckled at the time because the lead character in Tom Clancy’s novels is named John P. Ryan. I called Agent Ryan the next day. He wanted to know what the hell I was doing taking photos of a military facility. I explained that I was a journalist and taking pictures was what I did for a living. I directed him to a web site where he could find some of the photos I shot of the Navy Yard’s side gate on that day. He asked for additional information, including date of birth and social security number, which I provided, and then hung up.
I thought the matter was dead until a few weeks ago when an old friend from Washington called, said he was in the area, and suggested lunch. At lunch, he showed me the 100-plus pages of the file on me that grew out of that first encounter with Agent Ryan of NCIS. “Much of this information was gathered through what we call ‘national security letters,’” he said. “It allows us to gather information from a variety of sources.” A “national security letter” it turns out, can be issued by any FBI supervisor, without court order or judicial review, to compel libraries, banks, employers and other sources to turn over any and all information they have on American citizens.
According to my file, the banks where I have both business and checking accounts have been forced to turn over all records of my transactions, as have every company where I have a charge account or credit card. They’ve perused my book borrowing habits from libraries in Arlington and Floyd Counties as well as studied what television shows I watch on the Tivos in my house. They know I belong to the National Rifle Association, the National Press Photographers Association and other professional groups. They know I attend meetings of Alcoholic Anonymous on a regular basis and the file notes that my “pattern of spending” shows no purchase of “alcohol-related products” since the file was opened in 2001.
When I asked to keep the copy of the file, my friend said “no”. I promised to keep it and the source confidential. “You can’t,” he said. “You can’t keep anything hidden. Your life is an open book with us and it will be to the day you die.” After we left lunch and went our separate ways, I wondered how, if my life was under such scrutiny from Uncle Sam, he could meet me for lunch in a public restaurant and not be discovered? So the next day I went to a public phone in an out-of-the-way location and dialed his direct number. It was disconnected. Then I drove home with one eye glued to the rearview mirror. I did not see anything suspicious but if I turn up missing one day, just forward my mail to General Delivery, Guantanamo Bay, Cuba.Link here.
GRAHAM AMENDMENT PASSES: HABEAS CORPUS SUSPENDED
The Bush Administration, through an amendment introduced by South Carolina Senator Lindsey Graham, has just successfully stripped federal courts of jurisdiction to hear applications for habeas corpus brought by those unilaterally declared enemy combatants without any process and held by the U.S. indefinitely throughout the world and even in the U.S. This was accomplished by means of a last minute amendment to the Military Authorization Bill, brought up on the floor of the Senate without committee deliberations and virtually no advance warning to the American people that it was happening.
It was not only human rights groups like the Center for Constitutional Rights, but many in the military or retired from the military who opposed the Graham amendment: Judge John Gibbons, who argued the landmark CCR case Rasul v. Bush before the Supreme Court, John Hutson, Dean of Franklin Pierce Law Center and former Judge Advocate General of the U.S. Navy, and the National Institute for Military Justice, among others, wrote open letters to the Senate to oppose the dismantling of habeas corpus.
The Graham amendment will create a thousand points of darkness across the globe where the U.S. will be free to hold people indefinitely without a hearing and beyond the reach of U.S. law and the checks and balances of the courts enshrined in our Constitution. The last time this country suspended habeas corpus was for the internment of tens of thousands of Japanese Americans during World War II, a travesty that is now universally recognized as a blot on our nation’s history. The purpose of the writ of habeas corpus has always been to relieve those wrongfully held from the oppression of unchecked executive power. The most reliable way to determine whether someone is properly held or a victim of injustice is to have a right to judicial review of the detention. This has been understood at least since the proclamation of the Magna Carta in 1215.
While the Administration and its supporters have tried to characterize the men being held at Guantánamo as the worst of the worst against all evidence, the fact is that even the military has admitted that they often apprehended the wrong people. Most have no ties to Al Qaida, many were turned over to the U.S. for bounty, and many more were just in the wrong place at the wrong time. If they have no way to appeal their innocence or their status, they will be left to rot in detention indefinitely. As has been the practice of this Administration, this latest scheme was accomplished stealthily and in secret. The Center for Constitutional Rights vows to continue to fight for the rule of law. We will not allow American democracy to be eroded a little at a time, until, finally looking around, we can longer recognize what has become of this democratic nation.Link here.
PARADISE AT $850 AN ACRE
When Allen and Suzi Moore of Newburyport, Massachusetts went searching for a vacation home, they wanted a place relatively close by, where they could hunt and fish in rustic simplicity. After months of research, in 1986 they visited Cape Breton, an island connected by a causeway to the Nova Scotia mainland. It is a four-hour drive from Halifax (and a 1½ hour flight from Boston). A year later they found their Walden: a cozy three-room cabin on the banks of Cape Breton’s Margaree River, some of the finest Atlantic salmon water in North America. They have since planted a raspberry patch and apple and plum trees on their 10 acres, and have added two cabins. Their favorite time of year is foliage-rich October. “On rainy days we fish for Atlantic salmon,” he says. “And on sunny days we go after woodcock and grouse.”
The Moores got in early on Cape Breton, the long-overlooked, easternmost part of the peninsular province of Nova Scotia, whose mainland has been a hot real estate ticket since the early 1990s. Mainland Nova Scotia was said to feel like New England 50 years ago, a friendly, uncrowded maritime paradise with vast tracts of cheap, desirable land. It was discovered by wealthy Americans and Europeans (mostly Germans), who showed up in droves to buy waterfront property for $200,000 an acre in Chester and other tony shore towns west of Halifax. But those mainland bargains are harder to find now.
Cape Breton today is where Nova Scotia was a decade ago. Its oceanfront acreage, compared with the mainland’s, goes for less than half the price – and a mile or two inland, it is cheaper still. Lots on the Margaree River are available for $850 an acre, says Realtor Michael Coady. “The Margaree River is so bountiful and interesting,” says Allen. “There’s really no reason to go anywhere else.” Fishing is not the only attraction. Cape Breton has endless miles of good woodcock and grouse cover. Highlands Links golf course in Ingonish Beach is the top-rated course in Canada, more than worth its $71 greens fee.
As with most “last best places”, creative folk found it first. The notorious American sculptor Richard Serra has a house here. So does composer Philip Glass. But perhaps the most famous early settler was Alexander Graham Bell, who fell in love with Cape Breton because it reminded him of his home country of Scotland. He spent most of his final 37 years on Cape Breton, working on projects as varied as the vacuum jacket (a forerunner of the iron lung), man-carrying tetrahedral kites and, most famously, the hydrofoil.Link here.
SECEDING SELDOM SUCCEEDS, BUT VERMONTERS TRY
Politics, like fall foliage, turns faster in Vermont. The state was out front opposing slavery and first to approve civil unions. And if the activists who met here last month succeed, the state will set another precedent – first to secede since 1861. No, this was not a clandestine meeting of militants. It was a convention for Vermonters, held in the plush, gold-domed capitol. And its keynote – that separating from the U.S. is a just remedy for the federal government’s trampling of state sovereignty – is echoing beyond the snow-capped Green Mountains.
From Hawaii to South Carolina, dozens of groups across America are promoting a similar cause. Their efforts are not politically popular – yet. But they are reviving one of the most passionate debates in U.S. history: Can a state legally secede? For the Second Vermont Republic (SVR), the group that hosted the convention, the answer is “yes”. “If we had a right to join the Union, we certainly have a right to disband from it,” SVR founder Thomas Naylor told the assembly. In his view, Vermonters should join the cause if they “Say the U.S. has lost moral authority and is unsustainable, ungovernable, and unfixable,” and “Want to help take back Vermont from big business, big markets, and big government – and do so peacefully.”
Naylor’s talking points are not unique to Vermont. Separatist groups with diverse causes share the view that the federal government has grown too big and too powerful. Many say obedience to the Constitution would restore America’s lost liberty. But some insist that the federal government long ago overstepped its constitutional powers, leaving secession as a valid recourse. The Free State Project (FSP) is another group determined to reclaim constitutional liberty. Its libertarian members have pledged to move to New Hampshire to restore limited government. But FSP is not promoting secession, which, according to spokeswoman Amanda Phillips, usually has caused more problems than it has solved. “We can accomplish our goals by working within the constitutional framework,” she says. FSP’s reluctance to rock the boat points to a major obstacle U.S. separatists face: public uneasiness about secession.
Ever since the Civil War, many Americans view secession the way President Lincoln did, as an unlawful act of rebellion by the slave-holding Confederate States. Indeed, Lincoln saw it as a tyrannical threat to the principle of democracy. But movements like SVR counter with two points. First, they argue that secession is a continuing theme from America’s formative years. And second, they say that Lincoln was not a noble savior of the Union, but a racist warmonger intent on strengthening federal authority.Link here.
PETER DRUCKER, R.I.P.
When I moved from Arkansas to Mississippi in early 2005, I brought with me three Bibles and a shelf of books by Peter Drucker. That gives you some idea of how much I appreciated his writing. I began reading the ones I had not read, and re-reading those that I had read. The obituary in the New York Times did not begin to describe his accomplishments. The one in the Washington Post was better.
He was a pioneer in management studies. Yet his books went beyond management into social theory. He is the source of the idea of the “knowledge worker”, as distinguished from the “industrial worker”. He saw what a profound effect this would have on society long before his peers did. He understood the use of demographics. Some of his most notable predictions about America were based on trends that were already visible demographically – yet only he spotted them. He believed in decentralization of business. He understood that business management in a market economy is a way to reconcile the conflicting goals of the many (workers) with the goals of those who employed them. Society always seeks to do this. Management has achieved this. The result has been economic growth that has transformed the world.
He understood that the discovery of management techniques in the twentieth century was one of the most momentous discoveries in man’s history. He understood how management made America’s victory in World War II possible, how low-income, low-education workers could become highly productive through training and by breaking down their tasks into a series of component steps. He had no grand scheme of management, no cookie-cutter management technique. There is no “Drucker theory”.
He was highly successful as an author, a consultant, and a speaker. Before him, there was no literature on management. He was the right man in the right place in 1939 when his book appeared, The End of Economic Man. From that day until the 1990s, he cranked out book after book. They all sold well. He was giving interviews almost to the end. The only living author I can think of who has had as long a career, equally distinguished, is Jacques Barzun, whose magnum opus appeared in 2000, From Dawn to Decadence, a history of Western culture from the Renaissance until 1999. They have provided models – targets – for my own writing and longevity.Link here.
PLEA FROM A SIMPLE VIETNAMESE
I have been terrified since the event of 9-11, not because of the accused terrorists, nor the illegal, abusive activities of political governments. For I know exactly what they are, who they are, and their nature. I have been terrified by you, my fellow human beings! Yes, by YOU. Because you now are running the opposite way from liberty toward the political governments, which are the very institutions that we, generations after generations all around the world, have fought hard against to take back our liberty and dignity. I am terrified by your amnesia.
Throughout our history as humankind, political governments never gave us, the people, anything, even the protection that is supposed their job. They enslave us, and we have to protect ourselves against the power of our own governments. They always find ways to take, and steal away from us our property, our liberty, and our dignity. Remember it is we, the people, who have fought hard and sacrificed in many different ways to force them, the Kings, Queens, Presidents, Generals, etceteras, to give in, give up, and give back our rights, our dignity, our life as free peoples. All legal documents such as the constitutions do not give us our rights and liberty. These documents only recognize our rights after we, the people, have fought so hard for generations to force the political governments to give in by writing these documents. So please do not mistake that THEY, the political governments, gave us these documents, but we have fought and forced them to do so. They did not give. That is why political governments always try to bend and ignore the documents if we stop fighting.
The battle for liberty never ends, for the political government always tries to steal away our rights, our liberty as much as they can, and only give in and give back as little as they are forced to do so by us. We must not forget this.
We, Buddhists, Muslims, Christians, Jews, have lived peacefully together, have done business, exchanged goods and services, even married without any problem, until political government gets in and takes control. Our histories, our experiences speak for themselves. I am not a Jew, or a German, to speak of the experiences under Hitler. I am not a Russian, or a Chinese, to tell you about Stalin and Mao regimes. I am a Vietnamese, and I will tell you about the Vietnamese experience of political government.Link here.
PATRIOT ACT II: MEET THE NEW BOSS, SAME AS THE OLD BOSS
The course that congressional leaders are following this week to extend controversial domestic spying powers of the USA Patriot Act was never animated on Schoolhouse Rock or taught in high school civics classes. A considerable stretch of the Patriot Act II’s path to law lay behind closed doors among a small group of lawmakers accompanied by advisors from the White House. The process is reminiscent of the method by which the original Patriot Act was passed in 2001. During lengthy committee debate in the House back then, minority members fought strenuously for numerous safeguards for civil rights in view of the government’s expanded surveillance powers, and they succeeded in inserting several. However, the committee’s work was dismissed summarily by congressional leaders and replaced by a version of the legislation backed by the Administration. The leadership’s bill was rapidly brought for a vote on the floor before some members had time to even read it.
This time around, it was the Senate that fought for the Bill of Rights, unanimously voting earlier this fall to restore some checks and balances to the FBI’s powers to demand the personal records of ordinary Americans from a wide variety of businesses. The House approved a bill much more to the Administration’s liking, and this week conferees from both chambers met to iron out the differences. The end product, as it stands today, guts the Senate’s safeguards. Only the conferees know what took place in their closed sessions, but civil rights advocates warn that Congress is poised to repeat the mistakes made four years ago. “It’s very similar to the process in 2001,” said Bob Barr, former Republican representative from Georgia. “We believe it’s a very inappropriate and dangerous game to play. Politics seems to be driving this whole game. The Senate worked long and hard to fashion a compromise.”
The concern among a coalition of critics spanning the gamut of political leanings is that the Administration took control of the conference on Capitol Hill. For American businesses that face rising costs in complying with an exploding volume of FBI surveillance orders since the passage of the USA Patriot Act, the secretive bout of law-crafting adds to the defenselessness that they endure under the act. Manufacturers, banks, real estate firms, bookstores and other businesses banded together to press for checks and balances to the FBI’s powers, but that effort appeared to be no match for the administration’s determination to further bolster those powers.
Businesses and privacy rights advocates want foremost to dissuade the FBI from conducting unlimited, indefinite or unwarranted searches of ordinary Americans. Recent reports suggest that the FBI now issues tens of thousands of NSLs (National Security Letters) – orders for a wide variety of records that they issue unilaterally without any judicial review – annually, compared to a few hundred annually prior to the terrorist attacks of Sept. 11, 2001. “They have become the weapon of choice by the administration to conduct fishing expeditions,” Barr said about NSLs. “It’s simply a matter of filling in a couple of blanks. It’s an extraordinary power that has become ordinary behind closed doors.”Link here.
THE FEAR GAME, OUR LATEST SENSATION
We are more likely to die on the road than be killed by a terrorist act.
Forgive me if I am not shaking in my shoes over the risk of terrorism on our shores. There is a risk, of course, but it is being greatly exaggerated. After 30 years in journalism, I have learnt three things: how easy it is to scare the pants off a public looking for bad-news stories to spice up humdrum lives, how many interest groups stand to benefit by manipulating the public’s emotions, and how much more we would be able to do to reduce risks to life and limb if only we would assess those risks in a more cool-headed way.
There are plenty of things that offer a greater threat to our wellbeing than local terrorism which are not getting nearly as much attention or money lavished on them. It is well known to psychologists that humans have a tendency to overestimate small risks while underestimating big risks. The risk of being killed in a terrorist attack is very much lower than the risk of being killed on the road. Yet after the attacks of September 2001 in America, many people switched from traveling by air to traveling by road, presuming it to be safer. A study by psychologists at Cornell University estimated that this switch led to an increase of 240 driving fatalities a month over the rest of 2001. The public had returned to its senses by the end of the following year but, even so, it is estimated that 1200 road deaths can be attributed to effect of September 11.
According to the U.S. Center for Disease Control, the odds of an American dying in a terrorist attack are about one in 88,000. The odds of dying by falling off a ladder are one in 10,000. And, according to an article in Foreign Policy magazine, even in 2001, car crashes killed 15 times more Americans than terrorism.
In the welter of stories about terrorism, I have been surprised how few commentators have noted the obvious … that many groups have an interest in exaggerating the threat of terrorism. Starting with governments, our long-known tendency to unite against an external threat has made terrorism a windfall gain. Most have not resisted the temptation to play up the threat rather than calm us down. Politicians have become more concerned to be seen responding to the public’s media-incited worries than to fix the problem. Hence the continuing stream of legislation to give the police and security agencies the powers they need to protect us. The question no one dares to ask is why it has taken the pollies so many goes to get it right. And is this it, or will there be more fiddling down the track?
The media’s motives are narrowly and amorally commercial. The punters love a good scaring, and we are happy to oblige, which makes us easy prey for the political spin doctors. These mutually enjoyable terror games would be harmless if time and money grew on trees. Since they do not, we would probably save more lives putting the same effort into fixing black spots on the highways.Link here.
HOW TO DEFEAT BIG BROTHER AND RECLAIM YOUR FREEDOM
George Orwell’s 1984 is the story of a future society where individualism has been eliminated, where propaganda is used to control the masses, and where perpetual war is being waged to maintain the “peace”. It is a world where false is true and wrong is right, where history is constantly being rewritten to support whatever the regime is currently doing – and where Big Brother watches your every move. It can be summed up in the words of one of 1984’s characters, O’Brien, when he said, “If you want a vision of the future, imagine a boot stamping on a human face – forever.” But even in the middle of this totalitarian “utopia”, there is one man, Winston Smith, who dares to question authority, and who seeks a life and love for himself.
The parallels between our modern world and that of 1984 are uncanny. The Ministry of Truth, the Thought Police, the political manipulation of language to distort reality, the hidden censorship of political correctness, and the war on terror as a control mechanism – all echo the themes of 1984. So much so, that reading the news headlines often makes it seem disturbingly prophetic. 1984 is ultimately a depressing story. Winston Smith believes he is thwarti, a conspiracy which cheats him of his love, Julia, and ultimately of his own sanity – when he is incarcerated in the Ministry of Love, and subjected to the horrors of Room 101.
1984 is a chilling read for sure, and implies that the omnipotent state will ultimately win. It is rarely that a book instills real fear in the reader. However, even as Winston Smith lives out his days in diminished manhood, he clings on to one idea – that if there is any hope at all, it lies with the “proles” – the ordinary people … the masses … the great unwashed. These people were cannon fodder, and largely ignored by the powers that be. Smith’s hope was that one day the proles would “wake up”, and in so doing, would, by force of numbers, sweep away the vast illusion of totalitarian state power.
And this is the all-important point. It is an ILLUSION. State power is only effective as long as those subject to it “believe” in it. The state has no power except what we grant it. Its power is derived from our willingness to give up our own power. Thus, the state’s primary role is to instill in its subjects the idea that it is absolutely necessary, and that without it, life would be miserable and chaotic (like present-day Iraq, perhaps). The only thing that can destroy this illusion is if people simply ignore it and act as if it was not there.
The state’s ultimate power is its ability to control the flow of information. And that is exactly how “Big Brother” operated in 1984. All information was in constant flux – managed and massaged to suit the purposes of the party. In 1984, the ordinary people were completely subjugated because of the state’s control over information. In contrast, the internet bypasses the state information control apparatus. On the net, one has access to nonofficial news sources and opinions. It is literally impossible to censor the bulk of what goes on online. In this way, the modern aspiring “total” state has serious competition, because it cannot fully control the flow of information.
In 1984, the road ended in Room 101. But in the real world you have the opportunity to take a different road. You CAN defeat Big Brother in so many different ways. It is just a matter of “waking up” and seeing where the power really resides – with YOU. You have the power to withdraw your permission, to withdraw your support. You can do this in a multitude of ways – both minor and major. And you can find support networks of like-minded people, where the “how” of this is revealed. The internet can be your gateway to personal freedom … your portal to the real world – the world without the charade of state power. But you have to want freedom. You have to desire it intensely. If you want to be FREE, then it is time to wake up and ACT.Link here.
“OUTSOURCING” BOOMERS’ GOLDEN YEARS – DEVELOPING NATIONS LURE RETIREES
The aisles are packed on a Sunday afternoon at the Escazú branch of the PriceSmart warehouse-store chain in San José, Costa Rica, one of four mammoth outlets the San Diego retailer has opened in this Central American capital. Most of the shoppers filling their carts with Prego spaghetti sauce, Gorton’s fish sticks and Pringles potato chips are not upwardly mobile Latinos, though. They are retired Americans, part of a large cadre of foreign-born pensionados, who have settled here in the past 20 years. Costa Ricans like to say theirs is the only country in Latin American, and perhaps the world, boasting a greater number of Americans – as many as 20,000 retirees are here from the U.S. and Canada – than the number of its own émigrés abroad. That may be a stretch, since it requires counting some of the 1.4 million tourists who come here each year, an average of 30,000 Americans on any given week. Yet it gets at an important economic phenomenon.
Thanks to a decades-old policy of offering tax incentives and other perks to attract English-speaking retirees, Costa Rica has pioneered what is fast becoming a popular economic-development tool for the small, largely impoverished nations of the Caribbean basin: importing a high-spending consumer class unencumbered by school-age children, with the expectation that their dollars will quickly follow. In Costa Rica’s case, retirees contribute significantly to the $1.4 billion a year in direct spending by Americans here, the government says. (It does not differentiate between retirees and long-term visitors.) The multiplier effects – salaries in health care, construction, retail and other services – could bring the total benefit to $4 billion, nearly 25% of Costa Rica’s GDP.
Moreover, the retirement wave is synergistic. Early pensionados invested in second careers – running bed-and-breakfast hotels near the beach, or operating travel agencies – which attracted more tourists and more retirees. With the prospect of more than 30 million Americans starting to retire next year, many developing countries expect a windfall. Which raises the question: Should the U.S. “outsource” baby boomers’ golden years? The U.S. already depends heavily on immigrants to serve retirees, in the many kinds of services they need. Sending U.S. retirees abroad eliminates one step in closing that labor gap.
Foreign retirement is becoming quite the norm elsewhere. In Europe, more than a million German, Scandinavian, Dutch and British citizens live most of the year far from home – mainly near the Mediterranean coasts of Italy, Spain and Greece. Those retirees and their hosts enjoy the benefits of a “superstate” joining their nations under the E.U. Last year, Malaysia launched its “My Second Home” program aimed at attracting rich retirees from Hong Kong. Applicants are allowed to bring one maid. None of those benefits are available yet in this hemisphere, but demand for foreign retirement havens is rising.
None of those benefits are available yet in this hemisphere, but demand for foreign retirement havens is rising. In fact, the retirees’ market is so good for Costa Rica that the country has dropped some of the incentives it first used to lure retirees in the 1970s and 1980s – such as allowing them to import a car duty-free – and is considering raising the minimum income a foreigner must have in order to live here to $1,000 a month from $600. Panama, Honduras, Belize and Nicaragua also are actively courting American retirees, mainly by offering tax-free status to anyone willing to buy or build a house there. Beyond concomitant adjustment issues, there is a more elemental question: Is courting retirees something poor countries can afford to do?Link here.
RETIRING FROM THE U.S. TO PANAMA, AND OTHER POINTS SOUTH
The queue at Miami International Airport’s immigration counter is packed with individuals and families from Central and South America, many of them hoping to start a new life in the U.S. But another group of migrants is moving in the other direction – Americans seeking retirement homes in places such as Mexico, Panama, Honduras, Belize, and even Nicaragua. Retirement villages and sheltered housing are big business for developers and property companies and the U.S. has a huge retirement village sector, based largely in Florida and other southern states. However, driven by the rising prices of these properties and the soaring cost of healthcare – as well as the hurricanes that recently have ravaged the U.S. south – many American retirees are looking to resettle overseas.
“Argentina and Uruguay are both countries where the prices are still good for Americans, and you can get good value for your money,” says Barbara Perriello, who as travel director of Agora Travel runs property investment tours to countries such as Argentina, Uruguay, Nicaragua and Honduras. Property taxes and building costs in these countries, are often far lower than those in the U.S., she says. “In Argentina you can build for about $70 per square foot, and that’s high end,” she says. “And in Nicaragua and Honduras, it’s still about $80 per square foot – so you’re looking at much cheaper costs.” Less developed countries are welcoming the newcomers with open arms. With their eyes on a potential source for revenue, governments are busy adjusting their investment and visa rules to create conditions that will encourage a new wave of immigrants.Link here.
MICROSOFT SLASHES TAX BILL BY LICENSING IP TO IRISH AND NEVADA SUBSIDIARIES
A law firm’s office in Ireland houses an obscure subsidiary of Microsoft that helps the computer giant shave at least $500 million from its annual tax bill. The four-year-old subsidiary, Round Island One Ltd., has a thin roster of employees but controls more than $16 billion in Microsoft assets. Virtually unknown in Ireland, on paper it has quickly become one of the country’s biggest companies, with gross profits of nearly $9 billion in 2004.
Giant U.S. companies whose products are heavily based on their innovations, such as technology and pharmaceutical firms, increasingly are setting up units in Ireland that route intellectual property and its financial fruits to the low-tax haven – at the expense of the U.S. Treasury. Much of Round Island’s income is licensing fees from copyrighted software code that originates in the U.S. Some of the rights to these lucrative assets end up in Ireland via complex accounting rules on intellectual property that the Treasury is now seeking to overhaul.
Through a key holding, dubbed Flat Island Co., Round Island licenses rights to Microsoft software throughout Europe, the Middle East and Africa. Thus, Microsoft routes the license sales through Ireland and Round Island pays a total of just under $17 million in taxes to about 20 other governments that represent more than 300 million people. Microsoft’s effective world-wide tax rate plunged to 26% in its last fiscal year from 33% the year before. Nearly half of the drop was due to “foreign earnings taxed at lower rates,” Microsoft said in an August S.E.C. filing. Microsoft leaves much of its profit in Ireland, including $4.1 billion in cash, avoiding U.S. corporate income taxes. But it still can count this profit in its earnings.
Round Island One is a key component in a drive by Microsoft to place its intellectual property and other assets into tax havens. In the past three years, Round Island has swallowed up other Microsoft units, from Israel to India, moving much of their tax liability to Ireland. Within the U.S., the rights to many of Microsoft’s products and copyrights are managed by a subsidiary in Nevada, which, unlike the company’s headquarters state of Washington, does not tax royalty income on intellectual property. The Nevada unit, Round Island LLC, is the corporate parent of Ireland’s Round Island One.Links here and here.
SELLING CELL PHONE RECORDS
Your cell phone calling records are not as private as you think. As Philadelphia-based CBS 3’s Natasha Brown found, companies are making money selling your cell phone calling records to whoever wants them. Who you call. When you call. How many times you call. Believe it or not, it is all for sale. Joan Sill’s calling records cost us $110 from LocateCell.com. “This is my husband’s cell phone number, my mother’s number, friend’s phone numbers,” said Sill. She is a producer at CBS 3, and she confirmed we got all the numbers she dialed in the last 30 days. “I would never think that anybody else would be able to easily find out,” said Sill.
Neither did a woman whose identity we disguised. Her estranged husband bought her cell phone calling records from another website. “He found a cell phone number he didn’t recognize … called it and left threatening messages to a person that he didn’t even know,” she said. “I called him and I said, ‘Hey! What are you doing?! How did you get those numbers?’ ‘I went online.’”
Online to websites that sell private records for a price. Anyone can buy anyone else’s calling records – without permission. Just give them a cell number, a name, and an address. How are these web sites getting these numbers? Court records say, it is low tech. They say, some websites call wireless companies and pretend to be customers or even employees. Other experts suspect websites pay off employees or they steal the records right off wireless company websites. We bought our records from LocateCell.com. That company did not say how they got Joan’s records. But they said in an email, their services have helped find runaway kids and dangerous criminals – and that getting cell phone records is not illegal.Link here.
ECUADOR OFFERS RESIDENCY RIGHTS IN PARADISE – ON THE CHEAP
Ecuador has been in the headlines lately, and none of it good. Squabbles with the International Monetary Fund … interrupted oil exports … citizens marching in the streets. A lot of people look at that and might decide to stay away. I look at it and see a buying opportunity. And that is because Ecuador is a slice of paradise. Its short-term troubles give you a chance to buy real estate there on the cheap.
The fact is, every decade or so, Ecuador goes through the most “civilized” civil unrest you will ever see. People go on strike – but still show up to do their jobs. When and if the government changes, life goes on. A friend of mine drove through a protest during the last change of government. I asked her about it and she said, “Oh, that’s why everyone was banging on pots! I thought Ecuador had won an important soccer game.”
And Ecuador’s currency is the U.S. dollar. Any temporary economic downturn in that country just makes the greenbacks in your wallet worth more! Meanwhile, Ecuador offers numerous advantages as a place of residence, including legal advantages, tax advantages, easy residency, and easy citizenship. Most of the people of Ecuador are very poor. For those who have a little money, life there can indeed be an inexpensive slice of paradise.
Ecuador is small as countries go – about the size of the state of Colorado – yet it is also one of the most diverse countries in the world. You can live in the bustling city, quaint colonial towns or quiet villages. You can choose high mountains, a coastal life or even live in the Amazon. The cities offer every creature comfort and a huge variety of activities. The entire country (especially the Amazon Jungle) has incredible biodiversity – one of the highest in the world – and abounds with birds, flowers and wildlife seen nowhere else. Ecuador’s Pacific coast offers empty beaches, fishing, even surfing, and the Andes are filled with pristine forests, rivers and lakes.
The economy offers excellent opportunity. Ecuador is one of the world’s top exporters of banana, shrimp, roses, fresh flowers, tuna, and palmetto – plus, tourist opportunities abound. The U.S. dollar has been Ecuador’s currency for five years. What is more, inflation dropped in each of the past five years. Perhaps most important of all, Ecuador is a peaceful country with friendly people that are very welcoming to foreigners. You will not see any “Yankee Go Home” graffiti.Link here.
MOVING MONEY AROUND THE WORLD? THAT IS FINE, BUT WHO ARE YOU?
It seems that it is impossible to move these days without someone wanting a proof of ID. If you want a credit card or to open a bank account or book a flight or even to open a facility with your local video shop – all of these actions will be met with a request for proof that you are who you say you are and you live at the address that you claim is your home. It is enough to make anyone paranoid and almost everybody feels a twinge of nervousness when someone in authority questions them but we have all just about come to accept the annoyance and hassle with a resignation that comes from having been through the drill enough times for it to be routine. In fact the only time I have ever known anyone to be happy to have their ID checked is when my daughter went to the bar to buy alcohol (in the U.K.) on her 18th birthday and was asked for her ID.
These odd moments aside and despite the hassle and delay, it is important to remember that when you are standing at the counter while the guy behind the desk photocopies your passport, this extra bureaucracy also drives him and his company to distraction. They are merely complying with rules and regulations designed to protect them from being inadvertently caught up in illegal activity. The problem is that the police, customs and other regulatory authorities demand increasing levels of proof of identity, forcing those who deal with members of the public to become ever more vigilant. When it comes to moving funds around the globe, even more concerns are raised by the authorities because the incidence of money laundering is surprisingly common.
Until 1989, money laundering was generally thought of as the act of disguising the proceeds of crime to provide them with a clean trail and removing their association with the criminals. To most people, the mention of money laundering is met with a knowing look and a comment that alludes to the drug trafficking world. That is not surprising considering the huge sums of hard cash that were derived from the drugs business and exchanged for other currencies before being transmitted around the globe to hide their origin. Naturally, most governments had an interest in clamping down on the movement of these sums in order to restrict the activities of the drug smugglers.
The definitions changed in 1989 when the anti-money laundering regulations broadened their focus to include the funding of terrorist activity and at this point, the proof of ID demands increased considerably. The term “know your client” was always a sales phrase designed to ensure salesmen understood the needs and desires of their customers but after 1989 “KYC” became the focal point of the financial services industries around the globe. Knowing your client has now taken on a new meaning and it is literally the act of knowing before any transaction can take place that a client is in fact the person they purport to be. This means that everyone has to be screened to ensure they are bona fide and not involved in illegal activity.
When you want to establish an arrangement with a currency dealer to exchange your funds into another currency and transmit them to another country, as odd as it sounds, you should actually welcome the fact that your identity is being verified. You should be very wary of doing business with any currency dealer who does not ask you for proof of your identity before allowing you to use their services to transmit or exchange funds. Currency companies are required by law to gain and retain this information before doing business and so if you are accepted as a client without the company in question asking for any ID documents, you would do well to seek an alternative supplier for your currency needs. I can only guess at the hassle that would come from having all your worldly wealth tied up in a frozen bank account while you argue the case to have the funds released.Link here.
THE INTERNET VS. THE STATE
At the 1977 Libertarian Party Convention, mind-expansion advocate and LSD guru Timothy Leary gave a speech that few of us took very seriously. He spoke of something called the Internet, a network that would connect computers worldwide, allowing participants from around the globe to sign on and retrieve text, photographs, audio and video instantaneously, and to communicate in realtime with anyone in the whole world who also had a computer and a connection. He said that it would be the new revolution against the current social order and stifling status quo. He predicted it would be much, much bigger than drugs in its ability to overthrow the establishment. Whereas tuning in, turning on and dropping out had been of great interest to a somewhat narrow subset of the population, everyone would be able to use the Internet, in his own way, and thus the new revolution against the old order would transcend class, age, nationality and all other demographics. The bourgeois would have just as much interest and use for it as the so-called counterculture. And nothing would ever again be the same.
As I said, no one at the time really believed it. We figured Leary had just done a little too much acid and his imagination had gotten the best of him. The network of information he described seemed totally impossible – and yet it exists, precisely as he predicted it, right now. In fact, even Timothy Leary might be surprised to see the newest developments. Hardly a week goes by without some substantial revolution in cyberspace.
A lot of people say the Internet is overrated. They think it is just a bunch of vanity sites and ranting and raving kooks – and while they acknowledge it is nice that you can buy products online and have them delivered to your house, they doubt the net will prove as revolutionary of culture and industry as is predicted of it. Ever since the dot-com Boom of the late 1990s and the subsequent bust, many are inclined to dismiss the alleged greatness of the net. Some see it only as a novelty or fad that will hardly evolve far past its current size and scope. These people could not be more wrong. The Internet is not just not overrated – it is vastly underrated.
In the Internet we see our greatest hope for freedom and for the continual progress of humanity. In the Internet we see the anachronistic and obsolete institutions of society being pushed aside for a new dawn of better things. In the Internet we see the key to diminishing the power and status of the state and liberating ourselves from its oppression and deception. Let us first consider an indirect but nevertheless essential reason to have hope for freedom, thanks to the World Wide Web. The Internet is proof of libertarianism in action. In this unregulated sector of society, we have seen more progress and changes and improvements than in any other sector in any comparably short period of time. No other invention went so far so quickly. And all of it rests on the economic principles of spontaneous order that we have been touting for years, but had to wait until now to see fully realized.
Perhaps nothing right now is so astonishing as a demonstration of the wonders of spontaneous order as that online encyclopedia, Wikipedia – the largest collection of encyclopedia articles in the world, which are written completely by volunteers. It now boasts more than 810,000 articles in English, as well as hundreds of thousands more in dozens of other languages. Each article was written, edited and rewritten by whoever in the world decided to contribute. The division of labor, the capacity of people for consensus building and totally voluntary cooperation, and the general goodness of most people to respect each other’s boundaries are on display at this one site, and the entire world is better informed as a result. Wikipedia is a microcosm of a phenomenon online that many statists would have denied was possible before it came about. The good side of humanity – the charity that we libertarians are so used to insisting exists and does not need government to thrive – is right there. It is online, for everyone to behold.
I need not argue for the importance of a free, independent press as a bulwark for freedom, as a guardian of truth against political deception and an irreplaceable service to the people. Everyone in this room knows the significance of a press that will speak truth to power. For many years, however, the establishment press has not done so. There was the wonderful anomaly of the Nixon years, and a few other aberrations, but the mainstream press has, for as long as I have been alive, been a reliable mouthpiece for the political establishment. Thank goodness for the Internet! Nowadays, people know that anyone can start up a web page, and of the millions of people ranting out there, it is known that you cannot believe every word – or even most of them. And yet, the truth largely comes out through the processes of reputation. The Internet is not built around an arbitrary traditional hierarchy, nor is it mindlessly egalitarian. The error of opinion is unlimited and, only rivaled by the efforts of good people to combat it, the truth does, more than in the old media, come out. Thomas Jefferson also said that, if it were up to him, he would choose a world with newspapers but no government rather than a world with government but no newspapers. Thanks to the net, we might get to see the day when both artifacts are finally swept into the status of irrelevancy they deserve.
The state and its old media simply cannot keep up. At Antiwar.com and LewRockwell.com and hundreds of other sites we see the truth coming out every day. A politician lies, and as soon as someone with a computer knows, we all know. A bomb kills another innocent family and the photos and video footage are on your desktop in an hour. A famous columnist tries to pass off a slimy smear or a dishonest argument in the mainstream press, and suddenly a thousand people are debunking him and ridiculing him on their independent blogs. The Internet really is the destined home for libertarianism, and our greatest hope for freedom. On it we see the free market of ideas and services flourish even as the politicians try to stamp out civil society in realspace. On it we see the truth win out over the political and media establishment. On it we see the spirit of liberty.
The state cannot catch up to, it cannot match, and it cannot begin to comprehend the full power of the Internet. Politicians are baffled by it because it does not conform to their assumptions about the world, about human organization, about the need for central planning. The glorious Internet is a major source of confusion for all with a statist mindset. The Net is revolutionizing society, all toward more voluntary, civil and efficient methods of organization. It has given us all a way to participate in speaking the truth and standing up to the state. The Internet is ours – it belongs to the people and especially the friends of freedom and peace who feel so at home online because it is so free and so much the way we would like to see the rest of the world.
And so, when the revolution comes – when the state declines and freedom triumphs – the Internet will have played a deciding role. And I am hopeful of that future, and the move our culture is making toward it. Thanks to the net, our wildest imaginations and dreams might come true, and our destiny and our society might prove to be – just like LewRockwell.com, and just like so much of the Internet culture – anti-state, anti-war, and pro-market.Link here.
WHY THE SMARTEST INVESTORS MAKE THE DUMBEST DECISIONS
Terry R. Horn very nearly called a private detective before investing with John H. Whittier in November 2004. But then he thought, “Why bother?” The promising young hedge fund manager had all the right credentials – UC, Berkeley graduate and onetime analyst at Donaldson, Lufkin & Jenrette. His father was a former executive at Intel who could give Whittier the scoop on promising high-tech stocks. Besides, Horn was giving Whittier only $3 million, just a slice of the $130 million in the cash account at PNM Resources, a utility in Albuquerque, N.M., where he is acting chief financial officer. Still it stung when he learned he had been had. On October 7 Wood River Capital Management, Whittier’s hedge fund firm, disclosed that it owned 40% of Endwave Corp., which makes wireless transceivers and whose price had plunged 74% between July and September. Among the red-faced investors who got scorched was an unnamed client of BNP Paribas who tried unsuccessfully to yank $49 million from Wood River before it collapsed into receivership.
“We went into it knowing these things are risky,” says Horn, who claims a 17% annual return on his hedge fund investments, including the Wood River wipeout. “Sometimes some of them go wrong.” Sometimes unnecessarily. There were plenty of signs that Whittier was skating close to the edge. A little due diligence would have unmasked his unpaid taxes and the lawsuits accusing him of failing to pay for securities his fund had purchased. Yet, like Horn, investors focused on Whittier’s credentials and family connections. How could he have failed them? “He was part of the information network, and people thought that would translate into returns,” says Richard Klitzberg, a hedge fund consultant who was familiar with Whittier’s pitch but did not represent the fund. What makes smart investors so dumb?
Greed, of course. But we are talking about sophisticated investors who rarely take people – or balance sheets – at face value. Avarice alone cannot explain why so many of them fall for flimflammery, from hedge funds and secretive offshore commodities pools to ordinary Ponzi schemes. How, for example, could a buyout artist like Thomas H. Lee be taken in by Phillip Bennett, the Refco chairman eventually caught hiding (so say prosecutors) $430 million in bad debt?
A certain predisposition to folly is hard-wired into the human species. Decision making means processing an immense amount of data, and so the brain takes shortcuts. “Authority, scarcity, consensus, social proof – these are relatively primitive decision-making strategies we deploy,” says Robert B. Cialdini, a professor of psychology at Arizona State University and author of Influence: Science and Practice (2000). In other words, we are all susceptible to suggestions by influential people. We gravitate to something if it seems to be unavailable to everyone else, and we trust strangers who appear to be like us. One of the most effective – and potentially dangerous – shortcuts is relying on someone’s family background and pedigree as proxies for reliability. Investors in Samuel Israel III’s Bayou Management learned that painful lesson when the hedge fund turned out to be little more than a vehicle for Israel to squander money on bad trades and personal expenses.Link here.
HOW TO CHOOSE AN OFFSHORE HAVEN
At the root of the accelerating decline of financial privacy in many jurisdictions once considered secure are the hyped-up “wars” on drugs, money laundering, and terrorism. The war on drugs gave birth to money laundering laws, and together these legal weapons are being used to destroy privacy and bank secrecy. Rising terrorism (inspired by a rising resentment of American intervention in the politics of foreign nations) engenders the need for random searches, wiretapping and 24/7 surveillance. Where two or three decades ago there were numerous haven nations where privacy was expected and delivered, the high-tax nations have pushed, cajoled and threatened until the field of choices has been dramatically reduced.
How do individuals interested in privacy and security choose the best haven for wealth? To begin with, you should understand that each “offshore” haven is unique. A country that provides the best banking regulations will not necessarily be the best place for incorporating a business, just as the best jurisdiction for privacy will not necessarily be the best for an offshore trust. Yet, there are general guidelines for choosing an asset haven that apply across the board. The following are the more important considerations.
1.) Is the haven a completely independent sovereign nation? Or is it a territory, dependency or colony of a larger country? While the government of a dependency or territory may enact favorable legislation to attract foreign investment, such legislation will be hostage to the political and economic environment prevailing in the mother country.
2.) Does the haven respect privacy? And is privacy built into its law? Under what circumstances can creditors or the government obtain information about your wealth, or even seize it? Financial privacy has gotten a bad reputation in recent years. The prevailing attitude is, “if you are not committing a crime, why do you need privacy?” This attitude ignores the very real need for privacy in a nation such as the United States where there exist very few legislative protections for it. It is worth noting that a sue-happy lawyer or identity thief, armed with nothing more sophisticated than a personal computer, can in a few minutes unearth a great deal of financial information about whatever U.S. assets you own as a prelude to plunder. Ideally, secrecy should be built into the legal code and violations should be prosecuted with civil or criminal sanctions. From the standpoint of the tradition and legal basis for banking secrecy, the four countries that stand out are Austria, Liechtenstein, Luxembourg, and Switzerland.
3.) How long a tradition has the haven had? A country like Switzerland with centuries of traditional respect and protection of privacy, or like Luxembourg with decades of stability, are unlikely to change for transient reasons. 4.) Do the citizens support the haven’s offshore status? In some havens, such as the Bahamas, the local citizens are not the primary beneficiaries of banking secrecy. This contrasts with Switzerland, Austria and now Panama, where privacy laws and traditions affect a significant segment of the citizenry. 5.) Is the haven important to your government? The United Arab Emirates, because it is a “friendly” nation in an unstable region, enjoys the favor of the U.S. government.
6.) Does the haven wave a “red flag?” Public dealings with high-profile havens can raise a “red flag” in tax collector’s offices around the world. The Cayman Islands, Switzerland and Liechtenstein are examples. Panama, Austria, and Luxembourg are another step below that level. Bermuda is lower still, though it does not offer the secrecy the others do. 7.) How efficient and convenient are the services? 8.) What taxes are levied on the haven’s users?
Sovereign individuals select haven nations for placement of our assets according to the relative safety and privacy such places guaranteed by law. Those who move all or a portion of their assets offshore simply recognize reality, that governments in the major nations are engaged in a systematic destruction of their citizens’ right to financial privacy. Sadly, we must look to foreign asset havens for the sort of economic freedom once guaranteed by our homeland. The number of safe havens is dwindling, but they still exist.Link here.
THE YANQUIS ARE COMING!
In the run-up to last month’s passage of the Central America Free Trade Agreement (CAFTA), the anti-globalization doomsayers were out in force with bold predictions about the “final blow” the deal would mean to the economies of Central American countries. Pro free-traders argued just as vehemently that CAFTA was a major step in building the foundations for a democratic community of nations in our hemisphere. What is largely been overlooked from both sides however may have little to do with CAFTA at all. Instead, one of the biggest economic forces reshaping Central America in the coming years may be a demographic shift occurring right here in the U.S. spurred by the massive retirement of the baby boomer generation.
According to a recent New York Times story, starting in January of next year baby boomers – defined as those born between 1946 and 1964 – will start turning 60 at a rate of more than four million a year. The leading edge of the baby boomers is beginning to turn 59½ now – the age when Americans can start collecting certain retirement benefits without penalty. The number of Americans 55 and older is expected to skyrocket from 67 million this year to 97 million by 2020.
In many ways boomers are a different breed altogether than the generations that preceded them. They are healthier, live longer, and are more active, mobile and adventurous than prior generations. Trends suggest many will continue working beyond the traditional retirement age of 65, launching second careers, becoming entrepreneurs or focusing more on charitable and volunteer projects. But in one fundamental way, baby boomers may not be so different than their parents and grandparents. William Serow, professor of economics at Florida State University in Tallahassee has been studying migration patterns of the elderly for years, and believes that since the end of World War II younger, more well-off “roving retirees” in their 60s still instinctively seek out warmer climates in “fun” places like Arizona, North and South Carolina, and Florida.
According to Serow, the other key goal of this more affluent group of retirees is reducing living expenses by moving to sun-belt communities with cheap housing and lower taxes. And therein lies the big conundrum for today’s boomer retirees: Just as millions of retiring baby boomers are getting ready to migrate to warmer sun-belt states, these attractive retiree destinations are experiencing skyrocketing real estate prices and property tax assessments that may put these locations out of reach for all but the most wealthy boomers.
So, what is the significance of all of this for Central America? Tomorrow’s elder migration will not necessarily be to the sun-belt states in the U.S. It is just as likely that a large subset of boomer retirees – call them “boomer gringos” – will bypass southern sun-belt states altogether for more affordable Central American alternatives like Nicaragua, Costa Rica, Mexico, Panama, Belize and Honduras. Most Central American countries are still only a two or three hour flight back to the states and have adequate infrastructures allowing retirees to stay in touch with friends and loved ones back home – good cell phone coverage, broadband Internet connections, even satellite television. Having recently returned from vacation in Nicaragua and Costa Rica, the anecdotal evidence suggests it is already happening.
What is known is that governments in Central America are luring gringos with new laws that include impressive incentive packages for retirees. And despite the inherent volatility and political risks that remain in many of these countries, boomer gringos (and Central American governments themselves) are betting that the economic benefits of a retiree migration to Central America will be a two way street. Retirees get a lower cost of living, warm weather and cheap housing and create a virtuous cycle in return – more retirees equals more local jobs, resulting in more economic stability and less political instability, resulting in more retirees.Link here.
Joel Greenblatt is not famous … he is merely rich. Last week, I discovered why he is so rich. Joel is a Harvard Business School graduate, but let us not hold that against him. He is also the founder and managing partner of Gotham Capital, a private investment firm established in 1985. He started with $7 million of outside capital – mostly from junk bond king Michael Milken. Over the next decade, he earned 50% a year – compounded. Even after paying back all of the original seed capital and factoring out expenses, Greenblatt grew his $7 million stake to over $350 million. A mere $1,000 investment was worth $57,665 in 1995. A $10,000 investment was worth more than a half a million dollars. So when Greenblatt took the podium at the recent Value Investing Congress in New York City, I listened … intently.
Greenblatt declared that he had a simple two-part investment process that could deliver far greater returns than the rest of the market. He called the process his “magic formula”. I thought to myself, “Wow, that’s pretty corny … but maybe there’s something to it anyway.” As it turns out, there is. Greenblatt’s formula relies on a “value-oriented” process that ranks stocks on the basis of two variables – the earnings yield and the business’s return on capital. The first part of his formula requires that a stock trade for a bargain price relative to earnings power (or yield). E.g., if a company cannot earn more than 5% a year – the return you would receive from 10-year U.S. Treasury note – it is not a business you want to be in. Quite simply, it is not cheap relative to the risk you must take. To calculate a company’s earnings yield, you divide its annual earnings per share by its share price.
Investors must also ask a second question: Is the business a solid one? The last thing you want to do is to buy stock in a company that is cheap for a good reason. Greenblatt determines whether a company is “good” or not by looking at its return on invested capital. Is it investing its capital wisely adding to its earnings power? Or is it wasting its cash on frivolous investments that will create no (or even negative) value for shareholders moving forward? For instance, if a company spends $1 million on a new factory and it is able to crank out an additional $500,000 in profits the next year, the result is a 50% annual return on capital. That is outstanding. It says management knows how to spend YOUR shareholder money to create added value.
So Greenblatt wondered how much money you would make if you invested ONLY in good companies (those with a high return in invested capital) that trade for a bargain price (companies with high earnings yields). To answer that question, he researched the historical returns of the stocks his magic formula would have identified. Specifically, he went back and examined the top 3,500 American stocks (from your large behemoths like Microsoft on down to microcap companies with market caps of $50 million) from 1988-2004, according to his formula’s ranking system. He ranked each stock in terms of earnings yield and return on capital – from 1 to 3,500. The idea was to invest in the companies with the best combined score – those with the highest earnings yield AND the highest return on capital. So if a company ranked 100th in terms of earnings yield and 50th in terms of return on invested capital, it got a score of 150.
After generating a score for each company, Greenblatt created a portfolio of the top 30 companies. Greenblat created a new “Top 30” at the beginning of every year within his test, and then calculated the return an investor would have received by investing in each year’s top-30 stocks. From 1988-2004, if you had bought the top 30 companies generated every year using Greenblatt’s formula, you would have averaged a 30.8% return for 17 years. During that same time frame, the market averaged a 12.3% return. Moreover, there was never a 3-year period between 1988 and 2004 where this portfolio of 30 solid, bargain stocks was not profitable, nor a 3-year period in which it failed to beat the return of the S&P 500. An $11,000 investment in 1988 in Greenblatt’s magic formula stocks would have been worth over $1 million by 2004.
As a small-cap specialist, I was particularly intrigued by the fact that the small-cap value stocks within Greenblatt’s system dramatically boosted the overall results. For example, when Greenblatt excluded the smallest 2,500 stocks from his sample universe of 3,500, he discovered that his magic-formula portfolios produced an annual return of “only” 22.9% – still far better than the S&P 500’s, but the not nearly as good as the 30.8% annual returns that resulted when the mid- and small-cap stocks were included. So I wondered, what small-cap companies in today’s market would meet Greenblatt’s stringent value criteria? I ran some numbers of my own, and came up with 10 companies that had at least a 25% return on capital and an earning yield north of 9%. Check ‘em out … here.
You will notice immediately that most of the stocks in the table above have been performing very poorly all year. That should be no great surprise. You do not find value stock on the “New Highs” list – value always dwells among the stock market’s worst performing stocks. The trick, of course, is to identify the ones that will soon begin to perform well, and that is where Greenblatt’s magic formula comes in handy. Over the coming weeks and months, I will be tracking these 10 companies – and many others like them – to seek out some great value investments in the places where Wall Street’s big boys rarely bother to look. And we will apply Greenblatt’s magic formula to the research processes we already conduct.
Joel Greenblatt is no doubt one of the finest investors of all time. But unless you are a money manager, run a hedge fund or follow the market every day, there is a good chance you have never heard of him before today’s essay. He is not as high profile as Peter Lynch. And he is not quoted like Buffett or Templeton. But he is every bit as successful. And his investment theories are priceless. You would do well to follow them. In fact, if you did, I cannot imagine you would ever lose money.
[Note: Greenblatt has authored a terrific book about his magic formula entitled, The Little Book that Beats the Market. He has also created a Web site dedicated to the process.]Link here (scroll down to piece by James Boric).
THE STORY OF THE WORLD WAR I CHRISTMAS TRUCE
The Christmas Truce, which occurred primarily between the British and German soldiers along the Western Front in December 1914, is an event the official histories of the “Great War” leave out, and the Orwellian historians hide from the public. Stanley Weintraub has broken through this barrier of silence and written a moving account of this significant event by compiling letters sent home from the front, as well as diaries of the soldiers involved. His book is entitled Silent Night: The Story of the World War I Christmas Truce. The book contains many pictures of the actual events showing the opposing forces mixing and celebrating together that first Christmas of the war. This remarkable story began to unfold, according to Weintraub, on the morning of December 19, 1914.
Weintraub reports that the French and Belgians reacted differently to the war and with more emotion than the British in the beginning. The war was occurring on their land and “The French had lived in an atmosphere of revanche since 1870, when Alsace and Lorraine were seized by the Prussians” in a war declared by the French. The British and German soldiers, however, saw little meaning in the war as to them, and, after all, the British King and the German Kaiser were both grandsons of Queen Victoria. Why should the Germans and British be at war, or hating each other, because a royal couple from Austria were killed by an assassin while they were visiting in Serbia? However, since August when the war started, hundreds of thousands of soldiers had been killed, wounded or were missing by December 1914. It is estimated that over 80,000 young Germans had gone to England before the war to be employed in such jobs as waiters, cooks, and cab drivers and many spoke English very well. It appears that the Germans were the instigators of this move towards a truce. So much interchange had occurred across the lines by the time that Christmas Eve approached that Brigadier General G.T. Forrestier-Walker issued a directive forbidding fraternization. Later strict orders were issued that any fraternization would result in a court-martial.
As night fell on Christmas Eve the British soldiers noticed the Germans putting up small Christmas trees along with candles at the top of their trenches and many began to shout in English “We no shoot if you no shoot.” The firing stopped along the many miles of the trenches and the British began to notice that the Germans were coming out of the trenches toward the British who responded by coming out to meet them. They mixed and mingled in No Man’s Land and soon began to exchange chocolates for cigars and various newspaper accounts of the war which contained the propaganda from their respective homelands. Many of the officers on each side attempted to prevent the event from occurring but the soldiers ignored the risk of a court-martial or of being shot.
Some of the meetings reported in diaries were between Anglo-Saxons and German Saxons and the Germans joked that they should join together and fight the Prussians. The massive amount of fraternization, or maybe just the Christmas spirit, deterred the officers from taking action and many of them began to go out into No Man’s Land and exchange Christmas greetings with their opposing officers. Each side helped bury their dead and remove the wounded so that by Christmas morning there was a large open area about as wide as the size of two football fields separating the opposing trenches. The soldiers emerged again on Christmas morning and began singing Christmas carols, especially “Silent Night”.
Beginning with the French Revolution, one of the main ideas coming out of the 19th century, which became dominant at the beginning of the 20th century, was nationalism with unrestrained democracy. Two soldiers, one British and one German, both experienced the horrors of the trench warfare in the Great War and both wrote moving accounts which challenged the idea of the glory of a sacrifice of the individual to the nation in an unnecessary or unjust war. The British soldier, Wilfred Owen, wrote a famous poem before he was killed in the trenches seven days before the Armistice was signed on November 11, 1918. The German soldier was Erich M. Remarque who wrote one of the best anti-war novels of all time, All Quiet On The Western Front, which was later made into an American movie that won the Academy Award in 1929 for “Best Movie”. He also attacked the idea of the nobility of dying for your country in a war and he describes the suffering in the trenches. I would imagine that the Christmas Truce probably inspired English novelist and poet Thomas Hardy to write a poem about World War I entitled “The Man He Killed”, which ended, “Yes, quaint and curious war is!, You shoot a fellow down, You’d treat if met where any bar is, Or help to half-a-crown.”
The last chapter of Weintraub’s book, entitled “What If – ?”, is counterfactual history at its best. He sets out what he believes the rest of the 20th century would have been like if the soldiers had been able to cause the Christmas Truce of 1914 to stop the war at that point. Like many other historians, he believes that with an early end of the war in December of 1914, there probably would have been no Russian Revolution, no Communism, no Lenin, and no Stalin. Furthermore, there would have been no vicious peace imposed on Germany by the Versailles Treaty, and therefore, no Hitler, no Nazism and no World War II. With the early truce there would have been no entry of America into the European War and America might have had a chance to remain, or return, to being a Republic rather than moving toward World War II, the “Cold” War, and our present status as the world bully. The Great War killed over 10 million soldiers and Weintraub states, “Following the final Armistice came an imposed peace in 1919 that created new instabilities ensuring another war.” This next war killed more than 50 million people, over half of which were civilians. He writes:
“To many, the end of the war and the failure of the peace would validate the Christmas cease-fire as the only meaningful episode in the apocalypse. It belied the bellicose slogans and suggested that the men fighting and often dying were, as usual, proxies for governments and issues that had little to do with their everyday lives. A candle lit in the darkness of Flanders, the truce flickered briefly and survives only in memoirs, letters, song, drama and story.”Link here.
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