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(Especially noteworthy articles’ headings highlighted in gold.)
PROTECT YOUR ASSETS TODAY – SO YOU ARE FULLY PREPARED FOR TOMORROW
Individuals sometimes take extremely wrong measures to protect their assets. Take Stephen Jay Lawrence, for instance. Back in 1999, Lawrence got caught with inadequate margins in his brokerage account. The brokerage liquidated the account and applied the proceeds to the debt. But Lawrence still owed millions of dollars to the brokerage. To allegedly avoid paying it, he transferred about 90% of his liquid assets to an offshore trust. A little later, he filed for bankruptcy. Big mistake.
Not surprisingly, the bankruptcy judge was not amused. He ordered Lawrence to repatriate the assets. When Lawrence failed to do so, the judge held him to be in contempt of court and incarcerated him. While Lawrence wound up spending only two days in jail, the case was one of the first where a person using an offshore structure was jailed for allegedly using it to defraud a known creditor.
You do not need to take such extreme measures to protect your assets. Asset protection is respected by the law as long as you set up structures to protect your assets with completely “clean hands”. That means you protect your assets for legal purposes. You cannot set up asset protection plans to hide from creditors, the IRS or lawyers after you are already involved in a lawsuit. By then, it is already too late.
So when you do set up an asset protection plan, make sure your plan does not “hinder, delay or defraud” known or reasonably foreseeable creditors. If you do that, you make the transfer of assets a voidable “fraudulent conveyance” in the eyes of the law. Learn from Lawrence’s mistakes. Protect your assets now, so you can be prepared for any storms in the future.Link here (scroll down).
ALL THE WORLD’S A BUBBLE
How high will the Dow go? 15,000? 20,000? How about 36,000? While euphoria sweeps stock markets here and worldwide, there are at least a few voices of dissent.
One, unsurprisingly, is legendary value investor Jeremy Grantham – the man Dick Cheney, plus a lot of other rich people, trusts with his money. Grantham, chairman of Boston firm Grantham Mayo Van Otterloo, has been a voice of caution for years. But he has upped his concerns in his latest letter to shareholders. Grantham says we are now seeing the first worldwide bubble in history covering all asset classes. Everything is in bubble territory, he says. Everything.
“From Indian antiquities to modern Chinese art,” he wrote in a letter to clients this week following a 6-week world tour, “from land in Panama to Mayfair; from forestry, infrastructure and the junkiest bonds to mundane blue chips; it’s bubble time!”
“Everyone, everywhere is reinforcing one another,” he wrote. “Wherever you travel you will hear it confirmed that ‘they don’t make any more land,’ and that ‘with these growth rates and low interest rates, equity markets must keep rising,’ and ‘private equity will continue to drive the markets.’”
As Grantham points out, a bubble needs two things: excellent fundamentals and easy money. “The mechanism is surprisingly simple. Perfect conditions create very strong ‘animal spirits,’ reflected statistically in a low risk premium. Widely available cheap credit offers investors the opportunity to act on their optimism.”
And it becomes self-sustaining. “The more leverage you take, the better you do; the better you do, the more leverage you take. A critical part of a bubble is the reinforcement you get for your very optimistic view from those around you.” It is something to think about the next time you hear someone tell you that the stock market will keep rising simply because the world economy is doing so well. That would make sense only if we were paying a constant price for each unit of world GDP, instead of higher and higher prices for one slice of that GDP – equity.
Grantham concludes that every asset class is expensive today compared with historic averages and compared with the cost of replacing it. By his calculations, the only assets likely to beat inflation by any significant margin if you hold them for the next seven years are managed timber, “high-quality” U.S. stocks, and bonds. His “high-quality” U.S. stocks include Home Depot, Lowe’s, Merck, Pfizer, Johnson & Johnson, Exxon Mobil, UnitedHealth, Wal-Mart, AT&T, and Verizon.
“The bursting of [this] bubble will be across all countries and all assets, with the probable exception of high-grade bonds,” Grantham warned. “Since no similar global event has occurred before, the stresses to the system are likely to be unexpected. All of this is likely to depress confidence and lower economic activity.” Ouch.
Grantham sees two big potential catalysts that might turn this bull market into a bear: a surge in inflation, leading to higher interest rates, and a squeeze on profit margins, which are currently running way above long-term averages.
As for timing, he concedes that is impossible to predict. But here is the kicker: Even Grantham thinks you probably need to be bullish right now. The reason? Most bubbles, he notes, go through a short but dramatic “exponential phase” just before they burst. Like Japan in 1989 or the Internet in early 2000. “My colleagues suggest that this global bubble has not yet had this phase and perhaps they are right. ... In which case, pessimists or conservatives will take considerably more pain.”Link here.
PANAMA CITY HERE I COME – THE CENTRAL AMERICAN BOOMTOWN
We remember when we came to Panama in 1997. In those days Panama already showed a lot of positive signs. It was clear to us even then that by locating our offices in Panama that we had a much better chance of success than if we opened our office in the USA. There was excellent offshore corporate structures in Panama, excellent banking options, good telecommunications, low prices, good employees available for hire and low office rents. Panama was open for business in 1997, and we wanted to conduct business in a nation that still valued Laissez Faire Capitalism as Jefferson viewed it, and Privacy, underlined, and with a capital “P”. These were two attributes that were no longer available in the U.S. even then, and today they are but a sad memory. Back in 1997 we looked closely before we leapt, we liked what Panama had to offer, and we leapt.
Time has certainly proved to us that our decision was the right one. We now have 25 full time employees, are among the top 7,000 websites in the world and we are absolutely assured that we owe our early, and ongoing success to having located in Panama. We are not sure how much innovative genius there was in our decision, as we were also considering Belize, and if Belize would have had better telecommunications it might have been Belize that we chose rather than Panama.
In 1999 we wrote about what we felt were Belize’s failings in a report. After giving Belize high marks in most categories, such as ecology, banking, environment, its unique polyglot society, its offshore corporate structures, location, language, low prices and so on, we told readers where we thought Belize was falling down, and that was in its inability to provide freedom for competitive internet access. Its telecommunications access was then being hampered by the idiocy of the government-subsidized Belize Telecommunications Limited (BTL), which was at that time somewhere back in the 19th century mentally. It was clear to us that there was no way to run a website-based media company from a nation that was willing to strangle access to the internet. Belize at the time looked better to us than Panama if only because of its very open and laid back culture. When we first wrote about it in 1996 you could buy an island in Belize for $20,000! (Today in Belize the sum of $20,000 will only buy you a quarter acre lot on one of the islands that our early readers bought back then.)
Some of our staff recently returned to Panama City after several months in South America. They were quick to point out that the Panama City they had returned to was much transformed from the Panama City they had departed. New skyscrapers had sprung up on the waterfront, and more were springing up as they watched. They commented that Panama was looking more and more like a sophisticated Miami with each passing day. If the current boomtown landrush into Panama was inevitable with or without us, we are also pleased ... either way we picked the right spot. Tomas A. Cabal, the ABC TV media man in Panama City agreed to write an article for us on the recent changes in Panama. He is a Panamanian with a international perspective on his own country.
Panama is rapidly becoming the new boomtown in the Americas. Like when gold was discovered in California, American and European companies, investors, expats and baby boomers have discovered the joys of living and doing business in this small central american republic. The approval in a national referendum of plans to expand the Panama Canal with the construction of a third set of locks that will permit the transit of larger vessels, has triggered an investment boom that will be felt in the real estate market, residential tourism and the maritime sector. More than $10 billion will change Panama City’s skyline.
Donald Trump is one of the investors that has discovered Panama’s potential. With a Panamanian partner he is building a 60-story luxury condominium that will include all the amenities with a casino, yacht club and marina with daily hydrofoil trips to the nearby Pacific islands. The $5.25 billion canal expansion will provide the fill for the construction of a parallel causeway fronting Balboa Avenue that will completly renovate the land facing the bay of Panama. Foreign investors are busy buying up real estate in the vicinity to construct new buildings that will attract American and European retirees. Panama, with its very liberal and attractive retirement and pension laws is a magnet for baby boomers looking to retire in a warm climate. The Panamanian government offers all kinds of incentives for people settling in Panama or buying a retirement home.
The real estate boom which started 5 years ago when baby boomers discovered Bocas del Toro province on the Caribbean and Boquete in Chiriqui province mountain country has already attracted more the 15,000 retirees. The arrival of new immigrants has fueled real estate projects catering to the well heeled investor. Gated communities and luxury villas are springing up all over Bocas del Toro and Chiriqui province. Other projects nearer Panama City in the Sora highland region and on the Pacific coast are also attracting foreign investors.
Modern communications, excellent health services, a well developed banking center, the largest free zone in the Americas and ease of air travel make Panama the hottest boom town in the Americas. Panamanians are friendly, bilingual and eager to participate in joint ventures with foreign investors. Economists calculate that the canal expansion and the real estate boom will add another 2% growth to the already robust 7% annual GNP. New ports have sprung up on the Pacific and Atlantic terminus of the Panama Canal. The panamanian government will construct another port on the Pacific side at a cost of $500 million dollars to take advantage of the growing trade with the Far East.
The expansion of Panama´s maritime sector has attracted cruise ship lines that bring into the country some 350,000 visitors. Upon discovering Panama, many of them decide to invest or live in the country. Tourism is now Panama’s largest industry surpasing the income generated by the Panama Canal. New hotels dot the countryside with foreign investors exploiting the natural beauty of the isthmus. Tropical rainforest, breathtaking highlands and pristine beaches provide a majestic backdrop for first class hotels that cater to visitors and businessmen exploring investment opportunities.
The canal expansion project begins in 2007 and will take seven years to complete. Now is the time to invest in Panama, so if you are planning a trip, come on down and share in Central America’s best kept secret or simply say, “Panama here I come.”Link here.
KIDNAPPINGS, GUERRILLAS AND DRUGS? ANOTHER SIDE TO COLUMBIA
The modern bus slowed from the cruising speed we had been enjoying along the Pan American highway, south of Cali. Craning to see out the window, I could just make out the four machete-bearing Colombians dragging a freshly-cut tree across the road, stopping us in our tracks, while a handful of men dressed in camouflage emerged from the bush. Most of them waited outside, while the two who had boarded indicated silently with their machine-gun barrels that we should get off. As we exited, the women were corralled into a tight group while the men were lined up against the side of the bus. “Manos arriba,” our handler said quietly, and we obediently raised our arms.
Once again, something less than the perfect retirement haven, I thought. But as it turned out, these were the good guys. After a brief check to make sure we were not carrying any weapons, we reboarded the bus and continued on our way – the incident quickly over, but not forgotten, a shadow on this otherwise-magnificent country.
Located at the tip of South America, Colombia is where the Pacific and the Caribbean collide with the Andes and the Amazon. It is a country that is more beautiful, dramatic, and diverse than any you are likely to see – from its sparkling colonial cities in the highlands to its homey residential towns to the world famous (and safe) resorts along the Caribbean.
Founded in 1537, Pasto is not as spectacular as the highway that takes you there, but I found it a comfortable, pleasant, and inexpensive place to live. When we arrived in town, we checked into the Hotel Oro Verde, where we were quoted a rate of just $14 per night for a double room. During my month-long stay in Pasto, I came to appreciate the routine of the locals. Most mornings, I enjoyed a cup of Colombian coffee and two buñuelos (doughnuts) fresh out of the cooker for a total of 26 cents.
While the churches in Pasto are impressive colonial structures, much of the rest of the city is not – after a couple of earthquakes the colonial-style was often neglected in the rebuild. But the large town square is friendly and bustling and surrounded by all types of commercial establishments, from banks and restaurants, to markets and even a couple of modern shopping malls. On the real estate front, we looked at an apartment of 1,150 square feet, with three bedrooms, two bathrooms, a study, and two balconies. It was located on the small river that runs through town (with a river view) and was selling for $60,800. In a neighboring building, a new unit of 1,350 square feet had an asking price of $82,600. The least expensive listing in a nice neighborhood was a two bedroom older apartment selling for $26,000. If you are renting, expect to pay at least $100 to $200 per month for a 2-, or small 3-bedroom apartment.
Popayán is without a doubt the most livable and beautiful colonial city that I have seen in all my Latin America travels. I say that without hesitation. This town of 300,000 people is clean, tasteful, and elegant, not only for a few blocks around the square, but throughout the entire centro historico. Expanding outward from its tree-lined central plaza, all of the commercial buildings are bright white, with any signs being restricted to a burnished gold color. No dangling electric wires, garish cell phone billboards, or restaurant signs to be seen anywhere. Founded in 1537, Popayán was populated by wealthy Spanish families from Cali seeking a better climate.
The lifestyle here is calm and relaxed, and the city feels safe and secure. We spent several lazy afternoons enjoying the many coffee shops, sampling the offerings of the bakeries, and trying out the numerous fine restaurants. This is a city that is geared towards tourism, but one that sees almost no foreign tourists, including North Americans. It was refreshing to see that the Colombians keep Popayán so beautiful because it is their own colonial treasure, not because they are after the international tourist dollar.
Prices in Popayán tended to be a bit higher than those in Pasto – a small price to pay for its colonial charm. We had dinner at what was reported to be Popayán’s nicest restaurant – six wonderful courses and a glass of wine for $14.75 each. A room in a nice hotel with a window overlooking the park costs $35 per night. On the property market, there is a casa antigua, with an interior courtyard and two commercial locations on offer for $86,900. An apartment overlooking Parque Mosquera with three bedrooms, three bathrooms, and a garage has an asking price of $32,600. A modest apartment in Villamercedes (not downtown) is going for $10,870. A new apartment of 1,000 square feet in a restored colonial with a view of the courtyard was selling for $41,700. On the rental market, we looked at a nice apartment with three bedrooms, three bathrooms, and a community pool in Santa Ana. They were asking $180 per month.Link here.
CRIME INHIBITING CARIBBEAN GROWTH AND INVESTMENT
According to a new World Bank report, high rates of crime in the Caribbean are not only threatening human welfare, and impeding social development, but also impacting business, impeding investment and ultimately undermining the region’s economic growth. The report, published last week by the World Bank and the U.N. Office on Drugs and Crime (UNODC), said that in many countries, as crime increases, access to financing declines, spending on formal and informal security measures increases, and worker productivity declines.
Estimates suggest that reducing the homicide rate in the Caribbean by one third from its current level could more than double the region’s rate of per capita economic growth. According to the report “Crime, Violence and Development: Trends, Costs and Policy Options in the Caribbean”, murder rates in the Caribbean are higher than in any other region of the world, and assault rates are significantly above the world average. Narcotics trafficking is at the core of these high rates.
“The report clearly shows that crime and violence are development issues. Donors and OECD countries need to work together with Caribbean countries to reduce the current levels in the region,” said Caroline Anstey, World Bank Director for the Caribbean. “Some of the factors that make the Caribbean most vulnerable to crime and violence, mainly the drug trade and trafficking of weapons, require a response that transcends national and even regional boundaries.”
Among its recommendations, the report argues that in general, there is an over-reliance on the criminal justice system to reduce crime in the region, although it acknowledged that some types of crime – such as organized crime, drug and firearms trafficking – are generally impervious to prevention initiatives. The report also noted that many of the issues facing the Caribbean require a coordinated regional and international response. Demand for drugs emanates from Europe and the U.S. Deportees are sent back to the region from the U.S., the U.K., and Canad. And many weapons that are trafficked are brought from the U.S.Link here.
VIRGINIA TRAINING MANUAL LISTS PROPERTY RIGHTS ACTIVISTS AS TERRORISTS
A Virginia training manual used to help state employees recognize terrorists lists anti-government and property rights activists as terrorists and includes binoculars, video cameras, pads and notebooks in a compendium of terrorist tools. The manual, discovered by the Virginia News Source, is keen to emphasize that terrorists are not only Middle Eastern in scope and the main focus is afforded to domestic terrorism.
Included with Hamas, Al-Qaeda and Islamic Jihad, the following groups are identified as terrorist organizations. “Domestic terrorist organizations” include:
What are the terrorists after? According to the manual, they want to “create an atmosphere of anxiety amongst the public”, “undermine confidence in the government”, “influence governmnet or social policy”. [Ed: Does this make lobbyists terrorists?]
Presumably, tourists, journalists, hikers, bird-watchers, scuba divers, artists, painters, and anyone who takes a photograph is also now a terrorists according to the official list of terrorist paraphernalia provided:
Reading further into the manual, associations between domestic terrorists and the supporting the American Revolution are subtly made. In Alex Jones’s 2001 documentary 9/11: The Road To Tyranny, FEMA officials give a seminar in which they identify George Washington, Thomas Jefferson and other founding fathers as terrorists.
The manual encourages people to report any suspicious activity to an authority figure. Presumably, if property rights activism is deemed suspicious then anyone protesting or communicating about the recent eminent domain issue will be reported and investigated on grounds of terrorism. The manual concludes by encouraging state employees to seek more information from FEMA and Homeland Security.
Shortly after 9-11 a Phoenix FBI manual that was disseminated amongst federal employees at the end of the Clinton term caused waves on the Internet after it was revealed that potential terrorists included, “defenders of the U.S. Constitution against federal government and the UN”, and individuals who “make numerous references to the U.S. Constitution.”
This manual is another surreal and frightening reminder that government officials are being trained to embrace a Gestapo like mentality whereby any political activism or even individualistic outdoor leisure activity is deemed to be suspicious and a possible indication of terrorism.Link here.
SHOCK AND AU
Governments wage war on anything and anyone that interferes with their insane wish to dominate everything in sight. They are only about power, for its own sake. Any regular reader of Strike The Root will know this. Still, it is amazing to watch it happen.
The latest war, and in some ways one of the most sinister, was launched at the end of April. The owners of e-gold were indicted for the victimless crime of money-laundering. The jury-swaying sales line was that some of their customers were operators of child pornography. That may or may not be true, but is certainly irrelevant. The obvious real reason lies in the true statement, up-front on their website, that e-gold provides all customers with “better money” that is “backed 100% at all times with unencumbered metal in allocated storage.” This, the FedGov can hardly tolerate. If they do not control money – all money – their dreams of empire would be at risk, and that just will not do.
As their propaganda makes clear, the thugs are most horrified that money transactions can take place without the benefit of their scrutiny. Oh, horrors! How did mankind survive, all these millennia, while using coins that passed from hand to hand without any government snoop being the wiser?
E-gold’s CEO and his colleagues will no doubt put up a spirited defense in government court, and the very best of luck to them. But the DoJ has practiced hard at jury manipulation, so I cannot rate their chances high. Government courts are about policy enforcement, not about justice – or even about law – and the outrageous seizure of the company’s operating funds will make it very hard for them to stay in business, or hire legal assistance, which suits the DoJ just fine. They would be in big trouble if they had to play fair.
E-gold’s big mistake was to run this highly innovative non-bank bank with a toe-hold in the Land of the Free. Had they kept all their domiciles and offices and assets well outside Uncle’s jurisdiction, they would have been harder to hobble. Some of their rivals are doing just that.
For those not yet familiar with the merits of gold, nearby is shown a chart of its value compared to that of government paper. There has been a relentless erosion of the purchasing power of the greenback, of about three quarters in just the 37 years charted. $1 now buys what 25 cents did in 1970. Gold, in contrast, keeps its value over huge periods of time with remarkable consistency. One ounce will buy a fine quality suit of clothes today, just as it did in Roman times.
When the Age of Government is finally over gold will almost certainly be the exchange medium the resulting free market society will choose. It is durable, rare, intrinsically valuable, hard to counterfeit, and pretty to boot. Yes, one can fashion a necklace out of $100 bills, but it looks trashy. Average price levels, measured in gold, will not necessarily be constant, for gold is also a commodity in demand for purposes other than money. During the century when America was on a gold standard, prices actually fell by about 0.5% a year, presumably because productivity increased a bit faster than gold was mined and minted. But for 5,000 years or so, it has proven to be the best option available.
Gold does have a couple of drawbacks. It is heavy, and it buys so much that it is very hard to divide into small coins for purchases of low-price, everyday items. Even $70 worth of groceries would take only a tenth of an ounce, and a coin of that size is awfully easy to mislay. So electronic gold will surely have an important place in the free society for which we all yearn. An account such as e-gold offers, with an associated (and lightweight) plastic card that can be swiped to effect purchases of any amount, down to several decimal places of a gram. The company that the FedGov is on the brink of ruining right now is the one that pioneered just such a money system. It is all part of the war on liberty, privacy, real money and innovation.
For now, private systems of electronic money transfer must be seen as vulnerable to government savagery, and the bigger their U.S. footprint, the shorter the life expectancy. The convenience of bypassing the government-controlled banking cartel is so great, though, that many will favor continuing to use e-gold and its rivals by holding relatively small account balances, while for savings and asset storage physical gold, hidden where no snoop can find or steal it, is now clearly preferable. A nice feature of the e-gold service has been that of “redemption” – one can order the company to deliver one’s holding in physical form. I hope that can long continue.Link here.
MARGARITA ISLAND, VENEZUELA VS. PANAMA CITY, PANAMA
I have lived on Margarita Island for almost 4 years. I recently took a trip to Panama to see for myself what all the “hoop-la” was about. Here are my impressions of Panama City, Panama as it compares to Margarita Island, which is located off the coast of Venezuela. I found a big difference between the two! Panama City is a metropolis with over 1.5 million inhabitants. The largest city on Margarita Island is Porlamar. Best estimate of the entire island population is about 300,000 during the low season.
Panama City is an interesting, bustling city, but I also noticed some disadvantages as I compared the living conditions on Margarita Island with those I observed in Panama City. The first thing I noticed was the dirt/soot that was constantly spewed for buses and trucks. It lays down a coat of black greasy grit and this is not just in the downtown area, but in outlying neighborhoods as well. Soot comes in through open windows, and even collects on your skin and hair if you are walking around the city. Anyone with respiratory problems – this city is not for you! My eyes burned even while riding in an air-conditioned taxi! The cleanest residential area was the former U.S. Military base at Fort. Clayton. On Margarita Island we do not have the black, greasy soot over everything. You might find more in the downtown areas because of more traffic, but not in the overwhelming amounts found all over Panama City.
Panama City has unpleasant odors in many areas ... even some of the up-scale areas. Some restaurants pipe their grey water to the street gutters, where it runs for blocks and smells awful. Add to this the fact that trash collection sites are seldom cleaned and you will get an idea of the effluvium that gets worse as the day grows warmer. Casco Viejo is the historic area of Panama City and part of it has been restored. The real estate is very expensive but just around the block there are horrible slums. People I talked to there said all this would “eventually” be cleaned up, but at this time it is still mostly slums and not very safe. However, many other areas of Panama City are clean, well-maintained, and safe. You will seldom encounter offensive odors in the urban areas of Margarita Island. Trash collection can be slow during the holiday seasons but is usually adequate.
Panama City traffic is insane! If you took all the car horns away, the city would come to a standstill. You can expect to pay $8.00 per hour for a clean taxi and many have English-speaking drivers. They drive very aggressively, so fasten your seat belt! If you want to take a bus, good luck. The locals call the buses “Diabolos Rojos” or “Red Devils”. Their drivers hurtle their vehicles through the traffic like they are straight out of hell and in a hurry to get back. Do not get in front of one either on foot or in a car. With all the honking horns, revving engines, car alarms, and the noise level is unbelievable! Margarita Island drivers are more laid-back. You will seldom hear honking horns – except at traffic lights if you do not move quickly enough. Many of the buses here look pretty decrepit, but do not emit the black smoke like those in Panama City. Daily rate for a taxi is about the same as in Panama.
The area near Panama City’s airport looks a lot like the bayous in southern Louisiana. Driving across the Canal Zone toward Costa Rica, there is nothing to see but vegetation for miles. Just outside Panama City proper there are some beautiful neighborhoods with mature trees, lawns and flowers. Margarita Island is a fairly small island – 934 square kilometers, almost 600 sqare miles – and you will find everything from desert to semitropical ecosystems. There are no tropical jungles here as there are in Panama. La Restinga is a jungle-like Natural Park located between the eastern side of the island and Macanao on the west. Porlamar and Pampatar, the main cities, have green areas, beautiful homes, and a nice climate.
Panama is a beautiful tropical country with jungles and mountains. Unfortunately the jungles are closer to the city and the cooler mountains further away. Panama City is rainy, hot, and humid. Annual rainfall average is 64.7 inches. The humidity after a rain shower is intense. Your a/c bill alone can run to $200-$300 per month. To escape the heat and humidity it is necessary to drive more than an hour away from the city into the mountains. Margarita Island’s average annual rainfall is 22 inches. From Macanao, the “Arizona-like” western part of the island, to the mountains around El Copey – highest mountain at 890 meters – you can find almost any environment you seek. There are over 100 beaches and coves just a few minutes from anywhere on the island. It is slightly cooler in the mountain area just 15 or 20 minutes from the beach. The island is much less tropical than Panama and humidity is usually not as high. We use our air conditioner when needed, cook with electricity, and have a washer/dryer. Our bill has never been over $65 a month.
Panama City is an international business and banking center, and most other countries have at least a branch bank there. The main advantage to banking in Panama is that the banks are sound. Bank transactions in Panama are private and even the U.S. government must obtain special permission to view your records, and only if they can prove money laundering or terrorist activities. Your financial information is safe from prying eyes. Banking in Venezuela is risky, so it is wise to only keep a minimum basic amount in a national bank here.
Panama City has some beautiful and very expensive high-rise condos and apartments. These also have a “high-rise” price tag. Apartments in older buildings can be had for about $1000 per square meter. Homes in better neighborhoods are in the $100,000 to $200,000 up price range. Margarita Island Condo high-rises on are generally not as tall or as elegant as those I saw in Panama City. There is an abundance of apartments and condos here and more are being built as of this writing. The average cost is between $800 and $1000 per square meter. Homes in good areas inland can be found for around $40,000 up to whatever you are willing to pay. Ocean view property is naturally much more expensive. It seems building costs in both Panama City and on Margarita Island are generally comparable. Both places are experiencing a building boom– more so in Panama City. A foreigner can own real estate in either country.
You have to drive 2 to 3½ hours or more to find a nice beach near Panama City depending on whether you prefer the Atlantic or Caribbean side. If you want to live close to a beach the properties are expensive and there is not much else to do but go to the beach. Colon on the Caribbean side is a pigsty and very dangerous. There are some beautiful islands accessible only by boat. Bocas Del Toro is touted as being very popular, but it is 6-7 hours from Panama City and there is little infrastructure in place there. Household electricity is expensive (15 cents per kwh) but necessary as the areas near the beaches are hot and humid. Margarita Island has any kind of beach you seek. There are also dive tours and excursions to nearby Coche & Los Frailes Islands.
The bottom line? Which is the best deal for living within your means? I believe that depends on individual tastes, income, and priorities. If you are more comfortable in a big, busy city, Panama City has a lot to offer. On the other hand, if you prefer a slower-paced, more Caribbean lifestyle that still offers all the modern amenities, Margarita Island might be more to your liking. At present Margarita Island is one of the least expensive islands in the Caribbean. Other contenders might be the Dominican Republic or San Andreas Island (owned by Columbia). Both the Dominican Republic and San Andreas are in the hurricane zone, and the Dominican Republic is reputed to have a high crime rate. Margarita Island is only 25 km. off the Venezuelan coast, and 45 minutes to Caracas by air.
Thanks for your attention. Viva Margarita!!Link here.
ENOUGH IS ENOUGH!
Why the latest attack on tax havens is completely unfounded.
Earlier this month I spent several days in one of the world’s leading tax havens – Panama. I was there for a conference. Most of the attendees there were concerned about the many attractions and services any tax haven worthy of its name offers. They were looking for the best iron-clad asset protection, financial privacy guaranteed by law, profitable investments and discrete private banking.
Tax havens are again in the news in America since the Democrats took control of the U.S. Congress. Already U.S. Senators such as Michigan’s Carl Levin and North Dakota’s Byron Dorgan have introduced radical new proposals. These left-wing politicians claim that every year over $100 billion in taxes are illegally evaded by Americans who use offshore tax havens as a cover for their alleged tax crimes. There is absolutely no proof to back up this bold assertion or the fantastic number used. But the lazy “news” media is still going right along with the big lie without question. At the U.S. Senate hearings last week, it seemed that the senators did not even know what the definition of a “tax haven” is. Or as Bill Clinton once said, “It depends on what the definition of ‘is’ is.”
The senators are considering bills that would officially label 40+ foreign nations as suspected tax havens and promoters of tax evasion. The potential blacklist includes such unlikely candidates as Switzerland and Bermuda. But interestingly, their list excludes the two leading tax havens in the world - the U.S. and the U.K. Both tax their own citizens heavily, but are superb tax havens for foreigners.
What “tax haven” really means anyway.
Dan Mitchell of the Cato Institute recently addressed the definition of a tax haven and wrote, “[A] tax haven is probably best defined as a jurisdiction that meets at least two criteria: First, it will have at least some tax and/or regulatory policies that are market friendly and those policies will be perceived to attract economic activity from other jurisdictions. Second, it chooses, in at least some cases and within its right as a sovereign entity, not to help foreign governments tax economic activity inside its borders.” Certainly places such as Panama meet those criteria.
Dan continued, “So-called tax havens now are being persecuted. Politicians in high tax nations resent these jurisdictions because globalization has made it much more difficult to impose confiscatory tax rates. Indeed, tax rates have dropped dramatically since 1980, in part because havens have facilitated greater tax competition among nations. To fight against the liberalizing impact of globalization, politicians from high tax nations are working through international bureaucracies such as the [OECD] in a campaign against tax competition.” The Senate bills proposed are part of that malevolent campaign.
The real incentive behind this frivolous attack.
Of course, the leftist American pols who scream about tax havens claim they are doing so in order make all citizens, especially the so-called “rich”, pay their fair share. But in reality, these pols need more taxes to finance their big government political schemes. Gary Shilling figures that 52.6% of Americans, including dependents of direct recipients, “now receive significant income from government programs,” the Christian Science Monitor reported. In 2000, that number was 49.4%. And back in 1950, only 28.3% of Americans relied on Washington. That really shows how government welfare has expanded over the last half century.
Investor’s Business Daily puts all this in perspective: “The left delights in shrieking about how the rich beat down the poor, about how the wealthy benefit from the tax cuts at the expense of those at the bottom. But the top 5% of income earners pay 57.1% of all federal income taxes. At the same time, 45 million Americans, many of them in the lower income grouping, pay no taxes at all. Instead of the rich getting richer while the poor get poorer, the rich are paying a growing share of the tax burden while the poor’s share shrinks.”
Nearly two centuries ago, Alexis de Tocqueville predicted that in a democracy such as America, the nation will be headed towards oblivion as soon as the masses discover they can vote to transfer wealth from those better off to themselves. Small wonder then, that Americans of even modest wealth seek offshore tax havens.
I say, enough is enough!Link here.
TSA AND TYRANNY: CONNECTING THE DOTS
As with most bureaucracies, what the Transportation Security Administration (TSA) claims to accomplish and what it actually does accomplish are entirely different things. The excuse it offers for patting us down and rifling our belongings at airport checkpoints is that these shenanigans protect us – from terrorists, if not from sexual predators and thieves. In reality, the TSA exists to control us. Theory tells us that, and so do the facts when we connect several recent but isolated events.
First, the TSA’s screeners have once again failed to stop undercover agents from smuggling fake weapons through their checkpoints. This is becoming so habitual that we should add it to death and taxes as life’s only certainties. The TSA routinely flunks tests of its ability to intercept weapons. Flamingly. We are talking failure of 90% on those rare occasions when it is not a full 100%. Since 2002, when the TSA began operations, the GAO, the Department of Homeland Security, and even the TSA itself have tested airport screening hundreds of times. And the TSA has flopped hundreds of times. The TSA cannot and does not protect us.
So why is it not disbanded? Because the agency controls us far more effectively than it finds bombs. Police must rejoice at airport screening. Hanging around checkpoints, waiting for “criminals” to come to them rather than chasing down alleys and streets, searching citizens without the bother and paperwork that warrants require certainly makes policing easier. And far less dangerous, too. But it is lethal to liberty. The list of items the state does not want us to have extends well beyond phony IDs and drugs to such innocuous things as bookmarks and money. That list will keep growing as the government does.Link here.
THE ROAD TO COMPASSION AND FREEDOM
Freedom has been fading in America – where “freedom” is the national slogan and where enormous personal freedom (relative to most times and places) characterized the nation’s beginning – for more than a century. This increasing lack of freedom in America has brought forth the natural response of a freedom movement, including the Libertarian Party, market-anarchist groups and websites, and other pro-freedom organizations and efforts. For decades now, thousands of people have worked to interest others in freedom and to help them understand what freedom is and why it is important.
By now, we can no longer avoid the truth. This pro-freedom movement has failed. America is nearing a tipping point, where the formal institutions and rules designed to protect human rights no longer function effectively. History makes the danger of this situation very clear.
Why has the freedom movement failed so miserably? Put another way, why has the market rejected our offering? Perhaps the product is not as desirable as we think it is, or perhaps we are doing a poor job of marketing. There is a third possibility, however. Perhaps we have not understood our product accurately or completely, and thus have been promoting a damaged or incomplete version. If that is true, then it is no wonder we have failed in the marketplace. We should fail in the marketplace, until we bring the product up to spec and learn to promote it properly.
Expanding our market share, as it were, is more important than with most products. History shows that lack of freedom is incredibly dangerous. Even aside from the increasing dangers, we need very wide public support if we are to oppose tyranny effectively. Indeed, any plan without a realistic approach for dramatically increasing public support will fail, and that failure will likely have catastrophic consequences. We are trying to get the system to allow us our freedom – yet the purpose of the system is to prevent freedom. Without an understanding of what people want and need, and of what freedom actually means, we risk not only failing but actually being counterproductive. We risk making things worse instead of better as, indeed, we seem to have been doing these past several decades.
The freedom movement has proceeded from the assumption that “freedom” means nothing more than lack of interference from government, and that people want this freedom by definition. Those assumptions may be wrong. Indeed, I believe they are wrong, and the poor results of our efforts support that opinion. Since we have apparently been marketing something most people are not interested in, it behooves us to at least understand what people are interested in. It behooves us to consider what people actually want.
To encourage thought on those issues, I have questions: (1) What kind of world do you want? We will never succeed at interesting others in our vision of a better world until we have both a solid intellectual understanding of that world and a deeper, more profound emotional sense of that world. Seeing this world with emotional depth gives rise to a sense of loss, and a sense of longing for a world that should be. You have that world within you. Find it. Get familiar with it. Spend time with it. A passionate and emotional understanding of the world we are made for – which requires freedom – is one of the keys to advancing the freedom movement from obscurity, to interesting curiosity, to upcoming minority, and eventually to success. Without the passion, nothing happens. (2) What, beyond the non-initiation of coercion, is necessary for such a world?
Here is what I want, personally: a healthy society. Naturally, any healthy society must be free. Use of initiated coercion would never be conceived, much less condoned, in a truly healthy society. Yet a healthy society would offer much more than mere lack of government interference. A healthy society (or world) would include the necessary elements to encourage, protect, and sustain the division of labor and honest free-market activity. In such a world, people would feel a connection with each other, for one thing. A healthy society would include the compassion necessary to encourage even the poor, the sick, the disabled, and the disadvantaged to support the social order. A healthy society would be just and humane as well as free. That does not mean everyone would be equal in wealth, any more than they would be equal in height or beauty or athletic ability. It does mean that concern for one’s fellow man would be deeper and more widespread than one sees today. A healthy society would include widespread emotional health as well as freedom from coercion.
The contest between freedom and tyranny is an epic, world-changing struggle, and will be fundamentally a contest between paradigms. As I have already suggested, the freedom movement has failed so dismally because the paradigm it uses is broken and incomplete. The freedom movement itself has failed to promote or even to understand the integrated nature of love and freedom. If we want success, we need a new paradigm.
Freedom in human affairs requires love. Because people often see “freedom” as merely a lack of coercive interference, it is easy to miss the human element here. But we are human beings, not inanimate objects, and humans have needs beyond lack of coercion. In addition to personal needs for love and connection with others, the market, the division of labor, and society itself require widespread emotional health (the foundation of love) to function well and to prevent a drift towards fraud and coercion. Love is the lubricant and anti-corrosive for a free society. A widespread and severe lack of emotional health ensures a nightmare, no matter what the original political situation.Link here.
Cokes have not tasted as good as they used to because of the substitution of corn syrup for sugar. Coke tried something like this once before in the 1980s and it was a big flop. If you want a coke that is worth drinking keep going west. Out here you can get all the real Coke you want, made with real sugar, in glass bottles or can.
As far as buying things is concerned, you can also buy a quart of good gin in the grocery store for $0.67. (My typing keyboard does not even have a cent sign on it anymore). You can hire a plumber all day for $10. A full-time house maid earns $60 a month. The young man who drives my cars eats and sleeps at his home about half the time and I pay him about $150 a month. My gardener and maintenance man lives here, and works 26 days a month for $160 a month.
The brand-new high-tech hospital has pre-registered all in my family so that there can be no delay in admitting any of us in case of emergency, or for any other reason. In fact the CEO and Chief Neurologist made a house call to see us and get our histories. My neurologist charges me $9 when I visit him for a checkup, or to write a prescription. If you would like to have a complete medical blood test of the standard items just walk into any of the private labs you find everywhere and pay $10 and come back later that day to pick up the report.
Hong Kong is our nearest neighbor. The airfare over to their new airport is $39. It is a one and a half hour flight. Can you fly from Atlanta to Chicago for $39 up and $39 back? If you have not been to Hong Kong lately, you have probably missed something. I could go there to buy several cases of black fountain pen ink which is no longer worth buying in Western countries. Why? It is no longer black, but merely a badly dull kind of dark grey. Did you know that had been stolen from you? Why do such things happen to nice people?
A good techie will show up and work all day for $20. He can even bring you Vista Ultimate for another $20 (although he would try to talk you out of using it). The local franchise car repair location can change all your shock absorbers, springs, bushings, pads, and motor mounts for $60 plus $40 each for the gas shocks. This tends to make your car run more safely, securely, quietly ... more like new. If the A/C is not cooling like it used to, they will put in a couple cans of Freon for about $5 each, just like you always did. They can make a house call, too, if you need some gears replaced in your transmission. They do not drop any oil on your driveway either.
The hardwood narra tree has been endangered by the national governmentt and is almost extinct. We pay a caretaker at one of the older cemeteries with many trees to collect leaf seedpods for us every season, and we bring them home to propagate with loving care in the fertile ground in our front and back yards. I would say we have already set out about 50,000,000 currency units worth of hardwood narra trees so highly prized by the populace here and unavailable except for what is left of old burnt out tree trunks.
So, if you still want that swell-tasting, ice-cold Coke in a real glass bottle, go on West, Man. See what else they have that you can use, too, while you are there.Link here.
DEALING WITH POWER OF ATTORNEY CAN BE A MESS. GET A GRIP ON IT
Two months after an ailing Ramona Pesock granted her second husband her power of attorney, he used it to transfer her Coudersport, Pennsylvania house into his own name. When she died 11 months later, in March 2002, her son from her first marriage, Randall Metcalf, insisted she had meant to leave the house to him. By the time a state appeals court ruled in October 2005 that the husband never had the power to give away Ramona’s property, the house was in foreclosure. “Everything was flushed down the toilet,” says the son’s attorney, Jeffrey Leber.
Horror stories like these have prompted many states to rewrite their laws on financial powers of attorney. And more are likely to do so soon, spurred on by the National Conference of Commissioners on Uniform State Laws, which published a new model financial power of attorney law last fall – its first such rewrite in 20 years. The new model has already been adopted by New Mexico and introduced in several other state legislatures.
The suggested new law clarifies the murky process, with the aim of heading off disputes and also making the law more uniform across states. As a grantor under the model law you must specify in advance exactly which powers you mean to give away by checking boxes to indicate whether you want the power holder to be able to make decisions about, for example, taxes, litigation and business operations. A special section of boxes marked “Caution” in boldface, highlights certain powers that, if given away, “could significantly reduce your property or change how your property is distributed at your death.” Among them are making gifts, changing beneficiaries (say, on your life insurance or IRA) and retitling bank accounts as joint accounts. Ironically, Pennsylvania adopted a law requiring specific gifting authority back in 1999, well before Pesock signed over power to her husband. Unfortunately, her attorney used the old, vague form.
Is your power up to date? Check now. Too many otherwise diligent folks treat powers as an afterthought – just another paper to be signed when updating a will or estate plan. That is a mistake. “There is not a more powerful piece of paper you can sign,” says Robert Clofine, a lawyer in York, Pennsylvania.
Typically, you sign one form for financial decisions and one or more for health care decisions, even if you give the same person power for both purposes. Usually, the financial power kicks in immediately. But you can also sign a power that takes effect only if you are incapacitated. This “springing” power requires your agent to get a doctor to certify you are out of it. That is usually better than having no form at all, in which case a court has to appoint a guardian. You can also sign a power for a limited purpose or period – say, if you are off hiking in Tibet while the sale of your house is closing.
If your state has changed or changes its law, an old power grant will still be valid, but it might not be interpreted the way you intended. Moreover, banks or other institutions sometimes balk at accepting outdated documents. 18 states now have a suggested form, which makes it easier to check whether yours is the latest. You can usually get forms from a state’s attorney general or bar association. The financial-planning tool kit at cch.com also provides links. Only 12 states currently honor out-of-state forms. Another trap that the model law likely will not end is that your brokerage firm or bank may demand you fill out a separate power of attorney using its in-house form.
Of course, just as important as having the right form is picking an agent you can trust – something no law can improve. Still, warns Chicago estate lawyer John Brooks, “even well-meaning agents get themselves in trouble. It is like giving a monkey a machine gun.” While the power to make gifts can be abused, e.g., do not be too hasty to deny it to your agent. At present the first $2 million you pass on to heirs is free of federal estate tax. But you can give $12,000 a year to as many recipients as you like without eating into that $2 million. If you have lots of children, grandchildren or other heirs, your agent could transfer hundreds of thousands of dollars out of your estate in the last few years of your life, saving your heirs a bundle. Moreover, some states tax smaller estates, and yet do not limit deathbed transfers. An agent in one of those states might wisely make a big premortem gift on your behalf.
A practical way around this dilemma? Typically, you name a primary agent and a backup agent (say, your eldest child and your second eldest). Specify that your primary agent can act individually in most cases but must act jointly with the backup agent to make a gift or sell property. Both would need to sign the deed to sell your house and give away the proceeds.
Another trouble spot is mingling of assets. Say your agent, the eldest of your children, decides, for convenience, to put his name, as well as yours, on your bank accounts. If he runs into financial problems, his creditors could grab your money. And any joint accounts will not be part of the estate, cutting out siblings and creating other problems. So require your agent to sign a form agreeing to keep your assets separate from his and to keep a record of what he does on your behalf (the model law has an optional form to do this).
Do you need to pay a lawyer to update your power? If your state has a standard form and your assets and family relationships are simple, you might do it yourself. For more complex situations – say a family business or children from multiple marriages – you will want professional help and likely a customized form.Link here.
CASES KEEP FLOWING IN, BUT THE AMERICAN JURY POOL IS IDLE
Trials are on the verge of extinction. They have been replaced by settlements and plea deals, by mediations and arbitrations and by decisions from judges based only on lawyers’ written submissions. Federal courts conducted about 3,600 trials in civil cases last year, down from 5,800 in 1962. That is not an enormous drop – until you consider that the number of cases has quintupled in the meantime. In percentage terms, only 1.3% of federal civil cases ended in trials last year, down from 11.5% in 1962.
The trends in criminal cases and in the state courts are broadly similar, though not always quite as striking. But it is beyond dispute that even as the number of lawyers has grown twice as fast as the population and even as the number of lawsuits has exploded, actual trials have become quite rare. Instead of hearing testimony, ruling on objections and instructing jurors on the law, judges spend most of their time supervising the exchange of information, deciding pretrial motions and dealing with settlements and plea bargains.
There is, of course, nothing wrong with settlements, at least when they are the product of reasoned and sensible compromise between evenly matched adversaries. But trials are not disappearing simply because more cases are being settled. Instead, they are increasingly being replaced by summary judgments, in which judges evaluate evidence submitted to them on paper.
“During the last years of the 20th century, summary judgment in the federal courts moved from a small fraction of dispositions by trial to a magnitude several times greater than the number of trials,” Marc Galanter, who teaches law at the University of Wisconsin and the London School of Economics and Political Science, wrote last year in The Journal of Dispute Resolution. “Summary judgments are being asked for in about 17 percent of cases and granted in about 9 percent,” he elaborated in an interview. That is a big jump from 1960, when no more than 1.8 % of federal civil cases ended in summary judgment. “We have moved in a way to a more European way of decision-making, by looking at the court file rather than through encounters with living witnesses whose testimony is tested by cross-examination.”
In criminal cases, the vast majority of prosecutions end in plea bargains. In an article called “Vanishing Trials, Vanishing Juries, Vanishing Constitution” in the Suffolk University Law Review last year, a federal judge questioned the fairness of the choices confronting many criminal defendants. Those who have the temerity to “request the jury trial guaranteed them under the U.S. Constitution,” wrote the judge, William G. Young of the Federal District Court in Boston, face “savage sentences” that can be five times as long as those meted out to defendants who plead guilty and cooperate with the government.
The movement away from jury trials is not just a societal reallocation of resources or a policy choice. Rather, as Judge Young put it, it represents a disavowal of “the most stunning and successful experiment in direct popular sovereignty in all history.” Indeed, juries were central to the framers of the Constitution, who guaranteed the right to a jury trial in criminal cases, and to the drafters of the Bill of Rights, who referred to juries in the Fifth, Sixth and Seventh Amendments. Jury trials may be expensive and time-consuming, but the jury, local and populist, is a counterweight to central authority and is as important an element in the constitutional balance as the two houses of Congress, the three branches of government and the federal system itself.
In an article titled “Why Summary Judgment Is Unconstitutional”, published last month in the Virginia Law Review, Suja A. Thomas, a law professor at the University of Cincinnati, makes the perfectly plausible argument that the procedure violates the Seventh Amendment, which reserves the job of determining the facts in civil cases to juries. When judges decide summary judgment motions, Professor Thomas wrote, they intrude on that job. The theory of summary judgment is that judges may rule for one side or the other only after finding that no “genuine” issues of “material” fact are in dispute. They must determine, as the Supreme Court has put it, whether “a reasonable jury could return a verdict” for the party defending against a motion for summary judgment. All of that pushes judges right up to and sometimes across the constitutional line of determining the facts for themselves.
In 2004, in the process of revitalizing the role of the jury in criminal cases, Supreme Court Justice Antonin Scalia wrote that there were good arguments for “leaving justice entirely in the hands of professionals.” But that is not the theory of the Constitution, he continued, which enshrined “the common-law ideal of limited state power accomplished by strict division of authority between judge and jury.”
I was on jury duty last week, in a state criminal court in Manhattan. During the orientation, a court officer, with mixed pride and hyperbole, said his was the busiest courthouse in America. I never saw so much as the inside of a courtroom. After a couple of days of milling around in an assembly room with more than 100 other potential jurors, the State of New York thanked us for our service and sent us home.Link here.
FORBES SPRING 2007 INVESTMENT GUIDE IS OUT
Investing: art or science? Since it is, after all, based on numbers, some try to concoct market-beating formulas. Robert Colby has evolved a system that, while hardly foolproof, is pretty clever. The spring Investment Guide also offers the wisdom of Yale professor Robert Shiller on how to insulate yourself from oil-price unpleasantness.
Everybody knows you need fixed-income securities as ballast in a portfolio. The ins and outs of bond funds are explored. And many changes are buffeting the 401(k), the centerpiece of many people’s retirement stashes. See how to deal with them.
Stock buybacks are all the rage. When and why do the shares go up? An explanation. Condo fever may have subsided, but there are still cities where you can buy good units sporting a government subsidy. If you rent out residential property, learn how to maximize your tax savings.Link here.
IT’S A MAD, MAD, MAD, MAD WORLD
Fractional-reserves, the Fed and the bubble.
The classic 1963 slapstick comedy, It’s a Mad, Mad, Mad, Mad World, begins when the occupants of four vehicles learn about hidden treasure in a fictional town in California. According to a dying man’s last words, $350,000 (about $2.3 million in today’s dollars) is buried under a mysterious “big W”, less than a day’s drive away. When the strangers cannot agree on how to share the loot, a wild race for riches ensues.
In the 44 years since, the mad dash for wealth without work has been repeated throughout countless bubbles and manias. Witness the Japanese mania and U.S. takeover bubble of 1989, the biotech bubble of 1991, the 2000 tech bubble, and more recently the 2005 housing bubble – all ending in tears. Fittingly, in the movie’s finale the protagonists fall off a fire escape and all end up in the hospital. Was the film’s director, Stanley Kramer, prescient – metaphorically speaking – or have we evolved to the current state of perfection in which the investing masses are entitled to get rich simply by tuning in to Jim Cramer’s Mad Money?Link here.
THE END OF THE CLASSLESS SOCIETY
The immigration bill brought forward and apparently likely to pass demonstrates an unattractive new political trend in the U.S.: the end of the classless society for which the U.S. has been famous and the opening of yawning political as well as economic gaps between rich and poor. Traditionally, the U.S. has been economically unequal, but without a sharp divide between rich and poor in the political arena. Democrats represented the South, minorities and unionized labor, while Republicans represented small business and the professional classes. The truly rich have always been more or less evenly divided between the parties. Thus, except for a brief period in 1932-46, the U.S. never had a real class-based politics.
One economic force was always likely to change this – the steady increase in inequality seen in the U.S. since about 1969. The household Gini coefficient of income inequality has risen from 39.7 in that year to 46.9 in 2005 – extrapolating that trend would suggest a figure of 47.3 by today.
At around 40, the Gini coefficient was close to the optimal level. Unlike in egalitarian Scandinavia it left enough incentive in the society to ensure that entrepreneurship and hard work were fostered, but yet it did not cause divisions between classes. At 47, it is approaching the level prevalent in Latin America, (Argentina 52, Mexico 55, Brazil 60) which has historically exhibited a politics characterized by deep alienation between classes, producing as rulers an unpleasant collection of corrupt oligarchs and irresponsible leftists.
The counterproductive Latin American politics appears to result from excessively high inequality. The important driver is that the conditions of the classes are so radically separated, and the likelihood of poor people working themselves into the middle class so distant, that politics ceases to be a process of attempting to produce a better society and instead becomes a corrupt search for rents. The elite control the system for most of the time, diverting public resources to their own use and securing reelection by offering state handouts to the impoverished masses. The masses in turn have no incentive to vote for a party that might allow them to better themselves, so regard politics only as a process by which handouts are produced. The "Christian Democrat" parties so common in Europe, to some extent represented historically in both major parties in the U.S., never really appeared in Latin America.
This does not appear to be purely a cultural problem. Similar pathologies appear in Africa, when the society gets rich enough to have wide divisions of wealth, in the Middle East, to the extent democracy exists there, and in certain Asian societies such as the Philippines, with the highest Gini in Southeast Asia at about 48. It is particularly worrying that there are no recorded cases of a middle-income or wealthy country with a democratic government successfully emerging from a Latin American income distribution. Once such a distribution is entrenched, economic growth slows to a crawl and the pathological social system becomes permanent.
H.G. Wells postulated in his 1895 Time Machine the ultimate destination of a Latin American-style social system. In his future 800,000 years hence the human race has divided into two species, the eloi, who do no work and live only for trivial aesthetic pleasures and the morlocks, sub-men who work underground keeping the mechanical civilization running. Wells’s fantasy seemed far-fetched after 1920, as equality increased and the working classes became both educated and comfortably off. However the fantasy looks a lot closer to reality in 2007 than it did in 1957, when the movie was made.
In the U.S., one would expect political activity to begin showing Latin American characteristics, including a breakdown in social cohesion, as Gini rises towards Latin American levels. This appears to be happening. One example is the doubling since 2000 of the number of Washington lobbyists, whose objective is primarily to divert public resources to private uses. A second is the growth of earmarking in legislation, up 10-fold in the decade to 2005. Earmarks are generally inserted in order to benefit some private interest at the expense of the general good. U.S. politics has always been corrupt, and was especially so during the 1870-96 Gilded Age, the previous high point for inequality, but the increase in the proportion of GDP spent on lobbyists, on corrupt government spending, and indeed on elections themselves suggests that systemic corruption is rapidly increasing.
The new immigration bill is above all an example of class legislation. The Immigration Act of 1924, which largely restricted immigration to the richer countries of northwest Europe, produced the greatest social leveling the U.S. has ever seen, with the Gini coefficient declining by around 10 points between 1920 and 1965, the years of its salience. After 1965, immigration policy was reversed, to encourage a larger flow of immigrants, primarily from developing countries. Initially, this had only a modest economic effect. Then the 1986 amnesty encouraged low skill immigrants, allegedly now numbering 12 million, to try their luck with the overstretched immigration bureaucracy.
Whatever the economic effect of moderate amounts of skilled immigrant labor, almost certainly positive, the economic effect of large amounts of unskilled immigrant labor is very clear: it drives wage rates down to rock bottom levels, particularly in personal service sectors where training is minimal and employment informal. It is why even modest middle class households now have a cleaner and a gardener, and it is why enormous numbers of dubiously-constructed houses appeared when finance became available in 2002-06.
For the elite, the eloi of the HG Wells future we appear to be entering, this is all very attractive. The servant problem, butt of jokes ever since equality began to increase after World War I, has suddenly gone away – the rich can and do have as many servants as they want, provided they speak Spanish. Those who employ low skill labor no longer need make any pretence of paying union wage rates; they can simply hire illegal immigrants to fill any gaps that may appear. Corporate profits are at record high levels and service sector inflation, a bane in the 1970s and 1980s, has more or less disappeared.
The claim by eloi pro-immigration forces that the U.S. economy has a massive new “need” for unskilled labor is of course pure bunkum. If there are 12 million illegal immigrant workers in the economy, about 8% of the working population, then since we know the value of output, productivity is in reality about 8% lower than we thought it was. That means that productivity growth, far from accelerating in the mid 1990s as Wall Street fatuously claimed, in fact slowed, as more and more bodies were required to achieve the same output. GDP may have continued to increase, but GDP per capita is also 8% less than we thought, and hence has shown little growth. It is this that has caused the curious phenomenon of an apparent rapid increase in GDP that in practice makes nobody any better off.
However attractive illegal immigration is to the eloi, it is hell for the morlocks. Instead of the well paid factory jobs their fathers had, making physical products in which they could take pride, they are now reduced to competing with infinite numbers of illegal immigrants for personal service, retail and construction jobs that have not been mechanized or outsourced. The inability of the morlock element to achieve the modest comfort of their fathers brings other social pathologies. Since the morlocks are unable to “settle down” to marital bliss and a decent standard of living, illegitimacy and crime increase – only partly from the immigrants, legal or illegal, but also from the impoverished population as a whole. Political activity no longer offers hope of assistance, so they cease to vote or participate in politics, either directly or indirectly through unions and fraternal organizations. There is little point in saving, so they run up gigantic credit card debts. The eloi in turn withdraw themselves to gated communities, and Wells’s dystopia grows ever closer.
The new immigration bill, with its ineffectual enforcement provisions and its enthusiastically inserted loopholes through which even more immigrants can arrive, is perhaps the most socially divisive policy since the taille of the French ancien regime, a tax that was exacted from the poor and the middle class but not from the nobility. It stems from the same cause as the taille, a desire by the political class and its financial backers to entrench their superiority over the common herd.
Our choice of future is thus clear: Wellsian dystopia, or the Terror.Link here.
WHY EXPATS SHOULD CONSIDER A MOVE TO CHILE
There was a time in America when someone with a dream, ambition, and talent could make great things happen. It was a time when the government was not involved in every aspect of their lives, a time when you could start a business with an idea and little or no money, a time in which family and friends held a premium on your time.
Those days are gone. The days where the elderly were cared for by the younger generations is gone. Dad coming home at the end of his work day to his wife and family for dinner are gone. Mom having the option to stay at home with her children and take care of both are gone. The current U.S. is a country that is ruled by fear – and war-mongers. It is a place where precious little happens that the government, in some shape or form, is not involved. The government is in our business, schools, churches, and bedrooms.
If you receive too many packages in the mail – you go on a watch list. If you receive a wire transfer in excess of $3000.00 – watch list. Nearly everything you do has the potential to land you on a watch list of one sort or another. You have no privacy. I used to call people who held these types of beliefs weirdoes, nuts, paranoids, and all sorts of other things. I now call them brethren. I never paid attention to what was going on in our country. I was too busy earning a big, fat paycheck to care. As long as I was comfortable I turned a blind eye to the goings on of our government. I voted regularly, paid my taxes, and just kept on truckin’. Then September 11, 2001 happened and my whole life changed.
People were willing to give up any and all rights if it kept us safe, and our government exploited it to its utmost. First the Patriot Act, then the Patriot Act II, and now Bush’s Buddy list. None of the measures that are being taken are keeping us any safer than we were before. Not. One. Bit. We simply allowed the fear-mongers to exploit us and ram these new laws down our throats.
The other major problem in the U.S. is the sad treatment of our pensioners. They have been left trying to figure out if they are going to get their prescription medications or eat each month. That is why so many seniors have moved to other countries. Their Social Security dollars go much further and they can live quite comfortably on it elsewhere. Others, like myself, leave to other countries because we feel so strongly about the political situation in the States.
Whatever the reasons, great care should be given when making such a life-changing move. We need to consider our health, finances, and lifestyle before making the leap. Research on different countries should be done and if possible, contacts in those countries should be made. I can not imagine having done this without a good contact. It is possible to do without one, but it may be more difficult, especially if you are considering a move to a country where you do not speak the language.
Something else I find to be very important to consider is that cheap living should not be the first and foremost consideration unless you are very young, in excellent health, and willing to put up with a myriad of difficulties that many of us in our more advanced or advancing years simply would not wish to tolerate. If you are a middle-class American, you do not want to go to an undeveloped or Third World country. Yes, I have read the articles saying how you can live like a king or queen on your social security in one of these little island countries. The main price you pay for this is substandard living conditions, unless you you can afford to buy in a very exclusive area. By American standards, most houses in the Caribbean and South America are inexpensive. Just remember, inexpensive is relative.
My husband and I were living quite comfortably in Brooklyn, New York. Our first complaint was the amount of taxes we were paying. Between Federal, State, and local, I was only receiving about 43% of my earnings. Now, this big, fat salary was reduced to an OK income. It would not have been so bad except I saw my tax dollars being wasted in more ways than I could count. It seemed that only the very rich were prospering while the rest of us were in an ever steady state of declination.
Americans are also so stressed that they are taking pills for everything. I had to take sleeping pills at night just to shut my brain down enough that I could get a few hours sleep. My job had me jumping at all hours and I had little or no time to unwind and relax. No time for exercise. No time to prepare a fresh, healthy meal. I was becoming fatter by the second. This resulted in minor health problems that could have become major health problems had I not done something about it. When my husband and I went to Hawaii for our very first vacation in years, the first thing we noticed was how peaceful everyone was. Returning from Hawaii, we began to dream of something different.
We knew that living in Hawaii would be just as expensive as living in New York, and the end result would be that we would still be chasing the dime. That is not what we wanted. We began discussing the possibility of living in another country. Why not? We created a list.
The list began to grow and evolve over a few months time. We wanted to live in a developed nation. We ruled out European nations as they were too much like the States for our liking. We wanted a year-round warm climate, preferably with the ocean nearby. We did not want to have to worry about poisonous and other dangerous creatures, so that eliminated Australia and New Zealand. Another thing we considered was the educational system of the country and the disparity between the wealthy and the poor. We were looking for a country where there is a majority middle class. That really narrowed down the choices. Chile was at the top of the list.
Once we decided that Chile was probably the place we would choose for our new home, we began to look at different cities for climate and cost of living. We wanted year-round warmth with little variation in the temperature from season-to-season and little rain. That really narrowed down the choices! Arica was the only place that fit the entire bill. No heaters and no air conditioners are required. There has been no recorded rain in Arica. Ever. It is, after all, simply an oasis in the Atacama Desert.
The first thing you should know is that the bulk of your living expense will be housing. We have found a house with 4 bedrooms, 2 full baths, huge living and dining rooms, and a reasonably sized kitchen, front and rear patios, and within short walking distance to the beach for about $200.00 per month. Our immediate neighbors are a doctor, a lawyer, a policeman, and store owner. It is not a luxurious neighborhood, but it is very quiet, safe, and convenient.
If you love fresh fruits, vegetables, seafood, and chicken then you will be in heaven here. We have estimated our food bill to be about $1.50 per day - no, that was not a typo. The meat, fish, seafood, and produce is of excellent quality and superior in many ways to what we get in the States because nothing is fooled around with. It is all organic, nothing is genetically modified, or injected with hormones or antibiotics. You can still get your favorite junk food. Just be prepared to pay more for it than you will for fresh.
Costs of items vary. Things that are necessities are inexpensive and things that are luxuries are expensive. You should buy the best laptop or PC that you can afford before you come. If you require a printer, get that and plenty of ink refills as well. DVD players and VCRs are also on the expensive side here. If you buy them to bring along, make sure they are able to handle all formats. If you really have to have a television, your current TV may not be compatible. TVs are very expensive here.
Conversely, items such as refrigerators, stoves, washing machines (but not clothes dryers), and various other kitchen appliances are very inexpensive. They are smaller than those you find in the States because most of the kitchens are smaller. Of course, if you are buying fresh, you do not really need a large refrigerator. Broadband internet access is widely available, with pricing ranging from $15.00 to $40.00 per month, depending on whether you are using DSL, cable, or have a combination telephone service/DSL. Electricity, water, and gas are rarely included in the rents, and cost about $80.00 monthly, depending on how wasteful you are.
We brought our cat with us. The Chilean embassy’s web site stated that a health certificate from the veterinarian, no older than 15 days, certifying the animal to have rabies vaccinations no older than 6 months and no newer than 30 days as well as being free from parasites, both internal and external was sufficient. A friend, who brought her dog here told me that she required a certificate from a USDA veterinarian. She was right. This certification is required. Insist on one. I almost had my cat deported because of lacking one. The other thing we did was make sure our cat had in-cabin flight privileges.
You will never meet people who are more warm, friendly, and genuinely caring than you will here in Chile. We were here less than a week and had made enough friends to have a small dinner party. We really had no friends in New York. We had no time to nurture friendships as we were so busy working. Here, we can live more leisurely, meet people, socialize and finally enjoy life’s true meaning.
Arica is not for everyone. It is the desert, after all. If you prefer city life, then perhaps Santiago would be to your liking. If you want four seasons, then try the central lakes region, which is absolutely breathtaking. The choices are as vast and varied as this country is so, make your lists of priorities and do some research. Just remember to read all that is offered, as more than one perspective is a must. One man’s heaven may be another man’s hell.Link here.
AFRICA’S “CYBER” CURRENCY
Try to imagine, if you will, a cashless economy where there is no paper, no plastic, no coins – just mobile banking. Far-fetched? Now stretch your imagination a little. Imagine a virtual currency where pre-paid airtime is traded across national borders to exchange goods and services, cancelling conventional currency exchange and the associated costs from the equation as a prerequisite. Where at the touch of a button, value can be transferred from your bank, stored as airtime in your cellphone and used to purchase, say, a can of Coke from your local street vendor.
The very thought of those innovations in technology promises to reshape the trading system that underpins 21st century capitalism, multiplying its revolutionary impact on the lives of the poor, giving them facilities once available to the rich only. It is not the only currency in town, but mobile banking has already spawned a pseudo “cyber” currency in several African countries and emerging economies around the world.
Granted, as a trading system on a global scale, the phenomenon is in embryo, peculiar to less developed economies where banking services like ATMs and electronic banking are either remote or transferring money through banks is a slow, painstaking and expensive process. But it is growing at a breathless pace, says Gustav Vermaas. A few years ago Vermaas, whose payment processing company, Ventury, acts as an intermediary service provider between GSM networks, banks and end-consumers in Nigeria, Uganda and Tanzania by providing technological applications for airtime transactions, observed something unusual, purely by chance. More and more people were purchasing large amounts of airtime in Nigeria where Ventury has a contract with mobile phone operator Celtel to transact top-ups on prepaid phones.
At first, the transactions seemed fairly straightforward. “Instead of purchasing a voucher or scratchcard, people would purchase airtime using their phones. They would also, we discovered, trade airtime amongst themselves where, for example, someone with airtime worth 500 Naira sells airtime worth 200 Naira on to the next person in exchange for hard currency. The seller’s balance of airtime would be reduced by 200 Naira.”
This is not uncommon in Nigeria where MTN offers a similar service to consumers called DT. Then Vermaas noted unusually large top-up transactions in Nigeria where, instead of averages running at 200 Naira, individuals were purchasing top-ups worth 3000 to 5000 Naira. Very quickly the number of large prepaid top-ups were in bloom, which meant something was not quite normal. “It turns out that individuals were buying and selling airtime as a business. So you would go to Celtel and buy airtime worth 10,000 Naira then stand somewhere in a rural area where the logistics of getting hard cards is a nightmare and sell on the airtime.” That was the reason MTN Nigeria announced its prepaid top-up cards in Nigeria and the UK, allowing Nigerians living in the UK to buy airtime for members of family back home, as a convenient alternative to sending small amounts of money home.
Other big network operators and cellphone companies, including Vodaphone and Safaricom in Kenya, are investing heavily in the new market. The evolution of the system started out as a simple transaction to purchase airtime, strictly to make calls. Very soon, people in rural areas in just about every sub-Saharan African country were purchasing prepaid airtime from local vendors in cities and selling it on to merchants in rural locales, who in turn either rented the use of mobile phones to rural dwellers or sold the airtime on to them at a profit. That seems pretty normal on a continent where informal trading is everyone’s business. But the technological innovation did not stop there. The rate of airtime exchanging hands based on a relatively few large top-ups seemed an anomaly. “If so many people were topping up, why was this not reflecting on the system?” asks Vermaas.
When he investigated the reasons for this, he found something quite phenomenal. People were using airtime as a sort of virtual currency. “So instead of buying airtime off me, I would say I want to buy a can of Coke. You would say that costs 200 Naira. I would say would you take airtime, so instead of giving you 200 Naira in cash I would pay you with airtime.” Airtime had in effect become another means of exchange for goods and services, a “wallet in your phone” (or second currency) based on the stored value of prepaid vouchers.
Mobile banking had emerged on the scene. Suddenly banks, traditionally accustomed to the rarefied trade of the high-end formal market, woke up to the massive opportunity this presented to deploy mobile-banking applications which extend the formal financial service system to the poor – the unbanked – without customers having to incur the onerous administrative fees of ATM machines and point of service cash transactions. The critical mass to roll something like this out throughout the African continent was certainly a seduction. With over 3 billion mobile phone subscribers in the world, Africa is now the world’s fastest growing mobile phone market and, according to latest research, there are now more than 100 million mobile phones in use on the continent – one for every nine Africans. These are the unbanked who generally cannot afford the cost of formal banking services and infrastructure.
“Mobile phones not only break down communications barriers but offer a tradable commodity that is needed by the unbanked. The technology is there – meaning half the battle is already won,” says Vermaas.Link here.
THE TEMPORAL ILLUSION
We are at the brink of the police state, the Orwellian 1984 surveillance and control society, and on top of this horror there seems to be an environmental disaster approaching. All kinds of bad things seem to be happening in the not so distant future.
The war on drugs seems to be losing, it might not work as good as we thought and if we do not do anything about it, it might fail. The war on terrorism seems hopeless. No matter how much money is spent, how many laws are enacted, or how much controls are enforced, the terrorists might always be one step ahead of us. The war in (on) Iraq is not going too well. Unless more troops are sent there and more money invested in stifling resistance and wiping out insurgents the war might be lost.
Government spending is increasing rapidly and the national debt is increasing even faster. Unless things change we might end up a bankrupt nation. Public schools seem to be unable to educate our children. The number of people not learning how to read in our schools is increasing – if nothing is done things might become very, very bad. The quality of public health care might turn into a right-out nightmare if we do not do anything.
There is one common denominator in the above paragraphs is that they are all about horrors that might become real in the future. Not a single one of them discusses the outright and obvious failure of each and every one of these policies and issues – they all might fail, they are approaching failure, they could go wrong if nothing is done.
How come we as humans always tend to realize the real risk of horrors tomorrow, but not understanding the horrors that are already upon us? We are not at the brink of an Orwellian police state – it is already here. The wars on drugs, terrorism, poverty, and Iraq are not approaching failure – they have failed, and failed good.
If we cannot even see what we are in the midst of, then how can we expect to learn from the experience of previous years, never mind previous generations? We are doomed to have history repeat itself simply because we always aim for the future. We never stop to ponder what we really have and what mess we are in, our minds are fixed on what might be. This is a huge problem, not only because we as individuals might lose the greater part of our lives simply because we are not living it – we are living only in dreams of the future.
The real problem is political. Politics cements and reinforces the illusion of life being in the future rather than in the now . It forcefully teaches that the uncertainty of the future can only be managed by government. It is in the interest of political power to keep people from seeing the horrors of today. Whatever is happening in the now can be settled in the future ... a little more power granted government, and the future is safe. If people only think of the future, government plan to bring order and control to a seemingly chaotic and uncertain existence makes the size of government expand.
Habeas corpus is already gone. The wars on drugs and Iraq are already lost, and were probably lost even before they started. The U.S. is already broke. We are so deep in debt that it is already quite impossible to “do something.” The school system has already failed. The quality of health care and health care systems has al. There is no time to plan to do something. It is well past time to act.Link here.
MAN, FAMILY AND STATE
If statism is primarily an emotional reaction, it cannot be opposed with logical argument alone.
About a year and a half ago, I started recording libertarian podcasts in my car during my drive to and from work. It seemed like a fun way to kill the time in traffic, and it also gave me a chance to help clarify my thoughts with regards to various issues that people had written to me about after my first articles were published on Lew Rockwell. At first, my podcasts were largely concerned with the economics of anarcho-capitalism, and details regarding the implementation of my theory of Dispute Resolution Organizations (DROs), and how they could replace existing state functions.
I was impressed at how quickly this turned into a very involved philosophical conversation. At first, a few thousand podcasts a month were downloaded – then, this figure began to rise inexorably. In March of 2007, over 200,000 Freedomain Radio podcasts were downloaded, and tens of thousands of videos were viewed. The Internet is a wonderful medium for philosophy, because it can instantly distribute ideas to hundreds of thousands of people, and through message boards, can stimulate fascinating discussions on the resulting topics. Plus, philosophy was originally an oral art form, designed to be spoken and discussed, not just read.
The rigor of this new philosophical conversation was far beyond anything I had experienced before. As a community, we certainly talked about economics, politics and contemporary events, but it quickly became evident to me that where there is disagreement on fundamentals, there can be no real agreement on details – and that, relative to metaphysics, epistemology and ethics, politics is a mere detail. So, with the help of the listeners, I began to define the methodologies that we could use to help determine truth from falsehood – largely based on the scientific method, empirical observations and rigorous logic. And we made great progress, or so it seemed.
Then my wife, a practicing psychotherapist, said something extraordinary to me after reading one of my tracts on moral philosophy and the evils of the state. Looking up, she said, “It all starts with the family.” We mulled this over for some weeks, and then I decided to expand the conversation from philosophy to psychology and, in conjunction with my wife, began to trace our susceptibility to statism from our very first experiences of family life. In a series of podcasts, I put forth the proposition that the state is merely an effect of the family, and thus in order for libertarianism to really take root and flourish within society, what was required was not only a reevaluation of man, state and society, but a rigorous moral examination of the most essential social unit – the family.
This is when the conversation really began to take off! I received hundreds of e-mails from people about their experiences of authority within their own families, within the school system, within churches and other cultural institutions, which in general supported the role that our personal experiences with authority plays in our later susceptibility to impersonal authority, in the form of the state.
So far, this new direction seems to be really bearing fruit. If our adult susceptibilities to political hegemonies are rooted in our childhood experiences of authority, this helps explain why decades of talking about the evils of the state has done precious little to prevent the growth of the state. If statism is primarily an emotional reaction, or psychological defense mechanism, rather than a rational deduction, then it cannot be opposed with logical argument alone, but rather must be patiently undone through empathy and introspection.Link here.
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