Wealth International, Limited

April 2006 Selected Offshore News Clips

(Especially noteworthy articles’ headings highlighted in gold.)


When we write about “offshore jurisdictions” or “offshore tax havens”, what that means is any foreign place compared to where you now live and do business. When we say “offshore we mean any other place in the world that is not your home country but where financial and tax advantages are available. That is where we (and you) should want to be. Charles Caine, editor of Offshore Investment says “offshore simply means a different jurisdiction which will permit somebody from outside to obtain some special financial benefit.”

Let us get some terms straight. A tax haven is a country or other jurisdiction (some are colonial possessions of other nations, mostly the UK), that promotes and guarantees no taxes or low taxes for foreigners who chose to do business there. An asset haven is a country or jurisdiction that has adopted special laws and has a judicial system that guarantees strong protection for assets, plus a high degree of financial privacy. The same jurisdiction or place can be both a tax and asset haven and most usually do combine both functions.

So what are the benefits of “going offshore” with your finances? Much more profitable investments, better estate planning, strong asset protection, lower taxes, less regulation, even immediate residency, dual citizenship and a second passport. And you do not have to pick up and move to these havens to enjoy most of these benefits – only move your cash or other assets there.

A certain few nations and places have got it figured out. They have set up a legal system that makes them stand out as places that attract money – truly desirable offshore financial centers. They cater to foreign folks and foreign cash with laws that guarantee privacy, asset protection, ease of doing business and profitable investments – with little or no local taxes. Just as some American states (Florida, New Hampshire, Alaska et al) offer their citizens an escape from other states’ income taxes, offshore tax havens do the same for foreigners. These are tax breaks local citizens can only dream about, but the locals do profit from better jobs and higher incomes. (The two largest tax havens in the world are the USA and the UK – but only for non-citizens who choose to invest there. Locals pay taxes … lots of them).

The World Bank guesses more than half the world’s personal wealth – over $50 trillion – is stashed in 60 or so asset and tax havens worldwide – places like Switzerland, Panama and Hong Kong. In these places it is a crime to reveal a person’s financial information. Court procedures are stable, predictable and judges block any quick and easy enforcement of foreign judgments. No doubt places like this may seem strange and unfamiliar to you at first – they are certainly nothing like Bush’s current American financial police state, thank goodness! And that is exactly why you should consider “going offshore” – before Big Brother blocks your exit.

Link here.


Canadians making, sending and receiving phone calls, faxes and emails in and out of the country should pay close attention to recent revelations about a mass domestic spying program in the United States. Pundits and politicians from all sides of the spectrum in the U.S. are outraged about revelations that President George Bush secretly authorized the National Security Agency to spy, without warrants, on emails, faxes and telephone calls going into and out of that country. The vast data-mining system being used by the NSA is not just monitoring a few suspected terrorists. It is filtering through the international, and possibly even domestic, communications of potentially all ordinary, law-abiding U.S. citizens.

This mass invasion of privacy is anathema in the U.S., where in the 1970s, “warrantless” wiretapping by law enforcement agencies and the president led to a complete overhaul of the legislative framework and Richard Nixon’s impeachment. Not surprisingly, the recently revealed NSA wiretapping program is being strongly denounced, and Bush’s authority to create it is being questioned. The uproar is being fueled by admissions by the FBI, the agency which follows up on NSA “tips”, that the program simply is not effective at netting would-be terrorists.

What does this have to do with Canada? The Canadian Security Establishment (CSE) – the functional equivalent of the NSA – has been authorized to do the same kind of domestic spying here and may already be using the same data-mining approach to conduct mass surveillance of Canadians’ international communications. A rather obtuse section of the Canadian Anti-terrorism Act allows the minister of defence to authorize the CSE “to intercept private communications” coming into and out of Canada “in relation to an activity or class of activities specified in the authorization,” for the very broad purpose of “obtaining foreign intelligence.” While the CSE used to be restricted to spying on communications outside of Canada, the new act allows it to spy on domestic communication, as long as it involves someone outside of Canada. This power to spy on our international communications has been handed to the CSE without any effective oversight or safeguards.

Canada’s program may be even more intrusive than its American counterpart, because, unlike the U.S. program, there is no pretense that “probable cause” is required or that the program is restricted to an “anti-terrorism” purpose. And it is unclear what kind of restrictions there are on the kind of information the CSE can pass on to law enforcement agencies. As a consequence of these powers, the privacy and constitutional rights of many Canadians could be grossly violated. Furthermore, because the Charter deems intelligence gathering without a warrant illegal, prosecutions based on this intelligence could be jeopardized.

The CSE’s provisions in the Anti-terrorism Act have opened the door to massive, domestic and international spying on ordinary citizens. Canadians need to know how these powers are being used, on what scale, how often, and at whose request. We need to know who is advising the defence minister on what to authorize. We need to ask why there is no effective oversight mechanism for this kind of activity in Canada, and summon up a little outrage of our own.

Link here.


It has been reported in the Swiss media that revenues generated by the transitional withholding tax on Swiss savings and investments under the European Savings Directive are far below expectations, suggesting that investors have easily manoeuvred their assets into places where the directive cannot reach. Roland Reding, a tax expert at accounting firm KPMG, said that he has seen figures suggesting that the amount of tax withheld by Swiss banks since the directive came into force last July is relatively small. “I have seen [banking] provisions for this tax and I was always surprised the figures were so small. The payments to the EU may be far below expectations.”

According to Swissinfo, estimates of Switzerland’s withholding tax contribution vary between CHF120-200 million ($91-152 million) for the first 12 months. These contributions will soon be handed back to the government of the state where the investor has their primary residence. As originally drafted, the directive aimed at a uniform “information exchange” regime to apply across the EU, with all countries agreeing to report interest on savings paid to the citizens of other Member States to those States’ tax authorities. As Europe’s major private banking center, Switzerland was forced by the EU to adopt the directive, along with the UK’s offshore dependent territories, the Netherlands Antilles, Aruba and some European centers (Andorra, Monaco, Liechtenstein and San Marino). By way of a compromise, the EU has allowed most of these places to opt for a “transitional” withholding tax at 15% (20% from 2008).

However, as expected, wealthy investors are finding it easy to circumvent the directive. One of the most obvious “loopholes”, as many describe it, is the fact that the provisions of the directive apply to individuals, but not to companies or trusts. Billions of euros in assets have also reportedly flown to parts of the world where the EU directive cannot reach such as Hong Kong and Singapore, while in August 2005 alone, shortly after the directive entered into force, nearly €7 billion poured out of Swiss accounts into Luxembourg Sicav II bonds, which are outside the scope of the Directive.

Link here.


In the following table, columns 1 & 2 are the president and his last year in office, columns 3 & 4 are the debt and (estimated) population for that year (from the websites shown below), and column 5 is the computed per-person share of the U.S. National debt in that year’s dollars. The numbers are correlated to the year, but not the day (i.e., President Clinton left office in January of 2001, the debt number is from 09/30/2001, and the population estimate is from 1 July).

I considered, but ultimately rejected, another column showing the debt share in 2006 dollars because the several internet-based inflation calculators I consulted gave different results. However it is interesting to consider that in 1901 an ounce of gold cost (roughly) the per-person share of the debt, while today the per-person share is (about) 51 ounces of gold.

Some might argue that it is not fair to blame the president for the debt. I agree that congress is partly (or mostly) to blame. However, the president is responsible because of his ability to veto. And yes, he can line item veto – simply cross out the offending lines and veto the entire bill (with a note to congress that the bill will be signed after the offending lines are removed). Whether the fault is the president or congress, would honorable men (and women) vote (and sign) for such indebtedness?

Link here.


The global tax watch group that once branded The Bahamas as a harmful tax haven now welcomes the work by local officials to further the principles of transparency and effective exchange of information, according to an official of the OECD. The Bahamas made a commitment in March 2002 to improve the transparency of its tax and regulatory systems and establish effective exchange of information for tax matters with OECD countries by December 31, 2005.

Chris Barlow, of the OECD’s International Co-operation and Tax Competition Division Center for Tax Policy and Administration, pointed out in a communication to the Bahama Journal that currently the Global Forum is finalizing a report that surveys the legal and administrative framework in the areas of transparency and exchange of information in tax matters in more than eighty countries. “The publication of this report will mark a further step towards the achievement of a global level playing field in these areas.” It is anticipated that the report will be published in May and according to OECD officials demonstrates how OECD and non OECD countries are working together to ensure that progress is made towards a level playing field [where rules apply equally across the board].

The Bahamas was among 35 jurisdictions identified by the OECD in June 2000 as meeting the technical criteria for being a tax haven. Addressing a prime OECD concern, The Bahamas has already abolished bearer shares for IBCs through legislation enacted in December 2000. All bearer shares previously issued were recalled the following year. Authorities now require that the records of beneficial ownership of all shares of IBCs established in The Bahamas be maintained by a licensee under the Banks and Trust Companies Act. Relevant company records are also required to be maintained by the trustees.

Bahamas Ministry of Finance Minister James Smith had said that the Global Forum’s pending report would provide a wealth of information about the unevenness of the playing field which at present, he said, appears to be tipped heavily in favor of OECD members and non-member economies that were not named in any of the listing exercises. In the minister’s view, many practices for which offshore financial centers have been citied for deficiencies abound in OECD countries. “Good examples of this are the proliferation of bearer shares and the failure to meet the same high standards for anti-money laundering as are generally found in place in [offshore financial centers],” he said.

Link here.


The recent unveiling by the Democrats of an alternative national security program illustrates the limited choices Americans have in U.S. politics. The highlights of the Democrats’ plan are tired and worn – rebuilding the U.S. military, implementing the recommendations of the 9-11 Commission, increasing resources to catch the elusive Osama bin Laden, and the vague “responsible redeployment of U.S. forces” from Iraq, which does not set a deadline for the withdrawal of all U.S. forces. No one should be surprised that a party that essentially rolled over to the Bush administration’s transparently questionable Iraq adventure, and has been timid in its criticism of it ever since, would not come up with much of an alternative program.

Although globalization has opened markets around the world, the U.S. political system remains closed to true competition. Curiously, Americans are equally proud that they have one of the freest and most vibrant economies in the world and a two-party oligarchy that restricts competition among political parties. If greater competition is better in economics, why not in politics? Although no specific constitutional or legal requirement limits the number of major political parties, the U.S. has had only two dominant parties throughout most of its history because of the way the Constitution is written. The “winner take all” nature of the political system provides powerful disincentives for two stodgy, fairly broad political parties to break up into smaller, more competitive parties that would actually stand for something.

In contrast, a parliamentary system – in which parties earn the number of seats they have in parliament based on their percentage of the vote (proportional representation) and choose a prime minister based upon a party leader’s ability to form a coalition of parties that commands a majority in the legislature – is more competitive. Governing coalitions formed after a rough and tumble election campaign that give voters a wider choice among multiple parties are much different from the electoral coalitions of the two-party system, which cause political groupings to mute their differences in an attempt to allow their coalition to win.

Even the restricted competition in the U.S. political system has eroded since World War II. Military adventures overseas during the Cold War and thereafter have created an imperial presidency much stronger than the nation’s founders had intended. As in ancient Rome, the empire is slowly destroying the republic. In reality, the American people, who ultimately are supposed to be in charge of the political system, are governed by massive, unresponsive executive-branch bureaucracies. And the Congress, envisioned by the founders to be the dominant branch of government and a major check on executive power, has ceded much of its power to those bureaucracies, especially in foreign policy and decisions to go to war. Moreover, although the American people retain the theoretical ability to vote their representatives out of power, they rarely do because incumbent advantages are now so great and gerrymandered geographic boundaries create friendly districts for incumbent members.

Link here.


A few months ago I argued the case for value investing. I referenced scientific studies that did not support technical analysis or market timing. Some readers strongly objected to my conclusion, but no readers addressed the question of my evidence. Similarly, over the years I have written extensively about individual liberty, and found myself puzzled when I could not convert followers of socialism, communism, or any other forms of big government to the principles of individual sovereignty. Once again, this in spite of the historical evidence. I have puzzled over this phenomenon throughout my life. Arguments for a free-market fail to sway those who believe in government intervention. Evidence for Darwinian evolution fails to convince believers in religion. And studies showing the random nature of price movements fail to sway believers in technical analysis.

It seems that evolution has endowed us all with wiring that demands we support whatever beliefs that have been “stamped” into our brains. This has been demonstrated by a recent research study at Emory University in Atlanta, a study that has potentially wide implications, from politics to religion to investments. The investigators used functional magnetic-resonance imaging (fMRI) to study a group of committed Democrats and Republicans during the three months prior to the last U.S. Presidential election. The Democrats and Republicans were asked to evaluate threatening information about their own candidate while undergoing fMRI to see which parts of their brains were activated.

As reported by Emory, “… the partisans were given 18 sets of stimuli, six each regarding President George W. Bush, his challenger, Senator John Kerry, and politically neutral male control figures such as actor Tom Hanks. For each set of stimuli, partisans first read a statement from the target (Bush or Kerry), followed by a second statement that documented a clear contradiction between the target’s words and deeds, generally suggesting that the candidate was dishonest or pandering. Next, partisans were asked to consider the discrepancy, and then to rate the extent to which the person’s words and deeds were contradictory.”

Drew Westen, director of clinical psychology at Emory who led the study, said, “We did not see any increased activation of the parts of the brain normally engaged during reasoning, What we saw instead was a network of emotion circuits lighting up, including circuits hypothesized to be involved in regulating emotion, and circuits known to be involved in resolving conflicts.” In other words, in most cases no amount of logic interferes with our strongly-held beliefs. The brain automatically rationalizes discrepancies in facts to support beliefs.

Do you and I succumb to emotionally-biased judgments when we have a vested interest in supporting our beliefs? Only when we find ourselves resisting the evidence. Success in life tends to be proportional to our willingness to examine the evidence. H. L. Mencken observed, “The most common of all follies is to believe passionately in the palpably not true.” Beliefs, at least false beliefs, are an impediment to us all. Or, as Mark Twain put it, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

Link here.


An unprecedented run-up in the stock market propelled the U.S. economy in the late ‘90s and now an unprecedented run-up in house prices is propelling the current recovery. Like the stock bubble, the housing bubble will burst. Eventually, it must. When it does, the economy will be thrown into a severe recession, and tens of millions of homeowners, who never imagined that house prices could fall, will likely face serious hardships.

The basic facts on the housing market are straightforward. Quality-adjusted house prices ordinarily follow the overall rate of inflation. However, in the last eight years house prices have risen by almost 50% in real terms, as shown in Figure 1. The run-up has not been even. In large parts of the country (most of the South and Midwest) there has been little real appreciation in house prices. In contrast, the runups in the bubble areas (the West Coast, the East Coast north of DC, and Florida) have been close to 80% in real terms.

The housing bubble spurs the economy directly by increasing home construction, renovation, and sales and indirectly by supporting consumption. The run-up in house prices has created more than $5 trillion in real estate wealth compared to a scenario where prices follow their normal trend growth path. The wealth effect from house prices is conventionally estimated at 5 cents on the dollar, which means that annual consumption is approximately $250 billion (2% of GDP) higher than it would be in the absence of the housing bubble.

Nobody doubts that there has been a sharp increase in house prices, the question is why: Is it because of fundamentals or a speculative bubble? A quick examination of the fundamentals should remove any doubts on this issue. On the demand side, neither income nor population growth has been especially rapid. Real per capita income has grown at a respectable rate of 2% annually since 1997, but this is considerably slower than the 2.8% annual rate from 1953 to 1973, a period which saw no run-up in house prices. Furthermore, the median family income has actually been falling since 2000. Population trends also would not suggest a surge in demand for housing. There also is no obvious supply-side story. The best evidence that fundamentals are not the cause of the run-up in housing prices is the fact that there has been no comparable increase in rental prices. The fact that only the ownership market shows an unusual run-up in prices strongly supports the view that this price increase is being driven by speculation rather than fundamentals.

If housing prices are a speculative bubble, then eventually, prices will return to normal levels reflecting the value of housing services. The country has been building houses at a near record pace for the last few years, and this pace will continue as long as prices remain near their bubble peaks. At the moment, this oversupply has been absorbed by speculators and by a record vacancy rate in the rental market, but eventually excess supply will put downward pressure on sale prices (part of this story is the conversion of rental property to ownership units), which will cause speculative demand to evaporate. Just as the supply of shares of worthless Internet companies eventually outstripped demand, the supply of housing will eventually place enough downward pressure on housing prices that the bubble levels will prove unsustainable. The adjustment process will not be pretty.

Link here.


When Slobodan Milosevic died in his jail cell in March, he left behind an $800 million mystery. Between 1992 and 2000 the Serbian strongman spirited at least that amount, much of it in cash, out of the former Yugoslavia, according to papers filed at the war crimes tribunal in The Hague, Netherlands. The money was loaded onto an airplane and flown 1,000 miles to a small airport in Larnaca, Cyprus. Why there? Because, says an alleged co-conspirator and courier, the tiny Mediterranean island was “a passage to the world.”

Where did the money go from there? Court papers say Milosevic and co-conspirators set up eight Cypriot front companies, including one registered by the law firm of Tassos Papadopoulos, the nation’s current president. (Pambos Ioannides, head of Tassos Papadopoulos & Co., admits the firm opened a holding company called Southmed but strenuously denies it was set up on behalf of Milosevic or his regime.) These outfits allegedly set up some 250 bank accounts in Cyprus and Greece, and funneled money to more than 50 countries, including Liechtenstein, Luxembourg and Switzerland. Much of it was used for purchases from military supply businesses in the U.S., Russia and Israel. At least $3.5 million went to a company called Aviatrend, run by reputed Russian arms dealer Valeri Tchernyi. What happened to the rest is anyone’s guess.

Once part of the Byzantine Empire, Cyprus is a great place to make things disappear. This nation, population 740,000, has long been a way station for rogues and scoundrels, where officials have traditionally been willing to look the other way. Just 150 miles from Beirut, closer to the Middle East than to Europe, Cyprus has been a mecca for cigarette smuggling, money laundering, arms trading – allededly even terror financing, according to a post-Sept. 11 congressional hearing. The site of secret meetings between Israelis and Palestinians, it has also been a refuge for Russians transporting wealth of immense size and dubious provenance.

So it may come as a shock that Cyprus is now selling itself as the next tax haven for corporate America, a Delaware on the Mediterranean. As in Luxembourg or the Cayman Islands, businesses can cut their tax bills by setting up a holding company without any physical assets. To prepare for its entry into the EU in May 2004, lawmakers enacted legislation to strengthen anti-money-laundering rules, require greater transparency in business dealings and discourage tax evaders. U.S. officials agree that Cyprus has come a long way in cleaning up its act. People entering or leaving the country to declare currency or gold bullion worth $15,500 or more. Banks must report large cash deposits and suspicious transactions, and bank officials may be held personally liable if their institutions scrub clean dirty money. U.S. Treasury officials also say that Cyprus is likely to have money-laundering problems for some time. For American companies, though, there are still obvious attractions. Cyprus offers the lowest corporate tax rate in the EU, 10%, as well as a bevy of tax breaks and 33 international treaties to prevent double-taxation.

If you want dirty business, look at the Turk-occupied north, say Cypriot authorities. A potentially charming tourist destination, this slice of the island has been racked by embargoes and years of ethnic anger, making it all but impossible for sizable in – launched when the island’s divisions seemed at an end – and a dearth of upscale hotels, Western banks and amenities. The void is filled by casinos, some two dozen of them, owned by Turkish mainlanders and essentially unregulated. Some 500 “finance institutions” that give loans are also unregulated, and a 2004 U.S. State Department report says northern Cyprus has become a conduit for narcotics trade between Turkey and Britain as well as a destination for money launderers.

Link here.


The Securities and Exchange Commission is not the only regulator taking a closer look at executive compensation. The IRS will be scrutinizing executive pay this tax season too, as part of its continuing effort to force more companies to treat fringe benefits as wages for income and employment tax purposes. In 2004, the IRS launched a pilot program to investigate 24 companies already under audit to gauge their level of compliance with executive compensation rules. The test group fared poorly, and, as a result, executive pay became “an area for agents to focus on,” says an IRS spokesperson. Since then, the agency has released tax guidance in the form of a 2005 memo called an “audit technique guide”, and continues to keep a watchful eye on how companies book executive bonuses and perks. This year is no exception.

The IRS will not only be looking at high-profile items, such as stock option expensing and no-cost loans this year. Agents will be looking into more mundane areas, such as life insurance for spouses, club memberships, and transfer of company property, says Douglas Rogers, an executive with specialty insurer Capital Risk Partners. He should know. Until he left the IRS in January, Rogers was the director for Penalties and Interest, the department that assures fines are assessed, and interest calculated, consistently. Rogers explains that the IRS does not care about “how much” a company pays its executives. Rather the emphasis is on what form the pay takes, and how the payment is characterized in terms of an expense deduction, as well as its effect on withholding and other payroll taxes. Based on his 32 years of experience with the agency, Rogers worked up a list of compensation perks that may not seem unusual or controversial, yet may pique the interest of agents focused on uncovering compensation violations. Below are Rogers picks.

Link here.


Last week, a friend sent me a link to a Saturday Night Live (SNL) skit, wherein they present a “new consumer credit program”. It is called, “Don’t Buy Stuff You Cannot Afford”. While satire can be useful in pointing out the folly of America’s unprecedented borrowing and spending binge, the remedy will likely be so harsh that it precludes humor. Yet, the aspect of the effects of this credit phenomenon on the average American has long concerned me. So, with your permission, I will continue the story of the couple in the skit, whom I will call Bob and Sally Smith, in my own admittedly dour way. If you are fortunate enough to be reading this article with no credit problems, you still have been, and will be, affected by this historic, reckless expansion of credit. Beyond the effects of inflation, and the probability of deflation, the consequences of our profligacy will not play out in a vacuum and will not be nearly as hygienic as an academic discussion of this problem.

In response to the bursting of the stock market bubble of the late ‘90s, in 2001, the Federal Reserve began slashing interest rates, from 6.5% to 1% by 2003, bringing rates to their lowest levels since the Great Depression. Not surprisingly, as the credit spigot was opened wide, housing prices went parabolic. The unsustainable stock prices of the late ‘90s gave way to the unsustainable real estate prices of today. In 2004 and 2005, thousands of articles warned of a real estate bust, but the bust has yet to occur. Over the last two years, like us, many have cautioned that the stock market is again nearing a significant decline, yet no such decline has unfolded.

So, if things have been “good” for so long (3 years is forever to most Americans), why do we so doggedly hold to the idea that there is a problem and that our current course is not self-sustaining? I think that we are nearing the end of this present course, and while no person can know that this is “the top” (until it is too late to do anything about it), keeping watch for “the top” has never been more crucial. So once again, this time – through the eyes of Mr. and Mrs. Smith, we will look at the line of dominoes, the first of which is teetering and appears to be starting to fall.

Link here.


I have gotten a flurry of emails on and off about confiscation of gold and or silver bullion. My position is to be in physical assets in your possession, not much in electronic or stock accounts. The philosophy also includes a paid-off house, and other real assets in your possession. The premise is that physical possession is key when markets are crashing or illiquid, and if you have possession, you do not have to worry as much about getting your hands on your money by having to sell it into such a market. You do not have to worry about frozen accounts in a financial crisis – you already have your hands on it. To me, possession is not only “9 tenths of the law,” it is the best protection period.

Now about confiscation. The U.S. had gold confiscation in the 1930’s during the Great Depression. We had gold and silver coin currency in circulation, i.e., a gold dollar. The U.S. instituted mandatory conversion of gold dollars into fiat dollars, i.e. they wanted all the gold coin $U.S. currency back in the hands of the U.S. government. Ultimately, they only got a relatively small fraction of it back. The rest was hoarded in the U.S. and abroad. Safe deposit boxes were also attached by the U.S. government, and citizens were allowed to keep about $100 of gold coin, the rest was confiscated (converted into paper dollars) by the government. This is a scary proposition. When depositors went in to open their boxes, they were not permitted to do this in privacy, but in the attendance of a government agent, who would buy any gold from you with U.S. dollar paper money.

At that time, one of the motivations for collecting the gold coin was that the U.S. wanted to deficit spend during the depression to stimulate the economy and do government hiring programs that proliferated under Franklin D. Roosevelt. When we had gold coin, that restricted the government’s ability to deficit spend, so that was one major reason why the gold U.S. coin was confiscated by law. They were also afraid of gold hoarding, i.e., flight out of the U.S. currency, and so gold bullion was also confiscated. There is one major difference between today and then. We do not have gold U.S. coin currency now, so one of the prime motivations to confiscate gold in the 1930s is not at work today. The other risk, however, that of flight out of the U.S. dollar into gold hoarding, still remains in effect.

To get around flight out of the dollar, the major issue to the U.S. government would have to focus on is the currency markets because they have the size and liquidity to do the job. The US government would probably institute foreign exchange restrictions, i.e., freezing the conversion of electronic accounts into other currencies. That is, accounts already denominated in US dollars would probably be forced to stay in U.S. dollars. The amount of gold bullion available is a very, very small fraction of the total assets available for a change out of U.S. dollars. Foreign currencies would be the prime objective for converting out of the U.S. dollar, and gold would be a very small part of this equation. Therefore, I do not see gold being the main target of foreign exchange restrictions as it was in the 1930s. However, the U.S. can indeed confiscate anything they feel threatens the stability of the U.S. dollar with laws already on the books.

Electronic gold accounts would be a major target of these foreign exchange restrictions, however. These are liquid alternatives to U.S. dollar accounts, but again, the size of these things is literally a drop in the ocean of U.S. dollar accounts worldwide. The only real way that U.S. dollars could be washed in a currency crisis would have to be into other foreign currencies that have the size and liquidity to be able to handle the volume of U.S. money that would seek haven. The gold stocks, the gold ETFs and gold bullion are a minute fraction of the market size and liquidity that would have to be available. If we were to consider the actual gold bullion in the hands of private individuals, that gold would just become unavailable for any U.S. dollar price until the dollar either stabilized or crashed into nothingness. As a matter of fact, I believe that gold bullion in general will become unavailable for any dollar price in the event of a serious dollar crisis.

What is my point? Gold bullion is not going to be a feasible alternative to flight out of the U.S. dollar because there is not enough of it to make a market. The U.S. would have to institute currency exchange restrictions like Argentina did a few years ago, where they prevented people from taking out pesos (allowed a very low monthly withdrawal), and froze bank accounts. Now, it is possible that the U.S. would seek to get the gold bullion from the citizenry, but that would not be the major source of pressure on the dollar in a real crisis. I do believe, however, that larger gold depositories would be subject to freezes or attachments. Also, I do not foresee that having these depositories out of the country is going to do much. The U.S., Japan, and Britain are very closely aligned monetarily, and will cooperate in a real USD crisis and lock up large gold depositories under their jurisdictions. It is my opinion that a few hundred or few thousand ounces in one’s personal possession will be a very small issue to the U.S. government.

There is another issue. Since gold is non-traceable, it is possible that the U.S. government would seek its control for security issues. In fact, is some speculation that some large gold ETFs are vehicles of choice for non-legal money. That is not the ETF’s fault, but it does put a spotlight on them in this regard. It may be possible that transacting in gold bullion would be too dangerous in a security alerted world. In that case, gold would have to just be kept for a later time, and not spent.

Link here.


The Electronic Frontier Foundation filed a class-action lawsuit against AT&T, accusing the telecom company of violating federal laws by collaborating with the government’s secret, warrantless wiretapping of American citizens’ phone and internet usage. The suit (PDF file), filed by the civil liberties group in federal court in San Francisco, alleges AT&T secretly gave the NSA access to two massive databases that included both the contents of its subscribers’ communications and detailed transaction records, such as numbers dialed and internet addresses visited. “Our goal is to go after the people who are making the government’s illegal surveillance possible,” says EFF attorney Kevin Bankston. “They could not do what they are doing without the help of companies like AT&T. We want to make it clear to AT&T that it is not in their legal or economic interests to violate the law whenever the president asks them to.”

One of AT&T’s databases, known as “Hawkeye”, contains 312 terabytes of data detailing nearly every telephone communication on AT&T’s domestic network since 2001, according to the complaint. The suit also alleges that AT&T allowed the NSA to use the company’s powerful Daytona database-management software to quickly search this and other communication databases. That action violates the First and Fourth amendments to the Constitution, federal wiretapping statutes, telecommunications laws and the Electronic Communications Privacy Act, according to the complaint. The suit, which relies on reporting from The Los Angeles Times, seeks up to $22,000 in damages for each AT&T customer, plus punitive fines.

The lawsuit comes a little more than a month after The New York Times reported that in 2001, President Bush ordered the NSA to begin warrantless monitoring of Americans’ overseas phone calls and internet usage. The administration defends the eavesdropping program, saying it is only targeting communications to and from suspected terrorists, that government lawyers review the program every 45 days and that Congress authorized the president to track down 9-11 co-conspirators, thereby giving the president the ability to bypass wiretapping laws. Some Senators, along with civil libertarians and former government officials, counter that the wiretaps are simply illegal and that wiretapping warrants can be acquired easily if the government has probable cause to believe an American is affiliated with terrorists. The government is not named in the lawsuit, though it is already being sued by the American Civil Liberties Union over the surveillance program.

Link here.


To many privacy geeks, it is the holy grail – a totally anonymous and secure computer so easy to use you can hand it to your grandmother and send her off on her own to the local Starbucks. That was the guiding principle for the members of kaos.theory security research when they set out to put a secure crypto-heavy operating systems on a bootable CD – a disc that would offer the masses the same level of privacy available to security professionals, but with an easy user interface.

It is a difficult problem, entailing a great deal of attention to both security details and usability issues. The group finally unveiled their finished product at the Shmoo Con hacker conference, with mixed results. Titled Anonym.OS, the system is a type of disc called a “live CD” – meaning it is a complete solution for using a computer without touching the hard drive. Developers say Anonym.OS is likely the first live CD based on the security-heavy OpenBSD operating system. OpenBSD running in secure mode is relatively rare among desktop users. So to keep from standing out, Anonym.OS leaves a deceptive network fingerprint. In everything from the way it actively reports itself to other computers, to matters of technical minutia such as TCP packet length, the system is designed to look like Windows XP SP1. “We considered part of what makes a system anonymous is looking like what is most popular, so you blend in with the crowd,” explains project developer Adam Bregenzer of Super Light Industry.

Booting the CD, you are presented with a text based wizard-style list of questions to answer, one at a time, with defaults that will work for most users. Within a few moments, a fairly naive user can be up and running and connected to an open Wi-Fi point, if one is available. Once you are running, you have a broad range of anonymity-protecting applications at your disposal. But actually using the system can be a slow experience. Anonym.OS makes extensive use of Tor, the onion routing network that relies on an array of servers passing encrypted traffic to permit untraceable surfing. Sadly, Tor has recently suffered from user-base growth far outpacing the number of servers available to those users – at last count there were only 419 servers worldwide. So Tor lags badly at times of heavy use. Between Tor’s problems, and some nagging performance issues on the disc itself, Banks concedes that the CD is not yet ready for the wide audience he hopes to someday serve. “Is Grandma really going to be able to use it today? I don’t know. If she already uses the internet, yes.”

Experts also say Anonym.OS may not solve the internet’s most pressing issues, such as where repressive governments – like China – monitor their population’s net access, and censor or jail citizens who speak out against the government. Ethan Zuckerman, fellow with Harvard’s Berkman Center for Internet and Society, works extensively with international bloggers and journalists, many of whom live under constant threat from their own governments. He see Anonym.OS as a blessing for some – but not for those at the greatest risk. “Rebooting isn’t often an option,” explains Zuckerman, who would like to see anonymity solutions move toward minimally invasive strategies like the TorPark, a USB key that allows access to a Tor-enabled browser without rebooting, and private proxies matched up one by one with dissidents.

But kaos.theory members say Anonym.OS is just the first step in making anonymity widely available. Future versions, they say, may run on a USB keychain. Additionally, they plan to implement Enigmail to allow encrypted e-mail for Thunderbird and Gaim Off-the-Record, which allows users to use instant messaging without their logs being tied to them.

Link here.


After hiking the fed funds rate to 4.75% on March 28th, the Federal Reserve acknowledged that the “Commodity Super Cycle” might be signaling higher inflation. Engaging in a battle with the “Commodity Super Cycle” would represent a 180º turn in Bernanke’s thinking on commodity prices and inflation. But the Fed is almost out of ammunition in its 21-month old battle against gold, silver, copper, zinc, and crude oil. At the current sales pace, there were enough new homes on the market to satisfy demand for the next 6.3 months, the largest amount in more than a decade. The median selling price of a new home last month was $230,400, down from $243,900 in October. The Fed is not about to pull any nasty tricks like European Central Bank chief “Tricky” Trichet, and should follow through on its widely telegraphed quarter-point rate hike to 5.0% on May 10th. But beyond 5.0%, the Fed would risk killing the goose that lays the golden eggs for the U.S. economy, the housing bubble, and that might be a red line that Bernanke & Co. cannot cross.

If so, which central bank would assume the mantle of fighting the commodities rallies with a tighter monetary policy? European and Japanese central banks are playing a double game, tightening monetary policy at a snail’s pace, but leaving plenty of euros and yen floating in the banking system at negative real interest rates, in an effort to keep their equity markets afloat. The Federal Reserve announced on November 10th, 2005, that it would no longer disclose to Americans what it is doing with the U.S. M3 money supply. Since then, gold has soared $110 per ounce, bumping against the psychological $600 level.

While the Dow Jones Industrials rally to 5-year high might look impressive in U.S. dollar terms, the DJI is in a raging bear market in hard money terms. Last week, the DJIA fell below 19 ounces of gold, or 30% lower than two years ago. While gold is matching the performances of European and Japanese equity benchmarks, and blowing away the Dow Industrials, the yellow metal is still in a four year bear market against the crude oil market. Gold has rebounded from as low as 6.5 barrel of crude oil per ounce, but meeting resistance at 9.25 barrels this year. Gold might outperform crude oil, if Arab oil kingdoms in the Persian Gulf decide to allocate more Petro-dollars to gold, in a flight to safety from the Ayatollah of Iran.

Pension funds poured money into crude oil, base and precious metals in March, putting the “Commodity Super Cycle” back on track after a period of consolidation in February. There are about 10,000 hedge funds managing up to $1.5 trillion in assets around the world, and institutional investment in commodity index funds has topped $80 billion. Former Fed chief “Easy” Al Greenspan, was quoted in January, saying gold’s rally did not reflect heightened inflation expectations, but rather geo-political tensions around the world. With the yellow metal bumping up against $600 per ounce level, its highest in 25-years, perhaps Gold knows what no one knows!

Link here.


Publisher’s note: Costa Rica is a swell place to live when you compare it to Detroit or Baltimore, and there is plenty to do in Costa Rica that you could never do in Detroit or Baltimore. Costa Rica is exceedingly beautiful with a variety of climatic conditions, and it is still possible to find good real estate prices in Costa Rica, especially compared to the prices in Europe and Canada. If you have your heart set on Costa Rica, then move to Costa Rica. My article, “Real Estate in Costa Rica - The Greater Fool Phenomena”, seems to have started a fresh rash of Costa Rica bashings. All of the email we received regarding the article was positive and in agreement with my assessment, and now we have received the following article. I wish someone would send us a positive article on Costa Rica. Every time I have gone to Costa Rica I have had a ball. I want to make it clear that I am not bashing Costa Rica … just trying to set the record straight. I was much more militant when I wrote that article than I am today … but the article comes back to haunt me.

Some fifteen years ago, an old time friend told me about “dreamland” – rain forests full of vibrant and colorful life, tamed volcanoes and pristine beaches. A paradise offering springtime weather all year round, low cost of living and first world class services. A friendly place where wealth and social justice were walking together harmoniously and violent crime was known as a reference to our overcrowded and polluted cities. Two years into my new “costarrican” life, I have rediscovered a very simple rule of rational thinking: myths are just that, myths. There are no promised lands, nor greener pastures, nor better people elsewhere.

The glamorous Costa Rica of the ‘60s, ‘70s, and early part of the ‘80s is badly crippled nowadays. It was not a sudden attack. It is a lengthy and dolorous disease. A social and economical Osteoporosis slowly eating the bones of the “Welfare state” of this small country, once called the Swiss of Central America. Cities in the Central Valley – San Jose, Alajuela, Heredia and Cartago – where peasants were able to walk the streets unconcerned and secure, are nothing more than remembrances. Crime is rampant, frequently violent. One could get shot for a cellular phone, a few Colones (local currency) or even for a cheap watch. It can happen in the worse slum and in the best neighborhood. Hotels located in downtown San Jose, advice their guests not to venture out by foot after dusk and to take all kind of precaution. Guards with bulletproof vests and armed with shotguns stood vigilantly in front of supermarkets and shopping centers. Petty thefts, robs and assaults occur in the surroundings of the Metropolitan Cathedral all day round!

But if tourists are exposed, not less are residents. Police deficits, in addition to a tolerant legal system and extended drug consumption have contributed to crime record highs. Corruption plays no small part. Blending into this explosive compound, 50% of people are living in poverty. Within them, 21.2% are hardly surviving extreme poverty, relegated to “Precarios” or misery slum, without minimum conditions. Results are highly inflammable. Costa Rica ranks as World’s 19th in murders per capita, and 5th place in the Americas (USA ranks as America’s 7th and World’s 24th). A nighttime trip across Costa Rica’s cities reveals people caged into their ironwork enclosed homes, prisoners of prevailing insecurity. During the last eleven months, my girlfriend’s Toyota, protected by a superb alarm system, has resisted three robbery attempts, including one inside our ironwork-closed garage!

National inflation for 2005 reached 14%! It was 12.9% in 2004. The forecast for 2006 is 11%! During the last decade, this fast paced cost of living has imposed a heavy toll on society, even affecting basic foods. Although GDP and exports have grown steadily, Midas has touched a very few chosen. Middle class and workers are sliding downhill. A bloated public debt affects government capacity to deal successfully with infrastructural and social issues. Reluctant to tackling the real causes of the deficit, successive governments have transferred the load to people shoulders, while the oligarchy gets away with tax evasion and corruption. Making things worse, uncontrolled immigration from neighboring Nicaragua has created havoc.

These are not good news for expatriates willing to save on their hard-earned pensions while looking for an upscale life they cannot afford in America. Expatriates may live here somehow more economically than in USA, but they should be aware that third world countries do not offer first world living standards. In addition, the biggest lost will be security. Savings in rent and utilities are real, as well as in medical bills, but vehicles, gas, clothing, personal care items, home appliances, computers and general electronics, cost 40 to 300% more. Making things even more difficult for foreign retirees, lawmakers are actually debating new legislation enforcing taxes to foreign income, including pensions. Furthermore, ballooning Real Estate prices are surrealistically out of touch with building costs and national rent. Personally, I have found no suitable dwelling for a reasonable price. I am not looking for a once in a lifetime bargain, but for a fair price. Costa Rica cities are far from what you may expect from a contemporary metropolis. The infrastructure is severely damaged. Except for a few highways, roads are in poor condition.

On the other side, Costa Rica’s landscape is as magnificent as ugly are its cities. Glorious nature at its best, this country has a bounty to offer those craving for a simple rural life. Springtime weather all year round at the highlands, and tropical weather at sea level. There are only two seasons, rainy and dry. The first one last for about seven months and believe me, if it is not a “Macondo’s” clone – the flooding town in One Hundred Years of Solitude by Nobel Prize laureate Gabriel Garcia Marquez – it is really close. So if you like rainy days, pure nature and a simple life, this might be your destiny.

If you are planning to live in Costa Rica – or any other Spanish speaking country – learn the language first. Otherwise, you will feel isolated. Costa Rica nationals speak Spanish and only a handful are fluid in Shakespeare’s language. It is not a good idea to collect info from tourist guides and hotel clerks for dwelling purposes. They have been programmed to enhance your experience, converting you in a faithful believer, eager to return. If you really want to walk beyond the façade, you must actively interact for an extended period of time. Some self-proclaimed experts in Costa Rica have ties to real estate and tourism industries. Considering the huge income gap between USA and Costa Rica, suitable real estate properties are overpriced and totally out of touch with local economy.

As for my mercurial old friend – the one that introduced me to “dreamland” … less than a year later, totally discouraged by violent crime and a much higher than expected cost of living, he and his family returned to the states. As for myself, I am actually looking south. Two trips later, Panama seems like a better place to live or to invest on a second home. The cost of living is by far lower than Costa Rica, including Real Estate prices. Dwellings do not look like fortresses. No barbed wire. Many cars sleep in the streets. Additionally, we were able to walk unharmed throughout downtown Panama at 2:30 a.m. Panama City is a modern metropolis. The infrastructure is sound. Panama also offers the best incentive programs for retirees and entrepreneurs all over the world. I am not promoting Panama. Neither I am an expert, nor I do I have a vested interest there. Besides, I am not even certain that Panama fulfills my expectations. Fortunately, we live in a wide world full of opportunities …

Link here.


A federal court in San Jose, California gave the IRS permission to ask PayPal – a company that enables online money transfers – for account information for American taxpayers who have bank accounts, credit cards or debit cards issued by financial institutions in more than 30 countries reputed to be tax havens. PayPal spokeswoman Amanda Pires said the company just received the summons. “We’re still evaluating our options,” she said. “The privacy of our customers’ information is something we take really seriously.”

PayPal enables individuals and businesses around the globe to send and receive money online. In 2005, users moved $27.5 billion through the money transmitter. The company, owned by eBay, has 100 million account holders globally. The request for information is an outgrowth of an IRS effort, begun several years ago, to trace money that American taxpayers hold offshore to avoid paying taxes. The IRS said many of those taxpayers access their money through credit and debit cards. The tax collectors have already obtained information from some credit card companies, merchants and payment processors. “PayPal is another one of the mechanisms by which money stashed overseas might be spent,” Eileen OConnor, assistant attorney general for the Justice Department Tax Division, told reporters.

In some cases, the IRS obtained credit card numbers but could not identify the cardholder. The IRS said PayPal might be able to lead the tax agency to those individuals. The IRS also hopes PayPal can help them identify currently unknown taxpayers’ and their payment cards, as well as offshore bank accounts, that might be evidence of tax evasion. The request covers transactions occurring from 1999 through 2004. PayPal offers service in less than a third of the locations listed in the summons, according to the company. Those places were Anguilla, Costa Rica, Cypress, Hong Kong, Latvia, Luxembourg, Malta, Singapore, Switzerland, the Channel Islands and the Isle of Mann, Ms. Pires said.

The demand promised to heighten concerns of online privacy advocates that contend law enforcement officials see the Internet as a virtual gold mine of information about people’s lives and activities. A battle between Google and the U.S. DoJ ended last month with U.S. District Court Judge James Ware ordering the company to turn over data about what people are seeking on the Internet. In what was hailed as a victory, Google convinced Ware to make the company provide only a sliver of the information originally requested by the government, as he ordered Google to turn over a random list of 50,000 Website addresses resulting from Internet search requests. The judge nixed the idea of Google handing over exact queries or other information that might infringe on the privacy of computers users.

Links here, here, and here.


The continuing crackdown on criminal and terrorist money networks has the government scrambling to enforce tougher rules against money laundering without over-burdening or even killing legitimate businesses. Money services businesses (MSBs) – non-bank financial institutions which do services such as money transmitters, currency dealers, check cashers – are one example of an industry caught up in requirements of the money laundering laws. Government agencies are pressing for more information from the banks that do business with MSBs. The financial institutions have to deliver that data, and carry the costs.

While there are unlicensed money services businesses operating outside of government oversight, state-licensed companies have to adopt programs that combat money laundering in order to stay in a multi-billion market. But this has not always been enough to keep them in business. “A lot of big American banks had begun to refuse to open accounts with money service businesses” because they are afraid those companies do not have strong anti-money laundering programs, said Elaine Carey, senior vice president at Control Risks in Los Angeles, a consultant firm.

David Landsman, executive director of National Money Transmitters Association Inc., representing 45 companies, said the situation is growing worse. “We have reached a crisis” level, he said in a phone interview. “We estimate that 95% of banks have made it a policy not to take money transmitters accounts.” A money transmitter is an MSB whose core business consist of remittances – transfers of money by foreign workers to their home countries. “In this general atmosphere of cracking down, you have the mistaken notion that we are high risk because we’ve always been categorized together with unlicensed MSBs or foreign money transmitters, although we are not,” Landsman declared. “We have fallen between the cracks.” He criticized the lack of a federal certification system for MSBs, saying that the state license “is not given the respect that we think we deserve.”

Currency transaction reports – documents that financial institutions have to fill out for all cash transactions above $10,000 – are another issue vexing the financial industry. “There are 13 million CTRs that banks fill out every year. Our question is how effective are they,” said John Hall, a spokesman for the American Bankers Association. He pleaded for waiving some of the requirements, especially for customers well known to banks. Michael Morehart, an agent with the FBI’s counter-terrorism division, agreed that “certain categories of CTRs can be eliminated without harm.” But he warned that changing the requirements “without a careful and independent study, could be devastating” to intelligence efforts in both the global war on terrorism and traditional criminal activities. “Our experience shows that terrorism activities are relatively inexpensive to carry out and that the majority of the transactions reports are of value to us,” he said at the Senate Banking Committee last week.

Link here.


Is less actually more? The answer – every April, at least – is yes. As the wealthiest Americans file their income tax returns this month, many probably wish they could report just a bit less – a smaller income, a more modest bonus, less impressive stock portfolio returns. Unless they are fudging the numbers, that is not likely. 2005 was a very good year for the rich. Bill Gates’ personal net worth alone increased $3.5 billion last year, as reported in Forbes’s list of the World’s Billionaires. Investment banks such as Goldman Sachs reported record-breaking annual profits, leading to a bonus season that would make Midas blush.

The strong economy affected ordinary Americans, too. According to the Bureau of Economic Analysis, per capita disposable personal income nudged up $89 from November 2005 to December 2005. Of course, the more you make, the more you generally give back to Uncle Sam. And with tax havens things of the past and offshore accounts coming under international scrutiny, there are fewer ways to avoid it. “No matter where you live, if you’re a U.S. citizen, you’re taxable on all income from all sources,” says Robert McKenzie, a lawyer with Arnstein & Lehr in Chicago. Even if you renounce your U.S. citizenship – an extreme alternative to paying income tax, but perhaps a financially sound one – that, too, is now “a taxable event,” says McKenzie. “There is a tax imposed on assets you seek to take out of the country.”

International tax havens, fabled places where income taxes are low or nonexistent, are being looked at closely by the U.S. government, the OECD, and the related FATF. “Pressure is being imposed on all tax havens, since there are still some left for those living outside the U.S.,” Gideon Rothschild, an asset-protection attorney with Moses & Singer in New York City, emails. “The OECD and FATF are concerned about money-laundering and terrorist financing, as well as tax transparency. Most jurisdictions have succumbed to the pressures of these bodies.”

That does not deter some people, nor do other risks. McKenzie became a tax lawyer in 1978, the year he left his former employer – the IRS – to “protect” victims of tax law. In the intervening years, McKenzie has learned that people will try anything to avoid paying them. “There are a lot of tax havens I’ve had clients use over the years,” says McKenzie, citing a client who placed a “substantial amount” of money in a Bahamian bank account, only to lose it when the bank closed.

What is a U.S. citizen to do as April 15 approaches? That is where Rothschild comes in. “There are not laws that make transfers to offshore trusts for asset-protection purposes illegal, provided the transfers are made when there are no clouds, or creditors, on the horizon, and that the trusts and the U.S. taxpayers creating such trusts comply with all the IRS reporting requirements,” Rothschild explains. While he is quick to point out that asset protection does not involve minimizing income taxes, Rothschild says there are strategies that can help save estate taxes and offshore trusts. Using private-placement life insurance products is one such strategy. In the spirit of fiscal strategizing, Forbes has compiled our annual list of Tax Haven Getaways again this year – 10 sunny destinations, once famous for their very friendly tax laws.

Link here.


Migratory retirees have lent more than a touch of gray to Florida, Arizona and Southern California. Next stop on the aging boomer bandwagon? Panama. With low housing and living costs, a stable political environment, relatively safe streets and that tropical climate, people in their 50’s and early 60’s are flocking to the Central American nation, rather than working for a few more years to scrape together enough money for a condo on the Florida coast. “We’re seeing a significant number of Americans coming here to retire,” said William Ostick, a spokesman for the U.S. Embassy in Panama City. “Panama as a nation is trying to attract people who want to build second homes here, but a lot of them are selling their homes in the U.S. and just buying here.” Mr. Ostick said the embassy did not keep statistics on Americans who have moved to Panama to retire, but he said there were 25,000 to 30,000 Americans living there. According to the Panamanian government, four times as many American retirees applied for visas last year as in 2004.

Although Panama, a country of 3.2 million people, can present challenges to those unaccustomed to living in a developing nation, its quirks are, for many, part of its charm. “This is a place for people who don’t need outside stimulus, unless it’s looking at the sunrise or watching the bananas grow,” said Honey Dodge, who moved to the mountain town of Altos del María with her husband, Larry, a retired sociologist, in 2004. Ms. Dodge, 58, was the national chairwoman of the Libertarian Party and ran a furniture business with her brother in Dallas just before moving to Panama. She said that she and her husband considered moving to countries in nearly every part of the world before settling on Panama. “We found charts on various aspects of life around the world – like what percentage of a country’s population is in prison, how much corruption there is – and Panama never came out the best on any one chart, but it was always in the Top 10,” Ms. Dodge said. “By the time we flew down here, I said if it’s half as good as it’s supposed to be, it’ll be great. Well, it was more like 90 percent as advertised.”

Like many retirees, Ms. Dodge said that a chief concern about moving to another country was the quality of its health care and medical insurance. Mr. Dodge, who is 62, “has had a lot of heart trouble,” Ms. Dodge said, “and we’re to the point where we can’t afford health insurance.” While that may be a major problem in the U.S., Ms. Dodge said that medical procedures in Panama are inexpensive “and very good.” She said that Mr. Dodge has required two heart stents to open clogged arteries. One in Houston cost $52,000, and one in Panama cost $11,000, with good results. Ms. Dodge added that if either she or her husband ever had a debilitating disease like Alzheimer’s, she could hire someone to be there full time “to make food, feed and bathe you for $10 a day. If you need someone 24 hours, it’d be $30 a day,” she said. “That’s where this place really kicked in.”

Overseas retirement specialists said that while Panama is among the hottest foreign destinations, others are growing in popularity, too. Roger Gallo, publisher of EscapeArtist.com, a Web site about international relocation, said that Belize and Argentina have also attracted many American retirees in recent years. As for Panama, most of the recent American retirees gravitate to one of three regions: (1) Coastal areas near the Costa Rican border, like the Bocas del Toro archipelago. (2) The cooler mountain regions of the Chiriquí Province or Altos del María. And (3) Panama City, to a lesser extent. According to Bob Adams, who runs RetirementWave.com, a Web site for Americans looking to retire in foreign countries, “For $200,000 to $250,000 you can get a very nice condo or home with a beautiful ocean or mountain view.” The cost of living, too, can be significantly lower than in the U.S., Mr. Adams and others said. Restaurant meals are typically inexpensive, as is supermarket fare. Gas tops $3 a gallon. And, yes, the dollar is the Panamanian currency.

Links here and here.


The explosive idea of forcing Internet providers to record their customers’ online activities for future police access is gaining ground in state capitols and in Washington, D.C. Top Bush administration officials have endorsed the concept, and some members of the U.S. Congress have said federal legislation is needed to aid law enforcement investigations into child pornography. A bill is already pending in the Colorado State Senate. Mandatory data retention requirements worry privacy advocates because they permit police to obtain records of e-mail chatter, Web browsing or chat-room activity that normally would have been discarded after a few months. And some proposals would require providers to retain data that ordinarily never would have been kept at all.

We first reported last June that the U.S. Department of Justice was quietly shopping around the idea of legally required data retention. But it was the European Parliament’s vote in December for a data retention requirement that seems to have attracted broader interest inside the U.S. Internet providers generally offer three reasons why they are skeptical of mandatory data retention. (1) It is not clear who will be able to access records of someone’s online behavior. (2) It is not clear who will pay for the data warehouses to be constructed. And (3), it is not clear that police are hindered by current law as long as they move swiftly in investigations. “What we haven’t seen is any evidence where the data would have been helpful, where the problem was not caused by law enforcement taking too long when they knew a problem existed,” said Dave McClure, president of the U.S. Internet Industry Association, which represents small to midsize companies. McClure said that while data retention aficionados cite child pornography, the stored data would be open to any type of investigation – including, for instance, those focused on drug crimes, tax fraud, or terrorism prosecutions. “The agenda behind this doesn’t appear to be legitimate,” he said.

Proposals for mandatory data retention tend to adhere to one of two models, address storage or some kind of content storage. In the first model, businesses must record only which Internet address is assigned to a customer at a specific time. In the second, which is closer to what Europe adopted, more types of information must be retained – including telephone numbers dialed, contents of Web pages visited, recipients of e-mail messages and so on. Without saying what model he favored, Homeland Security Secretary Michael Chertoff broadly endorsed data retention at a meeting of a departmental privacy panel last month. Federal politicians also are being lobbied by state law enforcement agencies, which say strict data retention laws will help them investigate crimes that have taken place a while ago.

Link here.


For about 7 years we have been searching the world for a place to live an easier, less constricted lifestyle, longing to find a more basic and natural way of life than in our home country Holland. During those years we have visited other western countries like Australia, Canada, and the U.S. only to find out that the rules for immigration are so restrictive. To us this would have meant less freedom instead of more. In other EU countries like France, Spain, Italy the price of real estate has risen so much, bureaucracy has become so overbearing, and getting a renovation done is so complicated. Following the implementation of the Euro in our country, general life has become so much more expensive, that we felt even more we wanted to get out and find a place where you can still get a decent value for your money.

After watching a popular daily English emigration TV-show, “A Place in the Sun”, where people with similar ideas are followed on pursuing their dream abroad, we were intrigued by the beauty and prices of land and real estate in Eastern Europe, especially Slovakia. So off we went in November last year, not the best time but for research, but quite good considering there was less competition from other buyers. Slovakia is divided into 8 self-administered regions, each having its own capital – Bratislava, Trnava, Trencin, Nitra, Zilina (western Slovakia), Banska Bystrica (central Slovakia), Kosice and Presov (East). Public transport is excellent, if you want to get away from the car culture. Every little village has public bus service connecting it with the outside world. The northwestern part we did not like particularly, a bit gloomy and still too much a feel of the communist oppression for our taste. The high Tatra Mountains although amazingly beautiful, were too cold in winter and have a too short summer season for us.

Most of economic life is still concentrated in the Bratislava area, followed by other main western Slovak cities. These areas are also likely to be of most interest to a property investor. The reasons are simple – solid economy, growing investments (foreign as well as domestic), excellent infrastructure, favorable business environment. Along with relatively low unemployment and higher prosperity of the population makes Trnava, Zilina, and to a lesser extent Trencin and Nitra into exceptional markets for those looking for untapped opportunities. Prices are low with little competition and there are potentially high returns. Trnava and Zilina are perhaps no longer a secret tip in Slovakia, but are still practically unknown abroad.

After 3 weeks of traveling the country, feeling and trying to decide on what would be a good area for us, the southwest area around the town of Levice in the Nitra district, a relaxed small sized town, situated in the midst of wine fields and, to the north, mountains for skiing, walking, biking and general outdoor life. This area has a Mediterranean atmosphere, without the price tag. So you have the best of both worlds, with all-season holiday opportunities. Everywhere there are these rural markets with people selling their own grown produce: fruits, vegetables, mushrooms and nuts.

What really won our hearts over are the Spas, a naturally ingrained health tradition in Slovakia. Doctors here are highly trained, as are most people we met, since education was free for everybody in the communist days. Their approach to solving health problems is a natural and more sustainable one. Instead of chemical medication, one goes to a Spa and spends a few days or weeks depending on your health problem. Every Spa has a specialty, like skin, heart or respiratory problems. Prices which include room, board and treatments are very affordable indeed. After spending a day in a Spa we felt this would be a great country to settle.

The Slovak property market continues to offer some of Europe’s best opportunities with low prices and healthy and solid growth. And of one thing you can be sure. As virtually all property sales are sold to locals, and 95% are owner occupiers in their (family) apartment or house, so you will always be able to sell your property on to a Slovak buyer, ensuring a safe exit.

Link here.


Don’t worry about losing your credit card number, bank account or entire identity to some pimply little geek hunched in front of a computer in Minsk. Beat the problem with the technology that created it. Here is how to get started: Practice on your kids. 17 years ago I surrendered part of my identity to an innocent infant. Time passed, and she came into possession of me-too versions of my credit and ATM cards. This same individual, who used to chatter to me quite freely about almost everything, is now overseas. And she has grown very cagey about all things “personal”, which is to say, everything. She now has, in short, much in common with the guy in Minsk.

But money talks. With my financial software (Quicken) wired to my bank and credit card accounts, I can track this identity thief, in almost real time, as she traverses the coffee shops and train stations of Europe. I have stolen back my own identity. Yes, I know, it was mine all along – I have mounds of paper statements stuffed away somewhere to prove it. But near-instant access changes everything. And soon it will be truly instant. With two spendthrift boys following a few years behind their (comparatively) frugal sister, I am going to need a ticker scrolling family financial news in real time across the bottom of my screen. The bright side is that no one beyond those three is going to steal my credit card and get away with it for long. The fraud protection software in my bank’s infuriatingly stupid computer calls me every few weeks because it apparently finds my family’s shopping habits too weird to swallow. With a private financial wire, my own eyes and software do the same job much faster – and do it right.

What I still need is an equally transparent window on my account at the IRS. My Social Security number is surely the least secure – and most important – id number I own. I hand it out willy-nilly, because I have to. It is a key starting point in most identity frauds. And it could so easily be used to defeat them. Financial institutions link every individual interest-bearing account to a Social Security number and report the income earned to the IRS. Give me real-time access to just one innocuous piece of information – the exact number of financial accounts tied to my Social Security number – and I can take care of the rest. If the count ever changes when it should not, I will find a way to get people in authority to track the unauthorized change back to its source.

I face similar problems with other government-issue IDs, like my driver’s license. The identity thief knows that many government agencies are pretty casual about sticking a first set of unverified identification numbers into a computer to spawn a second set that makes a false identity that much more credible. I could take steps to protect myself if I got quick notice whenever any of my numbers – my Social Security number, for example – was fed into these second-tier ID factories. But I do not get any notice at all.

Link here.


A big cadre of American baby boomers looking to retire someplace sunny and cheap is fueling a land rush in the Riviera Maya, a small idyllic slice of Mexico’s Yucatan peninsula. But many land-seekers are encountering a variety of obstacles, including skyrocketing real-estate prices, confusing laws and con artists. Real estate prices have spiked so quickly – roughly doubling in the past five years – that unscrupulous promoters sometimes try to flip property they do not even own. The warnings against this potential trouble are everywhere. “This property is not for sale,” advises a hand-lettered placard posted in Spanish on a fenced-off beachfront lot, one of several near Tulum, about 80 miles south of Cancun. “Don’t be caught by surprise.”

The land rush is occurring at the beginning of a demographic tidal wave. With more than 70 million American baby boomers expected to retire in the next two decades, many without adequate pensions or health plans, some experts predict a vast migration to warmer – and cheaper – climates. Often, such buyers purchase a property 10 to 15 years before retirement, use it as a vacation home, and then eventually move there for most of the year. Developers increasingly are taking advantage of the trend, building gated communities, condominiums and golf courses. Mexico, already thought to be home to as many as one million American citizens, or roughly a quarter of all U.S. expatriates, is set to get the lion’s share of new arrivals. No place has boomed in recent years like the state of Quintana Roo in Mexico’s far southeast corner, anchored by the high-rise resort destination Cancun at one end and cosmopolitan Playa del Carmen an hour to the south. The hottest section is near Tulum, just down the beach from a massive Mayan fortress overlooking the Caribbean.

But Mexican real-estate law can be tough to navigate. Under the Mexican constitution, foreigners are allowed to own land outright anywhere except within 50 kilometers (31 miles) of the coastline or 100 kilometers from a national border. Within the so-called restricted zone, they can hold the property in a trust, or fideicomiso. While they do not officially own it, they retain the right to use it and sell it for a renewable 50-year period. In Tulum there is an additional real-estate wrinkle. Several miles of virgin beachfront are claimed by an ejido – a form of communal ownership that is fairly common in Mexico. The ejido is composed of impoverished peasants who were given the land years ago by the government, before anybody thought the property was worth anything. Now it could fetch tens of millions of dollars. Under current law, ejidos can be “privatized”, subdivided and sold, subject to unanimous approval by ejido members and time-consuming government approvals. Until that happens, foreigners are technically blocked from buying pieces of it, according to real-estate experts.

Unfortunately, anxious buyers sometimes do not want to wait. They find an individual ejido member who claims ownership of a parcel and buy it at a steep discount, on the promise that they will receive full title when a privatization is completed. Such arrangements have given rise to endless title disputes. Conflicts over title are not uncommon in Mexico. In 2000, some 200 American homeowners were evicted from their luxury development on the Baja coast, after a court ruled against the developer in a convoluted title dispute. But such hardships may be on the wane in much of Mexico, as the real-estate business matures. If you are interested in making a purchase, experts say there are a few basic steps to help avoid heartache.

Link here.


Many years ago I rented a small farm at the edge of a rural community. I did this so that my wife would have space for her horses, and so that I had a quiet place to study and write on my four days off every week. The farm had three acres planted in mature walnuts, and two pastures of three acres each. The place came with an old diesel tractor fitted with a disc harrow, and part of the rental agreement included using the tractor to maintain fire lanes and to generally control weeds. I did not intend to earn money on the place, although I sold a ton of walnuts every year. I did not buy the place, as it was not for sale. It only served to prove a point, namely that marginal farm land can be restored easily and cheaply with the application of informed stewardship. I would like to pass on this information to younger people who are searching for a way to hedge their bets on the future, people who are most likely urban-born and educated in high-tech professions.

For anybody who is interested, I can suggest specifics to be investigated. What one is looking for is ten to 20 acres of “worn out” flatland that is zoned farming and that is not deed restricted to million dollar estates, preferably outside any city limits. I would look for something that has been destroyed by a “horse ranch” that also comes with a decayed mobile home, a well, and a septic system. From such a wreck a young, healthy person can build a paradise. Since I became sensitive to the idea I have seen eligible properties in many areas of the U.S., including the southeast, middle-west, and northwest. What I see is land gone to weeds, and an old doublewide mobile home surrounded by junk cars and household garbage. Nobody wants to buy a mess like that! Right? One 5-acre parcel I saw went on the market at $35k, and sold for $13k. The buyers cleaned it up in a week, and then rebuilt the mobile home from the inside where nobody could see it – no permits, no inspectors, no interference. A buyer will never get a commercial mortgage on such distressed property, so the seller has to provide it, if they truly want to sell. Just be sure the water is running before you sign.

Can a small farm pay for itself? Yes. Here a person has to do their homework. Search for high-priced crops, like items sold in heath-food stores, holistic medicine, and gourmet foods. Even 10 acres in wine grapes will pay the mortgage. Hedgerows densely planted in fast growing trees can provide adequate firewood year after year with careful management. Please note that I am talking about a comfortable place to live in the country and a quiet restoration project with a fall-back business plan in mind. While I fully agree that gold is the best hedge against inflation, I think that fertile land is the ultimate hedge against social meltdown.

Look around. Rent a place. Try it out.

Links here and here.


One of the world’s larger diamond producers, Canada, may soon announce anti-money laundering and anti-terrorism financing diamond and jewelry industry rules that may well be more demanding than that of its southern neighbors. The Canadian government seems to hold rather exaggerated fears about the money laundering and terrorist financing risks associated with its diamond production. In a preamble to a rule-making consultation paper, the government states, “Police investigations indicate that organized crime groups are taking a growing interest in Canada’s expanding diamond industry. Unless preventative measures are taken, law enforcement authorities predict that the incidence of money laundering and terrorist activity financing in the sector will significantly increase in the future with the domestic expansion of the precious metals and jewelry industries.”

With reference to the appropriate FATF recommendations, the Canadian government proposes to subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) persons or entities in the business of selling or purchasing gold, diamonds and other precious stones, including jewelry. Similar to the rule-making process that was followed in the United States, the Canadian government sought views from the industry on specific elements of the proposal. By the time this deadline expired, only one industry player had clearly enunciated its thoughts – BHP Billiton Diamonds. BHP formulated a detailed position, that “encourages the adoption of provisions that are clearly aligned with those already implemented by Belgium, for both uniformity of coverage and implementation within the industry. However, having had more than 18 months of operating experience with the Belgian legislation, we believe that certain improvements can be made …”

BHP noted that in virtually every country in the world, the filing of a suspicious activity report is done (and kept) in greatest secrecy. In Belgium, government has taken action against certain diamond firms based on suspicious activity reports, without allowing the suspect party much room for defending its reputation or pleading its case. “[W]e believe that – save and except in the case where national security is at immediate and direct risk – an expedited appeal process should be established for access by those whose conduct or reputation may have been wrongly impugned by a report that was filed more as a defensive reaction to the legislation (out of fear of being prosecuted ‘after the fact’) or as a vendetta for past wrongs than because of a bona fide belief that the proposed transaction involved ‘suspicious’ circumstances.”

BHP VP Graham Nichols wryly implied that he believes the government overstated the “dangers” posed by the industry, when he remarks that “subject to further explanation by the Federal Government as to how the sale or trade in rough or polished diamonds has been used as a mechanism to facilitate money laundering (the financing of terrorist activities having being documented), we believe that all segments of the diamond industry engaged in sale and purchase transactions should be included in the PCMLTFA, from the sale of rough by producers and traders, through the cutting and polishing (manufacturing) processes, to the retail sale of loose stones and jewelry to the consuming public.” Other elements of BHP’s proposal included placing a monetary minimum on mandatory compliance with the PCMLTFA.

A fascinating feature of the company’s proposal is the suggestion that because compliance with the legislation will be new to most dealers impacted by the anti-money laundering legislation (and publication of companies’ failure to comply is proposed in the Canadian proposals), initial reporting may be unduly prolific until guidelines are established and the industry develops a greater familiarity with the legislation. This could lead to “precautionary reporting”, which ultimately could prove to contain unfounded suspicions. At present, the legislation prohibits any disclosure to others by the author of a report and provides for no right of appeal by the reported party. This raises the specter of ruined reputations and damaged business interests without the impugned party having either knowledge or recourse as regards the report, made worse by the proposed disclosure to other local government departments and international law enforcement agencies and “foreign partners”.

Link here.


Few spending choices in life are as smart as buying a home.

The above sentence was the lead in a Chicago Tribune new story last week. Not: “Few spending choices in life are as smart as buying something, anything, for your wife on your anniversary.” Or even, “Few spending choices in life are as smart as buying a home with a garage apartment for your mother-in-law.” No, the lead was brazen and to the point: The smartest thing a human being can do aside from installing a Tom Cruise and Katie Holmes news filter for the television to is buy a house. By implication, the dumbest thing you can do is rent, the only financial move more boneheaded than not listening to Jim Cramer.

The purpose of the reporter’s bold lead was to introduce a book titled The Automatic Millionaire Homeowner: A Powerful Plan to Finish Rich in Real Estate. The book is by David Boch, author of several similarly upbeat books on various topics, all of which ensure that the reader will “Finish Rich”. As his latest title suggests, Mr. Bach is a big fan of homeownership. He even tells the reporter, “People work their whole lives and save, save, save but buying a home and living in it will make them more money than anything else they do.” Either Mr. Bach has a lot a faith in real estate or very little faith in his readers’ investment acumen. He certainly has no faith in the slack-jawed renter, a person who rather would throw money down a toilet that he does not even own than take out a mortgage and start making money automatically.

But is the buy vs. rent decision really so clear cut? Not according to Dinkytown’s Rent vs. Buy calculator. This spiffy program incorporates mortgage payments, insurance, property taxes and even maintenance expenses. Here, the true cost of home ownership can be compared to the cost of renting. Dinkytown even accounts for money that the renter saves by making a smaller monthly payment and by not parting with a big downpayment. With the variables in place, Dinytown churns out a “break-even” period – the number of years you would have to live in a home before selling it and wind up spending the same of amount of money that you would have spent renting.

After playing with the calculator for a while, say long enough for darkness to preempt any lawn mowing, it is easy to see that the key to making the “buy” decision a slam dunk is the little slot for the home appreciation rate. A double digit appreciation rate can cover a lot of real estate commissions, property taxes and insurance. Just like Mr. Bach says, it makes you rich automatically.

But a slower appreciation rates makes the rent vs. buy decision a closer call. By comparing $1,000 a month rent to a $200,000 house that appreciates only 3% per year (with a 6.5% mortgage rate, a downpayment of about $15,500 and 3% property taxes), the breakeven period is 16 years. And that is with maintenance expenses of just $1,200 annually. A true amortization of the cost of new appliances, heating and a/c maintenance, plumber visits, and the latest power tools from Home Depot would likely put that figure much higher. In fact, if that maintenance figure doubles to $2,400 a year, the “buy” decision never breaks even during the life of the mortgage. In other words, the renter would be better off staying in the apartment than trying to get rich automatically. At least until the mother-in-law moves in.

Link here.


I have had occasion lately to look in on my old friends the Objectivists. I call them my friends because I grew up intellectually among them. I consider Ayn Rand the most important intellectual influence on my life, the influence who made all others possible and defined the limits in which they could function. As both a Catholic and an anarchist, however, I find that my Objectivist friends do not think much of the influences to which I have opened myself since those earlier days. Well, I cannot say I think much of the turns they have taken, either. I have been looking at their Websites – both the “official” one (the Ayn Rand Institute, the one that holds all the copyrights), and the most important of the “unofficial” ones (the Objectivist Center, the one that gets along with other libertarians). I find that they are both just too friendly with tyrants. I would like to imagine Ayn Rand turning over in her grave, but I fear that is wishful thinking.

There are all sorts of minor objections one can make to the Objectivists’ cozy attachment to the United State, from an article stating that concern with a national I.D. program was “trivial” to an explicit claim that the president was right to declare war on Afghanistan – even though he has no such authority, as limited-government constitutionalists should know. Those are all side issues. The main issue is rather that these old friends of mine just blank out when it comes to thinking about the United State. They are self-blinded to its nature. They think of it as “we”, that pronoun one finds all over their Websites when they talk about the so-called War on Terrorism. They identify with their government. They give it their moral sanction, and they are loyal to it.

The simple fact is that Objectivists and Randians have always been just a little in love with the United State, always willing to make excuses for it. One can perhaps give a naturalized immigrant, a refugee from communism, a pass here. But what about these others who owe this government nothing, who have taken no loyalty oaths? They can bluster all they want about the evil of compromise. But the U.S. government commits crimes and initiates violence and threatens to do so every single day against every one of them and against every other American. Period. It is no friend of liberty. It is no friend of reason. Nevertheless, the Objectivists have made their peace with it. They have made their peace with fascism.

Ayn Rand was right. There can be no compromise with evil. None whatever. And as Roy Childs wrote in an essay now forgotten, “The only logical attitude that any Objectivist should take toward the present government and constitution is one of uncompromising hostility. And since one does not sanction evil in any capacity, that means that every Objectivist should withdraw his sanction from the political establishment immediately and in every possible way.” The U.S. government can fight the terrorists perfectly well without the Objectivists’ rallying around its flag. It does not need them. The cause of justice does. So what is it going to be? Friendship with the cause of justice or with fascism? It looks, I am afraid, as if they have made their choice.

Link here.
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