Offshore News Digest for Week of February 20, 2006

GLOBAL LIVING & BUSINESS

UNSEXY

I am embarrassed to admit it, but logistics have become important to me. When I think now about a good quality of life, top priority is good infrastructure. Those who know me recognize the irony in this. I disdain administration, have trouble keeping my driver’s license current, but, today, I am all about the practical. How accessible is a place? How many airlines fly into its capital city? From where, and how often? How far from the airport to downtown? How good the roads? How reliable and extensive the wireless access? I am reluctant to confess it, even to myself, but my life has evolved (you might say devolved) to the point where these things matter more than most others. Making the three-hour drive from the airport in Shannon to our Ireland office in Waterford earlier this week, I was struck by this truth. A survey published by The Economist recently named Ireland the best place in the world to live. Not if you are in any hurry, I would have to argue.

My family considering where else we might spend an extended time, and Panama is at the top of the list of choices. It meets all criteria on both our lists. The cost of living is low, the tax situation can be favorable, good English-language schools exist, both for primary- and secondary-level education, and, critically, the airport is but a half-hour from downtown. You can fly into Panama’s Tocumen International Airport any day of the week from Miami or Houston, direct. And, once in the country, you have no trouble getting around (on nicely asphalted highways). You never want for Internet service – broadband or wireless. In most parts of Panama City, you can take your pick. Talk about stripping the romance out of it. Money, taxes, and transportation. Very unsexy ideas that seem to rule our lives.

What are we doing spending so much time in Ireland and Paris? Here it gets tricky. For these kinds of decisions – where to spend your time, your money, your energy – are not made entirely with the head. Ireland used to be affordable, cheap even. And it used to be tax-friendly. Neither no more. Today’s Ireland suffers from bubble pricing, for real estate, mostly, but when it comes to the overall cost of living, too. And, this year, Irish tax laws are changing so non-Irish residents will no longer be taxed on a remittance basis (that is, based on what money they bring into the country), but on the basis of worldwide income. Ouch. We came to Ireland to avail of government tax incentives for the business and to establish an EU base of operation for International Living. Reasonable reasons.

Paris, expensive and boasting one of the most onerous tax regimes in the world?? Well, it’s Paris. Beautiful, romantic, historic, captivating … And this is my point. One that lately I struggle to remember myself. In the end, I believe, convenience and a cheap lunch do not Paradise make. Where, then, is the best place in the world to live? Listen not only to your head, but to your heart, as well, when trying to come up with an answer to this question. And do not be afraid to make a move that may not seem entirely sensible on paper. You can try to spreadsheet your future – but, in the end, it is the feel of a place that makes it a fit.

CHINESE INVESTORS FLOCK TO HONG KONG

According to Hong Kong’s Ministry of Commerce, there has been a 58% increase in the number of enterprises from Mainland China granted approval to invest in Hong Kong in 2005 compared to the previous year. Figures released by the department this week show that 253 Mainland enterprises were granted approval to invest in Hong Kong last year, up 58% on the 160 approvals in 2004. Mike Rowse, Director-General of Investment Promotion at InvestHK, the government’s investment promotion agency, believes that the growing investment from the Mainland shows Hong Kong’s increasingly important role as the springboard for companies to expand out of China.

Speaking at the annual spring reception for business leaders of Hong Kong-based Chinese enterprises last week, Mr. Rowse stated that the Mainland was the one of the largest contributors to Hong Kong’s direct investment inflow in 2004, amounting to $62 billion – a 63% rise in inflow from the Mainland on 2003. Meanwhile, Mr. Qin Xiao, chairman of the Hong Kong Chinese Enterprises Association, noted that the Closer Economic Partnership Arrangement (CEPA), which has removed tariff and regulatory barriers for Hong kong firms investing in China and visa versa, has also had a beneficial impact on trade between Hong Kong and the mainland.

Hong Kong had fastest inflation in 7 years in January.

Hong Kong’s consumer prices advanced in January at the fastest pace in more than seven years as rents rose and food and travel became more expensive during the Lunar New Year holiday. Inflation was expected to reach 2.3%, according to the median forecast of 19 economists surveyed by Bloomberg News. Hong Kong snapped six years of deflation in 2005, as rental contracts signed during the severe acute respiratory syndrome (SARS) outbreak two years earlier came up for renewal at higher rates. Falling unemployment and rising tourist arrivals are spurring demand, allowing retailers and restaurants to raise prices.

DUBAI PORTS WORLD: COMMERCIAL RACIAL PROFILING

Some members of Congress, exhibiting post-9/11 jingoism and paranoia, are pressuring the Bush administration to reconsider its decision to allow Dubai Ports World, an Arab company, to take over operations at six U.S. ports. The approval should stand. Congressman Peter T. King (R-N.Y.), Chairman of the House Homeland Security Committee and, more importantly, a Congressman from an area near two of the ports that will be operated by Dubai Ports World, expressed this xenophobic view about Dubai’s acquisition of the British company that is currently operating the ports: “In the post-9/11 world, there should have been a presumption against this company.”

Why? Because two of the 9/11 hijackers happened to be from the United Arab Emirates (UAE), the country in which the company is based. Yet the British company, Peninsular and Oriental Steam Navigation Company, was allowed to operate the ports in New York, New Jersey, Baltimore, Philadelphia, Miami, and New Orleans despite Richard Reid’s (the infamous “shoe bomber”) British citizenship. And American companies are permitted to operate some U.S. ports despite the fact that Timothy McVeigh, Jose Padilla, and other U.S. citizens are convicted or accused terrorists. For that matter, how do we know that even an American company running the ports would be immune from terrorist infiltration?

In fact, since two of the 9/11 hijackers were from the UAE, Dubai Ports World might even have a stronger interest in operating safe and secure ports than companies from other nations. Dubai has a worldwide presence, an extensive history of operating ports, and a reputation to uphold. If a terrorist incident occurred in one of its ports, the company would probably lose more business worldwide than a non-Arabic company would under the same circumstances. The company should be evaluated on its qualifications to operate the ports, not on McCarthy-like litmus tests for Arabs or the UAE. Besides, although Dubai Ports World will operate the ports, U.S. federal and local authorities will remain in charge of security.

After 9/11, U.S. authorities incarcerated and questioned people based on their Arabic nationalities and Islamic religion. The vast majority of them had no connection to terrorism or the 9/11 attacks. This was widely perceived to have been an overreaction. Yet more than four years after 9/11, this racial and ethnic profiling has now moved from individuals to businesses.

The Dubai Ports issue is really Wal-Mart and Toyota all over again.

Good Heavens! George Bush is threatening to veto a piece of Congressional legislation, breaking his record of never having used the veto. What is going on? A coalition of Democrats led by New York Senators Charles Schumer and Hillary Clinton, joined Republican Senate leader, Bill Frist, as well as Christian conservatives such as Cal Thomas, see Dubai’s acquisition of P&O’s port concessions as a threat to American security. Why, two of the 911 bombers came from that small nation! Bush’s “War on Terror” having cried “wolf” everywhere, including Saddam’s Iraq, is now having the issue come back to “bite the President in the rear.”

Beneath all of this “security” clamor, it is really the Wal-mart question again, in a slightly different guise. There have been protests around America over the last few years as Wal-Mart has sought to open new stores in various communities. The hue and cry has come basically from two groups pushing two separate issues. The first is that Wal-Mart’s “low” wages and alleged lack of other benefits is a threat to the American worker. Yet, thousands of people line up for the potential job openings as a new Wal-Mart prepares to open its doors. The unions operating in a number of America’s other supermarket chains have complained to politicians about that competition. The unions at General Motors and Ford have said the same thing about Japanese and other foreign auto makers building new plants in this country, especially in the South. Well, are American ports any different? Only slightly.

American ports used to be controlled by a corruption-prone alliance of politicians and unions. One can recall with nostalgia a half century ago, as Oscar week approaches, Marlon Brando, Karl Malden, Lee J. Cobb, Rod Steiger and Eva Marie Saint in On the Waterfront, offering us a glimpse of this relationship. And, as we observe the posturing of Chuck and Hillary, we are reminded that all of our actors are not in Hollywood. As a former Floridian and co-author of A History of Florida, I can attest that the Port of Miami has been a case study in such shenanigans, and that explains why some of the pols there are so upset.

A piece by John Nichols, “Corporate Control of Ports Is the Problem”, lets the cat out of the bag. Nichols concedes that, Dubai and security issues aside, no corporation should be operating an American port, “it would be a bad idea.” Further, “Ports are essential pieces of the infrastructure of the United States, and they are best run by public authorities that are accountable to elected officials and the people those officials represent. While traditional port authorities still exist, they are increasing marginalized as privatization schemes have allowed corporations – often with tough anti-union attitudes and even tougher bottom lines – to take charge of more and more of the basic operations at the nation’s ports.” So, the real issue is privatization. Mr. Nichols would prefer government ownership. In all of this talk of accountability, nowhere is there any mention of the historical reality that American ports were long bastions of the unholy alliance of corrupt politicians, bureaucrats and union officials. No wonder all of the unions, from teachers to longshoremen, are behind Chuck and Hillary on this issue.

In the course of criticizing the idea that corporations are in business to make money, he inadvertently concedes the phoniness of the “security” issue. Privatization has been going on for some time in American ports with modest profits as the efficiency of our ports has fallen relative to the operations of larger companies in Asia and elsewhere. Like the small businesses opposing a local Wal-Mart, these companies would like things to remain much as they are, and they are relying on Chuck, Hillary and Bill to keep it that way. If I might refer once again to a film analogy, I hope this time George will “veto one for the Gipper!”

Dubai plans to muscle in on the global aviation industry.

Dubai has announced the formation of the Dubai Aerospace Enterprise (DAE), which is to be used as an investment vehicle to channel some $15 billion into a global aerospace manufacturing and services corporation. DAE will become the holding company for six operational subsidiaries involved in manufacturing and services across 14 industry segments. Speaking at the launch event, DAE’s Chairman HH Sheikh Ahmed Bin Saeed Al Maktoum, President of Dubai’s Department of Civil Aviation and Chairman of Emirates Group, expressed his belief that through the building of strategic alliances with leading aerospace companies, DAE will become an integral part of the global aerospace industry “within ten years”.

The initiative has been launched against a background of unprecedented growth in the regional aviation market. The Middle East has become the leading buyer of aircraft internationally, and together with Asia will account for three out of every five wide-body aircraft delivered in the next few years, according to a feasibility conducted by A.T. Kearney, the leading management consultancy. According to the DIFC, airline passenger traffic in the Middle East and Asia (especially China) is expected to grow as much as 9% a year for the next 10 years, reaching 1.7 billion passengers by 2015. Annual air freight growth is also expected to exceed 6% a year. India and China alone plan more than 145 airport projects in the decade – including greenfield builds, expansions and upgrades.

GULF OIL WEALTH LOOKS EAST FOR INVESTMENT

Later this year, Akbar Shah plans to bring a couple dozen of the Middle East Gulf’s richest people – and their checkbooks – to Asia on a hunt for investments. Middle Eastern wealth, inflated by high oil prices, is increasingly finding its way into Asian assets ranging from property and infrastructure to stocks and buyouts. Some market watchers say Asian bourses should enjoy a lift from the influx of oil money, with Gulf investors expected to buy more than $360 billion in overseas assets during 2005 and 2006, according to the Institute of International Finance. “The Middle East names, even the governments, are looking to diversify, and where else but where there’s huge opportunity,” said Shah, managing director and Middle East region head of Citigroup Global Wealth Management.

Historically, Gulf oil money has been invested locally and in Western assets such as U.S. Treasuries and London property. While those markets still lure petrodollars, Asia is seen as better value after Gulf stock and property markets have rocketed since 2002. Asia is also perceived as more friendly than the West to Middle Eastern wealth following the September 11, 2001 attacks on the U.S. Finally, Asia is attractive because its markets are linked to or closely track the dollar – the global oil currency. “A lot of the Gulf investment funds are being very aggressive in Asia, particularly China and India – both government and private money. It’s something we’ve seen in the last six to nine months,” said Shailesh Dash, head of strategic asset management at Kuwait-based fund manager Global Investment House.

THE OECD USED TO BE SNOW WHITE, THEN IT DRIFTED

The OECD was created in 1960 as the economic counterpart of NATO. It was, in many ways, a defender of Western economic liberty. Through the 1980s, OECD studies focused on market solutions against state intervention. Then, the OECD started drifting. Imposing “fair competition” and a “global playing field” has been one of the statist Trojan horses brought into the OECD. Consider the initiative on “harmful tax competition”, launched by the Organization in 1998. “Competitive forces,” writes the OECD, “have encouraged countries to make their tax systems more attractive to investors. However, some tax practices are anti-competitive and undermine fair competition and public confidence in tax systems.” Thus, the OECD wants to achieve a “global level playing field” by requiring member states to enforce their tax laws through exchange of financial information, including banking information on individuals. In public choice terms, the taxers are forming a cartel to extract as much as possible from the taxed.

The links between the OECD and the Financial Action Task Force (FATF), an intergovernmental group fighting money laundering and promoting the related surveillance and control activities, then becomes understandable. Although both organizations say that they are independent of each other, the OECD’s 2004 report entitled “Getting to Grips with Globalization” lists FATF among “Affiliated Agencies and Semi-autonomous Bodies”. FATF’s secretariat is housed at the OECD headquarters in Paris. The report states, “In many respects, the OECD’s work complements that of … the [FATF] in the fight against money laundering. The OECD promotes competition … [b]ut it also insists that, to be truly effective, competition needs to be fair and open.”

Since the 1990s, the OECD has also embraced “corporate governance” and “social responsibility”. Its newly released Principles of Corporate Governance assume that insider trading must be illegal, that “stake holders” have claims against corporations, and that, in general, the state must teach ethics to corporations, by force if necessary. From an innocuous and rather useful free-market-oriented economic and statistical shop, the OECD has thus become a promoter of global diktats. Some of the work done by the OECD is still useful, but the question remains whether the declining benefits are worth the growing costs.

ANTIGUA AND BARBUDA ALARMED AT U.S. INDIFFERENCE TO WTO RULING ON INTERNET GAMING

The government of Antigua and Barbuda has accused the U.S. of failing to comply with a World Trade Organization ruling that its laws unfairly discriminate against remote online gaming companies, and has protested at new legislative attempts to ban offshore firms from offering services to American citizens over the internet. A ruling by the WTO Appellate Body in April 2005 upheld one of Antigua and Barbuda’s complaints over U.S. prohibitions, which prevented U.S. banks and major internet search engines from doing business with gambling firms on the island.

The tiny Caribbean jurisdiction, where several online gaming firms are based, had argued that by seeking to legally prevent U.S. citizens from accessing online gambling services such as those offered by many companies in Antigua and Barbuda, the government of the U.S. was contradicting service sector commitments that it made when the WTO was formed in 1995. U.S. federal laws bar the placing of bets across state lines by electronic means, preventing Antiguan online gambling companies from accessing U.S. customers. Although both sides initially claimed victory based on the complex and somewhat confusing statement by the WTO, the United States has been given until April 3, 2006 to implement the ruling.

However, with little more than a month left before the deadline, the U.S. has apparently done little to comply with the WTO decision, and in the meantime, lawmakers have renewed their attempts to prohibit Americans from using online gambling sites, a development which has alarmed the Antiguan government. “As of today, with less than two months remaining on an 11-month and two week compliance period, to our knowledge no legislation has been introduced into the Congress that would seek to bring the United States into compliance,” Antigua’s ambassador to the WTO, John Ashe, wrote in a letter to the U.S. trade representative, Rob Portman, which was released last week.

The U.S. Trade Department has stated that it is continuing to explore various options to comply with the WTO ruling. However, for Antigua & Barbuda, the issue goes far beyond enforcing the letter of the law, with the country’s economic well-being at stake as it attempts to diversify its economy away from a reliance on tourism and agriculture.

BAHRAIN STAKES CLAIM AS MIDDLE EAST’S FINANCIAL “JURISDICTION OF CHOICE”

Bahrain’s financial services industry continued to develop and expand during 2005, with the Bahrain Monetary Agency (BMA) issuing 32 new licenses during the year. Of the new licenses issued during 2005, 24 were for banks and banking-related institutions, 7 for insurance and insurance-related operations, and one was for a capital market broker. At the end of 2005, the total number of institutions licensed by the BMA stood at 366, comprising 202 banking institutions, 151 insurance and insurance-related operations firms and 13 capital market brokers. “We managed to attract a good mix of locally incorporated, regional and international institutions during 2005” observed Ahmed Al Bassam, Director of Licensing & Policy at the BMA. The BMA issued licences to several well-known firms across the financial services spectrum last year, which Mr. Al Bassam believes demonstrates the fact that Bahrain remains “the jurisdiction of first choice” for financial institutions in the Middle East region.

THE OUTSOURCING WAVE HITS INVESTMENT BANKERS

First came IT outsourcing. Now comes investment banking. After years of outsourcing technology support and other back-office operations to countries like India and China, financial institutions are increasingly looking to move large portions of their investment banking operations abroad, according to a recent report by Deloitte Touche Tohmatsu. Faced with a dearth of skilled workers and shrinking profit margins, banks that want to remain competitive in the global marketplace cannot afford to miss out on high-quality – and cheaper – foreign talent, the report said. As a result, what began as technology support is now morphing into more analytic operations.

“Most of the large financial institutions were in the IT side of outsourcing but as they leveraged that experience, they got more interested” in moving more of their investment banking and research activities abroad, said Niket Patankar, chief executive of outsourcing firm Adventity Inc. Among the leaders in outsourcing and offshoring are the big investment banks, Citigroup, Morgan Stanley, Lehman Brothers and JPMorgan Chase. Typically, those banks have moved their research analysis operations offshore in order to take advantage of the time difference between the U.S. and Asia as well as the cheaper labor. “Investment banking has a lot of number crunching that to a large degree can be done anywhere,” said Alenka Grealish, manager of the banking group at Celent LLC. “By taking press releases and data feeds and digesting them offshore, the components can be made into basic analyst reports” that are available to clients early in the morning.

JPMorgan Chase, however, is taking its investment banking activities abroad a step further. The company was one of the first investment banks to not only transfer the company’s back-office and call-center operations but to also hire research analysts in India, Hong Kong and Singapore to complement its U.S.-based research team. After piloting the program in 2003 with about 1,200 employees in India, the company announced late last year that it plans to have a total of 9,000 employees in India by the end of 2007, with one-third of those employees working for the company’s investment banking unit. Not only will the Indian workers handle research and analysis for the bank but will also be responsible for its foreign exchange trades and its highly complicated credit derivatives contracts. Some experts expect that as banks become more comfortable with their offshore operations and foreign talent becomes more attuned to the companies’ way of doing business, financial institutions may even shift some deal-making responsibility onto its foreign employees.

The Deloitte Touche Tohmatsu report indicated that offshore operations give financial services companies a foothold in new and emerging markets such as China, where there are more revenue opportunites than mature markets like the U.S. The report also predicts that driven by the need to take aggressive cost-cutting measures, the financial services industry will move 20% of its total costs base offshore by the end of 2010, compared to the current average of 3.5%. Although no numbers are yet available, Peter Lowes, principle and head of outsourcing advisory services at Deloitte Consulting LLP, said in a few years, banks may increasingly rely on offshore talent to conduct due diligence and to screen prospective clients for investment banking business. And while there is no single, authoritative source on the specific number of U.S. investment banking jobs that could be lost to offshoring, Forrester Research predicts that within 10 years, at least 3.3 million U.S. jobs across industries will be shipped to lower-cost and developing countries such India, China and the Phillipines.

PRESIDENT OF THE COUNCIL OF THE EU INCREASES PRESSURE ON TURKEY OVER CYPRUS

Austria’s Federal Chancellor Wolfgang Schüssel, the current President of the Council of the EU, warned that Turkey has until the end of the year to recognize the Cypriot government and open its ports and airports to Cypriot-flagged vessels. “The Austrian Presidency is doing everything in its power to support the current UN-sponsored process”, the Chancellor stated, continuing, “We know the situation is very complex and difficult and that it will not be easy to solve this conflict.”

Although Turkey has signed an accord extending its pre-existing customs accord with the EU to the 10 new member states, it stated last year that this would not entail lifting the embargo on Cypriot vessels, a step which, the government argued, can only take place once the EU moves to end Northern Cyprus’s trade isolation. It had been hoped that new proposals put forward by the Turkish authorities last month would represent at least a small step towards ending the stalemate, but they were met with little enthusiasm by the Greek and Greek Cypriot governments when they were released. The Turkish authorities again offered to open the country’s ports and airports to Cyprus in return for restrictions being lifted on the Turkish-occupied north, and additionally called for high-level talks on uniting the Island to begin again later this year. Cypriot Foreign Minister, George Iacovou dismissed them at the time as “reheated food”.

MORE WARNINGS ON OVERPRICED COSTA RICA REAL ESTATE (RENT, CONCURS CONSULTANT)

“January 2006 is an important landmark for me, i.e., 48 years as an international investment consultant and 25 years living in Costa Rica. Your excellent article about Costa Rica property prices not only has a great title but is 100% spot-on. Land and home prices, and supply, have increased dramatically over the past few years. Are the beaches now an overbuilt, overpriced market as in the Central Valley?

“An independent investment consultant, with long experience in Costa Rica, must seriously consider the effects of the deflating U.S. property boom on Costa Rica’s boom. “When Uncle Sam sneezes the Ticos catch pneumonia” is still true today. Buying a home or property in Costa Rica now, unless for retirement or truly long-term investment, merits serious consideration and objectivity. Buying, based on the “arrival” of American baby-boomers and the “greater fool” theory, is not a sound basis for investing in Costa Rica.

“Is there a viable solution if one wants to enjoy Costa Rica’s renowned beauty, outstanding climate and friendly people without buying into a bubble? Yes, in one word – rent! If one owns a house or condo why not sell, take your profits, (or recover your investment), and sign a contract to rent the same property from the new owner? Pass the ownership risk to the buyer but continue to enjoy Costa Rica “worry free”. Costa Rica’s rental laws favor the renter for 3 to 6 years with 0% annual rental increases if the rental contract is in dollars. The new owner has potential profits, a known renter with a legal contract, and a satisfactory return on his investment.

“I have made other observations about Costa Rican property (trafinsa@racsa.co.cr) with a suggestion how to profit in declining markets. Bricks and mortar “on the beach” only show a profit in markets of induced demand, low interest rates or periods of rapidly increasing inflation. Thanks Roger (who wrote the article the writer is responding to), for your perceptive article confirming the old investment maxim “investigate before investing”. Especially when buying into Costa Rica’s property bubble.”

“Roger” replies and points out that, “The current critics of my (skeptical) view aren’t even aware that Costa Rica has gone totally broke a half dozen times. … The important thing to keep in mind about the newcomer is that Costa Rica is many times more romantic then wherever it is they are coming from. That could sustain the prices they are paying. I’ve been offshore long enough not to make predictions cast in stone. I’d buy in Costa Rica tomorrow if the price and the property was right … but I’d do it with my eyes wide open. … As for Boquete (a heavily promoted development) it is better to forget the place. I get a ton of feedback of people who tell me they wish they had never bought there. It is easier to buy there then to sell the overpriced property that you’ve bought.” He concludes his reply with, “I think that you are right on about renting in Costa Rica. Or, rent with an option to buy at a locked-in price. There are still bargains in Costa Rica, but they are well off the beaten track. If one is willing to go out and beat the bushes there are still good deals.”

And at least question all the Argentina hype as well.

“Just writing you with a different point of view on Argentina. Having lived in Cordoba (before, during and after the Default) I do have some suggestions on people planning to move to Argentina. It is of course a beautiful country and life can be very relaxed if one is moving in the upperclass and rural sites. However, I have decided to move back before ending up like so many of those foreigners that have lost their hopes in that country. At the end, it is a pity to see most of them coming to Argentina with enough capital and live the dream for a while and then end up living the Argentinean economical nightmare. Retired people are obviously not included in the ratrace and can relax.

“Still, I have a good exportbusiness in Argentina but I cannot recommend anybody to seriously believe that moving to Argentina is just another expat move. I have lived in Mexico, Spain, London, Paris and stayed lots of time on the Latinocontinent. Argentina is not just business as usual. … On average it defaults every 8 years and leaves an economic nightmare behind: it means 3 years of downspiral, 4 years of resurrection and 1 year of turmoil. And that is every decade …

“It is a very difficult mentality to live with and sooner or later a foreigner gets into that trap. I left with a succesful business but sadly I have seen most of the foreign residents caught in a trap with few possibilities to get out. You might think this is a negative viewpoint but still, I just am sick of all these shiny articles that let it look like heaven on earth while neglecting hardfacts one should definitely know about and those people you never hear about.”

CARIBBEAN REAL ESTATE A HEDGE AGAINST COOLING U.S. MARKET?

With the U.S. domestic market showing signs of cooling, Ricardo Cardenas, vice president and regional director of RE/MAX Caribbean and Central America, believes the Caribbean market could act as a low-risk hedge against falling U.S. real estate prices. “Property values are low in many areas, but they are appreciating rapidly, so a relatively small investment can yield good returns,” Mr. Cardenas noted, adding that there are few legal barriers to prevent Americans from buying homes in the region. “If you plan to use a second property for short vacations, up to 30 days, typically no visa is required. Many islands have a U.S. or British title system and there are no restrictions on full ownership. In Honduras, for example, you can purchase up to three-quarter of an acre of land in your own name without forming a corporation.”

While the Caribbean is currently witnessing a boom in the building of high-end real estate developments, Mr. Cardenas says that there are still many bargains to be found. “Many people think of the Caribbean as the string of islands running from Florida all the way to Venezuela, but Central America also has a Caribbean coast and prices are generally lower there. You can find some surprisingly affordable homes in Panama, Costa Rica and the Bay Islands in Honduras.” Other growing markets cited by Cardenas include Turks & Caicos, Belize, Grenada, St. Croix, St. Kitts & Nevis, St. Vincent & the Grenadines, and the Dominican Republic. “These areas are less travelled, and have less infrastructure, but attractive prices, ranging from $200 to $500 per square foot.” Conversely, the Cayman Islands, St. John (U.S. Virgin Islands), Puerto Rico, and Jamaica are seen as more mature markets, and therefore harder to find real estate at bargain prices.

Multiple listing services, such as those found in the U.S., are still relatively rare in the Caribbean, and according to Cardenas, potential buyers should seek out expert advice to guide them through the buying process. “You need to use someone who is based in the immediate market you’re interested in, knows the price trends, and is well-versed in local regulations,” he advised.

TAXES

COSTA RICAN TAX PLAN CLEARS FIRST VOTE

Plan would introduce U.S.-style worldwide income taxation, VAT.

The long awaited Costa Rican fiscal reform plan cleared its first legislative hurdle in the national assembly in its first reading last week after a majority of lawmakers voted in favor of the tax plan which seeks to increase tax revenues by $500 million. In a vote split largely along party lines, 32 members of the Asamblea Legislativa voted in favour of the tax reform bill with 15 members voting against. However, the bill must clear a second vote, which could be scheduled for later this week, before President Abel Pacheco can sign the legislation into law.

The tax plan will introduce some major changes if passed, such as a switch to worldwide taxation from the current territorial tax system, the introduction of a value added tax system on all but a handful of exempt services to replace the current 13% sales tax, and a general tax rate of 30% on all types of economic activity. It is thought that the tax reforms will increase the amount of tax paid by those earning more than $3,000 per month.

Opponents of the tax plan fear that a move to a global tax system will deter wealthy foreign expats and investors from locating to or investing in Costa Rica, but the legislation is said to contain amendments allowing foreigners to deduct tax paid on income earned abroad. However, the situation is by no means certain and may not be clarified completely until the bill becomes law.

Arias, who supports tax plan, clinches Costa Rican election victory.

Reports from Costa Rica appear to confirm that Nobel Peace Prize winner Oscar Arias, who is a supporter of Costa Rica’s participation in the Central American Free Trade Agreement (CAFTA) and the country’s controversial fiscal reform plan, has won a slender victory in the country’s presidential elections. Although exit polls had Arias winning the February 5 election with 40.7% of the vote compared to the 40.2% share polled by his closest rival Otton Solis, a final declaration was postponed while ballots were recounted by hand. With the recount now finished, election officials revealed on Wednesday that Arias has indeed won a narrow victory, by about 18,000 votes. However, officials are unable to declare a winner until several challenges to the election results are resolved.

Mr. Arias, 65, served as the country’s president from 1986 to 1990. He won the Nobel Peace Prize in 1987 after working to end armed struggles in other Central American countries. Mr. Arias favors the CAFTA trade pact, whose approval is currently languishing in Costa Rica’s legislature, while Mr. Solis is against it. He is also thought to be in favour of the tax reform package, which seeks to boost revenues by imposing a worldwide tax regime among other measures, and which awaits a crucial second vote in the Legislative Assembly.

AUSTRALIAN EXPAT TAX REGIME TO BE ONE OF WORLD’S MOST COMPETITIVE

Australian Treasurer Peter Costello has claimed that proposed improvements to the taxation arrangements for temporary residents will give Australia one of the most competitive expatriate taxation regimes in the world. The bill, introduced into parliament on February 16, represents the third time that the National/Liberal government has attempted to make improvements to the expat tax regime, after two previous attempts were blocked by Labor Party opposition. However, Costello explained that the new bill, introduced as part of the 2005/6 budget, will go further than the previously blocked legislation which would have applied a tax exemption to a temporary resident for a period of 4 years, only if the temporary resident had not been an Australian resident within the previous 10 years.

“The Government will now remove these time limits as they provide unnecessary disincentives and distortions for individuals wishing to remain working in Australia,” Costello said. The measure will now apply to holders of a temporary visa, with the exception of those who are directly or indirectly treated as residents for social security purposes. Under the proposed legislation, holders of a temporary visa will not be taxed on foreign source income. They will continue to be taxed on all Australian source income and salary and wages generally, including income from employee shares or rights. Further, capital gains taxation of temporary residents will be aligned with non-residents. The combination of these changes will also ensure that the capital gains tax rules for departing residents do not apply to temporary residents.

ISLE OF MAN BUDGET CONFIRMS ZERO CORPORATE TAX RATE

Isle of Man’s 2006 budget included a package of measures to further stimulate the inflow of investment and business to the Island, including the introduction of zero corporate tax as of 5th April 2006. The new 0% tax regime is in accordance with the promised five year public taxation plan announced in 2000, which has been delivered on target, two years ahead of other UK Crown Dependencies and other competitors in the full implementation of a zero tax strategy. This is intended to stimulate inward investment by businesses establishing on the Island, and will also provide a consistent treatment across all sectors of the economy as part of the Isle of Man’s commitment to a diversified economy.

Presenting an integrated strategy of business and individual tax incentives, the Budget also introduces a cap on personal income tax at a maximum level of £100,000 per annum, irrespective of earnings. It is foreseen that this will attract high-net-worth individuals and active entrepreneurs to the Island with the drive to further stimulate the Isle of Man’s burgeoning economy. By making a tax system that is simple to understand and available to all, Treasury Minister Allan Bell is keen to provide a competitive advantage to the Island, in line with its fiscal strategy to promote the Isle of Man as a quality business centre of international standing. The introduction of a new Manx corporate vehicle, due later this year, is a further key element of its coordinated fiscal policy.

The Budget aims to deliver for the individual as well as business via a number of measures that will benefit all households on the Island. As part of the personal tax measures, an increase in personal tax allowances was announced, to £8,670 for single people and to £17,340 for married couples. Combined with an increase in the Personal Allowance Credit by 40% to £350, this will help the less well off, giving almost £3 million income to the neediest

In line with Tynwald statutory directives, says the government, the budget has been achieved without creating a deficit. The Isle of Man Treasury budgets for a surplus and balances its books year on year. The new tax measures are introduced without any increase in taxes or cut in public expenditure. As such, the Isle of Man says it is one of the most successful economies in Europe, and is now in its 21st year of unbroken growth, with unemployment below 1.5%. In the last ten years, its annual growth has averaged 7.4%, compared to an EU average of 2½%. Standard & Poor’s and Moody’s have awarded the Isle of Man Triple A and AAA ratings respectively.

HONG KONG BUDGET BRINGS MODEST INCOME TAX CUTS

Henry Tang yesterday unveiled his third budget as Hong Kong’s Financial Secretary, which has committed the government to modest income tax cuts for the middle classes, measures to boost the city’s standing as an international financial center, further liberalization of Renmimbi (yuan) business and a consultation on the proposal to introduce a goods and services tax. While business groups and taxpayers will be dismayed at a lack of significant tax cuts given Hong Kong’s strong economic record recently – GDP grew by 7.3% in 2005 following 8.6% growth in 2004 – Tang’s latest budget shows a determination to get to grips with the territory’s notoriously narrow tax base. Currently only about 20% of Hong Kong’s work force pay tax.

Nonetheless, Tang has tinkered with marginal salary tax rates in order to give mainly middle-class residents about HK$1.5 billion a year in tax cuts. Under the changes, the marginal rates of the second, third and top tax bands will by lowered by one percentage point to 7, 13 and 19% respectively. Tang also proposed to extend the limit for the deduction of mortgage interest by a further three years to a total of ten years, subject to the maximum annual deduction of HK$100,000. This measure will cost the Government some HK$1.2 billion in 2006–07.

To attract further inflows of new funds into the financial sector, Tang confirmed that a bill will be introduced to give effect to the proposed exemption of offshore funds from profits tax, and pledged to cut by 20% the levy on trading in securities, options and futures contracts. Tang added that the recent abolition of estate duty will also help to attract new funds to Hong Kong. Further expansion of a market for the Chinese currency, the Renmimbi (RMB), in Hong Kong is one Tang’s “major development objectives”. As a result, Hong Kong residents will soon be allowed to open RMB current accounts in a Hong Kong bank, while RMB deposit-taking services have been extended to non-individuals.

TIME RUNNING OUT FOR U.S. TAXPAYERS TO CLAIM $2 BILLION IN TAX REFUNDS FOR 2002

Unclaimed refunds totaling more than $2 billion are awaiting about 1.7 million people who failed to file a federal income tax return for 2002, according to the IRS, which is urging affected taxpayers to file a 2002 tax return no later than April 17, 2006 to remain eligible to collect their refund. The IRS estimates that half of those who could claim refunds would receive more than $570. In some cases, individuals had taxes withheld from their wages, or made payments against their taxes out of self-employed earnings, but had too little income to require filing a tax return. Some taxpayers may also be eligible for the refundable Earned Income Tax Credit, the IRS stated.

In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury. The IRS also warned that taxpayers seeking a 2002 refund will have their checks held if they have not filed tax returns for 2003 or 2004. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to satisfy unpaid child support or past due federal debts such as student loans.

SENIOR SENATE DEMOCRAT WANTS TO KNOW JUST HOW IRS WILL REDUCE “TAX GAP”

Sen. Max Baucus (D-Montana) has called upon IRS Commissioner Mark Everson to explain recent remarks made last week, where he claimed that the agency has the ability to collect up to $100 billion in extra tax without burdening the taxpayer. Speaking before the Senate Budget Committee last week on the subject of the “tax gap” – the difference between what taxpayers should have paid and what they actually paid on a timely basis – Everson argued that given the appropriate level of funding and enforcement tools by the government, the IRS could reduce the amount of outstanding taxes by between $50 billion and $100 billion. Everson also told lawmakers that the IRS is already making progress on closing the tax gap, and is on course to increase the overall compliance rate from 83.5% to 85% by 2009.

However, Everson did not fully explain how the agency would go about collecting such a sum, and Sen Baucus has demanded that Everson provide a full analysis of how the IRS can narrow the tax gap which, according to the agency’s latest estimate, stood at $345 billion in 2001. Baucus noted that while the Administration’s budget plan for fiscal 2007 contains five legislative proposals aimed at closing the tax gap that are estimated to raise $3.5 billion over 10 years, or $350 million per year, the budget remained “essentially flat” after inflation.

“How does a flat budget with modest legislative proposals translate into the additional collections predicted last week? To what extent does IRS expect to achieve efficiency and productivity gains that would facilitate increased collections?” Baucus asked the IRS chief. Baucus requested that the IRS identify, by March 8, 2006, “specific components” of the tax gap that will be reduced and explain how this reduction will be accomplished. The letter also instructs Everson to indicate what actions can be undertaken “immediately” to reduce the tax gap without the need for new legislation.

COURT ALLOWS AUSTRALIAN CRIME COMMISSION TO INVESTIGATE OFFSHORE TAX FRAUD CASES

The Australian Crime Commission has won a significant legal victory in its ongoing offensive to stamp out alleged offshore tax evasion schemes, after a recent Federal Court ruling allowed it to proceed with an investigation into several high-profile individuals suspected of tax avoidance. A full panel of Federal Court judges voted 2-1 that the ACC was within its constitutional rights to subpoena seven individuals and question them over breaches of state law, reports in the Australian media stated this week. Lawyers for the accused had argued that legislation only gives the commission power to investigate breaches of federal law. It is expected that the Federal Court ruling will be appealed to the High Court.

The ACC is taking part in a multi-agency effort to crack down on offshore tax evasion, money laundering and fraud codenamed “Operation Wickenby”. Since the middle of last year, the campaign has pooled the collective resources of the Australian Tax Office, the Australian Federal Police, the Australian Securities and Investments Commission and the Commonwealth Director of Public Prosecutions and the ACC, to uncover and punish those promoting and using offshore tax schemes. Last year, the authorities identified 511 cases of offshore tax avoidance and fraud, many of which had been uncovered using data from Austrac, which monitors money flows entering and leaving Australia. The ACC also raided 85 homes in four states in connection with the investigation, issuing 48 warrants in respect of suspected tax evasion.

ASSET PROTECTION / LEGAL STRUCTURES

OFFSHORE TRUSTS ARE BEST – NOW MORE THAN EVER

We have long advocated the use of offshore asset protection trusts (APT) as an ideal means to protect assets and assure their distribution to your chosen heirs and beneficiaries. The geographic location of an offshore APT adds a significant layer of protection – distance. It also places assets outside the jurisdiction of your home country courts. And it avoids the public and lengthy probate process required by a last will and testament. If your estate is valued at $500,000 or more, you should consider an offshore APT.

Now there is another, perhaps decisive, reason for choosing an offshore APT, rather then a trust located within the United States. There is an expanding U.S. state legislative movement to weaken significantly the most attractive aspects of trusts – trust integrity, privacy, limits on possible beneficiaries, and lower estate taxes – all highly important factors in creating your trust. If these factors are important to you, then do not set up a trust in any of these U.S. states: Arkansas, Kansas, Maine, Missouri, Nebraska, New Mexico, Utah, Tennessee, New Hampshire, North Carolina, Oregon, South Carolina, Virginia, Wyoming or the District of Columbia. If you already have a trust in these places, you had better reconsider.

You need to know about an obscure initiative from the National Conference of Commissioners on Uniform State Laws (NCCUSL). It is called the Uniform Trust Code (2005) or UTC. As its name implies, this group wants to make state laws more uniform, but trust laws are now in their gun sights. This UTC represents a radical shift in the legal treatment of trusts, greatly increasing the rights of beneficiaries and diminishing a trusts’ ability to shelter assets from a beneficiary’s creditors. For 400 years plus, English and U.S. trust law has been based on a simple concept: that a donor (grantor) can make a gift subject to whatever conditions he wishes to impose. While there are some limited exceptions to this rule, (a grantor may not make a gift contingent upon a child marrying a certain person), the old rule clearly supports a grantor’s right to restrict a gift.

But the radical, new UTC, more than ever before, gives trust beneficiaries a much greater right to challenge in court the grantor’s wishes. This can really hurt asset protection because in debtor-creditor law the general rule is that a creditor “stands in the shoes” of a debtor. That means a creditor may use any property or other right that the debtor can exercise. Some say this means that a creditor may be able attach a beneficiary’s interest in a trust formed in a UTC state – or even force the trust to make a distribution to the creditor. In “discretionary trusts” beneficiaries have no right to receive income or principal from the trust, and cannot force a trustee to make distributions. Until now this trust has prevented any creditor, including the federal government, from making a claim against trust assets. In UTC states, that is no longer true.

This is just the tip of the iceberg. The UTC’s radical expansion of beneficiaries’ rights also requires full disclosure of heretofore private trust arrangements to beneficiaries and expands the types of creditors who can invade the trust. No wonder experts predict a litigation explosion, as beneficiaries sue demanding greater distributions and more information and as creditors demand those same rights. If the UTC is not already law in your state, contact legislators and demand they oppose it. But your best bet is forming an offshore asset protection trust in a jurisdiction that avoids weakening traditional law.

DUBAI: MAKE THE MOST OF YOUR MONEY IN THE CITY OF GOLD

Zero taxes, zero restrictions, and busybody bureaucrats be damned.

On September 26, 2005, Dubai opened the Dubai International Financial Exchange (DIFX) – and opened a world of opportunity for offshore investors. The DIFX offers benefits such as (1) A zero tax rate on income and profits, (2) 100% foreign ownership, (3) No restrictions on foreign exchange or capital/profit repatriation, and (4) World-class operational support and business continuity facilities.

Sure, other offshore centers offer these things. However, Dubai has some extraordinary qualities that set it apart. It is a strong economic state and part of the United Arab Emirates. As such it cannot be pushed around by the OECD and the EU in the way that smaller offshore financial centers have been in the last few years. Dubai offers a stable regime that is not subject to the EU savings tax directive, the OECD’s tax harmonization pressures or the increasing intrusions on financial privacy from the U.S. and others.

When you think of the Middle East, the first words that come to your mind might not be “business friendly”, “moderate” or “peaceful”. But all those words describe Dubai. The UAE is a small nation nestled between Saudi Arabia and Oman, but oil wealth helped put its per capita GDP on par with Western Europe. The far-sighted leaders of the UAE are not content to live and die on oil wealth – the country’s oil and gas are due to run out in about 10 years. So the government has been busy investing its current wealth in new wealth creation initiatives, with a goal of creating an environment for growth, progress and economic development. It is already a success, with oil and gas now contributing just 6% of economic output. Having achieved one goal, the government is moving the goalposts. Now, the aim is for Dubai to become a successful onshore capital market that is designated as a sort of “offshore zone” in the hope of dominating financial services in the world’s biggest oil producing region.

Market for Dubai villas remains strong, unlike apartments.

The slowdown reported in apartment sales in Dubai has not been apparent for villas. Even off-plan villa sales are still going strong, and the resale market remains a seller’s market. This new dynamic to the market has been developing for some time. The mismatch between the supply of villas and the latent demand has been apparent for many years. In the early days of the first Dubai Marina apartment sales Emaar Properties noted huge demand for the very small number of villa units at the base of the development. This is one reason why Emaar went on to build the 2,000 villa Meadows and 4,000 town-house Springs developments, and then the very successful Arabian Ranches project. The first two schemes sold out long ago, though the release of villas at The Arabian Ranches continues.

The rental market for villas in Dubai is also well established and given that the supply of villas built in recent years is, if anything, behind the demand curve then the outlook for rental yields on villas should be considered more stable. In short, there is not a massive oversupply of villas about to hit the market whereas the same can not be said for apartments. This is one explanation why the resale market for villas in Dubai is currently strong, with properties not remaining on the market very long, while resales of off-plan apartments in a number of projects is difficult.

So it looks as though two different property markets now exist in Dubai: villas and apartments. To be fair, completed apartments in The Greens, for example, are still in demand, and the off-plan apartment market is where the main problems exist.

DUTCH ANTI-OFFSHORE SMEAR IS DISHONEST

There is no better example of the dishonest manner in which the world’s tax collectors seek to smear and discredit all offshore financial activity than a recent study commissioned by the Dutch Finance Ministry. The report is not only a mishmash of anti-capitalist leftist propaganda against offshore tax havens, it blithely assumes what is now leftist dogma – that legal tax avoidance is to be equated with illegal tax evasion and criminal money laundering. Try to minimize your personal or business taxes within the letter of the law and suddenly you become a suspected tax criminal!

A major theme of the anti-offshore smear is alleged “money laundering”, an all-purpose crime prosecutors twist to fit any criminal indictment. Both the IRS and the UK’s Inland Revenue consistently distort legal tax avoidance and money laundering. John Healey, a UK Treasury official says, “Tax avoidance and the industry that drives it are increasingly an international phenomenon, and it is vital that we have effective international co-operation to tackle it, as we do for tackling terrorism, organized crime, money laundering and fraud.” I heard a high U.S. Justice Department official say he and his colleagues assume that any offshore financial activity is probably criminal! If these dissemblers have their way legitimate tax avoidance will be understood as being the same as smuggling cocaine and blowing up innocent people.

Which is why the Dutch report is so odd in its content and conclusions. The report’s bottom line? The Netherlands is a tax haven and that makes it vulnerable to money laundering. The report estimates dirty cash laundered in the Netherlands is $22 billion annually, about 5% of Dutch GDP. (Passing strange that the Finance Ministry would attack tax laws that bring in so much foreign investment and taxes). This distorted thinking assumes that any nation that has low or no taxes automatically allows and is engaged in money laundering. In fact, tax havens worldwide now have tougher anti-money laundering laws than the U.S. or the UK. But low taxes do attract money and business to places such as Panama, the Channel Islands and – yes – the Netherlands. (If volume of offshore business measured in dollars is the rule, then the U.S. and the UK are the leading money launders in the world … as indeed they are).

For major multinational corporations the Netherlands has been a tax haven for decades because of its extensive network of tax treaties worldwide. Those with business operations in more than one country take advantage of these available tax treaties, a process tax lawyers call the “stepping stone” principal. (The IRS derisively calls it “treaty shopping”.) Stepping-stone transactions are most useful when passive interest or royalty income is involved, although other commercial and service businesses can also use this system. The tax treaty network allows a Dutch company to invest money virtually anywhere. Under treaty terms, the interest it receives is not subject to withholding taxes in the countries where the money is invested.

The tax collectors in the high tax socialist welfare states will not rest until all global tax competition is destroyed, to be replaced with uniform high tax confiscation everywhere. Thanks to national sovereignty, this is not about to happen. Unlike the Dutch bureaucrats who authored this report, most tax haven nations are not suicidal.

PRIVACY

PRIVATE IDENTITIES BECOME A CORPORATE FOCUS

During his keynote during the RSA Conference, Scott McNealy seemed almost apologetic. The Sun Microsystems CEO, infamous for his pronouncement, “You have zero privacy anyway – Get over it,” took a conciliatory tone on the stage here, allowing that privacy might be something for which consumers should fight. He warned companies that, unless they protect consumer privacy, they could lose out on significant online growth. “It’s going to get scarier if we don’t come up with technology and rules to protect appropriately privacy and secure the data, and the most important asset we have is obviously the data on people – our customers and employees and partners,” McNealy told attendees last week. “And if we can’t protect that, people are not going to go online.”

McNealy joined the heads of other technology companies at the RSA Conference who called for better protection of privacy and more specific ways of thinking about what data needs to be known to identify partners and customers. Part of McNealy’s epiphany? The week before the conference he was notified by a partner company that a lost laptop had his personal information stored on the hard drive. “I wish I could share with you the note I sent back to them,” he said, adding that he now better understood the consumer point of view. “It is a personal issue. What am I supposed to do now? They sent me this note, now what do I do?”

McNealy’s realization mirrored a wider conclusion among companies that privacy can be good business. It is a hard won lesson in the industry, and one for which consumers continue to pay. In 2005, more than 52 million account records were put at risk by the poor security of the companies handling data. In 2006, the problem seems hardly any better, with one newspaper company accidentally wrapping people’s Sunday editions with a list of 202,000 subscribers’ social security numbers and Seattle-based Providence Home Services acknowledging that backup tapes containing 365,000 patient records in the states of Washington and Oregon had been stolen from an employee’s car.

Along with the news that many companies have not handled customer data securely, many experts are questioning the amount of identifying data that companies store. Over the last decade, while the internet has boomed and busted, online identity has remained a binary proposition to most businesses, with users either fully identify themselves to a website or hide behind an anonymous handle. Because commerce sites believe anonymity means less security, online businesses have increasingly asked customers to more fully identify themselves, a choice highlighted by many companies’ difficulty in keeping the data safe. RSA Security CEO Art Coviello argued that companies should adopt technology that allows consumers to present trusted credentials for specific attributes, such as the visitor to the website is over 18 years old. In the current online world, a person might have to enter a credit card as “proof”, but in reality that would prove very little and place valuable data in the website’s system. Instead, a trusted third party – such as the Department of Motor Vehicles – could issue the certificate, which could then be presented to any site that required the data.

HOLLYWOOD PRIVATE EYE CHARGED WITH HACKING AND ILLEGAL WIRETAPPING

Anthony Pellicano recorded Sylvester Stallone’s telephone calls and managed to gain access to police computers to find out about the stars, court documents allege. The feds allege Pellicano snooped on Garry Shandling, Kevin Nealon, and Keith Carradine, hacks Anita Busch and Bernard Weinraub, and agents Bryan Lourd and Kevin Huvane. The court documents, published by Smoking Gun here, allege Pellicano worked with Mark Arneson, a former copper who tapped into the top secret National Crime Information Center (NCIC) database it is alleged.

Another person charged in the case is Kevin Kachikian, a software engineer, who iz alleged to have designed a computer program called “Telesleuth” which Pellicano used to wiretap conversations of Stallone, Carradine, and other Hollywood people. Another ex-copper, Craig Stevens, is charged with taking cash from Pellicano in exchange for tapping into Beverly Hills Police Department computers, it is alleged. Stevens pleaded guilty to six felony counts in connection with the Pellicano scheme. A former phone company manager, Teresa Wright, helped Pellicano get toll records, phone numbers, and home addresses. She has since pleaded guilty to a single felony count of unauthorized access of protected computer information, it is said.

According to court documents, Pellicano was “responsible for securing clients who were willing and able to pay large sums for the purpose of obtaining personal information of a confidential, embarrassing, or incriminating nature.”

LAW

PENUMBRAS, EMANATIONS, AND STUFF

You could easily get the impression that the U.S. Supreme Court has banned public displays of the Tenth Amendment. Actually, this has not happened … at least not yet. Anyway, adults can still read it in the privacy of their own homes, if they can lay hands on a copy. And in the age of the Internet, it would be hard to suppress completely. But a conspiracy of silence, if observed by enough people, can be as effective as an outright ban. And since at least the days of Franklin D. Roosevelt, that lump of foul deformity, most employees of the Federal Government have tacitly agreed to avoid all mention of the Tenth, which encapsulates the meaning of the U.S. Constitution. The silence was broken in 1996 by Bob Dole, who, in a desperate attempt to salvage his losing presidential campaign, said he always carried a copy of the Tenth in his wallet. Not that anyone would have been led to suspect this from his long voting record.

The Tenth is often referred to as “the states’ rights amendment”, but that is not quite accurate. It speaks of powers, not rights. It says that the powers that have not been “delegated” to the Federal Government in the Constitution are reserved to the individual states and the people. This was an attempt to make the Constitution foolproof. Nice try! At the time, it may have seemed that nobody, not even a politician or a lawyer, could miss the point: The Federal Government could exercise only those powers listed in the Constitution. Whatever was not authorized was forbidden. The basic list was found in Article I, Section 8. It was pretty specific: coining (not printing) money, punishing counterfeiters, declaring war, and so forth.

In principle, simple. Unfortunately, however, it runs up against the politician’s eternal credo, “In principle, I am a man of principle. But in practice, I am a practical man.” So the politicians, all practical men, began their endless but fruitful search for powers other than those listed – “implied” powers that were not spelled out in the text, but were “necessary and proper” for the execution of the explicitly enumerated powers. Among the most creative interpreters of the Constitution was Abraham Lincoln, who found he needed all the implied powers he could get his hands on in order to prevent peaceful secession by the exercise of violence. Nobody had discovered these “reservoirs” of power before. Later such reservoirs would also be called “penumbras, formed by emanations.”

But the richest cache of penumbras and emanations was later found in Congress’s power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” Especially since the New Deal, the part about “the several states” has gotten quite a workout. It is now interpreted to mean that the Federal Government can “regulate” just about everything we do, from sea to shining sea. This makes the rest of the Constitution pretty much superfluous.

Where does this leave the Tenth Amendment? Oh, that. The Supreme Court has held that it is just “declaratory”, a mere “truism”, a trivially true acknowledgment that the states retain any powers they have not actually “surrendered” (the Court carefully avoided the fraught word “delegated”). To call all this “legislating from the bench” is an almost imbecilic understatement. It inverts the plain meaning of the Constitution, making it mean the opposite of what it actually says. It is nothing less than revolution by means of “interpretation”. Notice that the Tenth Amendment is one of the few passages in the Constitution in which the Federal judiciary has not discovered reservoirs of penumbras and emanations. I wonder why.

TOTALITARIAN TONY

Hyde Park Corner is one of the most famous and hallowed spots in London. There, each Sunday morning, orators, preachers, revolutionaries and crazies would mount soapboxes and say whatever they pleased. Nothing was taboo. This was Britain’s temple of free speech. Last week, PM Tony Blair rammed a new law through Parliament making “glorification of terrorism” a criminal offence. Meanwhile, Blair’s big brother, U.S. President George W. Bush, is in deep, deep doodoo over the Iraq debacle, mounting casualties in Afghanistan, Hurricane Katrina and the storm of national ridicule caused by trigger-happy VP Dick Cheney. Republicans are gasping for air.

The image of Cheney, the warlord who avoided the Vietnam draft, blasting defenceless little birds and an unlucky friend on a hunting trip last weekend probably did more damage to the Bush administration than all its lies about Iraq. The only area in which Bush still commands favorable public support is his so-called war on terrorism. Incidentally, the Pentagon just proclaimed a “long war against terrorism”, meaning an Orwellian endless struggle against a ghostly enemy that hopefully will keep flag-waving Bible-Belters voting Republican, and defence plants running three shifts.

Over in Britain, Blair’s power is eroding. He has been exposed as a serial liar over Iraq. In sharp contrast to the lapdog U.S. media, Britain’s feisty press keeps slamming Blair. How to reverse Labour’s waning fortunes? Monkey see, monkey do. Follow your leader, George W. Whip up the voters over “terrorism” even though there is no such thing. (As Prince Hassan of Jordan observed with impeccable logic, “terrorism is a tactic, not a definable enemy.”) A vague law mandating prison for “glorifying terrorism” reeks of totalitarianism and undermines Britain’s reputation as a font of democracy and justice.

To preserve the status quo, the Great Powers decided to brand all armed struggles against oppression and injustice as “terrorism”. Palestinians resisting Israeli occupation, tiny bands of Chechen mujahidin fighting Russian genocide in the Caucasus, guerillas battling communist regimes in Uzbekistan, Filipino Muslims resisting Christian invaders seizing their farms, Kashmiris fighting for independence from India, and so on … all are now “terrorists”. Now, mounting a Hyde Park soapbox to praise the Chechens’ valiant struggle or urging Palestinians or Iraqis or Afghans to keep resisting foreign occupation will be a crime. Terrorism has erased the term “justice” from our minds.

The litmus test of free speech is letting people you detest say what they choose, and defending their right to say things that may be painfully hateful or deeply stupid. Tony Blair just trampled this basic British right. Britain now joins sleazy, third-world despotisms where The Glorious Leader alone determines what one may and may not say. History shows such gag laws are soon followed by offences like “insulting the leadership”. Then, by crimes like “encouraging anti-state activities”, and, that gulag gate-opener, being “an enemy of the people”.

RESPECTING THE CONSTITUTION

For all the divisiveness about the president and the Constitution, it is good to have the document in the news again. As Daniel Webster said of it, “Miracles do not cluster. Hold on to the Constitution and the republic for which it stands.” Among those now most urgently holding on are certain conservatives who support the president in the war on terrorism but question his assumption of unilateral powers. David Keene, chairman of the American Conservative Union, in urging Congress to hold its recent hearings on the scope and depth of the National Security Agency’s warrantless surveilling, spoke to the crucial restoration of the separation of powers. “No one would deny the government the power it needs to protect us all, but when that power poses a threat to the basic rights that make our nation unique, its exercise must be carefully monitored by Congress and the courts.”

In reporting what should be a nonpartisan issue on the separation of powers, Cybercast News Service on January 18 also carried a comment by Alan Gottlieb, founder of the Second Amendment Foundation, on why gun owners are particularly concerned with the NSA wiretapping program: “If the law is not reformed, ordinary Americans’ personal information could be swept into all-encompassing federal databases encroaching upon every aspect of their lives.” That this is already happening, not only to gun owners and not only in federal databases, has been carefully and rivetingly documented in Robert O’Harrow’s No Place to Hide. This book is a manual of privacy self-defense for all “ordinary” Americans.

And the conservative Free Congress Foundation – of which Paul Weyrich is chairman and CEO, and to which I am indebted for a weekly update on our diminishing privacy – makes a liberty-saving point in questioning the care and accountability of the FBI’s targeting groups such as Greenpeace and People for the Ethical Treatment of Animals: “Make no mistake, the Free Congress Foundation is adamantly opposed to the agendas of both groups and has little respect for their tactics. They push the boundaries. However, put another administration in power – one bent on enforcing political correctness – and it will no longer be Greenpeace or PETA that is under the microscope. It will be property-rights groups, pro-lifers, defenders of traditional values, Second Amendment stalwarts.”

Conservatives such as Mr. Keene, Bob Barr and Grover Norquist, president of Americans for Tax Reform, are taken to task for what the National Review calls “the strangest company they are keeping” in working to hold on to the Constitution. Instead of keeping lists of who appears with whom at various meetings, it would be much more restorative of constitutional values if conservatives, liberals and independents were to unite in a campaign to strengthen the currently lamentable state of teaching the history and contents of the Constitution throughout all levels of our educational system. And, by the way, are key presidential advisers Alberto Gonzales, Dick Cheney and Donald Rumsfeld constitutional scholars? The president needs one.

President Bush’s conception of his own powers is even more dangerous than his specific abuses.

Repeatedly through our history, the liberties guaranteed by the Constitution have been threatened in war by an overreacting government and then reaffirmed in peace by calmer leadership. The Alien and Sedition Acts of 1798, Lincoln’s suspension of habeas corpus, the suppression of free speech during and after World War I, the internment of Japanese Americans during World War II, McCarthyism, and the wiretapping of Vietnam-era dissenters – all of these came to be seen, once fears subsided, as violations of our freedoms and embarrassments to our heritage. George W. Bush’s presidency is another era of overreaction at the expense of constitutional rights, but the prospects for a quick correction are not auspicious. Nothing has helped end earlier bouts of repression so much as the fact that the wars themselves came to a close, and nothing has so exposed our liberties to indefinite jeopardy as the conception of a “war on terrorism” with no end.

The president claims an inherent power to imprison American citizens whom he has determined to be this country’s enemies without obtaining a warrant, letting them hear the charges against them, or following other safeguards against wrongful punishment guaranteed by the Bill of Rights. Under his administration, the government has engaged in inhumane treatment of prisoners that amounts to torture, and when Congress passed legislation to ban such treatment, he declared he would simply interpret the law his own way. Although the Constitution says treaties are the “supreme law of the land,” the president has abrogated them on his own. And, we now know, he ordered a secret program of electronic surveillance of Americans without court warrants.

But there is something more dangerous than any of these specific abuses and usurpations, and that is the theory of inherent powers that Bush invokes to justify most of these actions and the possibility of its being effectively institutionalized by a meek Congress and, worst of all, by a deferential Supreme Court. My concern is analogous to the one that Justice Robert H. Jackson articulated when he dissented from the majority in Korematsu, the infamous Supreme Court decision in the midst of war (1944) upholding the constitutionality of the military order to intern Japanese Americans. A judicial construction sustaining the program, he wrote, “is a far more subtle blow to liberty than the promulgation of the order itself.”

The real danger today is the loaded weapon that Bush and his defenders are willing to put in the hands of all future presidents. Even members of his own party ought to be able to see that danger, and act to stop it. Our Constitution divides the president’s authority with Congress and the courts so as to create a system of mandatory consultations. Not long ago, the Supreme Court could have been counted on to restore the checks that Bush has thrust aside. But the confirmation of the president’s two nominees to the Court may now tilt it in his direction. Of course, if the voters elect a Democratic president in 2008, perhaps even the Court’s new justices may discover constitutional reasons to limit the president’s inherent powers. I am not saying this is the only hope. But in a democracy, those who cannot imagine being out of power deserve another experience of being without it.

CITY OF LONDON BANKERS LOSE APPEAL AGAINST BEING EXTRADITED TO THE U.S.

Three British bankers face extradition to the U.S. over fraud charges in connection with the Enron scandal after losing a high court battle. The former NatWest executives David Bermingham, Gary Mulgrew and Giles Darby failed in their appeal to challenge the legality of the extradition orders made by a Bow Street district judge and confirmed by the home secretary, Charles Clarke. Mr. Bermingham said the British government had failed in its first duty, which he said was to protect its citizens, and the three were being used as “political currency” to “curry favour” with another government. “This case is going to have a profound impact, not just on us, but many, many people, some who are already in the system,” he said, adding, “I can honestly say for the first time in my life today: I’m ashamed to be British.”

The case has sparked widespread anger among the British business community over the perceived unfairness of the government’s 2003 Extradition Act. Mr. Bermingham’s MP, Boris Johnson, said there was “a serious imbalance and asymmetry” in the UK’'s extradition arrangements with the U.S. He told BBC Radio 4’s World at One, “They [the U.S.] can, under the 2003 Extradition Act, Hoover (bring over, as if by a vacuum cleaner) over to America, as if by some electromagnetic power, people against whom they are not obliged to produce any prima facie evidence – whereas we have absolutely no such corresponding right to extradite to Britain suspects that we want to.”

The three men, all British citizens, are accused of defrauding Greenwich NatWest, a subsidiary of British parent company NatWest, of some $7.3 million (£4.2 million). U.S. prosecutors allege that the men advised NatWest in 2000 to sell part of an Enron business it owned for less than the stake it was worth. They then left NatWest, bought into the firm themselves and sold it for a much higher price, pocketing about $2.7 million each in the process. The deal was allegedly carried out with the help of top Enron executives, including the former chief financial officer Andrew Fastow.

Lawyers for the NatWest trio fought the extradition on two fronts. They argued, first, that the Serious Fraud Office, not the U.S., should investigate the case and that any trial should take place in the UK. Second, they said the offences were not extradition offences and that putting them on trial in the U.S. would be unjust and incompatible with European and UK human rights law. But Lord Justice Laws and Mr. Justice Ouseley dismissed both challenges. Under the 2003 law, the U.S. does not need to put a prima facie case before a judge in a British court, and is instead able to extradite suspects to America and keep them on remand before a trial. By contrast, U.S. citizens cannot yet be extradited to Britain in a similar way.

OPINION & ANALYSIS

TRAITORS IN U.S. CONGRESS

Those bagpipes you hear playing in the background provide a much-needed funeral dirge for freedom, which died this week at the hands of the U.S. Congress. Freedom has been on its deathbed for about five years now, mortally-wounded in the post-9/11 frenzy that put political expediency above the Constitution and gave paranoia supremacy over what used to be guarantees of individual rights for all Americans. Freedom went on the endangered-species list in the hours following the 9/11 attacks when President George W. Bush turned to attorney general John Ashcroft and said “John, take whatever steps you feel are necessary to make sure something like this never, ever, happens again.” Turning a zealot like Ashcroft loose on the Constitution is like giving Bill Clinton the keys to a sorority house. Someone is going to get screwed big-time and in this case it was, collectively, the whole concept of freedom and individual rights in this country.

Ashcroft crafted his personal vision of a new America, one ruled by a police state reporting to a totalitarian government, and called it the USA Patriot Act. It sailed through a shell-shocked Congress and gave Bush and his gang of thugs all they needed to create a new American Gestapo, detaining this nation’s citizens without due course, spying on Americans without warrants and setting the country on a headlong rush to ruin. The abuses of the Patriot Act proved so onerous that even firebrand conservatives like Bob Barr joined forces with uber-liberals like the ACLU to fight it.

Late last year, spurred by anger over Bush’s admission that he authorized the warrantless spying on Americans by the National Security Act, the Patriot Act appeared to face serious opposition when it came up for renewal. Congress twice granted temporary extensions and promised to add new language to protect the civil liberties of Americans. But, as happens all too often in Washington, those promises vanished into thin air as the Patriot Act this week cleared hurdle after hurdle and heads for permanent renewal when the goons who call themselves our elected representatives return from the President’s Day recess. In the end, the White House “negotiated” a set of meaningless changes with a handful of Republicans and the so-called compromise sailed through the Senate last week on a 96-3 vote.

Virtually no one – Democratic or Republican, conservative or liberal, left or right – can claim the high road when it comes to destroying freedom in the United States. Only Sen. Russ Feingold, D-Wisconsin, seems to realize the dangers of the act, continuing to fight it and saying the law, even as amended, allows “government fishing expeditions” and an outright assault on the Constitution. For the most part, the rest of Congress sold out the people who elected them to office, all Americans who depend on Congress to serve as a check and balance on the excesses of the White House. Those who “serve” in Congress should take a long, hard look at the blood on their hands. They stand guilty of high crimes and treason against the United States of America. They are traitors and should be treated as such.

THE POLITICALLY INCORRECT GUIDE TO AMERICAN HISTORY

The winners write the history, and the winning states especially so. Thomas Woods, however, sets out to write a primer on American history from a different point of view, one that does not glorify centralization and intervention. The result is the only primer on American history that is heavily informed by the economics of the Austrian School. It was also a New York Times bestseller and one of the most controversial books in American history to appear in decades. From the Puritans through the drafting of the Constitution, the Civil War, the World Wars, the rise of the “Great Society” all the way up through the of the Clinton Administration, this brightly written book discusses the real ideals of the founding, the truth about the Civil War, the heroism of the robber barrons, the ravages of statism in World War I, high taxes, and the war against free markets.

He shows that the Constitution was never understood to be a permanent union, that big government caused the North-South conflict, that Alexander Hamilton’s friends were racketeers, that the U.S. did not have to enter WW I, that Hoover was a big government conservative, that FDR made the Depression worse, that there really were Communists in government, that FDR made WW II inevitable, that the Marshall Plan was a flop, that the Civil Rights movement increased social conflict and made everyone worse off, that unions made workers poorer, that the ‘80s were not really the decade of greed, that Clinton’s wars were aggressive and avoidable, and that his personal issues were a major distraction from the real problems of the 1990s. Thomas Woods writes in a Rothbardian spirit, combining scholarship, radicalism, and a burning desire to communicate.

This book was marketed by the publisher to a conservative audience (e.g., the title alone), but what readers actually find is a radical reinterpretation of the whole American experience from a Jeffersonian-Rothbardian point of view. Woods has written a bracing and indispensible book. It is no wonder that Amazon.com has 177 reviews of this book online, with reviewers battling it out with a fury. It has also been subjected to incredible calumny. See what all the fuss is about!

50 YEARS AGO: THE DAY KHRUSHCHEV DENOUNCED STALIN

For 10 days in February 1956, Moscow’s few Western correspondents had been covering the 20th Congress of the Soviet Communist Party, where “the cult of personality”, a veiled reference to Stalin, was repeatedly denounced. But the night after the congress formally closed, the party’s Central Committee building was humming with activity into the early hours, its windows ablaze with light. Why, we wondered, after the congress was over? And then the rumours began. Khrushchev, it was said, had made a shattering report to a secret session, openly denouncing Stalin by name as a murderer and torturer of party members. This was so traumatic that it is now said some delegates had heart attacks during the speech, and others committed suicide afterwards.

In those days a Westerner was lucky to have any unofficial Soviet friends. Under Stalin, no Soviet citizen would have dared risk unauthorized contact with a foreigner. It would have meant instant arrest as a suspected spy. True, in the three years since his death, Moscow’s citizens had relaxed somewhat under the warm glow of Khrushchev’s “thaw”, but not all that much. Fear still lurked only just beneath the surface, and Muscovites were still very wary. But Kostya Orlov, a young Soviet citizen of my acquaintance, seemed quite unperturbed when I met him. Without any notes, he launched into a detailed account of the very speech we had been hearing about, which was even more sensational than I had thought. He said it was being read to party meetings, and that a friend of his was a local party secretary who had let him see it.

But the question was, could I believe him? Yes, it fitted in with what little we did know, and Orlov had been right about lesser matters before. Still, I did not feel I could on my own break the censorship and file such an earth-shaking and dubiously sourced story from outside the country. What if it were a false plant? The consequences could be dire, both for me and for Reuters. I called Sidney Weiland, who was my boss, and arranged to meet him at midnight. To avoid microphones, we tramped through the snow as I told him the whole tale, pausing just now and then under street lights to consult my notes. And in the end we decided we did believe it.

I asked Reuters to keep my name off the story and use a dateline other than Moscow. After all, I had to go back there and was desperate not to be suspected of breaking the censorship. In any event nothing happened to me when I returned, until the autumn, that is, when shockwaves from the speech unleashed the Hungarian uprising, unrest all over Central Europe and even within the Soviet Union itself. In Moscow the thaw turned to deep freeze, and soon afterwards the KGB began to put pressure on me. So I asked to be recalled to London, and never expected to go back to Moscow. But 32 years later, in the new thaw of Mikhail Gorbachev, I did go back. By then it was obvious to me that Orlov could not possibly have been acting on his own.

So who had ordered that he should pass details of the speech to me? Could it have been Nikita Khrushchev himself, who wanted the world to know that he had broken with Stalin? Everybody I asked agreed that it probably was and I think so too, but will never find out for sure.

FRÉDÉRIC BASTIAT’S THE LAW IS WORTH READING AND RE-READING

Frédéric Bastiat was the great French proto-Austro-libertarian whose polemics and analytics run circles around every statist cliché. His primary desire as a writer was to reach people in the most practical way with the message of the moral and material urgency of freedom. The essay was published in French in 1850. This piece was published in English as part of Essays on Political Economy (G.P. Putnams & Sons, 1874) with authoritative translation by British economist Patrick James Stirling, with changes by David Wells. Spellings are American English.

THE BIRTH AND LIFE OF THE “9-11 TRUTH MOVEMENT”

Essentially, it is all about physics and common sense. Cut steel, and buildings fall. Crash a plane, and the Earth gets scarred. Fire a missile, see a hole. What is up must come down, cause makes effect, and for the truth to set you free, it must be freed itself.

It is easy to dismiss the odd characters. It is harder to ignore the regular guys in the room, or the polls showing that 49% of New York City residents believe the government knew about 9-11 before it happened, or the rock-solid certainty of these supposed doubters. “I’d love to be proven wrong. I would love for someone to come to me and say I’m full of sh*t. It hasn’t happened,” says 22-year-old filmmaker Dylan Avery, making of Loose Change, a slick, witty documentary featuring a hip soundtrack and a rapid-fire assault on nearly every aspect of the “official” story of 9-11. “I have scientists on my side. There’s so much evidence supporting my side, and the government’s side has nothing.” Its name notwithstanding, the 9-11 Truth movement tells a story – and is a story – about what happens when the government lies. Again, it is simple physics. For every action, there is a reaction equal and opposite.

The key to understanding the Truth movement is to realize that its members do not lack faith in all institutions of the U.S. government. On the contrary, their theories rely on a healthy respect for the power and competence of air defense units, FBI agents, high-rise building designers, and others. Why would Bush mistakenly say he had seen the first plane strike on TV? How could the FBI miss so many leads? Is it plausible that the CIA ignored all those warnings? And after the purported multiple failures of the FAA and NORAD on 9-11, how come no one was fired?

It is odd. For a group of people who harbor so many doubts about the intentions of their own and other governments, the media, and fellow citizens, much of the Truth movement does not suspect for a moment that our defense spending has been a rip-off, that the FBI is a clumsy bureaucracy, that our spy agencies are deaf and dumb, and that our skyscrapers are not 100% safe. They do not seem worried that they could be unwitting partners in a more mundane conspiracy to obscure the limits of security and science. To the lies of the Bush administration, many in the Truth movement reply with stunning and familiar certainty. “I can’t jump back to the other side,” says Avery. “I know that what I’m doing is right.”

MORE SECURITY IS NO SUBSTITUTE FOR LESS FREEDOM

The following happened in the United States of America on February 9 of this year. The scene is the Little Falls branch of the Montgomery County Public Library in Bethesda, Maryland. Business is going on as usual when two men in uniform stride into the main reading room and call for attention. Then they make an announcement: It is forbidden to use the library’s computers to view Internet pornography. As people are absorbing this, one of the men challenges a patron about a website he is visiting and asks the man to step outside. At this point, a librarian intervenes and calls the uniformed men aside. A police officer is summoned. The men leave. It turns out they are employees of the county’s department of Homeland Security and were operating way outside their authority.

We are indebted to reporter Cameron W. Barr of The Washington Post for the account of this incident, which, I feel constrained to repeat, did not happen in China, Cuba or North Korea. Rather, it happened a few days ago in this country. Right here in freedom’s land. There are those of us who would say the country has become less deserving of that sobriquet in recent years. They would point as evidence to the detention of U.S. citizens without charges, counsel or recourse, to laws empowering the government to check up on what you have been reading, to revelations of illegal eavesdropping. And there are others who would say, “So what?” They are in the 51%, according to a recent Los Angeles Times/Bloomberg poll, who say we should be ready give up our freedoms in exchange for security. Apparently, they are ignorant of what Benjamin Franklin said, “They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.”

Apparently, they are also unversed in something candidate Bush said in 1999: “There ought to be limits to freedom.” Mind you, this nugget of wisdom was not dropped in a discussion of national security. Rather, it was the future president’s reaction to a Website that made fun of him. Seven years later, he is clearly getting his wish. It chills me to know that does not chill more of us. Indeed, of all the many things I cannot fathom about certain of my countrymen and women, their ability to be sanguine at the threatened abrogation of their rights is very near the top. The only way I can explain it is that freedom – the right to do, say, think, go, live as you please – is so ingrained in our psyche, has been such a part of us for so long, that some are literally unable to imagine life without it.

Look, freedom is a messy business. It is also a risky business. But it means nothing if we surrender it at every hint of messiness and risk. That is cowardly and it is un-American. You would think we would have learned that lesson after the Sedition Act of 1918, the excesses of Joseph McCarthy, the surveillance of Martin Luther King. But apparently the lesson requires constant relearning. And vigilance. So thank you to the Little Falls library for having the guts to say, hell no. Some things should never happen in freedom’s land.