Wealth International, Limited

July 2006 Selected Offshore News Clips

(Especially noteworthy articles’ headings highlighted in gold.)


U.S. “PURE TRUST” PROMOTERS JAILED FOR TAX FRAUD

Five people have been sentenced to lengthy prison terms for promoting a tax evasion scheme using so-called “pure trust organizations”, the Justice Department and IRS announced. On September 8, 2005, after a 6-week trial, a jury convicted the defendants of tax crimes in connection with their promotion of a tax evasion scheme through Innovative Financial Consultants (IFC), a consulting company based in Tempe, Arizona. The defendants advanced their scheme through several avenues, including domestic and offshore seminars, a promotional website, and an interactive telephone conference line.

According to evidence the government presented at trial, from 1996 through early 2003, the defendants received $4.7 million in fees from their sale of 2,000 “pure trusts”, falsely claiming that their customers could lawfully avoid income taxes by placing their income and assets into a trust. Evidence introduced at trial showed that IFC’s trusts enabled customers to retain the use and control of any income and assets they placed into their respective trusts, while making it difficult for the IRS to track the true ownership of assets or income assigned to the “trusts”. Trial evidence also showed that IFC was a prominent vendor with the “Institute of Global Prosperity” (IGP). According to the Department of Justice, at offshore seminars hosted by IGP, defendant Dennis Poseley promoted IFC’s trust schemes to “thousands of people”.

U.S. District Judge Mary Murguia found the tax fraud scheme caused, at a minimum, a loss to the federal Treasury of between $3 million and $7 million. Nancy Jardini, Chief of IRS Criminal Investigations, commented that, “Promoting abusive trusts and tax schemes for the purpose of committing tax evasion isn’t tax planning. It’s criminal activity.” Poseley, a co-founder of IFC, was given the harshest sentence, and will serve an 84 month jail term for conspiracy to defraud the government and willful failure to file tax returns. He was also fined $175,000. David Trepas, a consultant for IFC, was given a 60 month sentence after being found guilty of the same charges. Keith Priest, described as an IFC “trustee” and Patricia Ensign, a co-founder of IFC, were each given 18 month sentences, while Rachel McElhinney, another consultant at the firm, was given a 16 month jail term.

Link here.

AT&T: ALL YOUR DATA BELONG TO US – RESISTANCE IS FUTILE

AT&T has issued an updated privacy policy. The changes are significant because they appear to give the telecom giant more latitude when it comes to sharing customers’ personal data with government officials. The new policy says that AT&T – not customers – owns customers’ confidential information and can use it “to protect its legitimate business interests, safeguard others, or respond to legal process.” The policy also indicates that AT&T will track the viewing habits of customers of its new video service – something that cable and satellite providers are prohibited from doing.

Moreover, AT&T (formerly known as SBC) is requiring customers to agree to its updated privacy policy as a condition for service – a new move that legal experts say will reduce customers' recourse for any future data sharing with government authorities or others. The company’s policy overhaul follows recent reports that AT&T was one of several leading telecom providers that allowed the National Security Agency warrantless access to its voice and data networks as part of the Bush administration’s war on terror. “They’re obviously trying to avoid a hornet’s nest of consumer-protection lawsuits,” said Chris Hoofnagle, a San Francisco privacy consultant and former senior counsel at the Electronic Privacy Information Center. “They’ve written this new policy so broadly that they’ve given themselves maximum flexibility when it comes to disclosing customers’ records.”

AT&T is being sued by San Francisco’s Electronic Frontier Foundation for allegedly allowing the NSA to tap into the company’s data network, providing warrantless access to customers’ e-mails and Web browsing. AT&T is also believed to have participated in President Bush’s acknowledged domestic spying program, in which the NSA was given warrantless access to U.S. citizens’ phone calls. AT&T said in a statement last month that it “has a long history of vigorously protecting customer privacy” and that “our customers expect, deserve and receive nothing less than our fullest commitment to their privacy.” But ... the company has “an obligation to assist law enforcement and other government agencies responsible for protecting the public welfare, whether it be an individual or the security interests of the entire nation.”

Link here.

COME HOME TO NOVA SCOTIA BY THE SEA

The beautiful Province of Nova Scotia spilled from the mouth of a glacier thousands of years ago, a huge gem deposited just far enough away from the other Provinces on the “mainland” to say we are “unique” in our own right, but not so far as to be inaccessible, by land, sea or air. We are surrounded by the great Atlantic Ocean, caressed by the Southern Gulf Stream and soothed by prevailing Westerly winds during the summer months. It seems we are hidden from dangerous tornadoes and hurricanes, no excessive weather of any sort, even the winters are becoming milder. Our air remains fresh and clear without the pall of pollution. Our spring fed groundwater comes up delicious from ordinary dug wells.

There are no dangerous animals. And no dangerous bugs. We have harmless wood ticks and so far, no lime disease-carrying deer ticks, but certainly we cannot avoid the pesky mosquitoes, black flies and no-see-ems, although I must tell you, my friends are using the new mosquito magnet machines and absolutely swear by them - the newest contest up at the lake is who has the most bugs at the annual weigh-in at the end of summer.

The County of Shelburne on the South East coast (where I live), is actually shaped like a wedge of cake, frosted on the edges with powder white sand beaches, sprinkled with boulders and ledges, some the size of small homes , and garnished with beautiful greenery from the various trees that grow abundantly throughout the area. We have acres of protected lands for all to see. From these areas come the six major rivers of Shelburne County, spilling into 32 fresh water lakes and numerous brooks, where lurk, some say, the granddaddy of all trout. There are eskers (ridges formed out of ancient stream beds) all over Nova Scotia. And then we have our coastline here in Shelburne Coounty … breathtaking beauty, the fresh cool feel of sweet salt air on your skin that is absolutely invigorating, surf sounds that sooth, long walks on pristine white sand beaches. The locals are friendly and helpful – proud Atlantic Canadians, most of whose ancestors were as they are today – commercial fisherman, boat builders, woodsman, a kind and gentle people who go down to the sea and into the forests to retrieve and bring back the most delectable goodies.

Can you buy property here? Of course. Can you live here? Yes you can, non-resident Canadians, 6 months of the year, and immigration to qualified persons. Sadly however there is only on thing you cannot do here in Nova Scotia. You cannot leave with your heart intact.

Link here.

PANAMA COURTS REAL ESTATE SHOPPERS WITH LOW PRICES

Add Panama to the list of nearby nations seeking buyers in South Florida for its real estate. Some half-dozen Panamanian exhibitors attended the recent International Real Estate Congress and Expo in Coral Gables, offering luxury condominiums in high-rise towers and other properties to buyers seeking lower-cost alternatives to South Florida. High on their target list: U.S. retirees and Baby Boomers soon to retire, who might enjoy a home 2 1/2 hours by jet from Miami in a country that uses the U.S. dollar and where English is widely spoken.

The pitch comes amid a boom in construction and real estate in Panama, spurred partly by tax incentives the Central American nation now offers to foreign investors. For example, overseas buyers of new properties for $200,000 and up can obtain resident visas and tax exemptions, Panamanian executives said at the expo. Panama City now plans at least nine high-rise towers, each with at least 56 floors. Plus construction is to start soon on a 101-story tower billed as the tallest in Latin America, said Aracelli de Jaen, vice president of sales for Panama’s Tribaldos Real Estate Corp.

Prices pale next to South Florida – with a three-bedroom, waterfront apartment in a top Panama City neighborhood available for less than $160,000, Jaen said. Panama’s outreach comes as more Americans choose to retire in nearby nations where their dollars can stretch farther, including Mexico and Costa Rica. It also coincides with a push by fellow Florida neighbors, including the Dominican Republic and the Bahamas, to sell vacation homes to U.S. Hispanics and boat owners.

Link here.

REALITY CHECK

The Fed is confused. Washington policymakers are confused. The markets trade confused. And pundits certainly speak as if they are confused. Truth be told, the current fixation on every word and nuance from the FOMC has become a farce – a mere heedless distraction from the critical financial/economic issues of the day. Clearly, the Fed lacks a policy/analytical framework other than mindlessly reciting its commitment to “fight inflation”. It is institutional “brain” has been corroded by an extended period of concurrent relatively stable “core” inflation and extraordinary asset inflation, not to mention years of Greenspan obfuscation.

The Federal Reserve is simply not institutionally prepared for the unfolding challenging environment, although the same could be said for policymakers and the public generally. The Fed is left floundering in the shallowest of central banking doctrine, bereft of any substance as to the key underlying forces driving the economy, the markets and, increasingly, inflationary pressures. At the same time, the Fed’s benign neglect of credit bubble excesses is buttressed by the view from the White House to the Halls of Congress that domestic and international growth are the only avenues for rectifying imbalances. It is quite dangerous dogma, yet the markets are happy to play along.

The Bernanke Fed today plays a dangerous game of sheep in wolf’s clothing, talking tough on (“core”) inflation while praying it can stay soft on excess. Highly speculative marketplaces at home and abroad savor in the gamesmanship. Markets recognize that the Fed will now talk the talk when speculative excess pushes the envelope, although they remain confident that the Fed will obediently retreat when markets come under sufficient pressure. Participants simply wait patiently for a signal from the Fed – as they believe they received last week – and get right back to their business.

I do read commentary that the Fed and global central bankers have been “withdrawing liquidity”. I do not see it. For starters, the vast majority of global liquidity these days emanates from private-sector debt growth and securities leveraging. Keep in mind that credit is growing at double-digit rates across the globe. The Fed’s balance sheet has become virtually irrelevant to the global liquidity-creation process, and the Fed has not been selling securities to reduce liquidity in the system (and they would have to sell a large amount today to offset record Credit growth!). For central banks to actually “tighten” policy would require an overall global rate environment sufficiently restrictive to induce private borrowing and leveraging restraint. I am still waiting.

The Fed does, however, hold (held?) a potentially powerful “stick” over the marketplace. It maintains the capacity to surprise the markets with more aggressive rate hikes, which would likely entail significant credit market disruption and speculator de-leveraging. At times, this threat can be quite effective in dousing greed and instilling some fear in frothy global equity and commodities markets. But I believe it is important to differentiate this dynamic from the actual tightening of general liquidity conditions for markets and credit systems. Credit markets are much better indicators of the prevailing liquidity backdrop than equities. Not only might the Fed’s potential “stick” not cajole lenders and credit market participants into restraint, it may very well even embolden them with the view that market turbulence will hold the timid Bernanke Fed at bay. Furthermore, the potential “stick” will lose much of its effectiveness over time. The stick loses all its punch come the perception that it will not be used. And the sophisticated players are definitely keen to Dr. Bernanke’s well-documented repugnance to “bubble popping”, and they must today relish that initial missteps have spurred the new chairman to kowtow to the markets.

So, if there were ever a time to step back, take a deep breath, and do a reality check – it is right now. We all read and hear assertions that the Fed is overshooting and inflation is not a serious issue today – and certainly will not be a problem when the economy slows (that for some time has been right around the corner when housing markets and consumption weaken). This is a myopic view certainly not atypical in the face of changing environments and key inflection points. It does, however, completely disregard a growing list of potentially momentous developments with respect to the future inflationary backdrop.

I suggest that prospects for an unexpected upsurge in intermediate-term inflation risk is high due to an extraordinary confluence of major developments, including (1) unfolding constraints on supply and rising global demand for energy and other commodities, (2) spiraling healthcare costs, especially for baby-boomer retirees, (3) various wars, including the ongoing “war on terror”, (4) untenable government liabilities, and (5) myriad issues related to global warming – to mention just a few. Unless the credit system buckles, there are endless sources of demand for finance waiting in the wings, regardless of the housing market. It is the confluence of developments I hope readers will ponder.

When I contemplate the future, I see a U.S. economy that will have no option other than massive restructuring. As an economy, it appears today that we will have little alternative than to consume significantly less oil, produce much more of various types of energy domestically, use energy much more efficiently and cleanly, consume fewer imports, and produce more manufactured goods for domestic consumption and export. This will entail a radical shift away from the service sector to the more arduous (and surely less “productive”) task of producing real things. Again, this is all a very tall order, even without devastating natural and man-made disasters. I would expect such a huge undertaking to entail great dislocation and pack quite an inflationary punch. The new patterns of the flow of finance will strain limited resources and greatly disturb prevailing pricing dynamics. There will be no alternative to massive government deficits at all levels. In such a scenario, we should expect the Fed and Congress to take extraordinary measure to underpin the credit market on the grounds of national security, openly stated or otherwise.

I have read the argument that credit bubbles always end in deflation. This is factually inaccurate, and we can look to Argentina and Indonesia as recent examples of bursting bubbles and the inflationary havoc wrought by collapsing currencies. Any thoughtful prognostication with respect to the future course of inflation must incorporate a view of the dollar’s prospects, as well as global currencies generally. Currency values are always relative, and we have already witnessed over the past two years how inflating (devaluing) foreign currencies can stabilize the nominal value of the dollar. We have also seen how concerted currency debasement can have a striking impact on oil and commodity prices. With a structurally maladjusted, energy glutton, and import-dependent economy, along with an overheated credit system and massive prospective government deficits, one can easily envision the dollar as a structurally weak currency for years to come. And I certainly expect China and Asia to face similar inflationary pressures, ensuring an inflationary bias for imported energy and goods prices for some time.

The least unfavorable course today would be to impose a meaningful slowdown on the highly imbalanced and overheated U.S. economy, setting the stage for a major redeployment of resources. Ironically, a U.S. recession is today seen as absolutely unacceptable, with policymakers (including our new Treasury Secretary) espousing the notion that the U.S. and our trading partners can grow our way out of imbalances. We need Washington to step back – do a reality check – and come to the recognition that the current global financial and economic boom is very much the problem and not the solution. I won’t hold my breath. I also will not be lining up to buy U.S. bonds anytime soon.

Link here (scroll down to last subheading in page content body).

IS THERE A “BEST” JURISDICTION FOR AN OFFSHORE ASSET PROTECTION TRUST?

Trusts have existed for hundreds of years, yet remain one of the best ways to achieve asset protection. From the time the first English knight conveyed property to a trusted friend for the benefit of his wife and children, trusts have preserved assets from family squabbles, spendthrift descendants and legal claims. Nearly 1,000 years later, trusts still provide highly effective asset protection. Virtually any property can be conveyed to a trust, including cash, securities, real estate, shares in private companies, artwork, jewelry, etc. Generally speaking, the beneficiaries’ creditors cannot reach a properly configured trust’s assets. But, a number of jurisdictions have enacted favorable laws that augment their wealth preservation possibilities. In a nutshell, that is why we recommend offshore asset protection trusts, or OAPTs.

Before discussing how to evaluate an offshore jurisdiction for an OAPT, let us review the nuts and bolts of any trust relationship. And a relationship is the operative word. Unlike a corporation, foundation, limited liability company or other structure, a trust does not have a separate legal identity. It is instead a contract between three parties [details here].

You can form a valid trust in any jurisdiction that inherited English law. That gives you nearly 60 jurisdictions to choose from—any of England’s current or former colonies. A few civil law countries, including Panama and Liechtenstein, also have laws authorizing the formation of trusts. Most of these jurisdictions have trust laws similar to those in England. That presents a potential problem, because when two countries’ laws are similar, it is possible one country’s judgments will be honored in the other country. Thus the first and most important requirement in any trust jurisdiction you might be considering is, make sure the trust jurisdiction does not honor foreign judgments against assets transferred to a valid trust formed there. There may be exceptions if the assets are derived from fraud or other criminal activity, but otherwise, the assets should be protected. That is the whole point of an OAPT!

Considering this factor and six others, you may find that dozens of jurisdictions may serve your purposes when considering an offshore trust. The easiest way to sort through the choices is to eliminate those jurisdictions that have attributes you do not like. The bottom line is that there is no “best” jurisdiction for an offshore trust. Depending on your specific objectives, many different ones may be suitable. Assuming your chosen offshore jurisdiction meets your requirements, it is more important to select the proper trustee for your OAPT rather than select a “perfect” trust domicile.

Offshore trusts are not asset protection panaceas. Problems may arise if you retain too much control over your trust or if you settle the trust after a liability arises. In these situations, there is a risk that a judge (especially in the U.S.) may find you in contempt and throw you in jail until you find a way to repatriate the trust’s funds for your creditors’ benefit. In addition, OAPTs generally cannot reduce your tax liabilities, and you should not count on them to “hide” assets. If you are sued, assume your opponent’s lawyer will find your OAPT.

Link here.

IN A GLOBAL ECONOMY YOU SHOULD INVEST GLOBALLY

If you are like most investors, you have allocated too little money to foreign stocks. Half of the world’s market capitalization belongs to companies overseas. Yet Greenwich Associates, the financial services consultant, calculates that 401(k) plans have 5% invested overseas. People may have good reason for keeping money close to home, or maybe they are just narrow-minded. Either way, they recently have missed out. Over the past three years the Morgan Stanley Capital International EAFE Index has had an annualized total return of 21% versus 10% for the S&P 500.

Okay, putting half your equity money abroad may be a bit much, but an allocation of 15% to 30% is generally recommended by the experts we have talked to. Some of your money will go into slow-growing but relatively safe economies (like Britain’s) and some into fast-growing but shaky ones (like Brazil’s). Do not overdo the emerging markets portion – 5% of your overall portfolio is about right. It is unlikely that a developed market will double in price over the course of a year, as did India and Brazil over the past 12 months, but developed markets are likely to deliver less pain when world markets undergo a correction such as the one this past spring.

Should you hedge against currency risks? Probably not. You can eliminate some risk in the short term by hedging the currency (for example, taking a short position in the euro when you buy a French stock), but you will lose the opportunity to profit from the weak dollar.

There are three ways to own foreign equities. Easiest is to have a mutual fund or exchange-traded fund do the buying. ETFs and index funds run up roughly half a percentage point in overhead costs annually. Actively managed international mutual funds cost three times that. Next easiest is to buy foreign shares via ADRs. You will not have to convert dollars into euros or convert euro dividends back into dollars. Hardest, but sometimes very rewarding, is to buy foreign shares that are not available as ADRs. You will lose a percentage point or two to transaction costs (between currency markups and sometimes two different brokerage commissions).

“We like to buy these markets when there’s little or no interest in them – when they’ve blown up, had a financial crisis, when people are shutting down these offices, swearing that they’ll never invest money in these countries again. In 1998, when Asia blew up, those were great times to buy,” says Citigroup’s Chief Global Equity Strategist Ajay Kapur. If his sentiment is right, this would be a good time to venture abroad.

Link here.

BETTING AGAINST THE DOLLAR

The dollar is weak, definitely not good news if you are traveling overseas. The euro is hovering at 52-week highs. Investors, however, can ride this trend to their advantage. The ever-canny Warren Buffett has taken huge bets against the dollar, both by shorting the currency in futures contracts and by buying foreign stocks. For a while last year the antidollar play looked dumb, but this year it looks clever.

The case made by the dollar bears hangs on our balance-of-payments deficit ($809 billion over the last four quarters). When foreigners who are now stockpiling dollar assets like Treasury notes tire of them, so goes the argument, they will unload dollars, and dollars will sink like stones in the currency markets. Emerging Asian economies are under pressure from trade partners to allow their currencies to appreciate. The incoming Treasury secretary, Henry Paulson, seems to embrace a weaker dollar, to make American goods more competitive abroad.

You do not have to be a billionaire to speculate against our currency. Frank H. Randall Jr., 77, invests to preserve something for his grandchildren. He has put $80,000, or 10% of his portfolio, into foreign currencies. Says Randall, a former electronics engineer and two-term Colorado state legislator, “The U.S. is printing money at the speed of light, and it’s scary. I worry more about the risk our country is taking than the risk I am taking.” Randall has divided his antidollar portfolio among certificates of deposit denominated in the Thailand baht, in the Norwegian krone and in a blend of currencies (the euro, the British pound and the Australian and New Zealand dollars).

EverBank Financial of Jacksonville, Florida offers depositors CDs in 15 currencies and overnight accounts in 18. Do not expect a handsome interest rate. Five of the most promising foreign CDs, say EverBank officials, have interest rates below the 5% you can get on a one-year CD in the U.S.. In fact, the Swiss CD offers no interest because that small, perennially neutral European nation, a traditional haven of capital and an icon of stability, is seen as the epitome of safety. EverBank has gathered up $900 million for its foreign currency accounts, which are protected by deposit insurance. EverBank’s spread of 0.75% is less than one percentage point from the midpoint of the institutional bid/ask spread for your purchase and selling prices.

Tax treatment? Your net interest is taxable as ordinary income. Gains or losses on converting the CD back into dollars are capital gains and losses, eligible for the 15% federal rate if the CD is held for at least a year and a day. (EverBank’s one-year CD does qualify as long term.)

Charles Butler, president of EverBank World Markets, is a fan of the Swiss franc. It has climbed 5% against the dollar since April and historically does well during dollar panic: It was up 20% in 2002, a post-September 11 reaction. The Swedish krona one-year CD carries a yield of 0.75%. But inflation in Sweden is only 1.6%, and the central bank is determined to keep it low. If you want a speculative play, buy Mexican pesos for a yield of 4.8%, at some risk that this historically shaky currency will suffer a collapse before you can get your dollars back.

Aside from certificates of deposit, there are several mutual funds that track multiple currencies. They run up annual expenses of 1.19% to 1.30% of assets. For those seeking Asian exposure, an alternative is currency notes, trading like a preferred stock on the American Exchange. Called principal-protected notes, these things hold a melange of the South Korean won, Thai baht, Indian rupee and Taiwan dollar. If you have a lot of bucks, consider holding currency futures on the Chicago Mercantile Exchange. The British pound contract, for example, is a bet on $114,000 worth of the currency. The round-trip commission on a single contract might be $7.20, the bid/ask spread another $12.50. Gains on the future are taxed at a blended rate of a maximum 23%. For the best liquidity, David Schulz of the Chicago Merc recommends selecting a maturity three months out.

Beware of currency charlatans. Since 2001 the Commodity Futures Trading Commission has won $300 million in restitution and civil penalties from 90 enforcement actions brought against hundreds of firms, owners and employees for defrauding 27,000 customers in forex schemes.

Link here.

THE U.S. EXPAT BILLION DOLLAR LOOPHOLE MAY BE LIVING ON BORROWED TIME

What do Getty Oil heir Tara Getty, Campbell Soup heir John Dorrance III, former Star-Kist Foods Chairman Joseph Bogdanovich, former Wheelabrator-Frye Chairman Michael Dingman, investment manger J. Mark Mobius, Templeton Group founder Sir John Templeton, Carnival Cruise Lines founder Ted Arison and Robert Miller all have in common? They have all taken advantage of the so-called the “billionaire’s loophole”. Here is how it works. You acquire foreign citizenship … get a second passport and set up residence overseas … then you give up your U.S. citizenship … and as a result, you save billions of dollars in future U.S. income, capital gains, gift taxes and estate tax.

The ultra-rich can save millions or even billions of dollars in future taxes by giving up their U.S. citizenships. E.g., if an Irish citizen, who lives outside of Ireland, dies with a $1 billion dollar estate, there is zero gift tax and estate taxes for all bequests outside of Ireland. But for an American citizen, living outside of the U.S., who dies with a $1 billion dollar estate, his heirs would have to pay a maximum combined U.S. gift and estate tax of more than $450 million. And that is true if the American had not spent one day in the U.S. in the last 40 years. The arithmetic is almost as compelling for individuals with smaller estates. A U.S. citizen with a $20 million estate could save over $8 million in estate and gift taxes by giving up his citizenship.

Until the mid-1990s, the billionaire’s loophole went pretty much unnoticed. But in 1994, Forbes made it famous in a seminal article entitled “The New Refugees”. Congress responded with outrage. The image of unimaginably wealthy former U.S. citizens living tax-free in tropical paradises was (and remains) an irresistible populist target. The result has been a series of increasingly stringent laws that put real teeth into rules penalizing U.S. citizens who give up their U.S. citizenship for “tax motivated” reasons. The most extraordinary law – on the books but never officially invoked – bars former U.S. citizens from ever re-entering the United States, if it is deemed they relinquished their citizenship for tax reasons.

Current anti-expatriation tax provisions are relatively easy to avoid. Persons giving up U.S. citizenship after June 3, 2004 are deemed to do so for tax avoidance purposes if they have assets of more than $2 million or have paid more than $620,000 in federal income taxes in the five years before expatriation. The law also applies to long-term U.S. residents who have lived in the U.S. more than eight years. Tax motivated expatriates must pay income tax on U.S.-source income and income “effectively connected” with a U.S. trade or business for 10 years after giving their U.S. citizenship or their long term residence. U.S. property remains subject to estate tax for this period as well. But by moving property offshore before giving up U.S. citizenship, the tax consequences of a tax-motivated expatriation are not that severe.

Because the anti-expatriation rules are not difficult to circumvent, there have been periodic calls to make them stricter. One proposal introduced in Congress every year since 1995 is for an exit tax on the unrealized worldwide gains of tax-motivated expatriates. On two occasions, most recently May 2006, exit tax legislation passed in the Senate, but faltered in the House of Representatives. Such a tax would affect many more people than just a handful of wealthy Americans who relinquish their U.S. citizenship. It would also affect tens of thousands of wealthy U.S. residents who are not U.S. citizens. An exit tax would accelerate the emigration of these persons if they have not already spent more than eight years in the U.S., and discourage wealthy foreigners from long-term residence.

The U.S. Constitution guarantees rights to end U.S. citizenship, to live and travel abroad freely and to acquire citizenship from other nations. Every one of these rights have been affirmed by the U.S. Supreme Court. An exit tax also harkens back to the notorious departure tax of Nazi Germany, in which wealthy Jews were stripped of their property before being allowed to leave, and of similar laws in the Soviet Union and apartheid-era South Africa. Instead of penalizing the most successful Americans, Congress should fix the problems with U.S. tax law – punitive estate tax rates and pervasive double taxation of savings and investment – that motivate them to take the drastic step of giving up their U.S. citizenship. But don’t hold your breath. The November 2006 mid-term elections are likely to result in a more liberal Congress with even less sympathy toward wealth and prosperity than the one that nearly passed an exit tax in May.

Link here.

THE TAX HAVEN THAT TODAY’S BRITISH SUPER RICH CITY COMMUTERS CALL HOME

A new generation of Britain’s super-rich are moving to the Riviera to avoid the Inland Revenue, largely thanks to tax loopholes which allow them to commute to work from Monaco. Such well-known residents as the recently-knighted retailer Philip Green and the Easyjet founder Stelios Haji-Ioannou have been joined in this tax haven by a new class of astonishingly-wealthy hedge fund managers, property developers and internet entrepreneurs. The Guardian has traced more than 650 directors of British companies who give their current address as Monaco, and the top 10 residents there with UK interests alone control family assets worth more than £13.5 billion. “It’s very commutable. It’s as easy as living in Birmingham and working in London,” says Roger Munns, who sells £3 million-plus apartments to those referred to in the City as “the Monaco boys”.

His sales territory is a corner of the principality reclaimed from the sea at Fontvieille, where new apartments are christened with reassuringly English estate-agents’ nomenclature. The Maseratis and Mercedes convertibles cruise by blocks called “Seaside Plaza”, while the rows of London-based yachts in the small harbour have names which tell their own story of modern English attitudes – “Sledge Hammer” and “New Flash”. Around the corner is the Columbus hotel, UK-owned, where visiting Britons sit in the bar discussing property prices, personal tax accountants and the relative merits of Monaco schools for their children versus those in the rival tax haven of Guernsey. Most of the snatches of mobile phone conversations overheard on the streets of Fontvieille are in English. One of Seaside Plaza’s key attractions is that it is next to the heliport, where helicopters shuttle British businessmen along the coast to Nice airport in a mere seven minutes.

The crucial tax loophole, dating from the steamship age, allows non-residents 90 days a year in Britain, plus the day of travel out and the day of travel back. This means businessmen can fly in on Monday morning, work four days, fly out on Thursday night, and do this for most weeks in the year without breaking the rules. The tax authorities have also allowed non-residents, since 1993, to keep a UK house without losing their status. Coupled with the laptop and a mobile phone, this makes it easy to run a British business from Monaco.

Traditionally, elderly Britons used to sell up their firms and retire to Monte Carlo with the proceeds, which were free of capital gains tax in return for a minimum of five years residence spent playing golf and lazing in the sun. Many still do this. But now they are being joined by the 30- and 40-somethings who treat the crowded principality more as a British suburb. There is zero income tax to pay on their dividends, and the Sûreté Publique will hand out a residence permit in return for evidence of a hefty deposit in a Monaco bank, and a willingness to pay sky-high prices for property.

Link here.

MEDICAL TOURISM

Why have routine (and not so routine) medical and dental services performed in the U.S. when you can have them done cheaper elsewhere and get a free vacation out of it to boot? “Medical Tourism India” is a developing concept whereby people from world over visit India for their medical and relaxation needs. The most common treatments are heart surgery, knee transplant, cosmetic surgery, and dental care. The reason India is a favorable destination is because of its infrastructure and technology, which is in par with those of the USA, U.K., and Europe. India has some of the best hospitals and treatment centers in the world and the best facilities.

When you can fly to India or Thailand and get world-class care for 20% of the U.S. cost, saving $80,000 on a heart operation, something has to give. That something is U.S. prices for goods and services. How much longer will it be before some HMOs require someone to fly to India or Thailand for treatment? Better yet will be an HMO that offers reduced prices for those willing to do so. Obviously, if you are in an accident and need services immediately, there is no choice. But on major dental work or elective procedures, or even scheduled heart transplants, for those in the know it may be foolish to have those procedures performed in the U.S.

Link here.

LOOKING FOR HAPPINESS? TRY VANUATU!

The inhabitants of the Pacific islands making up Vanuatu are apparently the happiest in the world, according to a new study by the New Economics Foundation. The NEF’s “Happy Planet Index”, which was launched for the first time last week, seeks to move beyond the usual country ratings based on national income, measured by GDP, to produce a picture of the progress of nations based on the amount of resources they use, and the length and happiness of people’s lives. The Happy Planet Index covers 178 countries by multiplying life expectancy by life satisfaction, and dividing it by environmental impact in each country, including carbon emissions. The index “addresses the relative success or failure of countries in giving their citizens a good life,” commented Andrew Simms, NEF’s Policy Director.

The results are surprising. While the countries of Central America dominate the top positions in the index – nations which are perhaps most commonly associated with war and political instability – the rich nations of the G8 are placed well down the rankings. However, it is Vanuatu which takes top spot in the index. According to the NEF, the 200,000 residents of the 80 or so islands that make up Vanuatu are the happiest in the world because they “can live long, happy lives without using more than their fair share of the earth’s resources.” This despite the fact that the average GDP per head is just $2,900 – far below that of the wealthiest countries.

The country can also be considered as something of a tax paradise. Vanuatu does not levy tax on personal incomes, corporate profits, dividends or capital gains. There are also no withholding taxes or sales taxes. Following Vanuatu in the top five were Colombia, Costa Rica, Dominica and Panama. By contrast, the highest ranked G8 country is Italy at 66th in the index. Germany is 81st, Japan 95th, the United Kingdom 108th, Canada 111th, France 129th, the U.S. 150th, and Russia 172nd. Switzerland, with its small ecological “footprint”, was the happiest European country. In Asia, Vietnam scored highest and was placed at number 12 in the index. Singapore was ranked lowest at 131. Perhaps unsurprisingly, seven of the 10 countries at the bottom of the index are located in Africa, with Zimbabwe placed at the foot of the ranking.

Link here.

INSIDER SECRETS TO INVESTING IN REAL ESTATE IN NICARAGUA

The word is is out. “Nicaragua is the new Costa Rica” but with prices 35-55% lower than its southern neighbor. Nicaragua is well and truly bouncing back from its troubled and often misunderstood past and beginning to transform into a sought after investment and tourism destination. Misconceptions still persist, but in many ways that only increases the opportunity that Nicaragua offers. Nicaragua’s democratically elected government is showing a great capacity to reform in line with its commitment to a free-market economy. The country is booming and tourism is now the #1 industry, increasing by over 19% in 2005 after a record-breaking year in 2004. There is a real buzz in the air for this land of opportunity. Whether you are looking for a retirement or vacation destination, a place to start a business or a place to invest for the future, Nicaragua is definitely worth considering.

How much is good real estate information worth? Market knowledge based on fact and base trends, rather than exaggeration and hype (in both directions) can make the difference between a good investment and a great one. The aim of this article is to capture the essence of the successful real estate investor in Nicaragua. We have consolidated the experience of hundreds of investors and identified seven success strategies for successful real estate investing in Nicaragua. Many of the principles and steps highlighted in this article will also hold true in other investment destinations and contexts.

  1. Understand the link between tourism and real estate. There is strong relationship between leisure and vocational markets and the market for second homes and retirement homes. The areas attracting the most tourism are also generating the greatest levels of real estate activity.
  2. Know where you are in a property cycle. Nicaragua has seen significant price rises in the past few years. These price rises indicate that Nicaragua is now on the map as an investment destination, the positive price trend has started, but we are only just seeing the beginnings of a “second wave” of investors – the pre-retirement and retirement market.
  3. Follow trends not events. The bulk of foreign investment into the real estate and tourism sectors in Nicaragua is focused on the south-western part of the country. Prices may be lower in the northern part of the coastline – but for a reason – and it is important for investors to take this into account before they make a property purchase.
  4. Build a good network. A solid piece of advice is to buy only what you see. Make up your mind on what you think the inherent value is of the property that you are looking at is. Do not factor in the “new coastal road” the “new airport” the “new Marriott” into the price. Certainly not if you are investing for the short term.
  5. Do due diligence on everything. More specifically, retain competent legal representation and take out title insurance.
  6. Invest with a confidence, develop with a conscience. When you arrive in Nicaragua the impression that you get is of a warm hearted nation that is welcoming to international visitors. In order for this positive feeling to endure into the future, local Nicaraguan also need to benefit from the real estate and tourism activity that is taking place in the country.
  7. Become and expert in investing in real estate in Nicaragua … before you invest.
Link here.

NEW SENATE BILL ATTACKS INTERNATIONAL TAX PROPOSALS

U.S. Senators James Inhofe (R-Oklahama) and Ben Nelson (D-Nebraska) have introduced a bipartisan bill to stop the United Nations, the OECD and other international organizations from taxing U.S. citizens and corporations or otherwise interfering with American tax policy. The bill, entitled the Protection Against United Nations Taxation Act of 2006 (S. 3633) has 32 original cosponsors and would withhold 20% of the U.S. subsidy to the UN, the OECD and other international organizations if they develop, advocate, endorse, promote, or publicize any proposal “concerning the imposition of a tax or fee on any United States national or any income earned in the United States in order to raise revenue for the United Nations, any foreign government, or any international organization.”

At the end of June, the House of Representatives passed an appropriations bill which included similar wording. The “Fiscal Year 2007 Foreign Operations, Export Financing And Related Programs Appropriations Bill”, HR 5522, is one of a number of appropriations (spending) bills making their way through the Congress as implementation of next year’s budget continues, and may not survive in its present form. The bill also applies only for the budget year in question. Says Congressman Ron Paul, (R-Texas), whose wording found its way into the bill, “Fortunately, the House of Representatives last week passed my language in the 2007 Foreign Operations bill. But that only protects us for another year. Given the stated goals of the UN, it would be foolish to believe the idea of a global tax will go away.”

Andrew Moylan, Government Affairs Manager, National Taxpayers Union, said, “Americans should not be forced to pay a global tax to a non-sovereign entity. With the federal government set to take $2.4 trillion in taxes out of the economy next year, American families can ill afford to pay an additional tax to an international organization that has proven itself a poor steward of their tax dollars in the past.”

Link here.

THE SUMMER OF 1914

With Hezbollah’s entry into the war between Israel and Hamas, Fourth Generation war has taken another developmental step forward. For the first time, a non-state entity has gone to war with a state not by waging an insurgency against a state invader, but across an international boundary. Again we see how those who define 4GW simply as insurgency are looking at only a small part of the picture. I think the stakes in the Israel-Hezbollah-Hamas war are significantly higher than most observers understand. If Hezbollah and Hamas win – and winning just means surviving, given that Israel’s objective is to destroy both entities – a powerful state will have suffered a new kind of defeat, again, a defeat across at least one international boundary and maybe two, depending on how one defines Gaza’s border. The balance between states and 4GW forces will be altered world-wide, and not to a trivial degree.

So far, Hezbollah is winning. As Arab states stood silent and helpless before Israel’s assault on Hamas, another non-state entity, Hezbollah, intervened to relieve the siege of Gaza by opening a second front. Its initial move, a brilliantly conducted raid that killed eight Israeli soldiers and captured two for the loss of one Hezbollah fighter, showed once again that Hezbollah can take on state armed forces on even terms (the Chechens are the only other 4GW force to demonstrate that capability). In both respects, the contrast with Arab states will be clear on the street, pushing the Arab and larger Islamic worlds further away from the state.

Hezbollah then pulled off two more firsts. It responded effectively to terror bombing from the air, which states think is their monopoly, with rocket barrages that reached deep into Israel. Once can only imagine how this resonated world-wide with people who are often bombed but can never bomb back. And, it attacked another state monopoly, navies, by hitting and disabling a blockading Israeli warship with something (I question Israel’s claim that the weapon was a C-801 anti-ship missile, which should have sunk a small missile corvette). Hezbollah’s leadership has promised more such surprises.

In response, Israel has had to hit not Hezbollah but the state of Lebanon. Israel’s Prime Minister, Ehud Olmert, referring to the initial Hezbollah raid, said, “I want to make clear that the event this morning is not a terror act but the act of a sovereign state that attacked Israel without reason.” This is an obvious fiction, as the state of Lebanon had nothing to do with the raid and cannot control Hezbollah. But it is a necessary fiction for Israel, because otherwise who can it respond against? Again we see the power 4GW entities obtain by hiding within states but not being a state. What comes next? In the short run, the question may be which runs out first, Hezbollah’s supply of rockets or the world’s patience with Israel bombing the helpless state of Lebanon.

The critical question is whether the current fighting spreads region-wide. It is possible that Hezbollah attacked Israel not only to relieve the siege of Hamas in Gaza but also to pre-empt an Israeli strike on Iran. If Israel does attack Iran, the “summer of 1914” analogy may play itself out, catastrophically for the U.S. As I have warned many times, war with Iran (Iran has publicly stated it would regard an Israeli attack as an attack by the U.S. also) could easily cost America the army it now has deployed in Iraq. It would almost certainly send shock waves through an already fragile world economy, potentially bringing that house of cards down. A Bush administration that has sneered at “stability” could find out just how high the price of instability can be.

Link here.

CEO OF BET ON SPORTS ARRESTED IN U.S. WHILE IN TRANSIT FROM LONDON TO COSTA RICA

When the U.S. House of Representatives overwhelmingly passed a bill cracking down on Internet gambling last week, David Carruthers, CEO of online gaming company Bet On Sports, was one of the most outspoken critics of the proposed law. The 49-year-old British executive has more immediate problems to worry about. Federal agents arrested Carruthers at Dallas-Fort Worth International Airport as he made his way from the company’s offices in London to Costa Rica.

As part of a wide-ranging probe of what the American Gaming Association says is a $12 billion online gambling industry, U.S. Attorney Catherine Hanaway unsealed a 22-count indictment charging racketeering, conspiracy and fraud against Carruthers, 10 others and four companies. A warrant was sworn out for the arrest of 47-year-old company founder Gary Kaplan. U.S. District Judge Catherine Perry also approved the government’s request to bar Bet On Sports from accepting bets from this country and forcing it to refund money to U.S. account holders. The FBI has ordered four phone companies to shut off service to the company.

The arrest of Carruthers, a longtime British racing industry executive who joined Bet On Sports in 2000, is setting off alarm bells in Europe and the Caribbean, where the offshore casino industry is based. Bet On Sports asked for its stock to be suspended on the London Stock Exchange. Shares of British gaming stocks, such as industry leader Party Gaming, fell Tuesday in heavy trading, wiping out more than $1 billion in value. “The No. 1 topic at every board meeting today is ‘Am I next?’” says Internet gambling attorney Lawrence Walters. “There’s a high degree of concern now that the government has made it clear they think they can prosecute foreign citizens at foreign corporations.”

The House bill is the first shot in an attack by the federal government on a foreign industry that considers itself beyond the reach of U.S. law. An estimated 23 million Americans play casino games such as poker and blackjack online, according to the Poker Players Alliance. The Justice Department says online gambling is illegal under the Federal Wire Act of 1961. While authorities have not pursued individual bettors playing poker on their home or office PC, they have gone after some gaming executives. Despite generating half or more of their revenue from U.S. customers, online gaming companies maintain that U.S. laws do not apply to them because they are located in places where online gaming is legal, such as England, Costa Rica and Gibraltar.

U.S. Attorney Hanaway promised the indictments are “but one step in a series of actions designed to punish and seize the profits of individuals who disregard federal and state laws” during a news conference. That means top casino executives will have to worry about personal exposure if they try to catch a connecting flight in the USA, as did Carruthers, says Walters.

A broad coalition of sports leagues, including the NFL and NCAA, and family rights groups supports the bill. Supporters add the proposed law would stop Internet gambling from spreading to cellphones and other new mediums. But critics charge the government would be better off regulating and taxing the online gambling industry. Their biggest complaint: The current bill provides exceptions for state-regulated lotteries such as Powerball and horse racing while cracking down on casino games. “This bill’s advocates proclaim the immorality of online gaming and shout it will destroy our society – unless you’re betting on horse races,” declared U.S. Rep. Shelley Berkley, D-Nevada, on the floor of the House during the bill debate.

Link here.

Gambling companies fear widening of U.S. investigators’ net.

British-based internet gambling companies were urgently consulting their lawyers about the risk of being targeted by U.S. prosecutors in the wake of the arrest in America of the chief executive of BetOnSports. The mounting concern comes as the indictment raises the possibility that U.S. investigators may spread their net wider than those already named. The document says that the defendants “and others, known and unknown” constituted a gambling enterprise that conducted unlawful computer and telephone-based betting. Another British company, Sports on the Internet Ltd, is described in the indictment as a “front for or supporter of the [illegal gambling] enterprise … whose funding and services benefited the enterprise”.

Julian Knowles, an extradition expert at Matrix Chambers, told The Times that Britain would refuse to send suspects to America for breaking anti-gambling laws, but might extradite them if accused of other illegal activities emerging from investigations. Evading taxes, for example, might result in extradition. A spokeswoman for the Home Office said that Britain would consider requests for extradition based on crimes arising from U.S. investigations into illegal gambling.

Link here.

IS THE USA BANKRUPT?

Is the USA, asks Laurence J. Kotlikoff, professor of economics at Boston University, “at the end of its resources, exhausted, stripped bare, destitute, bereft, wanting in property, or wrecked in consequence of failure to pay its creditors?” Or, abandoning the Oxford English Dictionary for Ray Charles, are Americans “busted, broke … no bread … I mean like nuthin’?” Answering his own question in the affirmative, Professor Kotlikoff explains, “This partial equilibrium analysis strongly suggests that the U.S. government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds.”

We do not know what a partial equilibrium analysis is. But since it supports our general view, we ask no questions. Instead, we merely probe more deeply into the report for elaboration and amusement. “Unless the United State moves quickly to fundamentally change and restrain its fiscal behavior, bankruptcy will become a foregone conclusion.” This does not particularly help us. We have no doubt that the nation will be bankrupt. What caught our eye was the assertion that it is already broke. But that, it turns out, depends on what you mean by the word “broke”.

“The proper way to consider a country’s solvency,” goes on the professor, “is to examine the life-time fiscal burdens facing current and future generations. If these burdens exceed the resources of those generations, get close to doing so, or simply get so high as to preclude their full collection, the country’s policy will be unsustainable and can constitute or lead to national bankruptcy. Does the United States fit this bill? No one knows for sure, but there are strong reasons to believe the United States may be going broke.”

Among the strongest reasons is a study of the total net “fiscal gap” that the country faces. This is the present value of the difference between the government’s future income and expenses – calculated using optimistic assumptions and not including any contingent liabilities. These are the basics – interest payments, government operations, social security, and drug money. The figure is $65.9 trillion – or about 500% of the nation’s GDP. There is no chance that the gap will be closed. Kotlikoff has a sense of humor on this point. He notes that the government would have to cut discretionary expenses by 143%. Or, personal and corporate income taxes could be doubled. Just in case the reader missed the joke, he includes a chart that tells us that people at the upper end of the income scale already pay more than 50% of their incomes in taxes.

With a problem this big staring them in the face, you might think the custodians of the nation’s financial health would be staying up late at night trying to come up with solutions. If you thought that, you would be an idiot. It is late in the cycle, dear reader. Patriots can no longer save the republic. It no longer exists. Instead, they spend their time trying to get what they can out of a decaying empire. Paul O’Neill was the first U.S. Treasury secretary to bother to calculate the “fiscal gap”. George W. Bush fired him for it and proceeded to sign every spending bill – no matter how preposterous – to come his way. For its part, Congress continues to add to the fiscal gap every day it is in session, which leads Kotlikoff to conclude: “The most likely scenario is that the government will start printing money to pay its bills. This could lead to spiraling expectations of higher inflation, with the process eventuating in hyperinflation.”

This is not the only reason to buy gold, but it is one of them.

Link here.

SINGAPORE REAL ESTATE – GET THERE BEFORE THE “GANG” ARRIVES

Hot investment money is pouring into mainland China’s biggest and most well-known cities. Shanghai has been a haven for foreigners buying commercial properties. Buoyed by rising property values, they are now also purchasing luxury residential real estate, mostly for rental purposes. Today the money is coming quickly from U.S., European, and Indian investors. But Chinese speculation in the Shanghai, Hangzhou and Beijing real estate markets is over. Oddly enough, while hot Western money is flowing into the People’s Republic of China (PRC), Chinese money for real estate purchases is flowing out. For anyone who wants to make money in the Asian real estate market, it is important now to watch closely where the mainland Chinese themselves buy and where trends likely will lead them.

For the last three years mainland Chinese who have returned to the PRC from the U.S. are brokering property purchases in America. Despite the distance and the hassle to get there, wealthy Chinese still see property in the U.S. as a solid investment that will return dividends over the long run. The U.S. market is a no-brainer for the Chinese investor. It is safe, transparent, mature, and it has endless choices based on your preferences. But, with the Hong Kong investment boom in Vancouver long over, no spot in North America, outside of the traditional California markets, has proved a highly concentrated “settling” point for Chinese investors’ cash.

Chinese speculators, who currently are peaking their run in Southwest China’s Sichuan Province, however, are another story. Anyone who knows anything about real estate in the PRC has heard of the “Wenzhou Bang”. In this case “bang” (pronounced in Mandarin Chinese with a short vowel ‘a’) benefits as much in meaning from its sound as the English word “BANG!” as from its Chinese meaning of “gang”. Indeed, the “Wenzhou Gang” causes all kinds of smoke and noise when it arrives in and leaves a city. This amorphous group is from one of the historically wealthiest cities in all of mainland China – wealth that never really disappeared when the Communist government took over in 1949.

The “Wenzhou Gang” demonstrated a pattern where they woul descend upon a city and begin buying up multiple available properties, driving real estate prices through the roof. Some would take their profits and leave quickly, while others would hold properties long enough to profit from downstream speculation generated by those following the Gang’s activity. The “Gang” has blasted its way already through the PRC’s most obvious and attractive Hangzhou, Shanghai, and Beijing markets. However, the mainland Chinese government has been busy trying to fight this domestic speculation phenomenon in China’s property markets. In addition, the PRC government is doing what it can to stop the hot foreign money flowing into Chinese real estate. Social pressure is forcing the government seriously to move quickly toward new property tax laws that will take the profit out of speculative ventures such as flipping properties in periods of less than five years. Unrest among the middle class in China as well as the poor continues to grow as they see that property, which was not even allowed to be in private hands 15 about years ago, is now already unaffordable to those of modest means.

It is obvious that Chinese money will have to flow elsewhere since the early glory days of real estate speculation in China are coming to an end for all. Moreover, rich people in China have never felt safe or completely at ease. So where will the “Wenzhou Gang” go? Although they have not yet figured it out, the hottest prospect for fast growth in Asian real estate available to mainland Chinese money is Singapore. And, if the “Gang” is reading the papers, the tip-off came for them in a Saturday, May 27th, when the Singapore government proudly announced that the Las Vegas Sands Corporation won the hotly contested contract to build a casino in a new “integrated resort” project on Marina Bay. From there, the “Gang” does not have to look far to see that all the international fundamentals are in place for a quick profit in a Singapore residential property boom. If Western investors want to reap the rewards from Singapore’s solid fundamentals that point to a significant chance for even stronger mainland Chinese investment, they will have to arrive now – before the “Gang” gets there!

Link here.

LIVING WELL IS THE BEST REVENGE

I have had it with the rat race. I am tired of scrambling to make a buck, tired of working for The Man. America is the unending hamster wheel to oblivion, where apparently you win if you die while in possession of a plasma TV, the fattest mortgage or the bitchinest Beemer ever. There has got to be a place left in the world where a man can be reflective rather than reactive, where mellow is the coin of the realm. Like Blake, I would like to kiss a little of the joy as it flies before shuffling off this mortal coil. And I do not want to have to be laden like a Spanish galleon to do it.

I used to believe that my salvation lay in France. Ah, the French … now they know how to live. Those wonderful cafes, those enticingly short work weeks, their joie de vivre. Wie Gott in Frankreich, “like God in France,” is no empty German phrase. Or, maybe, if France did not work out, I could transform myself into an indolent Spaniard or a drowsy Italian. A friend of mine, recently returned from Croatia, tells me the Dalmatian Coast is a bastion of easy living just now. But these are just foolish, romantic notions. If the European idyll ever existed at all, it exists no longer. The imperatives of the global economy, extolled and fueled by amped-up capitalists everywhere, put the kibosh on that.

So, where to go? Vanuatu. This South Pacific archipelago, lying due west of Fiji, is, according to the Happy Planet Index, the happiest country on Earth. The criteria used for determining happiness are what appeal to those of us with a normal human heart rate and relatively modest expectations in life. The index, compiled by the progressive New Economics Foundation (sort of an anti-Cato Institute), established its criteria for ranking 178 countries using classic economics – the ratio of benefits to costs. Nations were ranked by their general satisfaction with life, life expectancy and their environmental footprint. The latter refers to the amount of land required to sustain the population while adequately handling the attendant energy consumption. By that measuring stick, says the NEF, Vanuatu comes out on top. The U.S., leaving a size-16 environmental footprint wherever it treads, ranked 150th. And La Belle France fared little better, coming in at 129th. (Germany, interestingly enough, placed 81st, so perhaps they should consider redrafting the phrase.)

The index is a call for re-evaluating the way we live, for a reassessment of our core values. It is an indictment of mindless consumerism, and high time for that. Asked why he thought Vanuatu is the happiest country on Earth, Marke Lowen of Vanuatu Online said, “People are generally happy here because they are very satisfied with very little. This is not a consumer-driven society. Life here is about community and family and goodwill to other people. It’s a place where you don’t worry too much.” It sounds a little bit like Gauguin’s Tahiti, before the tourists swarmed in. We can all decamp to Vanuatu, which would no doubt thrill the islanders and totally screw up paradise. Or we can heed the words of Lowen, stay where we are, and learn to be satisfied with a little bit less.

Link here.

VOICE ENCRYPTION MAY DRAW U.S. SCRUTINY

Philip R. Zimmermann wants to protect online privacy. Who could object to that? He has found out once already. Trained as a computer scientist, he developed a program in 1991 called Pretty Good Privacy, or PGP, for scrambling and unscrambling e-mail messages. It won a following among privacy rights advocates and human rights groups working overseas – and a 3-year federal criminal investigation into whether he had violated export restrictions on cryptographic software. The case was dropped in 1996, and Mr. Zimmermann, who lives in Menlo Park, California, started PGP Inc. to sell his software commercially.

Now he is again inviting government scrutiny. In May he released a free Windows software program, Zfone, that encrypts a computer-to-computer voice conversation so both parties can be confident that no one is listening in. It became available earlier to Macintosh and Linux users of the system known as Voice-over-Internet protocol, or VoIP. What sets Zfone apart from comparable systems is that it does not require a web of computers to hold the keys, or long numbers, used in most encryption schemes. Instead, it performs the key exchange inside the digital voice channel while the call is being set up, so no third party has the keys.

In the wake of 9-11, there were calls for the government to institute new barriers to cryptography, to avoid its use in communications by enemies of the U.S. Easily accessible cryptography for Internet calling may intensify that debate. “I’m afraid it will put front and center an issue that had been resolved in the individual’s favor in the 1990’s,” said James X. Dempsey, policy director for the Center for Democracy and Technology, a Washington-based public policy group. The Federal Communications Commission has begun adopting regulations that would force Internet service providers and VoIP companies to adopt the technology that permits law enforcement officials to monitor conventional telephone calls. But for now, at least, F.C.C. regulation exempts programs that operate directly between computers, not through a hub.

Zfone can automatically encrypt any call between users of freely available VoIP software programs like X-Lite, Gizmo or SJphone. It can be downloaded at philzimmermann.com. The system does not work with Skype, which uses its own encryption scheme. German officials have claimed they had technology for intercepting and decrypting Skype phone calls, according to Anthony M. Rutkowski, vice president for regulatory affairs and standards for VeriSign, a company that offers security for Internet and phone operations. Mr. Zimmermann said he had not yet tested Zfone’s compatibility with Vonage, another popular VoIP service.

Link here. Zfone FAQ page here.

THE MYTH OF THE RULE OF LAW

In his novel 1984, George Orwell created a nightmare vision of the future in which an all-powerful Party exerts totalitarian control over society by forcing the citizens to master the technique of “doublethink”, which requires them “to hold simultaneously two opinions which cancel out, knowing them to be contradictory and believing in both of them.” Doublethink is usually regarded as a wonderful literary device, but, of course, one with no referent in reality since it is obviously impossible to believe both halves of a contradiction. In my opinion, this assessment is quite mistaken. Not only is it possible for people to believe both halves of a contradiction, it is something they do every day with no apparent difficulty.

Consider, for example, people’s beliefs about the legal system. They are obviously aware that the law is inherently political. The common complaint that members of Congress are corrupt, or are legislating for their own political benefit or for that of special interest groups demonstrates that citizens understand that the laws under which they live are a product of political forces rather than the embodiment of the ideal of justice. Further, as evidenced by the political battles fought over the recent nominations to the Supreme Court, the public obviously believes that the ideology of the people who serve as judges influences the way the law is interpreted.

This, however, in no way prevents people from simultaneously regarding the law as a body of definite, politically neutral rules amenable to an impartial application which all citizens have a moral obligation to obey. Thus, they seem both surprised and dismayed to learn that the Clean Air Act might have been written, not to produce the cleanest air possible, but to favor the economic interests of the miners of dirty-burning West Virginia coal (West Virginia coincidentally being the home of Robert Byrd, who was then chairman of the Senate Appropriations Committee) over those of the miners of cleaner-burning western coal. And, when the Supreme Court hands down a controversial ruling on a subject such as abortion, civil rights, or capital punishment, then, like Louis in Casablanca, the public is shocked, shocked, to find that the Court may have let political considerations influence its decision. The frequent condemnation of the judiciary for “undemocratic judicial activism” or “unprincipled social engineering” is merely a reflection of the public’s belief that the law consists of a set of definite and consistent “neutral principles” which the judge is obligated to apply in an objective manner, free from the influence of his or her personal political and moral beliefs.

I believe that, much as Orwell suggested, it is the public’s ability to engage in this type of doublethink, to be aware that the law is inherently political in character and yet believe it to be an objective embodiment of justice, that accounts for the amazing degree to which the federal government is able to exert its control over a supposedly free people. I would argue that this ability to maintain the belief that the law is a body of consistent, politically neutral rules that can be objectively applied by judges in the face of overwhelming evidence to the contrary, goes a long way toward explaining citizens’ acquiescence in the steady erosion of their fundamental freedoms. To show that this is, in fact, the case, I would like to direct your attention to the fiction which resides at the heart of this incongruity and allows the public to engage in the requisite doublethink without cognitive discomfort: the myth of the rule of law.

I refer to the myth of the rule of law because, to the extent this phrase suggests a society in which all are governed by neutral rules that are objectively applied by judges, there is no such thing. As a myth, however, the concept of the rule of law is both powerful and dangerous. Its power derives from its great emotive appeal. The rule of law suggests an absence of arbitrariness, an absence of the worst abuses of tyranny. The slogan “America is a government of laws and not people” suggests fair and impartial rule rather than subjugation to human whim. This is an image that can command both the allegiance and affection of the citizenry. After all, who would not be in favor of the rule of law if the only alternative were arbitrary rule? And if citizens really believe that they are being governed by fair and impartial rules and that the only alternative is subjection to personal rule, they will be much more likely to support the state as it progressively curtails their freedom.

In this Article, I will argue that this is a false dichotomy. Specifically, I intend to establish three points: 1) there is no such thing as a government of law and not people, 2) the belief that there is serves to maintain public support for society’s power structure, and 3) the establishment of a truly free society requires the abandonment of the myth of the rule of law.

Link here.

“JUST WONDERING” DEPARTMENT: GREENSPAN WAR CRIMES?

Here is an intriguing question: Could Greenspan (and the Bank of Japan) be at least partially responsible for the commodity boom as well as the liquidity bubble? Could the commodity boom (or bubble if you like) be a direct function of the liquidity bubble?

Oil at $70, $3 copper, and sky-high base metals are a function of massive developing world demand at the margins. Developing world demand for crude at the margins has also stimulated geopolitical tensions by putting pricing power in the hands of bad guys (Iran, Venezuela, etc.). Developing world demand was artificially juiced by the Bretton Woods II arrangement, i.e., China et. al would not have ramped up capex investment in factories, roads, machinery, plants etc. nearly as quickly if not for the gaping maw of the American consumer willing to consume all the “stuff” China produced.

The housing bubble was essentially a giant ponzi scheme that masked the true role of foreign creditors. Consumers, feeling richer and fatter on real estate, bought more stuff with their inflated gains, not realizing they were actually spending borrowed money. In turn, stocks gained on fat corporate profits, ostensibly traced back to a flush consumer, but actually are traceable further back to borrowed money.

So, look what happens when you remove the initial Greenspan/BoJ stimulus from the equation. No willy-nilly consumer spending ramp up. No mercantilist debt ramp-up masked by ponzi housing profits. No massive capex build-up in Asia and elsewhere to respond to artificial demand .No $75 oil, $3 copper … no raging commodities boom. What if developing world demand had ramped up more slowly and naturally in the absence of massive liquidity stimulus? Could all (or most) of these painfully sharp imbalances have been avoided, including $3 copper and $75 oil?

If China’s growth in recent years has been drastically above trend due to the mercantilist-driven, liquidity-fueled Bretton Woods II arrangement, would that explain Asia’s perplexing disconnect between thriving export economies and struggling domestic economies? What happens, then, in the aftermath of liquidity withdrawal? Does China go back to trend with a thud, with ugly nationalist antics (saber rattling at Taiwan, etc.) to follow?

And – last but not least – if Iran Kicks off World War III, and Iran’s clout is a product of $75 oil, and $75 oil is Easy Al’s indirect doing, does that mean we can prosecute Greenspan for war crimes?

Link here.

CRAVEN IMAGE: THE SENATE BOWS TO IMPERIAL POWER

Well, that did not take long. Two weeks ago we wrote here that the “lockstep, lickspittle” U.S. Congress would scurry to give their approval to the dictatorial powers asserted by President George W. Bush after the Supreme Court struck down those claims in the Hamdan case earlier this month. And lo and behold, last week Republican Senator Arlen Specter introduced a bill that would not only confirm Bush’s unrestrained, unconstitutional one-man rule – it would augment it, exalting the Dear Leader to even greater authoritarian heights.

A more slavish piece of work – and a more abject surrender of Congressional authority – can scarcely be imagined. And the implications are profound. Besides providing what amount to ex post facto cover for Bush’s clearly criminal domestic surveillance programs, the measure is a stinging confirmation that there is no crime the Bushists can commit that the craven rubberstamps in Congress will not countenance. But the reverberations go even further. Specter’s bill also represents a message from the American Establishment, giving its imprimatur to the codification of presidential dictatorship as the new form of government in the United States, replacing the constitutional republic established in 1789.

Link here.

THE CROATIAN ADVANTAGE

When I decided to move to Croatia early in 2005, my friends and business associates were shocked. “Where is it?” … “Isn’t there a war going on there?” … “Why would you start a business there?” At the time, my short answer was that the war had been over for 10 years and the Croatian coast where I was going was a beautiful place with a mild, Mediterranean climate that was located in the heart of Europe. After living here a year, registering a company, obtaining a business visa and operating my consulting and real estate firm, I am able to provide a much more complete response. Croatia is an emerging economy with tremendous prospects for growth because of its location, its anticipated accession to the EU by the end of the decade and its stable government that is working hard to encourage foreign investment.

The Austrian Foreign Trade Office recently surveyed foreign investors in Croatia and found that 61% of them listed the little republic’s location in the center of Europe as the primary motivation for their investing here. My business is located in Istria, a heart-shaped peninsula smaller than the state of Rhode Island. The local airport in Pula has non-stop flights to London’s Gatwick, Amsterdam, Munich, Edinburgh and Glasgow, many of them on low-cost carriers. The seaport of Rijeka at the northeast corner of Istria is undergoing a $266 million makeover financed by the World Bank that will turn it into a world class port of the caliber of Baltimore or Barcelona and the Adriatic’s “Gateway” to Europe. Istria is also a top tourist destination. Visitors from around the world are drawn by the azure blue Adriatic that is clearer than the water around the Bahamas, and unique towns like Pula with its Roman ampitheatre, the Venetian-flavored seaside village of Rovinj, and medieval Motovun surrounded by ancient walls and perched atop a cone-shaped hill.

Natural beauty and central location are also driving the real estate market. London’s Telegraph reported in March that Istria is the “regional hotspot, the fastest growing part of Croatia in both property and tourism.” These location-driven advantages are propelling economic growth that is in turn producing more optimism and investment. The Croatian economy grew at a solid 4.3% in 2005 and spurted to 6% in the first quarter of this year. Foreign investment increased by 36% in 2005 compared to 2004, and the Austrian survey of foreign investors would predict even greater growth in the future. More than 70% expect business to improve in the coming year.

Link here.

U.S. SENATORS SET SIGHTS ON “OFFSHORE TAX ABUSE”

IRS chief Mark W. Everson was called to testify before a Senate committee which is studying the issue of offshore tax havens and their impact on the U.S. federal tax system. The Permanent Subcommittee on Investigations hearing, entitled “Tax Haven Abuses: The Enablers, The Tools & Secrecy”, is the latest in a line of hearings by the committee on the subject of corporate and individual tax evasion through offshore-based entities and tax planning schemes. The hearing will present case histories on the use of offshore trusts and corporations to circumvent U.S. tax, securities and anti-money laundering laws. In addition to Everson, witnesses will include securities firms, banks, law firms, U.S. taxpayers, a trust protector, and tax and securities experts.

The committee believes that such “offshore abuses” drain billions of dollars every year from the U.S. Treasury and undermine the tax system and law enforcement efforts. Sen. Norm Coleman (R-Minnesota) and Sen. Carl Levin (D-Michigan), the chairman and ranking member of the committee respectively, have tried repeatedly to get an anti-offshore bill through the Senate to combat what they term “abusive tax shelters and uncooperative offshore tax havens used by businesses and individuals to dodge payment of their U.S. taxes.”

Although a 2004 bill was unsuccessful, some of its provisions made it into law by being attached to other pieces of legislation, including stronger penalties for failing to report interests in foreign financial accounts, civil fines for tax practitioners such as accountants and attorneys who violate specified standards of practice, stronger penalties for failing to register or provide to the IRS required information regarding a potentially abusive tax shelter, and stronger penalties for failing to maintain a list of participants in potentially abusive tax shelters.

The latest hearing has been welcomed by the U.S. branch of the Tax Justice Network, a pressure group established in 2003 which campaigns against corporate and individual offshore tax avoidance. “We think that the U.S. Congress and the President should take steps to stop the use by Americans of secret companies and bank accounts set up in tax havens to facilitate evasion of U.S. taxes,” the group has argued.

Link here.

Offshore tax cheats called out of control.

So many superrich Americans evade taxes using offshore accounts that law enforcement cannot control the growing misconduct, according to a Senate report that provides the most detailed look ever at high-level tax schemes. Among the billionaires cited in the report are the owner of the New York Jets football team – Robert Wood Johnson IV, the producer of the “Mighty Morphin Power Rangers” children’s show – Haim Saban, and two Texas businessmen, Charles and Sam Wyly, who the Center for Public Integrity found in 2000 were the ninth-largest contributors to President Bush.

Mr. Johnson and Mr. Saban, who are portrayed as victims in the report, are scheduled to testify before the Senate Permanent Investigations subcommittee. They are expected to say that professional advisers assured them their deals to avoid taxes were more likely lawful than not. They are now settling with the IRS. The Wyly brothers told the committee that they would invoke their Fifth Amendment right against self-incrimination and thus were not called to testify. The report characterizes them as active participants in tax schemes. Cheating now equals about 7 cents out of each dollar paid by honest taxpayers, as much as $70 billion a year, the report estimated. “The universe of offshore tax cheating has become so large that no one, not even the United States government, could go after all of it,” said Senator Carl Levin, the Michigan Democrat whose staff ran the investigation.

The report details how the Quellos Group, a tax shelter boutique based in Seattle, “concocted a tax shelter” using $9.6 billion “worth of fake securities transactions that were used to generate billions of dollars of fake capital losses.” The investigation, which took 18 months, involved 74 subpoenas, 80 interviews and the collection of more than two million documents, and yet Senator Levin said “the six cases we present are just examples, just a pinhole look.”

The 400-page report recommends eight changes, some of them aimed at going after the law and accounting firms, banks and investment advisers that the report says enable tax schemes that rely on complexity, secrecy and compartmentalizing information so that advisers can claim they had no idea that the overall transaction was a fraud. “We need to significantly strengthen the aiding and abetting statutes to get at the lawyers and accountants and other advisers who enable this cheating,” Senator Levin said, adding that “we need major changes in law to stop the use of tax havens” by tax cheats.

It also recommends new rules that strip away the underlying legal presumptions that make offshore tax havens like the Cayman Islands, Nevis, the Isle of Man and Panama attractive places for Americans to hide assets and income from the IRS. Senator Levin said the law “should assume that any transaction in a tax haven is a sham.” He said that during the investigation he grew angry as he learned how common cheating had become and how existing government rules aided tax cheats. “I get incensed by people who use tax havens to not pay their taxes while the average guy has to pay his taxes because they are taken out of his pay before he gets it,” he said.

Link here.

Senate “offshore” hearing called “one-sided”.

The U.S. Senate pursued its crusade against “offshore” at a hearing this week, threatening savage reprisals against people who use low-tax jurisdictions for tax-planning purposes. But the Center for Freedom and Prosperity called the hearing “entirely one-sided”. Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs billed its hearing “Tax Haven Abuses: The Enablers, the Tools, and Secrecy”. The Sub-Committee heard from IRS Commissioner Mark Everson along with a range of promoters and clients of tax-planning schemes that had been judged to be abusive. Senators Coleman and Levin presented a 400-page report that they said would “expose how offshore and U.S. professionals are helping U.S. citizens move assets offshore and dodge US taxes, adding to tax haven abuses that cost U.S. taxpayers an estimated $40 to $70 billion dollars each year.”

The Sub-Committee’s recommendations include:

Andrew F. Quinlan of the Center for Freedom and Prosperity commented, “Companies have a fiduciary obligation to shareholders to minimize their tax burdens. Because of the punitive tax rates and pervasive double-taxation of capital in the U.S. tax code, low-tax jurisdictions often are excellent platforms for economic activity. So-called tax havens also play a valuable role by encouraging better tax policy in the rest of the world. Policies designed to penalize low-tax jurisdictions would primarily benefit Europe’s uncompetitive, high-tax welfare states.”

Veronique de Rugy of the American Enterprise Institute said, “In part because of the liberalizing impact of tax havens and tax competition, personal income tax rates have dropped by 23 percentage points since 1980 and corporate tax rates have dropped by about 19 percentage points. These pro-growth reforms will be jeopardized if profligate politicians undermine low-tax jurisdictions and succeed in creating a tax cartel. An ‘OPEC for politicians’ will lead to bigger and more wasteful government.”

Link here.

IS THE BEACH PARTY OVER FOR THE “FLORIDA OF EUROPE”?

The signs at the Málaga, Spain airport say it all. “England is closer than you think,” reads an airline banner advertising one-way air fares of €55. “Come and see us, we speak YOUR language,” urges the billboard on a real estate agency kiosk planted in front of the baggage carrousel. While passengers in shorts and flip-flops wheel away their suitcases, a smiling woman hands out glossy brochures of white villas overlooking the ninth hole. Outside, rental cars speed toward beaches lined with white condo towers, British-style pubs and spas specializing in plastic surgery. Or they head for the arid mountains, where ubiquitous red cranes announce the coming of thousands of vacation homes.

About two million residents of the EU are expected to retire to Southern Europe in the next 10 years, said Gilberto Jordan, a Portuguese developer and member of the Resort Development committee of the Urban Land Institute, a nonprofit research organization. If past patterns are any guide, many of them will be retiring to Spain. With its seductive combination of warm climate, good hospitals for hip replacements, an abundance of housing and clever promotion, the country is leading other sunny European destinations, like Portugal, Italy and Greece, in the race to capture Europe’s aging baby boomers, who are traveling more – and spending more on themselves – than their parents did.

About 600,000 EU citizens are officially listed as permanent Spanish residents – one of the largest intra-EU migrations on record. Roughly 1.7 million – mostly Germans and British – own a second home in Spain, according to Live in Spain, an association of Spanish residential developers. Many of them are not seeking return on investment, but a gentler life once they retire. As they warm up, the Spanish coastline is looking increasingly like Miami and other seaside boom towns, the result of a construction frenzy over the past few years. An average of 600,000 new homes have been built each year since 2003 – triple the rate for the rest of Europe. Most of the new properties sit along tourist-packed regions such as Valencia, Cádiz, the Costa Brava and the Costa del Sol. These leisure idylls are aggressively marketed to Northern Europeans. Prices match both fixed-income and jet-set budgets. The northern influx has been so great that many coastal towns have more foreigners than Spaniards.

But after building at fever pitch over the past 10 years, the beach party seems to be winding down. Property prices on the Spanish coast are losing momentum, growing now by only 5% to 10% a year, compared with 17% from 2002 to 2004, said Muriel Muirden, an analyst for Economic Research Associates in London. Interest rates are higher now, and banks – which helped fuel the housing boom by granting mortgages up to 100 percent – are growing worried about defaults. Property resales are slower as short-term investors turn to emerging destinations like Morocco, Turkey or Croatia, she said.

In what could be described as a better-late-than-never move, environmental groups are putting pressure on the government to limit construction in the arid Spanish south, where water is scarce. Spaniards themselves have developed a love-hate relationship with the frenzied development. In March, crime in the glitzy resort town of Marbella reached Miami Vice proportions when the police arrested the mayor, the urban planning adviser and other city officials in connection with an elaborate scheme for generating millions of euros in kickbacks in exchange for building permits or rezoning decisions. But the scandal will probably not alter the long-term pattern of migration from north to south – or the appeal of Spain, Muirden said.

Developers have driven the market to some extent, but low-cost airlines have helped, blanketing the country and spurring property values wherever they land. Spain’s popularity as a tourist destination - it ranks second in the world, after France – has meant a steady stream of potential buyers already familiar with the territory. And unlike emerging, and cheaper, resort destinations in Turkey or Morocco, Spain is anchored within what Muirden calls the “comfort zone” of the EU, with its shared legal and economic framework.

Link here.

THE TIPPING POINT DOWNWARD OF WESTERN CIVILIZATION

To most non-historians, World War I is a vague and distant memory, faded photographs of guys in tin hats standing around in mud-filled trenches. In fact, it was one of two cataclysmic disasters of Western civilization in the Modern period (the other was the French Revolution). In 1914, the West put a gun to its collective head and blew its brains out. No, it was not the fault of Kaiser Wilhelm II, whom history has treated most unfairly. As Colonel House wrote to President Woodrow Wilson after meeting with the Kaiser in 1915, it is clear he neither expected not wanted war. A World War became inevitable when Tsar Nicholas II, not Kaiser Wilhelm, very reluctantly yielded to the demands of his War and Foreign Ministers and declared general mobilization instead of mobilization against Austria alone.

Once war occurred, and the failure of the Schlieffen Plan guaranteed it would be a long war, a disaster for Western civilization was inevitable. Still, had the Central Powers won in the end, the civilization destruction might not have been so complete. There would have been no Communism, nor a republic in Russia. A victorious Germany would have never tolerated it, and unlike the Western Allies, Germany was positioned geographically to do something about it. Hitler would have remained a non-entity. Prior to World War I, the best major European countries in which to be Jewish were Germany and Austria. Kaiser Wilhelm would never have allowed a Dreyfus Affair in Germany. The vast Jewish communities of Central and Eastern Europe would have held their traditional places in multi-nation-empires, instead of becoming aliens in new nation-states. It should not surprise us that in World War I, American Jews attempted to raise a regiment to fight for Germany.

Even more importantly, the traditionalism represented by the Central Powers would have been greatly strengthened by their victory. Instead, the fall of the German, Austro-Hungarian and Russian monarchies let the poisons of the French Revolution loose unchecked upon the West, and upon the world. The Marxist historian Arno Mayer is correct in arguing that in 1914, the U.S. represented (as a republic, with France) the international left, while by 1919 it was organizing the international right. America had not changed. Rather the spectrum had shifted around it.

Thus, when Americans and Europeans wonder today how and why the West lost its historic culture, morals and religion, the ultimate answer is the Allied victory in 1918. Nor is this all quite history. Just as the defeat of the Central Powers in 1918 marked the tipping point downward of Western civilization and the real beginning of the murderous 20th Century, so events in the Middle East today may mark the beginnings of the 21st Century and, not so much the death of the West, which has already occurred, but its burial. The shadows of 1914, and of 1918, are long indeed, and they end in Old Night.

Link here.
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