Wealth International, Limited

Offshore News Digest for Week of November 19, 2007

Note:  This week’s Finance Digest may be found here.


I am writing from my coveted spot at a sidewalk café in the city’s fashionable Recoleta district. I was not planning to stop and whip out my laptop but (a), there are a lot of really elegant women in summer dresses walking by. Pretending to pensively look above the screen of my MacBook while deep in thought is good cover for what really is just unabashed gawking. And (b), I wanted to jot down notes from a very interesting conversation I just had with the proprietor of Distal Libros, the international bookstore tucked into a busy corner of the Recoleta.

I went into Distal Libros to buy an English language copy of Louis Romero’s seminal book A History of Argentina in the Twentieth Century. Imagine my surprise, therefore, when I saw the staff stocking six shelves full of Robert Kiyosaki’s Rich Dad, Poor Dad series in both English and Spanish.

Normally, I am not a fan of self-help books or personal finance books dumbed down for mass consumption. Even so, while I will not go so far as to say I am a fan of the Rich Dad series, I will happily endorse Kiyosaki’s premise that wealth is created by starting and running businesses, by actively investing in operating companies and productive real estate. That, as opposed to being an employee and trying to build wealth by saving or by eventually selling your personal residence at a profit. Whatever you might think of them, Kiyosaki’s books undoubtedly champion self-reliance and entrepreneurship. But six shelves full? I had to ask.

The proprietor approached and asked, “Senor, may I help you with anything?”

“Yes,” I replied, “do you have a copy of Romero’s A History ... no wait, are these books really that popular?” I stammered, pointing to the purple paperbacks.

He smiled. “Yes Senor. We sold out in August and it took us until now to get them in again.” To underscore the point, he retrieved a clipboard from behind the counter. “This is the order list for the Spanish version,” he said, pointing to a list of about 40 names. “And this is for the English version,” he added, leafing through an even longer list. Warming to the topic, he added, “Interestingly, many on the English list have the book in Spanish but also want to read it in English because they don’t trust the translation.”

“Why is it so popular?” I asked.

He gave a little chuckle before responding with a question of his own. “Have you read it, Senor? You should. It is about being responsible for yourself, not relying on the government or anyone else for your well-being. It also teaches you about building a business. But you are born with that, because you are from the U.S. Yes?”

Okay, so he recognized me for the gringo I am. But there is a certain truth to what he said. In the U.S., we are raised with certain expectations. Sure, more fail to meet those expectations, but most Yanks have, at one point or another, at least dreamed about starting their own business. That is a big advantage over the populations of the Earth who are raised with an almost serf-like attitude about their future.

Anyhow, I found this unexpected and entirely unscientific survey of one to be quite encouraging because we have been bullish on Argentina for some time now. We have liked it for its lifestyle, reasonably priced real estate and the underlying strength of the country’s commodity-based economy. But this was an unexpected surprise because the fly in the ointment for Argentina in modern times has always been a distinct tendency to shift toward destructive socialist policies, given the slightest opening to do so. Quick sell-outs of do-it-yourself books on capitalism are a definite step in the right direction.

One of the points my Without Borders co-editor Simon Black and I like to stress – and the reason for our constant travels – is that, in order to get a visceral sense of a country and its future, you need to get into the street. With a little encouragement, my new bookseller friend went on to talk about last week’s elections the result of which is that the First Lady and current Argentine Senator, Cristina Kirchner, was elected as the next president of Argentina.

This victory by the center/left Peronist party candidate is seen locally as an endorsement of her husband’s policies which were credited – right or wrong – with helping the country recover from the crisis of 2001 when Argentina defaulted on over $80 billion in loans. According to my new bibliophile buddy, the election bodes well for the economy and opportunities for entrepreneurs and, more specifically, women entrepreneurs. He also thinks it will bode well for the Buenos Aires Stock Exchange. “Just watch, people are just now ready to start investing in our own markets,” he said. “In fact, investing books are some of my best sellers, at least to locals.”

For those looking to diversify their money and their lives, the bookseller may be right. Based on our many visits to the country, we think there are still abundant opportunities to earn above-market returns in Argentina. While Cristina Kirchner’s impact on the economy is yet to be determined (her hubby had odd ideas like capping energy prices, causing an energy shortage ... surprise, surprise), the elections are important in that they give the country another four – and maybe eight – years of some form of political consistency.

While there are a number of interesting Argentine conglomerates that trade via ADRs on U.S. exchanges, there is a closed-end fund that we are now doing our due diligence on that looks to be an excellent proxy play on Argentina. Taking a broader-basket approach such as that may be the best approach. Even real estate, which we were buying for pennies on the dollar a few years ago, and which has appreciated measurably since, still offers an excellent value when compared to the bubble-like prices on offer in most of the world.

Another way to play it may be by looking to invest in neighboring Uruguay. The country is also known for its friendly business climate and a private banking sector that does good business helping Argentines find a home away from home for their money. With all the commodity wealth being created in Argentina, as well as in other parts of South America, we think Uruguay is destined to do very, very well for the foreseeable future.

I am thinking of devising a new economic indicator that the global-minded should have in the top right-hand corner of their computer screen. It is to be called the Elegance Quotient. Very simply, the EQ will be calculated by taking the elegance factor of the place (somewhat subjective, to be sure) and dividing it by a weighted average basket of the goods and services that you most enjoy.

London, Paris, Barcelona, Singapore, Shanghai, San Tropez and Hong Kong will all have impressive numerators, but they will also have depressing denominators ... namely the high cost of pretty much everything.

My basket will include a bottle of good wine, a custom suit, a steak dinner, a gym membership, a cross-town taxi ride, a night in a 5-star hotel, a hand-rolled cigar and a maid’s monthly salary. Based on those inputs, Buenos Aires and Punta del Este, Uruguay will rank right at the top of the index.

Link here.


We are traveling with a full house this week on our Import-Export Expedition. Yet wherever we go one great thing is that we are never far from home because of two evolving technologies.

With our tiny 12" by 12", 3+ pound laptops, my wife, Merri, and I can call my Mom, our kids, our friends or almost anyone, almost anywhere in the world, almost for nothing. This is a trend that is transforming the utility of many people and places. This shift will create fortunes.

We are visiting markets where one can buy organic Andean and Amazonian spices at low prices to pack and resell at high markups as part of our Import-Export expedition right now. We have turned an out-of-the way Blue Ridge Farm and a tiny Andean village into international business centers with this technology. Land that used to be worth a little is now worth a lot. You can cash in too, if you figure out these dynamics before everyone else does.

VoIP (Voice Over Internet Protocol) and Wireless Broadband are changing the world. A few years ago I spoke at a seminar along with Ian Pierson, the head futurist for British Telcom. One of the points he made was that he had advised BT that within 10 years they would not be able to charge for phone calls. Now five years later, with VoIP, this is almost the case.

Merri and I do not have a long distance carrier anywhere. We place all our calls through VoIP. VoIP is a big part of the transformation, but wireless broadband is what really opens up this field. We were lucky at our Blue Ridge farm because the telephone company decided to introduce DSL (telephone line broadband).

But most of the rural world will not have easy access to this. This is where there could be an even greater innovation, Wireless Internet Broadband (WIB). WIB means that VoIP can be introduced quickly all over the world. WIB is the best way to get broadband connectivity in rural and semi-rural areas all over the world. WIB is just like other internet plans, giving incredibly fast speeds and “always on” features equal to cable or ADSL broadband technologies.

However, the similarities stop there. WIB customers connect to the internet wirelessly over the air, rather than through a phone line or cable. This means they get the benefits of broadband internet, plus freedom that only wireless internet can offer. Years would have passed before wired broadband would have reached out tiny village of Cotacachi. Yet we have it now because all we have is a line-of-site radio tower. It operates through tower transmitters just like cell phones. You get a very small dish pointed at a tower which may be miles away and – viola! – you have high speed always on internet.

This is good enough, but here is the #2 punch. With VoIP my computer also becomes a phone. In North Carolina we use Vonage which provides a small computer box that connects to our computer and the phone. In Ecuador we use Skype. My computer and a headset is the phone. We, in each case were allowed to choose a phone number anywhere in the world. We chose a Lakeland, Florida number so our daughter could call us with a local call. But though she (or whoever) dials a Florida number, the phone (actually the computer) rings here in Ecuador (or wherever we happen to be) as long as we are connected to the internet.

Our calls out are extremely inexpensive. If we are calling someone who is also signed onto Skype, the call is Free. Otherwise calling the U.S. from Ecuador for example is about 2 cents a minute.

These two innovations change everything, but I am not suggesting that you invest in VoIP or WIB businesses. The big potential is from spotting how these two innovations change people, places and businesses. For example, land here is cheap because it is viewed as remote. Yet these technologies have erased the concepts of time and space! I can set up a business here with very low labor and real estate cost, but can serve clients in high cost areas.

Here is another tip. There will be two steps that take place in this evolution. First, we will move from using computers to using interactive TV and the phone. Too many people are afraid of computers because they are too user unfriendly. But everyone knows how to use the TV and the phone. Second, we will shift from the typed word to voice. Not everyone can type but most of us can talk.

Look for ways that VoIP and WIB will change things and look for businesses that cash in on these easier to use interfaces. These are trends that can make you rich.

Link here.


The United Arab Emirates, Russia and Hong Kong are amongst the world’s most benign personal tax environments while Belgium, Denmark and Hungary are the least attractive, according to a survey of expatriate hot spots by Mercer, the global consulting firm. The data also shows that, in general, married employees are better off than single employees, while married employees with two children fare the best.

Mercer’s 2007 Worldwide Individual Tax Comparator Report analyzed the tax and benefits systems across 32 countries, focusing on personal tax structures, average salaries and marital status. This data is used by multinational companies to structure pay packages for their expatriate and local market employees.

For single managers, the UAE is the most attractive tax environment according to percentage of net income available. The UAE does not assess any income tax, and the country’s social security contributions amount to only 5% of an employee’s gross salary. Russia, ranked #2, applies a flat tax of 13% across all income levels, while Hong Kong was placed 3rd, with taxes and social security contributions at 14.2% of gross base salary.

Excluding Russia, in general, European countries have less attractive tax environments and dominate the bottom of the rankings. The UK ranks joint 14th, followed by Ireland (18), Spain (19), and Switzerland (21). France and Germany are ranked 22 and 29 respectively. At the bottom of the rankings, single managers in Hungary (30), Denmark (31) and Belgium (32) pay, respectively, 48.5%, 48.6% and 50.5% of their gross income in taxes and social security contributions.

Markus Wiesner, Mercer’s head of operations in Dubai, said, “We often find that the UAE’s zero taxation is a strong draw for expatriates on short-term assignments. For three to five years, young professionals can fast-track their savings to afford a mortgage when they return home, while senior executives can maximize their savings potential ahead of retirement. It is in these particular groups that we get a really good mix of expatriate talent in Dubai.”

Asian markets dominate the top end of the rankings with Hong Kong, Taiwan, Singapore, South Korea and China (Beijing) ranked 3, 4, 5, 6 and 7. The lowest ranked Asian market is India at 14 (sharing this position with the UK, Australia, and the U.S.). In the Americas, Mexico (8), Brazil (9) and Argentina (10) outrank the U.S. (14) and Canada (20).

Link here.


The OECD has released new GDP and household consumption comparisons based on purchasing power parities showing that Switzerland’s GDP per head slipped from 30% to 20% above the OECD average between 2002 and 2005, while Ireland and Luxembourg are two of the only four major countries with GDPs more than 25% above the average – in Luxembourg’s case a stunning 146% above.

The new comparisons show the level of GDP per head has risen closer to the OECD average in a number of countries including Turkey, Mexico, the Slovak Republic, Hungary, Poland and the Czech Republic. Italy’s GDP per head fell from a level that was 5% above the OECD average to a level 5% below between 2002 and 2005. Meanwhile, the rising value of Norway’s oil exports helped its GDP per head jump from 45% to 65% above the OECD average.

The latest PPP calculations also show that the share of GDP represented by household consumption of goods and services can vary considerably from country to country. Britain’s GDP per head is about 7% above the OECD average but its actual individual consumption is 20% above the average, due to low levels of investment, according to the OECD. The situation is the opposite in the Netherlands and Australia where the relative ranking of GDP per head is higher than for consumption per head.

The comparison tables cover the 30 member countries of the OECD, the 27 member states of the E.U., ten CIS countries, six Western Balkan countries and Israel.

Countries scoring between 100% and 124% of average include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Iceland, Japan, Netherlands, Sweden, Switzerland and the U.K. Coming in between 75% and 99% are Cyprus, Greece, Israel, Italy, New Zealand, Slovenia and Spain. Those in the 50% to 74% range are the Czech Republic, Estonia, Hungary, Korea, Malta, Portugal and the Slovak Republic.

The OECD points out that GDP per capita makes no allowance for international transfer payments such as profits received from abroad or remittances sent abroad. Gross national income (GNI) takes such flows into account. For some countries, in particular Switzerland, Ireland and Luxembourg, moving from GDP to GNI can markedly change the picture, putting the GDP per capita figure into perspective. For example, Swiss GNI per capita is estimated to be at more than 30% over the OECD average, significantly higher than GDP per capita (index of 122), signaling net transfer payments into Switzerland. The opposite holds for Ireland and Luxembourg. Measured in terms of GNI per capita, their index relative to the OECD average falls from 131 to around 110 for Ireland, and from 246 to around 200 for Luxembourg, signaling the presence of significant net transfers out of these countries. For most other OECD countries, GNI and GDP rankings are very similar.

The OECD also cautions that, while GDP and household consumption are indicators of economic and consumer activity, they should not be mistaken for direct measures of the well-being of citizens. This encompasses many elements, such as the health status of the population, the environment or the level of security. GDP is an important milestone in the measurement of citizens’ well-being, but only one.

Link here.


For the British and other Europeans, there has rarely been a better time to visit America. The weak dollar makes the U.S. bargain basement for nearly everything. That, and coast to coast tourist attractions should mean this is the destination of choice. But for many it is not anymore.

Official figures show a half a million fewer Brits traveled to the U.S. last year than in 2000, down 11%, while their visits to Turkey, the Caribbean, India and New Zealand are all considerably higher. Because more than four million Britons still come to the U.S., it is tempting to dismiss the downturn, until you consider the hard figures.

The U.S. business group, Discover America Partnership, says, “The overall 17% decline in overseas travel to the U.S. since 9-11 has cost America $94 billion in lost visitor spending, nearly 200,000 jobs, and $16 billion in lost taxes.” Some areas feel it worse than others. Foreign visitors are down in Boston by 25%, Miami 33%, Chicago 21% and L.A. 29%. How much worse would it be were it not for the weak dollar?

Fewer foreigners experiencing the good of America has another detrimental effect – there are fewer travelers to counter anti-U.S. feelings and propaganda when they get back home. Jonathan Tisch, owner of the New York Giants and chief advisor to the Commerce Department’s Tourism Board, told London’s Daily Telegraph that too little has been done to promote the U.S. and ensure visitors feel welcome.

The Telegraph story was posted on the paper’s Web site, and readers offered their views about why they are reluctant to visit America in the comments section. Perhaps, it is worth citing some of them.

One commented, “There is no way I will travel to the States anymore and put up with the rudeness and incivility of the immigration staff there.”

Another says, “The entry formalities into the U.S. are demeaning. They have the right to impose whatever security checks they want, we have the right to holiday elsewhere.”

This seemed to be the theme picked up by many. “I refuse to visit a country that fingerprints me on entry.” Another echoed that, saying, “The U.S. is the only country in the world where tourism is regarded as a criminal activity.”

A professor who went to New York to present a paper at a conference says, “I was treated so badly. I expect because I am brown and have a Muslim name. The immigration officer was aggressive, rude and I left in a state of shock, unable to sleep I was so scared. I will never go back.”

And once through the airport, is it any better? Not for some. One said, “California police act as highwaymen. Hiding, ready to jump out and catch a misfortunate tourist. There are plenty more welcoming places on Earth.”

Some report being treated with respect, that they understand why security is tight and are willing to live with it to have a great time.

While it may be easy to dismiss the feelings of a bunch of foreigners, it is not so easy to dismiss the hit the U.S. is taking. 200,000 and counting are a lot of U.S. jobs to lose. However, the greater danger is that first impressions are lasting impressions. As one person lamented, “U.S. fears have turned to paranoia, with the culture of a once welcoming nation tossed out the window.”

Link here.


A group of influential U.S. lawmakers is urging the Bush administration to review its policy on internet gambling, arguing that new legislation easing restrictions on the activity in the U.S. is preferable to paying off the country’s trading partners, and potentially unraveling a complex and fragile set of WTO agreements and commitments.

The Congressmen, who include House Financial Services Committee Chairman Barney Frank, House Judiciary Committee Chairman John Conyers and six others, have made their views known in a letter to U.S. Trade Representative Susan Schwab, which has criticized the administration’s apparent obstinance, in refusing to overturn legislation which effectively shut off certain types of internet gambling and blocked access for foreign gaming firms to the lucrative U.S. market, despite WTO rulings that the U.S. breached trading rules by doing so.

“Your agency has chosen not to consult with Congress, but instead to take what we view as a drastic step which could have significant consequences for the whole WTO system,” the letter stated. “We are writing to express our interest in considering possible legislative solutions that might restore U.S. compliance with the GATS (General Agreement on Tariffs) without renouncing any of our commitments under that agreement,” the legislators added.

The U.S. is facing compensation demands from several major trading partners, including the E.U., India, Japan, Costa Rica, Macao, Canada and Australia after withdrawing from its WTO commitments in respect of internet gaming to sidestep a negative WTO ruling, the result of a complaint from Antigua & Barbuda, a major domicile for global e-gaming companies.

Under WTO procedures, and following two failed sets of negotiations, the U.S. now has until 14 December to respond to the compensation demands. If the talks fail again, the U.S. and its allies can demand binding arbitration. However, the other lawmakers believe that the time has now come for the U.S. government to accept that it was wrong to sanction the Unlawful Internet Gambling Enforcement Act, passed in 2006, and back legislation reopening the internet gaming industry in the U.S. Carrying on down the current road, they argue, will be “expensive to the U.S. economy” and damage America’s credibility as a trading partner.

Link here.


Robert Kimmitt has hinted at plans to alter the country’s corporate tax regime in order to ensure U.S. businesses are able to compete effectively with their international counterparts. Speaking in an interview on CNBC, Mr. Kimmitt stated that, “I would anticipate that you will see something before the end of the year. ... We have been working both inside the administration and consulting closely with the Congress about the need for the corporate tax code to be more competitive.”

Commenting meanwhile on the Alternative Minimum Tax “patch” currently stalled in Congress, Mr. Kimmitt observed, “We need to separate the debate on tax policy from tax administration, which is not a political issue.” He went on to add that “inevitable delays” in the tax filing season would result from the impasse between Democrats and Republicans over how to pay for the AMT patch.

Link here.
U.S. Congressmen introduce tax technical corrections bill – link.


The IRS is looking for 115,478 taxpayers who are due refund checks worth about $110 million, after the checks were returned as undeliverable. The refund checks, averaging about $953, can be claimed as soon as taxpayers update their addresses with the IRS. Some taxpayers have more than one check waiting, the tax authority has revealed.

The “Where’s My Refund?” tool on IRS.gov enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status, and amount of refund shown on their 2006 return. The tool will provide the status of their refund, and in some cases provide instructions on how to resolve delivery problems.

The number of undeliverable refunds each year is a relatively small portion of all refunds returned to taxpayers. So far in 2007, the IRS has processed nearly 105 million refunds, totaling about $240 billion, either by mail or direct deposit.

Link here.


President Bush announced his intention to nominate Douglas H. Shulman to be Commissioner of the IRS. Shulman currently serves as Vice Chairman of the Financial Industry Regulatory Authority, previously known as the National Association of Securities Dealers.

Welcoming the nomination, Treasury Secretary Henry Paulson stated that he was “extremely pleased,” describing Shulman as a “highly capable executive. ... His experience as Senior Policy Advisor and Chief of Staff on the National Commission on Restructuring the IRS provides him with fundamental knowledge of the IRS and its critical responsibility of administering the tax code.

“Doug is an excellent choice to lead the IRS. His energy, creativity, strong management skills, and technology experience will ensure that the IRS fully serves its mission to provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness.”

Earlier in his career, Shulman served as Vice President of Darby Overseas Investments. Prior to this he served as Senior Policy Advisor and later Chief of Staff of the bi-partisan commission on restructuring the IRS. The IRS has not had a permanent Commissioner since Mark Everson left to lead the American Red Cross in May.

Link here.


Legislation has been introduced into the U.S. Senate to prohibit the U.S. Patent and Trademark Office (USPTO) from granting patents for common tax strategies and tax planning inventions. The legislation was introduced last week by Senate Finance Committee Chairman Max Baucus (D-Montana) and Ranking Republican Member Chuck Grassley (R-Iowa). The Senators explained that to date, the USPTO has granted 60 tax patents, with 99 pending final decisions.

The new measure seeks to protect taxpayers and tax practitioners from incurring fees when they use routine tax strategies. Additionally, the bill addresses fears that some tax patent applications are for tax shelters.

Said Grassley, “Tax patents undermine the integrity and fairness of the federal tax system. They put taxpayers in the undesirable position of having to choose between paying more than legally required in taxes or paying a royalty to a third-party for use of a tax planning invention that reduces those taxes.”

Tax planning inventions generally include tax plans, strategies, techniques, schemes, processes, or systems that are designed to reduce, minimize, avoid, or defer a taxpayer’s Federal or state tax liability. The U.S. Treasury Department recently expressed concerns about patent protection for tax planning methods, and issued proposed regulations that added patented transactions as a new category of reportable transactions.

The bill would amend Title 35, Section 101 of the United States Tax Code.

Link here.


Yet another contentious dossier will be added to the raft of unresolved VAT issues currently bogging down the EU’s legislative processes after Tax Commissioner Laszlo Kovacs said last week that he was planning to tackle the exemption of financial services from VAT, which prevents companies in that sector from reclaiming VAT they have paid out.

Many member states and large parts of the financial services industry would prefer to see zero-rating of financial services, which would permit the reclaim of “input” VAT. But it would also result in loss of revenue for member states, so that the unanimity rule on taxation issues will probably stand in the way of change, as has happened with proposals to do away with concessionary VAT rates (opposed by Britain) and introduce destination VAT charging for e-commerce services (opposed by Luxembourg).

The new non-constitution for the EU, even if it is ratified, does not address the unanimity rule on tax issues. But there is a way around it, called the European Court of Justice, which has been busily rationalizing tax legislation with its rulings, to the horror of eurosceptics and treasuries across the Union. Those member states that currently charge full VAT on some financial services will presumably resist Kovacs’s proposals, but the ECJ has been nibbling away at the inconsistencies created in international transactions by differential cross-border VAT treatments.

The ECJ has also leveled out the investment fund playing field with a recent ruling that VAT exemption will apply to the management of Investment Trust Companies. It is expected that the ECJ’s ruling will also impact pension funds, unit linked life assurance policies, investment clubs and venture capital trusts. The management of conventional collective investment funds under UCITS has been exempt from VAT for many years.

The Commission has been studying the problem of exemption for financial services for some time. The current rules militate against cross-border banking concentration, something that is badly needed in Europe, because the provision of inter-bank services is liable to VAT at rates up to 27%, which is unrecoverable.

“When banks merge, savings can amount to as much as 15% on particular services such as information technology platforms, but if, every time a bank has to bill another department for services, that department has to pay VAT, that can cancel out the profit,” said a European Banking Federation spokesman.

Link here.
EU to strengthen defences against VAT and excise tax fraud – link.


But fess up anyway, he advises.

Business and financial adviser Grant Thornton says HM Revenue and Customs’s second offshore “amnesty” is unlikely to generate much additional revenue for the Treasury. HMRC is currently receiving the final payments from its first Offshore Disclosure Facility (ODF), which ended earlier this year. Those who volunteered under this scheme had to pay the tax owed, interest, and a 10% penalty on all unpaid taxes over £2,500 – considerably less than the usual 30% – if they provided information by 22 June 2007. In some complex cases it was also possible to negotiate with HMRC over the repayment date.

However, Gary Ashford, tax investigations director at Grant Thornton, says that while it is likely that there will be a late influx of payments this month from those wanting to avoid the heavier penalties, HMRC will be somewhat disappointed with the amount of revenue generated. “It was initially thought billions could be recovered. It is now likely to be more like millions that will surface,” Ashford explained. “It may even be a case of HMRC having overestimated how many people hold undisclosed offshore accounts.”

He went on, “However, it looks like HMRC are about to embark on a second amnesty. They are already targeting another group of around 150 financial institutions in a bid to gain customer details. Given the existing legal rulings on the large banks it seems likely that HMRC will be successful in obtaining customer information relatively quickly. HMRC is determined to make examples of tax dodgers but will be looking to encourage them to disclose as they did with the Offshore Disclosure Initiative.”

Whatever the case, Ashford is advising those who have yet to come forward to do so or risk hefty tax bills. “One hears of anecdotal tales of individuals moving their funds to ever more exotic locations to avoid HMRC, but given the international cooperation taking place between tax authorities in relation to the exchange of information, it seems only a matter of time before the taxman catches up with them. Anyone concerned should seek financial advice from a tax expert sooner rather than later,” he concluded.

Link here.


UK Chancellor Alistair Darling has made unreserved apologies after discovering earlier this week that the personal details of over 25 million individuals in the UK have been lost in a colossal blunder by HMRC. Mr. Darling said that the error occurred after a junior official placed two discs full of information into a general post by accident.

The package was not sent by recorded delivery, and has failed to be traced since leaving the office. The discs contained names, addresses, dates of birth, child benefit numbers, National Insurance numbers and bank or building society account details of some 25 million individuals and 7.25 million families.

Mr. Darling spoke out earlier this week, attempting to reassure those whose information has gone missing that the discs in question are protected by secure passwords. “Our priority was and is to find this data. Searches have been and continue to be carried out, including of HMRC and NAO premises”, he said. “taff are being interviewed. But so far the missing data has not been found ... The police tell me that they have no reason to believe that this data has found its way into the wrong hands. The police are not aware of any evidence that it has been used for fraudulent purposes or criminal activity. ...I regard this as an extremely serious failure by HMRC in their responsibility to the public. ... Banks and building societies are putting in place safeguards to protect people’s accounts [and] will continue to monitor their accounts. No-one will suffer any loss if they are an innocent victim of fraud.”

Allen Blewitt, Chief Executive of ACCA (the Association of Chartered Certified Accountants) offered the following views in response to the Chancellor’s announcement: “ACCA is alarmed at this week’s announcement by the Chancellor, and especially that errors within HMRC have come to a head in such a way. We always knew there were issues with the department, and in the early stages of the merger from Inland Revenue and Customs & Excise into HMRC, teething problems could be expected.But after this weeks’ announcement, it is apparent that the problems are more deep rooted and endemic.”

In the light of the seriousness of the blunder, Paul Gray, the Chairman of HMRC, has announced his intention to step down from his post. This comes at an especially difficult time for Chancellor Darling, who is still working to recover the trust of the electorate after the Northern Rock crisis earlier this year.

Link here.


Canadian Minister of Finance, Jim Flaherty, has tabled in the House of Commons the Budget and Economic Statement Implementation Act, to effect the C$60 billion of broad-based tax relief proposed in the October 30, 2007 Economic Statement. The Act also includes Budget 2007 measures not included in the Budget Implementation Act, 2007, which received Royal Assent on June 22, 2007.

According to Flaherty, the tax cuts will reduce the overall level of taxation in Canada to its lowest level in decades: “Our government is reducing taxes across the board for every Canadian individual and business that pays tax. As a result of our efforts since taking office, taxes will fall by some (C)$190 billion over this and the next five years to their lowest level since the early 1960s. This is an achievement of which we can all be proud.”

“Our government is reducing taxes across the board for every Canadian individual and business that pays tax,” he stated. “As a result of our efforts since taking office, taxes will fall by some $190 billion over this and the next five years to their lowest level since the early 1960s. This is an achievement of which we can all be proud.”

Link here.


The Vietnamese National Assembly voted to approve changes to the country’s personal income tax rules, including the introduction of a new 20% tax on income from stock investment. The changes were reportedly approved by nearly 80% of deputies, and are set to come into force in January 2009.

According to a Vietnam News report, in addition to the 20% stock tax, which is not expected to have a significant adverse impact on the still developing stock market, personal income tax thresholds were adjusted, and taxation levels set for income from dividends and interest, royalties, lottery wins, and other gains from gifts or inheritances.

The new stock tax has reportedly met with mixed reactions, with some observers suggesting that it may help to prevent damaging speculative investments, while others argue that the rate has been set too high.

Link here.


Concern is well-founded, given the study was launched under pressure from leftist, pro-big government interests.

The Center for Freedom and Prosperity Foundation, the free market think tank, has sent a letter to World Bank’s President Robert B. Zoellick expressing concern about an upcoming study on the “development impact of off-shore financial centers.”

The CF&P Foundation wants to ensure that the study’s results are not influenced by an ideological bias against tax competition and fiscal sovereignty, and it argued that the World Bank should consider compelling evidence pointing to the positive effects that low-tax jurisdictions have had on global prosperity.

In his letter to Zoellick, Andrew F. Quinlan, President of the CF&P Foundation, suggested that, “Tax rates have been dramatically reduced in recent decades as tax competition has encouraged nations to adopt pro-growth policy in an effort to attract and retain capital. These lower rates have helped boost global economic growth – a result that is helping to lift tens of millions of people out of poverty.”

Quinlan went on to argue that offshore financial centers “are a key part of this process” as their tax-neutral platforms encourage global investment and finance activity and because their fiscal regimes increase tax competition, thus pressuring uncompetitive nations to lower tax rates and reform tax systems. “The World Bank should not undermine tax competition,” Quinlan’s letter continued. “Instead, the World Bank should embrace tax competition for its ability to stimulate pro-growth policies that encourage investment and innovation.”

According to the CF&P, the World Bank has launched the study on offshore financial centers under pressure from the government of Norway and the Tax Justice Network (TJN), which the Center describes as “openly hostile to tax competition” and “unambiguously” in favor of higher tax rates and bigger government. “The World Bank has been widely criticized for failing in its core mission of promoting economic development, so it is unclear why resources should be misallocated to appease Norway’s leftist government,” the CF&P has stated.

“There’s a clear risk that the study will be used as a launching pad for the tax harmonization schemes long sought by the [OECD], United Nations, European Commission and other international bureaucracies hostile to fiscal sovereignty and economic freedom,” it warned.

Link here.

World Bank and PricewaterhouseCoopers release “Paying Taxes 2008” report.

Tax reforms that make it easier for firms to pay taxes can increase government revenues by broadening the tax base, according to “Paying Taxes 2008”, a report published this week.

“Paying Taxes 2008” is the second report in an annual series by the World Bank, IFC, and PwC, covering 178 countries worldwide. The report presents new empirical evidence that there is a win-win opportunity for governments and firms in simplifying tax systems, easing compliance costs on business, and reducing tax rates.

According to PwC, “The study allows direct comparison of tax systems from around the world by use of a standardized case study. The Report uses the Total tax framework developed by PricewaterhouseCoopers which demonstrates again that corporate income tax is only part of the story. Governments need to look at all of the taxes that companies pay when considering their reform agenda.”

Link here.


Prosecutors in the British Virgin Islands have claimed there is “overwhelming evidence” that Russia’s Telecommunications Minister, Leonid Reiman is the main beneficiary of an offshore fund which owns substantial assets in companies that his ministry regulates.

The Wall Street Journal revealed last week that Terrence F. Williams, the BVI’s director of public prosecution, told the U.S. Justice Department in a letter filed last month that it was preparing charges against Jeffrey Galmond, a Danish lawyer and a close associate of Reiman. Galmond is accused of obscuring the fact that the Russian minister is the beneficial owner of the Bermuda-based IPOC International Growth Fund Ltd., which is said to hold sizeable holdings in Russian telecommunication firms, including Megafon, the country’s 3rd-largest mobile operator. Reiman is said to be a close ally of Russian President Vladimir Putin.

The letter, a request for legal assistance, described the BVI prosecutor’s office investigation to establish whether the IPOC fund is a “front” for the laundering the proceeds of crime, including those of Reiman. Some of the companies involved in the 3-year investigation in the BVI are also registered in the U.S., the letter revealed, hence the request by Williams for legal assistance by the U.S. Justice Department.

According to the WSJ report, the letter explained that preliminary criminal charges have been drafted, which include one count against Galmond for perjury and perverting the course of justice, and four counts of “acquisition, possession and use of the proceeds of criminal conduct” against Galmond and a director of IPOC.

At the center of the affair is a long-standing dispute between IPOC and Alpha Group, an industrial holding firm which also has major investments in Russian telecoms firms, in addition to Russian oil companies. Through its lawyers in the BVI, Alpha is alleging that $40 million in legal costs put up by IPOC were sourced from the proceeds of crime. IPOC argues that the money originated from consultancy services it supplied to a number of entities, including U.S.-based ones. But prosecutors in the BVI now believe that these consultancy agreements were in fact “shams”. A civil tribunal in Switzerland has also ruled that Reiman secretly owns stakes in Russian telecoms through the IPOC fund.

Reiman has consistently denied any link to the IPOC fund and allegations that he owns holdings in Russian telecom firms. “I would like to own just the tiniest part of what is being claimed I do,” he said in a statement relayed to the Financial Times. IPOC has also pointed to the results of an investigation by Russian prosecutors in 2006 which uncovered no evidence of money laundering by the fund.

Link here.


Pooled mortage-backed securities holders ruled to not have title to the underlying loans or real estate.

Judge Christopher A. Boyko of the Eastern Ohio U.S. District Court, on October 31, dismissed 14 Deutsche Bank-filed foreclosures in a ruling based on lack of standing for not owning the mortgage loan at the time the lawsuits were filed.

Judge Boyko issued an order requiring the Plaintiffs in a number of pending foreclosure cases to file a copy of the executed Assignment demonstrating Plaintiff (Deutsche Bank) was the holder and owner of the Note and Mortgage as of the date the Complaint was filed, or the court would enter a dismissal. The Court’s amended General Order No. 2006-16 requires Plaintiff (Deutsche Bank) to submit an affidavit along with the complaint, which identifies Plaintiff as the original mortgage holder, or as an assignee, trustee or successor-interest.

Apparently Deutsche bank submitted several affidavits that claim that Deutsche was in fact the owner of the mortgage note, but none of these affidavits mention assignment or trust or successor interest. Thus, the Judge ruled that in every instance, these submissions create a “conflict” and they “do not satisfy” the burden of demonstrating at the time of filing the complaint, that Deutsche Bank was in fact the “legal” note holder.

While the decision is great for homeowners in distress – it provides a new escape hatch out of foreclosure – it is a big blow to the cause of sorting out the high-finance side of the mortgage mess. Jacksonville Area Legal Aid Attorney, April Charney, made these comments regarding the Ohio Federal Court ruling:

This court order is what I have been saying in my cases. This is rampant fraud on every court in America or nonjudicial foreclosure fraud where the securitized trusts are filing foreclosures when they never own/hold the mortgage loan at the commencement of the foreclosure.

That means that the loans are clearly in default at the time of any eventual transfer of the ownership of the mortgage loans to the trusts. This means that the loans are being held by the originating lenders after the alleged “sale” to the trust despite what it says per the pooling and servicing agreements and despite what the securities laws require.

This also means that many securitized trusts do not really, legally own these bad loans.

In my cases, many of the trusts try to argue equitable assignment that predates the filing of the foreclosure, but a securitized trust cannot take an equitable assignment of a mortgage loan. It also means that the securitized trusts own nothing.

This opinion, once circulated and adopted by state and Federal courts across the country, will stop the progress of foreclosures, at first in judicial foreclosure states, across America, dead in their tracks.

So with this decision, it appears confirmed that investors in the mortgage debacle may in fact own nothing – not even the bad loans they funded! It seems their right to the cash flow from the underlying properties does not translate to ownership of the properties themselves, thus clouding the recovery picture considerably.

We agree with additional remarks Charney made pointing out that this decision has major adverse implications for the prospects of an amicable financial workout for the various investor contingents in mortgage-backed securities (MBSs). Doubt is cast on where the full write-downs will eventually land, and this uncertainty can only be expected to further harm the market value of MBS and MBS-based synthetic securities, already in shambles purely due to rising underlying delinquencies. Investors in these securities might have assumed – wrongly, it turns out – that they actually owned some “real estate” in these deals.

To paraphrase Jim Cramer, “They own nothing!”

Link here.


They also take all the gold.

From: Liberty Dollar <truth@libertydollar.org>
Date: Thursday, November 15, 2007 10:12 AM Subject: FBI Raids Liberty Dollar – Confiscates All Ron Paul Dollar

Dear Liberty Dollar Supporters:

I sincerely regret to inform you that about 8:00 this morning a dozen FBI and Secret Service agents raided the Liberty Dollar office in Evansville (Indiana).

For approximately six hours they took all the gold, all the silver, all the platinum and almost two tons of Ron Paul Dollars that where just delivered last Friday. They also took all the files, all the computers and froze our bank accounts.

We have no money. We have no products. We have no records to even know what was ordered or what you are owed. We have nothing but the will to push forward and overcome this massive assault on our liberty and our right to have real money as defined by the U.S. Constitution. We should not to be defrauded by the fake government money.

But to make matters worse, all the gold and silver that backs up the paper certificates and digital currency held in the vault at Sunshine Mint has also been confiscated. Even the dies for mint the Gold and Silver Libertys have been taken.

This in spite of the fact that Edmond C. Moy, the Director of the Mint, acknowledged in a letter to a U.S. Senator that the paper certificates did not violate Section 486 and were not illegal. But the FBI and Services took all the paper currency too.

The possibility of such action was the reason the Liberty Dollar was designed so that the vast majority of the money was in specie form and in the people’s hands. Of the $20 million Liberty Dollars, only about a million is in paper or digital form.

I regret that if you are due an order. It may be some time until it will be filled ... if ever ... it now all depends on our actions.

Everyone who has an unfulfilled order or has digital or paper currency should band together for a class action suit and demand redemption. We cannot allow the government to steal our money! Please do not let this happen!!! Many of you read the articles quoting the government and Federal Reserve officials that the Liberty Dollar was legal. You did nothing wrong. You are legally entitled to your property. Let us use this terrible act to band together and further our goal – to return America to a value based currency.

Please forward this important Alert ... so everyone who possess or use the Liberty Dollar is aware of the situation.

Please click HERE to sign up for the class action lawsuit and get your property back!

Thanks again for your support at this darkest time as the damn government and their dollar sinks to a new low.

Bernard von NotHaus
Monetary Architect

Link here.
More information on Liberty Dollar raid – link.

Feds raid Liberty Dollar (formerly Norfed).

Secret Service and FBI agents raided Liberty Dollar of Evansville, Indiana, last Thursday in a move likely aimed at stamping out an “illegal currency”. The company started selling precious-metal coins stamped with an image of Paul earlier this year, with the first one made of silver available in July. Part of the marketing for the coins involved a promise that part of the sale price would be donated to the Paul campaign.

The silver coins, which weigh one troy ounce, were sold for $25 each, with $5 being promised to help fund Paul’s presidential bid. The gimmick fit in well with Paul’s campaign promise to bring back the gold standard of monetary policy in which precious metals would back paper dollars. So far, Liberty Dollar has donated $2,300 to the Paul campaign, a fact confirmed by both Paul’s office and Bernard von NotHaus, who runs Liberty Dollar.

As a result of the raid, prices for the silver coins have skyrocketed, with Ron Paul silver dollars, which were available from Liberty Dollar at $25 on Wednesday, selling for $220 on eBay recently.

Coins made of other metals, such as copper, gold and platinum, were also available from Liberty Dollar for a variety of prices. Prior to last summer, the firm had produced generic liberty dollars. According to von NotHaus, the government move follows his efforts to sue the U.S. Mint, which in September had published warnings that von NotHaus’s products were “not legal tender.” Von NotHaus says he sued the U.S. Mint for slander after that proclamation.

Speaking hours after the raid, von Nothaus said he expects charges on money-laundering and wire fraud. Neither the FBI nor the U.S. attorney’s office would comment. But its clear something is coming, as the U.S. Mint declined to comment on the grounds that “litigation on the matter is pending.” The Paul campaign says it would likely return the donations if the money was deemed to have been obtained illegally. And that could very well happen if the charges stick.

Von NotHaus says the government agents had seized 500 pounds of silver, 40 ounces of gold, 3 ounces of platinum and 1.5 tons of copper, as well as taking all cash and computer records. Bank accounts were said to be frozen also.

The U.S. Mint says while it is not illegal to possess the Ron Paul money or Liberty Dollars, it is illegal to try to spend them.

Link here.
Liberty Dollar’s founder and monetary architect interviewed – link (MP3).


Some residents of the West Lanham Hills area of Prince George’s County are unhappy with a plan to expand a sweeping redevelopment zone to include their neighborhood. Residents of a working-class neighborhood say Prince George’s County is trying to bring the area into a sweeping redevelopment project that could replace their homes with high-end condos, shopping and restaurants.

County officials are considering a zoning change to West Lanham Hills to include the neighborhood in an 18-year-old project known as the Transit District Overlay Zone, created by the Maryland-National Capital Park and Planning Commission to develop roughly 71 wooded acres around a busy Metro [Washington, D.C. area subway system] station. The nine-member County Council unanimously agreed October 30 to have the commission present a plan to expand the zone into the neighborhood, which residents say has caught them by surprise and has included bullying tactics.

“They are calling our neighborhood deteriorating and blighted,” said Kate Tsubata, a West Lanham Hills resident and former president of the citizens association. The 66-year-old neighborhood has no mayor or council, and the association is the closest thing it has to a government.

West Lanham Hills resident Bob Nelson, 43, said he fears the next step will be the county trying to take property through eminent domain. “I’m always skeptical any time somebody tells me the neighborhood should look like this or that,” said Mr. Nelson, who in his youth was the neighborhood paperboy. “We’re ripe for the picking.”

Link here.


The U.S. government’s controversial plan to outfit all Americans with uniform electronic identification cards – officially known as Real ID – may be on its deathbed, opponents of the program claimed this week.

The U.S. Department of Homeland Security has long said that starting as soon as May 2008, and definitely after May 2013, it will deny state citizens the right to board planes or enter federal buildings unless they show Real ID-compliant documents. But on a recent conference call with state officials from across the country, Homeland Security Assistant Secretary Richard Barth gave the impression that the agency does not plan to punish states that have rejected the rules, according to Timothy Sparapani, senior legislative counsel to the ACLU, and Maine Secretary of State Matthew Dunlap. Barth also reportedly said Homeland Security may push back the deadline until 2015.

“To me, this signals the real end of the Real ID Act because it prevents the government from having any leverage over the states,” Sparapani said in a conference call. Homeland Security, for its part, vehemently denied any softening of its policy.

The ACLU has been one of the loudest voices attacking the regulations, which were passed as part of an emergency war-spending bill in 2005. They and other critics, including privacy advocates and conservative groups, argue that the federal mandate is overly expensive, potentially invasive to privacy, and ineffective in meeting the government’s stated goal, which is rooting out terrorists.

Dunlap, a Democrat, and Missouri state legislator Jim Guest, a Republican, backed up the ACLU’s assessment on the conference call, indicating that they believe Real ID was ill-fated all along. Both of their states are among the 17 states that have now passed laws or resolutions opposing Real ID or outright rejecting its implementation.

Meanwhile, Homeland Security continues to defend the Real ID regime as necessary to improve the authenticity and security of identification documents. Their stated goals are to keep rogue individuals sporting fake credentials from doing harm to Americans and to protect Americans from identity theft.

But opponents of Real ID still predict that the mandate will not hold up as-is, particularly as more states move toward enacting anti-Real ID laws. (Not all states are taking that path. New York Governor Eliot Spitzer said that his state would be working with Homeland Security to come up with a Real ID-compliant “enhanced driver’s license”, though details remain murky.)

Link here.


Random numbers are critical for cryptography – for encryption keys, random authentication challenges, initialization vectors, nonces, key-agreement schemes, generating prime numbers and so on. Break the random-number generator, and most of the time you break the entire security system. Which is why you should worry about a new random-number standard that includes an algorithm that is slow, badly designed and just might contain a backdoor for the National Security Agency.

Generating random numbers is not easy, and researchers have discovered lots of problems and attacks over the years. A recent paper found a flaw in the Windows 2000 random-number generator. Another paper found flaws in the Linux random-number generator. Back in 1996, an early version of SSL was broken because of flaws in its random-number generator.

The U.S. government released a new official standard for random-number generators this year, and it will likely be followed by software and hardware developers around the world. Called NIST Special Publication 800-90 (PDF), the document contains four different approved techniques, called DRBGs, or “Deterministic Random Bit Generators”. All four are based on existing cryptographic primitives. One is based on hash functions, one on HMAC, one on block ciphers and one on elliptic curves. It is smart cryptographic design to use only a few well-trusted cryptographic primitives, so building a random-number generator out of existing parts is a good thing.

But one of those generators – the one based on elliptic curves – is not like the others. Called Dual_EC_DRBG, not only is it a mouthful to say, it is also three orders of magnitude slower than its peers. It is in the standard only because it has been championed by the NSA. The NSA has always been intimately involved in U.S. cryptography standards. It is, after all, expert in making and breaking secret codes. So the agency’s participation in the standard is not sinister in itself. It is only when you look under the hood at the NSA’s contribution that questions arise.

Problems with Dual_EC_DRBG were first described in early 2006. The math is complicated, but the general point is that the random numbers it produces have a small bias. The problem is not large enough to make the algorithm unusable, but it is cause for concern.

And now there is an even bigger stink brewing around Dual_EC_DRBG. In an informal presentation (PDF) at the CRYPTO 2007 conference in August, Dan Shumow and Niels Ferguson showed that the algorithm contains a weakness that can only be described a backdoor. There are a bunch of constants in the standard used to define the algorithm’s elliptic curve. Nowhere is it explained where they came from.

Shumow and Ferguson showed that these numbers have a relationship with a second, secret set of numbers that can act as a kind of skeleton key. If you know the secret numbers, you can predict the output of the random-number generator after collecting just 32 bytes of its output. You would only need to monitor one TLS internet encryption connection in order to crack the security of that protocol. If you know the secret numbers, you can completely break any instantiation of Dual_EC_DRBG.

The researchers do not know what the secret numbers are. But because of the way the algorithm works, the person who produced the constants might know. He had the mathematical opportunity to produce the constants and the secret numbers in tandem. Of course, we have no way of knowing whether the NSA knows the secret numbers that break Dual_EC-DRBG. We have no way of knowing whether an NSA employee working on his own came up with the constants – and has the secret numbers. We do not know if someone in the ANSI working group has them. Maybe nobody does.

We do not know where the constants came from in the first place. We only know that whoever came up with them could have the key to this backdoor. And we know there is no way for anyone to prove otherwise. This is scary stuff indeed.

Even if no one knows the secret numbers, the fact that the backdoor is present makes Dual_EC_DRBG very fragile. If someone were to solve just one instance of the algorithm’s elliptic-curve problem, he would effectively have the keys to the kingdom. Or he could publish his result, and render every implementation of the random-number generator completely insecure.

It is possible to implement Dual_EC_DRBG in such a way as to protect it against this backdoor, but the procedure is optional, and my guess is that most implementations of the Dual_EC_DRBG will not bother.

If this story leaves you confused, join the club. I do not understand why the NSA was so insistent about including Dual_EC_DRBG in the standard. It makes no sense as a trap door. It is public, and rather obvious. It makes no sense from an engineering perspective. It is too slow for anyone to willingly use it. And it makes no sense from a backwards-compatibility perspective. Swapping one random-number generator for another is easy.

My recommendation, if you are in need of a random-number generator, is not to use Dual_EC_DRBG under any circumstances. If you have to use something in SP 800-90, use CTR_DRBG or Hash_DRBG. In the meantime, both NIST and the NSA have some explaining to do.

Link here.


Former attorney general’s legal fees mount in perjury and witness tampering probe.

Supporters of former attorney general Alberto R. Gonzales have created a trust fund to help pay for his legal expenses, which are mounting in the face of an ongoing Justice Department investigation into whether Gonzales committed perjury or improperly tampered with a congressional witness.

The establishment of a legal defense fund for the nation’s former chief law enforcement officer underscores the potential peril confronting Gonzales, who is one of a handful of attorneys general to face potential criminal charges for actions taken in office. David G. Leitch, a Gonzales friend and general counsel at the Ford Motor Co., wrote in an e-mail solicitation to potential contributors last month that Gonzales is “innocent of any wrongdoing” but does not have the means to pay for his legal defense after a career spent mostly in public service.

The Justice Department’s investigation of Gonzales is likely to be completed in the next several months, according to sources with knowledge of the investigation’s progress. The inspector general is looking at whether Gonzales misled Congress in sworn testimony and improperly sought to influence testimony of an aide, Monica M. Goodling, about last year’s firings of nine U.S. attorneys.

The IG’s office cannot bring criminal charges, but it can hand over evidence to prosecutors with a recommendation for further investigation and possible charges, officials have said. The results are likely to present a thorny issue for Gonzales’s successor, Attorney General Michael B. Mukasey, who was narrowly confirmed by the Senate earlier this month.

During Mukasey’s ceremony, President Bush vigorously defended Gonzales, his longtime aide and friend. “Al Gonzales worked tirelessly to make this country safer and to ensure that all Americans received equal justice before the law,” Bush said. “Over many years, I have witnessed his integrity, his decency and his deep dedication to the cause of justice.”

Link here.


Just in time for Thanksgiving’s traveling throngs, the TSA has agreed to “introduce ‘more aggressive, visible and unpredictable security measures’” at airports. Apparently, molesting the handicapped, groping grandmothers, and killing passengers do not suffice.

The TSA is evil enough to dream this up on its own, but it did not have to. The “recommendation” came from the Government Accountability Office (GAO) after its undercover investigators tested “checkpoints at 19 airports in March, May and June of this year” – as they have many times. And, as usual, the GAO found holes the size of a jumbo jet in the alleged “security”: “It is possible to bring the components for several IEDs (improvised explosive device) and one IID (improvised incendiary device) through TSA checkpoints and onto airline flights without being challenged by transportation security officers.” Yeah, but “transportation security officers” never miss your bottle of Coke, so it all balances out.

The GAO’s success in sneaking its items through the checkpoints proves the TSA’s futility. CBS News fears that “... a team of terrorists working together could easily beat the system.” But the Feds take a contrary lesson from the TSA’s inability to detect “components”. Screeners should abuse us serfs more “aggressively” and “unpredictably”. Why is it that every time the TSA fails, passengers pay the price?

This is only the latest of the agency’s scandals. Its incompetence and chicanery have been hogging headlines for weeks now. In October, USA Today “obtained” a “classified report” which said that screeners’ “failed to find fake bombs hidden on undercover agents posing as passengers” in 60% of the tests run at Chicago O’Hare last year and in 75% of those at Los Angeles International. Such jaw-dropping scores are about average for the TSA. Screeners routinely miss most of what agents try to smuggle.

And that is despite cheating. Though they are not supposed to know that they are being tested, let alone the investigators’ identities, what contraband they are carrying and where they’ve stashed it, screeners are often alerted to all those details. And have been for years. But only recently did we learn who is cluing them in. Earlier this month, NBC News reported that “those tipoffs may have come from high officials” at the TSA – specifically, from Mike Restovich, Assistant Administrator of Security Operations. Descriptions of the investigators, their whereabouts, and how they would bamboozle screeners were conveniently provided.

Link here.


There was a time when I used to believe that the police had a duty to serve and protect, to care for our property and to keep criminals away. Over the years, however, I have come to realize that though real crime exists in society, it is the cops who commit most of it.

This was not a very easy decision to make. Whenever I saw injustice and brutality, I would brush it off as a sporadic episode and move on. Having seen (and this is another reason why it is very important to keep the internet free) video after video of people being tasered, shot, beaten, executed, roughed up, fined, ticketed, jailed, harassed, insulted, and being subjected to an infinite number of abuses, it is hard to stay optimistic about the police and the system that runs it.

Government police is subject to the same ethical and economic analysis that is applicable to other government functions. Given that the state has no incentive to protect, that it can always count on taxes, that it is institutionalized aggression, that it legislates and therefore steals and plunders – given all these things, I had to change my tune. What I had thought to be random incidents of abuse were nothing but the normal, symptomatic function of the government at work – a series of inefficient and unethical monstrosities committed against society, allegedly for its own good.

I understood, then, that police departments are just another government program. Government programs, because they rely on taxation and legislation, are not wanted by society. And we know this is true because by resorting to taxation and regulation we have eliminated competitors who in the market would otherwise be free to meet the demand for security with a supply of such a service. Therefore, it is impossible to know that the quality and quantity of defense that is offered by the government reflects what people want.

When I refer to “crime” I do not mean crime as defined by state legislature, but seen as the violation of property rights. Things like taxation and eminent domain are clearly theft. And so are conscription and minimum wage laws because the former constitutes theft of the use of one’s body while the latter violates the right to contract freely.

Since cops are the enforcement arm of the state, they are the ones who must physically interact with citizens. And what do they do? Well, it is business as usual ... raids, searches and seizure, the war on drugs, on immigrants, on various “inequalities” and the list goes on and on. The amount of “public crime”, crime carried out by the government is overwhelmingly larger than “private crime”. Taxation and regulations are ultimately enforced by the police or another police-like executive authority. The existence of the state (even a minimal one) guarantees that the amount of public crime will always exceed the amount of private crime because while one can chose not to be a criminal, the state is nothing but a criminal entity.

Unlike juries and judges, and unlike legislators and prosecutors, the cops are the ones ultimately doing the dirty deeds. The judicial and legislative branches must count on someone to carry out their edicts. Of course, that implies that they are also guilty in the causal chain of criminality and are not exempt of guilt. The reason why I am picking on cops is because they are the most visible branch. Almost every interaction between the state and serf occurs through the executive branch – police officers, tax collectors, the various inspectors, regulators, confiscators and so forth.

Police officers technically must enforce all laws. Given the number of laws out there, let us be thankful that they are incapable of doing that. Let us also be thankful that we do not get all the government we pay for. If the state is institutionalized aggression, then the last thing we want is an efficient government, or, for that matter, efficient cops.

Link here.
Thriving without a license – link.


The U.S. Supreme Court touched a constitutional third rail ahead of next year’s election, agreeing to decide whether the Second Amendment gives individuals a right to own handguns. The court is expected to hear arguments in the spring and to issue an opinion by July, just as the campaign for the November presidential election heats up.

The high court has never invalidated a firearms regulation on Second Amendment grounds. Since the justices’ last word on the issue in 1939, lower courts have seen the provision as reflecting a state’s power to field a militia – not as an individual’s right to arm himself for personal reasons.

That doctrine has outraged gun-rights proponents, who found a friendly ear in the Bush administration. Under Attorney General John Ashcroft, in 2004 the Justice Department reversed course and formally concluded that the Constitution protects gun ownership much as it does freedom of speech. But it was not until March of this year that a federal appeals court agreed, striking down a 1976 District of Columbia ordinance that effectively bans handguns and requires that rifles and shotguns be kept unloaded and disassembled or under trigger lock.

Republican presidential candidates have endorsed the view that the Second Amendment provides an individual right. The campaigns of Democratic candidates Sens. Hillary Rodham Clinton, Barack Obama and former Sen. John Edwards did not respond to requests for comment. The issue poses tougher problems for Democrats, who are trying to reach beyond their urban base to rural and suburban voters in the South and the Rocky Mountain states.

The current justices have had little occasion to detail their views. In 1997, a 5-4 court struck down parts of the federal Brady gun-control act, but not on Second Amendment grounds. The court found that Congress exceeded its authority to direct state officials to enforce the law. The four dissenting justices – John Paul Stevens, David Souter, Ruth Bader Ginsburg and Stephen Breyer – remain on the court today. Justice Clarence Thomas, who joined the majority, hinted in his concurring opinion that he might be receptive to the individual-rights argument.

Justice Antonin Scalia, meanwhile, has indicated he might see the Second Amendment as a bar on federal regulation of firearms – but not that by states. In A Matter of Interpretation, a 1997 book laying out his approach to constitutional law, Justice Scalia wrote that he considers the amendment “a guarantee that the federal government will not interfere with the individual’s right to bear arms for self-defense.” That might portend poorly for the law enacted by the District of Columbia, which is not within any state and technically is an arm of the federal government.

Scalia added, however, that “properly understood, it is no limitation upon arms control by the states.” That suggests he might see the Second Amendment running up against another doctrine many conservatives embrace – states’ rights.

The Second Amendment, in its entirety, reads, “A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms shall not be infringed.” Legal debate has focused on whether the first clause qualifies the second, protecting gun possession only as part of service in a state militia or its modern-day descendant, the National Guard.

The 58-page appeals-court opinion striking down the district’s law, written by U.S. Circuit Judge Laurence Silberman, was a shot across the bow of prevailing jurisprudence. Plumbing history as well the amendment’s placement within the Bill of Rights, Judge Silberman, one of the bench’s most influential conservatives, wrote that the individual right to gun ownership predated the U.S. and was enshrined in the Constitution, “premised on the private use of arms for activities such as hunting and self-defense, the latter being understood as resistance to either private lawlessness or the depredations of a tyrannical government (or a threat from abroad).”

Advocates on both sides acknowledge the paucity of definitive authority on the matter, sending lawyers and scholars to history tomes and archaic grammars to parse the amendment’s meaning. So few are the precedents that Judge Silberman even turned to the Supreme Court’s most notorious opinion, Dred Scott v. Sandford, to support his ruling. While that 1857 pro-slavery case was “erroneous in holding that African-Americans are not citizens,” Judge Silberman noted that elsewhere it asserted, “albeit in passing, that the Second Amendment contains a personal right.”

Link here.


I love eBay. It is about as close to unfettered capitalism as you can get under the present circumstances. Buyers offer what they have to sel, sellers offer the prices they are willing to pay. When supply and demand meet, a sale is made. Caveat emptor is the rule, but eBay’s feedback and complaint processes are a relatively efficient way of weeding out the frauds.

I have bought and sold items on eBay for years. Buying is much easier (except on the pocketbook) than selling, which can be time consuming. As easy as it is to list an item for sale, it still takes a certain amount of time. In addition, it is usually a good idea to shoot and upload one or more photographs of the item, and then there is time spent answering inquiries from prospective buyers and packing and shipping the item if it sells. If you only sell a handful of items a year, it is not a big deal. But if you frequently have things to hawk, you are going to put in a considerable amount of time creating listings on eBay and packing and shipping the sold items.

Fortunately, the market has come to the rescue in the form of third-party sellers who will do all the hard work of photographing, listing, packing, and shipping your wares – for a fee, of course.

Unfortunately, wherever the market succeeds, you can rest assured that the state is not far behind to stifle this success or at least to get a significant cut of it. Thus it transpires that the Commonwealth of Pennsylvania is now threatening third-party eBay sellers with fines of $1,000 (or possibly $1,000 per item sold, the law is unclear) for the horrific crime of selling merchandise at auction without an auctioneer’s license, issuance of which is, conveniently, the exclusive domain of the bureaucrats in Harrisburg.

At least one third-party seller whom the state has (or is trying to) run out of business understands exactly what is going on. As AP reports:

Barry Fallon, who ran a business called iSold It on eBay in Lower Paxton Township, has been summoned to appear before the state Board of Auctioneer Examiners. He said the board is dominated by traditional auctioneers who fear competition.

“[It’s] kind of like having the buggy whip manufacturers decide whether to allow new automobiles to be sold,” Fallon said.

Not only are existing auctioneers trying to keep competition down by forcing online third-party sellers to pay up or pack up, but I would lay odds that the auctioneering licensing law itself was originally written and passed at the behest of already successful auctioneers for precisely the same reason. Find me a licensing law that was not created to stifle competition for those already established in the profession, and I will find you a living, breathing unicorn.

Let’s just go right to the fundamental issue here. Any two people ought to be permitted to come to a voluntary agreement whereby one sells certain items belonging to the other at mutually agreeable terms. The state ought to have no say in it whatsoever, whether the items are being sold out of a barn or on eBay. It is a simple matter of property rights, the very bedrock of freedom.

On the other hand, since all property owned by the state has been stolen from the citizens therein, I propose an online auction of all government property, with the proceeds divided equally among the taxpayers. I know how to sell things on eBay, and I would even do it on a no-commission basis as a service to my fellow man. That would at least provide us with a measure of restitution. If the Commonwealth of Pennsylvania wants to prosecute me for doing this without a license, well, good luck stringing me up, fellas, once you own no guns, courtrooms, or prisons.

Link here.


After 9-11 the neocons who dominate the Republican Party commenced three separate wars. One in Afghanistan, another in Iraq, and the third against the civil liberties of the American people. As Judge Andrew Napolitano writes in his brilliant new book, A Nation of Sheep (p. xi):

[T]he Bush Administration has systematically attacked and diminished virtually every freedom and right guaranteed by the Constitution: freedom of speech, freedom of the press, freedom of religion, freedom of association, the right to privacy, the right not to self incriminate, the right to counsel, the right to speedy trials, the right to fair trials, the right to avoid cruel and unusual punishment, even the right to be set free after acquittal! ... President Bush has broken laws he swore to uphold, and declined to enforce laws that he has himself signed into existence ...

While the Republican Party (with the help of many Democrats) was waging this war on American freedom, its propagandists in the media endlessly repeated the nonsensical notion that the people who attacked America did so because “they hate our freedoms.” In reality it is the neoconservatives who hate American freedom, as the above-mentioned “accomplishments” of theirs proves.

In A Nation of Sheep Napolitano gives us chapter and verse of how Americans have been neo-conned into acquiescing in such an attack on their own liberties. The book is the third in a trilogy, following Constitutional Chaos: What Happens When the Government Breaks its Own Laws, and The Constitution in Exile. All three are required reading for Ron Paul Revolutionaries – and for anyone who wants to understand the meaning and significance of constitutional liberty in America, who its enemies are, and why they must be stopped.

All neocons play the Orwellian game of making pronouncements about the Constitution, pretending to be supportive of it, while actively supporting its destruction. They are especially fond of cloaking themselves in a few selected words of the founding fathers to give the impression that Washington, Jefferson, and Madison would somehow approve of their foreign policy imperialism. As Judge Napolitano correctly points out, the slogan of the American Revolutionaries was “Give Me Liberty, or Give Me Death,” not “Give Me Security and I Will Gladly Give UP My Liberty.”

To make things even creepier, the administration claims that its war on American liberty has as its purpose the protection of “the Homeland”, a phrase that was never used by anyone else to describe America, and which is much more commonly associated with Nazi Germany than any other society.

There is no tradeoff between liberty and security, as Napolitano says. The notion that there is, is “a one-way trip into slavery.” Unfortunately, writes Napolitano, “the majority of Americans are sheep” who “stay in the herd and follow their shepherd without questioning where he is leading them.”

A Nation of Sheep also gives the reader an historical perspective on governmental attacks on personal liberties. It started almost at the very beginning of the republic, as the Adams Administration used the Sedition Act to arrest numerous critics of the government. When Thomas Jefferson succeeded Adams he pardoned everyone who had been unjustly imprisoned by the Federalists. But, writes Napolitano, “the progress made by Jefferson receded once President Lincoln took office.” He mentions Lincoln’s shutting down of the opposition press in the North, his illegal suspension of habeas corpus, and his censoring of telegraph communication. He also focuses on Lincoln’s deportation of Ohio Congressman Clement L. Vallandigham for speaking up against the Lincoln regime’s abuses of constitutional liberty.

Napolitano quotes the speech that Vallandigham made back home in Dayton, Ohio, on August 2, 1862, that eventually led to his arrest and imprisonment (without due process). “No matter how distasteful constitutions and laws may be, they must be obeyed,” said Vallandigham. “I am opposed to all mobs, and opposed also ... to violations of [the C]onstitution and law[s] by men in authority – public servants. The danger from usurpations and violations by them is fifty-fold greater than from any other quarter, because these violations and usurpations become clothed with [a] false semblance of authority.”

Vallandigham “hit the nail on the head here,” Napolitano correctly states. Lincoln, who is described by Napolitano as “The Great Perverter of the Constitution”, responded with slick and deceiving language to say, “Must I shoot a simple-minded soldier boy who deserts, and not touch a hair of the wily agitator who induces him to desert?” As Napolitano states, the “Constitution which is the sole source of all presidential power, gave him neither the right to ‘shoot a simple-minded soldier boy’ nor the right to impair in any way ‘the wily agitator’ using his First Amendment protected rights,” as Vallandigham was doing.

In his concluding chapter Napolitano notes that, as of his writing, there were sixteen politicians competing nationally to replace President Bush. Sadly, “With the exception of Rep. Ron Paul (R-Texas), in terms of fidelity to the Constitution, it does not matter which one of them wins. Except for Congressman Paul, they all love power for its own sake, believe that Big Government should redistribute wealth, regard the Constitution as a quaint obstacle, and would enforce or disregard laws as they saw fit ...”

Judge Andrew Napolitano is an alpha male wolf in a nation of sheep. We can only hope that books such as this one will awaken enough sheep to assist in the defense of liberty before it is too late.

Link here.


Thursday was the feast day of St. Cecilia, the virgin and martyr who died at the hands of the Romans 1,800 years ago. For the crime of being a Christian, she was beheaded, and has been venerated as the patron saint of music by both the Catholic and Eastern Orthodox churches ever since.

Unfortunately in America, this feast in honor of an ancient martyr who gave her life for her religious beliefs was mostly ignored in favor of the quasi-religious holiday created by politicians known as “Thanksgiving”. During this holiday, people mostly watch football and stuff their faces with turkey while possibly taking a minute to pay lip service to the bland little American god that is more of a political prop than a deity. This is the god of God Bless America, and of the Pledge of Allegiance, and of the legions of red-faced American nationalists who cannot tell the difference between a religion and a political party.

To drive home the semi-religious, but fully nationalistic nature of this holiday, we were recently granted right-wing columnist Joseph Farah’s latest paean to the American state which takes the rather silly position that there is a “War on Thanksgiving”. Farah inadvertently reveals the political usefulness of Thanksgiving in its religious posturing.

An attack on Thanksgiving, Farah tells us, is an attack on God. Thanksgiving, that holiday made up by politicians as yet another day of national unity, is now a sacred day. At the core of Farah’s assertions is a deep, deep attachment to a nationalist myth that posits the U.S. as a sacred nation. Thanksgiving thus serves an immensely useful purpose as a day of national unity and national self-congratulation.

In many ways, in fact, Thanksgiving has eclipsed Independence Day as the national holiday. While Independence Day, at least in theory, commemorates an act of political disloyalty and disunion, Thanksgiving, with its modern roots in the Civil War and Abraham Lincoln, is about unity, national “pride” and complacency. Be thankful, or else. And don’t complain like those Revolutionaries did.

The 4th of July now takes a back seat to the guaranteed four-day weekend of shopping, football, and travel that now kicks off the “holiday season”. Thanksgiving’s status as a universal national holiday is significant because at its root, Thanksgiving is a day that commemorates an American creation myth.

A good nationalist myth always conveys a few central pieces of information. It tells us that at some point in time (the earlier the better), “our” ancestors arrived at the place we are now and staked a claim to this physical territory. It tells us that we all have a common history and experience that can be traced back to these original ancestors. It tells us that we, being united by that common history, should also be politically and perpetually united. And finally, it tells us that God Almighty was and is in favor of the whole enterprise. These myths were essential to the rise of nationalism then and now, for they are designed to discourage dissent and to unite the population behind a central government. A population that accepts myths and legends about an alleged national “experience” or “bond” or “character” is much easier to control.

The modern Thanksgiving, the product of non-believer Abraham Lincoln’s 1863 proclamation, is explicitly a day of national unity. It was a chance for Lincoln to declare during the Civil War that God was on the North’s side and that all decent Americans should pray and thank God that the war (which the proclamation hints is all the South’s fault) had not destroyed the Northern economy. In the decades since, Thanksgiving has done an excellent job of not only providing a highly anticipated and much-revered national festival, but has provided the much-needed veneer of religiosity that any good feast day of national mythology requires.

Let’s not kid ourselves. Thanksgiving is not about God or giving Him thanks. Indeed, it is really rather sad that some people practice a version of Christianity so stripped down and impoverished that they need to get worked up about national holidays invented by 19th century atheist politicians like Abraham Lincoln.

Nationalist holidays like Thanksgiving are by definition opposed to the universal and the eternal, and instead of focusing on the deeds of defenseless martyrs like Saint Cecilia, they instead focus on the deeds of politicians and governments and on historical myths. Built on bad history and on worse religion, the rise of Thanksgiving is a fascinating case study in American history. But in the end, Thanksgiving is now and always has been an exercise in nationalism and watered down religion that has precious little to do with liberty, God, or even an accurate retelling of American history.

Link here.


I have a friend who was always trying to talk me into being part of his next business idea. Media, finance, health care – it did not matter which sector, he would always say the same thing. “Jerry, it’s gonna be bigger than Microsoft.” I would always nod and smile. Then I would change the subject back to the insurance firm that he already owned. How are your profits? Who is your best producer? Are you controlling your costs? I knew that would end the conversation pretty quickly, because talking about the business that he already owned was boring to him. It should not have been. He had built it from nothing and was beginning to break into the middle tier of his industry. He never made it, though. He would siphon all his best people off to his whim of the month, left the running of his core business to one of his mediocre guys, and in the end ... bankruptcy.

The problem, I think, was ingratitude.

I know a lot of guys like this. I have another friend who repeatedly tried to recruit a top manager who would be able to take over the business quickly so my friend could move on to other, more exciting ventures. He would hire some young hot shot and in a year or so, the hot shot would leave. I told him it was because he keeps trying to leave, leaving the available successors with the impression that this job was not worth much. Then they would jump ship. He finally figured out that he had a first-class, highly successful company, and was thankful for it and got focused again. The company is doing great now, and he is hiring far better performers than he has ever had before.

Another guy I know founded a highly successful state-level news analysis television program, but that was not enough for him. He wanted to start more of them. He imagined sticking pins in a map, until the map was filled with pins. The bone-head got overextended, ran out of money and had to ask his wife and kids to help him turn the company around. In the end, he became grateful for what he had, and cared for it, and it grew. That last guy, by the way, is me.

Ingratitude, I would say, is the most common reason for entrepreneurial failure.

The studies say that businesses fail because they are under-capitalized, or because they do not have enough cash flow to pay their debts. But behind those financial indicators, I see a character flaw. An under-capitalized business (if it is a good business idea) is just a pre-capitalized business. Somebody was unwilling to wait, work and save or sell shares while in their current job for long enough to create the new job.

It is not just a problem for start-ups. Established businesses suffer from ingratitude as well. After all, debt grows when businesses’ operating costs grow faster than their customer revenue. The owner ceases to be grateful for his current customers and switches his loyalty away from the real men and women who currently do business with him and toward the imaginary men and women whom he hopes will do business with him when he makes it big.

When my oldest son was about 10, I bought a little plastic toy frog for him. While we were driving home from the store together, he started complaining about it. Let me see it, I said. I took it, looked it over, and said, “You’re right, not good enough for you,” and I threw it out the car window. In our house, I told him, when you complain about something, you lose it.

1,900 years ago, a traveling rabbi wrote a letter to a small community of Jews who lived in Rome. Rome had, by that time, torn down even the vestigial organs associated with the Republic and had become a full-blooded dictatorial empire. Many philosophers and statesmen offered whispered explanations for the fall of the Republic, but I think the rabbi’s letter got to the essence of it: “They did not acknowledge God, neither were they grateful.” The Romans did not really know what they had inherited, and therefore, when Julius Caesar offered them peace and plenty without toil in exchange for republican legal institutions, they heartily accepted.

The foundation of asset management is gratitude. If you are grateful for something, then you will appreciate it. If you appreciate something then you will care for it. If you care for something then you will (more than likely) get more of it. In other words, if you show appreciation for the assets under your care, they will probably return the favor and show appreciation for you.

Link here.
Previous News Digest Home Next
Back to top