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THE ANCIENT CHINESE LIBERTARIAN TRADITION
The first libertarian intellectual was Lao-tzu, the founder of Taoism. Little is known about his life, but apparently he was a personal acquaintance of Confucius in the late sixth century BC and like the latter came from the state of Sung and was descended from the lower aristocracy of the Yin dynasty. Unlike the notable apologist for the rule of philosopher-bureaucrats, however, Lao-tzu developed a radical libertarian creed. For Lao-tzu the individual and his happiness was the key unit and goal of society. If social institutions hampered the individual’s flowering and his happiness, then those institutions should be reduced or abolished altogether. To the individualist Lao-tzu, government, with its “laws and regulations more numerous than the hairs of an ox,” was a vicious oppressor of the individual, and “more to be feared than fierce tigers.”
Government, in sum, must be limited to the smallest possible minimum. “Inaction” was the proper function of government, since only inaction can permit the individual to flourish and achieve happiness. Any intervention by government, Lao-tzu declared, would be counterproductive, and would lead to confusion and turmoil. After referring to the common experience of mankind with government, Lao-tzu came to this incisive conclusion: “The more artificial taboos and restrictions there are in the world, the more the people are impoverished. The more that laws and regulations are given prominence, the more thieves and robbers there will be.” The wisest course, then, is to keep the government simple and for it to take no action, for then the world “stabilizes itself”. As Lao-tzu put it, “Therefore the Sage says: I take no action yet the people transform themselves, I favor quiescence and the people right themselves, I take no action and the people enrich themselves.”
Lao-tzu arrived at his challenging and radical new insights in a world dominated by the power of Oriental despotism. What strategy to pursue for social change? It surely was unthinkable for Lao-tzu, with no available historical or contemporary example of libertarian social change, to set forth any optimistic strategy, let alone contemplate forming a mass movement to overthrow the State. And so Lao-tzu took the only strategic way out that seemed open to him, counseling the familiar Taoist path of withdrawal from society and the world, of retreat and inner contemplation.
I submit that while contemporary Taoists advocate retreat from the world as a matter of religious or ideological principle, it is very possible that Lao-tzu called for retreat not as a principle, but as the only strategy that in his despair seemed open to him. If it was hopeless to try to disentangle society from the oppressive coils of the State, then he perhaps assumed that the proper course was to counsel withdrawal from society and the world as the only way to escape State tyranny. That retreat from the State was a dominant Taoist objective may be seen in the views of the great Taoist Chuang-tzu (369 BC - 286 BC) who, two centuries after Lao-tzu, pushed the master’s ideas of laissez faire to their logical conclusion: individualist anarchism.Link here.
HMMM. WHAT IS THIS ALTERNATIVE TAX? HEY, WAIT! OUCH!
Do House Republicans harbor some sort of deep rage against moderately affluent families with lots of children? Maybe not, but take a close look at the $56 billion package of tax cuts that House leaders hope to pass before Christmas, and you have to wonder. If it were to become law, any family with two or more children and an income of $100,000 ought to run for the hills. Sift out dozens of nickel-and-dime provisions, and the essence of the House bill comes down to one provision that it includes and one that it omits. What the bill includes is a two-year extension of President Bush’s tax cuts for stock dividends and capital gains. Those provisions do not expire until the end of 2008, but the extension would cost $20 billion and is by far the most expensive provision in the House bill. More striking is what the bill does not include: any provision to prevent a surge in the alternative minimum tax, or A.M.T., next year.
The A.M.T. is a topic that makes most people’s eyes glaze over until it hits them personally. And if Congress makes no change, it will hit about 15 million new households in 2006 – with a surprise tax surcharge averaging about $2,000. The A.M.T. was created in 1969 to stop the very richest taxpayers from using tax breaks to avoid all or most of their income taxes. But it is set to engulf millions of families with fairly modest incomes, for two reasons: it is not indexed to inflation and it has a perverse interaction with President Bush’s tax cuts of 2001 and 2003. They lowered normal income taxes but not the A.M.T. If the A.M.T. turns out to be higher than the ordinary income tax, a person has to pay the higher amount.
For several years now, Congress has ducked the problem by passing temporary fixes that slowed down the expansion of the A.M.T. But those remedies are more expensive each year, and the one for 2006 would cost at least $27 billion. If Congress does nothing, the A.M.T. will kick in for millions of families, preventing them from taking exemptions for each of their children, deductions for state and local taxes and scores of other common tax breaks. As a result, its biggest impact would be on a classic Republican demographic: affluent families with roomy homes, two cars, high-achievers and lots of children. Think of leafy suburbs.
The A.M.T. becomes relevant for married couples who make as little as $58,000 a year. It applies a flat rate of 26% on the first $175,000 in earnings, and it strips out most standard tax breaks. According to calculations by the Tax Policy Center, here is what would happen for 2006 tax bills if no changes take place: 1.) 30% of the 12 million households that earn between $75,000 and $100,000 – about 3.7 million tax filers – would be hit with a tax increase. Since only 1% of people in that income range were affected in 2005, a lot of them would be in for a shock. 2.) Married couples with two or more children would be the most vulnerable – about 73% with incomes between $75,000 and $100,000 would face a tax increase. 3.) The total number of people paying the A.M.T. would shoot from 3.5 million this year to 18.9 million in 2006 and 30.9 million in 2010.Link here.
LAND-USE BATTLE RAGES IN FLORIDA
It is across the inlet from Palm Beach, but Riviera Beach, Florida – mostly black, blue-collar and with a large industrial and warehouse district – could be a continent away from the Fortune 500 and Rolls-Royce set. But its fortunes may soon change. In what has been called the largest eminent-domain case in the nation, the mayor and other elected leaders want to move about 6,000 residents, tear down their homes and use the emptied 400-acre site to build a waterfront yachting and residential complex for the well-to-do. The goal, Mayor Michael Brown said during a public meeting in September, is to “forever change the landscape” in this municipality of about 32,500. The $1 billion plan, local leaders have said, should generate jobs and haul Riviera Beach’s economy out of the doldrums.
Opponents, however, call the plan a government-sanctioned land grab that benefits private developers and the wealthy. “What they mean is that the view I have is too good for me, and should go to some millionaire,” said Martha Babson, 60, a house painter who lives near the Intracoastal Waterway. “This is a reverse Robin Hood,” said state Rep. Ronald Greenstein.
With many Americans sensitized to eminent-domain cases after a much-discussed ruling by the Supreme Court in June, property-rights organizations have been pointing to redevelopment plans in this Palm Beach County town as proof that laws must be changed to protect homeowners and businesses from the schemes of politicians. “You have people going in, essentially playing God, and saying something better than these people’s homes should be built on this property,” said Carol Saviak, executive director of the Coalition for Property Rights, based in Orlando. “That’s inherently wrong.”
“Unfortunately, taking poorer folks’ homes and turning them into higher-end development projects is all too routine in Florida and throughout the country,” said Scott Bullock, a senior attorney for the Institute for Justice, based in Washington, D.C. “What distinguishes Riviera Beach is the sheer scope of the project, and the number of people it displaces.”Link here.
DUE DILIGENCE EXPERTS SAY BANKING SECRECY IS NO OBSTACLE TO HUNTING DOWN FRAUD
Do so-called “secrecy laws” really make it nigh on impossible to obtain details of fraudulent activity in an offshore jurisdiction? Not according to a panel of lawyers and investigators who regularly dig through offshore transactions to try and pin down alleged con artists. The panel, speaking at a due diligence conference in Miami, organized by investigative reporter and Offshore Alert publisher David Marchant, outlined the various ways to track down evidence, and intelligence that can be used as a stepping stone to gathering information that will hold up in a court of law.
Some of the means used follow standard legal channels like court orders allowing for discovery or a search of public files. Other more innovative ways used by professional investigators are also used to turn up harder-to-obtain information – including going through the trash. Cheryl Cartwright, a partner with Bahamas law firm Callenders & Co., said there are numerous public channels now to source information, but she would also do what she could to solicit the help of any institution involved, say a bank, in the case under investigation. “I would suggest they be careful with any transfer of funds etc. as they could be held liable as a constructive trustee,” she told the audience.
Various initiatives in recent years pushing for greater transparency of corporate information, especially banking and property records, has gone a long way to create greater information access in the so-called offshore world, the group said. But you have to have legitimate grounds for seeking the information, especially if it isn’t publicly available. “You have to make a specific request, it cannot be a fishing expedition,” said Mario A. Vlieg, a Panama-based lawyer with Mossack Fonseca & Co.
“Offshore”, a term that generally makes regulators in these domiciles see red because of its negative connotations, is defined by U.S. tax authorities as a jurisdiction that offers financial secrecy laws, securing the privacy of client information, in an effort to attract investment from outside its borders. The term continues to be used, many would say unfairly, despite efforts by a significant number of the so-called jurisdictions, including Bermuda, to follow the letter of international regulations, making investments from dodgy dealers unwelcome. The tag may continue to be applied, usually to small island territories, because fraudsters have not stopped trying to hide or launder ill-gotten gains through bank accounts with financial institutions based in these locations.Link here.
THE COST OF HAVING A STROKE IS HIGHWAY ROBBERY
According to PBS’s “American Experience”, Chicago’s first crime syndicate boss back in the 1800s, “King Mike” McDonald, coined the phrase, “There is a sucker born every minute.” King Mike’s operation included enticing an endless stream of customers to his gigantic, four-story gambling house known as “The Store”. This casino was located close to Chicago’s famous City Hall, thus providing a convenient location for prominent politicians of the day to fraternize with Mike’s gambling customers. To make sure he could run his various business enterprises without interference, King Mike gained the cooperation of the police force, powerful politicians, and an army of what the PBS writers described as “skilled confidence men to run his rigged games.” In short, the secret of ol’ Mike’s success was the gift of knowing how to control and use the political system to his advantage.
Mike’s contempt for his fellow man, however, seeing them only as marks to be schmoozed and suckered into crooked business deals, is sadly emulated by many so-called “legitimate” business people today. Some of us see no difference between crime boss King Mike’s schmoozing with Chicago’s City Hall power elite at his girls and gambling emporium and Big Pharma and its health industry associates with their Gucci-shoe-clad armies of lobbyists schmoozing in the cloakrooms with Washington DC’s political power brokers or hiring cheerleaders as drug sales personnel to add a little sex appeal while pitching the virtues of drugs directly to doctors. The drug and health products industry is the largest block of influence peddlers in Washington as well as the most successful.
While we do not know what kind of murder and mayhem existed in Chicago, thanks to King Mike’s reign of power, we do know the body count thanks to modern medicine’s control of the system and we also know the seamier side of how the system is actually run. Most of us in the health freedom movement are also eyewitnesses, if not direct victims, of the suffering imposed by modern medicine’s monopoly control. News reports now disclose how most published scientific studies are false. Whistleblowers in the FDA report the agency is bowing to Big Pharma at the cost of thousands of pill-takers lives. Whistleblowers in the drug industry itself and even former editors of prestigious medical journals or faculty members of prominent medical schools now testify in Congress about their own eye witness accounts or write best-selling book exposés condemning the very system they work for.
My book, Death by Modern Medicine, covers some of the details of how 784,000 die every year thanks to participation in America’s system of modern medicine, and discusses a myriad of other sorry aspects of the system as well. However, it barely scratches the surface on the many ways modern medicine has failed us in its mission to heal us. For example, how we treat strokes is just one example of why so many health freedom fighters are outraged at the way modern medicine treats the sick while it loots our pocketbooks. The underlying point of this column is to bring to your attention that if you follow modern medicine’s protocols in using these products, which are the only “official” treatment for stroke, your drug bill will be sky high. Those of us who use and advocate natural healing arts modalities can see the lunacy of paying such outrageous prices for products that offer little true healing and at the same risking life and limb in the process.Link here.
PROPOSED CYBERCRIME TREATY A BACKDOOR ASSAULT ON U.S. SOVEREIGNTY
An internationalist assault on the sovereignty of the U.S. and the privacy of U.S. citizens is currently awaiting action by the full Senate. The Council of Europe Convention on Cybercrime is being aggressively pushed by Senate Foreign Relations Chairman Richard Lugar (R-Indiana), who reported the treaty out from his committee in early November. That should come as little surprise, in that Lugar has also been a leading proponent of the better-known Law of the Sea Treaty (LOST), another key building-block in the structure of world government.
Originally conceived as a tool to facilitate international cooperation in the pursuit of computer hackers and the like, the Cybercrime Treaty evolved during 15 years of negotiations to encompass any criminal offense that involves electronic evidence – which in the 21st century is essentially limitless. As written, it could require more surveillance on Americans who have been accused of violating the laws of foreign countries – even if they have not violated U.S. law. Treaty cheerleaders paint menacing pictures of hackers and child pornographers. But in reality the Convention is drafted so broadly that it encompasses virtually every area of law where the possibility exists of computerized evidence. That could affect thousands of innocent people, including not only political dissidents, but also the politically incorrect.
Fortunately, one heroic, albeit currently anonymous, conservative senator has placed a “hold” on this Cybercrime Convention, a procedural maneuver that prevents an immediate, unannounced vote on the floor of the whole Senate. Conservatives concerned with sovereignty and the Bill of Rights need to both become aware and raise others’ awareness of the dangers posed by the Cybercrime Treaty, lest the Senate acquiesce in this subjugation of Americans to European-style “hate speech” laws through an electronic back door.
Lugar’s pro-treaty rhetoric belies the broad, expansionary nature of the treaty. He claimed last year, in opening the sole hearing on the treaty, that “Prompt ratification … will help advance the security of Americans.” That is simply not the case when one considers that the treaty could allow European or even Chinese Communist agents to electronically spy on innocent Americans. The Convention on Cybercrime would be highly detrimental to American sovereignty and free people everywhere. The Senate should under no circumstances blindly approve such a document.Link here.
THE GOLD STANDARD GETS NO RESPECT
There is a lot of dumb stuff written about the gold standard and the Great Depression these days. I open the paper yesterday and I read a column by Robert Samuelson in The Washington Post, “Gold’s Enduring Mystery”. Samuelson goes on to say some things about gold’s role as money for much of recorded history. Then he gets to the Great Depression and he enters the realm of the absurd. He writes, “But the gold standard’s very rigidity led to its collapse in the Great Depression. Too little gold fostered banking and currency crises.” Tsk, tsk. Poor gold! Now the blame for the Great Depression lies at your feet. Truly, the victors write history. For here is history from the view of a paper money enthusiast.
Such a view is not uncommon. Our own newly appointed Fed chief, Ben Bernanke, also holds such views. Bernanke is a Great Depression buff, just as people are Civil War buffs. It fascinates him. He studies it as a man might pick over the remains of some archeological dig. He even began a book about it. Greg Ip’s piece in the Wall Street Journal summarizes some of Bernanke’s views on the Great Depression. On the top of the list: “Beware of outdated orthodoxies such as the gold standard.” To the world-improver set, confident they can push the right buttons and pull the right levers, the gold standard is nothing more than a straitjacket. To those who see gold’s charms, that is precisely its chief merit. You see, the gold standard checks the creation of new money.
If every dollar must be backed by a certain amount of gold, then you cannot create money out of thin air. The gold standard says you must have the gold first. Governments find it harder to wage war, dole out entitlements and build public works with a gold standard tying them down. Banks cannot lend as much money; hence they cannot make as much money. This is why the banking interests of this country backed the creation of the Federal Reserve. They appreciated the value of a good cartel.
The problem, Mr. Sameulson, is not that there was not enough gold. The problem was too many dollars. When Roosevelt ordered Americans to surrender their gold coins in the spring of ‘33, he was not saving capitalism. He was burying it. Bernanke may have studied the Great Depression, but he has read the wrong books. He should give a look at Murray Rothbard’s America’s Great Depression. Rothbard’s examination is clear and logical, without the trappings of mathematics that otherwise pollute economic texts today.
The gold standard is not to blame for the crises of the past. They were caused by our inability to keep the promise to redeem in gold. And, secondly, that far from causing crises, the gold standard kept in check the growth in money. As a result, the gold standard served to stem unsustainable booms and avoid the necessary busts that follow.Link here.
SECRET ID LAW TO GET HEARING
Although John Gilmore lives just five blocks from San Francisco’s Department of Motor Vehicles, his driver’s license is expired. On purpose. The outspoken, techno-hippie, wealthy civil libertarian does not want to give his Social Security number to the DMV. Neither will he show his driver’s license at airports, or submit to routine security searches. This refusal to obey the rules led him to file suit against the Bush administration (Gilmore v. Gonzales) after being rebuffed at two different airports on July 4, 2002, when he tried to fly without showing identification. One airline offered to let Gilmore fly without showing ID, but only if he underwent more intensive security screening, which he declined.
On December 8, Gilmore and his lawyers will get 20 minutes in front of the 9th U.S. Circuit Court of Appeals to make their argument against identification requirements and government secrecy, in a case that time and shifting public opinion has transformed from a quirky millionaire’s indignant protest into a closely watched test of the limitations of executive branch power. “The nexus of the case has always been the right to travel,” Gilmore said. “Can the government prevent Americans from moving around in their own country by slapping any silly rules on them – you have to show ID, you have to submit to searches, you have to wear a yarmulke?” Gilmore has sunk thousands of dollars into fighting identification requirements, but he also personally committed to not traveling in the U.S. if he has to show identification. So Gilmore has not taken a train, an intercity bus or a domestic flight since July 4, 2002. He still flies internationally.
Gilmore has long been a prominent figure in the privacy and civil liberties communities – he co-founded the Electronic Frontier Foundation. But many civil liberties advocates begged Gilmore not to file suit in 2002 because they were certain he would lose and set bad case law, according to Gilmore’s lawyer, Jim Harrison. Things might be different in late 2005. “The same people that were telling John that you really should not do this while the country is inflamed are the same ones that filed friend-of-the-court briefs to the 9th Circuit,” Harrison said.Link here.
WHERE DID THE MONEY GO?
You win a big judgement, but the defendant has tucked his assets into an offshore account. Collecting will be a challenge.
When “Ms. X” pursued a civil case against John Gordon Jones, whom she accused of raping her, a judge awarded her $6 million in 2002. When the woman tried to collect, however, she discovered that Jones had transferred the bulk of his $8 million in assets to accounts in the Cook Islands – a favorite South Pacific haven of the wealthy to keep their fortunes beyond the reach of creditors, lawyers and ex-wives.
With Cook Islands law designed to attract business from people who want to protect their assets from judgments, it would have been next to impossible for Ms. X to collect her money in a legal action there. So she sued the Cook Islands bank that held the Jones trust in the U.S., winning a $3 million default judgment. But this judgment was no more enforceable than the earlier one. Reason? This bank had no discernible assets in the U.S. to attach. Needless to say, offshore banks in asset havens usually do not maintain correspondent balances in New York City. They do business with a daisy chain of other offshore banks.
Getting a court order forcing Jones to cough up his offshore assets was the next step. But such orders are neither quick in coming nor automatically granted. In the end Ms. X settled with Jones for an undisclosed amount. Then she went after some peripheral players. A suit against the financial consultant she blames for helping arrange the offshore scheme, Robert Lambert, got her a $60,000 settlement. Another suit, against Miami asset-protection promoters Patricia Donlevy-Rosen and Howard Rosen, was settled for $47,500. To consultant Lambert, mastermind of many offshore trusts, there is nothing wrong with shielding clients who have suffered financial reversals from creditors.
Yes, there are legitimate domestic asset-protection schemes to fend off ruinous legal awards against doctors hit by medical malpractice claims, executives by shareholder suits, spouses by divorce. But from the point of view of the plaintiffs, asset-protection trusts frustrate the public policy of accountability enshrined in common law. According to a Government Accountability Office study last January, only 7%, or $40 million, of the $568 million owed in restitution in five unnamed criminal cases – much of it tucked offshore – has been paid. Impenetrable as offshore trusts may be, their owners still are subject to U.S. law. That U.S. citizens must declare income from anywhere in the world, and the possibility that the defendant could get a contempt-of-court citation for failing to disgorge funds from offshore accounts, give plaintiffs some leverage. Here are tips for people trying to collect from wealthy, secretive deadbeats.Link here.
So you are the defendant.
Here are some legitimate maneuvers for those worried they will be targeted by creditors in the future. Put a chunk of your net worth into a big house in one of eight jurisdictions (Florida, Texas, Arkansas, Iowa, Kansas, Oklahoma, South Dakota and Washington, D.C.) and creditors cannot get to it. Do this well in advance of trouble. Alaska, Delaware, Nevada, Rhode Island, Utah, Oklahoma and Missouri offer junior versions of offshore asset-protection trusts. While not as formidable as the overseas kind, they slow down creditors with one more layer of legal hassles. And tax-deferred IRAs and 401(k)s are exempt from creditor judgments, as are 529 college savings plans (almost never taxed). If filing for bankruptcy, you must have started funding one at least two years prior to prevent problems.Link here.
THERE IS NO SUCH THING AS A “FAIR TAX”
Syndicated talk show host Neal Boortz and Congressman John Linder (R-Georgia) have joined forces to write The FairTax Book – a proposal to replace the current system of federal income taxes, corporate taxes, Social Security and Medicare taxes, capital gains taxes, gift taxes, and estate taxes with a national sales tax on new goods and services that does not reduce the government’s overall tax revenue. They have never been so right and never been so wrong.
Former attorney Boortz is the well-known Atlanta-based “libertarian” talk show host who, like Rush Limbaugh and Sean Hannity, spends an inordinate amount of time on the evils of liberalism, the Left, and the Democratic Party while turning a blind eye to big government Republicans and supporting Bush’s “War on Terror”. Boortz has drawn fire from Christians for his support of abortion and gay rights. Former dentist Linder represents Georgia’s Seventh District, which includes the highly gerrymandered parts of five counties. It is interesting to note that his rating on The New American magazine’s “Conservative Index” for his term in the 108th Congress was 45. For this same period, the universally acknowledged “taxpayer’s friend,” Ron Paul (R-Texas), scored a perfect 100.
Boortz is certainly right when he describes the evils of our current tax system. The FairTax Book contains whole chapters on the hidden evils of the withholding tax, corporate taxes, the cost of compliance with the tax code, the embedded costs of taxes in all consumer goods and services, and corporations moving offshore (“They’re moving for one simple reason: to escape a punishing tax structure here at home.”). The abuses of the IRS merit not only a full chapter, but are mentioned throughout the book. But rather than just calling for the elimination of Social Security and Medicare taxes, withholding taxes, corporate taxes, gift taxes, estate taxes, capital gains taxes, and personal income taxes, Boortz proposes to replace all of these taxes with the FairTax.
In addition to the unsubstantiated claims that Boortz makes for the FairTax, there are three ridiculous lies of the FairTax Plan, including that the FairTax would abolish the IRS. Besides the fact that it does not lower the amount of taxes seized from the taxpayers by the federal government and is based on unsubstantiated claims and ridiculous lies, the FairTax is fraught with other problems. Since Boortz never gets to the bad, I here present 17 problems with the FairTax. The FairTax is not the solution. And because it allows the federal government to confiscate the wealth of American citizens less intrusively and more efficiently, it will become part of the problem – the problem of the ever-increasing, ever-intruding, ever-destroying welfare/warfare state. The FairTax is a fraud. The antidote to the fraud of the FairTax is a good dose of the wisdom of Murray Rothbard, “There can be no such thing as ‘fairness in taxation.’ Taxation is nothing but organized theft, and the concept of a ‘fair tax’ is therefore every bit as absurd as that of ‘fair theft.’”Link here.
8TH ANNIVERSARY OFFSHORE PILOT QUARTERLY ISSUE COVERS PANAMA FOUNDATIONS
This issue marks the 8th anniversary of the Offshore Pilot Quarterly and I would venture to suggest that anyone seeking an introduction to the world of offshore financial services (with insight into some of the quirks and contradictions that are an essential part of it) will find an ample source of information in the back issues of the OPQ. Each year the OPQ has covered a wide range of issues, some of which have been recurring themes such as the combined efforts of the EU and the OECD to curb many of the activities of the offshore financial services centers. Other topics have included how to choose the right professionals and avoid the swindlers, regulatory and supervisory issues, the emergence and the future of offshore centers, money laundering, trusts, trustees and trust companies, succession planning, asset protection, bearer shares, tax evasion, and banking secrecy.
The very first OPQ issue concentrated on Panama as an offshore center and so will this one. In the past eight years the progress made in raising Panama’s profile as an offshore centre has been remarkable. Controls and supervision have been significantly strengthened but perhaps the most progress has been made in the area of banking. Maximilien Robespierre said that when a banker jumps out of a window, jump after him because that is where the money is. But in Panama such a banker is probably trying to escape from an angry mob who have been trying to get their bank accounts opened. The process can be arduous and reflects the profound changes which have taken place since the laissez faire days of 20 years ago. Government has imposed stringent rules regarding the due diligence required of banks and, indeed, trust companies.
Although trusts and foundations can open bank accounts, own real estate and manage investment accounts, many people want their testamentary affairs (which is what trusts and foundations deal with) to be as private as possible. They prefer to submit company paperwork rather than foundation and trust information. After all, practically every business or contractual relationship, bar marriage, can be entered into by companies. But unless you will be personally taking charge, the service provider representing your company needs to have both the experience and the qualifications that will enable your best interests to be served.
Bearing in mind that the offshore company is usually central to most offshore business plans, the quality of administration can be very important. All too often the unsuspecting and unknowing client is assured that no problem is insurmountable by the questionably-qualified company manager. A client might think that the agent really is a magician who can produce a rabbit from a hat, but the reality, of course, is often the opposite.
This brings us to Panama’s trust and foundation laws. Banking and offshore companies have been the superstars of Panama’s offshore services whereas in the past trusts and foundations have taken on the role of Cinderella. This is changing as strategies become increasingly sophisticated. A trust today can be established for any lawful purpose and execution of the trust deed can remain private unless real estate in Panama forms part of the corpus when the trust’s existence must be recorded at the Public Registry.
The trust falls within the ambit of the privacy protection given to other financial services in Panama. Trustees (including, where appropriate, their employees) are bound by strict confidentiality and breaches can mean both prison sentences and substantial fines. Settlors, trustees and beneficiaries can be companies rather than individuals if such arrangements will be conducive and even although the trust is managed in Panama, the law governing its administration can be that of another jurisdiction. Trusts created under a foreign law can, if permitted, adopt Panamanian law (but the formalities applicable to Panamanian trusts must first be complied with). In all other material respects Panamanian trusts are indistinguishable from those of most jurisdictions, even if they are governed by civil law and not common law.
The foundation law in Panama, however, is far more recent. What is the difference between a trust and a Panamanian foundation? This question is frequently asked. I often respond by saying that the foundation suffers from an identity crisis because it thinks like a trust but has the personality of a company except that instead of having shareholders, it has beneficiaries. It cannot, however, conduct commercial activities in its own name and normally uses a company which it controls 100% for such purposes. Being a fiduciary arrangement, it is very similar to a trust, having a founder (settlor), charter and regulations (trust deed), foundation council (trustee) and beneficiaries. Like the Panamanian company and trust, certain of the foundation’s activities can be kept confidential. Although the charter is required to be recorded at the Public Registry, the accompanying regulations (detailing such matters as information about beneficiaries, benefits and the main powers given to either the foundation council or other parties) are not. Once the charter is registered, the foundation in Panama takes on the complexion of a corporate body.
The only details regarding the foundation which cannot be confined to the private regulations, and which will appear on the Public Registry records, are the name of the foundation, its place of domicile, details of the initial corpus, the names and addresses of foundation council members (either 3 individuals or one or more corporations), details of the local Registered Agent (must be either a lawyer or law firm in Panama), the objectives, its duration (can be perpetual), how (but not their names) beneficiaries are selected, confirmation that the charter can be modified and, finally, the manner in which liquidation of the foundation is to be dealt with in the event of dissolution. By switching foundation council members for directors and noting many other similarities, it is easy to see how the Panamanian foundation has a DNA similar to a company but is readily identifiable with a trust also.Link here and here (PDF file).
RICHARD RAINWATER’S PROPHECY OF DOOM
Richard Rainwater does not want to sound like a kook. But he is about as worried as a happily married guy with more than $2 billion and a home in Pebble Beach can get. Americans are “in the kind of trouble people shouldn’t find themselves in,” he says. He is just wary about being the one to sound the alarm.
Rainwater is something of a behind-the-scenes type. He counts President Bush as a personal friend but dislikes politics, and frankly, when he gets worked up, he says some pretty far-out things that could easily be taken out of context. Such as: An economic tsunami is about to hit the global economy as the world runs out of oil. Or a coalition of communist and Islamic states may decide to stop selling their precious crude to Americans any day now. Or food shortages may soon hit the U.S. Or he read on a blog last night that there is this one gargantuan chunk of ice sitting on a precipice in Antarctica that, if it falls off, will raise sea levels worldwide by two feet – and it is getting closer to the edge. … And then he will interrupt himself: “Look, I’m not predicting anything. That’s when you get a little kooky-sounding.”
Rainwater is no crackpot. But you do not get to be a multibillionaire investor – one who has more than doubled his net worth in a decade – through incremental gains on little stock trades. You have to push way past conventional thinking, test the boundaries of chaos, see events in a bigger context. You have to look at all the scenarios, from “A to friggin’ Z,” as he says, and not be afraid to focus on Z. Only when you have vacuumed up as much information as possible and you know the world is at a major inflection point do you put a hell of a lot of money behind your conviction.
Such insights have allowed Rainwater to turn moments of cataclysm into gigantic paydays before. In the mid-1990s he saw panic selling in Houston real estate and bought some 15 million square feet. Now the properties are selling for three times his purchase price. In the late 1990s, when oil seemed plentiful and its price had fallen to the low teens, he bet hundreds of millions – by investing in oil stocks and futures – that it would rise. A billion dollars later, that move is still paying off. “Most people invest and then sit around worrying what the next blowup will be,” he says. “I do the opposite. I wait for the blowup, then invest.”
The next blowup, however, looms so large that it scares and confuses him. For the past few months he has been holed up in hard-core research mode – reading books, academic studies, and, yes, blogs. Every morning he rises before dawn and spends four or five hours reading sites like LifeAftertheOilCrash.net or DieOff.org, obsessively following links and sifting through data. How worried is he? He has some $500 million of his $2.5 billion fortune in cash, more than ever before. “I’m long oil and I’m liquid,” he says. “I’ve put myself in a position that if the end of the world came tomorrow I’d kind of be prepared.”
His instincts tell him that another enormous moneymaking opportunity is about to present itself, what he calls a “slow pitch down the middle.” But, at 61, wealthier and happier than ever before, Rainwater finds himself reacting differently this time. He is focused more on staying rich than on getting richer. But there is something else too: a sort of billionaire-style civic duty he feels to get a conversation started. As industry analysts debate whether the world’s oil production is destined to decline, the prospect makes him itchy.
“This is a nonrecurring event,” he says, “… now there’s the opportunity to do something based on a shortage of natural resources. Can you make money? Well, yeah. One way is to just stay long domestic oil. But there may be something more important than making money. This is the first scenario I’ve seen where I question the survivability of mankind. I don’t want the world to wake up one day and say, ‘How come some doofus billionaire in Texas made all this money by being aware of this, and why didn’t someone tell us?’”Link here.
LIVE TRACKING OF MOBILE PHONES PROMPTS COURT FIGHTS ON PRIVACY
Most Americans carry cellphones, but many may not know that government agencies can track their movements through the signals emanating from the handset. In recent years, law enforcement officials have turned to cellular technology as a tool for easily and secretly monitoring the movements of suspects as they occur. But this kind of surveillance – which investigators have been able to conduct with easily obtained court orders – has now come under tougher legal scrutiny. In the last four months, three federal judges have denied prosecutors the right to get cellphone tracking information from wireless companies without first showing “probable cause” to believe that a crime has been or is being committed. That is the same standard applied to requests for search warrants. The rulings, issued by magistrate judges in New York, Texas and Maryland, underscore the growing debate over privacy rights and government surveillance in the digital age.
With mobile phones becoming as prevalent as conventional phones (there are 195 million cellular subscribers in the U.S.), wireless companies are starting to exploit the phones’ tracking abilities. For example, companies are marketing services that turn phones into even more precise global positioning devices for driving or allowing parents to track the whereabouts of their children through the handsets. Not surprisingly, law enforcement agencies want to exploit this technology, too – which means more courts are bound to wrestle with what legal standard applies when government agents ask to conduct such surveillance.
Cellular operators like Verizon Wireless and Cingular Wireless know, within about 300 yards, the location of their subscribers whenever a phone is turned on. Even if the phone is not in use it is communicating with cellphone tower sites, and the wireless provider keeps track of the phone’s position as it travels. The operators have said that they turn over location information when presented with a court order to do so. The recent rulings by the magistrates, who are appointed by a majority of the federal district judges in a given court, do not bind other courts. But they could significantly curtail access to cell location data if other jurisdictions adopt the same reasoning. (The government’s requests in the three cases, with their details, were sealed because they involve investigations still under way.)Link here.
THE MURDER OF FREEDOM
“How should you understand reasons of State? You must learn, child, that what would be wrong for you or for any of the common people is not wrong in a great Queen such as I. The weight of the world is on our shoulders. We must be freed from all rules. Ours is a high and lonely destiny.” ~ the queen of Charn, in The Magician’s Nephew, by C. S. Lewis.
Why has it been so hard for the American freedom movement to achieve any lasting, meaningful victories? Is it because our enemies are so powerful? Is it because so few really desire freedom? Or is it just possible that the seeds of failure lie within the activists themselves? The battlefield on which we are fighting is the human mind. The State’s power rests primarily on the voluntary submission of its victims, and only secondarily on its guns. If any sizable minority of the American populace had a clear understanding of the principles of liberty and a firm resolve not to submit to unjust “laws”, their freedom could not be taken away. So the first order of business for the freedom movement must be to reclaim the territory of our own minds from the enemy.
How can the freedom movement ever have a hope of success so long as State worship maintains a grip on the minds of so many freedom activists? The essence of State worship lies in a double standard: there is one set of legal and moral standards for judging us, the peasantry, and another, much looser, set of legal and moral standards for judging acts carried out in the name of the holy State. The activities of the State are of such a lofty, noble, and quasi-divine character that they must be exempted from the petty moral standards that apply to mere mortals. Nowhere is this double standard more evident than in the reverential attitude many display toward the State’s hired killers, as exemplified by Lady Liberty’s article, “The Devaluation of Freedom”, a pean to the soldiers in Iraq “defending freedom”. What in the world did the U.S. invasion and conquest of Iraq have to do with American freedom? To quote Inigo Montoya from The Princess Bride, “You keep saying that word. I do not think it means what you think it means.”
The invasion of Iraq was simply an act of naked aggression, on par with Hitler’s invasion of Poland. It was an unquestionably evil act. We do not eulogize criminals who die while committing their crimes. None of us praised the bravery of the ATF agents who died assaulting the Branch Davidians at Waco. Why do the armed federal employees who have died in the conquest of Iraq deserve any more respect? It is high time that freedom activists stopped making excuses for those who commit crimes in the name of the State. It is time we took the State and its enforcers off their pedestal. It is time we uprooted any latent State worship from our minds. Only then will we have a shot at winning our freedom.Link here.
HOW LATINS VIEW THE U.S.
Many readers will be familiar with the dictum “poor Mexico, so far from God and so close to the United States,” uttered by Mexican dictator Porfirio Díaz at the turn of the 20th century. The latest in-depth survey of attitudes and values across the hemisphere conducted by Latinobarómetro, a prestigious research organization, indicates that Latin Americans are now a lot closer to God and farther from the U.S. than in Porfirio Díaz’s time.
There has been a gradual erosion of support for the Catholic Church in Latin America. Rather than a move away from religion, this signifies the consolidation of a phenomenon that has been quietly taking place for some years – the rise of evangelical churches. An overwhelming 85% of the population of Latin America declares itself religious. The novelty is that 15% of the population now declares itself Protestant rather than Catholic.
The second important finding has to do with attitudes toward the U.S. Around 40% of Latin Americans have a favorable opinion of the U. S., a much smaller figure than 10 years ago. In Argentina, Venezuela, Uruguay, and Bolivia, the figure is lower. Despite the fact that more Latin Americans than ever want to migrate to the U.S. (it is estimated that one million illegal immigrants came into the country last year) and that many families depend on cash remittances from migrants based in the U.S., a majority of Latin Americans continue to view their northern neighbor with suspicion. There is a subtle connection between these two findings that is worth noting.
The spectacular growth of Protestantism in countries like Brazil, Guatemala, Peru and, to a lesser extent, Mexico, is one of the ways in which ordinary Latin Americans have revolted against centralized power. The Catholic Church is perceived as being attached to the elites. Among many Latin Americans, there is the perception that the U.S. is too closely allied with political and business elite groups. These are the very groups that ordinary Latin American citizens have been revolting against for decades. Among some Latin Americans, the U.S. is perceived as another pillar – like the Catholic Church, traditional parties, or the military – of the prevailing system.
How does one rectify this? Apart from the obvious way – lending less support to measures seen to reinforce the prevailing system based on legal discrimination between those who are close to government and those who are not, I can think of only one way: a massive increase in exchanges that do not pass through official institutions of any kind. In other words, a greater communication between civil societies rather than between governments or entities perceived as being part of the status quo.Link here.
THE TOTAL CORRUPTION OF THE REGIME
The Great Powers of the twentieth century were built on the 19th century foundation of far greater freedom of science and capitalism which vastly increased human material creativity, efficiency, and wealth. Though there were many local variations, the Great Powers were built by central governments using those foundation assets to pursue national and global goals of imperial aggrandizement by building vast bureaucratic systems to mobilize moral, political, financial and military power. These growing bureaucratic states were able to continue growing and amassing wealth and all other forms of power for roughly a century, though at decreasing rates as the inevitable suffocation of creativity and efficiency by bureaucracy grew steadily. In the last several decades, however, the suffocating effects of bureaucracy have grown more rapidly than the real economies. This led the ever more power-inebriated and hubris-blinded governments and their ever more vast imperial corporations to use the ancient borrowing, currency inflation and credit-weakening methods to continue growing in the short run, though more in official statistics than in reality.
These methods inevitably eroded the incentives of the real economies over the long run and finally began to produce Great Financial Bubbles and Crashes that could be overcome in the short run by using more of the same methods that destroyed the long run prospects of real creativity and growth. In recent decades these massively centralized, bureaucratized and inflated states have become totally corrupt at the top and “trickle down” corruptions of all forms on the lower depths of society. This in turn has generated soaring distrust, cynicism, loathing of politics and government and corporations, social fragmentation and disintegration, and soaring conflicts ranging from incivility and massive disruptions by “demos” to civil wars over drugs, gangs, and much else.
The Soviet System was the most centralized of the Great Powers, so it moved through this entire cycle of take-off of government powers to the great crash far faster than the others have done. The other “communist” systems were generally less centralized and bureaucratized, but have all crashed or been held up and increasingly engulfed by the growth of the more free “underground” economies displacing them, as is most obvious in China. The European “democratic socialist” models of centralization and bureaucratization slowed down at an accelerating rate over decades, then a few decades ago began to stagnate at an accelerating rate, though Britain partially “freed up” some segments of the economy and began using more cautious inflationary policies to grow a bit more. The U.S. began centralizing later and did so at a slower pace, and is only now finishing up the massive centralization of corporate production in huge bureaucracies, education in huge education factories trying to meet the Testing Plans of bureaucratic central planners, and so on. The U.S. also controls the global currency and has used that vast power to borrow and inflate at rapidly accelerating rates without suffering massive consumer price inflation at home.
But by the 1980’s and 1990’s America was a highly socialized, centralized, bureaucratized state with vast overt and secret police armies, an immense prison industry for anyone violating the drug import and pricing dictates, and so on. Almost all informed, intelligent Americans quickly became aware that their society had become highly corrupt at the top, though few would admit to themselves that this was now total, so they became more corrupt themselves to get ahead, while distrust and loathing of the politicians and government soared. All of the Great Powers became Caesarist and imperialist. The politicians were lured by the lust for power, wealth and glory into ever more militaristic and exploitative policies. Caesarism in Rome totally destroyed the Republic, though the external forms were kept in place and massively displayed to deceive the ignorant plebians. This vast explosion of American Caesarism will probably lead to terrible defeats for the U.S. Empire and extreme “reforms” at home.
The American Global Empire was intended to solve the growing Great Financial and Economic Crisis of the U.S., the so-called “overstretch”. The massive growth of the guerilla movements and armies in the Muslim World and the growing defeat by them in Afghanistan and Iraq are now vastly exacerbating the Great Financial and Economic Crisis. The U.S. Empire was already in grave peril because of the stagnating effects of a century of rapid growth of centralization, bureaucratization, debt, credit risk, suffocation of creativity and efficiency, decline of growth and all the effects of these. Now the failing Caesarist Plan is vastly accelerating the growth of all of those problems. All of these major dimensions of America’s Great Global Crisis are now interdependent with each other, each amplifying the others. The Great Global Crisis is thus growing very rapidly now.
It is conceivable that the U.S. will suffer some minor crash and pull back from all of these disastrous policies and stabilize its Empire at a lower position of global power. I doubt it can be done. The problems are so interdependent and extreme now that it seems pretty clear that the System is totally corrupt – “rotten” – at the top, very much like the Soviet System by the 1980’s. Small crises and crashes are likely to accelerate into a Great Crash that can only be dealt with by getting out of The System in some way. I used to think we could limp along from one bubble to another for decades. We have been doing that since the 1980’s, but I now expect the Great Reckoning, the Great Crash, is getting quite near. There are many possible triggers out there waiting to be pulled …Link here.
HOW CONGRESS HAS ASSAULTED OUR FREEDOMS IN THE PATRIOT ACT
The compromise version of the Patriot Act to which House and Senate conferees agreed last week and for which the House voted for is an unforgivable assault on basic American values and core constitutional liberties. Unless amended in response to the courageous efforts of a few dozen senators from both parties, the new Patriot Act will continue to give federal agents the power to write their own search warrants – the statute’s newspeak terminology calls them “national security letters” – and serve them on a host of persons and entities that regularly gather and store sensitive, private information on virtually every American.
Congress once respected the Fourth Amendment until it began cutting holes in it. Before Congress enacted the Foreign Intelligence Surveillance Act (FISA) in 1977, Americans and even non-citizens physically present here enjoyed the right to privacy guaranteed by the Fourth Amendment. That Amendment, which was written out of a revulsion to warrants that let British soldiers look for any tangible thing anywhere they chose, specifically requires that the government demonstrate to a judge and the judge specifically find the existence of probable cause of criminal activity on the part of the person whose property the government wishes to search. The Fourth Amendment commands that only a judge can authorize a search warrant.
FISA unconstitutionally changed the probable cause of criminality requirement to probable cause of employment by a foreign government, hostile or friendly. Under FISA, if the government can demonstrate the foreign agency or employment status of the person whose things it wishes to search, the secret FISA court will issue the search warrant. But even FISA respects constitutional liberty, since it prohibits prosecutions based on evidence obtained from these warrants. Thus, if a FISA warrant reveals that the embassy janitor is really a spy who beats his wife, he would not and could not be prosecuted for either crime because the evidence of his crimes was obtained in violation of the Fourth Amendment’s requirement of a judicial finding of probable cause of criminal activity. Instead of being prosecuted, he would be deported.
On October 15, 2001 Congress enacted the Patriot Act. Together with its offspring the Intelligence Authorization Act for Fiscal 2004 and the Intelligence Reform Act of 2004, the Patriot Act not only permits the execution of self-written search warrants on a host of new subjects, it rejects the no-criminal-prosecution protections of its predecessors by requiring evidence obtained contrary to the Fourth Amendment to be turned over to prosecutors and mandating that such evidence is constitutionally competent in criminal prosecutions. The new version of the Patriot Act purports to make all of this congressional rejection of our history, our values, and our Constitution the law of the land.
So, any representative or Senator who votes for the House/Senate conference approved version will be authorizing federal agents on their own, in violation of the Constitution, and without you knowing it, to obtain records about you from your accountant, bank, boat dealer, bodega, book store, car dealer, casino, computer server, credit union, dentist, HMO, hospital, hotel manager, insurance company, jewelry store, lawyer, library, pawn broker, pharmacist, physician, postman, real estate agent, supermarket, tax collectors, telephone company, travel agency, and trust company, and use the evidence thus obtained in any criminal prosecution against you.
Why would Congress, whose members swore to uphold the Constitution, authorize such a massive evasion of it by the federal agents we have come to rely upon to protect our freedoms? How could the men and women we elect to fortify our freedoms and write our laws so naïvely embrace the less-freedom-equals-more-security canard? Why have we fought for 230 years to keep foreign governments from eviscerating our freedoms if we will voluntarily let our own government do so? The unfortunate answer to these questions is the inescapable historical truth that those in government – from both parties and with a few courageous exceptions – do not feel constrained by the Constitution. They vote for legislation they have not read and do not understand. Their only fear is being overruled by judges. In the case of the Patriot Act, they should be afraid. The federal judges who have published opinions on the challenges to it have all found it constitutionally flawed.
The Fourth Amendment worked for 200 years to facilitate law enforcement and protect constitutional freedoms before Congress began to cut holes in it. Judges sit in every state in the Union 24/7 to hear probable cause applications for search warrants. There is simply no real demonstrable evidence that our American-value-driven-constitutional-privacy-protection-system is in need of such a radical change. A self-written search warrant, even one called a national security letter, is the ultimate constitutional farce. What federal agents would not authorize themselves to seize whatever they wished? Why even bother with such a meaningless requirement? Who would trust government agents with this unfettered unreviewable power? The Framers did not.Link here. Bush did not start the war on the Bill of Rights – link.
GUILTY WHEN CHARGED
While enjoying the Christmas season in the comfort of your home, take a minute to say a prayer for the wrongfully convicted. American prisons are full of wrongfully convicted persons. Many were coerced into admitting to crimes they did not commit by prosecutors’ threats to pile on more charges. Others were convicted by false testimony from criminals bribed by prosecutors, who exchanged dropped charges or reduced sentences in exchange for false testimony against defendants. Not all the wrongfully convicted are poor. Some are wealthy and prominent people targeted by corrupt prosecutors seeking a celebrity case in order to boost their careers.
Until it happens to them or to a member of their family, Americans are clueless to the corruption in the criminal justice (sic) system. Most prosecutors are focused on their conviction rates, and judges are focused on clearing their court dockets. Defendants are processed accordingly, not in terms of guilt or innocence. “Law and order conservatives” wrongly believe that the justice (sic) system is run by liberal judges who turn the criminals loose. In actual fact, the system is so loaded against a defendant that very few people, including the totally innocent, dare to risk a trial. Almost all (95-97%) felony indictments are settled by a coerced plea. By withholding exculpatory evidence, suborning perjury, fabricating evidence, and lying to jurors, prosecutors have made the risks of a trial too great even for the innocent. Consequently, the prosecutors’ cases and police evidence are almost never tested in court. Defendants are simply intimidated into self-incrimination rather than risk the terrors of trial.
According to Yale University law professor John Langbein, “The parallels between the modern American plea bargaining system and the ancient system of judicial torture are many and chilling.” Just as the person on the rack admitted to guilt in order to stop the pain, the present day defendant succumbs to psychological torture and cops a plea, whether he is innocent or guilty, in order to avoid ever more charges.
Michael Tonry, director of Cambridge University’s Institute of Criminology, reports that the U.S. has the highest percentage of its population in prison than any country on earth, including dictatorships, tyrannies, and China. The U.S. incarceration rate is up to 12 times higher than that of European countries. Unless you believe Americans are 12 times more criminally inclined than Europeans, why is one of every 80 Americans (not counting children and the elderly) locked away from family, friends, career, and life? Part of the answer is the private prison industry, which requires inmates to fuel the profits of investors. Another part of the answer is career-driven prosecutors who want convictions at all costs. Yet another is the failure of judges to rein-in prosecutorial abuses. Another part of the answer is the hostility of Americans to defendants and indifference to their innocence or guilt.
In America, defendants are no longer innocent until they are proven guilty. They are guilty the minute they are charged, and the system works to process the guilty, not to determine innocence or guilt. Americans in their ignorance and gullibility think that only the guilty would enter a guilty plea. This is the uninformed opinion of the naive who have never experienced the terror and psychological torture of the U.S. criminal justice (sic) system.Link here.
BOOK OFFERS A GLIMPSE BEHIND THE HEDGE FUND CURTAIN
Ah, the grand life of the hedge fund manger … the annual paychecks in the tens, if not the hundreds, of millions, the mansions in Greenwich, Connecticut and the ski houses in Aspen. But there is another other side of the business, one examined by Barton Biggs, the former Morgan Stanley strategist and now a hedge fund manager himself, in a soon-to-be published book, Hedgehogging. In it, he writes about stressed-out managers struggling to maintain their lavish lifestyles even as their funds suffer losses. One manager, identified as “Ian”, would grind his teeth each night, according to an advance copy of the book; he shut his hedge fund down after only two years, crushed by losses of more than 16%. “The pressure of living so intimately, so intensely with his portfolio (and dying a little on the bad days) had become intolerable,” Biggs writes.
Another trader is stung by losses after moving into a Greenwich estate with $20,000 trees, a two-story screening room and a wine cellar that holds 5,000 bottles. “The straws were mounting on the camel’s back even as dark clouds were gathering,” Biggs writes. With losses approaching 30%, the manager has a breakdown and refused to get out of bed, so his wife goes in and abruptly shuts the fund. The book, which will be published in two weeks, offers a rare peek inside a world that thrives on secrecy and the promise of outsized returns.
A mystique has developed around hedge fund managers, who have become Wall Street’s biggest clients and challenge some of the biggest companies – witness Carl Icahn and Time Warner. The perception is that hedge fund managers are swimming in money, spending tens of millions of dollars on the choicest artwork and real estate. Yet the average investor understands very little about how hedge funds – lightly regulated private investment partnerships – operate and how they make money. The book is a return to Biggs’s role as a Wall Street commentator, harkening back to his days at Morgan Stanley when his literate essays on the markets were well circulated among investors.Link here.
OFFSHORE TRUSTS: VERY MUCH ALIVE AND WELL
For most of the last decade the IRS’s target shooters have slapped a big red bull’s eye on one of the most venerable of all estate planning and asset protection devices – the trust, especially the best ones – trusts located in offshore jurisdictions. The eager IRS seems to presume guilt if one dares to go offshore for any financial activity, but especially if it involves what might be a “sham” trust. Topping the IRS target list are “people selling fraudulent trusts that they claim will eliminate or reduce income or estate taxes.” The IRS warns both sellers and buyers of “fraudulent trusts” that they face fines and jail, and if intent is proven, “criminal prosecution for tax evasion.”
IRS saber rattling against trusts goes back to 1997 when that agency issued a warning to U.S. persons to shun what they described as “abusive trust arrangements … that are not permitted under federal tax laws.” The warning came shortly after Congress clamped down on foreign trusts created by U.S. grantors. (A grantor, also called a settlor, is the person or entity that creates and funds a trust.) That law required, for the first time, extensive reporting of offshore trust “events” including creation, annual income and distributions to trust beneficiaries, as well as appointment of a U.S.-based “limited agent” to respond to IRS inquiries. Beneficiaries for the first time had to report income received from an offshore trust. [See WIL’s “Offshore Trust Structuring and Its Impact on the United States Taxpayor” summary of the matter.]
The lure of supposedly tax-free income is a powerful one. But U.S. taxpayers cannot say they were not warned about these restrictions. Even before the IRS issued its threats, the American Bar Association and several state attorneys general issued similar warnings. The IRS only was restating established rules that good U.S. tax planners already follow. As far back as 1976, Congress tried to restrict the ability of U.S. persons to form an offshore trust and obtain related tax benefits during their lifetime.
I, as an attorney, emphatically disagree that trusts are on the way out as an estate planning tool. There still is great utility in offshore trusts as asset protection devices and they certainly are worth the efforts required to create and maintain them. Trusts have been around since ancient Egypt and Rome. They have survived because of their unique and useful qualities and will endure, notwithstanding all the world’s eager tax collectors. But the IRS anti-trust campaign has sown dissension among some professional offshore planners in America and elsewhere. In this sense, the IRS won ground because many planners now advise clients that establishing an offshore trust could trigger automatic IRS audits. That is not really true, but for timid souls it is scary. These IRS initiatives are part of a wider global attack on legal tax avoidance.
Beware of false claims of offshore trust tax savings. In truth, offshore trusts offer few tax savings during a U.S. grantor’s lifetime, but they do provide effective asset protection against civil creditors. In pursuing a properly configured offshore trust, a creditor has to bring his claim in a foreign court that is much less receptive to various “deep pocket” theories popular among U.S. contingency fee lawyers. An offshore trust can also qualify as a “non-U.S. investor” avoiding regulations by the SEC that prohibit U.S. persons from purchasing many types of profitable offshore investments. Under U.S. tax rules, during a grantor’s lifetime, he or she must pay tax on annual income generated by trust assets and investments.
For Americans, a domestic or offshore trust is “income tax neutral” – all trust income is treated as the U.S. grantor’s personal income and taxed accordingly. That the trust is “offshore” does not negate the U.S. grantor’s personal obligation to report trust income. Even with these restrictions, a citizen of a foreign nation is free to create an offshore trust with U.S. citizens or residents as beneficiaries. Income received by U.S. beneficiaries from such trusts is tax-free. Thus, American citizens or residents can receive tax-free income from trusts established by wealthy relatives who themselves are neither U.S. citizens nor U.S. resident aliens. But the foreign grantor must not be acting as an agent or nominee for those U.S. beneficiaries. As you might imagine, the IRS is highly suspicious of offshore trusts set up by foreign citizens who U.S. beneficiaries claim are such “loving relatives” – especially if your “loved one” turns out to be your offshore attorney.Link here (subscribers only).
THE CHRISTMAS THAT ALMOST WASN’T
The state does not like competition, and especially from religion. The religious leaders in the time of Christ tried to use this against him. They led Jesus to Pilate and accused him, saying, “We found this fellow perverting the nation, and forbidding to give tribute to Caesar, saying that he himself is Christ a King” (Luke 23:2). When Pilate sought to release the Lord the leaders protested, saying, “If thou let this man go, thou art not Caesar’s friend: whosoever maketh himself a king speaketh against Caesar” (John 19:12). During the ministry of Paul the Apostle, the leaders accused the Christians of doing “contrary to the decrees of Caesar, saying that there is another king, one Jesus” (Acts 17:7).
Yet, some of the state’s greatest apologists are religious. Pastors and other Christian leaders who serve as spokesmen for Bush, the Republican Party, and the war in Iraq are fond of reciting their “obey the powers that be” mantra as if that somehow means that Christians should blindly follow whatever the president or the government says. It is a good thing that the wise men that came bearing gold, frankincense, and myrrh to the young Christ child were not part of the Religious Right.
Herod the king was troubled when the wise men came to Jerusalem seeking Jesus after they had seen “his star in the east” (Matthew 2:2). Herod sent for the wise men and “inquired of them diligently what time the star appeared” (Matthew 2:7). Then he commanded the wise men to go to Bethlehem and “search diligently for the young child; and when ye have found him, bring me word again, that I may come and worship him also” (Matthew 2:8). We know from what Matthew records later that Herod wanted to do nothing of the kind. Joseph was told later that “Herod will seek the young child to destroy him” (Matthew 2:13). After the wise men saw the Christ child, worshipped him, and presented him with their gifts, they were “warned of God in a dream that they should not return to Herod” (Matthew 2:12).
The wise men were faced with a dilemma: Obey the government or obey the command of God. To them the decision was a no-brainer. “They departed into their own country another way” (Matthew 2:12). Like the Hebrew midwives, Saul’s footmen, the three Hebrew children, the prophet Daniel, and the apostles, the wise men refused to obey the state. If they had been dupes and lapdogs of the ruling parties, like so many Christians are today, the wise men would certainly defend Herod’s actions and label his opponents as traitors and anti-slaughter weenies. Then they would associate his opponents with that evil political party that was against Herod for purely political reasons. I thank God for the courage of the wise men and the fact that Christmas was. Merry Christmas.Link here.
JACKBOOT SOCIETY: PURE TYRANNY ON THE STREETS OF AMERICA
We never stop talking about martial law and that is because we are constantly fed with new examples of how America has turned into a police state right in front of our very eyes. The latest instance comes out of Ohio and has been labeled “the Ohio Patriot Act”. According to News Net 5, One state representative said it resembles Gestapo-style tactics of government, and there could be changes coming on the streets of Ohio’s small towns and big cities. The Ohio Patriot Act has made it to the governor’s desk, and with the stroke of a pen, it would most likely become the toughest terrorism bill in the country. The lengthy piece of legislation would let police arrest people in public places who will not give their names, address and birth dates, even if they are not doing anything wrong. WEWS reported it would also pave the way for everyone entering critical transportation sites such as train stations, airports, and bus stations to show ID.
Simultaneously, the Miami Police Department announced an identical “shock and awe” program in which cops would randomly conduct sieges on buildings with no evidence linking them to terrorist activity and randomly check identification. It makes absolutely no sense unless it is designed to scare people into groveling to the overlords in black ski masks. Concurrently also is the introduction of TSA VIPER squads to patrol mass transit facilities in major cities conducting searches and checking ID’s. The VIPER teams have nothing to do with preventing terrorism, they are there to get people to cower and accept they are under control. Air marshal spokesman David Adams has commented that there is no new intelligence indicating that terrorists are interested in targeting transportation modes.
This is total Stasi America and it has nothing to do with keeping you safe as they tag on blanket amnesty provisions to the latest immigration bill. The borders are wide open and border patrol have in the past been ordered to stand down and not arrest illegals. The one place where all this security and police presence would be its most useful, the border, is the only place that the federal government is willing to turn a blind eye to. Test runs where terrorists smuggle dummy nuclear bombs across the border without being apprehended were successfully conducted by Glenn Spencer’s American Border Patrol on three separate occasions. The federal government is not concerned about that but they are concerned about demanding middle aged women present ID on buses in Denver and arresting men for donating travel tokens to people without the right change in New York.
This is textbook, mechanized, classic tyranny. The very same people who grope pregnant women and make 90-year-old men remove their shoes in airports are now going to be on American streets. Senate bill 742 in Oregon which was slimly defeated by just three votes would have classified terrorism as a plethora of completely unrelated actions. Downloading music, blocking traffic, writing a hot check, or any form of protest. All these would be punishable by life in prison unless you agreed to attend a “forest labor camp” for 25 years of enforced labor. These are actual bills being drawn up by our supposed representatives in government. Does this sound like a sick joke? Yes, but the bill is real and it nearly passed. Not even Communist China or Stalinist North Korea put people in labor camps for writing a hot check but this was actually debated in the “land of the free”.
In Rhode Island, governors proposed a bill that would have outlawed criticism of the government, defining it as anarchy under World War One era rhetoric. As the elite externalize their plans to the point where the agenda is crystal clear, more credible individuals of conscience step forward to oppose the slaughter of America. Maybe we should pay attention when Congressman Ron Paul warns that martial law is being implemented, or when Former Republican Congressman and CIA official Bob Barr says a military dictatorship is emerging. Or perhaps it is noteworthy when Dr. Paul Craig Roberts says the Government is in the hands of total psychopaths hell bent on martial law.Link here.
LIVING OFF THE LAND
“I owe, I owe, so it’s off to work I go.” ~ American national anthem
Earn and spend, earn and spend, earn and spend. Slave to the credit card. Mortgage is due. Job you hate. Sound familiar? What if you could find a way to live that broke that cycle? If you are prepared to completely rethink everything about your life, to learn to live with the earth, rather than fight against it, then permaculture may be the answer you are looking for.
What if you could be self-sufficient? Grow your own food, spin your own wool, bake your own bread, brew your own beer. Barter or trade for the few things you could not make yourself. Instead of being a slave to an economic system whose very existence depends upon you to spend money you do not have on crap you do not need, why not cut yourself free, and simplify your life to what is truly essential, to what you actually need? Permaculture, or “permanent agriculture”, was the brain child of Australian Bill Mollison. It is a design for living on the land, and with the land, and can be implemented just about anywhere, although it is easiest and cheapest in the temperate and tropical climes. It is no great surprise, then, that it was first perfected in Australia. It is has also gained significant popularity in New Zealand, parts of Europe, and, surprisingly, Japan, and could easily be implemented in South or Central America.
Permaculture is more than just having a vegie garden. It is about designing a property to minimize human labor, to create a self-balancing miniature ecosystem of which you, the owner, are merely a part. In farming, as in life, control is merely an illusion. The permaculturist becomes instead a custodian of the land, rather than its master. Laziness is a supreme virtue in permaculture. Do not get me wrong – this is a lifestyle that means dirt under the nails, and callouses you will never lose. But by good design, you can create a largely self-perpetuating property of animals, vegetables, and fruit trees (and humans!) that requires minimal effort from you to keep it ticking along.
Something is very, very rotten in our modern world. Television, junk food, religion, and other drugs are used increasingly to mask the symptoms. You cannot solve the problem. You cannot change the system. But you can refuse to be part of that system. You can insist on your right to live a quiet life in your small corner of the world. If you take a plot of fertile earth and make it live, then you can say, “I did this. This land is mine.” This is what our forefathers did when they first came to America. This is what man was born to do, what your ancestors have done for a hundred centuries and more. If they can do it, so can you.Link here.
ECONOMIC CITIZENSHIP ALIVE AND WELL IN THE EASTERN CARIBBEAN
So you want to move to one of the Eastern Caribbean islands and start a new life? There are many decisions and even more options involved in such a move, and one of them can be economic citizenship. Why economic citizenship? Economic citizenship programs in the region allow foreign nationals a fast track to full citizenship of a participating country, through a government sponsored investment program. For both personal and professional reasons, this can be a perfect solution for a number of reasons. If you have made a commitment to a lifestyle change, economically, physically and emotionally you want to move forward and finalize that commitment as soon as possible, which can include becoming a citizen.
Of course, its not going to be a cheap option, but a great alternative to waiting the normal five or seven years for full citizenship with passport and voting rights. Although it can take up to 30 years in the worst case countries, and even then, there are no guarantees of success. So you must do your research carefully and find out which countries are most welcoming to new citizens. Most Eastern Caribbean countries do not have an economic citizenship program, although many are amenable to an approach from a private individual with a very deep pocket. Most Eastern Caribbean countries do not have an economic citizenship program, although many are amenable to an approach from a private individual with a very deep pocket. Over the years different countries in the EC region have tried or implemented an economic citizenship program but times change, and few of them have been particularly well done.
Caribbean countries whose economic citizenship programs are alive, kicking and working well are Dominica and the Federation of St.Kitts and Nevis. There are many, many good reasons for relocating to any of these three countries, and much of this has been said in previous articles, but it is important to know that behind the excellent framework of these programs sponsored by elected governments, there is a genuine desire from the ground up to welcome new citizens and help them start a new life. For both countries an application can be made on behalf of an individual, or an entire family (applicant, spouse and two unmarried dependant children). Those meeting the requirements of the investment programme are rewarded by full citizenship, including a passport and the right to permanently reside, vote and work in the participating country. Set out below is everything you need to know in order to apply to one of these programs.Link here.
TRACKED BY CELLPHONE
Recent court cases in the U.S. raise the question of the standard required when the police want to know exactly where you are, using your cell phone to track you down. The issue again raises the question of how new technologies can invade privacy rights, and how quantitative changes in the type and amounts of data collected and stored result in qualitative changes in privacy rights. These require a reexamination of even established laws of privacy and of probable cause. These precedents also apply to entities like ISPs and telephone companies that routinely collect massive amounts of data about individuals which may be subject to eventual discovery or disclosure. It is important that we establish and apply the correct legal standard for obtaining this information now.
Whenever you carry (much less use) a cell phone that is turned on, the cellular network is constantly “scanning” to determine where you are so that it can route telephone calls to the appropriate cell location. With relatively low level of precision, the cell provider can determine where you are at any point in time. Other technologies employed by cell providers, such as those employed with E-911 services, can determine your location with greater precision. This digital location information, coupled with high-speed internet access in some cell phones, can be a great boon to users. They can use cell phones to locate restaurants, theaters, or other entertainment in their area, make reservations or arrange for carry out as they travel. They might use such technology to locate family members, including children. In a disaster situation (assuming the cell towers continue to work), the technology might be useful in locating survivors – or at least locating the survivor’s cell phones. One can imagine their use by law enforcement agencies in kidnapping cases.
Such data is already being used by cellular providers to determine demand for and therefore location of new cell towers. It is not difficult to imagine the economic usefulness of this data as well. Cell providers can collect this information, link it to specific users as well as the demographic information provided when the subscriber initiated the cellular contract. They can then sell, lease or otherwise provide this information to third parties. In addition, cell providers are increasingly becoming indistinguishable from internet service providers, as people use their handheld devices to access the internet from anywhere. Thus, cell providers will have the ability to collect records of every place you have been, who you have talked to, and collect location and content of text messages, e-mails, web traffic, IP video and downloaded or streaming audio. It is time to set some rules on what information can be collected, and what can be done with all of this information.
In at least three separate cases, the U.S. government has attempted unsuccessfully to obtain court order to require the cellular providers to provide them information about the location of a cellular customer. This in and of itself is remarkable. When the government wants a court order to obtain a wiretap, a pen register, or to search for or seize documents or records, it files the paperwork ex parte and in camera – only the government is represented. If the government believes that a certain law applies, it and only it presents the law to the magistrate judge. In fact, for virtually all such applications, the records relating to the application are sealed – either automatically by statute or as a matter of routine by application of the government. Thus, we have no idea how many times the federal government has gone to court to obtain cell phone location data and been granted the data, with no questions asked. The fact that three magistrates refused the government’s request is itself amazing. At issue was the legal standard the government had to meet to obtain the information.
The real issue is whether people have a reasonable expectation of privacy in the location data in the first place. As a general rule, the U.S. Supreme Court has adopted what I call the “breeze rule”. Effectively, if I am outside (and can feel a breeze), I probably do not have an expectation of privacy in what I am doing. Thus, if I am growing pot in my backyard with a 20 foot un-scalable fence, the cops with a helicopter and a telescope can monitor me without probable cause or a warrant. If I am walking or driving down the street, the cops can follow me without a warrant or even suspicion. The same goes for using technology to enhance the ability to search. Thus, drug, money or explosive sniffing dogs can sniff me, my briefcase, my car, and presumably my house (if there is no trespass to do so) without any legal restriction. If I walk into my house however, the Supreme Court has ruled, the cops cannot, e.g., use an infrared detector to monitor my activities in the house without some kind of warrant.
The real problem here is that the cell phone providers have the ability to collect, store, collate and aggregate location data on hundreds of millions of people. These records then become a commodity, subject to use, sale, transfer, subpoena or other discovery. Congress needs to step in and establish guidelines for both private, public, law enforcement and intelligence acquisition and use of this passive tracking information.Link here.
WE ARE AT THE PRECIPICE, SAYS A COMMUNITY BANK PRESIDENT
We are about three years into a debt fueled economic and market recovery, measuring from late 2002 or early 2003. Borrowing became cheaper than at any time in 40 to 50 years as the Federal Reserve, in panic mode from 2001 to 2004, shoved short term interest rates to historic lows. The Fed’s solution to the stock market decline of 2000 to 2003 was to encourage debt accumulation and punish savers. Consumers responded with enthusiasm by borrowing money as though there was no tomorrow. Household debt payments as a percentage of income and total consumer debt each reached new extremes. Banks and other lenders responded to the Fed’s initiative by lending to most all willing borrowers. Standards for creditworthiness were relaxed time and time again. While real estate prices soared average home equity declined as mortgage debt accumulated faster than property values.
Throughout this burgeoning debt bubble savers lost out, especially those retirees relying on interest income form their hard earned savings. Those of us in community banks saw first hand how dismayed savers were to renew their 5% certificates of deposit at rates of 1.5% to 2.0%. The Federal Reserve Board members could not have been unaware of the devastating effect their decisions would have on such savers. While the debt bubble served to mitigate some of the fallout of the implosion of the stock mania, it also resulted in a bubble in a different asset class: property. After several years of rising real estate prices we are beginning to see this bubble, too, on the precipice of implosion. Mortgage applications are declining in number. Property prices are beginning to erode in some markets while the inventory of unsold homes has increased substantially.
The average consumer has become so debt saturated that there is reduced capacity for additional borrowing. Bankers are turning cautious for the first time in years. True to form for government bureaucracies, bank regulators are issuing new “guidance” which will restrict real estate lending. They hasten to close the barn door as they belatedly realize the cattle have already fled. Many of the above assertions are mere statements of what has transpired in the past several years. What will occur during the next few years will determine the fates of pension funds, stock owners, governments and consumers. Personally, I think we are in for turmoil in the markets and the economy. Below are my best guesses.
One of the reasons the stock market bubble of the late 1990s was not widely recognized is we were living inside the bubble. Living within the times of momentous events, in my opinion, restricts our ability to gauge the significance of such events. I think we are now within the debt and property bubbles.Link here.
HACKERS REBEL AGAINST SPY CAMS
BERLIN – When the Austrian government passed a law this year allowing police to install closed-circuit surveillance cameras in public spaces without a court order, the Austrian civil liberties group Quintessenz vowed to watch the watchers. Members of the organization worked out a way to intercept the camera images with an inexpensive, 1-GHz satellite receiver. The signal could then be descrambled using hardware designed to enhance copy-protected video as it is transferred from DVD to VHS tape. The Quintessenz activists then began figuring out how to blind the cameras with balloons, lasers and infrared devices. And, just for fun, the group created an anonymous surveillance system that uses face-recognition software to place a black stripe over the eyes of people whose images are recorded.
Quintessenz members Adrian Dabrowski and Martin Slunksy presented their video-surveillance research at the 22nd annual Chaos Communication Congress here this week. 500 hackers jammed into a meeting room for a presentation that fit nicely into CCC’s 2005 theme of “private investigations”. Slunksy pointed out that searching for special strings in Google, such as axis-cgi/, will return links that access internet-connected cameras around the world. Quintessenz developers entered these Google results into a database, analyzed the IP addresses and set up a website that gives users the ability to search by country or topic – and then rate the cameras. “You can use this to see if you are being watched in your daily life,” said Dabrowski.
The conference, hosted by Germany’s Chaos Computer Club, featured many discussions on data interception and pushing back the unprecedented onslaught of surveillance technologies. CCC member and security researcher Frank Rieger said hackers should provide secure communications for political and social movements and encourage the widespread use of anonymity technologies. He said people on the other side of the camera need to be laughed at and shamed.Link here.
TWO ROTTEN BRANCHES
Every time there is a congressional election, the senators promise to “fight” for their state. Thus, Chuck Shumer and Hillary Clinton, when the circumstances call for it, devotedly proclaim their resolve to wage battle on behalf of New York. There are two ways to interpret such bellicosity. One, the state of New York is literally at war with the other states of the Union. Two, there is a need for some of the resources hoarded by the federal pirates to be distributed among the shipmates, and a quarrel usually arises regarding who should be getting how much. The “fight” involves attempting to snatch as much loot for the senators’ own friends in each state at the expense of all other states.
It is useful to keep in mind that this is one essential function of the Congress: to transfer wealth forcibly from those who cannot defend themselves from being robbed to the members of the political elite. The second and no less important function of the Congress is to empower the executive branch. “Live and let (the federal bureaucrats) live,” is the motto of the congressional hippies. The vast majority of congressmen never even read the bills presented to them. They merely rubber-stamp whatever the federals demand, precisely as matters stood in the Soviet Union. We should not fault them for this, however, for as a rule, congressmen are benighted and corrupt creatures and cannot help themselves. The third function of the Congress is to allocate the resources to various government bureaus and contractors engaged in Projects That Are Too Important To Be Left To The Market. It must be torture for the congressmen to sacrifice one such Important Project in order to finance another. Poor guys. Now it is clear why the government needs every red cent you have!
A critic may, of course, object that the “real” job of the Congress is to look after the “general welfare”. It may never occur to such a critic that the best thing the congressmen could do to promote general welfare would be immediately to abdicate or, what amounts to the same thing, be recalled never to return. Does this position appear to be “extreme”? If so, then let our critic examine the recent legislation and attempt to identify the last decree that truly was in the interest of the common good. It is unlikely that this attempt will succeed.Link here.
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