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

November 2008 Selected Offshore News Clips

(Especially noteworthy articles’ dates highlighted in gold.)

November 4, 2008

The market, community, civic and religious organizations, non-profits, businesses, and individuals working for their own dreams create social peace. Politics does the opposite.

As the great election circus draws to a close, finally releasing the clowns to get down to the serious business of picking our pockets, let us step back and acknowledge a fundamental reality of human existence. Beyond the fact that the differences between the two major candidates are small, politics is inherently incapable of resolving differences among people productively and morally. Quite the opposite. Politics enforces the dictates of a few so-called representatives down the barrel of a gun. Nobody has the option of simply agreeing to disagree and building a good fence in order to be a good neighbor. You will obey. This is not the path to peace or goodwill.

Alternative modes of social organization do promote peace, or at least unarmed truces. These modes have the singular characteristic of being voluntary: the free market and the countless civic and religious organizations which dot our day to day lives. But the state is a jealous god, and will constantly seek to make these organizations serve its interests ... or else. Stalin and Mao overtly suppressed and undermined anything that served as alternative sources of identity to the state. Expect the steady encroachment to continue in America.

As far back as I can remember, presidential candidates have promised unity for a nation torn apart by partisanship. John McCain is the maverick who "reaches across the aisle" to get things done, putting aside the partisan bickering that is supposedly the source of our troubles. Barack Obama famously sermonized at the 2004 Democratic National Convention that "there's not a liberal America and a conservative America; there is the United States of America," and ever since he has promised to bring the country together.

While the candidates talk about themselves as if they can play referee, as if they can heal the nation's wounds and stop Americans from being at one another's throats, the very opposite is true: So much of the division in our society is caused by the government itself, and especially the presidency that is celebrated and heralded constantly but especially every four years at election time.

It is society that brings out the best of everyone's differences and harmonizes them toward mutually beneficial aims. The market, community, civic and religious organizations, non-profits, businesses, and individuals working for their own dreams create social peace. There is no reason why businessmen, workers, entrepreneurs, artists, writers, athletes, plumbers, community organizers, and people of all walks of life, all religions and ethnic backgrounds, cannot coexist in peace and social consonance. The market economy in particular fosters a tolerance and harmony that allow hundreds of millions, actually billions, of people, each with very different interests and hopes, to live together in a world of honest competition and cooperation. The very fact that we are all different brings us together in peace, and society needs no presidents, no rulers of any kind, to experience the wonders of true diversity in an atmosphere of commerce, cultural exchange and liberty.

At his famous "Yes We Can" speech in New Hampshire, Obama said the following words, which speak to our common humanity, and thus have a ring of inspirational truth to them, but nevertheless miss the mark completely as it relates to politics:
[T]he struggles of the textile worker in Spartanburg are not so different than the plight of the dishwasher in Las Vegas ... the hopes of the little girl who goes to a crumbling school in Dillon are the same as the dreams of the boy who learns on the streets of L.A. We will remember that there is something happening in America; that we are not as divided as our politics suggests; that we are one people; we are one nation.
Here we see the grand paradox of the politics of unity. The textile worker and dishwasher share a common human interest, an interest in peace and liberty. They both suffer under an economy crippled by regulation, inflation and taxation. They should indeed be united, despite their politics, but not with the presidential state. On the contrary, they should unite against the state that is their common enemy.

As for the little girl in Dillon and the boy in L.A., who is Obama to say their hopes and dreams "are the same"? One might wish to be a professional musician and the other a doctor. One might want to devote his life to the clergy and the other might want to pursue modeling. Liberty and the market can harmonize their very different dreams and can enrich them both in a world of peace and prosperity. But the presidency is not what brings them together. Indeed, it is politics that amplifies whatever differences they might have into social conflict.

Obama says "we are one nation." This is true in that one national government plagues us all, but aside from that, and the cultural continuity among most people of a nation, there is no magical component to our being Americans that make us "one people" or gives us uniform dreams and hopes that can be addressed and administered by a national central planner. And while, despite many differences, we have much in common, it is the contest over who gets to be that planner that most divides us.

Consider the hysteria we have witnessed over the last couple weeks. Despite the nearly identical programs of both Obama and McCain -- the continuation of the empire, the police state, the corporatist regulatory machine and entitlements, with some superficial differences here and there -- millions of Americans are convinced this is "the most important election" in decades, if not since the birth of the American republic.

Because their two agendas are so similar, every minor difference becomes amplified into a question of immense international importance. Obama prefers a slightly higher tax rate on the highest tax bracket -- thus he is a "socialist" whereas McCain is "laissez-faire." Obama wants to be more conventionally diplomatic while still beefing up the military and sending more troops to Afghanistan and maybe Pakistan and elsewhere, and so he is the "peace candidate."

Those of us who have paid close attention to American politics for years, and not just around election time but every day, can only be amused by the hysteria gripping the nation. Tens of millions of Americans wait in line to vote, and for what? Even the genuine major differences between the two -- for example, who will actually kill more people abroad -- is a matter of conjecture.

What is even worse is seeing the cultural differences among Americans transformed into a national conflict. The cosmopolitans in the blue states and the red-state townsfolk have absolutely no reason to hate each other. In fact, in today's society and economy, they depend on each other. They might have their disagreements, maybe even important ones, about how to raise their families, how to worship, and lifestyle questions in a whole range of areas. But these differences need not be a cause of animosity or resentment. They should be discussed and deliberated upon peacefully, where people live by example and share their experiences, rather than a cause of hostility culminating in a national referendum in which one side of the "culture war" wins and the other loses.

And so the struggle is over whether Obama's Chicago values or Palin's small-town Alaska values will dominate the nation. I would much prefer to see those values kept on their own turf politically. The rest of us can pick and choose what we like about urban community organizing and rural hunting (and, for my part, I see attractive and negative things about all of America).

This raises a radical point: How can a modern national election be just, even if all the votes are counted? How can one man rule 300 million Americans, most of whom did not vote for him, just because a majority of those who did vote considered him the lesser of evils? It would be insane to subject nearly half the nation to Obama's rule, or McCain's rule, no less than it has been an injustice that from sea to shining sea we have all been ruled by Bush for eight years, and Clinton for eight years before that.

What is more, when we are talking about mass democracy, we are not even talking about true democracy. The two choices presented, unlike the zillions of choices available in the marketplace, were picked by establishment handlers and have been vetted to ensure they will continue business as usual. Meanwhile, the illusion of democracy tricks the populace into thinking the state is an extension of themselves, only bolstering the state's capacity to commit oppression. Far from being a check on despotism, elections provide democratic states the social legitimacy to conduct all manners of mayhem.

Especially given the meaninglessness of the democratic choice, the hysteria and even hatred apparent in America around the time of an election cycle are a depressing sight for those of us who love liberty and who believe the one thing that actually does unite people, across many differences, is a desire to be free. Election time is the time when Americans work hard to impose their way on others so as to preemptively avoid having the other way imposed upon them. Yet we should all know, no matter the outcome, our freedom will continue to be in great jeopardy, our wealth will be looted to benefit the politically connected, the innocent will continue to be murdered by American bombs.

Tens of millions of Americans can vote but choose not to. They are castigated by their peers, but they have the right idea. We are told that if you do not vote you cannot complain, but voting, at least for the major parties, does not register much of a complaint at all. You might think you are voting against the war or tax hikes, but it will instead be counted as just another voice of unity behind the dictatorial mandates of the chosen leader.

There is an awful lot to complain about. If you have fundamental disagreements with American politics, reject the whole system. So long as most Americans are swindled by the promises of mass democracy and distracted by its insanities, we cannot be free. So long as national unity is seen as a goal to be pursued through nationalism and the coercive central state, we will be needlessly divided.

November 5, 2008

This interview with investor extraordinaire Jim Rogers was conducted last summer just before the bear market in stocks went into overdrive. This is of little matter, as Rogers has made his fortune via "a much-fabled ability to spot unique points in history," as the interviewer expresses it. He is a big-picture man, not a market timer. Here are the biggest points we take away from the talk:

We at W.I.L. have long predicted an economic crisis followed by government controls such as limits on exporting capital. These controls are all theft by another name. The crisis is now here. Systematic overt controls have yet to come, although the monitoring of foreign capital flows is well advanced.

One does not need to be a chronic gloom-and-doomer, or a perspicacious student of historical inflection points like Rogers, to arrive at this prediction. A brief but discerning look at past economic crises around the world reveals the obvious pattern. Since the last instance in the U.S. was several generations ago and very few people are true studiers of history, the signficance is not seen. (And many of those who are still alive are FDR worshippers, and think the fascistic controls "saved the country.")

Bottom line: Be prepared. In the long decline that appears to be ahead, the fight over the economic pie will get more vicious still. Your assets will be fair game. Take action before it is too late.

During a 40-minute interview during a wealth-management conference [in Vancouver in August], Rogers said that: Keith Fitz-Gerald (Q): Looks like the financial train wreck we talked about earlier this year is happening.

Jim Rogers: There was a train wreck, yes. Two or three -- more than one, as you know. [U.S. Federal Reserve Chairman Ben S.] Bernanke and his boys both came to the rescue. Which is going to cover things up for a while. And then I do not know how long the rally will last and then we will be off to the races again. Whether the rally lasts six days or six weeks, I don't know. I wish I did know that sort of thing, but I never do.

What would Chairman Bernanke have to do to "get it right?"


Is there anything else that you think he could do that would be correct other than let these things fail?

Well, at this stage, it does not seem like he can do it. He could raise interest rates -- which he should do, anyway. Somebody should. The market is going to do it whether he does it or not, eventually.

The problem is that he has got all that garbage on his balance sheet now. He has $400 billion of questionable assets owing to the feds on his balance sheet. I mean, he could try to reverse that. He could raise interest rates. Yeah, that is what he could do. That would help. It would cause a shock to the system, but if we do not have the shock now, the shock is going to be much worse later on. Every shock, so far, has been worse than the last shock. Bear-Stearns [now part of JP Morgan Chase & Co.] was one thing and then it is Fannie Mae, you know, and now Freddie Mac.

The next shock is going to be even bigger still. So the shocks keep getting bigger because we kept propping things up and this has been going on at least since Long-Term Capital Management. They have been bailing everyone out and Greenspan took interest rates down and then he took them down again after the "dot-com bubble" shock, so I guess Bernanke could try to start reversing some of this stuff.

But he has to not just reverse it -- he would have to increase interest rates a lot to make up for it and that is not going to solve the problem either, because the basic problems are that America has got a horrible tax system, it has got litigation right, left, and center, it has got horrible education system, you know, and it has got many, many, many [other] problems that are going to take a while to resolve. If he did at least turn things around -- turn some of these policies around -- we would have a sharp drop, but at least it would clean out some of the excesses and the system could turn around and start doing better.

But this is academic -- he is not going to do it. But again the best thing for him would be to abolish the Federal Reserve and resign. That will be the best solution. Is he going to do that? No, of course not. He still thinks he knows what he is doing.

Earlier this year, when we talked in Singapore, you made the observation that the average American still does not know anything is wrong -- that anything is happening. Is that still the case?


What would you tell the "Average Joe" in no-nonsense terms?

I would say that for the last 200 years, America has elected politicians and scoundrels have built up $5 trillion in debt. In the last few weekends, some un-elected officials added another $5 trillion to America's national debt.

Suddenly we are on the hook for another $5 trillion. There have been attempts to explain this to the public, about what is happening with the debt, and with the fact that America's situation is deteriorating in the world.

I don't know why it does not sink in. People have other things on their minds, or do not want to be bothered. Too complicated, or whatever.

I am sure when the [British Empire] declined there were many people who rang the bell and said: "Guys, we are making too many mistakes here in the U.K." And nobody listened until it was too late.

When Spain was in decline, when Rome was in decline, I am sure there were people who noticed that things were going wrong.

Many experts do not agree with -- at the very least do not understand -- the Fed's current strategies. How can our leaders think they are making the right choices? What do you think?

Bernanke is a very narrow-gauged guy. He has spent his whole intellectual career studying the printing of money and we have now given him the keys to the printing presses. All he knows how to do is run them.

Bernanke was [on the record as saying] that there is no problem with housing in America. There was no problem in housing finance. I mean this was like in 2006 or 2005.


He is the Federal Reserve and the Federal Reserve more than anybody is supposed to be regulating these [financial institutions], so they should have the inside scoop, if nothing else.

That is problematic.

It is mind-boggling. Here is a man who does not understand the market, who does not understand economics -- basic economics. His intellectual career has been spent on the narrow-gauge study of printing money. That is all he knows.

Yes, he has got a Ph.D., which says economics on it, but economics can be one of 200 different narrow fields. And his is printing money, which he is good at, we know. We have learned that he is ready, willing and able to step in and bail out everybody.

There is this worry [whenever you have a major financial institution that looks ready to fail] that, "Oh my God, we are going to go down, and if we go down, the whole system goes down."

This is nothing new. Whole systems have been taken down before. We have had it happen plenty of times

History is littered with failed financial institutions.

I know. It is not as though this is the first time it has ever happened. But since [Chairman Bernanke's] whole career is about printing money and studying the Depression, he says: "Okay, got to print some more money. Got to save the day." And, of course, that is when he gets himself in deeper, because the first time you print it, you prop up Institution X, [but] then you got to worry about institution Y and Z.

And now we have got a dangerous precedent.

That is exactly right. And when the next guy calls him up, he is going to bail him out, too.

What do you think [former Fed Chairman] Paul Volcker thinks about all this?

Well, Volcker has said it is certainly beyond the scope of central banking, as he understands central banking.

That is pretty darn clear.

Volcker has been very clear -- very clear to me, anyway -- about what he thinks of it, and Volcker was the last decent American central banker. We have had couple in our history: Volcker and William McChesney Martin were two.

You know, McChesney Martin was the guy who said the job of a good central banker was to take away the punchbowl when the party starts getting good. Now [the Fed] -- when the party starts getting out of control -- pours more moonshine in. McChesney Martin would always pull the bowl away when people started getting a little giggly. Now the party is out of control.

This could be the end of the Federal Reserve, which we talked about in Singapore. This would be the third failure -- correct?

Yes. We had two central banks that disappeared for whatever reason. This one is going to disappear, too, I say.

Throughout your career you have had a much-fabled ability to spot unique points in history -- inflection points, if you will. Points when, as you put it, somebody puts money in the corner at which you then simply pick up.

That is the way to invest, as far as I am concerned.

So conceivably, history would show that the highest returns go to those who invest when there is blood in the streets, even if it is their own.


Is there a point in time or something you are looking for that will signal that the U.S. economy has reached the inflection point in this crisis?

Well, yeah, but it is a long way away. In fact, it may not be in our lifetimes. Of course I covered my shorts -- my financial shorts. Not all of them, but most of them last week. (In early August.)

So, if you are talking about a temporary inflection point, we may have hit it.

If you look back at previous countries that have declined, you almost always see exchange controls -- all sorts of controls -- before failure. America is already doing some of that. America, for example, would not let the Chinese buy the oil company, would not let the [Dubai firm] buy the ports, et cetera.

But I am really talking about full-fledged, all-out exchange controls. That would certainly be a sign, but usually exchange controls are not the end of the story. Historically, they are somewhere during the decline. Then the politicians bring in exchange controls and then things get worse from there before they bottom.

Before World War II, Japan's yen was two to the dollar. After they lost the war, the yen was 500 to the dollar. That is a collapse. That was also a bottom.

These are not predictions for the U.S., but I am just saying that things have to usually get pretty, pretty, pretty, pretty bad.

It was similar in the United Kingdom. In 1918, the U.K. was the richest, most powerful country in the world. It had just won the First World War, et cetera. By 1939, it had exchange controls and this is in just one generation. And strict exchange controls. They in fact made it an act of treason for people to use anything except the pound sterling in settling debts.

Treason? Wow, I did not know that.

Yes ... an act of treason. It used to be that people could use anything they wanted as money. Gold or other metals. Banks would issue their own currencies. Anything. You could even use other people's currencies.

Things were so bad in the U.K. in the 1930s they made it an act of treason to use anything except sterling and then by ‘39 they had full-exchange controls. And then, of course, they had the war and that disaster. It was a disaster before the war. The war just exacerbated the problems. And by the mid-‘70s, the U.K. was bankrupt. They could not sell long-term government bonds. Remember, this is a country that two generations or three generations before had been the richest most powerful country in the world.

Now the only thing that saved the U.K. was the North Sea oil fields, even though Prime Minister Margaret Thatcher likes to take credit, but Margaret Thatcher has good PR. Margaret Thatcher came into office in 1979 and North Sea oil started flowing. And the U.K. suddenly had a huge balance-of-payment surplus.

You know, even if Mother Teresa had come in [as prime minister] in ‘79, or Joseph Stalin, or whomever had come in 1979 -- you know, Jimmy Carter, George Bush, whomever -- it still would have been great.

You give me the largest oil field in the world and I will show you a good time, too. That is what happened.

What if Thatcher had never come to power?

Who knows, because the U.K. was in such disastrous straits when she came in. And that is why she came to power ... because it was such a disaster. I am sure she would have made things better, but short of all that oil, the situation would have continued to decline.

So it may not be in our lifetimes that we will see the bottom, just given the U.K.'s history, for instance.

That is going to be terrifying for individual investors to think about.

Yeah. But remember that America had such a magnificent and gigantic position of dominance that deterioration will take time. You know, you do not just change that in a decade or two. It takes a lot of hard work by a lot of incompetent people to change the situation. The U.K. situation I just explained ... that decline was over 40 or 50 years, but they had so much money they could have continued to spiral downward for a long time.

Even Zimbabwe, you know, took 10 or 15 years to really get going into its collapse, but Robert Mugabe came into power in 1980 and, as recently as 1995, things still looked good for Zimbabwe. But now, of course, it is a major disaster.

That is one of the advantages of Singapore. The place has an astonishing amount of wealth and only 4 million people. So even if it started squandering it in 2008, which they may be, it is going to take them forever to do so.

Is there a specific signal that this is "over?"

Sure ... when our entire U.S. cabinet has Swiss bank accounts. Linked inside bank accounts. When that happens, we will know we are getting close because they will do it even after it is illegal -- after America has put in the exchange controls.

They will move their own money.

Yeah, because you look at people like the Israelis and the Argentineans and people who have had exchange controls -- the politicians usually figured it out and have taken care of themselves on the side.

We saw that in South Africa and other countries, for example, as people tried to get their money out.

Everybody figures it out, eventually, including the politicians. They say: "You know, others cannot do this, but it is alright for us." Those days will come. I guess when all the congressmen have foreign bank accounts, we will be at the bottom.

But we have got a long way to go, yet.

The obvious conclusion is move some of your assets offshore before it is illegal, and long before the policians do it themselves.

November 16, 2008

The original New Deal unequivocally made the Great Depression much worse, and much longer-lasting, than it would otherwise have been. Washington seems determined to repeat the experience.

Thomas DiLorenzo shows how all the words in deeds coming out of Washington appear to be pursuing invariably the same object, evincing a design to create another 1930s-style economic disaster. With no revolutionaries to throw off such misguided policies, we had best be prepared for exactly such a recurrence.

Along with the ascendancy of the Democratic Party to control of the executive and legislative branches of government has come the repetition of the tired, old mantra of an alleged need for a "new New Deal." God help us. The original New Deal unequivocally made the Great Depression much worse, and much longer-lasting, than it would otherwise have been.

One of the most readable expositions of why the New Deal was an economic debacle is Jim Powell's book, FDR's Folly. It summarizes more than a half century of economic research on the actual effects of the New Deal and presents the results in a very readable, conversational style that is suitable to a general reading audience. And every bit of it is being studiously ignored by the powers that be in Washington. After his voluminous survey of the ill effects of New Deal interventionism Powell concludes with "lessons for today." Every one of these lessons is not only being ignored by Washington policymakers, but the policy proposals coming out of Washington are ominously structured to do exactly the opposite of what Powell suggests.

Lesson Number One is that "the basic problem with central banks is that like socialist economic planners, they can never have more than a fraction of the vast knowledge needed to make a society work, knowledge that is dispersed in the minds of millions of people. In addition, when central bankers make mistakes -- as they inevitably will, since they are human beings -- these mistakes harm not just the economy in a city or a region but the entire country. The Fed's response to the current economic crisis, which it created by creating the housing bubble, has been to declare more and more central planning powers for itself."

Lesson Number Two is that "deposit insurance must be priced to reflect the risks of the banks that buy it. Having the federal government provide deposit insurance inevitably introduced political pressures to offer deposit insurance at the same price for all banks, which meant subsidized banks engaged in risky practices and contributed to the instability of the banking system." The federal government recently expanded the coverage of federal deposit insurance, thereby guaranteeing more excessively risky lending in the future.

Lesson Number Three is, "Especially because taxes are the biggest burden millions of people face today, it is crucial to cut taxes. Tax cuts mean expanding economic liberty ..." President-elect Obama is promising punitive taxes on the most productive people in America -- higher income families and investors and savers, combined with government handouts that he mislabels as "tax cuts" for people who do not even pay income taxes.

Lesson Number Four is "efforts to ‘soak the rich’ will backfire, because the investments of the rich are needed to create jobs." If Obama's campaign and, indeed, his entire political career, has been about anything it has been about soaking the rich and "redistributing" income and wealth through the tax system.

Lesson Number Five is "public works and other ‘jobs’ programs must be avoided because they increase the cost and burden of government, making it more difficult for the private sector to function." All of Washington is foaming at the mouth over the prospect of more pork-barrel spending, laughingly labeled "stimulus package."

Lesson Number Six is that "especially during a recession or depression, the government must not enact laws preventing prices from adjusting to circumstances. Prices are vital signals that help people decide what to produce and consume." The government has been doing exactly the opposite. Stopping prices from adjusting to realistic levels is the whole intent of the Fed's policies as well as the Wall Street Plutocrat Bailout Bill.

Lesson Number Seven is that "government must not enact laws preventing wages from adjusting to circumstances. ... Labor union monopolies have been major obstacles to adjusting wages." One of the first orders of business for the Obama administration will be to strengthen labor union monopolies by passing a law that prohibits secret ballot voting in union certification elections.

Lesson Number Eight is, "only if investors feel private property is secure will they be willing to make long-term financial commitments needed to spur recovery and boost employment." The government has been busy charging businesses that have simply gone bankrupt with crimes, promising more of the same, placing price controls on executive pay, increasing the taxation of investment with higher capital gains taxes, and generally demonizing the entire American capitalist system as a means of shifting the blame for the economic crisis that its own stupid policies have created.

In other words, everything going on in Washington today is a recipe for another Great Depression.

November 12, 2008

Millions of Americans live in a non-reality-based belief system informed by childish clichés – they can barely differentiate between lies and truth.

The 1989 book The Unreality Industry: The Deliberate Manufacturing of Falsehood and What It Is Doing to Our Lives, by Ian Mitroff and Warren Bennis, argued that the deliberate creation of unreality via the mass media was a pervasive feature of modern times and was having a profound and fearful effect on the collective mind-set. People are encouraged to live in, to consume if you will, a comforting fantasy world as an alternative to the complex and ambiguous real world. And yet, the real world refuses to disappear.

As a reviewer on Amazon puts it:

The authors take care to outline the dichotomy between reality and unreality. Reality is very difficult to understand, is stressful to deal with, and only increases in its complexity. Unreality is simple, mindless, and creates the illusion (computer games, movies) of some kind of control over one's surroundings. Our embrace of unreality as a means of escape from the harshness and confounding nature of reality is deeply rooted in U.S. culture: bigger is better, the infallibility of science and technology, the veneration of "progress." One aspect of unreality is that it employs "boundary warping" to catch the audience's attention. "Boundary warping" entails the near complete destruction of rational thought processes and categorization, the lack of any organization and coherence.

Now, 15 years later, one upshot is that almost 1/3 of the U.S. population at best is barely literate, and cannot think critically. This means that the political candidate who successfully hits on what appeals to and manipulates that mindset can achieve great success at getting elected. The problem is that once in office, the now-officeholder confronts the impossible problem of keeping the same population segment placated and amused while grappling with the nuances of the decidedly challenging reality which faces us. Things are not helped when those who still have the capacity to think instead succumb to wishful thinking and mindless sloganeering. America is truly on the verge of amusing itself to death, as Neil Postman put it.

We live in two Americas. One America, now the minority, functions in a print-based, literate world. It can cope with complexity and has the intellectual tools to separate illusion from truth. The other America, which constitutes the majority, exists in a non-reality-based belief system. This America, dependent on skillfully manipulated images for information, has severed itself from the literate, print-based culture. It cannot differentiate between lies and truth. It is informed by simplistic, childish narratives and cliches. It is thrown into confusion by ambiguity, nuance and self-reflection. This divide, more than race, class or gender, more than rural or urban, believer or nonbeliever, red state or blue state, has split the country into radically distinct, unbridgeable and antagonistic entities.

There are over 42 million American adults, 20% of whom hold high school diplomas, who cannot read, as well as the 50 million who read at a 4th- or 5th-grade level. Nearly 1/3 of the nation's population is illiterate or barely literate. And their numbers are growing by an estimated 2 million a year. But even those who are supposedly literate retreat in huge numbers into this image-based existence. A third of high school graduates, along with 42% of college graduates, never read a book after they finish school. 80% of the families in the U.S. last year did not buy a book.

The illiterate rarely vote, and when they do vote they do so without the ability to make decisions based on textual information. American political campaigns, which have learned to speak in the comforting epistemology of images, eschew real ideas and policy for cheap slogans and reassuring personal narratives. Political propaganda now masquerades as ideology. Political campaigns have become an experience. They do not require cognitive or self-critical skills. They are designed to ignite pseudo-religious feelings of euphoria, empowerment and collective salvation. Campaigns that succeed are carefully constructed psychological instruments that manipulate fickle public moods, emotions and impulses, many of which are subliminal. They create a public ecstasy that annuls individuality and fosters a state of mindlessness. They thrust us into an eternal present. They cater to a nation that now lives in a state of permanent amnesia. It is style and story, not content or history or reality, which inform our politics and our lives. We prefer happy illusions. And it works because so much of the American electorate, including those who should know better, blindly cast ballots for slogans, smiles, the cheerful family tableaux, narratives and the perceived sincerity and the attractiveness of candidates. We confuse how we feel with knowledge.

The illiterate and semi-literate, once the campaigns are over, remain powerless. They still cannot protect their children from dysfunctional public schools. They still cannot understand predatory loan deals, the intricacies of mortgage papers, credit card agreements and equity lines of credit that drive them into foreclosures and bankruptcies. They still struggle with the most basic chores of daily life from reading instructions on medicine bottles to filling out bank forms, car loan documents and unemployment benefit and insurance papers. They watch helplessly and without comprehension as hundreds of thousands of jobs are shed. They are hostages to brands. Brands come with images and slogans. Images and slogans are all they understand. Many eat at fast food restaurants not only because it is cheap but because they can order from pictures rather than menus. And those who serve them, also semi-literate or illiterate, punch in orders on cash registers whose keys are marked with symbols and pictures. This is our brave new world.

Political leaders in our post-literate society no longer need to be competent, sincere or honest. They only need to appear to have these qualities. Most of all they need a story, a narrative. The reality of the narrative is irrelevant. It can be completely at odds with the facts. The consistency and emotional appeal of the story are paramount. The most essential skill in political theater and the consumer culture is artifice. Those who are best at artifice succeed. Those who have not mastered the art of artifice fail. In an age of images and entertainment, in an age of instant emotional gratification, we do not seek or want honesty. We ask to be indulged and entertained by clichs, stereotypes and mythic narratives that tell us we can be whomever we want to be, that we live in the greatest country on Earth, that we are endowed with superior moral and physical qualities and that our glorious future is preordained, either because of our attributes as Americans or because we are blessed by God or both.

The ability to magnify these simple and childish lies, to repeat them and have surrogates repeat them in endless loops of news cycles, gives these lies the aura of an uncontested truth. We are repeatedly fed words or phrases like yes we can, maverick, change, pro-life, hope or war on terror. It feels good not to think. All we have to do is visualize what we want, believe in ourselves and summon those hidden inner resources, whether divine or national, that make the world conform to our desires. Reality is never an impediment to our advancement.

The Princeton Review analyzed the transcripts of the Gore-Bush debates, the Clinton-Bush-Perot debates of 1992, the Kennedy-Nixon debates of 1960 and the Lincoln-Douglas debates of 1858. It reviewed these transcripts using a standard vocabulary test that indicates the minimum educational standard needed for a reader to grasp the text. During the 2000 debates George W. Bush spoke at a 6th-grade level (6.7) and Al Gore at a 7th-grade level (7.6). In the 1992 debates Bill Clinton spoke at a 7th-grade level (7.6), while George H.W. Bush spoke at a 6th-grade level (6.8), as did H. Ross Perot (6.3). In the debates between John F. Kennedy and Richard Nixon the candidates spoke in language used by 10th-graders. In the debates of Abraham Lincoln and Stephen A. Douglas the scores were respectively 11.2 and 12.0. In short, today's political rhetoric is designed to be comprehensible to a 10-year-old child or an adult with a sixth-grade reading level. It is fitted to this level of comprehension because most Americans speak, think and are entertained at this level. This is why serious film and theater and other serious artistic expression, as well as newspapers and books, are being pushed to the margins of American society. Voltaire was the most famous man of the 18th century. Today the most famous "person" is Mickey Mouse.

In our post-literate world, because ideas are inaccessible, there is a need for constant stimulus. News, political debate, theater, art and books are judged not on the power of their ideas but on their ability to entertain. Cultural products that force us to examine ourselves and our society are condemned as elitist and impenetrable. Hannah Arendt warned that the marketization of culture leads to its degradation, that this marketization creates a new celebrity class of intellectuals who, although well read and informed themselves, see their role in society as persuading the masses that Hamlet can be as entertaining as The Lion King and perhaps as educational. "Culture," she wrote, "is being destroyed in order to yield entertainment."

"There are many great authors of the past who have survived centuries of oblivion and neglect," Arendt wrote, "but it is still an open question whether they will be able to survive an entertaining version of what they have to say."

The change from a print-based to an image-based society has transformed our nation. Huge segments of our population, especially those who live in the embrace of the Christian right and the consumer culture, are completely unmoored from reality. They lack the capacity to search for truth and cope rationally with our mounting social and economic ills. They seek clarity, entertainment and order. They are willing to use force to impose this clarity on others, especially those who do not speak as they speak and think as they think. All the traditional tools of democracies, including dispassionate scientific and historical truth, facts, news and rational debate, are useless instruments in a world that lacks the capacity to use them.

As we descend into a devastating economic crisis, one that Barack Obama cannot halt, there will be tens of millions of Americans who will be ruthlessly thrust aside. As their houses are foreclosed, as their jobs are lost, as they are forced to declare bankruptcy and watch their communities collapse, they will retreat even further into irrational fantasy. They will be led toward glittering and self-destructive illusions by our modern Pied Pipers -- our corporate advertisers, our charlatan preachers, our television news celebrities, our self-help gurus, our entertainment industry and our political demagogues -- who will offer increasingly absurd forms of escapism.

The core values of our open society, the ability to think for oneself, to draw independent conclusions, to express dissent when judgment and common sense indicate something is wrong, to be self-critical, to challenge authority, to understand historical facts, to separate truth from lies, to advocate for change and to acknowledge that there are other views, different ways of being, that are morally and socially acceptable, are dying. Obama used hundreds of millions of dollars in campaign funds to appeal to and manipulate this illiteracy and irrationalism to his advantage, but these forces will prove to be his most deadly nemesis once they collide with the awful reality that awaits us.

November 17, 2008

You do not think and you ignore experience.

A friend recently alerted us to the well-honed pen of libertarian editorialist Craig Cantoni. His uncompromising approach is similar to that of most columnists on LewRockwell.com or Strike the Root, and he has an accessible and direct writing style.

Are you in the mainstream of American thinking? Do you have what it takes to be a member of Congress, president of the United States, teacher or trusted leader? Do you have the proper view of government, the economy, and other subjects? Take the following test. Good luck!

(1) Business profits average about 6% of national income of which federal, state and local governments consume about 44%. Which of the following should be reduced?:

(a) Corporate profits. (b) Government spending.

If you selected "a", you are in line with mainstream thinking. Congrats! You get a free subscription to USA Today or a comic book of your choice, whichever you can read without moving your lips.

(2) All of the experiments with collectivism in this country, such as the communitarian communities of New Harmony and Oneida, quickly failed due to the inherent fatal flaws of central planning and the collective ownership of property. Similar experiments by nation states have resulted in tyranny, mass starvation, and widespread poverty. What is best for the nation?

(a) More collectivism. b) Less collectivism.

If "a" was your answer, you should think about applying for a job at The New York Times.

(3) Governments intentionally killed over 100 million people in the 20th century alone. Industry accidentally killed a tiny fraction of this number and actually saved more lives through inventions and discoveries. Consider what happened during the Great Influenza of the second decade of the 20th century. Private medical doctors and institutions warned the government that influenza would spread and kill thousands if the government went ahead with a war bond parade in Philadelphia. The government heartlessly went ahead with the parade. What is the greatest threat to life?

(a) Business. (b) Government.

Many people who have chosen the answer "a" have experienced the terror of Ronald McDonald putting a gun to their head and forcing them to buy a Big Mac.

(4) Medical care and medical insurance are much more costly than they would otherwise be, due to the government virtually destroying a consumer market in healthcare over the last 66 years and shifting costs to third parties. What should be done to make medical care/insurance more available/affordable?

(a) Nationalize all remnants of a consumer market. (b) Restore a consumer market.

Your intellect is awesome if you chose "a". No doubt, in order to be intellectually consistent you also want the government to nationalize the food industry and require all Americans to eat at government commissaries. Burp! Excuse me.

(5) The federal government is insolvent and is printing money to hide the fact. It also has over $60 trillion in unfunded liabilities for Social Security and Medicare -- over $700,000 for each American under the age of 18. What should be done about this?

(a) Give Americans more free stuff and entitlements. (b) Give Americans less free stuff and fewer entitlements.

Run for office if you answered "a". Note: You are halfway done. If you happen to be failing the test, do not despair. You can turn the situation around by burning your extensive library of history, philosophy, and economics books, especially those by Milton Friedman, F.A. Hayek, and Thomas Sowell. Replace them with mainstream reading material, such as Newsweek, high school textbooks, and college lectures. You should also watch a lot of network news and 24/7 cable news. In short order, you will be getting the questions right.

(6) Inflation is an insidious, hidden tax. From 1776 to the passage of the Federal Reserve Act in 1913, inflation averaged almost zero. Since 1913, inflation has increased dramatically, especially after the gold peg was removed. In the last half-century, the dollar has lost about 90% of its value, and the money supply has increased by about 3,000%. Along with government housing policies, easy money was the primary cause of the latest housing bubble and subsequent collapse. Government printing presses are now running red hot to pay the cost of the bailout. High inflation will inevitably follow the current economic downturn, thus penalizing savers, who are the backbone of a healthy economy. Can you trust the government with your money?

(a) Yes. (b) No.

Correct answer: "a".

(7) Fatherless families are a leading cause of poverty, school dropouts, crime and emotional problems. A leading cause of fatherless families is men who walk away from their parental responsibilities and encourage the mothers of their children to "marry" the state. What government action would have the highest payoff in reducing poverty, school dropouts, crime, and emotional problems?

(a) Increase spending on welfare, K-12 education, childcare, tutors, and psychotropic drugs. (b) Remove the incentives for men to walk away and for women to marry the state.

Correct answer: "a".

(8) G.W. Bush increased federal spending more than any president since Lyndon Johnson. In terms of regulations, his administration set a record in 2004 for proposed and enacted rules published in the Federal Register -- 75,000 pages. His increase in regulatory spending in 2003 of more than 24% broke a 50-year record. In all, he increased regulatory spending by 68% during his two terms. Before becoming president, he made millions from taxpayer-subsidized baseball. What does this make him?

(a) A cowboy capitalist whose cutting of regulations was responsible for the mortgage meltdown and economic crisis. (b) A big-government statist like the Democrats.

If you selected "a" you have a wonderful ability to disregard facts. Are you a journalist?

(9) Franklin Delano Roosevelt protracted the Great Depression with his cornucopia of new regulatory agencies. Canada's banking system was less regulated but fared much better than the U.S. system during the Great Depression. In 1992, the highly regulated Swedish economy and banking system experienced a housing meltdown and economic crisis similar to the situation in the U.S. today. What is the primary cause of today's housing meltdown and economic crisis?

(a) A lack of regulations. (b) An assumption perpetuated by the government that home prices would always go up, although they have gone down in 50 of the last 100 years.

Correct answer: "a".

(10) Obama would get a perfect score on this test, for he would choose answer "a" for all of the preceding questions. Did you vote for him?

(a) Yes. (b) No.

If you answered "a" to every question, you are solidly in the mainstream.

If you answered "b" to every question, you feel like a stranger in a strange land, you yell at the TV, mutter at the newspaper, are seen as a crackpot, and are thinking of emigrating.

Incidentally, I failed the test.

Paying Homage to Coercion and to the Coercer Extraordinaire
November 21, 2008

Coercion does not exist in the public’s mind, because the word has been removed from the American lexicon.

It has come to this. It had to come to this. But it is still frightening that it has come to this.

We have now reached the point in our nation's history where tens of thousands of adoring fans of Barack Obama pay homage to coercion and to ask for even more of it. In a case of mass cognitive dissonance, they hate George W. Bush for the very same trait that they adore in their coercer extraordinaire.

Like GWB, the Chosen One wants to use government force to tell others how to live and to remake the world into his image. The only difference is that he wants to coerce different people and has a different image in mind than GWB did.

Ah, but in the self-righteous, sanctimonious minds of him and his acolytes, Obama's goals are noble while GWB's were ignoble. In their thinking, GWB wanted to bomb Muslims and enrich Big Oil. They, on the other hand, want to end poverty, provide free healthcare, achieve equal outcomes, and attain perfect fairness and social justice. And how do they want to do that? They want to do it by treating some folks unequally through unfair and unjust coercion, using the power of the IRS to take their money and redistribute it to other folks.

Hello, do they see the intellectual contradiction?

Of course, the coercers can live with the contradiction, because in their twisted minds, the victims of their coercion are not real people. They are caricatures of evil. They are greedy mortgage lenders, fat-cat CEOs, red-necked racists, selfish white suburbanites, rich people born into privilege, and right-wing Republicans. It is a story as old as the human race: justify coercion by demonizing the other group.

Well, my 88-year-old mom must be a demon. Why else would they want to raise the capital gains tax on her investments and increase the estate tax on her estate?

The problem is, she is a real person, not a caricature. Orphaned as an infant, she was raised by her immigrant aunt and uncle, who worked as a waiter. She worked in clerical and secretarial jobs all of her life, and her husband, my deceased dad, worked in blue-collar jobs all of his. But, oh, did my forebearers ever know how to save money. They scrimped so that their progeny, generation by generation, could climb the socioeconomic ladder, finally reaching the rung where my son is the first in the family tree to have the financial wherewithal to attend an Ivy League university, should he desire to be brainwashed in socialism and multiculturalism like Obama.

In heaven's name, what moral justification is there for using force against an 88-year-old woman? Why do they want to spit on my mom's dreams? What kind of brainwashing and mob mentality can get people to do things as a group that they would not do as individuals?

The accolytes do not even realize that force begets force. When Group A gets in power and uses force against Group B, Group B will retaliate when it gets in power. Or, speaking as an Italian-American, mess with my mom and I will bash your face in if I ever get the chance.

The nation's intellectual elites, most of whom love coercion if it is of the leftist kind, wonder why politics has become so nasty and partisan. Hey, egghead, it is because you cannot mind your own business.

Speaking of eggheads, a professor is now advising Democrat members of Congress to confiscate 401(k) savings, because, according to her deficient math skills, the rich get a bigger tax break than the poor under that provision of the tax code. It does not dawn on the yolk-for-brain professor that she is advocating coercion to solve an imagined problem that was caused by coercion in the first place. The 401(k) provision exists only because income is taxed twice, once as wages and then again as savings. Do away with the coercive tax on savings and there would be no need for subsequent coercion. There also would not be a need for armies of bureaucrats, accountants and lawyers to regulate, administer, and litigate the 401(k) provision.

The professor must be confusing America with Argentina, which has recently confiscated private retirement savings to fund the country's bankrupt treasury.

Her confusion is understandable. Once it became widely accepted by the American public that it is okay to use government force for every purpose imaginable instead of for only the legitimate purpose of protecting life, liberty and property, the yellowed parchments under glass in the National Archives would no longer keep man's genetic desire for power and control in check.

Coercion is not a slippery slope; it is a cliff of sheer ice. One step in its direction, for whatever high-minded or low-minded reason, and it is nearly impossible to stop the fall and turn back, especially without the ice ax and cleats of the Constitution.

Almost all of American politics is now about coercion -- about some group that wants to use government force against another group to achieve some end, usually to take the other group's money for themselves or their pet cause. Of course, the coercers do not put it that way and never use the word "coercion." Tellingly, the media on both the left and right do not use the word, either, perhaps because they have not been educated to think in terms of coercion.

Why would they be educated about coercion? After all, the government monopoly on K-12 education is not going to educate students about coercion when it is an institution based on coercion. In fact, the founders of the public education movement wanted to use public schools to coerce Catholics to learn WASP ways, including learning the King James Bible.

The indoctrination is so complete that the word "coercion" has almost totally disappeared from public discourse, although coercion is what Barack Obama and the rest of Congress embrace.

In 1984, George Orwell wrote that the aim of Newspeak was to "make thoughtcrime literally impossible, because there will be no words in which to express it." Similarly, coercion does not exist in the public's mind, because the word has been removed from the American lexicon.

November 19, 2008

This piece is written by a pair of Ojectivists, showing that when Ojectivists stop calling for the nuclear obliteration of Iraq and other such nonsense, and instead base their opinions on sound assumptions and reasoning, they can come up with some pretty good stuff.

Many have expressed dismay and outrage that so many of today's problems are blamed on "capitalism" when the reality is that the culprit is the antithesis of capitalism, namely coercion-based government meddling. These two authors do it particularly effectively. They note: "Whatever one wishes to call the unruly mixture of freedom and government controls that made up our economic and political system during the last three decades, one cannot call it capitalism. ... Why then should capitalism take the blame today -- when capitalism does not even exist?"

Good question. Obvious answer: Repeated telling of a big lie benefits the teller, otherwise he/she/they would not keep repeating it. Who is the purveyor of the "it is capitalism's fault" lie? Government and its beneficiaries and enablers. Voila.

Speaking of the financial crisis, French president Nicolas Sarkozy recently said, "Laissez-faire is finished. The all-powerful market that always knows best is finished."

Sarkozy was echoing the views of many, including president-elect Obama, who assume that the financial crisis was caused by free markets -- by "unbridled greed" unleashed by decades of deregulation and a "hands off" approach to the economy. And given this premise, the solution, they say, is obvious. To solve this crisis and prevent another one, we need a heavy dose of Uncle Sam's elixir: government intervention. Whether it is more bailouts, stricter regulation, a new round of nationalizations, or some other scheme, the only question since day one has been how, not whether, government is going to intervene.

And the issue is wider than the financial crisis. Millions of Americans do not have health insurance? Well, says Obama, that is because we have left the health-care system to the free market. The solution: a complete government takeover of medicine. A few companies engaged in accounting fraud? It must be because we did not impose enough regulations on businessmen. The solution: rein in corporations with Sarbanes-Oxley.

But while capitalism may be a convenient scapegoat, it did not cause any of these problems. Indeed, whatever one wishes to call the unruly mixture of freedom and government controls that made up our economic and political system during the last three decades, one cannot call it capitalism.

Take a step back. In the lead up to the "Reagan Revolution," the explosive growth of government during the ‘60s and ‘70s had left the American economy in disarray. A crushing tax burden, runaway inflation, brutal unemployment, and economic stagnation had Americans looking for an alternative. That is what Reagan offered, denouncing big government and promising a new "morning in America."

Under Reagan, some taxes were reduced, inflation was subdued, a few regulations were relaxed -- and the economy roared back to life. But while markets were able to function to a greater degree than in the immediate past, the regulatory and welfare state remained largely untouched, with government spending continuing to increase, as well as some taxes.

Later administrations were even worse. Bush Jr., often laughably called a champion of free markets, presided over massive new governmental controls like Sarbanes-Oxley and massive new welfare programs like the prescription drug benefit.

None of this is consistent with capitalism. As the economic system that fully recognizes and protects individual rights, including the right to private property, capitalism means, in Ayn Rand's words, "the abolition of any and all forms of government intervention in production and trade, the separation of State and Economics, in the same way and for the same reasons as the separation of Church and State."

Laissez-faire means laissez-faire: no welfare state entitlements, no Federal Reserve monetary manipulation, no regulatory bullying, no controls, no government interference in the economy. The government's job under capitalism is single but crucial: to protect individual rights from violation by force or fraud.

America came closest to this system in the latter half of the 19th century. The result was an unprecedented explosion of wealth creation and consequent rise in the standard of living. Even now, when the fading remnants of capitalism are badly crippled by endless controls, we see that the freest countries -- those which retain the most capitalist elements -- have the highest standard of living.

Why then should capitalism take the blame today -- when capitalism does not even exist? Consider the current crisis. The causes are complex, but the driving force is clearly government intervention: the Fed keeping interest rates below the rate of inflation, thus encouraging people to borrow and providing the impetus for a housing bubble; the Community Reinvestment Act, which forces banks to lend money to low-income and poor-credit households; the creation of Fannie Mae and Freddie Mac with government-guaranteed debt leading to artificially low mortgage rates and the illusion that the financial instruments created by bundling them are low risk; government-licensed rating agencies, which gave AAA ratings to mortgage-backed securities, creating a false sense of confidence; deposit insurance and the "too big to fail" doctrine, whose bailout promises have created huge distortions in incentives and risk-taking throughout the financial system; and so on. In the face of this long list, who can say with a straight face that the housing and financial markets were frontiers of "cowboy capitalism?"

This is just the latest example of a pattern that has been going on since the rise of capitalism: capitalism is blamed for the ills of government intervention -- and then even more government intervention is proposed as the cure. The Great Depression? Despite massive evidence that the Federal Reserve's and other government policies were responsible for the crash and the inability of the economy to recover, it was laissez-faire that was blamed. Consequently, in the aftermath, the government's power over the economy was not curtailed but dramatically expanded. Or what about the energy crisis of the 1970s? Despite compelling evidence that it was brought on by monetary inflation exacerbated by the abandonment of the remnants of the gold standard, and made worse by prices controls, "greedy" oil companies were blamed. The prescribed "solution" was for the government to exert even more control.

It is time to stop blaming capitalism for the sins of government intervention, and give true laissez-faire a chance. Now that would be a change we could we believe in.

November 24, 2008

The Dominican Republic has become an increasingly popular expat destination and features a growing tourism industry. Here, a visitor describes choosing to travel beyond the capital city of Santo Domingo and the country's wonderful beaches and finding a life -- or so we presume, given the author's current vocation compared to the previous life she describes.

For years, one of the finest jewels of the Caribbean, the Dominican Republic, was veiled in the commercial shadow of its big brother, Puerto Rico. During the past 30 years Internet use has grown, information has become one of the most marketable commodities, and the click of a mouse can send one to the other side of the world. As the tourism industry has moved into the virtual realm, the Dominican Republic has emerged as king of pristine beaches, economical resorts, and great baseball players. Today, tourism is one of the fastest-growing industries in the Dominican Republic. Officials at Berlin's 4th International Tourism Bourse, one of the world's most celebrated travel trade shows, announced that over 26 million travelers have visited the Dominican Republic in the last 10 years. The majority of these 26 million visitors have flocked to tourist-oriented locations such as Santo Domingo, Puerto Plata, and Punta Cana. While the capital city and the celebrated beaches of the Dominican Republic are unquestionably sight-worthy, traveling to some of the less commercialized Dominican cities can provide one with a rich, authentic travel experience that he or she will never forget.

San Juan de la Maguana is the capital city of San Juan, a province located in the western part of the Dominican Republic. Although San Juan de la Maguana is only 3 1/2 hours away from the capital city, visitors will feel as if they are far removed from the modern metropolis of Santo Domingo. The natural setting of the city is truly picturesque. Lush, green mountains stretch upward to kiss the brilliant blue sky and create a natural border for the province as well as for the eye. The San Juan valley is one of the leading producers of agricultural exports in the Dominican. Thus, those who venture outside of the city will encounter flowing fields of rice and beans wherever they look. Although several successful Santo Domingo businesspersons make their second home in San Juan de la Maguana, the town is not an affluent one. Devastating poverty can be found in barrios all around the edge of the city, and beggars are a common sight.

There are no words to describe the effect that seeing a true barrio for the first time has upon a traveler from an affluent first-world nation. Children run through the dirt roads barefoot and sometimes naked, entire families live in a single-room stick hut and sleep on the same mattress, and trash and waste line the streets. Residents are sometimes malnourished and clean water is a luxury that almost no one can afford. Haphazard power lines jerry-rigged by enterprising residents hoping to find power during one of the many power-outages are strung across the barrios, and many a visitor has marveled at the fact that these power lines even work at all. The poverty found in the barrios around San Juan can overwhelm travelers and make them feel guilty about the 3-bedroom home and 2-car garage they have left behind.

I strongly advise that visitors to the barrios take a moment to look beyond the deficiencies that can be perceived by so many first-world eyes and examine the reasons that those they consider to be "less-fortunate" have found to smile. Children will eagerly rush to cling to the hands of any visitor they encounter, adults will bring out plastic patio chairs and invite guests to make themselves at home. Proud housewives sweep dirt floors on a daily basis and maintain a dignity far greater than many can even begin to comprehend. The residents of the barrios have struggled in life, but the smiles on their faces, their overwhelming generosity, and the gentle demeanors that one will encounter betray a secret that is all but unknown to those of us who live in first world nations. Travelers are sure to encounter many a broad smile borne of hope and immense faith. Best of all, any North American traveler with European features will be overjoyed that, in a world in which Americans are often viewed in a negative light, he or she will be greeted with ecstatic cries of, "Mira el Americano!" and the entire town will rush to make his or her acquaintance.

Just outside of San Juan de la Maguana lies the Orfanato la Rosa en el Desierto, an orphanage that is run by a U.S.-based mission organization, Full Gospel World Ministries. The Orfanato la Rosa en el Desierto is home to 45 boys and five girls whose charm and innocence is enough to give joy to the most cantankerous of individuals. The children are intelligent, eager-to-learn, and loving beyond question. They love to practice English with those who visit and they need only see a face once to remember the name. Best of all, the love and understanding that the orphanage directors attempt to foster in the environment of their establishment is evident in the actions of the children. They are keen to help each other and share what they have. I once helped a boy with a group craft project only to watch him give his creation to a disabled boy sitting next to him without a second thought. In that moment, I came to understand the insignificance of material wealth; the children who I had once perceived to have nothing have all of the riches imaginable. The unfortunate one was not the children at the Orfanato la Rosa en el Desierto, but I. At the time, I was living alone in a city where I had few friends and no relatives and working at a job that I abhorred but was afraid to leave because I was convinced that accomplishment was measured by income. I arrived at the Orfanato la Rosa en el Desierto convinced of the superiority of my privileged lifestyle, and I left humbled by 50 children who understood what living means in a way that I had yet to discover.

As awe-inspiring as the children at the Orfanato la Rosa en el Desierto are, they have not quite reached the level of sainthood. The saying "boys will be boys" applies universally, and these children are no exception. One of their favorite pastimes is to chase tarantulas out of their holes using sticks and allow them to crawl all over their shoulders the way snake-handlers do with pythons and boa constrictors. During one trip, I became acquainted with a very special little boy of about five years. Every time I asked his name, he would duck his head shyly and flash a mischievous smile, so I took to calling him my "No-Name Friend." During snack time that day, he returned for four cups of Kool-Aid in less than 10 minutes. I was busy marveling at his capacity to drink his Kool-Aid so quickly when I noticed pink rivulets dripping down the tip of his nose. My little friend had been ducking around the corner and pouring his Kool-Aid over the top of his head so that he could return to me with his winning, impish smile, and hold out his empty cup for more. The same little boy trailed behind me as I went outside to play volleyball and managed to drive his bicycle directly into the path of the ball every time it came my way. To this day, I still do not know his name, but I can assure you that I would recognize the smile of that little rogue anywhere!

The people of San Juan de la Maguana and especially the children at the Orfanato la Rosa en el Desierto have many gifts to share with the traveler who wishes to experience the Dominican Republic not as a tourist, but as the guest of an entire rural community. Those who wish to experience San Juan de la Maguana from the Orfanato la Rosa en el Desierto can travel with Guaitiao, an organization that is dedicated to designing travel-service programs that foster authentic travel experiences, interpersonal relationships, and individual growth. Participants in a Guaitiao program will stay at a small, local hotel in San Juan and will dine at various local restaurants. They will share their talents with the residents of the orphanage as well as at other locations around San Juan and get to know the countryside from an incredibly unique perspective. At night, they will take part in various cultural activities that are tailored to make them a part of the San Juan community. Examples of these activities include Spanish lessons given by a local teacher, merengue classes with local students, a baseball game with the residents and staff at the Orfanato la Rosa en el Desierto, and an evening to meet with local artists. Participants will not only have the opportunity to live in and serve the community that they are visiting, but they will also have the occasion to allow the community to serve them. Service is not an act of selfless giving; rather, it is a reciprocal act. Those who serve must learn to accept the fact that inevitably, they will receive more than they give.

November 28, 2008

Several confident-sounding representatives of European offshore center financial institutions say that the widespread anticipatory dread of an Obama administration led crackdown on offshore havens is unjustified. They have heard it all many times before and while some details change, the foundations of their business models end up withstanding the assaults.

As a spokesman for the Swiss Bankers Association puts it: "We have always managed to deal with different American administrations, no matter what their political agenda is, and reach a balanced agreement on issues on banking secrecy and our status as an offshore center."

This year's exposés -- notably the revalations that followed the theft and sale of a Liechtenstein bank's client data -- and accompanying publicity do appear to represent and prefigure more intense efforts in the governments' perputual war on privacy and moving assets abroad. Aligned against this is the indubitable financial interests of the various offshore centers, who stand to lose a fair portion of their economic wellbeing if they make a concession too far. That their diplomatic skills in this arena are well-honed is also beyond dispute. So the voice of experience certainly deserves some heed, and we reserve the right to later say "Brave words, but ..."

Europe's offshore centers might be feeling the first cold winds of a renewed crackdown on their activities with the incoming Obama administration, but are confident they can withstand regulatory onslaught from governments talking tough on tax. They can also take some comfort from American commentators who say any crackdown may be bluster.

Thomas Sutter, a spokesman for the Swiss Bankers Association, which represents the interests of Swiss banks, said: "We have always managed to deal with different American administrations, no matter what their political agenda is, and reach a balanced agreement on issues on banking secrecy and our status as an offshore center.

"We don't expect there will be any difference in our relationship with the Obama administration." Sutter added that Switzerland has a history of success in negotiating bilateral agreements on tax with its European neighbors and the U.S.

He said: "We have a bilateral agreement with the European Union, working through the European savings tax directive and tax treaties with the U.S. We are quite prepared to draw up further treaties if need be. A balanced approach will always be negotiated."

Sutter said even the U.S. crackdown on UBS Wealth Management will not undermine Switzerland as a financial center. He said: "Switzerland will continue to be a thriving financial center with a well-regulated offshore business. We are not a tax haven."

Last week, U.S. federal prosecutors charged UBS's top global wealth management official Raoul Weil with conspiring with fellow bankers and wealthy clients to defraud the U.S. Government by evading taxes.

Switzerland is the world's biggest offshore financial center with approximately $1.5 trillion (€1.2 trillion) worth of offshore accounts deposited in the Alpine country.

Even smaller offshore centers in Europe appear not to be too worried about regulatory pressures.

Russell Clark, a partner in Guernsey-based law firm Carey Olsen, said: "We expect a challenging time ahead. But we can point out to the likes of the UK and the U.S. that offshore centers exist in their countries. The U.S. has Delaware, a mini-tax haven, and the UK has its resident non-domiciled tax advantages, even if they have been watered down recently.s

"Targeting offshore centers like us is an easy political point to make. But we have met our international obligations to such an extent that the International Monetary Fund applauded our efforts in improving transparency of our financial services sector when they were last here in 2003."

Switzerland and Guernsey last year found themselves on a blacklist of 34 offshore jurisdictions, and branded tax havens by the Obama co-sponsored Tax Haven Abuse Act.

Obama's support for tougher measures to deter tax havens has prompted media speculation that offshore financial centers are in for a tougher time now the 47-year-old Democrat has been elected President. Soon after his election, European media coverage was dominated by headlines such as "Obama backs crackdown on tax havens" and "Obama to demand end to Swiss banking secrecy."

Switzerland has also found itself on the sharp end of criticism from its northern neighbour – Germany. Germany's Finance Minister Peer Steinbrück called for Switzerland to be placed on an OECD "blacklist" of uncooperative tax regimes. There are three countries on the OECD list -- Monaco, Liechtenstein and Andorra -- compared with 35 when it was drawn up in 2000.

Some U.S. commentators believe that as far as Obama is concerned, offshore centers are in for no more tough a time than they experienced under the Bush administration. JD Foster, a fellow in Washington-based conservative think-tank The Heritage Foundation, said: "There is likely to be a continuum of policy. Don't forget the Bush administration did a lot to deter tax evasion worldwide."

Foster said the current financial turmoil does not mean a crackdown on tax havens is inevitable. He said: "There is not a link. The financial turmoil is institutionally led and has very little to do with offshore financial centers. They cannot take the blame.

Joseph Field, a partner in private client law firm Withers's office in New York, said wealthy Americans are likely to be targeted. He said: "Americans who may hide money in offshore centers are certainly not in much of a position to come forward in opposition. ... I think the new President will be pretty busy with other issues for a while."

November 28, 2008

The Caribbean nations better hang together, or they will end up hanging separately.

Brave words of the powerful European offshore financial centers above notwithstanding, Sir Ronald Sanders -- “a former Caribbean diplomat, now a corporate executive who publishes widely on small states in the international community” -- says their Caribbean counterparts have plenty to worry about and had better create a unified response to the depredations of the OECD bigwigs. Incorporated in this call is a useful summary of the major anti-offshore initiatives to date.

Ominous clouds are gathering around financial services in the Caribbean both offshore and onshore. The clouds are approaching from two directions – the new U.S. government that will take office in January 2009, and the European Union's (EU) implementation of the Economic Partnership Agreement (EPA) that Caribbean countries have signed.

The Caribbean will well recall the blacklisting of many of their jurisdictions in 1998 by the Organization for Economic Cooperation and Development (OECD) -- known as the rich nations' club -- when it launched its so-called "harmful tax competition initiative" (HTCI). The OECD claimed the tax-revenue bases of its member states were being eroded by competition from 41 low taxing jurisdictions, some of them in the Caribbean.

Alongside the HTCI, the OECD's sister-organisation, the Financial Action Task Force (FATF), initiated its "Forty recommendations on money laundering" which it then unilaterally sought to impose on the world by naming countries that it said were "uncooperative" in the effort to curb money laundering. Of course, the so-called recommendations were not recommendations at all. They were rules that the OECD countries alone created. Eventually, the IMF, also controlled by the OECD countries, adopted the "recommendations" and now use them as part of the financial sector appraisal programmes of countries.

The OECD's HTCI initiative was widely seen as an attempt to kill the offshore financial services sector of the economies of developing states which had turned to such services as a means of diversifying their economies and easing their reliance on the exports of primary products or tourism. The financial services providers in some of these countries in the Caribbean, such as the British Virgin Islands, the Cayman Islands, the Bahamas and Bermuda, became very good at it and gave stiff competition to their rivals in the OECD nations.

In the end, the OECD set aside its HTCI blacklist but the intent behind it was never fully abandoned. The tactical withdrawal of the OECD from the HTCI owed much to the ability of the affected countries to argue their case vigorously in Commonwealth councils where OECD members -- Australia, Britain, Canada and New Zealand were present. Even though the major breakthrough was the decision of the [then] new U.S. administration of George W. Bush not to support the OECD initiative which was started with the full co-operation of Lawrence Summers, the treasury secretary of the previous Democratic Party government of president Bill Clinton.

Summers was part of the election campaign team of the Democratic President-elect of the United States, Barack Obama who is on record as being opposed to "tax havens". In February 2008, Obama co-sponsored a bill in the U.S. Senate with Carl Levin, the senator from Michigan, which names 13 Caribbean jurisdictions among those that could be listed by the treasury secretary as "uncooperative" and penalized. Among these countries are the four mentioned earlier and Anguilla, Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, St. Lucia, St. Kitts/Nevis, and St. Vincent & the Grenadines.

Levin believes that the total loss to the U.S. Treasury from offshore tax evasion alone approaches US$100 billion per year and he wants, among other things, to give the Treasury authority to take special measures against foreign jurisdictions and financial institutions that impede U.S. tax enforcement. Exactly how the U.S. Treasury will establish that U.S. tax enforcement is being impeded is unclear, but given the past history of how these matters have been handled, the burden of proof may very well be imposed on the foreign jurisdictions and financial institutions not the U.S. Treasury.

In any event, a robust pan-Caribbean response is needed to the "Stop Tax Havens Abuse Act" as the Levin-Obama Bill is called. Some Caribbean countries have had the tendency to go it alone on these issues, in the belief that they are better able to negotiate themselves out of them. This problem is far too fundamental to the new Caribbean ideology of services as the saviour of their economies not to be tackled jointly.

The governments of Jamaica and Guyana have recently indicated that they wish to establish financial services, and legislation has been enacted to do so. In this connection, with almost all of its member states and associate member states being vulnerable to the U.S. Bill, the Secretariat of the Caribbean Community and Common Market (Caricom) might take the initiative to convene a group to start preparing a pan-Caribbean response.

The EU member states of the OECD -- France, Germany and Britain in particular -- were also hawks on the HTCI. In March this year, the 27 finance ministers of the EU announced their determination "to crack down on tax havens". And it is significant that the EU has sought to introduce into the EPAs, which it is negotiating with several developing countries, standards that have not been agreed in negotiations at the World Trade Organisation (WTO) on the General Agreement on Trade in Services (GATS). Among these "standards" are: the OECD's "Agreement on exchange of information on tax matters" and a requirement that note be taken of the "Ten key principles for information exchange" promulgated by the finance ministers of the G7 nations.

It is telling that no small state was invited to the G20 meeting held in Washington on 15 November, to consider the current global financial crisis, even though many of these countries operate financial services and have borne the brunt of OECD criticism over financial regulation and supervision. Without even acknowledging that the current crisis resulted from poor oversight in the U.S. particularly and some countries in Europe, the G20 communiqué stated: "Tax authorities, drawing upon the work of relevant bodies such as the (OECD), should continue efforts to promote tax information exchange. Lack of transparency and a failure to exchange tax information should be vigorously addressed."

Tax information exchange has nothing to do with the current global crisis, but the crisis is being used to again target the financial services of small countries.

Recognizing that the storm clouds are gathering, Caribbean countries should bolster their regulatory and supervisory systems so that they are beyond reproach, but they should also gear themselves for a downpour of new demands. They would do so better if they do it together.

November 28, 2008

The U.S. is seeking the names of about 17,000 U.S. UBS clients. Swiss lawyers have said Switzerland is considering disclosing information on only a few hundred.

Whenever a Swiss bank discloses information on a U.S. client to the IRS, the U.S. government and its beneficiaries and sycophants routinely proclaim: “Swiss banking secrecy is dead! Forget about going offshore. Nothing left to see here, folks. Pay your taxes and move along.”

The Swiss then counter: “This was a specific case that violated our existing rules. Nothing has changed. Ignore that red, white and blue man behind the curtain. Let’s you and us talk.”

The widely publicized news that Swiss megabank UBS caved into demands to cough up all kinds of information on their (soon to be ex-) U.S. clients was for UBS U.S.-onshore clients. Their reponse to the IRS "fishing trip" requests for USB Swiss bank client information is that they will at most toss them a few reprobate minnows, and the minnows -- see immediately above -- are fighting even that. The UBS/Swiss tune sounds good, and is consistent with past events of the sort. Whether things are truly different this time awaits the development of events.

LUCERNE, Switzerland (Reuters) — UBS said ... it has discovered a few cases of tax fraud as part of a U.S. inquiry into whether it helped wealthy Americans dodge taxes through accounts in Switzerland.

"Our investigations have uncovered a limited number of cases of tax fraud under both U.S. and Swiss law," Chairman Peter Kurer told 2,400 shareholders gathered to vote on the bank raising 6 billion Swiss francs ($5 billion) with a convertible bond issue to the Swiss state.

Kurer, who took over in April, also said current and former top executives would give up SF70 million in bonuses they received after coming under fire for accepting fat salaries despite steering Switzerland's flagship bank into heavy losses.

He reiterated that UBS, one of the hardest-hit banks in the subprime turmoil, still aimed to make a profit in 2009, but stressed market conditions remained difficult. UBS made a small 3rd-quarter profit, mainly thanks to tax gains and accounting factors, but analysts expect it to take a new hit this quarter.

UBS is also under pressure from the U.S. tax investigation launched earlier this year, which led to the indictment of the bank's head of global wealth management this month and threatens to weaken Switzerland's precious banking secrecy laws.

But bank-client confidentiality, a pillar of Swiss banking, "is not there to protect cases of tax fraud," Kurer said, suggesting UBS could be ready to hand over some client details to U.S. authorities as part of a possible settlement.

The U.S. authorities are seeking the names of about 17,000 U.S. clients of UBS who have Swiss-based bank accounts. Swiss lawyers representing U.S. clients of UBS have said Switzerland is considering disclosing information on only a few hundred.

Kurer, who is trying to rebuild the bank's reputation after it was forced to write down about $49 billion on risky subprime assets, said UBS had taken broad measures to address its shortcomings, including aggressively reducing its balance sheet and overhauling its pay structure.

The chairman said he was personally replying to the many angry shareholders who had written to express their discontent with UBS, formerly an icon of Swiss banking whose stock used to be popular among Swiss retail investors.

Under the new pay system, the chairman will not get bonuses. Ex-Chairman Marcel Ospel, whose drive into investment banking many analysts blame for UBS's present woes, has also returned some of his pay, along with other executives.

"UBS is a leader in this regard," Kurer said, adding he was working on getting more bonuses waived or returned.

"Those who are responsible must be brought to court," said a 68-year-old UBS investor who lost much of his pension savings. "I have lost nearly all what I and my wife had saved up for later years. What am I going to do now.?"

Kurer gave no details on to what extent UBS was stemming client money withdrawals, which totaled a record $49 billion in the third quarter in its core wealth management business.

UBS said earlier this month the pace of client outflows had started to ease after the Swiss government announced its rescue package. The deal also allows UBS to hive off up to $60 billion of illiquid assets in a special central bank-controlled fund.

He said the Swiss government intervention -- including the SF6 billion of new capital the shareholders approved ... "has helped bolster confidence in UBS and the Swiss banking and financial services industry as a whole."

November 30, 2008

Are all corporations -- privileges granted by the state, as liberty-oriented thinkers so often characterize them -- born in sin? J. H. Huebert and Walter Block argue no, giving us a taste of their forthcoming longer article.

Do big business and big government team up to rip you off? Of course they do. All the time. Unfortunately, Roderick Long has taken that important insight and, in a new essay for the Cato Institute, twisted it into a misguided attack on "corporate power," tax breaks, and Wal-Mart.

Let us set the record straight on the correct libertarian view of these matters.

Before we do, we should note that Roderick Long is a leading libertarian theoretician. He was for several years editor of the flagship libertarian publication, the Journal of Libertarian Studies, and did a wonderful job in that capacity. He has written the best short defense of the libertarian anarchist position ever written. And not only is he a pure libertarian, he has made important contributions to technical philosophy.

Still, with all due respect, we cannot agree with him on this occasion. Indeed, his importance as a libertarian philosopher makes his comments all the more alarming.

Long writes that "Corporate power depends crucially on government intervention in the marketplace."

But what does he mean by "corporate power"? A corporation is merely a group of individuals who have entered into a particular type of business relationship. The corporate form allows them to be known collectively by their business's name instead of their own names. And it allows them to enter into contracts under which they limit their own liability -- something which is perfectly legitimate under libertarianism. (Objectivist historian Robert Hessen has made this point well in his book, In Defense of the Corporation, and see our article, "Defending Corporations," forthcoming in the Cumberland Law Review.)

The corporation, therefore, has no power to speak of.

Instead, only the state has power.

And, yes, sometimes the state uses its power to confer benefits, direct and indirect, on corporations. It also uses its power to confer benefits on partnerships. And sole proprietorships. And individuals. There is nothing special or different about government privileges for corporations -- so why does Long single them out?

Maybe he just means that he does not believe big businesses would succeed but for the state -- he says as much elsewhere in the piece. If so, he should say so, because he appears to be attacking the corporate form in particular for reasons that are not clear.

In any event, his apparent view that big business needs the state to survive is unfounded. As it is, there are big businesses that do not benefit much from government and there are small businesses that benefit greatly from government. In a fully free market, undoubtedly, large and small businesses would both survive, succeed, and prosper. Long's assertions to the contrary are unfounded speculation.