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LEAVE THE UNITED STATES IF YOU CAN
Libertarian and "individualist feminism" Wendy McElroy writes that that U.S. police state is likely to get far worse when the current economic crunch hits in earnest, so it is time to get yourself and your assets outside the borders. She speculates that the resulting police state will be the biggest ever, best ever, in typical American fashion.
Her reasons given for securing you wealth outside the reach of the authorities are reasons we have been preaching for years: (1) Whatever avenues for relocating it still exist, they could be wiped out overnight. (2) With government starved for revenues to support itself and pay off its constituents, it will resort to taxation and outright confiscation under increasingly flimsy pretexts. Moreover, come the economic collapse the number of supplicants for state aid and their willingness to overlook traditional niceties like due process and justice will both increase.
It is time -- arguably, it is past time -- for you to get your family and your wealth safely outside the borders of the United States. America has become a police state that is moving quickly toward total surveillance and, in typical American fashion, the resulting society will almost certainly be the "the best and the biggest" tyranny in the world.
Make plans right now while opportunities still exist to secure your wealth outside of the authorities' rapacious reach because that door of opportunity may be slammed in your face in the near future. It is not merely that government at all levels is starving for the cash that has dried up from property taxes and, so, will steal and confiscate like a drunken highwayman. Many factors point to rise of the Total State, which will grind up your freedom, your future and the lives of those who resist.
I read about 12 news sources a day, from far-left to the Religious Right. Month by month, there is a dramatic increase in reports of police brutality, government surveillance, crack-downs, the control of daily life down to the minutia of which oils you may cook french fries. ... And there seems to be precious little opposition to the arrival of totalitarianism. Perhaps the flood of oppression is too overwhelming and has caused a general paralysis. At times, that is my reaction. But, mostly, I think people are either focused on financial survival or they actually applaud the Total State.
Even those who believe they believe in freedom are among the applauders because they buy the justifications being offered for the annihilation of civil liberties. For example, consider just one of the incredible and successful assaults on the due process and liberties of us all. In the name of defending women and children, the campaign against sex offenders has created a class of "untouchables" in class-free America -- people whom the government tells where to live, how to make a living, which sites they can e-visit, etc., etc. In the name of noble goals, the government has erased the idea of serving out a time in jail (which used to be called "paying your debt to society") and, instead, established the idea of indefinite sentences and "forever" punishments. But the establishment of this caste system is just one aspect of the wild plunge into tyranny.
What should worry you the most is that everything has occurred before the economic collapse of the United States, which I believe will happen in the near future. (The timing depends somewhat on when "too many" foreign-held dollars are dumped back into America.) I expect a severe depression to unfold over the next few years. And nothing, nothing, nothing encourages the growth of State as much as people who are frightened and hungry/homeless. An entire population can turn to a leader much as children turn toward a parent ... and for the same reason: to feel safe.
If an economic depression is added to the convergence of the police state with a total surveillance society, then I honestly do not know what will happen. But I do know that you do not want to be there to find out. Don't be fooled by those who say "but America has too strong a tradition of freedom for this to happen." Pre-Nazi Germans thought their culture was too sophisticated and fine to allow the triumph of barbarism. Leave.
PANAMA IS FACING AN UNCERTAIN FUTURE
Things can change fast in expat-favored destinations, and this blog entry claims Panama's once promising future is open to question due to a variety of factors. Not surprisingly, real estate prices are softening. The glut in condos could choke the whole sector, as others have warned along the way. But also, crime is increasing, the country's corruption level is not getting any better, the military may be on the ascendency again, and -- most surprising of all -- the country's commitment to protecting the assets of those who use it as a haven may be waning.
The piece was written by a Canadian expat, Rebecca Tyre, who moved to Panama in 2005 and who blogs extensively about her experiences there. Perhaps these straws in the wind she flags will not kill the deal in the longer run. Indeed, she does not appear to be overly pessimistic about the situation. But the warnings should be carefully heeded before buying into Panama. The consistent advice coming from all quarters is to get to know an area by living there as a renter or guest before buying in.
"The outcome of next year's elections will probably say a lot about whether Panama wants to embrace tourists and retirees or if they would be happier that we all just get out and stay out," assesses Ms. Tyre. "We foreigners can suggest and complain all we want, but in the end it is for the Panamanians to decide. ... We chose to live or visit and we have the same choice to leave. Many Panamanians do not have that same option."
Panama is currently dealing with a number of issues that will determine whether or not the country will continue to be a top destination for tourists and retirees. Much of the future will depend on who is elected to run the country next year.
The current administration is hashing out details of new security reform which has some wondering if the new measures will lead to a return of Panama's military. President Martin Torrijos was granted "special powers" by the National Assembly but has been pretty quiet about the details of his decisions. What is known is that though currently prohibited, future leaders will be able nominate a uniformed head of the National Police, a practice which is currently prohibited. These reforms have some expats worried that Panama will reinstate the military and leave the doors open to a situation which lead to the rise of General Noriega.
Cinta Costera Controversy
It has now come to light that the $190 million Coastal Beltway in Panama City may be the financial responsibility of area residents. The beltway is currently under construction through the bay of Panama and is expected to ease traffic problems in the capital. The Public Works Ministry believes residents of Punta Pacifica, Punta Paitilla, Marbella, Bella Vista and Calidonia should foot the bill for the work, since it will increase the values of their homes. Hundreds of people who bought houses or condos in this area are now shocked to learn they could be paying up to $8,000 a year (for 10 years) in taxes to pay for the project. For a country that is trying to encourage international investment, this hardly seems like a wise move. If you own a condo in these areas right now, good luck trying to sell it in the next 10 years.
Tourism Laws Changing
Panama's new tourism laws are due to come in to effect next month and if the current proposal remains intact, far fewer foreigners will be eligible for the pensioners visa. Currently to apply for a pensionado visa one must have a retirement income of $500 (plus $100 for every dependant) per month but the new law states that every person applying must have an income of at least $1000/month. The proposed law will exclude many foreigners who were once considering Panama as a retirement destination.
Real Estate Boom to Bust
Real estate prices in Panama are certainly not what they used to be. The ever increasing prices are locking a lot of people out of being able to invest in this country. People who have already purchased here and are hoping to resell their units could have a very hard time if there are thousands of condo units on the market. Panama is building too fast and the demand is not increasing. Something will have to give. There is a economic downturn going on around the globe, and the U.S. is seeing the worst real estate market in decades. Where will the people come from to fill the glut of condos being built? Panamanian developers just need to slow down and wait things out before they destroy the real estate sector for good.
Not so Cheap Living
The cost of living is increasing around the world, but it is very apparent in Panama. The poverty rate in Panama is between 30 and 40 percent. That means more than a third of the population is having a very hard time meeting their basic needs. The poverty rate will increase as the cost of the basics rise. More poverty equals more unhappy, desperate people. The countries in Latin America with the highest crime rates are also the countries with some of the highest numbers of impoverished people. If the government doesn't step in and help (cap electricity rates, subsidise more food products, etc - take a hint from Mexico) then there will be many more desperate Panamanians.
Transparency International gave Panama a 3.2 when rating the corruption perception in 2007. A 10 on the scale is highly clean, and a 0 is highly corrupt. Corruption is an every day occurrence in Panama and it ranges from crooked lawyers and police to crooked politicians and companies. Every foreigner moving to Panama has been told that money will grease any wheel. It can be very confusing and frustrating if you are actually trying to do the right thing and follow the rule of law. In many cases you cannot get anywhere by being honest and trying to do what is right. Corruption can sometimes work in favor of the expat or tourist, but it can also ruin them.
Rising Crime Rate
The crime rate in Panama is on the rise. Last year 444 people were murdered in Panama. Panama is quickly creeping up the list of countries with the highest murder rates per capita. High crime rates justifiably scare tourists and potential investors away, especially when crimes are committed against foreigners. In the past few weeks there have been a couple of cases where North Americans were shot during robberies in Panama. These are the types of crimes that will put an end to Panama's potential as a tourism hot spot. With any luck, the proposed security reforms will help curb Panama increasing crime rate.
Diminished Security of Asset Protection
Panama has long been known as a top site for asset protection and offshore accounts. Recently the Supreme Court of Panama ruled that funds in Private Interest Foundations can be sequestered even when the PIF has nothing to due with the reason the person is being sued. The decision stems from a libel suit filed by HSBC against a Canadian retiree living in Panama. The Canadian made negative comments about the bank on an internet chat room (never mentioning he was speaking on behalf of his PIF) and the bank successfully petitioned to have the funds of his anonymous foundation sequestered. This decision may hinder the current ease that money launderers have hiding their money, but it is going to scare off a lot of legitimate businesses and retirees who have opened bank accounts using a corporation or foundation. Panama is no longer a safe place to keep clean or dirty money.
More Talent Needed
Panama needs more skilled workers and a better service culture if it wants to compete with other tourism and retirement destinations. The government can invest all the money it wants in tourism campaigns, but when travelers arrive and are greeted by a mono-lingual immigration officer and the clerk at the hotel they check in to would rather talk to her boyfriend on her cellphone then hand over the room keys, you certainly will not see many repeat visitors.
Panama has an incredibly bright future if it treads carefully. The outcome of next year's elections will probably say a lot about whether Panama wants to embrace tourists and retirees or if they would be happier that we all just get out and stay out. We foreigners can suggest and complain all we want, but in the end it is for the Panamanians to decide. This is not our country. We chose to live or visit and we have the same choice to leave. Many Panamanians do not have that same option.
Living in Panama’s Interior Versus Panama City
An entry by Rebecca Tyre which preceded the above suggests that if you move to Panama, there are major differences in the experience of living in the country compared with Panama City. Some are good, some are bad, and you need to test the alternatives directly in order to make an informed choice.
People often refer to themselves as country folks or city folks. I do not think you could take someone who is used to living in Manhattan and move them to Volcan. I am sure someone used to living in small town Ohio would have to adjust to living in Panama City. Both city and country have their advantages and disadvantages and they are more pronounced in Panama than in many other countries.
Panama City has a lot to offer visitors and residents. There are great restaurants, many bars and nightclubs, shopping malls, more banks than you can imagine. Getting things done in the city is a lot easier than getting things done in the countryside. Granted, it takes longer to get around, but pretty much every thing you need can be found in the city. That is not so true once you are outside of Panama City. In the interior of Panama it can be hard to find many items. Food shopping becomes more difficult in the countryside if you are used to buying certain brands. Shopping for clothing can be just as hard. Some of the larger cities in the interior will have a handful of banks, but not all banks are represented outside of PTY.
There are less options for entertainment outside of Panama City as well. There are just a handful of movie theatres, and they do not show the same movies you will find in the city. It can also be hard to find a restaurant that serves something besides Panamanian or seafood. The interior is full of cantinas, but there is not much nightlife besides that. However, cantinas can be a great source of entertainment if you go on the right night. There is nothing like enjoying an impromptu concert by the locals, fuelled by seco! Towns in the countryside also have some of the best festivals in the country. Those towns spend the entire year preparing for these festivals, so they are big hit with locals and foreigners.
Panamanians living in the countryside tend to be a bit more friendly and open than those living in the city. The pace is a lot slower in the interior as well. That is not always a good thing though. If you think service in Panama City is bad, service in a small town can be even worse!
Prices tend to be cheaper in the countryside. Gas is the main exception. Once you leave Panama City, the price of gas goes up sometimes 20 cents a gallon. Food, drinks, labor and entertainment are less expensive in the countryside.
Both the city and the interior have a lot to offer as well as drawbacks. If you are planning a move to Panama, it is best to spend time in different locations to figure out what will work for you. Some expats love the city and others prefer a more calm existence in the countryside. In an ideal world, split your time between the two to enjoy the best of both worlds.
CARIBBEAN TAX HAVENS DRAGGED OVER COALS BY U.S. SENATE
The U.S. Senate, led by the usual suspects, Max Baucus and Chuck Grassley, held an ex parte show trial of offshore tax havens in late July. The accusation is that such havens are used to enable massive tax evasion by U.S. persons. Undoubtedly some evaders slip through the increasingly fine net. But with multi-trillion dollar wars and bailouts, for starters, we doubt that this loss of tax "revenues" is the most serious source of the U.S. federal deficits. Nor would putting a greater effort into stemming those offshore losses give the biggest deficit reduction bang for the buck.
But ... since arbitrary accusations are getting thrown around, we will say that the larger agenda is to make it still harder for assets to escape from the U.S. Stopping offshore tax evasion is the norminal reason which the public can be sold on.
Caribbean tax havens came under attack in the U.S. Senate ... during a hearing by the Finance Committee on the Cayman Islands and offshore tax issues. Senators as well as witnesses had much to say about tax avoidance and evasion by U.S. individuals and corporations using offshore financial centers. ...
"Today, we'll examine whether many of those tenants are feasting at American taxpayers' expense," Baucus said.
Senator Chuck Grassley added that the hearing would also examine the problem of U.S. income tax evasion by taxpayers who hide their assets and income in foreign bank accounts and foreign entities.
Jack Blum, a Washington, D.C. attorney with long experience in dealing with the issues of offshore tax evasion, money laundering, and related financial crime, in testifying before the Committee ... said that offshore tax evasion is a serious and growing problem. Blum referred in particular to three Caribbean jurisdictions: the British Virgin Islands (BVI), Nevis and Belize.
The BVI is the place to go for quick, cheap, anonymous incorporation, as evidenced by its "more than 500,000 shell companies," Blum said. "It is important to understand that the structures are mere pieces of paper with no commercial reality," he added. The BVI has also developed a new trust "product" that allows a "trust" to be the owner of a corporation without the trustee having any knowledge about the operation of the corporation. "Under U.S. law this is not a trust," Blum said.
Blum claimed that Nevis is home to "tens of thousands of corporations," all of which have boards of directors. When banks and brokerage firms ask about the control of the corporation for anti-money-laundering purposes, the person opening the account furnishes the passport photos of the nominee shareholders, officers and directors. The same 20 people are the nominees for thousands of corporations. They have no knowledge of, or fiduciary responsibility for the corporation's business, he went on to say.
"If the nominee directors and officers were water-boarded they could not tell you what the corporation was doing or who owned it," Blum said. The directors and officers do not participate in "corporate" decisions and keep no records relating to corporate activities. They do not even know where the records are, Blum testified.
Blum told the Committee that the BVI is not the only jurisdiction that has legalized "sham" trusts. Other jurisdictions have passed trust laws that leave the trustee with little or no responsibility. In Belize, he said, you can be the grantor, the trustee, and the beneficiary, and have the trust considered valid. You can include provisions allowing you to redraw the trust instrument and add a flee clause which allows a change in situs for the trust in case of criminal or tax investigation.
There is not much point in having a structure which is legal according to the issuing jurisdiction but is not recognized as such by the user's home country. A "trust" where one person is the grantor, trustee, and beneficiary is an alter ego practically by definition.
Blum summarized his testimony by saying that offshore evasions is a massive threat to the integrity of the U.S. tax system. "We cannot continue to treat entities without substance or purpose as real and expect our tax authorities to navigate their way around the obstacles. We must close the loopholes foreigners use to put money in the U.S. market without leaving a trail," Blum said.
Quite the useful government mouthpiece, this Mr. Blum.
Michael Brostek, Director of Strategic Issues at the U.S. Government Accountability Office (GAO) testified as to the GAO's investigation and report concerning Ugland House in the Cayman Islands. According to the GAO report, Ugland House provides an instructive case example of the tremendous challenges facing the U.S. tax system in an increasingly global economy.
In particular, the ability of U.S. persons to establish entities with relatively little expense in the Cayman Islands and similar jurisdictions facilitates both legal tax minimization and illegal tax evasion. Cayman entities can be used to obscure legal ownership of assets and associated income and to exploit grey areas of U.S. tax law to minimize U.S. tax obligations, the report concluded.
The implication that one can walk in with one's piece of paper and open up a financial account with no fuss or muss is largely a fiction. Almost any financial institution will want to "know their customers" ... the actually parties of beneficial interest and will want identification. Most jurisdictions will readily turn over records to the U.S. or other O.E.C.D. countries upon formal request. Which is not to say that the proliferation of paper does not require extra legwork on the part of the IRS et al.
"Balancing the need to ensure compliance with our tax and other laws while not harming U.S. business interests and also respecting the sovereignty of the Cayman Islands and similar jurisdictions undoubtedly will be a continuing challenge for our nation," the report said.
Frank Ng, IRS Commissioner of Large and Mid-Sized Businesses, also testified as to the GAO report. He pointed out that, while the GAO made no recommendations as part of its report, the report noted some of the difficulties faced in dealing with the companies located in the Cayman Islands.
Specifically, Ng said, the attraction provided by Cayman Islands to many companies seeking to do business there is based on a number of legitimate business reasons. "The difficulty we generally face in obtaining information in jurisdictions such as the Cayman Islands is our inability to identify with specificity the individual and activities to establish the basis for an information request," Ng said.
The tenor of much of the oral testimony and other remarks at [the] hearing indicated that senators are determined to crackdown on offshore tax havens. Along with increased Congressional scrutiny, the possibility of shifting the burden of proof was suggested. In that event, the onus would then be on the taxpayer to prove that any offshore entity was being used legitimately, instead of the IRS being required to show that it was not.
BANK LOSSES SHAME DISGRUNTLED SWISS
The losses on American subprime mortgage loans suffered by Swiss banks such as UBS has been well covered in these pages. The banks' reputations have been tarnished, and many Swiss people are now embarrassed to be associated with the debacle. There are the large losses from not practicing the classic Swiss conservatism, and also the unseemly rush to grab the golden ring by Swiss bankers that looks like what happened in the American financial casino. So now the Swiss banks are going to have to rebuild their reputations in the world market and in their own citizens' eyes to regain their former standing.
In Zurich's central square trams rumble past the tourist stalls doing a gentle trade in Swiss souvenirs. But while local chocolate, miniature cuckoo clocks and pen knives are still proving popular in the summer sunshine, another icon of Swiss identity is desperately trying to hold onto its good name.
As the credit crunch has bitten over the past year, the country's two largest banks, UBS and Credit Suisse, have between them been forced to write down almost $50 billion. For a country that has built its name on its cautious and dependable nature, the events of the last 12 months have come as a shock to many in Switzerland.
The cafes by the banks of the River Zimmat that flows through the center of Zurich are bustling with lunchtime punters enjoying the summer sun. Among those enjoying an early afternoon coffee are school teacher Christine and her friend Conchi.
Up until a year ago, neither of the two women had had much interest in the banks that populate the center of their native city. But after a year that has seen headlines about rogue traders, spiraling salaries and mounting losses, both now feel strongly about the way the bankers have behaved.
"I think they have ruined our good reputation and I feel ashamed of what has happened at the banks," says Christine. "Bad management was one of the problems but there was also a greed for profit."
The public reputation of bankers in Switzerland was already poor, with many balking at their often huge salaries and conspicuous consumption. But since the massive profits turned into enormous write downs, their reputation has fallen even further in the eyes of the general public.
"I do not have any respect for them and I certainly don't trust them anymore. It is a very sad situation," says Conchi. "I am very proud of being Swiss, but I don't want to be associated with what has gone on."
UBS began life in its current form in 1912 when a merger of two regional banks create the Union Bank of Switzerland. It thrived throughout the last century, mixing its asset management business in Switzerland with the development of an investment banking empire with a presence in all major financial centres in the world.
And it was the lure of the high risk and high returns in the investment bank that led UBS to invest in products linked to American mortgages, which have turned out to be almost worthless.
Many in Switzerland now feel that the banks should return to its traditional strength in the more conservative pursuit of asset management and cut back on their investment banking activities.
While the headquarters of the main banks are all in Zurich, the most important city in world banking is the medieval town of Basel in the West of the country. Just down the road from the bustling main railway station, surrounded by branches of UBS and Credit Suisse, is the headquarters of the Swiss Bankers Association.
The association's head, former UBS executive Urs Roth, seems more relaxed about the damage that the credit crunch has caused to Swiss banking. "I never would have imagined that we would have seen the losses over the past year," he says. "But we do not see much reputational damage at the moment as both banks here are mainly involved in wealth management, which has not been as badly damaged."
But just as Swiss banks are beginning to put their overseas subprime woes behind them, a more home grown problem is beginning to emerge in the form of tough new rules from the Swiss Federal Banking Commission (SFBC). Mindful of the embarrassment of the past year, the SFBC want the banks to hold more capital in their reserves so that when another financial storm comes along they will be in a better position to weather it.
Mr. Roth is not enthusiastic about the possibility of such new rules. He believes it might make Swiss banks less competitive. "Switzerland should not take unilateral action and impose its own rules," he says. "We are active in a global market and we should compete according to global rules."
And go down the tubes with everyone else? Sounds like an American investment banker.
With a decision on the new standards expected in October, Mr. Roth believes that there will plenty of "tough discussions" ahead. But the question for the whole of Switzerland is just how long it will take for the country to regain its reputation for financial prudence.
Gerhard Schwartz, the economics editor of the Neue Zurcher Zeitung newspaper, says that action is needed to make sure the whole country gets back to its former position. "This crisis has damaged the Swiss reputation and the banks will need to do something to recover," he says. "But I'm convinced that it will recover simply because it is so important to the country's economy and because so many people work in the financial sector."
As the bankers troop out of their offices in the centre of Zurich at the end of the working day, it seems that that it will be a while yet before a spring returns to country's collective step.
Now UBS has decided to split the investment and wealth management businesses. See this link.
ATTORNEY MICHAEL MINNS BEATS IRS, AGAIN
Anderson Ark & Associates (AAA) was a organization that operated what looked like a transparently illegal offshore money laundering/tax evasion scheme. It was busted in 2001 in a massive IRS raid that targeted virtually everyone who had a part in promoting the organization and scheme. One small problem with the whole IRS initiative and version of events: IRS auditors actually gave the program a pass. At least so this article says. We are unware of corroboration for the claim.
The body of the article concerns how Michael Minns, an attorney outside of Houston, obtained an acquittal of all charges for a couple, James and Pamela Moran, caught up in the AAA raids and prosecutions. The prosecutors and judges, as is typical in tax cases (presumably including the other AAA-related trials), wanted to dispense with a fair trial for the Morans and prevented them from voicing the valid defense that they had no willfulness or knowledge of breaking any law (or non-law). Such a counterclaim is sufficient grounds for acquittal. Minns got his clients' convictions overturned on appeal due to this legal error by the court. In the retrial, the Morans were found innocent on all counts, and some interesting facts about how the IRS Criminal Investigation Division (CID) operated surfaced. Unfortunately, many who were involved with AAA are in prison because of the lack of a capable attorney like Minns.
In a followup article to this one, revealing still more underhanded IRS tactics, the author put in this interesting addendum note: "One very unique and important defense tactic used by Minns was to ask the various CID agents if they had taken classes given by the IRS on how to be effective witnesses and thus sway unsuspecting jurors. Minns knows that taking such a class is a requirement for all CID agents and he also knows that jurors want to hear the straight truth, not an acting job by dangerous and abusive agents of the IRS. It would behoove all attorneys who represent clients in tax cases to expose this fact in their criminal tax cases."
On February 28, 2001, the IRS conducted the largest raid in its history covering three countries, Canada, Costa Rica and the United States, leading to the indictments of dozens of people across the country that worked for or purchased products from an organization called Anderson Ark and Associates (AAA) based in Costa Rica.
Armed searches and arrests took place coast to coast stretching from Boston to Sacramento and Fresno, California and from Seattle to South Carolina and Texas. At the time, this police action was referred to as, "stopping the largest tax scam in history."
During the next six years, indictments rained down from Washington targeting nearly everyone who participated in the organization, either as a developer, unsuspecting promoter, or trusting client. From February 2001 until November 2007, the IRS had a 100% conviction rate. ... What was their offense? Actually, it was following the Internal Revenue Tax Code.
James and Pamela Moran became involved in AAA through a professional relationship with Roosevelt Drummer, a former IRS agent who rendered them tax accounting assistance years earlier. Mr. Moran, a Viet Nam veteran and minister, who, along with Pamela a church organist truly believed in the AAA mission of ridding people of debt and creating wealth. Their passion for this program led them to a leadership position within the organization, assisting others in marketing various products and opportunities. For their efforts in helping others, they were subjected to humiliation through investigations, indictments, arrest and two Federal trials that drew national exposure in Seattle, Washington. Included in this Federal travesty was confiscation of their worldly possessions, including their home and new Jeep.
The charges included alleged charges of wire fraud, money laundering and assisting in the preparation of false tax returns. This form of incrimination is particularly odd since the Moran's were not privy to the clients' tax returns, nor did they suspect that they were doing anything unlawful or illegal. The money they were accused of defrauding people out of included their own money which they never got back. The Morans were literally accused of being involved in a conspiracy to steal money from themselves.
Nevertheless, they were put on trial in late 2004 along with four Certified Public Accountants/IRS enrolled agents, the alleged ring leaders of the organization, Keith Anderson of Costa Rica and Wayne Anderson from Central California, as well as the head of U.S. operations Richard Marks
The first trial lasted for more than a month ending with guilty verdicts for the Andersons, Marks and James and Pamela. The CPA's verdicts were hung and the government agents' threats to pursue them with another trial eventually led to their capitulation, because of the stress and financial ruin to which they were being subjected. The mighty Department of Justice got their marks and all was well with the world.
Not quite, ruled the Ninth Circuit Court of Appeals. Much to the chagrin of the Assistant U.S. Attorneys, it appears the over zealous prosecutors and judge in the 2004 trial failed to allow Pamela's testimony regarding her state of mind as to her intent to break the law to be heard during the trial. As has happened in other AAA trials the government, and in some cases the defense attorneys, took all precautions to keep the defendants from telling their story. It appears this inconvenient truth threatened their desired outcome, for if the juries were allowed to hear defendants argue that there was no willfulness or knowledge of breaking any law, they would be found not guilty.
The Morans being good law abiding folk, only wanted to help others less fortunate than themselves or help those more fortunate to find tax deferment advice from the CPA staff. Tax avoidance is not the same as tax evasion. Tax avoidance is an acceptable practice sought out by people every day all over this country.
Unlike those victims/defendants that were tried before them, the Morans, with the assistance of Michael Minns, his daughter Attorney Rain Minns, Peter Mair and John Zulauf ... [on] all counts of the indictment received a not guilty verdict. The IRS skein of convictions stopped when the Jury of 12 citizens heard the truth and exposed the callous disregard the tax enforcers have for honest people looking for investment advantages. More importantly the acquittals proved that everyone in the organization below the Moran's level, including those that promoted the program never had any knowledge that the program was anywhere near illegal, a point that the IRS or the DoJ has not bothered to prove. In fact, the prosecutions occurred because the people involved did not hold elite status as determined by government bureaucrats.
Hundreds of lives have been damaged and some destroyed because of run amuck government agents and deceitful prosecutors and in most cases compliant judges. For the Morans these verdicts ended nearly seven years of horror as they lived with the fear of being separated if imprisoned, loss of their assets, reputations and alienation of friends and neighbors.
Paul DeFosses, former IRS revenue agent and founder of the Whistle Blowers Association of former IRS employees has declared that the organization for which they once worked has gotten out of control and violates American principles of justice. DeFosses is reported to have said: "Minns is so far above the pack there is no number 'Two.' He is the top tax defense lawyer in the country." DeFosses has testified about IRS atrocities several times before the U.S. Congress and helped draft the TaxPayers Bill of Rights. Rights, that seem to have vanished through the unbridled ambition of bottom dwellers working with a badge, under the color of law.
Enrolled Agent Collis Redd, reviewing the cases remarked, "If you can't hire Minns or get a lawyer willing to study his books and techniques, pack your tooth brush. You are going to jail. No one else knows how to defend the innocent taxpayer in court. Minns wrote the book, actually, both of them."
Congressman and Presidential contender Ron Paul said, "Working in the tradition of the framers of the Constitution, is attorney Michael Louis Minns. He has defended many Americans against the depredations of the tax police, and argued for a fair and constitutional system in place of the personal income tax." Congressman Ron Paul also wrote the introduction to Minns's second book.
John Berthound, President of the National Taxpayers Union said, "Tax-and-Spend Members of Congress and their shrill media allies proclaim that 'tax cheating' is rampant and on the rise because of recent IRS reforms. Michael Minns provides prima facie evidence against those who would like to make us think we've gone 'too far' in trying to rein in IRS abuse and change the way we tax our citizens."
So it is said that behind every successful man there stands a strong capable woman and in this case she is Minns's daughter Rain, who volunteered to act as co-counsel with her father. With a successful career helping bring justice to people harmed in senior housing facilities behind her, she answered the call to pitch in and got the defense team ready for trial. This was a daunting task as the Minns team had all of three months to un-track the U.S. Government team of prosecutors.
Rain Minns, a long-time advocate for tax justice will continue as a partner in her father's firm to help people like the Morans and other investors in AAA, or victims of malicious prosecution everywhere who did not get their fair day in court. What follows are vignettes portraying some of the tactics used by the men in black.
During the recent trial one witness spoke about the government asking her to lie about the Morans and make them out to be at the top of the AAA organization. What is astounding is that she was asked this question by the prosecutor after Minns's question was objected to and sustained.
Probably the person in charge of the attack on the Morans, that did the most damage to these two innocent people, was CID (IRS) agent Michelle Hagemann, known for her shoot-from-the-hip and asks-questions-later style of investigation. CPA Joseph Moschetti of Grand Junction, Colorado took it upon himself to personally destroy the Morans. Moschetti, who may have been concerned about losing a client to AAA took it upon himself to act as an investigating agent and recorded phone calls with the intent to entrap the Morans. These tapes were handed over to CID agent Hagemann, who under oath admitted she had a professional relationship with Moschetti, who swore to bring the Morans down. Hagemann also admitted, "The tax code can be complex depending upon which section you are looking at."
Minns had trouble understanding the relationship between Hageman and Moschetti, who Hageman called the most honorable and honest of individuals. On the stand, Hageman avoided answering this question ten ways from Sunday, until finally, under Minns's polite but persistent questioning, she admitted that there was more to her relationship with Moschetti than simply an IRS agent to an informant. Minns kept asking: "How is it that this CPA has the phone number of an IRS Special Agent? Isn't that unusual?" And the truth finally came out. Not only did Hageman accompany Moschetti personally to an Anderson Ark meeting where the Moran's were speaking, she finally admitted, he also prepared her personal tax returns. "Will Moschetti get a reward for turning these people in?" Minns asked her. And again, she avoided the straight answer saying: "I know nothing about it," until finally she admitted it was possible that a request would possibly come to her when all the trials were over.
To this day the IRS has never proven the AAA program illegal. In fact, this paper [the US~Observer website/e-zine] reported over 18 months ago that the IRS auditors did not consider the program illegal, but the Department of Justice attorneys were prosecuting participants as if it were the largest tax scam in history. Presumption trumps reality every time. The Morans stated, "We were humbled by our seven year ordeal, but left our fate in the hands of the Lord." Now let's get the Moran's Jeep back.
The Jeep was returned, as detailed here.
Minns's book How to Survive the IRS: My Battles Against Goliath has this comment from Ron Paul's brother Wayne, on its Amazon page:
"Unlike other lawyers who surrender to the IRS's maze of bureaucracy and deceptions, Michael Minns goes in with the singular intent to fight and win for his clients who have been wronged. His insight and tenacity are unparalleled, his candor refreshing and his integrity embraced by those of us who strive daily to right the wrongs to our fellow citizens. I highly recommend this book to all of my clients and tell them to pass it on. His first book The Underground Lawyer was just a interesting and is a must read for everyone who needs a lawyer."
NETHERLANDS ANTILLES ASKS TO BE TAKEN OFF EC TAX BLACKLISTS
The Netherlands Antilles wants to get off the EU tax blacklists, but is getting a bureaucratic runaround about how to do that or why it is even still on the lists, given the seals of approval it has gotten elsewhere. The Caribbean nation's State Secretary of Finance reasonably asks for a level playing field vis a vis EU members themselves, and dryly notes that being on the blacklists does not help his country's financial services sector.
Alex Rosaria, the State Secretary of Finance for the Netherlands Antilles, has this week called on the Tax Directorate of the European Commission to remove the jurisdiction from tax haven "blacklists" in some EU member states.
Mr. Rosaria argued that the Netherlands Antilles is committed to providing a leading edge financial service industry with high-end supervision in line with international standards to protect the consumer. He observed that: "We are an active and a complying member of various international organizations such as the OECD, the Egmont Group, the Financial Action Task Force (FATF) and the Caribbean Financial Action Task Force (CFATF)."
The Netherlands Antilles is recognized by the OECD as a co-operative jurisdiction. In April 2008 the Egmont Group gave the Netherlands Antilles its seal of approval, and the IMF in its most recent Article IV Consultation concluded that "The financial sector of the Netherlands Antilles is broadly healthy."
As Mr. Rosaria explained ... "Any reference to us being a tax haven" is totally misguided, contradictory and unjust. If we were a tax haven Spain would not have concluded a Tax Information Exchange Treaty with us in June 2008."
Mr. Rosaria revealed, however, that the reaction from the Tax Directorate so far has been somewhat unsatisfactory, explaining that: "The EC claims it can not intervene on our behalf to correct the above mentioned unjust inclusion on black lists of some EU members because EU Members are autonomous in their tax matters.
"This statement seems very curious especially when we note that in the case of imposing actions to promote what the EU calls good tax governance the EC does have the authority to act on behalf of the EU Members.
"Why does the argument of autonomy of the individual EU Member not apply when the EU takes actions to promote good tax governance on the Netherlands Antilles? And why does it apply when the Netherlands Antilles request the EC, not for a favor mind you, but to simply correct an error that has been made by some EU members?"
The State Secretary for Finance concluded: "The EC must understand that we demand a level playing field, that we can not be held to higher standards than is demanded of other OECD Member and especially that I must do everything in my power to guard our international financial services industry from further erosion. Black listing seriously undermines the competitiveness of the Netherlands Antilles' financial services sector and consequently the well-being of our people."
ANOTHER ACCOUNTANT ARRESTED IN AUSTRALIA FOR SELLING VANUATU TAX SHELTERS
Vanuatu is to Australia as the Carribean is to the U.S. Vanuatu has some interesting legal structures which can be put to good use if set up and operated legally and properly. The small island country can also be used to conduct any number of paper-shuffling plus rapid-fire money movement games to try to flummox the Australian government. This week an accountant who ran one such not-very-subtle operation was arrested, following what looks like a long investigation.
A Vanuatu-based accountant, reportedly with links to a big-four accounting firm, has been arrested by the Australian Federal Police (AFP) for his part in promoting offshore tax avoidance schemes. Federal agents arrested the Queensland man ... soon after he arrived in Australia on a flight from Vanuatu.
The police allege that the suspect, named by The Australian newspaper as Brian Francis Fox, promoted an asset stripping scheme designed to leave Australian companies in a position unable to pay their tax liabilities. The alleged fraud involved the promotion of tax avoidance through an intricate network of companies in Australia and Vanuatu.
The AFP investigation began after a referral from the Australian Tax Office, which is investigating offshore tax evasion schemes as part of a multi-agency effort designed to crack down on offshore-based financial crime and money laundering under the banner of Project Wickenby.
AFP National Manager Economic and Special Operations Warren Gray said the joint investigation has identified 69 companies from Queensland, New South Wales, Victoria, South Australia and the Australian Capital Territory as participants in the asset stripping arrangement, which involves tax fraud in excess of A$10 million. This offence carries a maximum penalty of 20 years imprisonment and/or a fine of A$220,000.
"This operation pre-dates Project Wickenby but it is another example of how the AFP, in concert with its Project Wickenby partners, continues to focus on arrangements involving offshore secrecy havens and money laundering, to ensure those involved pay their fair share of tax," Commander Gray said.
Two men were arrested in May and are currently before the courts on charges relating to the scheme. It is understood, however, that the investigation into Mr. Fox and his subsequent arrest are unconnected with the highly-publicized arrest of Western Australia-based accountant Robert Agius earlier this year, which took place under Wickenby. Agius is also accused by the federal authorities of promoting abusive tax evasion schemes linked to Vanuatu.
Leading up to the arrest of Agius, Australian and international agencies had conducted operations in three countries -- Australia, New Zealand and Vanuatu -- while the ATO had conducted 80 audits, examining allegedly false tax deductions exceeding $A90 million (US$84 million).
U.S. CORPORATE TAXES NOW 50% HIGHER THAN OECD AVERAGE
The U.S. has left its high corporate tax rates unchanged for 20+ years while everyone else has lower them. Now the U.S. rate is 50% higher than the OECD average. Certainly not an incentive to set up shop in America. On the other hand, see the next posting.
A new study by the Organization for Economic Cooperation and Development has shown that the U.S. is effectively moving backwards in terms of corporate tax competitiveness with its continued failure to lower rates. The OECD study shows that for the 17th consecutive year, the average rate of corporate taxes in non-U.S. countries fell while the U.S. corporate tax rate stayed the same.
As a result of the U.S. failure to lower its corporate tax rate for more than two decades while other major trading nations lowered theirs, the U.S. corporate tax rate is now 50% higher than the OECD average. Nine key trading partners cut their rates during 2007.
"Continued failure by U.S. tax policymakers to keep up with our top global economic competitors means that we are solidifying a trend that will result in our children and grandchildren not seeing the economic growth we have seen in our lifetimes," stated Scott Hodge, President of the Tax Foundation in the organization's latest Fiscal Fact, released ... in response to the OECD report.
"There is a real-wallet impact for Americans as we continue to sit idly by while other countries improve the way they do business, and we should be very concerned about jobs, capital, and investments moving from high-tax countries to low-tax countries," Hodge warned.
According to the Tax Foundation, the latest report comes on the heels of another recent OECD study showing that corporate taxes are the single most harmful tax to GDP growth, more so than personal income taxes or consumption taxes.
The combined federal and state corporate tax rate in the U.S. currently stands at 39.3% -- the 2nd-highest among industrialized countries -- while the OECD average rate has fallen to 26.6%.
Even China has recognized the significance of cutting the corporate tax to become more competitive, reducing their top standard corporate tax rate from 33% to 25% just this year, the Tax Foundation noted.
GAO REPORT SHOWS MOST U.S. CORPORATIONS PAYING NO TAX
The U.S. may have a nominally high corporate tax rate -- 50% higher than the OECD average as cited in the posting immediately above. But it appears most corporations operating in the U.S., whether domestic or foreign owned, pay no taxes in the end. They end up being able to use a multitude of clauses in the U.S. tax code to defer their taxes. In theory those taxes will eventually come due, in effect after operating as zero-interest loans, but in practice most corporations are able to keep deferring the taxes indefinitely. This is only slightly surprising. Corporations are well represented by lobbyists in D.C. and can garner special little exemptions in the code that individuals cannot.
Of course, the Congressmen holding out this fact for public consumption cannot help but pronounce themselves shocked -- shocked! -- that corporations are not paying taxes, while conveniently ignoring the fact that they all voted for the favors that allowed it all to happen. Expect the charade to continue.
Most corporations doing business in the United States pay no federal income tax to the federal government according to a new Government Accountability Office (GAO) study requested by U.S. Senators Byron Dorgan (D-North Dakota) and Carl Levin (D-Michigan).
The report says that 2/3 of both American companies and foreign companies doing business in the United States end up avoiding all income tax obligations to the federal government despite corporate sales totaling $2.5 trillion.
The report discloses that each year from 1998 to 2005, an average of 68% of the foreign companies doing business in the U.S. paid zero federal income taxes. During the same period 66% of U.S. domestic corporations paid no federal income taxes to the federal government.
In 2005, 28% of large foreign companies (over $250 million in assets or $50 million in sales) doing business in the U.S. paid no taxes even though they reported $372 billion in gross receipts that year. This amounts to 998 companies, the Senators said. They also noted that 25% of the largest U.S. corporations had $1.1 trillion in gross sales in 2005 and yet paid no federal income taxes for the year.
Dorgan called the conclusions "a shocking indictment of the current tax system. ... It's shameful that so many corporations make big profits and pay nothing to support our country. The tax system that allows this wholesale tax avoidance is an embarrassment and unfair to hardworking Americans who pay their fair share of taxes. We need to plug these tax loopholes and put these corporations back on the tax rolls," he said, adding that: "It's time for the big corporations to pay their fair share."
Levin commented: "This report makes clear that too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States."
In reaching its conclusions, the GAO analyzed data from the IRS's Statistics of Income samples of corporate tax returns. It found that foreign-controlled domestic corporations (FCDCs) reported lower tax liabilities than U.S.-controlled corporations (USCCs) by most measures. Also, a greater percentage of large FCDCs reported no tax liability in a given year from 1998 through 2005.
For all corporations, a higher percentage of FCDCs reported no tax liabilities than USCCs through 2001 but according to the GAO, differences after 2001 were "not statistically significant." Most large FCDCs and USCCs that reported no tax liability in 2005 also reported that they had no current-year income. A smaller proportion of these corporations had losses from prior years and tax credits that eliminated any tax liability. By another measure, large FCDCs were more likely to report no tax liability over multiple years than large USCCs, the report stated. ...
The GAO did not attempt to determine the extent to which these factors and others, such as transfer pricing abuse, explain differences in tax liabilities. It also did not make any recommendations in its report.
The spirit of the chairman haunts the Beijing Olympics.
This editorial from the Boston Phoenix -- a leftist leaning weekly that has its roots in the 1960s counterculture -- neatly encapsulates the state of the China nation as it hosts this year's summer Olympics, in all its contradictions and power.
The biggest topic on the table concerns the question of what the U.S. people (and the rest of the world's people) have gained from their dealings with China. A lot of cheap consumer goods, yes, but bought on credit and thus resulting in a lot of U.S. financial liabilities ending up in China's hands. The Phoenix leans in the right direction in assigning responsibility for the now perilous situation: "The fault is with a political establishment that has become so used to its own double-talk that it fails to recognize where the interests of its citizens lie."
Well OK, but the politicians needed consumers who willing to go into hock to buy the cheap doodads. When a borrowing culture economically interacts with a saving culture one cannot be surprised when the outcome is that the saving culture ends up owning income producing assets while the borrowing one ends up owning toys.
And now what is China going to do with its financial firepower? Good question. The International Olympic Committee awarded these Olympics to China, not Beijing. The only other time the games were awarded to a country was in 1936. As the Phoenix points out: "[I]n each instance, [the IOC] fractured its own protocols to massage egos that were as internationally aggressive as they were domestically repressive."
Also provocative is the assertion that it was Mao, the greatest mass murderer in history, who forged China into a superpower. Unlike Russia, which was well on its way to being a world power before Lenin and Stalin took over, China had been technologically and economically backward for centuries before Mao. Whether the current outcome is in spite of or because of Mao, the claim is that it would not have happened without him.
When the 21st century is old enough to support a sense of historical perspective, the date 8/8/08 may well be more significant than 9/11. The Olympic Games, which [began that day], mark China's modern coming of age.
"Modern" is an important qualification. As the planet's oldest civilization with a recognizable sense of continuity, China has seen glory before. Gunpowder, paper, printing, and the compass were all products of its ancient genius. But for much of modern history, China was a nation on the margins: misunderstood and discounted, shamelessly exploited by Western powers and brutally pillaged by the Japanese.
Chairman Mao Zedong changed that -- though it takes a strong constitution to stomach the murderous nature of his achievement. Mao brought China neither peace nor prosperity. His Soviet-inspired agricultural policies led to famine. His Cultural Revolution transformed the country into a massive concentration camp. Median estimates of the total number dead as a result of Mao's will and whim float around 50 million — give or take 10 million. Whatever the body count, most historians agree that Mao was the greatest mass murderer of all time.
It was Mao's perverse achievement to forge in the smithy of the ancient Chinese soul the makings of a reconstituted superpower. Whether the nation's ascendancy is because of Mao or in spite of him is almost irrelevant. The DNA is too tight to unravel, the duality too synthesized to deconstruct. Mao, or a version of him, is China. China, in some manifestation, is Mao. Mao's embalmed corpse on display under glass in a mausoleum in Tiananmen Square taps into the Confucian ideal of ancestor reverence, and yet also transcends it. Mao, the great helmsman, washes all other ancestors with his wake.
The cult of Mao is a form of zombie politics. It is part of the voodoo employed by the shrewd, sophisticated bureaucrats who command the Middle Kingdom. They are, by Mao's standards, faceless. The art of ruling the world's most populous nation is to be one of a crowd. (During the terror of the Cultural Revolution, only Mao's favor could save one from the chaos; to survive, the individual had to melt into the mob. Its memory disciplines the masses.)
China today is a dragon with a capitalist head and a communist heart. It is a living, breathing, thriving contradiction. Because the dragon is rising (the metaphor is no less apt because it is melodramatic), its momentum tends to mask its weak spots.
All things considered, however, China has ridden its momentum to exceptional advantage. It has, from a narrow and admittedly selfish American point of view, promised much (or appeared to promise much) and given little.
The vicissitudes of domestic politics aside, when President Richard Nixon knocked on China's door 36 years ago, America had little to lose by recognizing the reality (denied -- ironically -- by people like Nixon) that China was in fact Communist.
More problematic for the average American worker was China's entry into the World Trade Organization. It is hard to see how this benefited the average American. Yes, there are lower prices for an increasingly huge number of consumer goods made in China. But that appears to come as a direct loss of American jobs with little return in terms of access to Chinese markets.
The real winners of this development have been the multinational conglomerates that moved to China, and the financial institutions that backed them. Both of the presumptive presidential nominees, John McCain and Barack Obama, are curiously tight-lipped about future China policy. The reason for that may be simple: both are advised by people who make their livings outside of electoral politics, counseling multinationals that make mega-bucks in China.
Since Nixon approached China, the argument has gone that engaging the country economically would provide political leverage and ultimately result in liberalization of the repressive Chinese regime. According to the U.S. State Department, China is still among the world's nastiest governments — so much for Secretary of State Condoleezza Rice's "iron law" that economic liberation will lead to political liberation.
Seeking raw materials and favors that sharpen its economic might, China sponsors terror in the Sudan and Zimbabwe and props up dictatorships in Myanmar (Burma) and North Korea. Its rape of Tibet has intensified, as has its crackdown on internal critics and dissidents. So secure is China in its ability to play on the hopes and avarice of the West, that it has -- against all expectations (foolish though they might have been) -- barred meaningful Internet access to the legions of journalists covering the Olympic Games.
Engagement was the reason China was awarded the Olympics. As a rule, cities, as opposed to nations, are awarded the Games in an effort to downplay international rivalries and accentuate the efforts of individual athletes. However, there have been two exceptions: the Berlin Games in 1936 were awarded by contract to Hitler's Germany and the 2008 Games were awarded to the People's Republic of China. The distinction may appear small and legalistic. But in each instance, the International Olympic Committee fractured its own protocols to massage egos that were as internationally aggressive as they were domestically repressive.
Demonizing China is counterproductive. Nations have interests, not friends. But Americans should ask themselves, is it in our interests that China today holds $1.2 trillion in reserve assets alone, with billions more invested in US financial institutions and other businesses? And while we ponder that question, we should ask ourselves this: Is it prudent for the federal government to spend like a drunken sailor with money borrowed from China? The fault is not China's for pressing its advantage as vigorously as it can. The fault is with a political establishment that has become so used to its own double-talk that it fails to recognize where the interests of its citizens lie.
Meanwhile, Mao smiles in his mausoleum.
WARREN BUFFETT’S 7 SECRETS FOR LIVING A HAPPY AND SIMPLE LIFE
Rule No. 1: Never lose money. Rule No. 2: Never forget Rule. No. 1 ~~ Warren Buffett
We have some differences in political philosophy with billionaire Warren Buffett, who has no problem with the state acting as a wealth redistribution. He seems blissfully unaware of the idea that the state is the ruling class's wealth aggregator. Nevertheless, Buffett is no hypocrite. For someone of his net worth, his current consumption level is surprisingly small, e.g., he still lives in the same simple home in Omaha, Nebraska that he has for decades. That choice is consistent with his articulated philosophy on life, which boils down the idea that happiness and simplicity go together. This includes limiting ones material consumption even if one can afford it.
The website Success Soul, whose motto is "Abundance and simplicity for mind, body, and soul," summarized certain things Buffett has said over the years into a useful compendium. As one of the article commenters offered: "I reckon that these are not secrets, but the majority of us are blind to them because of our inherent lusting consumerism."
Are you sold on the fake notion that owning possessions is the touchstone of your self-worth? Have you felt jealous and self-pity when a neighbor bought a new Mercedes or a new yacht that you always wanted to possess? We all have.
If your paycheck is not keeping up the pace with your cravings for the new iPhone, why not learn the secrets of simplicity from the richest man on the earth who still lives without a cell phone? Before you sink your money for the latest gadget what if you were to know that the Oracle of Omaha still has no desk computer in his modest office?
In this world full of the rich and famous, Warren Buffett remains the greatest investor ever born not due to his acumen for the wise investments that he has made during his life but more for exemplifying the greatness with simplicity. He is full of wit and happiness and this is at the core of everything that he does.
Secret #1 : Happiness comes from within.
In my adult business life I have never had to make a choice of trading between professional and personal. I tap-dance to work, and when I get there it is tremendous fun. ~~ Warren Buffett
This is the man who truly does what he loves. The battle between productivity and anti-productivity blogs stems from their convoluted chains of frequently twisted rationale to substantiate their claim that productivity is a force of an external demand -- from an employer or a competitor. In reality, productivity comes from within. It comes from doing what we love and loving what we do. When we start trading time between our professional and personal life, we wage war in our own mind to justify our passion in terms of a personal benefit. In my business I have felt more stress and angst when I have not given all of my talent, hard work and passion to help others on a given day. The myth of working hard to make more money to buy more things throws us in the vicious circle of hallucination. Our happiness always remains imprisoned when we do work that we abhor yet justify doing it to pay bills for those things that we do not need. I used to work even after buying my first hotel for many years to justify the fake notion that I needed additional income to pay bills. What I needed was to change my lifestyle to free myself from this never-ending rut chase.
Secret #2 : Find happiness in simple pleasures.
I have simple pleasures. I play bridge online for 12 hours a week. Bill and I play, he is “chalengr” and I am “tbone”. ~~ Warren Buffett
If the man richer than God can find happiness in the simple pleasure of playing bridge online with another billionaire, I have to learn to be happy with the simple pleasures of playing cards with friends or playing with my children or taking a walk in the wilderness. All of these simple pleasures do not need extravagant spending. I used to go play golf with other businessmen when the local chamber of commerce sponsored an event. I never found happiness in those events as they were centered on generating more business and exchanging business cards than on truly enjoying the moment. I was allowing myself to be run ragged by trading business cards after hours in a vain hope of making more money whereas that time deserved a dinner with my family.
Secret #3 : Live a simple life.
I just naturally want to do things that make sense. In my personal life too, I do not care what other rich people are doing. I don’t want a 405 foot boat just because someone else has a 400 foot boat. ~~ Warren Buffett
The sad truth is that our ever-sophisticated advertising industry has conditioned our mind to find happiness from consumption by spending our hard-earned money on the possessions that never bring us lasting happiness. We spend our life-energy on those possessions that we seldom use. We worry about making payments for a luxury car that sits in our garage collecting dust only for the right to brag about it at an occasional social gathering. Keeping up with the Joneses is the worst epidemic among those who should never contemplate that notion in the first place.
If a man who can possibly buy a nation with his cash never espouses the mantra of "more the better", I need to learn not to spread my legs beyond the reach of the blanket. We are conditioned to spend money before we earn it. We are sold on the fake happiness of "Buy now, pay later dearly" -- It is nothing more than buying possessions that we cannot afford. I have my share of insanity when it comes to mindless spending, but lately I try to pay for most of my purchases with cash. It creates awareness towards the impulse buy when I pay by cash. I have also started redlining items on the credit card statement that I consider useless spending. All of these efforts have built my awareness towards my impulse purchases. I have been using mantra of "less is more" to simplify every aspect of my life. It is a work in progress but the results are astounding.
Secret #4 : Think simply.
I want to be able to explain my mistakes. This means I do only the things I completely understand. ~~ Warren Buffett
There lies one of the greatest secrets of simplicity. Warren Buffett invests only in the businesses that he understands. If you ever read research reports from an accomplished Wall Street guru, you will find a plethora of details that make you dizzy. The success of Warren Buffett as the greatest investor ever lies in his ability to think simply.
I used to invest in the stock market in the mid '90s when everyone wanted to make overnight millions in an exuberant market. I used to read Investor's Business Daily only to look at the movers and shakers. These were the stocks that made a significant upward move a day before. A few days before Christmas, I made $52,000 in one stock in a matter of a few days. I knew nothing about the company. I created a new reality for my thoughts that I had figured out how the Wall Street works. I was on my way to the riches. I applied the same thought model on the next several stocks. Needless to say, I lost all that I made and much more. I was lacking in a basic human quality that Warren Buffett has mastered well -- common sense. It says a great deal about the character of a man who invested a measly amount in Microsoft despite the fact that Bill Gates is one of his closest friends. I learned a valuable lesson of life from this experience -- "Not losing hard-earned money is far more important than making more money."
If I apply this rule in my life, I can develop clarity and sanity in my thoughts. Clarity is the mother of simplicity. Life is not a roulette; life is about simple yet profound choices.
Secret #5 : Invest simply.
The best way to own common stocks is through an index fund. ~~ Warren Buffett
It is astounding to know that the greatest investor in the world is not bragging about intricate financial maneuvering to impress the rest of the world with his financial genius. Instead, Warren Buffett shows us the most simplistic approach to our financial freedom -- "Flow with the market rather than pretending to be smarter than God."
In this world full of so-called financial experts, Warren stands tall by showing us the simplest way to the riches. The stock market has moved upward for the last 100 years despite numerous setbacks. He is using a long historical view to back his argument rather than making a futile effort to predict how we can make a quick fortune. After losing most of my capital in the late '90s, I have precisely followed the simple advice of investing in the no-load index funds. I am happier than ever and while my assets have not skyrocketed, they have not dwindled either.
Secret #6 : Have a mentor in life.
I was lucky to have the right heroes. Tell me who your heroes are and I will tell you how you will turn out to be. The qualities of the one you admire are the traits that you, with a little practice, can make your own, and that, if practiced, will become habit-forming. ~~ Warren Buffett
We are worshipers of celebrity demi-gods. All of us have this acute desire to look and live like these celebrities. However, are they truly the ones with character and moral compass to lead us? Having a mentor is as important as having a purpose in our life but having a wrong mentor is as devastating as having a wrong purpose in our life. The mentor has to be someone whom we can trust and have an unwavering faith in his/her guidance. The mentor has to be the one who has made outstanding strides in advancing the greater and guiding purpose of happiness in his/her own life. You will find that person in your inner circle if you think hard enough. Write down why you admire them. Try to emulate their traits and as Warren has shown by his exemplary life, with a little practice, you can form a habit to clone the life that you admire the most.
Secret #7 : Making money is not the backbone of our guiding purpose; making money is the by-product of our guiding purpose.
If you are doing something you love, you are more likely to put your all into it, and that generally equates to making money. ~~ Warren Buffett
How do you rationalize the richest man on the earth still living in a small 3-bedroom house that he purchased 50 years ago? Warren Buffett never travels in a private jet despite the fact that he owns the largest private jet company. His character and way of life speak volume about his greatness. This is the man who spent his personal time investigating a $4 line item on his tax return to hunt down the specifics of it while giving away billions of dollars to Bill Gates foundation. It is rare to find the richest man on the earth living without luxuries that we want to possess even by mortgaging our future. He has demonstrated that while valuing the worth of money is vital for our ingenuity and success, money shall never become the object and end all of our motivation.
I am an avid admirer of simplicity, but I am an even bigger fan of the man who has mastered the greatness by living and breathing simplicity amid an ocean of wealth.
SUGAR DADDY GOD
The old something-for-nothing flimflam takes a new form.
Politicians are always promising, out of the sides of their mouths, that the voter can live as the expense of someone/everyone else -- the rich, the foreigners, future generations, whoever.
One of the alleged lessons of the Reagan reign was that "deficits don't matter," and his successors seem determined to push the theory until something breaks. But the Keynesian economists had already supplied the appropriate cover story for deficit spending long before Reagan came along. That enabled FDR to spend the country out of the Great Depression and into prosperity ... that is, he would have if only the scheme had worked. In filling the role of court scribe, the economics profession was transformed from a dour, "there ain't no such thing as a free lunch," profession to one unbound by current scarcity, and the need to connect consumption and saving. In the process the aggregate income level of the profession was augmented considerably -- at the expense of the public, but, you know, it was for their own good.
Now Christianity, or something that calls itself that, has gotten in on the free lunch act. No more "my world is not of this world" stuff. It is now "this is my world and I want more of it." God wants you to be rich, and you get that way by donating part of your income to the preacher of the free lunch gospel. A spiritual Ponzi scheme, we guess. Unlike the government, people are only spending their own money, so one could argue that no harm is done. You could even make a case that the believers are just paying a lot for entertainment. However, Kevin Phillips does not think the damage stops with the believers' own pocketbooks. In a new book, the architect of Richard Nixon's victory in 1968 claims the evangelicals have undermined the traditional Republican value of fiscal prudence.
Phillips may have a valid point, but it is not as if the evangelicals are foisting the philosophy on unwilling compatriots. At least in the political sphere, most seem to think the philosophy of consuming today and letting the morrow take thought for the things of itself is just fine.
"Daddy God," is how Victoria Osteen refers to Him. Honestly. We are not making this up. When Mr. Joel Osteen took a wife, it was Victoria that he got, for better or for worse. And now the two of them preside over a mega-church in a suburb of Houston. Mr. Osteen is the author of a super bestselling book, Your Best Life Now. God wants us to be prosperous, he argues, in front of thousands of worshippers. How does he know what God wants? He speaks "face to face" with God, says his wife, making him the first person ever to do so. (What did He look like? Has anyone asked?)
Over in Atlanta, the Rev. Creflo Dollar Jr., seems to be doing even better. He and his wife, Taffi, entertain at another huge church, drive around in a Rolls Royce, and have a private $5 million jet to move them from one speaking engagement to another.
Mr. Dollar, like Mr. Osteen, believes in the power of God to move mountains, but they trust in the Almighty Dollar to smooth out the little foothills in their way. Last year, for example, Mr. Dollar sent 100 of the local Fulton County police officers checks for $1,000 each -- a month after two traffic tickets the Reverend Dollar had received had been downgraded to warnings.
And back in the Lone Star State, Kenneth Copeland and his main squeeze, Gloria, have done even better -- with 4 jets at their disposal. Mr. Copeland, the subject of a MoneyWeek article last month, is also said to have a parsonage the "size of a hotel," probably more like a huge Motel 6 than a Crillon.
This might be just another part of the baroque spectacle that makes America such an amusing place. But there is more to the story, which is -- as you might guess -- the subject of today's column.
Gibbon blamed the fall of Rome at least in part, on Christianity. It encouraged a retreat from the battle for money and power, he said. Now, Kevin Phillips, in a new book, Bad Money, charges the pentecostal wing of American Christianity with undermining the U.S. empire in the opposite way. He argues that the evangelicals pushed the Republicans down-market. There, the yahoo voters brought them temporal power -- 30% of Republican voters identify themselves with an evangelical sect. But they also hollowed out Republicans' traditional respect for sensible finances.
Among the many frauds of the Reagan-Bush II period, few were gaudier than the "prosperity gospel." Preached in America's gamy religious outposts, the concept does for religion what the neo-conservatives did to conservatism, what modern portfolio theory did for Wall Street, and what Keynesianism did to the economics profession -- it a made a monkey of it.
In politics, the neos turned conservatism inside out. The old conservatives were wet blankets, do-nothings and naysayers. When news spread of Calvin Coolidge's death, for example, people asked, "How could they tell?" But the new conservatives are the life of the party. It is said that George W. Bush "doesn't even know the meaning of the word can't." (Of course, there may be other words he does not know the meaning of.) And the neocons' idea of political economy was similarly liberated from any residual notions of conservatism and common sense. "Deficits don't matter," said Dick Cheney, speaking for every wishful thinker since Caligula.
On Wall Street and the City, the old conservative doctrines were put away with top hats and spats. In place of prudence came derring-do. In the place of reasonable salaries came breathtaking bonuses. Mortgage lenders no longer studied a borrower's finances to make sure he was a good credit risk. They did not even take his pulse. And they no longer seemed to care whether their takeovers, triple-A paper, and structured products made any real financial sense. It was enough that they paid a fee.
In economics, too, somehow, the world's leading economists bent the figures into a preposterous new shape so appealing that even a teenager could love it. An economy can get richer by living it up, they said. And the purpose of central banking was to encourage consumption rather than capital formation.
Was it any wonder that the pulpits sank into the honey too? Along came Jim and Tammy Faye Baker with a sexy new religion -- spreading the get-rich gospel over the TV waves. Then, poor Jim got sent to prison for fraud, and when he came out he renounced the new doctrine. But other couples -- for some reason these preachers seem to work in husband and wife teams, like Juan and Eva Peron -- picked up the tablets. Soon, they had convinced millions to give up the hard-benches of the old Calvinists and sink their plump derrieres into some of the cushiest seats in Christendom.
Churchgoers at Mr. Dollar's World Changers church services wave envelopes full of cash, reports the Atlanta paper. On the big screen, they offer testimonial proof of the "financial blessings" that came their way after they began sending the preacher 10% of their pre-tax earnings: "The congregants ... yell in joy as ushers pass the white buckets down the row to collect the envelopes. After more singing, Dollar preaches ... He relentlessly attacks the idea that Christians should limit material possessions. Christians have for too long let the "devil's crowd" get all the money, power and real estate, he says. Then he tells congregants to say, 'I want my stuff.'"
"I want my stuff," they repeat, laughing.
Politics, money, religion -- the flim flam was the same everywhere. It was the promise of something for nothing, gain without pain, Easter without Good Friday. But with America's housing prices falling and unemployment rising, the Pentecostals will find it harder to get their stuff than ever. Maybe God did not want them to be wealthy after all. On the evidence, maybe He just likes a good laugh, like the rest of us.
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