Wealth International, Limited (trustprofessionals.com) : Where There’s W.I.L., There’s A Way

W.I.L. Offshore News Digest for Week of April 28, 2008

This Week’s Entries : This week’s W.I.L. Finance Digest is here.


Under standard macroeconomic theory, i.e., theory which justifies constant government meddling with monetary policy, “relief” from inflation is obtained by raising interest rates which causes a recession which depresses demand for goods which depresses their prices. Of course the recession causes a fall in employment and incomes, so interest rates need to be lowered in order to increase demand for goods, etc., etc.

It really makes little sense. Inflation is caused by an increase in the supply of money and credit relative to a given quantity of goods and services, i.e., a given level of supply and demand. Stopping excess credit and money creation will stop inflation. No need to kill economic activity. As Ed Bugos rightfully points out, how can killing production help reduce price pressure?

Without getting into an introductory lesson on microeconomic theory: The central banks purposely confuse moving up and down the demand and supply curves with shifting them in their public pronouncements. They know better. But to explain things too thoroughly would be to admit to all the damage they do.

The economy does not know what to do with itself. The Fed has made it all but certain that inflation will be a problem. Prices are rising and everything has become more expensive. So what ever happened to this recession we have been hearing about? Shouldn't a slowing economy be depressing prices? You would think, but the Fed has mandated some violent economic mood swings that may spell trouble down the road.

The Bureau of Labor Statistics (BLS) reported another sharp increase in producer prices during March. Finished goods were up 1.1% and intermediate-level goods rose 2.3%, pushing the year-over-year rates to 6.9% and 10.6%, respectively, in the month of March -- the biggest yearly increases in this price indicator since 1981. U.S. consumer prices rose 4% year over year, pushing the high end of a 15-year range. And you can bet the reality is worse than what the government data will confess.

The U.K. also reported a 6.2% year-over-year gain in its headline PPI. I mention it because the pound has been stronger than the greenback in recent years -- but the inflation story is not just about the dollar. The buildup of inflation pressures overseas will soon be evident -- when the foreign currency bubble pops.

You are seeing a price revolution unfold before your very eyes. Media reports of truckers and consumers angry over escalating fuel prices are becoming more frequent and intense, as are the reports of riots over soaring food prices in some corners of the world. Cost inflation continues to ravage mining project economics, hampering the industry's ability to increase production in response to higher prices.

The ultimate cause of both price inflation and the business (boom-bust) cycle lies in the constant manipulation of money supply and interest rate levels by central banks and their governments. The economic data, meanwhile, continue to point to recession. Instead of letting the market correct the dislocation -- heaven forbid -- central bankers, under pressure from the electorate, are but fanning the flames with price pressures already at two-decade highs.

Working off the same defunct Phillips Curve dynamic (the consumptionist theory of a trade-off between inflation and unemployment) that formed the monetary policy playbook of the 1970s, the Federal Reserve is hoping a weak economy will weigh down prices. Yet even using this theory, one can see that if the Fed is successful at averting recession, what will keep prices down? There is no end in sight for this vicious cycle but hyperinflation if the policy continues.

But more relevant to the present, the idea that slower economic growth might relieve price pressures that are concomitantly fueled by monetary policy is limited by global factors that many have alluded to over the past year or two -- a worldwide slowdown in the growth of the real pool of savings, a switch from mercantilism to consumption policies in developing countries and slower productivity growth.

As one economist recently put it (emphasize mine):
"Past bouts of expansion have created bubbles in the financial sector, plus other sectors such as housing and state-dominated sectors like medicine and education. But a high dollar internationally, the growth of the international division of labor as well as technological advance kept the prices of consumer goods down, even falling. All these effects have been absorbed already, and the falling dollar relative to other international currencies has meant a higher price on imports. Lower productivity contributes, as well, as does the general recessionary environment. So the downward price pressure on consumer goods is at an end."
So a contraction in production just makes the situation worse.

Tell it to the Fed. Or just buy gold.


China wants to announce its hegemonic ambitions with Olympic victory – but may fall short of the gold.

Is alleged that this century will be "The China Century", just as the bloody 20th was dubbed "The American Century". There is ample reason to think this might be so, with China's population and burgeoning financial surplusses.

In keeping with its political dominance, the U.S. dominated the Olympics during the 20th Century. So with the upcoming Summer Olypics being hosted in Beijing, it would be fitting for the Chinese to showcase its political ascendancy with a dominant sporting performance. But despite a massive effort, it may not be able to knock off King USA just yet, according to this article.

Despite the combined efforts of Steven Spielberg, the Dalai Lama, Muslim separatists, Western human-rights campaigners, and green activists, the Beijing Olympics are going to happen. At 08:08:08 on August 8, 2008, China's Communist top brass will be crammed into Beijing's "bird's nest" stadium for the start of the Games. Do not be surprised to see them glancing anxiously at the sky. Their greatest fear is that at that moment -- one of the most auspicious in modern Chinese history -- the heavens will open and wash out the opening ceremony.

Meteorologists say there is a 50% chance of a downpour over the $440-million open-air stadium. To reduce the risk, officials have poured money into "cloud seeding," a process whereby thousands of silver iodate pellets are blasted into threatening clouds days before the Games begin in order to induce rain. This (far from reliable) "weather modification" project shows just how determined China is to ensure that the Games of the XXIX Olympiad are a success.

But aside from keeping Hu Jintao, the country's paramount leader, dry during the opening celebrations, how will China measure success? In public, Chinese politicians blabber about bringing the world's nations together through sport, promoting respect, harmony, and friendship. Forget about that. For China, success means one thing: knocking the United States off the top of the medal stand. The 2008 Olympics is not merely a sporting event. It is, as sportswriter Tim Noonan put it, "the coming out party of the Chinese empire," a chance for China to put the world on notice of its coming supremacy in global affairs.

Don't imagine that the humiliations of the past few months have dimmed China's dreams of Olympic glory. ... Protesters might not realize, however, that these setbacks only sharpen China's desire to silence critics with a crushing victory at the Games.

Until recently, the idea of China winning an Olympics was laughable. Before the Communists took power in 1949, Chinese athletes took part in three Olympics and won nothing. When Mao Zedong unleashed the Cultural Revolution in 1966, the Party banned competitive sports. Top-flight sportsmen were denounced publicly for jinbiao zhuyi, or "trophy mania." Ping pong champion Rong Guotuan was held on a false spying charge and hanged himself in jail. China remained in sporting isolation until the end of the 1970s, when Deng Xiaoping decided to promote not only economic but also athletic competition. China finally returned to the Games in 1980 at the Winter Olympics in Lake Placid. The country had to wait until 1984 for its first gold. Yet only 20 years later, at the 2004 Games in Athens, it came second only to the United States.

How did China reverse its sporting fortunes so dramatically? The driving engine was politics, more specifically nationalism, which, rather than Communism, is the regime's defining ideology. The Beijing Games offer the Communist Party an unrivaled opportunity to boost its legitimacy by achieving a unifying, morale-boosting victory in the world's greatest sporting competition. ...

Determined to move China far beyond its traditional areas of dominance -- badminton, table tennis, and gymnastics -- officials looked at the figures. China has 1.25 billion people, a 5th of the planet's population. Somewhere among them there must be a potentially world-class canoeist, marathon runner, and freestyle swimmer. How do you find them? Go around to schools with a measuring tape and pack off any child with the appropriate dimensions -- sometimes determined with the help of X-rays -- for intensive sports training.

This was the system that discovered Yao Ming, the tallest player in the NBA and a regular starter in the annual All-Star Game. ... Liu Xiang, a slim 24-year-old with a boyish face, is another outstanding product of the system. The only child of a truck driver and a waitress, in the fourth grade Liu was selected and placed in a sports school, where he excelled at high jump. At 15, he met a hurdle coach who persuaded him to switch events. In 2004, he won gold at Athens in the 110 meter hurdles, with a world-record-equaling time of 12.91 seconds. "I believe I achieved a modest miracle for the yellow-skinned Chinese people and the Asian people," he said afterwards. His politically incorrect observation highlighted a point that is often glossed over: China's push for medals has a distinct racial undertone, as if the country were determined to prove that the "yellow-skinned" man is the physical equal of his black and white rivals. ...

China's Olympic team as a whole projects an aura of invincibility that intimidates rivals. The official Chinese news agency, Xinhua, captured the national mood when it ran a story last Christmas that began, "China is widely expected to beat the United States and Russia to top the medal standings of the 2008 Olympic Games," before reeling off a long list of gold-medal prospects. The British Olympic Association has predicted that China will win in Beijing with 48 golds (16 more than in Athens), followed by the United States with 37 and Russia with 32. Last year, Jim Scherr, chief executive of the U.S. Olympic Committee, appeared to agree with that assessment. "It's no secret that we're underdogs," he said. "They're blowing us out of the water in the gold medal race."

When China's main Olympic opponents look back to Athens, they feel a twinge of fear. At the 2004 Games, the average age of Chinese athletes was a strikingly low 23.3. In other words, China decided to drop seasoned athletes in favor of younger competitors who gained valuable Olympic experience in Greece but are destined to reach their peak in Beijing. Add to this the fact that in Athens, China played to its traditional strengths: 21 of its 32 golds came in badminton, diving, shooting, table tennis, and weightlifting. If the 119 Project succeeds in Beijing, China can expect to add to this haul a clutch of golds on the track and in the pool.

And yet curiously, as China's rivals prepare mentally for defeat, confidence is waning among the very officials who designed China's pitch for Olympic supremacy. Cui Dalin, China's deputy minister of sport and vice chairman of the Chinese Olympic Committee, recently hinted that the 119 Project might not fulfill expectations. "We have been backward in these sports for a long time, and our training methods and levels are undeveloped," Cui said. "We have put in the effort but have not made big improvements. Another problem is that we have already bought out full potential in such advantageous events as diving, table tennis, badminton, gymnastics, shooting and weightlifting in Athens. There is little room to improve on the results in Beijing."

Perhaps Cui was simply trying to manage his countrymen's soaring expectations. Yet China does have cause for concern. The British Olympic Association's projection of 48 golds in Beijing was based on results from international competitions in 2006. But in 2007, China's performance in the 119 Project events took a nosedive. At the World Championships in Athletics in Osaka, China won just one gold (Liu Xiang in the hurdles), leaving it tied for 11th place overall with Cuba and Belarus. And at the World Aquatics Championships in Melbourne, China recorded its worst performance in 15 years: it won just 16 medals, while the U.S. took 40. If China's athletes perform no better in August, the host country faces humiliation.

In the build-up to Beijing, Chinese officials seem to have underestimated America's enduring strength in Olympic competition. The U.S. has dominated the modern Games: since 1896, it has won 2,194 medals -- more than double the total of its closest rival, Russia. Moreover, America is bringing its biggest Olympic team ever to this year's Games. And yet many in U.S. Olympic circles are convinced that their adversary is hoarding a secret weapon. Jill Geer, director of communications at USA Track & Field, recently struck an ominous note. "The world needs to be prepared for China to come out with athletes we've never seen before, with performances that we've not seen before," she said. In other words, somewhere in the vastness of China there may be a training camp where drug-enhanced monstrosities run the 100 meters in under 9 seconds and throw the javelin clean out of the stadium.

There have long been suspicions that China, in common with the former Communist sporting powers of the Soviet Union and the GDR, runs a huge covert doping operation. In the 1990s, this was almost certainly true. Numerous leading Chinese athletes were thrown out of international competitions after failing drug tests. As recently as 2005, the world half-marathon champion, Sun Yingjie, tested positive for the testosterone derivative androsterone and received a two-year ban. But with the Beijing Olympics on the horizon, the government launched a massive crackdown on doping. In 2006, Chinese authorities raided a sports school in northeastern China. According to Xinhua, "Officials caught school staff injecting teenage students with banned substances and confiscated illegal drugs including erythropoietin (EPO) and testosterone." School staff faced criminal charges under a draconian new anti-doping code.

Another theory is that China forced its athletes to put the brakes on in international competition in 2007 to lull the U.S. into a false sense of security. So when Cui Dalin publicly doubted China's chances, he was not being frank but devilishly cunning. This suggestion has the typical disadvantage of conspiracy theories: there is no proof. Common sense suggests that ultra-competitive elite athletes are unlikely to hold back on the world stage.

The simplest explanation is that China has drastically overestimated its chances of winning the 2008 Olympics. Having spent most of the new millennium talking up the country's chances, the authorities are starting to play them down. But it is too late. The Chinese public expects nothing less than victory, and if the host nation fails to top the medal count, China's aspirations to international hegemony will take a big hit.

Over the past 25 years, China has achieved the most dramatic sporting transformation of any nation in history. It has gone from Olympic minnow to whale shark. But the evidence suggests it has still not done enough to defeat the world's only sporting superpower. It may yet rain on China's parade.


In other big news: The Pope welcomes Catholics, and the Los Angeles Lakers welcome their playoff round victory.

The Organization for Economic Cooperation and Development (OECD) ... welcomed two new bilateral arrangements for the exchange of information for tax purposes, between Guernsey and the Netherlands and between the Isle of Man and Ireland. The OECD revealed that this brings to 14 the number of such agreements signed since the beginning of 2007 by jurisdictions committed to work with OECD countries. The OECD notes that "other negotiations" are ongoing and are expected to lead to further new agreements shortly.

The agreement with the Netherlands is the second such agreement signed by Guernsey, which concluded an agreement with the United States in 2002. For the Isle of Man, the agreement with Ireland is its 10th TIEA.

Paolo Ciocca, Chair of the OECD's Committee on Fiscal Affairs, argued that the agreements enhance the international reputations of Guernsey and the Isle of Man as legitimate financial centres, thereby strengthening their integration into the international financial system.

It inarguably buys them some legitimacy -- in the eyes of the OECD governments, if not Guernsey and the IoM's clients.

Mr Ciocca explained that: "The trend towards greater transparency and tax cooperation continues as more and more countries and jurisdictions implement the OECD standards.

"Recent events have put international tax evasion in the spotlight, demonstrating the pressing need for action to tackle tax compliance issues in an increasingly borderless world. These agreements will better equip their signatories to address all forms of tax abuses," he concluded.


This story involves a rather convoluted tax shelter schema, whereby Canadian taxpayors borrowed money to make alleged charitable contributions which would be tax deductible. In the early 1980s a lot of U.S. tax shelters involved a similar use of leverage, where investments generating substantial up-front deductions were financed with nonrecourse loans from the promoter. The tax rules were quickly changed so that only amounts put at risk by the investor qualified for deductibility. Loans with no recourse beyond the investment itself were not considered at risk.

Notwithstanding the sketchy details about the flows of money or, indeed, the nature of the charges being considered by the Candian government, we would think the issue will come down to what degree the Canadian taxpayors were actually on the hook for the loan amounts.

Canadian investigators were in The Bahamas recently as part of an investigation into what they suspect is a fraudulent tax scheme that may be linked to certain Bahamas-based entities and individuals. They are investigating whether a scheme known as the Banyan Tree Foundation was used fraudulently. Banyan Tree is a gifting program devised and based in Canada.

On the civil side, a class action lawsuit in Canada alleges that Promittere Capital Group Inc., Promittere Asset Management Ltd. and Banyan Tree Foundation with the assistance of Rochester Financial Limited, developed, promoted, sold and administered a gift program under which participants borrowed money to make charitable donations in order to receive charitable donation receipts and concomitant tax credits. The Plaintiffs are seeking C$50,000,000, plus C$5,000,000 in punitive damages. ...

Investigators' findings would determine whether the beneficiaries in Canada face any penalties for having participated, and whether the promoters would face criminal and civil penalties. The value of the transaction under review totals C$197,700,000. ...

The Canada Revenue Agency believes that a substantial amount of the funds donated to Banyan by its donors was transferred by Banyan to Bahamas-based Hampton Insurance Company Limited via the purchase of term annuity policies from Hampton. The Agency believes that these term annuity policies have been assigned to recipient Canadian charities. ...

One of the purported beneficiaries of the Canadian donors was the University of the West Indies, Mona Campus. Canadian investigators are seeking to determine why UWI was chosen to benefit from Banyan's "generosity." ...

Some observers fear that UWI's tax status could be affected as a result of what investigators believe may be questionable donations made to it. They also fear that any connection Bahamas-based entities or individuals may have to any fraudulent tax scheme abroad could give The Bahamas financial services jurisdiction a bad name at a time when the memory of the 2000 blacklisting by industrialized nations has not been completely washed away.


Following the recent decision of British pharmaceutical company Shire to relocate to Ireland for tax reasons, and a similar decision by United Business Media, suddenly the UK Treasury is thinking to ask whether they should do something about the incentives behind the moves. Gee. Do you think?

Alistair Darling [has] launched a review of the competitiveness of the UK's tax system, as a leading accountant warned a "bandwagon effect" could create a flood of companies fleeing the country for tax purposes. The move follows decisions by Shire, the UK's third-biggest pharmaceutical company, and United Business Media, the publisher, to relocate headquarters to Ireland for tax reasons.

WPP warned the UK's complex corporate taxation could force it to relocate. Sir Martin Sorrell's advertising group said it would decide after examining Treasury proposals on taxing foreign profits due out this summer. AstraZeneca, the drugs group, also would not rule out relocating. At the heart of the dispute are plans to change the tax treatment of UK companies with overseas subsidiaries to stop them reducing their bills by diverting profits to low-tax jurisdictions.

Similar ideas are floating out of the U.S.

With the row threatening to further undermine the government's reputation for economic competence after a series of budget retreats, the chancellor moved to stop the trickle of departures from growing. Mr. Darling said he was inviting multinationals to sit on a new working group to advise ministers on the "long-term challenges" facing the UK tax system. "We need to anticipate a growing problem for all governments -- how to protect revenues in an increasingly global marketplace ... while promoting the competitiveness of our businesses," he said in a speech in the City. ...

Warned of the"danger of a bandwagon effect here," John Griffith-Jones, head of KPMG Europe, told the Financial Times that the Treasury was concentrating on closing loopholes but "they need to look at this through a corporate lens ... the fact is, the shop down the road is selling [business taxation] for less."

The CBI employers' organization said it recognized the government had "little room for manoeuvre" to offer tax cuts in the short-term. But Richard Lambert, the CBI director-general who is expected to sit on the new working party, said he wanted to see "certainty and clarity and a sense of direction" on taxation in the medium-term. "I don't want this to be a talking shop," he told the FT. "There is a real problem for the UK here."

George Osborne, shadow chancellor, said: "The chancellor does not need a review to tell him now is not the time to be increasing capital gains tax, increasing small business tax and making the tax environment less attractive for multinationals."

The Treasury said the working group would not be a "substitute" for consultation but was an overhaul of the way foreign profits were taxed. The government fears it could lose £1 billion in tax revenues if it caves into industry pressure to relax the proposed anti-avoidance regime.

Love that government bureaucrat thinking: "Losing" tax revenues that are stolen from those who earned them. And even taking that at face value, not thinking through the consequences, that £1 billion not "lost" today will likely result in more than that "lost" in the future. Where do they find these people?

Additional link may be found here.


Bermuda's record in tackling money laundering and tightening compliance in the financial sector has been branded "appalling" by the head of Britain's Committee of Public Accounts. And Britain's top civil servant in the Foreign and Commonwealth Office (FCO) in charge of Overseas Territories was accused of being "asleep on the job" by not enforcing higher standards.

In a hearing late last year, available on the Hansard website, chairman Edward Leigh and other MPs grilled FCO permanent secretary Sir Peter Ricketts over Britain's role in ensuring its territories are up to standard in their financial oversight. Mr. Leigh questioned why Britain was subsidizing Bermuda which he described as a "fabulously rich place" with a GDP of $4.9 billion -- the highest in the world at $76,000 per head. He suggested Bermuda could be taking Britain "for a ride" by taking $338,000 a year for the Governor's staff costs.

Bermuda has considered independence from Britain in the recent past. Nothing has come of it so far.

Sir Peter defended Bermuda and said he was more concerned about smaller territories to which Mr. Leigh responded with: "Some of these territories which you are responsible for perform very badly. There is a large number of red lights. If you look at Bermuda, for instance, money laundering, materially noncompliant, 22%." And he said compliance in Bermuda's insurance sector was materially non-observed in 44% of cases. He also attacked the record of the British Virgin Islands and said Britain's three Crown dependencies, the Isle of Man, Jersey and Guernsey, were doing much better than BVI and Bermuda.

"They are performing poorly and you, Sir Peter, are responsible for them. There is a large risk involved here and apparently you are asleep on the job."

And Mr. Leigh, a Conservative MP, added: "Are they colonies or are they not? If we are responsible for them, you can see that this record in terms of compliance in money laundering, banking, insurance, securities, compared to the three Crown dependencies, Jersey, Guernsey, Isle of Man, is appalling and you are directly responsible for these places. "We are responsible. There is no point shuffling and saying, 'Oh, they manage themselves.' Why are they still colonies?"

Good question, but perhaps for different reasons than Mr. Leigh, who apparently pines for the good old days when the sun never set on the British Empire, implies. But -- good question -- why do these colonies want to stay formally affiliated, and why does Britain want them anyway?

When Sir Peter pointed out that territories like Bermuda were internally self governing and capable of improving Mr. Leigh said: "A GDP of $4.9 billion, a population of 63,000, a GDP per head of $76,000, yet look at their record. "It is appalling! Perhaps some people might say they are taking you for a ride."

Sir Peter said market forces as well as pressure from the UK would help Bermuda which he said was doing pretty well in banking compliance. However he added: "I agree with you on insurance it is not doing adequately and I think it is something that the Bermuda Government needs to take very seriously."

Earlier in the exchange Mr. Leigh pointed out Bermuda's low rate of suspicious activity reports compared to the Isle of Man as he wondered whether the overseas territories were a significant money laundering risk.

And how many of the Isle of Man SARs resulted in discovering illegal activities? The whole accusation implies that success is measured by how much paper you pushed and whether procedures were adequately followed, rather than whether real world accomplishments were achieved.

Amid probing from another MP who said the world was awash with "funny money looking for a home", Sir Peter said Bermuda had well developed financial services regulation and he said he had written to Britain's Treasury and other financial authorities urging them to do all they could to work with Bermuda and other territories. However he said Bermuda had 11 people dealing with financial intelligence and investigations compared with 21 in the Caymans.

The Caymans have a bad reputation to overcome, while Bermuda and money laundering are not so immediately associated. It is easier to get a bad reputation than to lose it.


Dad’s oversight at baseball game lands son in foster care.

"Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience." ~~ C.S. Lewis

Can you say, "Things have gotten out of hand," kiddies? The example at hand is emblematic of a lot of things: (a) The smothering nature of the "Mommy Dearest" state, (b) the triumph of rules and bureaucratic CYA-instincts over common sense, justice, intelligence, and concern for those the rules are nominally designed to serve.

We say "nominally" because we do not think the rules are truly designed to protect "the children" or whoever. They are cover for bureaucratic empire building. But to the degree the public assigns a "well-meaning but misguided" writeoff to such execution of the rules, it has some appropriateness. The "omnipotent moral busybodies" of the C.S. Lewis quote above are actually power adicts in disguise, per this simple and direct H.L. Mencken quote: "The urge to save humanity is almost always a false front for the urge to rule."

If you watch much television, you have probably heard of a product called Mike's Hard Lemonade. [Uh no, but anyway ...] And if you ask Christopher Ratte and his wife how they lost custody of their 7-year-old son, the short version is that nobody in the Ratte family watches much television.

The way police and child protection workers figure it, Ratte should have known that what a Comerica Park [where the Detroit Tigers play baseball] vendor handed over when Ratte ordered a lemonade for his boy three Saturdays ago contained alcohol, and Ratte's ignorance justified placing young Leo in foster care until his dad got up to speed on the commercial beverage industry. Even if, in hindsight, that decision seems a bit, um, idiotic.

Ratte is a tenured professor of classical archaeology at the University of Michigan, which means that, on a given day, he is more likely to be excavating ancient burial sites in Turkey than watching Dancing with the Stars -- or even the History Channel, for that matter. The 47-year-old academic says he was not even aware alcoholic lemonade existed when he and Leo stopped at a concession stand on the way to their seats in Section 114.

"I'd never drunk it, never purchased it, never heard of it," Ratte of Ann Arbor told me sheepishly last week. "And it's certainly not what I expected when I ordered a lemonade for my 7-year-old."

But it was not until the top of the 9th inning that a Comerica Park security guard noticed the bottle in young Leo's hand. "You know this is an alcoholic beverage?" the guard asked the professor.

"You've got to be kidding," Ratte replied. He asked for the bottle, but the security guard snatched it before Ratte could examine the label. An hour later, Ratte was being interviewed by a Detroit police officer at Children's Hospital, where a physician at the Comerica Park clinic had dispatched Leo -- by ambulance! -- after a cursory exam.

So let us start by giving credit where credit is due: The fascist security guard started the whole ball rolling. He should be fired by the ballpark, due to lack of a sense of perspective and humanity. The clinic physician sounds like a piece of work too.

Leo betrayed no symptoms of inebriation. But the physician and a police officer from the Comerica substation suggested the ER visit after the boy admitted he was feeling a little nauseated.

The Comerica cop estimated that Leo had drunk about 12 ounces of the hard lemonade, which is 5% alcohol. But an ER resident who drew Leo's blood less than 90 minutes after he and his father were escorted from their seats detected no trace of alcohol. "Completely normal appearing," the resident wrote in his report, "... he is cleared to go home."

But it would be two days before the state of Michigan allowed Ratte's wife, University of Michigan architecture professor Claire Zimmerman, to take their son home, and nearly a week before Ratte was permitted to move back into his own house.

And if you think nothing so ludicrous could happen to your family, maybe you should pay a little less attention to who is getting booted from Dancing with the Stars and a little more to how the state agency responsible for protecting Michigan's children is going about its work.

Doing their duty

Almost everyone Chris Ratte met the night they took Leo away conceded the state was probably overreacting. The sympathetic cop who interviewed Ratte and his son at the hospital said she was convinced what happened had been an accident, but that her supervisor was insisting the matter be referred to Child Protective Services.

And Ratte thought the two child protection workers who came to take Leo away seemed more annoyed with the police than with him. "This is so unnecessary," one told Ratte before driving away with his son. But there was really nothing any of them could do, they all said. They were just adhering to protocol, following orders.

Ah yes, the Nuremberg defense. Apparently it does not serve as an excuse for killing people in certain situations, but raises no eyebrows when used in defense of gross violations of common sense.

And so what had begun as an outing to the ballpark ended with Leo crying himself to sleep in front of a television inside the Child Protective Services building, and Ratte and his wife standing on the sidewalk outside, wondering when they would see their little boy again.

Child Protective Services is the unit of the Michigan Department of Human Services responsible for intervening when someone suspects a child is being abused, neglected or endangered. Its powers include the authority to remove children from their homes and transfer them to foster parents who answer only to the state.

So here we get to one of the roots of the issue. The state's authority here is absolute. If some bureaucrat suspects a child is being neglected (e.g., they are being home schooled?) or something, they have the authority to remove children from their homes and transfer them to foster parents who answer only to the state. No due process.

By law, CPS officials are forbidden to discuss the particulars of any investigation. But Mike Patterson, Child and Family Services director for the Wayne County district that includes Comerica Park, said that in general his agency's discretion is limited once police obtain a court order to remove a child from the parental home -- usually authorized, as in Leo's case, by a juvenile court referee responding to a police officer's recommendation. "Once the court has authorized a child's removal," Patterson told me, "we cannot return the child to the parental custody" until the court has OK'd it.

Once the wheels are in motion, no human intervention is possible. It is like the Doomsday machine in Dr. Strangelove: "[B]ecause of the automated and irrevocable decision-making process which rules out human meddling, the Doomsday machine is terrifying and simple to understand ... and completely credible and convincing."

Hard to say a priori whether this was a court power grab or rules-obsession run (routinely) amuck. Behind it all is a default faith in centralized power and solutions. The people cannot be trusted. They are prone to meddling. But, once they become court employees, evidently, they are magically transmogrified into founts of wisdom.

But that does not explain why CPS refused to release Leo to the custody of two aunts -- one a social worker and licensed foster parent -- who drove all night from New England to take custody of their nephew. Chris Ratte's sisters, Catherine Miller and Felicity Ratte, left Massachusetts at 10:30 the night of the fateful lemonade purchase after the police officer who had reluctantly requested a removal order told Ratte the state would likely jump at the chance to place Leo with responsible relatives.

But when the two women arrived at the CPS office early Sunday, a caseworker explained they would not be allowed to see Leo until they had secured a hotel room. The sisters quickly complied. But by the time they returned to CPS around 10:30 a.m., their nephew had been taken to an undisclosed foster home, where he would remain until a preliminary court hearing the following afternoon.

By that Monday, April 7, when Ratte and his wife returned for a meeting with Latricia Jones, the CPS caseworker assigned to their case, no one in the family had been able to talk to Leo for a day and a half.

Sounds like the kid was well taken care of. Thank goodness the procedures were all followed correctly.

At a hearing later that day, Jones recommended that Leo remain in foster care until she had completed her investigation, a process she estimated would take several days. It was only after the assistant attorney general who represented CPS admitted that the state was not interested in pursuing the case aggressively that juvenile referee Leslie Graves agreed to release Leo to his mother -- on the condition that Ratte himself relocate to a hotel.

So if the assistant AG basically said there was no case, what business did she have adding this expensive hoop to jump through to the ordeal? It is a given that power is a very powerful drug. Not only is it addictive, it gives its ingesters a sense of grandiosity that divorces them from their humanity.

Finally, at a second hearing three days later, Graves dismissed the complaint and permitted Ratte to move home.

Don Duquette, a U-M law professor who directs the university's Child Advocacy Law Clinic, represented Ratte and his wife. He notes sardonically that the most remarkable thing about the couple's case may be the relative speed with which they were reunited with Leo.

Duquette says the emergency removal powers of CPS, though "well-intentioned" [probably not, per beginning commentary] are "out of control and partly responsible for the large numbers of kids in the foster care system," which is almost universally acknowledged to be badly overburdened.

Ratte and his wife have filed a formal complaint with the CPS ombudsman's office. "I have apologized to Leo from the bottom of my heart for the silly mistake that got him into this mess," Ratte wrote in the complaint. "But I have also told him that what happened afterward was an even bigger error, and I would like to be able to say to him that institutions, like people, can learn from their mistakes."

Yeah, right. Even the victim fails to note the fundamentally evil structure inside which the "mistakes" were made. Not to kick a guy when he is down, but perhaps being a long-time employee (he is tenured) of a state run and heavily federally subsidized institution gets in the way of such thinking.


The “Land of the Free’ locks up a lot of people.

The U.S. leads the world in prisoners per capita and, amazingly, total number of prisoners period. Various theories about why are discussed in this article from the New York Times.

There is expected standard "liberal" cant that due to a culture given by a history of gun-totin' rugged individualism, there is more violence, thus more crimes, more arrests and convictions, more prisoners. And there is the expected "law and order", "lock 'em up and throw away the key" conservative cant about how the U.S. is "tougher" on crime than the lilly-livered, well, rest of the world, ergo a larger prisoner population.

The article falls down in a couple of obvious areas -- see the comments further on.

The United States has less than 5% of the world's population. But it has almost a quarter of the world's prisoners. Indeed, the U.S. leads the world in producing prisoners, a reflection of a relatively recent and now entirely distinctive American approach to crime and punishment. Americans are locked up for crimes -- from writing bad checks to using drugs -- that would rarely produce prison sentences in other countries. And in particular they are kept incarcerated far longer than prisoners in other nations.

Criminologists and legal scholars in other industrialized nations say they are mystified and appalled by the number and length of American prison sentences. The U.S. has, for instance, 2.3 million criminals behind bars, more than any other nation, according to data maintained by the International Center for Prison Studies at King's College London.

China, which is four times more populous than the U.S., is a distant second, with 1.6 million people in prison. (That number excludes hundreds of thousands of people held in administrative detention, most of them in China's extrajudicial system of re-education through labor, which often singles out political activists who have not committed crimes.) San Marino, with a population of about 30,000, is at the end of the long list of 218 countries compiled by the center. It has a single prisoner.

The United States comes in first, too, on a more meaningful list from the prison studies center, the one ranked in order of the incarceration rates. It has 751 people in prison or jail for every 100,000 in population. (If you count only adults, one in 100 Americans is locked up.) The only other major industrialized nation that even comes close is Russia, with 627 prisoners for every 100,000 people. The others have much lower rates. England's rate is 151; Germany's is 88; and Japan's is 63. The median among all nations is about 125, roughly 1/6 of the American rate.

There is little question that the high incarceration rate here has helped drive down crime, though there is debate about how much. Criminologists and legal experts here and abroad point to a tangle of factors to explain America's extraordinary incarceration rate: higher levels of violent crime, harsher sentencing laws, a legacy of racial turmoil, a special fervor in combating illegal drugs, the American temperament, and the lack of a social safety net. Even democracy plays a role, as judges -- many of whom are elected, another American anomaly -- yield to populist demands for tough justice. Whatever the reason, the gap between American justice and that of the rest of the world is enormous and growing.

It used to be that Europeans came to the U.S. to study its prison systems. They came away impressed. "In no country is criminal justice administered with more mildness than in the United States," Alexis de Tocqueville, who toured American penitentiaries in 1831, wrote in Democracy in America.

No more. "Far from serving as a model for the world, contemporary America is viewed with horror," James Q. Whitman, a specialist in comparative law at Yale, wrote last year in Social Research. "Certainly there are no European governments sending delegations to learn from us about how to manage prisons."

Prison sentences here have become "vastly harsher than in any other country to which the United States would ordinarily be compared," Michael H. Tonry, a leading authority on crime policy, wrote in The Handbook of Crime and Punishment. Indeed, said Vivien Stern, a research fellow at the prison studies center in London, the American incarceration rate has made the U.S. "a rogue state, a country that has made a decision not to follow what is a normal Western approach."

The spike in American incarceration rates is quite recent. From 1925 to 1975, the rate remained stable, around 110 people in prison per 100,000 people. It shot up with the movement to get tough on crime in the late 1970s. (These numbers exclude people held in jails, as comprehensive information on prisoners held in state and local jails was not collected until relatively recently.)

The nation's relatively high violent crime rate, partly driven by the much easier availability of guns here, helps explain the number of people in American prisons. "The assault rate in New York and London is not that much different," said Marc Mauer, the executive director of the Sentencing Project, a research and advocacy group. "But if you look at the murder rate, particularly with firearms, it's much higher." Despite the recent decline in the murder rate in the U.S., it is still about four times that of many nations in Western Europe.

But that is only a partial explanation. The U.S., in fact, has relatively low rates of nonviolent crime. It has lower burglary and robbery rates than Australia, Canada and England. People who commit nonviolent crimes in the rest of the world are less likely to receive prison time and certainly less likely to receive long sentences. The U.S. is, for instance, the only advanced country that incarcerates people for minor property crimes like passing bad checks, Mr. Whitman wrote.

Efforts to combat illegal drugs play a major role in explaining long prison sentences in the United States as well. In 1980, there were about 40,000 people in American jails and prisons for drug crimes. These days, there are almost 500,000. Those figures have drawn contempt from European critics. "The U.S. pursues the war on drugs with an ignorant fanaticism," said Ms. Stern of King's College.

Many American prosecutors, on the other hand, say that locking up people involved in the drug trade is imperative, as it helps thwart demand for illegal drugs and drives down other kinds of crime. Attorney General Michael B. Mukasey, for instance, has fought hard to prevent the early release of people in federal prison on crack cocaine offenses, saying that many of them "are among the most serious and violent offenders."

Typical prosecutor self-justification. If a drug user commits a crime against person or property, while on drugs or not, i.e., is a "serious and violent offender," then of course releasing them "early" is not a decision to be made lightly. But if the user's only "crime" is taking the drug, then the whole argument is invalid on its face. We doubt Mukasey makes such distinctions, however obvious.

Still, it is the length of sentences that truly distinguishes American prison policy. Indeed, the mere number of sentences imposed here would not place the United States at the top of the incarceration lists. If lists were compiled based on annual admissions to prison per capita, several European countries would outpace the U.S. But American prison stays are much longer, so the total incarceration rate is higher. Burglars in the United States serve an average of 16 months in prison, according to Mr. Mauer, compared with 5 months in Canada and 7 months in England.

So if the U.S. leads in prisoner population but not in gross sentences, and the U.S. population includes a large number of victimless crime "perpetrators" that are not heavily represented in other countries, does this mean that other countries are more effective at sentencing perpetrators of crimes with victims? That would seem to be one conclusion that falls from that statistic. In any case, it begs for elaboration.

Many specialists dismissed race as an important distinguishing factor in the American prison rate. It is true that blacks are much more likely to be imprisoned than other groups in the U.S., but that is not a particularly distinctive phenomenon. Minorities in Canada, Britain and Australia are also disproportionately represented in those nation's prisons, and the ratios are similar to or larger than those in the U.S.

Some scholars have found that English-speaking nations have higher prison rates. "Although it is not at all clear what it is about Anglo-Saxon culture that makes predominantly English-speaking countries especially punitive, they are," Mr. Tonry wrote last year in Crime, Punishment and Politics in Comparative Perspective.

"It could be related to economies that are more capitalistic and political cultures that are less social democratic than those of most European countries," Mr. Tonry wrote. "Or it could have something to do with the Protestant religions with strong Calvinist overtones that were long influential."

The American character -- self-reliant, independent, judgmental -- also plays a role. "America is a comparatively tough place, which puts a strong emphasis on individual responsibility," Mr. Whitman of Yale wrote. "That attitude has shown up in the American criminal justice of the last 30 years." French-speaking countries, by contrast, have "comparatively mild penal policies," Mr. Tonry wrote.

Of course, sentencing policies within the United States are not monolithic, and national comparisons can be misleading. "Minnesota looks more like Sweden than like Texas," said Mr. Mauer of the Sentencing Project. (Sweden imprisons about 80 people per 100,000 of population; Minnesota, about 300; and Texas, almost 1,000. Maine has the lowest incarceration rate in the United States, at 273; and Louisiana the highest, at 1,138.)

Whatever the reasons, there is little dispute that America's exceptional incarceration rate has had an impact on crime. "As one might expect, a good case can be made that fewer Americans are now being victimized" thanks to the tougher crime policies, Paul G. Cassell, an authority on sentencing and a former federal judge, wrote in The Stanford Law Review.

From 1981 to 1996, according to Justice Department statistics, the risk of punishment rose in the U.S. and fell in England. The crime rates predictably moved in the opposite directions, falling in the United States and rising in England. "These figures," Mr. Cassell wrote, "should give one pause before too quickly concluding that European sentences are appropriate." ...

Sure. Locking up all those marijuana smokers sure has made the U.S. a safer place. Again, the catalog of crimes examined should break things down more finely than just those things that break some law.

There is a counterexample, however, to the north. "Rises and falls in Canada's crime rate have closely paralleled America's for 40 years," Mr. Tonry wrote last year. "But its imprisonment rate has remained stable."

Several specialists here and abroad pointed to a surprising explanation for the high incarceration rate in the United States: democracy. Most state court judges and prosecutors in the U.S. are elected and are therefore sensitive to a public that is, according to opinion polls, generally in favor of tough crime policies. In the rest of the world, criminal justice professionals tend to be civil servants who are insulated from popular demands for tough sentencing.

Mr. Whitman, who has studied Tocqueville's work on American penitentiaries, was asked what accounted for America's booming prison population. "Unfortunately, a lot of the answer is democracy -- just what Tocqueville was talking about," he said. "We have a highly politicized criminal justice system."

Conspicuously missing is any implicating of the rise of the "Prison-Industrial Complex" (see next entry). As with any government-run program, those who benefit from the construction and operation of prisons have become vociferous advocates for more, more, more. Beneficiaries include contractors, employees, and companies which take advantage of low-cost prison labor. With the economy on the ropes, the government welfare program for prison system beneficiaries is going to have plenty more promoters still. "We can't let people out early. That will result in prison employees losing jobs!"

Also missing is any curiosity about what some partial or more comprehensive cost/benefit analysis would turn up. What is the cost of incarcerating a prisoner for a year vs. the benefit of the damages to "society" thereby avoided? For anyone with no history of victimizing others, the answer would seem obvious: the costs are great, the benefits are zero. And never mind the whole basic idea of punishing someone for a crime rather than forcing them to make the victim whole, which seems a lot more humane and just (ask the victims, as a start).

Suffice it to say that the prison system is, top to bottom, another government run boondoggle. Do not expect rationality. Do not expect it to serve the interests of the public. Do not expect cost efficiency. It is precisely "highly politicized", attendant with the full panoply of outcomes one might expect as a consequence.


Mealy-mouthed and incurious the N.Y. Times article may be, but this piece from a LewRockwell.com writer pulls no punches. Any doubts about the existence of a "Prison-Industrial Complex" are put to rest decisively, and damningly.

The Thirteenth Amendment of the Constitution, adopted at the end of the civil War in 1865, abolished slavery, but this same amendment expressly permits prison slavery and involuntary servitude.


Neither slavery nor involuntary servitude, except as punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.

The United States has less than 5% of the world's population and almost 25% of the world's prisoners. Are Americans more criminal than other folks? Or are there incentives that give the U.S. the dubious honor of leading the world in prison population.

Prison labor has its roots in slavery. After the 1861–1865 Civil War a system of "hiring out prisoners" was introduced in order to continue the slavery tradition. Freed slaves were charged with not carrying out their sharecropping commitments (cultivating someone else's land in exchange for part of the harvest) or petty thievery -- which were almost never proven -- and were then "hired out" for cotton picking, working in mines and building railroads.

The tradition continues. The nation needs a way to fill the prisons which provide a source of cheap labor. Surely the criminal justice system can be of help here, and indeed they are. Gerry Spence, the famed criminal lawyer, in his book From Freedom To Slavery, tells us: "I found that the minions of the law -- the special agents of the FBI -- to be men who proved themselves not only fully capable, but also utterly willing to manufacture evidence, to conceal crucial evidence and even to change the rules that governed life and death if, in the prosecution of the accused, it seemed expedient to do so."

Well surely the court judges are concerned with justice? Spence: "We are told that our judges, charged with constitutional obligations, insure equal justice for all. That, too, is a myth. The function of the law is not to provide justice or to preserve freedom. The function of the law is to keep those who hold power, in power."

Now the law enforcement authorities do not do this all by themselves. For one thing, they have onerous laws to help them. It is instructive to look at the state of California in this regard. The California Prison system is the third largest penal system in the country, costing $5.7 billion dollars a year and housing over 170,000 inmates. Since 1980 the number of California prisons has tripled and the number of inmates has jumped significantly. In the past few years controversies involving prison expansion, sky-rocketing costs, and claims of mismanagement and inmate abuse have put the California prison system under heightened public scrutiny.

What caused prisons to be a growth industry in California? Did Californians suddenly become lawless? We need look no further than the CCPOA, the California Correctional Peace Officers Association. "The Power this prison guards' union wields inside our prisons, legislative chambers and governor's office disturbs me. It should disturb every citizen." ~ Judith Tannenbaum, formerly an English teacher at San Quentin State Prison

The CCPOA is the biggest contributor to political campaigns in California. The CCPOA gives twice as much in political contributions as the California Teachers Association, yet it is 1/10 its size. In 1998, the CCPOA gave over $2 million to Governor Gray Davis, $763,000 to the media, and over $100,000 to Proposition 184, the 3 Strikes law. The 3 Strikes law mandated that convicted felons with one prior felony got twice the normal sentence for their 2nd strike, and convicted felons with two or more prior felonies would get at least 3 times the normal sentence or 25 years (whichever is more) for their 3rd strike. The CCCPOA has a vested interest in locking up more and more Californians for longer sentences. ...

Currently California is in a fiscal crisis, so Governor Schwarzenegger is proposing the early release of some 22,000 inmates and eliminating about 4,500 prison guard positions to help shave $400 million from the budget of the state corrections department. The guards' union is unhappy with that scenario, and has allied with victims' associations to fight it. Meanwhile overcrowding in state prisons results in violence. A stabbing attack on four guards at one overcrowded state prison and a racially sparked brawl at another mark the type of violence that guards, inmates' attorneys and Schwarzenegger have been worried about for years.

What to do with all these prisoners? A U.S. prison population of over 2 million people -- mostly Black and Hispanic -- are working for various industries for a pittance. For the tycoons who have invested in the prison industry, it has been like finding a pot of gold. They don't have to worry about strikes or paying unemployment insurance, vacations or comp time. All of their workers are full-time, and never arrive late or are absent because of family problems; moreover, if they do not like the pay of 25 cents an hour and refuse to work, they are locked up in isolation cells.

Private companies, now numbering 135, began using prison labor in the 1970s. Microsoft, McDonalds, TWA, IBM, Victoria's Secret, AT&T and Toys 'R' Us are just some of the companies that use prisoners to cheaply produce products or provide services. While the rate of pay may vary from state to state, the constant is that the great majority of the money that the companies pay goes to the state in which the prisoners are incarcerated.

For instance, in California prisoners receive the "minimum wage" on paper, but the state takes 80% for state restitution, anti-drug campaigns, victim's rights organizations and a prisoner "trust fund."

The state of Colorado employs prison labor for everything from agriculture, which includes running a fishery, dairy farm and harvesting grapes, to making furniture and firefighting. Colorado legislators recently passed some of the most restrictive immigration laws in the country following a massive mobilization for immigrant rights. The new laws scared away workers, causing many crops to spoil in the fields for lack of farm workers. The Colorado farm owners' answer to this crisis is to find labor even more exploitable than immigrant workers -- prison labor "chain gangs." And the need for more prisoners is thereby increased even more.

The prison industry complex is one of the fastest-growing industries in the U.S. and its investors are on Wall Street. This multimillion-dollar industry has its own trade exhibitions, conventions, websites, and mail-order/internet catalogs. It also has direct advertising campaigns, architecture companies, construction companies, investment houses on Wall Street, plumbing supply companies, food supply companies, armed security, and padded cells in designer colors.

The federal prison industry produces 100% of all military helmets, ammunition belts, bullet-proof vests, ID tags, shirts, pants, tents, bags, and canteens. Along with war supplies, prison workers supply 98% of the entire market for equipment assembly services; 93% of paints and paintbrushes; 92% of stove assembly; 46% of body armor; 36% of home appliances; 30% of headphones/microphones/speakers; and 21% of office furniture. Airplane parts, medical supplies, and much more: prisoners are even raising seeing-eye dogs for blind people.

It might be a good idea to get away from these public union-driven prisons. How about private prisons? The number of prisoners in private prisons grew more than 3,000% between 1987 and 2004, soaring from 3,122 to 98,700.

Two companies dominate the for-profit incarceration industry -- Corrections Corporation of America (CCA) and the GEO Group, formerly known as Wackenhut Corrections. These two companies control 75% of the for-profit incarceration market. The highest-paying private prison is CCA in Tennessee, where prisoners receive 50 cents per hour for what they call "highly skilled positions."

The problem with prison privatization is that Corporate-owned prisons need a steady flow of inmates to maintain profits. To protect their profit margins, prison companies exert political influence by contributing thousands of dollars to state political campaigns. Lobbyists for private prisons support tough-on-crime legislation that ensures the continued need for prison space, including mandatory minimum sentences, life terms for "three strikes," and sentencing juveniles as adults.

We are back where we started, with the private corporations doing what the California union is doing -- promoting the supply of more inmates in more prisons with longer sentences.

So there we have it. America, with 1/4 the population of China, has 500,000 more prisoners than China and many of them are hard at work. U.S. citizens are placed in long-term involuntary servitude with the help of law enforcement and onerous laws pushed by a prison workers union and private prison corporations, and it is all constitutional.


The campaign winds down, but the movement is just beginning.

Most of you reading these pages probably saw Ron Paul as the only reasonable U.S. presidential candidate from either party -- no contest (possibly excepting anarchists who see any attempt to fix the system from within as doomed and couterproductive). Daniel McCarthy, writing in The American Conservative, quotes one Paul enthusiast: "His is a campaign of ideas. ... His army was left unchallenged on the battlefield."

That well summarizes the second signal characteristic of Paul's candidacy. He stands apart not only for his integrity and his promise to stick to the Constitution. It seems he is the only one with ideas that are worth of the label, period. McCarthy contends that even as Paul has officially lost the battle to be presidential candidate, his ideas have taken root and will spread. And this is not just wild hope. He has some details about the organizations dedicated to promoting the ideas. The fact that so many otherwise thoroughly apathetic and cynical young people are enthusiastic supporters is a promising portend.

"Ron Paul owns the future," influential evangelical Doug Wead concluded in an early April post on his personal blog. Wead makes an unlikely Paul enthusiast: His religious background might seem a better fit for Mike Huckabee. And his personal history -- as an adviser to both Presidents Bush -- might have inclined him toward the triumphant establishment candidate, John McCain. But in Ron Paul and the movement that championed him, Wead saw something remarkable: "His is a campaign of ideas. ... His army was left unchallenged on the battlefield. Now their ideas have taken root and they will grow."

Yes, they will -- they have already begun to. The Ron Paul "revolution," as it is known to its adherents, has made deep inroads into an area where Republicans are otherwise weak: energizing and mobilizing young people. Already, Paul has inspired other Republicans, mostly young themselves, to campaign for Congress on his antiwar, fiscally conservative platform. A new youth movement is also coming into being as Students for Ron Paul reconfigures into a permanent libertarian-conservative activist organization, Young Americans for Liberty. And these are just the first manifestations of the revolution's second act, as youth gains political experience.

Wead had no connection to the campaign, but early on he sensed what it might become. The day after Super Tuesday, Wead compared the legacy of the Paul campaign to that of Barry Goldwater's 1964 run. Paul's supporters, he wrote, "are producing blogs and papers and books and like Goldwater's revolution they will be able to say that they could see what the country missed. They were there when history was made."

Fine words and, I hope, true, but at the time they were published, I did not want to put them on the Paul campaign blog, the Daily Dose. I had been hired a month earlier -- a few days shy of my 30th birthday -- after Paul's disheartening 5th-place finish in the New Hampshire primary. The day of the primary, January 8, The New Republic published racially inflammatory excerpts from newsletters printed under Paul's name in the early 1990s. On January 9, the campaign's phone lines were jammed with callers demanding a Granite State recount. The campaign needed rapid response. They needed a blog. They hired me.

My job was to get out the latest news about the Paul movement and reinforce the message that the candidate and campaign chiefs put out -- keep the troops informed and raise their spirits.

The first issue I had to tackle was not a morale builder: there would be no recount. Paul did not want one; it would only distract from upcoming battles, including the Nevada caucuses -- where Paul would finish 2nd -- and the Super Tuesday primaries. And within the campaign, we knew there was no need to invoke voter fraud to account for the 5th-place result. We got the votes we expected to get. What we did not anticipate was record-breaking turnout, which overwhelmed our base. A minor candidate, Albert Howard, eventually prevailed upon New Hampshire for a recount. Paul picked up 38 additional votes. Howard lost one -- he only had 44 to begin with.

Seeing what happened in New Hampshire, we knew that Super Tuesday did not bode well. ... After Paul's second-place in Nevada, we had high hopes for Louisiana's January 22 caucuses. But Bayou State chicanery scuttled those dreams and robbed us of a clean silver-medal finish. ... Super Tuesday brought the results we were dreading. Even Montana's caucuses, which we hoped to win, bore disappointment: 2nd again. Good, but not good enough. ... I put up a post on the Daily Dose that drew inspiration from a line of the Aeneid that Austrian economist Ludwig von Mises ... had adopted as his motto: tu ne cede malis sed contra audentior. "Do not give in to evils, but proceed ever more boldly against them." I wrote to fortify my own resolve as much as our supporters'.

The next day, February 6, Wead published his first assessment of Paul's paradoxical success. Our campaign manager brought it to my attention. But I was reluctant to put it on the blog: it conceded too much to John McCain, I thought, awarding him the nomination before he had gone through the formality of winning the delegates needed to clinch it. What I did not know then, but soon discovered, was that Wead's words had resonated with Paul himself. Once that became clear, I put it right up.

That evening was an all-staff dinner, with about 40 attendees. The event was a morale booster, and Paul himself delivered the good news: the campaign was continuing, indeed, redoubling its efforts. Two notes in Paul's remarks resounded. First, he emphasized that the battle he was fighting was for the middle class, and it would be won or lost -- today or in years to come -- in the heartland. He was campaigning for soldiers who had gone to Iraq and lost limbs if not lives; for families who had lost jobs and homes -- and sometimes sons or daughters in the war. Other candidates could emote ... but only Paul addressed the forces driving America's decline: the twin evils of unfettered spending and an enfeebled currency. A strong dollar, backed by gold, would be no panacea, but it would preserve Americans' savings and might save jobs.

The second theme that impressed me in Paul's remarks was the effect that young people had had in buoying his spirits. Paul loved talking to students, and that enthusiasm was reciprocated, as I saw at a February 13 Georgetown University event. The auditorium was filled to capacity; over 700 students received Paul like a rock star, with wild cheers as he spoke about getting out of Iraq and slashing federal spending. By any measure, the Republican Party has lost the youth of America ... The parties had been close to parity in 1988, after eight years of Reagan. Eight years of Bush had cost the GOP a generation. Ron Paul offered the prospect of winning them back.

The campaign drew down after February 5. With Paul's Texas congressional primary impending on March 4, he began to spend more time in his home state. ... Paul swept to an easy victory in his congressional primary, crushing challenger Chris Peden 71 to 29%. Voters who get to know Paul like him, and Texas's 14th congressional district has come to know him very well in the 12 years that he has represented it. But McCain won too, in the presidential primary, and came out of Texas with enough delegates to secure the nomination. Huckabee dropped out.

But Paul campaigns on, evangelizing his message of peace and sound money, giving voters a choice, however symbolic, to cast their ballots for a Republican other than McCain. My time as Paul's blogger ended the week before Texas, however, as the campaign continued to contract.

Barring a temperamental explosion, ill health, or an unprecedented delegate revolt at the Republican convention, John McCain will be the party's nominee. But does the future, as Doug Wead suggests, belong to Ron Paul?

The second act of the Paul revolution now proceeds at a quickening pace.

Even if Paul had prevailed in every contest and were on his way to beating the Democrat in November, the revolution would just be beginning. Without support in Congress there is little a president can do -- if he accepts the constraints of the Constitution. Yet changing Congress requires change in the media, in education, in the grassroots organization of voters, and in a myriad of other fields. Even in the best of worlds, the Paul movement's work would have barely begun.

The second act of the Paul revolution now proceeds at a quickening pace, outstripping anything other Republicans are attempting. Its work is not without precedent. Goldwater lost the Republican nomination in 1960, but his volunteers built the infrastructure that allowed him to win it four years later, and although he lost the general election, the conservative movement rose from the ashes of his campaign. Pat Robertson lost the nomination in 1988; he did not even get as far as Ron Paul did this year. Yet Robertson's race laid the foundation for the Christian Coalition, which was instrumental in the Republicans' 1994 victories. The organizational infrastructure built by Robertson and later improved upon by James Dobson and others surpassed anything the Moral Majority constructed and made the Religious Right the most important grassroots Republican constituency -- one Bush exploited to full effect in 2004 and which single -- handedly propelled Huckabee's campaign this year.

Now constitutional conservatives, foreign-policy realists, libertarians, Taft Republicans, and domestic-policy Goldwaterites need institutional structures every bit as good as those of the Republican establishment and the Religious Right. Paul has the tools to build those institutions: a mailing list; a $5 million war chest; cadres of activists with experience in the hard, unglamorous work of ballot access and convention politics; a brain trust; and a youth auxiliary.

Paul has only hinted at what he has planned. His existing political vehicles, the Foundation for Rational Economic Education and the Liberty PAC, will expand. More is yet to come. And already a wider movement takes shape outside of official channels.

Candidates across the country have declared themselves "Ron Paul Republicans" in House and Senate bids. Indeed, on the otherwise dark night of the Potomac Primaries, self-designated Ron Paul Republicans won four Maryland GOP congressional nominations -- all in heavily Democratic districts, unfortunately.

They are just the beginning. ... Amit Singh is fighting for the GOP nomination to take on Democrat Jim Moran in November. Singh exemplifies many of the qualities of a Ron Paul Republican. He's a first-time candidate, an antiwar fiscal conservative. "I was a big proponent of Ron Paul," says Singh. "What piqued my interest in him was in the May debate of last year, the exchange between him and Rudy Giuliani. He talked about blowback. Working in the intelligence community now, and I have been for the last 10 years, when he talked about that I actually took notice and said, 'Wow, he understands what's going on.' So that's when I started following him. ... He was really somebody who inspired me to get off my couch and actually go do something."

Singh does not agree with Paul on every issue, but that has not dampened his appeal to Paul supporters -- or staff. I counted seven past and present Paul staffers at Singh's April 6 campaign kickoff in Alexandria. One former Paul field coordinator, Nena Bartlett, who organized get-out-the-vote efforts in Iowa, Michigan, and Minnesota, has joined Singh's campaign as coalitions director. "I learned about it through the Ron Paul Meet-Ups," she says.

"I would say that most of our supporters were former Ron Paul supporters as well, not all of them, but it's definitely an area of recruitment, as we share many of the same ideals," Singh relates, noting that he also finds broad support among "conservatives who are fiscally responsible."

Only two non-incumbents have so far picked up endorsements from Paul himself. One is Senate candidate Murray Sabrin of New Jersey. The other is Jim Forsythe, who has raised over $100,000 in his bid for the Republican nomination in New Hampshire's first congressional district. Like Singh, Forsythe has recruited a Paul campaign veteran, former finance director Jonathan Bydlak. ... Not long after talking to Bydlak, I learned that Forsythe might withdraw from the congressional race, possibly with an eye toward running for the state legislature instead. That may be a wise move. All the Ron Paul Republicans running this year face long odds against making it to Congress.

In any event, there is more to the Ron Paul movement than political campaigns, as one of Bydlak's other activities shows. He has launched an ambitious project to connect individual donors with students needing scholarships through a website, discoverscholars.org, bypassing university financial-aid offices. "The concept for Discover Scholars is very much born out of Ron's views and my political beliefs," he says, "in that it's this idea of letting the free market decide educational funding."

Key to his plan is the power of financial transparency, which Bydlak discovered working for the campaign. "I think it was revolutionary not just for the Ron Paul campaign," he says about showing fundraising numbers online in real time, "but to political campaigns in general. If you look at other campaigns, both Hillary Clinton and Barack Obama had fundraising widgets on their site, Hillary had a counter for the number of phone calls made. For all the talk about Obama's campaign being the innovative online campaign, they were the ones copying us. We saw the results of the transparency. It empowered individual supporters, who were smaller in numbers than those of other campaigns but raised similar or even larger amounts of money." ...

Youth is a common denominator in the efforts inspired by Ron Paul -- somewhat ironically, considering that at 72, Paul was the oldest candidate in the 2008 field. The Ron Paul Republicans running for Congress, as well as their staffs, tend to be young. Amit Singh is 33. Jonathan Bydlak is 24. And Jeff Frazee, organizer of the largest youth-based Ron Paul spin-off, is 25.

Frazee remains on Paul's campaign staff as national youth coordinator. He is transitioning Students for Paul -- with 500 chapters across all 50 states -- into something the Right has not had in nearly 30 years: a nationwide organization of young conservatives and libertarians. What Young Americans for Freedom was to Goldwater and Reagan, Frazee hopes his group, Young Americans for Liberty, will be to future Ron Paul Republicans.

"Its mission is winning on principle," Frazee says of YAL. "I like to see it as a kind of a variation on the Leadership Institute mission to identify, train, and place conservatives in media, public policy, and government—training and placing right-wing libertarians and learning how to win on principle, taking the Leadership Institute and putting more of an ideological bent on it." As Frazee explains, the Leadership Institute -- Republican activist Morton Blackwell's organization, where Frazee once worked as deputy national field director -- is a 501(c)(3) nonprofit that cannot turn anyone away from its programs or endorse candidates or legislation.

YAL will have a 501(c)(4) component: supporting and opposing candidates will be very much part of its mission, and it will not necessarily be open to everyone. "It will be restrictive in the sense that it will be identified with some philosophy," Frazee says. The group's activities are planned to be "kind of a take off of the tradition of Young Americans for Freedom, in terms of the amount of activism and youth organization. But at the same time it's very different from Young Americans for Freedom, too, because of its issues and its philosophy" -- which will parallel the ideas of Ron Paul.

Frazee has a mailing list of over 31,000 students, and he is administrator of a Paul group on Facebook with over 62,500 members. Paul's personal support for the project means that Frazee should have little trouble raising money. Already he has drawn up plans for a national student conference this summer. "From the interest we've had this far, I'm pretty confident we can have at least the low end [attendance] of 250 students, and maybe 500 at the high end." Once the group is established, Frazee plans to target states "where there's actually a possibility that a libertarian Republican can win, building up the chapters around there, as well as in some of the key states where we already have strong Students for Ron Paul chapters, and also key states like New Hampshire, where we already have a libertarian mindset."

With only the College Republicans and College Libertarians to compete with -- both of them limited by their status as party auxiliaries -- Young Americans for Liberty has the potential to reshape the youth politics of the Right. And as part of a panoply of institutions arising out of the Paul campaign, YAL could be even more influential.

What other institutions might emerge from the Paul revolution remains unclear. Not everyone associated with the movement is confident of its future: "People are running in different directions," says one former staffer, "Unless there's some sort of centralized apparatus to continue to feed them the message, I don't think that a lot of [Paul supporters] are going to be the kind of people to stay in it. The young, or the ones who don't have as much to contribute, are going to be the ones who stick around."

There is a paradox in this contention. So much of the Ron Paul campaign was not orchestrated by some command central. A lot of its effectiveness derived from the use of the internet to spontaneously organize initiatives that the people back at headquarters would not have approved or thought of. Young Americans for Liberty might have Ron Paul's endorsement and some monetary muscle backing it up, but it will have to earn a reputation as a or the major organization for nurturing "the revolution."

In the near term, at least, there is a vehicle for Ron Paul's message -- his new book, The Revolution: A Manifesto. Unlike his previous books, which were compilations of speeches and essays, this one is an organic whole, a cohesive portrait of Paul's philosophy. "The revolution my supporters refer to will persist long after my retirement from politics," he writes. "Here is my effort to give them a long-term manifesto based on ideas, and perhaps some short-term marching orders." "Reading orders" might be more accurate -- The Revolution ends with a list of 48 recommended books. The list will not win any elections. But it may form a few maturing minds.

What Ron Paul’s Book Accomplishes

A convincing reception for Ron Paul's new book The Revolution: A Manifesto would go a long way towards continuing the momentum of his revolution. Thomas E. Woods, Jr. -- senior fellow in American history at the Ludwig von Mises Institute and the author of, among other books, 33 Questions About American History You're Not Supposed to Ask and The Politically Incorrect Guide to American History -- explains why it is fit to carry this burden.

The Revolution: A Manifesto, whose official release date is today [April 30], accomplishes much more than what you see here. But, for starters, here goes:

(1) It gives Ron Paul's movement a statement for the ages. One reason Taft Republicanism died is that Robert Taft left behind no systematic statement of his philosophy around which a continuing effort could cohere. Former Member of Congress Barry Goldwater, Jr., says of the book: "This book takes a wrecking ball to the political establishment. Senator Goldwater would have loved it. It's The Conscience of a Conservative for the twenty-first century."

(2) It is excellent for those who say they respect and agree with Dr. Paul's domestic views but cannot abide his foreign policy, and/or who denounce his foreign policy as "liberal" (in the sense of left-liberal rather than classical liberal). The foreign policy chapter of The Revolution: A Manifesto is as persuasive and succinct a defense of nonintervention as I have ever seen anywhere, and it answers his critics very effectively.

(3) A lot of people joined Ron Paul's movement out of an attachment to one particular issue, and without necessarily understanding the whole package. The Revolution: A Manifesto lays out that whole package as a single, coherent, and elegant whole.

(4) The book gives supporters of Ron Paul's message scores of additional arguments they can use to defend their positions.

(5) This book will be what countless young people, 10 to 20 years down the road, will cite as the formative influence on their political outlook. Although anyone's mind can be changed, it is the young, who are still figuring out where they stand, who are most likely to be reached. The Manifesto will reach them, and will continue to reach people long after no one remembers what The Audacity of Hope even was.

(6) It explains Dr. Paul's position on gold, fiat money, and the Federal Reserve System concisely and for the layman. Here is an issue essentially no one was talking about before, but is now cracking through into mainstream discussion.

Now to be sure, the usual hacks of Left and Right, who supposedly occupy opposing ends of our political spectrum, could not kiss and make up fast enough in their mad rush to defend the institution that has emptied the dollar of its value since 1913. That was to be expected: Whenever anyone asks a truly fundamental question, mainstream Left and Right always give the game away and close ranks in defense of the status quo. But enough independent thinkers began investigating Dr. Paul's arguments that our discourse on these matters has already begun to change.

Still, most people know nothing about the subject, except for an inchoate sense that gold = bad, so Dr. Paul's chapter on the subject is of great importance. I will never forget an entry at DailyKos in which the writer (who wished to explain to her liberal friends that Dr. Paul was really a terrible person who should be ignored in favor of the pro-war, pro-police state Hillary) argued that the gold standard "would destroy the economy." At first we wonder if she has ever cracked open a single book on the subject, but we already know the answer. Since she never hears monetary freedom and opposition to central banking discussed in Newsweek or the New York Times, she just knows it just has to be wrong.

Dr. Paul calmly eviscerates lazy thinking like that.

(7) It is filled with things no presidential candidate would dare tell the American people. I have compiled a few examples here.

(8) A bestselling book, which this one promises to be, gives the movement additional credibility and visibility. Grand Central Publishing (the former Warner Books) is a major publisher, boasting authors ranging from Stephen Colbert to John Paul II. They can get books into stores and Dr. Paul in the media. (Though the more he sells, the more media curiosity he will attract, so book purchases certainly help in this department.)

(9) For your friends who have heard of Ron Paul only in caricature, or have never heard of him at all, it shows him to be a learned, thoughtful, and mature statesman. Its arguments are consistently persuasive, and it is written in a way that keeps your attention from the first page to the last. It is a book that can change minds.

And we sure need plenty of that.


New chipset from AMD with integrated graphics allows amazing power and efficiency.

As circuit sizes have gotten smaller, more features have been integrated into the motherboard chipset. How often does one need to add network adaptor or USB/Firewire cards these days? Even the audio processors integrated into the chipset are good enough that only gaming fiends or super-picky audiophiles bother adding a separate sound card. Integrated graphics capabilities, on the other hand, have been pretty lame so far. If you wanted any game handling capabilities -- we do not care ourselves, but do take that capability as quality measure of a sort -- buying a discrete graphics card was mandatory. Until now?

CPU chipmaker Advanced Micro Devices purchased graphics chip maker ATI in 2006. ATI's arch-graphics processing chip competitor nVidia had previously moved into the chipset business, and AMD felt it had to buy ATI in order to defend its competitive position. And now the new AMD 780g chipset has graphics capabilities comparable to the latest entry-level discrete video cards, and many integrated video-out streams to boot. Combined with AMD's Athlon X2 4050e 2.1 GHz CPU the power consumption is also spectacularly low, which means low heat and low fan noise needed to keep the heat in check. All of which means the 780g chipset plus the Athlon X2 4050e CPU makes an idea home theater PC platform. Coding Horror, a site whose virtues we recently made acquaintance with, editor Jeff Atwood explains how easy and cheap building a HTPC now is.

I have kept a PC in my living room for the past three years as my primary home theater interface, and I heartily recommend it. It is shocking how cheap and easy it is to build a home theater PC these days.

I have been pondering an upgrade to my creaky old home theater PC, and rave reviews of the new integrated AMD platform at Tech Report, Silent PC Review, and Tom's Hardware finally pushed me over the edge.
CPUAMD Athlon X2 4050e 2.1 GHz (45w)   $70
MotherboardGigabyte GA-MA78GM-S2H Micro ATX$100
RAMKingston 2GB DDR2 800   $39
Power Supply UnitSeasonic ECO 300W   $55
DVDLite-On 20X DVD±R SATA   $29
I did not buy the PSU because I already have that particular model, but I bought everything else on this list for a grand total of less than 250 bucks. (You can save a bit on the power supply, but I do not recommend it, particularly if you plan to leave your HTPC running 24/7. Efficient power supplies not only save you money on electricity in the long run, but also tend to be of generally higher quality, and quieter to boot.)

The new AMD 780G platform is striking in its simplicity. Just pop in the RAM and the low-power Athlon X2 CPU and you have an (almost) complete ultra low-power home theater PC. Just check out the awesome array of rear panel connections [image]. We have the expected stuff (4x USB, gigabit ethernet), but the exciting part is DVI, VGA, and HDMI video out! Not to mention optical digital out for beautiful, pristine digital audio direct to your receiver. Those are the key connections for a home theater PC. We even have an eSATA port and firewire thrown in, which is always nice.

I simply dropped the new motherboard and DVD in my existing transparent acrylic Micro-ATX PC case [image here], replacing the old stuff. (If you are thinking of going this route, I can recommend the Antec Minuet Micro-ATX case for $100, which conveniently comes with an efficient power supply, too -- but be aware of the half-height expansion slots.)

I kept my existing hard drives (a small 2.5" boot drive for low noise / power consumption, and giant capacity 3.5" drives for long-term storage and recording), and my Hauppauge PVR-150 dual analog PCI tuner card, which I love to death.

For the longest time, integrated graphics was synonymous with craptacular graphics. That is not the case for this new AMD 780g chipset. The integrated graphics are fully DirectX 10 compliant, comparable to the latest entry-level discrete video cards. Gaming is not our goal, though this would be perfectly adequate for many games. More importantly for a HTPC build, the integrated graphics support the full suite of H.264 and WMV video playback acceleration. ...

My old Pentium-M single core struggled to play back 1080p videos. The Athlon X2 4050e CPU I chose is one of AMD's low power dual core models, far from top of the line. The testers at SilentPCReview found any modern dual core chip is more than enough for the most strenuous of video playback tasks ...

AMD is a better choice for a home theater PC because their idle voltage and multiplier throttling -- the marketing term is "Cool n' Quiet" -- is outstanding. (I am also glad to have the opportunity to support AMD because I am desperately afraid of a world where Intel is the only CPU vendor. And you should be too.) ...

My old highly optimized HTPC build consumed just under 80 watts at idle, up from around 65 before I began upgrading it to make it more Vista friendly. Guess how much this new HTPC platform build, which is more than twice as powerful, consumes at idle? ... FORTY. SIX. WATTS. That is flippin' amazing. We are talking about a powerful modern PC here, with quite a bit of additional hardware you would not find in most PCs, including a dual TV tuner PCI card and three hard drives. Granted two of those drives are in sleep mode most of the time, but still. 46 watts -- twice the power at almost half the energy consumption! Incredible! Silence and efficiency were nowhere near this easy three or four years ago.

Needless to say, I am pretty excited about this particular $250 upgrade, and I can sell my old parts to underwrite it. ... We use our home theater PC every day. It is silent, draws very little power, and it is small enough to tuck away cleanly in our living room decor. It plays anything through a slick 10-foot UI, and offers unrestricted access to the web at any time. Putting a great one together today is almost ridiculously easy. If you have not considered building your own home theater PC -- why not?

UPDATE: since people asked, here is a complete from-scratch build list for a home theater PC. [Total is $523.] If you plan to use Vista Media Center, add a Vista Home Premium SP1 license for $110. I also saw that Blu-Ray internal drives (read only) are down to $130 as of the time I am writing this.

We are still perfectly happy with a DVD player for movies and do not watch enough television to even bother subscibing to cable, but this article is of interest because it indicates how cheaply a powerful, small, quiet PC can be built for these days. The author's from-scatch price list, minus the tuner and remote control, adds up to $430. Wait a couple of months and this will probably be down to $400 or so.

Which brings us to another observation: The high tech hardware industry must be among the least regulated industries out there. (Software shows the heavy hand of government with software patents, copyright laws, digital rights managment, etc.) With unfettered competition we have seen an astounding fall in the technology price/performance ratio over time. The decline is so swift that it is measurable over timespans as short as months. There is no reason that medical care, for example, should not demonstrate a cost curve with similar characteristics, if less dramatic due to the high labor component. But, as we are all aware, the forces that drive the medical industry are anything but market-based.