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MYSTERIES OF VENEZUELA REVEALED
Since 1999, when Hugo Chavez first became president of Venezuela, the country has been clouded in mystery and intrigue. Chavez’s socialist agenda and ongoing theatrics with Cuban dictator Fidel Castro and U.S. President George Bush have sent up red flags regarding Venezuela all over the democratic world. In spite of all the political posturing and bloviating in the media, the country remains one of the most unspoiled vacation destinations in the world, whether visiting the beaches, mountains, Amazon, or plains. It also remains one of the best countries to get more bang for your dollar, whether buying real estate, or just eating dinner out. The most recent background information on the political and econmomic situations in Venezuela will surprise a lot of readers and challenge their perceptions that this is a “communist” country or that the future of this place is bleak.
“A disastrous two-month national oil strike from December 2002 to February 2003, temporarily halted economic activity. The economy remained in depression in 2003, declining by 9.2% after an 8.9% fall in 2002. Despite continued domestic instability, output recovered strongly in 2004, aided by high oil prices,” says The CIA Factbook. The political situation is now stable again, after two or three years of unrest. In fact, the economy is now booming due to these higher oil prices. According to a recent issue of The Economist, “Emerging-market indicators show that Venezuela is the fastest growing country in the world. GDP growth is up 11.2% year-on-year change (as of 2005 figures), and it is the only country in the world which registered double digit growth rate.” (China, the second highest, kicked in at 9.5%, imagine that!) Even more impressive, industrial production is up 23.1%. That is mostly local money. As a result, confidence is high locally, hence the political calm. Instead of taking money out of the country, local business leaders and government are keeping it in and reinvesting it.
As for Chavez and any perceived anti-American attitude, it has been at least partially caused by the U.S. government and its policies from what I have been able to research on the subject, as well as from speaking with the locals on my four trips through the Caribbean coast of Venezuela since April, 2005. The Chavez government was against the wars in Afghanistan and Iraq. However, we know many other countries were also against these wars, some of them supposed allies of the USA. Of course, the way this was covered in the U.S. media and responded to by the Bush government shined a dim light on U.S.-Venezuela relations. In spite of this deterioration in relations, the people in the country have remained very friendly towards the Americans visiting their country. I found no bad attitudes, resentment or maltreatment of any kind directed towards my family and me. Also, to eradicate any perceived anti-American perception, Chavez has put in place much tougher penalties for any crimes against foreigners in general and Americans in particular.
From the investors angle, although the “up cycle” seems to have started, property prices are still at a historical low and the currency exchange, which was around 680 Bolivars to the dollar in 2000 after Chavez took office (CIA Factbook), is now 2,150 to one and fixed by the government. That is the official rate, you can exchange dollars privately and receive between 2,400 to 2,700 Bolivars to the buck, depending on the amount you exchange. The low prices and high exchange rate combine for a great opportunity to buy. This is the time all offshore investors look for, prices have not risen much but the economy is taking off. Foreigners can directly own real property in Venezuela the same as a citizen can . No Venezuelan corporation or fideicomiso (bank trust, as in parts of Mexico) is needed, although you could set up a Venezuelan corporation and buy through it if that is what helps your personal situation. Another fact makes the coastal area of Miranda state, which includes hundreds of miles of both gorgeous coastline and natural canals, particularly attractive to investors.
We all know the tourist Mecca in Venezuela has been Margarita Island for many years. Previous governments have pumped much money into developing and marketing the island. However, due to present day politics, this has been changing. It turns out that the governor of Nueva Esparta, the state that Margarita is in, is of the opposition party, not Chavez’s party. Their differences run deep enough that Chavez is no longer concerned with further development and promotion of Margarita. The governor of Miranda state, where Rio Chico and Isla de Oro is located, is a former vice-president of Chavez. Between them, they want to make the Caribbean coast of Miranda the next tourist capital of Venezuela. If you have visitied Margarita Island lately, you may have noticed that it does not shine like it once did. Times are changing for Caribbean Venezuela.
I have been researching emerging markets in Latin America and the Caribbean, as well as traveling to them to search out properties for years. I have been to Mexico, Panama, Nicaragua, Colombia, and the Bahamas. Nowhere have I found lower prices, an “earlier-in” time for investing, a better exchange rate or more beautiful beaches. You owe it to yourself to visit. At least visit our website to get a taste of what you are missing. Be well, and hope to see you there soon.Link here.
PAY DOWN YOUR CREDIT CARD BALANCE TOO MUCH, BECOME A TERRORIST SUSPECT
Walter Soehnge is a retired Texas schoolteacher who traveled north with his wife, Deana, saw summer change to fall in Rhode Island and decided this was a place to stay for a while. Last week, that he told me that he was “madder than a panther with kerosene on his tail.” He says things like that. Texas does leave its mark on a man. What got him so upset might seem trivial to some people who have learned to accept small infringements on their freedom as just part of the way things are in this age of terror-fed paranoia. It is that “everything changed after 9-11” thing. But not Walter. “We’re a product of the ‘60s,” he said. “We believe government should be way away from us in that regard.”
He was referring to the recent decision by him and his wife to be responsible, to do the kind of thing that just about anyone would say makes good, solid financial sense. They paid down some debt. The balance on their JCPenney Platinum MasterCard had gotten to an unhealthy level. So they sent in a large payment, a check for $6,522. And an alarm went off. A red flag went up. The Soehnges’ behavior was found questionable. And all they did was pay down their debt. They did not call a suspected terrorist on their cell phone. They did not try to sneak a machine gun through customs. They just paid a hefty chunk of their credit card balance. And they learned how frighteningly wide the net of suspicion has been cast.
After sending in the check, they checked online to see if their account had been duly credited. They learned that the check had arrived, but the amount available for credit on their account had not changed. They learned the same astounding piece of information about the little things that can set the threat sensors to beeping and blinking. They were told, as they moved up the managerial ladder at the call center, that the amount they had sent in was much larger than their normal monthly payment. And if the increase hits a certain percentage higher than that normal payment, Homeland Security has to be notified. And the money does not move until the threat alert is lifted.
Walter called television stations, the American Civil Liberties Union and me. And he went on the Internet to see what he could learn. He learned about changes in something called the Bank Privacy Act. “The more I’m on, the scarier it gets,” he said. “It’s scary how easily someone in Homeland Security can get permission to spy.” Eventually, his and his wife’s money was freed up. The Soehnges were apparently found not to be promoting global terrorism under the guise of paying a credit-card bill. They never did learn how a large credit card payment can pose a security threat. But the experience has been a reminder that a small piece of privacy has been surrendered. Walter Soehnge, who says he holds solid, middle-of-the-road American beliefs, worries about rights being lost.Links here and here.
SECULAR BEAR MARKETS: CONCERNS AND STRATEGIES FOR FINANCIAL PLANNERS
As a profession that has spent decades establishing itself in the midst of one of the greatest bull markets in history, it is understandably difficult for financial planners to conceive of the possibility that the markets of the future might be fundamentally different from those of the past. Although we all have repeated the ubiquitous phrase, “past performance is not an indicator of future results,” we produce financial plans that are predicated on historical average market returns, and then try to design portfolios that will be most likely to match those long-term averages.
However, since March of 2000, it is probable that most financial planners have delivered a level of investment performance that is far below the assumptions made in their clients’ financial plans at that time, even if the planner had used “reasonable” historical averages rather than the remarkable returns of the 1990s. Many in the industry would answer that although portfolios have underperformed in the short term, clients realize that their balanced portfolios have significantly outperformed the absolute losses of the stock markets, especially the Nasdaq. Many advisors believe that while clients may be trailing their original assumptions, most clients are grateful that their capital has been reasonably preserved over this period with their diversified strategic portfolios. While this may be true, the numbers are appalling. Unless the planner had the ability to achieve superior returns through either excellent security or manager selection, or other active management strategies, the portfolio performance of clients is probably considerably lagging the planner’s initial real-return projections.
This article proposes that strategic asset allocation is not the most desirable strategy for portfolio management during secular bear markets. During these periods of long-term market returns that underperform historical averages, the traditional passive strategic “rules” for managing client portfolios must be reconsidered. The authors will present evidence that suggests long-term market cycles do, in fact, exist. The article will then present four alternative active management strategies that are currently considered to be “high risk” strategies by the planning community (often because they “risk” substantially underperforming their relative benchmark), but may actually deliver significantly better returns for clients in difficult markets. Finally, the authors will discuss the phobic response to active management strategies in the advisor community and consider the financial planning and business implications of a secular bear market.Link here.
PATRIOT ACT EMAIL SEARCHES APPLY TO NON-TERRORISTS, JUDGES SAY
Two federal judges in Florida have upheld the authority of individual courts to use the Patriot Act to order searches anywhere in the country for emails and computer data in all types of criminal investigations, overruling a magistrate who found that Congress limited such expanded jurisdiction to cases involving terrorism. The disagreement among the jurists about the scope of their powers simmered for more than two years before coming to light in an opinion unsealed earlier this month. The resolution, which underscored the government’s broad legal authority to intercept electronic communications, comes as debate is raging over President Bush’s warrantless surveillance program and the duties of Internet providers to protect personal data.
A magistrate judge in Orlando, James Glazebrook, first questioned the so-called nationwide-search provision in 2003, after investigators in a child pornography probe asked him to issue a search warrant requiring a “legitimate” California-based Web site to identify all users who accessed certain “password-protected” photos posted on the site. Magistrate Glazebrook said that in passing the Patriot Act, Congress made clear its focus was on terrorism. He said there was nothing in the language Congress adopted in the days after the September 11, 2001, terrorist attacks that suggested the nationwide-search provision should apply to garden variety federal cases. He also noted that many of the examples given during legislative debate involved terrorism. The then chairman of the Senate Judiciary Committee, Senator Leahy, D-Vermont, described the nationwide-search language as applying in terrorism cases, the court noted.
Magistrate Glazebrook denied the search warrant, but it was recently disclosed that the government appealed to a federal judge, G. Kendall Sharp, who granted it without explanation. The scenario played out again late last year, after prosecutors presented Magistrate Glazebrook with an application for a search warrant directed to Yahoo. The government asked that Yahoo produce web pages, documents, and usage logs pertaining to two -mail addresses and a Web site allegedly linked to an Orlando man, Earl Beach, under investigation for involvement in child pornography. Magistrate Glazebrook allowed searches of Mr. Beach’s home and computers, but again rejected prosecutors’ request to acquire data located across the country. Again, prosecutors appealed. Judge Gregory Presnell took up the question and concluded that “it seems” Congress did intend to authorize nationwide search warrants in all cases, not just ones pertaining to terrorism. However, the judge acknowledged that the language Congress used was far from clear. The chief federal defender in Orlando, R. Fletcher Peacock, said the dispute was a straightforward one pitting literal interpretation against legislative intent. “Judge Presnell was more willing to go behind the language of the statute and look at the statutory intent, and clearly Judge Glazebrook was not,” the attorney said.
Privacy advocate, Kevin Bankston, said there is no question that the Justice Department wanted the Patriot Act to include nationwide-search authority for all crimes, but whether lawmakers accomplished that task is another question. “I don’t know that Congress knew what it was voting on,” he said. Magistrate Glazebrook said in a brief interview that he could not discuss the specific cases that prompted the legal disagreement over the Patriot Act, but that he expects the question to arise again. “It is certainly something that will come up,” he said. “There are a lot of interesting issues surrounding that.”Link here.
GORE VIDAL, ON WHERE AMERICA IS HEADED
Interviewer: Gore Vidal, finally, can I ask you to engage in prophecy just for a moment? Look down the track. Four more years of George Bush. What will America and what will the world look like, in your opinion?
Gore Vidal: Well, an unholy mess. The dollar declines in value. There is no way that you can up it. There is nothing you can do. The wars will continue. There will be an attempt made in Iran and Syria, other places that look exciting. The United States will go broke. It is as simple as that. That is what ended the British Empire. One of the reasons we got into World War I was that in 1914, under the Asquith Government, the government fecklessly ran out of money, and here they were, supposed to be fighting the central powers, Germany and so on. The same thing is happening to us. We do not have the money to pay the debts. Now, great nations that are rich in a sense do not go bankrupt the way individuals do, because you cannot put a valuation on them, but you can certainly show lack of confidence in their currency if it goes down, down, down, which it is now doing, and interest rates go up, up, up. As the interest rates go up, then we have the problem of inflation, which will give social insecurity to everybody, because the price of bread will suddenly get very high, which it has never been in the United States since the early ‘30s. So I would say that, in the long run, the world will be saved American despotism by the coming bankruptcy of the country. Now, that will have awful fallout for everybody. I do not even want to look into that crystal ball.Link here.
WHY DATA MINING WILL NOT STOP TERROR
In the post-9/11 world, there is much focus on connecting the dots. Many believe data mining is the crystal ball that will enable us to uncover future terrorist plots. But even in the most wildly optimistic projections, data mining is not tenable for that purpose. We are not trading privacy for security. We are giving up privacy and getting no security in return.
Most people first learned about data mining in November 2002, when news broke about a massive government data mining program called Total Information Awareness. The basic idea was as audacious as it was repellent: suck up as much data as possible about everyone, sift through it with massive computers, and investigate patterns that might indicate terrorist plots. Americans across the political spectrum denounced the program, and in September 2003, Congress eliminated its funding and closed its offices. But TIA did not die. According to The National Journal, it just changed its name and moved inside the Defense Department. This should not be a surprise. In May 2004, the General Accounting Office published a report listing 122 different federal government data-mining programs that used people’s personal information. This list did not include classified programs, like the NSA’s eavesdropping effort or state-run programs like MATRIX.
The promise of data mining is compelling, and convinces many. But it is wrong. We are not going to find terrorist plots through systems like this, and we are going to waste valuable resources chasing down false alarms. To understand why, we have to look at the economics of the system. Security is always a trade-off, and for a system to be worthwhile, the advantages have to be greater than the disadvantages. A national security data-mining program is going to find some percentage of real attacks and some percentage of false alarms. If the benefits of finding and stopping those attacks outweigh the cost – in money, liberties, etc. – then the system is a good one. If not, you would be better off spending that capital elsewhere.
Data mining works best when you are searching for a well-defined profile, a reasonable number of attacks per year and a low cost of false alarms. Credit-card fraud is one of data mining’s success stories. All credit-card companies mine their transaction databases for data for spending patterns that indicate a stolen card. Many credit-card thieves share a pattern – purchase expensive luxury goods, purchase things that can be easily fenced, etc. – and data mining systems can minimize the losses in many cases by shutting down the card. In addition, the cost of false alarms is only a phone call to the cardholder asking him to verify a couple of purchases. The cardholders do not even resent these phone calls – as long as they are infrequent – so the cost is just a few minutes of operator time.
Terrorist plots are different. There is no well-defined profile and attacks are very rare. Taken together, these facts mean that data-mining systems will not uncover any terrorist plots until they are very accurate, and that even very accurate systems will be so flooded with false alarms that they will be useless. Data mining is like searching for a needle in a haystack. There are 900 million credit cards in circulation in the U.S. About 1% (10 million) cards are stolen and fraudulently used each year. When it comes to terrorism, however, trillions of connections exist between people and events – things that the data-mining system will have to “look at” – and very few plots. This rarity makes even accurate identification systems useless.Link here.
HARRY BROWNE, R.I.P.
Harry Browne, author of a dozen books and hundreds of articles on politics, economics and investing, and the Libertarian Party’s presidential candidate in 1996 and 2000, has passed away. We have lost a great libertarian. In Harry’s last published article, “Why You’re A Libertarian”, he gave the answer simply. You are a libertarian because “you’re willing to tolerate anything that’s peaceful, and you practice the principle of live and let live – opposing the initiation of force (violence) against anyone for any purpose.” This is the radical conception of libertarianism that he espoused, reduced to its glorious basics, ethically compelling, and unencumbered by a single concession to the statist impulse.
The loss of Harry Browne, on March 1, 2006, is a tragedy for the libertarian movement. It is the newest reason to sympathize with a joke he cracked as emcee of a banquet at the 2004 Libertarian Party Convention in Atlanta, the last time I saw him, when he said, in reference to a libertarian activist he much admired who had passed away several years before, “I hate death.” Dryly, he continued, “If I were president, I would outlaw death. And just like every other law, Congress would be exempt.” Harry appeared fond of joking. From what I could tell, he appreciated the pursuit of happiness nearly as much as he appreciated life, his “obsession” with which led to his “obsession” with war – its great adversary – and liberty, for which he fought without flinching throughout his admirable life. He will be warmly regarded and highly respected as long as there are libertarians, and, I do believe, his influence has helped ensure that there always will be.Links here and here.
HONDURAS IS A COUNTRY FOR DREAMERS
Honduras is a country for dreamers, where Caribbean breezes lift fresh ocean air through your windows, the sunlight glints off the water at odd angles, and the sound of waves lapping at the shore is just hypnotic enough to spirit away the dissonance of the 21st century. All year round, temperatures hover in the 80s – with cooler, forested areas inland. Jaguars, armadillos, toucans, and herons complete this scene of a wild, untamed paradise. The Bay Islands – and the coral reef surrounding them, which is second in size only to the Great Barrier Reef – have been a well-kept secret of divers.
Not only is Honduras a place of great natural beauty, but property prices are reasonable, the cost of living is low, crime is almost nonexistent, and health care is top-notch and inexpensive. In addition, it is home to some of the best-preserved Mayan ruins in the world. The country’s landscape is varied – the coast meets a backdrop of high-country mountains and cloud forests that slope down into valleys at intervals to make way for rivers. Vast expanses of land on a central plateau are farmed for coffee, tobacco, wheat, fruits, and vegetables. Large cattle ranches occupy much of the flatlands. Along the Mosquito Coast, a waterlogged terrain produces fields of mangroves. Mahogany and other hardwood trees flourish farther inland.
Just as the landscape is varied, so too are the populated communities. Some spots in the country will certainly interest you more than others. Some regions are almost inaccessible, while others are overcrowded. In several communities, the best property buys are long gone, but in others you can still find great bargain deals.
If you choose to retire in Honduras, the Honduran government will not tax your U.S. Social Security and pension payments. In fact, as a foreign resident, you will be entitled to tax breaks. And the government encourages foreign investment in the tourism industry – a promising sector that has been largely neglected until now – with attractive tax incentives. If you are involved with a government-approved tourism project – that could be anything from a restaurant to a hotel to a souvenir shop – you will pay no income tax on your profits for 20 years no matter how much you make.
Though its history is riddled with stories of colonial domination, war, and conspiracy, in recent years Honduras has shown remarkable, sustained peace. The last two democratic elections have proven to be models for the peaceful transfer of power – no mean feat for a young democracy struggling to gain a foothold in an enormous world economy. Tremendous natural resources and a willing work force have also come together to put Honduras on a path toward prosperity.Link here.
HOW “STRUCTURING” A FINANCIAL TRANSACTION COULD PUT YOU IN THE SPOTLIGHT
Many people are aware that the U.S. Government requires that certain types of information be reported when large quantities of cash are moved in or out of financial institutions (e.g., banks, savings and loans, credit unions, etc). Often people conducting high-value financial transactions will ask the bank teller “What is the dollar amount required to file a report with the government?” The response is a Cash Transaction Report, CTR, (IRS Form 4789/FinCEN Form 104) is required to be filed for any amounts cumulatively exceeding $10,000 for a single day.
Once informed, customers often lower the amount of the transaction to less than $10,000. Generally, the new amounts deposited or withdrawn reflect values such as $9,900, $9,800, or $9,500. However, once the change in amount is made, the financial institution is obligated to file a Suspicious Activity Report (SAR) without alerting or notifying the customer of this fact. The reason why this happens is because “structuring” deposits or withdraws to avoid detection is a money laundering technique.
USC 31 §5324, “Structuring Transactions To Evade Reporting Requirement Prohibited”, defines what constitutes a violation of this statue: Any person who, for the purpose of evading the CTR reporting requirements, (1) cause or attempt to cause a domestic financial institution to fail to file a report; (2) cause or attempt to cause a domestic financial institution to file a report that contains a material omission or misstatement of fact; or (3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.
Thus, “structuring” financial transactions to avoid filing requirements is a form of money laundering and subject to penalties and forfeitures under the current laws and regulations. In fact, many of the SAR submissions are based on people behaving in this fashion and our focus for this month’s link chart reflects such a case. In this case, once the party acted in that manner, then from that point forward all of her financial transactions were reported as SARs.
The analysis clearly shows how people try to structure their transactions to avoid Cash Transaction Report (CTR) filing requirements. If large volumes of cash are derived from legitimate purposes (e.g., restaurants, bars, churches, etc.), there should be no concern about depositing or withdrawing the money. The CTR forms are not currently used for tax purposes or any other government oversight other than to help detect and expose money laundering activities. Structuring transactions, providing false information, or trying to avoid CTR filings will result in SAR filings – which are highly scrutinized by governments throughout the world.Link here.
THE TERRORIST IN THE MIRROR
Terrorism, like beauty, is in the eye of the beholder. And if you look in the mirror, you just might behold a terrorist. “Surely you are joking,” you are thinking. Alas, no …
Consider the saga of Walter Soehnge, of Providence, R.I., who found himself under suspicion of being a terrorist because he paid off his credit card bill. A few months ago he decided to bring down his credit card balance to save on interest payments, so he sent in a payment for $6,522. Shortly afterward, wehn Mr. Soehnge checked his account balance, the payment had not been credited. He contacted the bank to find out what had happened. He was told that the amount he had sent in was much larger than his normal monthly payment. And that raised a huge red flag – one that had to be reported to the federal government’s Department of Homeland Security as a potentially “terrorist-related transaction”. The irony is that at least some of the 9-11 hijackers reportedly ran up large credit card bills that they never paid off. In other words, paying off your credit bill makes you a terrorist suspect – and so does NOT paying it off.
Nuns are also potential terrorists. Last November, checks written by the nuns at the Holy Name Monastery in St. Leo, Florida, began bouncing. The nuns contacted their bank, a local branch of Wachovia, and were informed that their account had been frozen in an anti-terrorism investigation. There was no warning from Wachovia – the bank simply refused payment on 22 checks, and deducted a fee for every bounced check. The nuns learned that the problem was that an 80-year-old nun at the convent who is a signatory to the account did not have her Social Security number and photo ID on file. That fact obviously made her a potential comrade-in-arms to al Qaeda and its ilk.
After considerable inconvenience, both Mr. Soehnge and the Holy Name Monastery were able to regain access to their financial accounts. However, buried deep within the bowels of the Homeland Security Administration, FinCEN and perhaps even the NSA, there almost certainly exists a record of the investigations that will be shared with other government agencies, such as the TSA (which is itself a division of the HSA). Will Mr. Soehnge and the good nuns from the Holy Name Monastery be permitted to board an airplane next time they wish to travel? Or have their names been added to the secret watch list of suspected terrorists maintained by the National Counterterrorism Center that now numbers 325,000 names? If they have been swept into the net cast by the nation’s anti-terrorism laws, they may not be permitted to board.
Other than persons who pay off (or fail to pay off) their credit card bills, and nuns, who else might be considered a terrorist? On at least 14 occasions, babies in their mothers’ arms have not been allowed to board flights because their names showed up on a terrorist watch list. Naturally, the babies are detained pending an investigation. The FBI’s counter terrorism unit has targeted the Catholic Workers Group for investigation because of the group’s “semi-communistic ideology”. FBI agents in Indianapolis were so alarmed by the announcement of a “Vegan Community Project” that they called in the agency’s counter-terrorism unit to investigate it. Obviously, anyone who engages in any kind of civil disobedience is a potential terrorist. Indeed, the USA PATRIOT Act states that any act that has the potential to damage property and that “appears to intended” to influence the policy of a government by intimidation or coercion constitutes “terrorism”. A Supreme Court allows the government to designate any business or group as a “terrorist organization” – perhaps yours – and seize its assets, with no right of appeal.
Are you a potential terrorist? Look in the mirror. If you see a face gazing back at you, the answer is “yes”. If you think this situation is ridiculous – and threatening – you should take two steps that I consider essential for all persons wanting to protect themselves from an out-of-control government, ASAP. (1) Establish an offshore nest egg. An offshore bank account is a good start, but since you can be forced to repatriate the assets in an offshore account, an investment like a Liechtenstein insurance policy that provides statutory asset protection under (Swiss) Liechtenstein law is even a better idea. [Ed: W.I.L. clients enjoy similar protections.] (2) Investigate places to live outside the U.S. I lived in Austria for nearly three years. Austria is a lot different from the US, and I had to make some major adjustments, but there were no terrorist watch lists and no charitable organizations having their assets confiscated without a court hearing.
There is no time to waste. It is just a matter of time before another terrorist incident in the US emboldens our leaders to crack down even harder against anyone who can see their reflection in the mirror … perhaps you.Link here.
IRS DECISION TO OUTSOURCE DEBT COLLECTION RAISES PRIVACY CONCERNS
The IRS announced last week that it has awarded contracts to three firms to participate in the first phase of its private debt collection initiative – a controversial decision opposed by privacy advocates. The contracts have been awarded to the CBE Group Inc., Linebarger Goggan Blair & Sampson, LLP, and Pioneer Credit Recovery, Inc. A total of 33 firms took part in the competitive bidding process that resulted in the contract awards. The IRS has been authorized to hire private firms to collect federal tax debts to assist the agency in its collection of back taxes by the 2004 American Jobs Creation Act.
Under the rules governing the new contracts, private firms will not be authorized to take enforcement actions such as liens, levies or seizures. In addition, private firms will not be authorized to work on technical issues such as offers in compromise, bankruptcies, hardship issues or litigation. The IRS also says that it will assign to the private firms cases in which the taxpayer has not disputed the liability. The private firms will contact taxpayers to make payment arrangements.
However, despite the IRS insisting that private firms will be subject to “stringent” taxpayer protection and privacy rules, the decision to outsource tax debt collection to private companies was described President Colleen M. Kelley of the National Treasury Employees Union (NTEU) as “a sad day for America’s taxpayers.” “American taxpayers can no longer have the confidence that federal tax collections are not based on personal gain,” Kelley commented. “Taxpayers deserve much better than this program. Their personal, sensitive and private information should not be divulged by our government.” IRS Commissioner Mark W. Everson disputed these claims, noting that the majority of state governments already use private firms to help collect delinquent taxes.Link here.
SPEAKING TRUTH OR CRYING “WOLF”?
Back during the 1970s recession I was a real estate expert with Morgan Stanley. We helped banks and REITs work out billions of loser portfolios, reorganize, file bankruptcy, even advised the U.S. Dept of Housing & Urban Development on the collapsed Federal New Towns program. I have worked for developers and mortgage bankers, got degrees in architecture and city planning, taught commercial real estate at Cornell University. But oddly, like the rest of America, most of the time I do not think about the housing bubble that is about to pop. We ignore the coming storm. But when it gets up close and personal – like my family’s home – well, suddenly I am shocked out of my denial. The shocker? I just learned we live in a metro area that could see a devastating 55.8% decline in home prices in the next five years. Worse yet, most of the real estate north and south of us – from San Francisco to San Diego – is predicted to decline 50% in the next five years. Ouch!
That dire prediction was made by former Goldman Sachs investment banker John Talbott in his new book, Sell Now! The End of the Housing Bubble. Next time you are in a bookstore check out his top 130 metro areas. The chapter is titled, “Are You in Trouble?” Warning: Chances are you are in big trouble, or in denial. And folks, this is not just an isolated West Coast phenomenon. Talbott points out that America’s top 40 cities are facing a average 47.2% decline: Boston is 49.4%. Miami 44.8%. New York 44.6%. And Chicago is 27.3% overpriced. Yikes!
But “so what?” you say. You have heard it before. Right? Warnings reported month after month. For example, Talbott reminded me of an editorial in The Economist last summer: “Never before have real house prices risen so fast, for so long, in so many countries. Property markets have been frothing from America, Britain and Australia to France, Spain and China. Rising property prices helped to prop up the world economy after the stock market bubble burst in 2000 … This is the biggest bubble in history.” Yes, the irrational exuberance of our failed stock market simply shifted over into a new irrational exuberance in housing. In five short years an estimated $30 trillion was added to housing prices worldwide, an unsustainable 75% increase to $70 trillion, largely due to then Fed chairman Alan Greenspan’s cheap money policies. Greenspan dismissed the global bubble, telling Congress it was just a little “regional froth”. Happy-talk, while our housing and mortgage industry has been taking advantage of naïve home buyers and sellers with loose underwriting practices.
My files are full of warnings from America’s top economists predicting a housing market collapse and a widespread global disaster: Gary Shilling, Bill Gross, Jeremy Grantham, Robert Shiller, Robert Rubin and others take exception to the deceptive happy-talk of self-serving spinmeisters in Washington, Wall Street, realty brokers and homebuilders. Unfortunately, bubble warnings are routinely dismissed. Our brains cannot handle all the bad news. Besides we have been brainwashed into short-term thinkers, incapable of long-term planning. Witness the collective denial and paralysis toward mounting deficits from out-of-control federal budgets, foreign trade, war debt, state, municipal and consumer debt, under-funded pensions, Social Security and Medicare shortfalls.
Still, experts like Gross, Shilling, Talbott and others are dismissed as “crying wolf” one too many times. The housing bubble has not popped, warnings accumulate, we are overwhelmed, confused, numb, feel helpless, so we fade into denial. And our leaders are even more oblivious, hardened and ineffectual. But … am I going follow Talbott’s advice and “sell now”? No. We love our home and our town. Besides, even if prices do fall 55.8%, we are still ahead of the game, out of harm’s way. But maybe you should sell now. A lot of people are going to get badly hurt in the real estate crash, far worst than in the 2000-2002 recession when we lost $8 trillion in market cap.
If your stock portfolio were out of whack there would a possible solution. Dump equities. Sadly, unlike the stock market there is little you can do once the illiquid housing market collapses. If you cannot sell now, you will have no choice but bite the bullet. If you live in one of America’s top 40 metro areas and, e.g., you bought last year for $500,000 with $450,000 in mortgages and the market drops just 10%, your equity is gone. And if it drops the predicted 47.2%, your home is worth $250,000, you really are in trouble. If you lose a job, or suddenly get hit with extraordinary expenses, or just cannot make tax and mortgage payments, or otherwise forced to sell, you could be wiped out under the tough new bankruptcy laws.
So please read Talbott’s book closely: Is your home is at risk? Then quickly decide whether you can hang on in a housing collapse, a stock market bear and another long recession. And if not, consider taking his advice to sell now.Link here.
SOME SOVEREIGN STATES, LIKE PANAMA, ARE MORE SOVEREIGN THAN OTHERS
Monaco is not a dependency, but how independent is it really? Many European countries treat it with suspicion, convinced that it is more a haven for dubious business. The view has been expressed that Monaco’s sovereignty is hostage to the fundamental interests of France. (French residents living there have been subject to French taxes since 1963). The learned British Judge, Lord Denning, stated that by international law “every sovereign state has no sovereignty beyond its own frontiers. The Courts of other countries will not allow it to go beyond the bounds. They will not enforce any of its laws to purport to exercise sovereignty beyond the limits of its authority.” But sovereignty is beset with problems because there does appear to be degrees of it as this century has already shown.
Panama’s sovereignty is absolute but, according to Simon Chesterman, executive director of the Institute for International Law and Justice at New York University, there are, in fact, “… different and complicated forms. The idea that sovereignty means all states are equal is the great fiction of international law.” George Orwell, who wrote another piece of related fiction, Animal Farm, would have understood and Monaco, as well as another finance center, Andorra, prove the point. Both are sovereignties with seats at the UN but their foreign policies are controlled by France.
The origin of sovereignty has brought about misunderstandings. History, after all, is a confused heap of facts according to Lord Chesterfield. The concept of sovereignty stems from the Treaty of Westphalia in 1648 under which a prince, or sovereign, was identified with the territory he governed. This premise formed part of the marrow of international law and led to the conviction that sovereigns are equal and always had the final word regarding their realms’ affairs. This, of course, has had important consequences in the field of offshore financial services where courts in different places have claimed exclusive jurisdiction, causing a conflict over the application of laws. As if to reinforce Mr. Chesterman’s case, when Albert II, Monaco’s new prince, was enthroned last November, the only head of state to attend and not give Prince Albert the cold shoulder was, ironically, the president of Iceland.
The OECD, when talking about taxation, speaks of “harmonization” but you could just as easily substitute the word “standardization”. There are countless examples (the OECD initiative is not one of them) where standardization makes sense and brings with it dependability, certainty and orderliness. Although much of the business done offshore calls for this approach (such as regulation and supervision of banks and professionals) it is also true to say that some of the business does not because, by its very nature, it falls into a special category requiring a different approach. Bureaucrats are not the only ones who fail to appreciate the difference. Some practitioners are equally guilty or simply choose to ignore the fact. Template tactics, as I call them, can have unfortunate consequences for clients.
Henry Mintzberg, in his book, Managers Not MBAs, argues that the average MBA course offers “specialized training in the functions of business, not general educating in the practice of management.” He sees management as a craft and he is right and focusing one’s skills will make it easy not to cross the boundary line of one’s abilities. Incessantly, people travel to foreign shores where they then ask for advice about their domestic taxes which can be dangerous if the offshore practitioner, for whatever motives, does not point out that tax reservations should be addressed before flight reservations are made. Once, in a less complex world, one could be well versed in several disciplines. The 21st century makes this a very difficult goal to achieve and I am convinced that the offshore arena, in particular, calls for specialization, whether it be mutual funds, captive insurance or private banking. The complexities (ever increasing) of each service demands it if one is to be able to provide best advice.
Professionalism of a high degree comes, however, at a price. Recognizing real value is how the old, traditional private banks have not only lured but kept their clients. They have given a superlative service supported by an abundance of knowledge. Private bankers argue that wealth management services given by big banks lean towards the impersonal. You might say that self-interest would have them say that, but having experienced working for both a monolithic and also a minuscule financial services institution, I strongly support the contention.
The OECD’s tax harmonization initiative just celebrated its 10th anniversary. There is a lot at stake. The IMF, when it made its last estimate, reckons that $5 trillion is held offshore. Initially, the OECD decided on the stick, rather than the carrot, approach but found that this was not realistic – especially when the U.S. perceived an intention to clamp down on tax competition. The new message is about “mutual benefits” but the crucial problem remains - the OECD is guilty of double standards. After all, non-committed Austria’s Federal Chancellor, Wolfgang Schüssel, is presently President of the Council of the EU. It is because of this background that Panama, while a participant in the initiative, has publicly declared that its agreement depends on universal compliance.
Unlike the Cayman Islands and similar dependencies, Panama remains on the periphery of the OECD’s ability to use the stick and throw away the carrot. This realization by many has fuelled the growth in Panamanian offshore business. Such growth offshore is frustrating for many tax-hungry OECD members who have enough difficulties collecting revenue from a captive domestic population. Panama is also fortunate not to suffer from hurricanes and it would seem to me, in a similar context, that any future pressure from the OECD is likely, figuratively speaking, to bring the isthmus perhaps light rain, but never hurricanes. Not so for those dependent finance centers in the region that have both atmospheric and OECD pressure to deal with.Link here.
BELIZE – ONE OF THE WORLD’S TOP RETIREMENT HAVENS
From its Caribbean shores to its jungle interior, Belize has great natural beauty – blue water, deserted beaches, and inland retreats where you can explore Mayan ruins, tall waterfalls, rainforests, and rivers. Bird watching in Belize’s interior is also a treat. You will be able to spot parrots, toucans, flycatchers, and herons in their natural habitat or visit a jaguar preserve where you can venture into the jungle in search of the elusive cats. It is no wonder Belize’s tourism industry is booming. If recent figures are any indication, this tiny tropical paradise could be on its way to becoming the next hot destination for explorers, expats, retirees, and investors. Between 2003 and 2004, cruise visits to this country increased by a full 55.1% – as opposed to 13.1%, for example, for the same period in the Bahamas.
Belize’s far-thinking banking laws have given the nation a distinct advantage when it comes to banking privacy. In an age when the accounts in other jurisdictions are under attack, those in Belize remain secure … no mean feat. And Belize’s retiree program offers attractive incentives to foreigners looking to relocate here – particularly those who are already planning to declare their permanent residency outside the U.S. But what really sets Belize apart from its neighboring countries is that its population speaks English. If you feel you are at the stage in your life when you do not really want to learn a new language, put Belize at the top of you list as a potential destination for business, retirement, or a new home.
Belizeans themselves and the expatriates their country has attracted over the centuries are fiercely independent. In Belize, people solve their own problems. They avoid taking their petty disputes to court. In a few cases where court action was threatened, the two parties suddenly found a way to settle things themselves. They could not stand the thought of the government (or anyone else) making a decision for them.
Thanks to the Trusts Act of 1992, Belize has become a premier jurisdiction for asset-protection trusts. Today, Belize is a haven offering rock-solid protection of assets that are transferred into a Belizean Trust. It is also one of the few trust jurisdictions in the world that offers protection from court action initiated by creditors that might challenge your transfer of property into a trust. In the absence of actual fraud in the creation of a trust, the assets of a Belizean trust cannot be attached to satisfy the judgment of a foreign court. Belizean trust laws have been tested and proved solid. Belize IBCs enable foreigners to incorporate in Belize and enjoy huge advantages.
Belize is not the most affordable place to settle in Central America. You will likely find prices for some items to be more than what you are used to paying in the U.S., but many services actually cost less. Also, your cost of living will depend largely on where and how you choose to live. If you settle on Ambergris Caye, the island that attracts the vast majority of Belize’s tourists (and investors) for example, you will likely find living a bit more expensive than in the U.S. Being an island, everything is imported so you will pay extra for that transport cost. On the other hand, if you decide to live in the north of Belize in Corozal and can take advantage of easy shopping trips to nearby Mexico, you can enjoy all the benefits of English-speaking Belize, but buy your goods for less just across the border.
On September 15, 1999, Belize enacted some of the most attractive “retiree” legislation available anywhere in the world today. The program is aimed squarely at North American and UK nationals already planning to live full time outside their native counties. And it comes with almost no fine print or red tape. To qualify, you need to be 45 years and older and be able to show only that you have a monthly income of at least $2,000. To keep your “Qualified Retired Person” (QRP) status, you must spend just one month of the year in Belize. The law allows you to import your car as well as personal and household effects duty-free. Qualified Retired Persons (QRPs) also receive certain tax advantages. More information on the benefits of the QRP program is available at this Web site.Link here.
THE RISE AND FALL OF AN EXPAT HAVEN
San Miguel de Allende, Mexico is a beautiful town, with one of the best climates on the planet, and now, one of the hottest real-estate markets on the planet. The town began as a destination for Americans when in the 1950’s a few yanks discovered that they could attend the Instituto Allende, an art school put together by an American, Stirling Dickinson, on their G.I. Bill benefits. What better life than having a dollar stipend, a perfect climate, and all the Tequila and Pot you could buy in a sweet lovely little Mexican town that had been forgotten by time?
The 1950’s U.S. Veterans were followed by 1960’s/70’s U.S. bohos and beats (Neil Cassidy of Kerouac’s On the Road fame died in San Miguel). Where the Hipsters went, the well-to-do soon followed. So the “scene” in San Miguel – great parties, great drugs, great weather, great beauty great art, reached its apex in the 70’s and 80’s. Americans continued to arrive in San Miguel attracted by its reputation, its beauty and climate and by something difficult to describe, that did not exist in other gringo gathering spots – cultural respect for Mexican art and life. New generations of yanks, attracted more by how far their Social Security checks would stretch than by the plentiful cannabis and other intoxicants came. Older Americans who were barely scraping by could buy a house for $10,000, have a maid and gardener and still have enough left over to go out for Margaritas and tacos.
Then a few years ago, Conde-Nast’s Traveler Magazine’s readers voted San Miguel among the 10 best destinations in the world. Another wave of Americans visited and looked for homes there. Now San Miguel de Allende is morphing into The Hamptons with chili as the upwardly chic crowd pour in to snap up renovated homes for a million plus dollars apiece. Rich Texans seek relief in July and August from the humid heat. The old bohos are gone, the Social Security people are being priced out of the market and it is is becoming a weekend destination for rich Mexicans from Mexico City. These days the narrow cobble-stoned streets can barely accommodate the ludicrously massive SUV’s, Escalades and Hummers. I am selling my house and moving on.Link here.
CYBER BOOKIE THUMBS NOSE AT UNCLE SAM FROM OFFSHORE OASIS
On a warm, bright morning just outside San José, Costa Rica, Calvin Ayre, slightly hungover, was lounging in his bathrobe at a poolside office in his new $3.5 million, 10,000-square-foot compound. Sipping coffee poured by one of his five servants, the entrepreneur declared, paraphrasing Sun Tzu’s The Art of War, “I’m going to win this war without fighting battles. I’ve put a lot of energy into finding ways not to fight my enemies.”
From this tropical oasis, Ayre has dodged and taunted those enemies, the main one being the U.S. Department of Justice. His Bodog Entertainment Group is in the not very kosher business of Web gambling. It takes bets from 16 million customers, most of them in the U.S. And that appears to violate the law – Title 18, §1084 of the U.S. Code – which forbids using telephones or other communication devices “in interstate or foreign commerce” in order to take bets. “Online gambling, whether it is located offshore or not, is illegal when it comes to the United States and its citizens,” says a DoJ official who works on Internet gambling crimes.
But Bodog has no physical presence in the U.S., Ayre is not an American citizen, and the extraterritorial reach of U.S. law is not clear. Ayre, at any rate, has no assets in the U.S. for the G-men to seize. Last year the privately held Bodog handled $7.3 billion in online wagers. Ayre presumably has not just the vice squad but the tax collectors in a huff. While 95% of his sales come from the U.S., the 44-year-old does not pay a nickel in corporate or personal income tax here. Is that legit? Foreigners are supposed to pay federal tax on income derived from U.S. business activities. The suckers are stateside, the electronic roulette wheels and digitized sports pools in Costa Rica. Where is the action? It remains to be seen whether IRS agents could make Ayre pay, assuming they could get their mitts on either him or his money.Link here.
LIVE TAX FREE OFFSHORE
If you decide to live abroad, following your cash, assets and investments offshore, there is a very helpful provision of U.S. tax law you might use to your financial advantage. The so-called “foreign earned income exclusion” lets a U.S. citizen who lives and works outside the U.S. to exclude up to $80,000 of foreign earned income from U.S. income taxes. Both you and your spouse, if employed, can earn a tax free $160,000 annually offshore, plus tax free housing allowances an offshore employer pays. This is an outright exclusion of your offshore earnings from gross income, so you pay no U.S. income tax on that amount.
To qualify for these benefits you must: (1) establish a “tax home” in a foreign country, (2) pass either the “foreign residence test” or the “physical presence test”, (3) actually have earned income, (4) live in the U.S. for no more than one month per year, and (5) file a U.S. income tax return for each year you live abroad.
Usually your “tax home” is where your principal place of business is located, not where you live. The term “tax home” is broader when determining eligibility for the foreign earned income exclusion. Confusion over this point hurts many Americans overseas. If you work overseas and maintain a U.S. residence, your tax home remains in the U.S. To qualify for the foreign earned income exclusion you must establish both your principal place of business and your actual residence outside of the United States.
A complicated test that determines if you get this exclusion involves counting the maximum number of days you are in or out of the USA. But the foreign residence test is easier for most taxpayers to pass. You must establish yourself as a bona fide resident of a foreign country for an uninterrupted period that includes an entire taxable year, and you must intend to stay there indefinitely. If you do not pass this test, you are considered a transient and will not qualify. The bottom line is that you must establish clearly yourself as a member of a foreign community.Link here.
LIECHTENSTEIN WILL RESIST MOVES TO END BANK SECRECY
Liechtenstein is unlikely to dispense with its coveted banking secrecy laws any time soon because such a measure would probably not be approved if put to a referendum, according to Prince Alois, ruler of the Principality. Prince Alois told Bloomberg News that banking secrecy is “very firmly anchored” in Liechtenstein and any proposed watering down of current laws to satisfy the OECD and the FATF would therefore be rejected when put to a referendum – a necessary measure under the Principality’s constitution. “I don’t think a draft law or international accord proposing to scrap bank secrecy would be successful in the foreseeable future.”, the prince stated.
Financial services constitutes about 30% of Liechtenstein’s GDP. According to the recent progress report on anti-money laundering initiatives across the globe by the U.S. State Department, Liechtenstein’s well-developed offshore financial services sector, relatively low tax rates, liberal incorporation and corporate governance rules, and tradition of strict bank secrecy have contributed significantly to the ability of financial intermediaries in Liechtenstein to attract funds from abroad. However, the report went on to note that these same factors have historically made the country attractive to money launderers. “Rumours and accusations of misuse of Liechtenstein’s banking system persist in spite of the progress the principality has made in its efforts against money laundering,” [our emphasis] the report stated.
Besides Liechtenstein, other countries also not cooperating with the OECD to improve rules on tax disclosure are Andorra, Liberia, the Marshall Islands and Monaco. Industrialized countries said when the list was drawn up that they are unable to collect hundreds of billions of dollars in taxes because of the havens. Tax havens impose no more than nominal taxes and refuse to disclose tax information, among other practices cited by the OECD. Liechtenstein’s bank secrecy does not protect criminals although tax evasion is not considered a crime in the principality. “Low taxes and bank secrecy are the basis for Liechtenstein’s prosperity,” said Wolfgang Gerke, a banking professor at the University of Erlangen and Nuremberg in Germany. If they drop secrecy “they will be doing themselves great harm.”
Under pressure from the EU, Liechtenstein last year introduced a tax on the savings of EU residents. The 15% tax will rise to 35% by 2011 and applies to interest earned on bond-coupon payments, bank-account interest and gains from mutual funds holding 40% or more of their assets in debt securities. Liechtenstein, home to 15 banks including LGT, owned by the royal family, and VP Bank Group, agreed to levy the tax and distribute it to the countries whose residents have savings in the principality. To preserve bank secrecy, Liechtenstein will not disclose the identity of the account holders. There is no sign the tax is slowing inflows of client assets into Liechtenstein, while existing clients have probably moved their savings into tax-exempt products, Prince Alois said.
Liechtenstein, with 34,000 residents in a mostly mountainous territory the size of Washington, DC, joined Norway and Iceland in the European Economic Area in 1992 to benefit from free trade with the EU. Its residents have the highest per capita income in Europe, according to a 2005 study by GfK, a German market researcher. The country, which uses the Swiss currency and relies on Swiss customs officers to monitor its borders, has no plans to join the 25-country EU, the prince said. Switzerland is not a member of the EU. “EU membership is inconceivable at the moment,” he said. “We would have to adopt rules that aren’t attractive for us and above all we would have to massively expand our civil service.”Link here.
PROOF OF CONCEPT: UNAUTHORIZED MATCHING OF PUBLIC AND PRIVATE EMAIL ADDRESSES
Do you use a throwaway or public email address on the web, and save your private email address for friends and business associates? Most of us do. Keeps out the riff-raff. Gives you a certain amount of privacy, too. So imagine how you would feel if you signed up for a contest with your throwaway address, and suddenly started getting messages from the contest holder at your private address. Some Miller Brewing customers say that is exactly what happened to them. And Spam King sleuth, Brian McWilliams, says Equifax performed the data mining operation that made it possible. Further, McWilliams offers compelling evidence that the Equifax grey-ops email-matching project is driven by a guy who is well-known to spam hunters: Scott Hirsch.
Hard to believe, no? Miller and Equifax have shocked some folks. Maybe we should thank them for the wake-up call. There is no real privacy for those who participate in a modern open society, and there never was. In the U.S., the tracking began a short time after your Social Security Number was issued. Old School groups like Equifax, Experian, TransUnion, Acxiom and others sliced and diced information as you grew, from myriad sources, frequently yielding nuggets better left buried. The advent of the Internet made tracking, buying, selling, leaking and stealing the data that is “you” infinitely easier. You have likely left footprints all over the web – IP address, cookies, user name, email addresses, real name, address, phone.
And New School data trappers have run the gamut of respectability … Alexa, Doubleclick, Gator, Claria, Cydoor and many, many more. All it takes is a bit of time meshing the Old School data with the New School. Out pops everything there is to know about you, from Social Security Number, voting habits, religious preferences, credit history, and banking details to all your user names and email addresses. By comparison, the Equifax-Miller Brewing stunt is a parlor trick. Are you paranoid yet?Link here.
IRS DEBUNKS FRIVOLOUS ARGUMENTS USED TO AVOID PAYMENT OF TAX
The IRS has issued a warning to taxpayers not to be tempted to avoid paying their income taxes based on “frivolous” arguments such as that income taxes are technically illegal under federal law, and therefore need not be paid. “Taxpayers need to avoid being taken in by groundless theories suggesting that they don’t have to pay taxes or file returns,” announced IRS Commissioner Mark W. Everson. “The truth about these frivolous arguments is simple: They don’t work.”
IRS Notice 2006-31 describes 26 frivolous arguments that taxpayers should avoid when filing their returns. Five revenue rulings issued in conjunction with the notice address specific frivolous claims often made to the IRS. These include false arguments that taxpayers can attribute income and expenses to a purported trust to avoid federal income tax liability, that a general “Native American treaty” exists allegedly providing tax-exempt status, and that only federal employees and persons residing in Washington, D.C. or federal territories and enclaves are subject to federal tax.
The IRS has also heralded the imminent publication of a 65-page document, entitled, “The Truth About Frivolous Arguments”, addressing false arguments about the legality of not paying taxes or filing returns. The updated document includes citations from numerous cases decided by the courts in 2005 and 2006, and responds to 40 frivolous contentions. “Our rulings on frivolous arguments emphasize that the IRS and the courts reject these arguments about the validity of the income tax and ‘too good to be true’ schemes to eliminate tax liability,” observed IRS Chief Counsel Donald L. Korb.
The IRS went on to warn that in addition to tax and interest, taxpayers who file frivolous income tax returns face a $500 penalty, and may be subject to civil penalties of 20 or 75 percent of the underpaid tax. Those who pursue frivolous tax cases in court may face an additional penalty of up to $25,000.Link here.
BREATH ANALYZER SOFTWARE SOURCE CODE DEMAND SAVES DRIVERS FROM DUI CONVICTIONS
U.S. lawyers using software intellectual property laws to get clients off drink driving convictions. It all started when one Timothy Muldowny’s lawyers asked for the source code to the Intoxilyzer alcohol breath analysis machine which was the police’s main evidence against him. However Intoxilyzer did not want to make its source code public because it would mean handing over the information to its rivals or hackers. A Seminole County judge tossed out Muldowny’s alcohol breath test and the ruling was upheld by an appeals court in 2004.
Since then Driving Under the Influence suspects in Florida, New York, Nebraska have had their cases throwned out or reduced to lesser offences. Now law makers are considering bringing in new laws that will mean that source code does not have to be produced for DUI defendants. However they might find that such laws are unconstitutional. Apparently it is everyone’s legal right to face an accuser in court, even if the accuser is a machine.Link here.
BUSH SAYS SPYING ON TERROR SUSPECTS WITHOUT COURT APPROVAL IS OK. WHAT ABOUT PHYSICAL SEARCHES?
In the dark days after the 9/11, terrorist attacks, a small group of lawyers from the White House and the Justice Department began meeting to debate a number of novel legal strategies to help prevent another attack. Soon after, President Bush authorized the National Security Agency to begin conducting electronic eavesdropping on terrorism suspects in the U.S., including American citizens, without court approval. Meeting in the FBI’s command center, the lawyers talked with senior FBI officials about using the same legal authority to conduct physical searches of homes and businesses of terrorism suspects – also without court approval, one current and one former government official tell U.S. News. “There was a fair amount of discussion at Justice on the warrantless physical search issue,” says a former senior FBI official. “Discussions about – if [the searches] happened – where would the information go, and would it taint cases.”
FBI Director Robert Mueller was alarmed by the proposal, the two officials said, and pushed back hard against it. “Mueller was personally very concerned,” one official says, “not only because of the blowback issue but also because of the legal and constitutional questions raised by warrantless physical searches.” FBI spokesman John Miller said none of the FBI’s senior staff are aware of any such discussions and added that the bureau has not conducted “physical searches of any location without consent or a judicial order.”
In December, the New York Times disclosed the NSA’s warrantless electronic surveillance program, resulting in an angry reaction from President Bush. It has not previously been disclosed, however, that administration lawyers had cited the same legal authority to justify warrantless physical searches. But in a little-noticed white paper submitted by Attorney General Alberto Gonzales to Congress on January 19 justifying the legality of the NSA eavesdropping, Justice Department lawyers made a tacit case that President Bush also has the inherent authority to order such physical searches. In order to fulfill his duties as commander in chief, the 42-page white paper says, “a consistent understanding has developed that the president has inherent constitutional authority to conduct warrantless searches and surveillance within the United States for foreign intelligence purposes.” The memo cites congressional testimony of Jamie Gorelick, a former deputy attorney general in the Clinton administration, in 1994 stating that the Justice Department “believes, and the case law supports, that the president has inherent authority to conduct warrantless physical searches for foreign intelligence purposes.”
Justice Department spokesman Brian Roehrkasse says the white paper cited the Gorelick testimony simply to bolster its legal defense of the NSA’s electronic surveillance program. Roehrkasse points out that Justice Department lawyers have told Congress that the NSA program “described by the president does not involve physical searches.” But John Martin, a former DoJ attorney who prosecuted the two most important cases involving warrantless searches and surveillance, says the department is sending an unambiguous message to Congress. “They couldn’t make it clearer,” says Martin, “that they are also making the case for inherent presidential power to conduct warrantless physical searches.”Link here.
GOOD MORNING, VIETNAM
Vietnam – a nation of 83 million people on a thin strip of lush country slammed up against the Gulf of Tonkin and the South China Sea. Excluding various islands, the land area of Vietnam is not much bigger than New Mexico, though it supports a population more than 40 times as large. In the south is Ho Chi Minh City (locally, it is still often referred to as Saigon, even though the name officially changed in 1976). And all along the coast on the way north are plenty of sun-kissed fishing villages and quiet, pristine beaches – such as those found in Nha Trang. The green jagged mountains inland, carpeted in dense misty jungles, provide a stunning backdrop. Most of the people on the beaches are adventurous foreigners – Americans, Germans, Australians and French. Mostly, they stay in foreign-built resort-style buildings dotting the bay. It is usually hot, often wet, and sometimes wetter.
The seafood is always fresh, usually alive moments before it is eaten. Right up to the water’s edge, women pull up their full nets from colorful boats. The women gut fish, chop squid, wrestle with shellfish and cook up interesting pots of fish, noodles, peppers and other goodies. This is one of the places in the world where the dollar goes a long, long way. A family can eat like kings for $7 or less. In Hanoi, the capital city in the north, you see busy tree-lined streets full of cars, cycles, scooters, and – as if to remind you of its fading past – rickshaws. Old French villas evoke Vietnam’s colonial history. The swirl of noise and smells assaults your senses.
This is Vietnam. For Americans, it inevitably stirs up ugly memories, or at least a painful chapter in U.S. history. The Vietnamese people and countryside bear the physical and psychological scars of that not-too-distant conflict as well. Yet, Vietnam is rapidly changing, with time and market forces doing their parts to mend old wounds and bring new growth. Vietnam still produces a lot of old-world agricultural goods, e.g., rice, coffee, cotton, tea, pepper, soybeans, sugar cane, peanuts, and bananas – more than 60% of the work force is engaged in agriculture in some way. However, the manufacturing and service industries are growing and taking bigger slices of the pie as the years roll by. The Vietnamese make garments and shoes, as well as glass, tires, and steel. They produce cement and paper and mine for coal. But there is much more to the story.
The Vietnamese economy has quietly become one of the fastest growing in the world, approaching the scorching pace of India and China. It is also become a magnet for foreign capital. In 2005 alone, investment in Vietnam totaled over $5 billion. Already, about 260 U.S. firms have invested directly in Vietnam. In 2006, another $6 billion is expected. This includes major technology and infrastructure projects. In the last week of February came the most telling announcement yet. The Vietnamese government approved Intel’s plans to build the biggest single technology project in the history of Vietnam – a chip assembly plant in Ho Chi Minh City, an investment that could cost as much as $605 million. This major turning point was barely mentioned in the mainstream press. The work at the plant will be labor intensive and require a sophisticated work force, which is why insiders are impressed with the deal. It means Intel believes the Vietnamese can do more than the expected low-skilled jobs. More foreign investment will surely follow Intel’s lead.
The attraction? The Vietnamese work very hard for very little by Western standards. The foreign private companies pay the best – on average, about $60 per month. State-owned enterprises paid only $19 per month. Those are cheap rates, even by the standard of the Chinese. While in China, I heard Chinese business people talk about Vietnam like Americans talk about Mexico. China is Vietnam’s largest trading partner. Much of what is happening in China is only beginning in Vietnam. Recently, the state-owned Vietcombank announced plans to list its shares in Hong Kong or Singapore. This would be Vietnam’s first overseas initial public offering. And several Western banks are taking minority positions in Vietnamese banks, anticipating future IPOs and growth.
The market has a long way to go before it approaches the likes of even China in terms of a developed stock and bond market with some semblance of disclosure. Nonetheless, all great journeys begin with a humble first step. Vietnam is on its way.Link here (scroll down to piece by Chris Mayer).
THE INTERNET AND YOU: ‘TIL DEATH DO YOU PART AND BEYOND
Forget about Andy Warhol’s “15 minutes of fame”. By now there may be a full dossier about you sitting right there on the Internet for all to see, complete with contact information, your life preferences, what you have done, who you know. Chances are, you (or your computer savvy kids or grand kids) put a lot of it there! We are talking about the so-called “social networking” web sites – MySpace, Facebook, Friendster, Hi5, Live Journal and Orkut. These network users easily create personal web pages to be viewed by anyone on the user’s “friends” list – often by anyone with a Net connection. Millions of mostly young people have created profiles on these web sites. True, the info most post on the web pages is usually trite and innocuous – but pages are easily stored, waiting for the day when a prospective employer, spouse, litigant or government investigator decides to investigate them.
And no, just because your teen-age daughter deleted her profile posing suggestively does not mean it disappeared. It may be in an online archive such as http://www.archive.org, that says it can pull up 55 billion web pages in a database going back to 1996. It works. I found old versions of my web site dating back to 1998, when I first created it! I am not opposed to social networking web sites. Indeed, they make my job much easier. When I need to investigate someone, especially a younger person, I will go first to the pages of their web sites to learn about them. Now it is easier for investigative journalists to dig up dirt on politicians, prospective judicial nominees, names in the news. Even if the information is not on the web page itself, users list names of friends in their social networks. An investigator need only contact those friends to fill in the blanks.
Call me paranoid if you want, but consider how the U.S. Deptartment of Homeland Security would react if your “social network” included suspected terrorists or their acquaintances? These associations already may be “data mined” by government computers. What is your profile? If a friends’ list contains suspected criminals you may be questioned or even listed as a risk to “national security?” Stalkers love these profiles. As an experiment, I searched one of these web sites for teenage females who attend a high school near where I live. Within seconds, I had a list of more than 100 girls. Several had sexually suggestive screen names. The bared all – their full names, birthdays, likes and dislikes and names of buddies. A photo showed exactly what each girl looks like. Add to all this the threat of identity theft. If you know someone’s name, residential address and date of birth, plus a few other tidbits, it is not difficult to obtain their Social Security number – and from then on the impersonation can destroy their credit.
As a colleague who writes widely on privacy issues told me, “Don’t post anything on the Internet that you wouldn’t mind reading the next day (or 10 years from now) in The New York Times.” Good advice, I would say.Link here.
NSA EAVESDROPPING PROGRAM BROADER THAN PREVIOUSLY DESCRIBED
The Bush administration has assiduously avoided any talk about the actual workings of its program to intercept the phone calls and e-mails of people in the U.S. who are suspected of having links to terrorists abroad. Officials’ unwavering script goes like this: Present the legal justifications for the president to authorize domestic electronic surveillance without warrants, but say nothing about how the National Security Agency actually does it – or about what else the agency might be doing.
But when Attorney General Alberto Gonzales appeared before the Senate Judiciary Committee on February 6 to answer questions about the program, what he did not say pulled back the curtain on how the NSA decides which calls and e-mails to monitor. The agency bases those decisions on a broad and less focused surveillance than officials have publicly described, a surveillance that may, or may not, be legal. In a hearing that lasted more than eight hours, Gonzales, who did not testify under oath, dutifully batted away senators’ inquiries about “operational details” and stayed silent, under determined questioning by some Democrats, about other warrantless programs that the president might have secretly authorized. When the hearing finally ended, so did Gonzales’s comments on the program.
Until 22 days later. On February 28, Gonzales sent committee Chairman Arlen Specter, R-Pennsylvania, a six-page letter, partly to respond to questions he was unprepared to answer at the hearing, but also “to clarify certain of my responses” in the earlier testimony. Gonzales’s letter was intriguing for what else it did not say, especially on one point. With exacting language, he narrowed the scope of his comments to address only “questions relating to the specific NSA activities that have been publicly confirmed by the president.” Then, as if to avoid any confusion, Gonzales added, “Those activities involve the interception by the NSA of the contents of communications” involving suspected terrorists and people in the U.S. Slightly, and with a single word, Gonzales was tipping his hand. The content of electronic communications is usually considered to be the spoken words of a phone call or the written words in an electronic message. The term does not include the wealth of so-called transactional data that accompany every communication – a phone number, what calls were placed to and from that number, the time a call was placed, whether the call was answered and how long it lasted, down to the second, the time and date that an e-mail message was sent, as well as its unique address and routing path, which reveals the location of the computer that sent it and, presumably, the author.
“You will get a very full picture of a person’s associations and their patterns of activity,” said Jim Dempsey, the policy director of the Center for Democracy and Technology, an electronic-privacy advocacy group. “You’ll know who they’re talking to, when they’re talking, how long, how frequently. … It’s a lot [of information]. I mean, a lot.” According to sources who are familiar with the details of what the White House calls the “terrorist surveillance program”, and who asked to remain anonymous because the program is still classified, analyzing transactional data is one of the first and most important steps the agency takes in deciding which phone calls to listen to and which electronic messages to read.
Far from the limited or targeted surveillance that Gonzales, President Bush, and intelligence officials have described, this traffic analysis examines thousands, perhaps hundreds of thousands, of individuals, because nearly every phone number and nearly every e-mail address is connected to a person.Link here.
AUSTRALIA’S FINANCIAL ORGANIZATIONS, AND EVEN LAWYERS, TO BECOME GOVERNMENT SPIES
If you open a bank account, get a credit card or loan, or even lay a large bet with the TAB you could be secretly reported to the Federal Government under a proposed crackdown on money laundering and terrorism. The Anti-Money Laundering and Counter-Terrorism Financing Bill 2005, to be debated this year, forces people to give much more information about their income and assets to financial institutions than at present. It requires employees of financial agencies, gaming organizations and bullion dealers to make “risk assessments” of clients to determine the possibility of the money being used in money laundering or funding of terrorist activities. If they have serious concerns they must report them to federal authorities.
A second tranche of the legislation will extend to dealings with pawnbrokers, bookmakers, jewelers, real estate agents, the TAB or anyone else dealing with thousands of dollars in cash. Though the Australian Bankers Association supports the philosophy, privacy groups, unions and some credit organizations have a bleak view. Anna Johnston, the chairwoman of the Australian Privacy Foundation, said she thought the approach was heavy-handed. “They are proposing to sweep up the transactions of everyone in the net of surveillance,” she said. “We think it is a licence for racism and profiling. Some people will not make eye contact in a bank for religious reasons. You can have indigenous people, Muslims or people with a Middle Eastern background. What is even more disturbing is that these reports are secret and people have no idea that the report has been made.”
Because reporting of suspicions was mandatory, institutions would be inclined to err on the side of over-reporting. Raj Venga, the executive director of the Association of Permanent Building Societies, said the lifeblood of the societies was customer relations. “We think that laws requiring us to be very intrusive cannot be good,” he said.
The proposed legislation includes financial institutions and individuals such as lawyers and accountants who might perform equivalent services. But the future coverage of lawyers, accountants, real estate agents and others will require them to extend their inquiries of clients beyond financial transactions. John North, the president of the Law Council of Australia, said the legislation was totally unacceptable. “It strikes at the heart of lawyer-client confidentiality,” he said. “Lawyers are already the most regulated profession. This one-brush approach will cause impossible problems for the administration of justice.”Link here.
BANKS HAVE PUT HUGE BETS ON HOUSING
For many people, the concept of systemic risk has never been experienced outside a textbook. But many financial experts worry we are closer than ever to experiencing it, thanks to stresses on the ubiquitous mortgage market. Lately, lax mortgage lenders have all but maximized the potential for systemic risk. Regulators are finally stepping in. “Regulators are obviously very concerned,” said Paul Kasriel, chief economist at Northern Trust. “They’ve issued guidelines with regard to home-equity lending and are working on guidelines for nontraditional mortgages.”
Mr. Kasriel said he has been concerned for some time that banks had too many chips on one bet. “So what if mortgage defaults are on the rise?” he asked. “No biggie except that U.S. commercial banks have a record exposure to the mortgage market.” When you add mortgages they hold on their balance sheets – the ones they do not sell off – to mortgage-backed securities and agency bonds, such as those issued by Freddie Mac and Fannie Mae, you find that mortgage-related assets making up a record 62% of commercial banks’ earning assets. As recently as 1985, banks’ holdings were south of 30%. We are talking about a huge bet that housing stays afloat here. If the housing bubble bursts, it is safe to say banks’ ability to lend will be seriously pinched for a time.
Now meet the cowboys, better known as hedge funds. Recall that many mortgages are sold off by those doing the lending. That explains the letter you got shortly after you closed on your home that asked you to make your monthly check out to someone else. Most of the mortgages being sold are of the plain-vanilla, 30-year-fixed variety. But so-called smart mortgages have risen in popularity – the no-document, no-down-payment, no-principal … heck, no-payment-every-once-in-a-while, adjustable-rate jobbers. Believe it or not, these mortgages too are sold off. In a world plagued by low interest rates, they are gobbled up by investors hungry for yield and not so concerned about risk. Many of these investors are hedge funds. “[S]omebody has to own the worst of it; hedge funds hold a lot of this toxic waste,” said Mr. Kasriel.
Here is where things get tricky. To juice returns, they are buying these investments on credit – or, as they say in the business, leveraging them up. And where do they get the loans to buy the “waste”? Well, who makes loans? In the worst-case scenario, banks could get it coming – in the form of defaults that directly impact their highly concentrated holdings – and going – in the form of bad loans to hedge funds. This scenario has yet to unfold. But have no doubt that the risk is there. Systemic risk is in place.Link here.
WHERE MILLIONAIRES STASH IT AWAY
Faster economic growth in India and China and record oil prices are creating a bigger group of millionaires drawn to Singapore, where taxes are among Asia’s lowest. Assets managed for offshore clients by private banks in Singapore climbed about 25% in 2005, the world’s biggest gain, according to Roman Scott, a Singapore-based partner at Boston Consulting Group. “Singapore will be the fastest-growing offshore private banking center in the next five years,” Roland Knecht, Asia head at the Zurich-based Clariden Bank, said. The unit of Credit Suisse Group manages $35 billion for clients with assets of €1 million, or $1.22 million, and opened its first overseas branch in Singapore in November. Knecht plans to increase staff in Singapore to 50 by the end of 2006 from 32 when the office opened.
Switzerland, the world’s biggest offshore banking center, still dwarfs Singapore. Private banking clients held SF1.38 trillion, or $1.07 trillion, there in 2004, according to the Swiss National Bank. Singapore ranked #6 worldwide as an offshore private banking center last year. The Caribbean islands ranked second, followed by Luxembourg, the U.S. and the Channel Islands, according to Scott at Boston Consulting Group. Singapore is the world’s fastest-growing market for millionaires. The city of 4.35 million had 48,500 people with assets of more than $1 million at the end of 2004, up 22% from a year earlier, according to a report by Merrill Lynch and Cap Gemini. That was the biggest jump of 16 countries worldwide tracked by the survey.
Individuals had 154.6 billion Singapore dollars, or $95.6 billion, in assets under management in Singapore at the end of 2004, up 40% from a year earlier, according to the latest data from the Monetary Authority of Singapore. That was more than double the 19% increase in Hong Kong to HK132 billion, or $17 billion, in 2004, according to the Hong Kong Securities and Futures Commission. Hong Kong had $379 billion in overall assets under management, including those held by institutions, vs. Singapore’s $350.8 billion. Singapore’s offshore private banking assets rose by about a quarter last year to 200 billion Singapore dollars, beating an estimated 20% gain in Hong Kong and a 5% increase in Switzerland, according to Scott at Boston Consulting Group. “With China and India in the region, Singapore will be used, to a large extent, as the Switzerland in Asia,” said Kong Eng Huat, managing director of Merrill Lynch’s private banking unit in Singapore.
Some money that used to go to Swiss banks will flow to Singapore after a 15% withholding tax on interest income on Swiss deposits took effect last year, said Daniel Truchi, head of Société Générale’s Asian wealth management branch in Singapore. The Swiss tax will rise to 35% in 2015. Singapore amended its tax laws in 2004 to attract more overseas wealth. Residents do not pay tax on income they earn overseas. Investment gains earned in Singapore from stocks and other financial instruments are also tax-exempt.Link here.
FREE 40 MILLION AMERICANS: PRIVATIZE MARRIAGE
Civilization is built upon the family. It is the primary relationship within which all values are transmitted to future generations. From the family grows the clan and the tribe, and ultimately the city and the state. Although this idea of the beginning of the state may not be recognized in the 21st century, the concept of marriage and family is at the heart of a political and social debate throughout America and beyond.
Debate about marriage is necessary because its costs and consequences impact all of us. It is at once the most personal and the most public of acts. In the debate about marriage, those who stand for “traditional” marriage and those who want to adjust that term to modern times all work within a worldview that places the state at the heart of the debate. Into that debate we must inject the view that persons, and voluntary groups of persons should not have their behavior mandated by the state. The failure to allow voluntary organizations to help manage marriage is perhaps understandable, but it is the core source of many of the problems we confront today.
Marriage is an ancient institution. Like all human institutions it works best when the parties involved know that their various investments will be respected and the intention of the marriage contract enforced. Through most of human history marriage has been the institution that was used to ensure the safety of the children and the perpetuation of subsequent generations – an expensive endeavor. Marriage was originally formed before any known system of philosophy and before any understanding of the causality described through economics. The current chaos surrounding marriage cannot be resolved by more state action.
Marriages fail at exceedingly high rates. To understand why this is taking place we must examine how this happened. For centuries the Catholic Church was the arbiter of the dissolution of marriage in Europe. Marriage was a life time commitment. By the time America freed itself from English rule, America did not control the dissolution of marriage through a particular church. Practices of marriage dissolution, such as those followed by the Puritan Church, were giving way to civil solutions.
This public route was deemed necessary in early America because marriage was considered a public good and therefore its dissolution needed to be for the common good. This idea, collectivist in nature, denied to individuals their contract right and ignored the covenant many had made. However, its purpose was clear – to protect other citizens from having to care for children or a spouse unable to care for themselves. As typically occurs, the creation of this “public good” led to the sense that all incidents of marriage were completely under state control – ignoring economics and natural rights. The consequences of this state model are perfectly predictable. When racial discrimination was a central part of politics, states prohibited persons of different races from marrying. When the eugenics movement swept across America, criminals and those deemed unfit were prevented from marrying or were sterilized to prevent their “breeding”. Marriage’s legacy in America has therefore been one of complete state control of marriage and its incidents. Instead of human action and choice, the heavy hand of legislation is the only tool used to shape marriage.
By the middle of the 1800’s America had placed divorce in the hands of the courts and approximately 100 years later in the 1960’s, beginning in California “no-fault” divorce swept through America. Today marriage – the legal creation of the state of being married – through a license is one of the easiest legal events of great significance. The ease with which marriage is contracted fails to make participants aware of the weight and significance of the contract they are signing. Dealing with problems upon the dissolution of marriage or disputes that may arise even within marriage can be incredibly complex. State divorce courts have grown to prodigious levels, an array of social workers, therapists and other “experts” are enriched by the divorce bonanza ushered through state divorce gates. These courts and these experts hold virtually every family in their jurisdiction in complete control – their judgments can be disturbed only upon a showing of an abuse of discretion. The inscription on those courthouses should read like the inscription on the gates Dante places at the entrance to Hell, “Abandon all hope, ye that enter there.”
When states adopted no-fault dissolution laws, they failed to account for the ability of the law to shape attitudes and actions. Nobody was prepared for the tsunami of broken families swept into domestic courts or the assets gobbled up by courts, attorneys and other forms of loss. Theory was applied directly to the lives of millions and the theory, unexamined for the potential impact, ignored the reality of a marriage as a vehicle for holding the capital investment of two individuals making a shared investment unique to that couple. In fact, no contract built on a collectivist model can work for any specific couple. Virtually nobody predicted that countless marriages involving children would dissolve. Nobody predicted that numerous long time marriages that appeared happy to everyone and to one of the spouses would end in dissolution. Nobody predicted that nearly 50% of all marriages would fail. No-fault created a devastating legal reality – marriage was no longer attached to contract, commitment or children. Instead, marriage was about autonomous fulfillment that could be judged by either spouse at any time in the marriage.
As marriage continues to be shaped, society itself will be reshaped to deal with the new situations created by these new realities. What the “no-fault” proponents failed to recognize, the new marriage proponents fail to recognize all the more – marriage is easy, the consequences of marriage including its dissolution are not. Marriage as mandated by the State today destroys the capital of trust, embeds deceit and mangles lives. Antagonism and distrust across gender lines and within families is also rising. One of the costs of no-fault divorce is the very fabric of family trust and continuity. It need not be so. One of the most important and beneficial ways marriage reform can occur is to allow individuals to choose their own private marriage contract – along with the means, outside of the State, to mediate and enforce that contract.
When our investment in marriage is easily destroyed, it is natural that we reconsider whether or not marriage is purposive today. As issued by the State it is not. It is an agreement whose dissolution transfers wealth into the hands of those who have grown like barnacles on the whole system. We created these encrusted constituencies because we failed to use the principles of natural rights and the insights gained from an informed understanding of how markets impact human choice. No excuse exists for allowing a state structure of divorce – worthy of the former Soviet bloc – to limit what is arguably the most purposive human activity.Link here.
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