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

W.I.L. Offshore News Digest :: April 2009, Part 4

This Week’s Entries :


Great bankruptcies have changed history.

The facile claim by the late former Citibank CEO Walter Wriston that countries do not go bankrupt was, of course, inherently nonsensical. For one, why should any organization -- never mind a particularly corrupt and inefficient one -- be exempt from financial ups and downs just because it carries the label "government." For two, it utterly ignored history.

Now as the financial meltdown unfolds, the risk is that we will be seeing sovereign bankruptcies -- de facto if not officially -- by the bushel, vs. one at a time as in recent decades. The UK Telegraph's Ambrose Evans-Pritchard looks around the EU and finds that "a disturbing number of states look like" meltdown posterboy "Iceland once you dig into the entrails." Most at risk are those with large external debts, i.e., those whose capital inflows and economic booms were fueled by bubble credit.

A deeper issue fingered by Evans-Pritchard is that the larger European countries who would traditionally step up and bail out their smaller neighbors "are themselves exhausting their credit lines and cultural reserves." A possible outcome if the defaults come to pass? "My hunch is that it would expose Europe's deep fatigue – brutally so – reducing the Old World to a backwater. Whether U.S. hegemony remains intact is an open question. I would bet on U.S.-China condominium for a quarter century, or just G2 for short."

Unless this capital is forthcoming, a clutch of countries will prove unable to roll over their debts at a bearable cost. Those that cannot print money to tide them through, either because they no longer have a national currency (Ireland, Club Med), or because they borrowed abroad (East Europe), run the biggest risk of default.

Traders already whisper that some governments are buying their own debt through proxies at bond auctions to keep up illusions -- not to be confused with transparent buying by central banks under quantitative easing. This cannot continue for long.

Commerzbank said every European bond auction is turning into an "event risk." Britain too finds itself some way down the AAA pecking order as it tries to sell £220 billion of Gilts this year to irascible investors, astonished by 5% deficits into the middle of the next decade.

U.S. hedge fund Hayman Advisers is betting on the biggest wave of state bankruptcies and restructurings since 1934. The worst profiles are almost all in Europe -- the epicenter of leverage, and denial. As the IMF said last week, Europe's banks have written down 17% of their losses -- American banks have swallowed half.

"We have spent a good part of six months combing through the world's sovereign balance sheets to understand how much leverage we are dealing with. The results are shocking," said Hayman's Kyle Bass.

It looked easy for Western governments during the credit bubble, when China, Russia, emerging Asia, and petro-powers were accumulating $1.3 trillion a year in reserves, recycling this wealth back into U.S. Treasuries and agency debt, or European bonds.

The tap has been turned off. These countries have become net sellers. Central bank holdings have fallen by $248 billion to $6.7 trillion over the last six months. The oil crash has forced both Russia and Venezuela to slash reserves by a third. China let slip last week that it would use more of its $40 billion monthly surplus to shore up growth at home and invest in harder assets -- perhaps mining companies.

The National Institute for Economic and Social Research (NIESR) said last week that since UK debt topped 200% of GDP after the Second World War, we can comfortably manage the debt-load in this debacle (80% to 100%). Variants of this argument are often made for the rest of the OECD club.

But our world is nothing like the late 1940s, when large families were rearing the workforce that would master the debt. Today we face demographic retreat. West and East are both tipping into old-aged atrophy (though the U.S. is in best shape, nota bene).

Japan's $1.5 trillion state pension fund -- the world's biggest -- dropped a bombshell this month. It will start selling holdings of Japanese state bonds this year to cover a $40 billion shortfall on its books. So how is the Ministry of Finance going to fund a sovereign debt expected to reach 200% of GDP by 2010 -- also the world's biggest -- even assuming that Japan's industry recovers from its 38% crash?

Japan is the first country to face a shrinking workforce in absolute terms, crossing the dreaded line in 2005. Its army of pensioners is dipping into the collective coffers. Japan's savings rate has fallen from 14% of GDP to 2% since 1990. Such a fate looms for Germany, Italy, Korea, Eastern Europe, and eventually China as well.

So where is the $6 trillion going to come from this year, and beyond? For now we must fall back on the Fed, the Bank of England, and fellow central banks, relying on QE (printing money) to pay for our schools, roads, and administration. It is necessary, alas, to stave off debt deflation. But it is also a slippery slope, as Fed hawks keep reminding their chairman Ben Bernanke.

Threadneedle Street may soon have to double its dose to £150 billion, increasing the Gilt load that must eventually be fed back onto the market. The longer this goes on, the bigger the headache later. The Fed is in much the same bind. One wonders if Mr Bernanke regrets saying so blithely that Washington can create unlimited dollars "at essentially no cost."

Hayman Advisers says the default threat lies in the cocktail of spiraling public debt and the liabilities of banks -- like RBS, Fortis, or Hypo Real -- that are landing on sovereign ledger books.

"The crux of the problem is not sub-prime, or Alt-A mortgage loans, or this or that bank. Governments around the world allowed their banking systems to grow unchecked, in some cases growing into an untenable liability for the host country," said Mr. Bass.

A disturbing number of states look like Iceland once you dig into the entrails, and most are in Europe where liabilities average 4.2 times GDP, compared with 2% for the US. "There could be a cluster of defaults over the next three years, possibly sooner," he said.

Research by former IMF chief economist Ken Rogoff and professor Carmen Reinhart found that spasms of default occur every couple of generations, each time shattering the illusions of bondholders. Half the world succumbed in the 1830s and again in the 1930s.

The G20 deal to triple the IMF's fire-fighting fund to $750 billion buys time for the likes of Ukraine and Argentina. But the deeper malaise is that so many of the IMF's backers are themselves exhausting their credit lines and cultural reserves.

Great bankruptcies change the world. Spain's defaults under Philip II ruined the Catholic banking dynasties of Italy and south Germany, shifting the locus of financial power to Amsterdam. Anglo-Dutch forces were able to halt the Counter-Reformation, free northern Europe from absolutism, and break into North America.

Who knows what revolution may come from this crisis if it ever reaches defaults. My hunch is that it would expose Europe's deep fatigue -- brutally so -- reducing the Old World to a backwater. Whether U.S. hegemony remains intact is an open question. I would bet on U.S.-China condominium for a quarter century, or just G2 for short.


The growing medical tourism business gives a fair indication of just how out of control the U.S. government/special interests axis has become. The AMA, pharmaceutical companies, insurance companies et al have conspired with the federal government to drive the cost of health care so high that it often makes economic sense to go overseas and obtain care even when you are adequately insured, travel and lodging costs notwithstanding.

What about the quality of offshore medical care versus the U.S.? The World Health Organization ranks the U.S. healthcare system #37 in the world -- and really little more needs to be said.

But that is an aggregate assessment/statistic. Your mileage can vary considerably unless you choose your provider carefully. This article provides what appears to be a very useful introduction for those considering becoming medical tourists, with advise and suggested resources aplenty.

If you live in a country where health care is expensive -- like the U.S. -- you may have heard about the growing popularity of going overseas for medical or dental procedures, or in some cases for nursing home care.

Even with good insurance, the cost of care in the U.S. is, for lack of a better term, unbelievable. You may survive the operation, but will you survive the bill? Not only that, but care in the U.S. is often not the best, depending on your circumstances. The World Health Organization ranks the U.S. healthcare system #37 in the world, behind almost every European country, Saudi Arabia, Columbia, Costa Rica, and Chile.

If you do not live in the U.S., you may still have some interest in medical tourism -- perhaps your domestic health care system does not cover a procedure you want, or maybe the wait for the procedure is too long.

People should not have to export themselves to get decent, affordable medical care, but this is the world we live in.

Types of Medical Tourism

Probably the most straightforward type of medical tourism is going overseas for dental work.

The most highly developed center catering to overseas dental patients is Mexico. The primary business of some entire towns along the Mexican/U.S. border is dental work.

Costa Rica is another popular place for dental procedures. The dental infrastructure and sheer number of dentists is much smaller, but it is still a good destination for many procedures.

It is possible to get quality dental work in many countries, but in Latin America these two countries probably have the most overseas dental patients.

Plastic surgery overseas has been popular for quite some time. Many of the plastic surgeons performing procedures overseas have training comparable to those in the U.S. or Europe and many have even gone to medical schools in the U.S. or Europe.

A fairly new form of medical tourism consists of going overseas for procedures which are just too expensive in one's home country. In some cases, it may be possible to pay cash for a procedure overseas -- say gall bladder surgery, or chemotherapy or even imaging like MRI or cat scans -- and even with travel expenses included end up paying less than your deductible and co-pays would have been in the U.S., even for those with insurance.

For those without insurance, and with limited access to the health care system, it could be a life-or-death matter. For a few people, going overseas for a medical procedure could literally save your life. Some insurance companies are beginning to pay for medical procedures performed in other countries, since the savings are so great. Hospitals have opened up in India and Thailand, among other places, which cater solely to overseas patients.

Alternative therapies not available in one's home country have been popular for a long time. For someone with prostate or other types of cancer in the U.S., there are treatments available in Germany and other places which are not available in the U.S.

Overseas nursing home care is a small but growing business. This is something worth considering for those who will need nursing home care, particularly from the U.S.

U.S. rules require that you be basically broke (have under $2500 in assets) before the government pays for your nursing home care. If you do not have long-term care insurance, the charges of $3,000-5,000 per month for nursing home care will quickly eat up whatever savings you might have. Speaking from personal experience of my own mother's 15 years in U.S. nursing homes, it may be worth checking into care in Mexico, to compare with offerings in the U.S. For those who can speak some Spanish, have at least some mobility, are flexible, and do not have children to look after them, it might be a good option.

Quality of Overseas Care

A very interesting web site, which anyone contemplating overseas health care should study closely, is Planet Hospital. Their web site provides a great deal of information on procedures in various countries. This company can also assist you in choosing a provider, and for a relatively small fee can help you in arranging all the details of your overseas care. I am not endorsing this company one way or the other, but their approach seems to me to be impartial and helpful.

It would be worth asking whether a foreign hospital you plan to use has been accredited by the Joint Commission International, particularly if you are considering a complicated and/or invasive procedure. To the best of my knowledge, no such accreditation exists for overseas dental care and nursing home care.

Cost alone is usually a very poor standard to go by, and should never be the primary factor in your decision as to which health care providers to use.

Regardless of which facilities or providers you may decide to use, it would probably be wise for you to do a walk-through of the facility or offices before any procedures are performed. It is easy to produce glossy brochures and web sites, and to make all sorts of promises and assurances. At any rate a walk-through would give you an idea of the general standards of their facility.

Another option would be to ask for references of people from your own country who have been treated at a facility or by a provider. While it is possible that some people could be paid to lie about their treatment (or lack of treatment) it is still worth a shot. If you are knowledgeable about the procedure that you plan to have, you can ask some pointed questions that only a person who has had the procedure (or a medical professional) would know the answers to.

Overseas Dental Care

As mentioned above, the best-developed center for foreign patients seeking dental care is Mexico.

Some border towns along the U.S./Mexico border seem to exist primarily to serve U.S. dental patients. Most border towns will have a relatively large number of dental offices, so it is not always necessary to go to a town like Nuevo Progresso (just south of McAllen, Texas) which has perhaps several hundred dentists.

In terms of quality, it can vary quite a bit. It would be wise to know exactly what you need before you go to Mexico, so that you will not be sold any unnecessary procedures. Of course it would be wise to also know what a procedure would cost in the U.S.

The internet has a number of advertisements for dentists in Mexican border towns. Dentists in the interior do not tend to advertise much. Prices tend to be higher along the border, but it can also be more convenient since it is not necessary to travel further south, and with a concentration of dentists the lab work can be faster and better quality (but not always).

If you plan to have some dental work done on the border, it would be wise to get an estimate of cost and the time required before making a trip, and then allow at least an extra day or so, in case anything comes up or the lab has to redo some of their work.

If you know someone who has had dental work done along the border, ask them for input on their experience.

If you travel to a town on the border before deciding on a particular dentist, walk around and take a look at some of the offices. You might want to speak with several dentists and look at their equipment to get a feel for their competence. A dirty office is never a good sign, nor is equipment that seems to date from before the revolution.

From my own personal experience, I have seen mostly very modern equipment in Mexican dental offices. The X-ray machines tend to be the newer type where you do not need the lead apron. Mexico graduates a lot of dentists, and they seem to buy new equipment when they set up their offices.

If you go to a small dental office, the dentist may not have a receptionist or even an assistant. This is not necessarily a bad thing, as the dentist may still offer good quality care. Some dentists have an office in the front of their house. Again, this is not necessarily a bad thing, and does not necessarily detract from the quality of their care.

I have known people who have saved thousands, and in some cases tens of thousands, by getting dental care in Mexico.

If you do visit a border town for dental care, you can normally get cheaper lodging on the Mexican side, but standards are sometimes better on the U.S. side. It is also not a bad idea to park your car on the U.S. side, and take taxis on the Mexican side.

Many (not all but most) dentists in border towns will speak some English. In the interior, it is not so common. Standards at the border seem to be more consistent, in the interior it seems to vary more.

If you are interested in dental care in a different country, a lot of my advice still holds. It is mostly a matter of evaluating the cost, the dentist's references, the cost and ease of your travel to their office, how long the procedures will take, and how comfortable you feel with their expertise.

Plastic and General Surgery

One provider of overseas medical care can be found at the Overseas Medical Facilitators website. This company is affiliated with Wockhardt International, a hospital group in India. The Wockhardt hospitals have been inspected and accredited by Joint Commission International. Their web site has a good breakdown of procedures and costs.

Dealing with a hospital that has been inspected and accredited by Joint Commission International does take some of the guesswork out of getting care overseas. As usual there are few guarantees, but you know that procedures, equipment, staff, and training are probably going to be adequate for your needs. When you locate a health provider from a web site and only have their glowing (self provided) references to go on, you may be taking a much bigger chance, since you have no idea of the adequacy of their care.

There are any number of websites which offer plastic and general surgery in various countries, so do some checking. But do not in any case make any sort of decision on any procedure based on what you saw on some website. These sites are best used as a basis for further research, to check references and prices, and to get an idea of how the w -- do not get just one estimate in the U.S., get several. Some websites will high-ball the U.S. cost to make it look like their "discounted" prices are lower.

Another thing to consider, particularly for an elective procedure for which you have either no insurance or insufficient insurance to pay for the whole thing, is that you may be able to negotiate a discount on a procedure in the U.S., without even going overseas. Some surgeons and hospitals will give a break on some procedures, but of course few will advertise this. If you have a certain amount of money for a procedure, ask around–let them know you will pay the bill upon completion of the procedure. It is certainly worth checking this option before going overseas.

For the downside of plastic surgery overseas, check this web site.

Concerning elective surgery overseas, my advice is buyer beware. Look for a hospital that is certified (see Joint Commission International, above). I would not necessarily believe all the horror stories (you mean no plastic surgery patients in the U.S. ever had any problems and all overseas patients have problems?) nor would I believe the glowing reports the overseas providers give (you mean EVERY patient you ever had was perfectly satisfied?). Going under the knife is serious business, and do not even think about it unless you have done extensive research on the surgery provider.

In response to U.S. providers who posit that all care in other countries is dangerous, I would ask them why the World Health Organization rates the U.S. system as #37, after Costa Rica, Columbia, Chile, and almost every European country? It is possible to get excellent care overseas, provided you do your homework.

If you can find a provider who was trained in the U.S. or Europe, so much the better. Do not spend a dime until you see the facility and talk with the surgeons who will be performing any procedures. Where did they receive their training? What if you have problems after the surgery, how will they deal with that? What sort of insurance do they have if you have to sue them? Can you even sue them at all in another country? What sort of after-surgery follow-up procedures do they have?

Arrive a couple days early for a procedure, and tour the facility where you plan to have surgery. Talk to the surgeon. Do you feel comfortable with the facility and the surgeon? If not, think twice about going through with any procedure.

Before going overseas, ask for and check out any references you can get. Talk to anybody you might know who has had a similar procedure done, whether in the U.S. or overseas. Do not consider paying cash for a procedure, always pay by credit card. If your credit card limit is not high enough, try to work it out with the issuing company.

In my opinion, any reputable surgery provider should have lots of good references, should be willing and eager to answer any of your concerns to your satisfaction, should be willing to accept payment by credit card after the procedure is done and you are satisfied with the results, and their hospital of facility should be inspected and accredited by an independent accreditation body, like Joint Commission International.

It is also worth Googling any overseas doctor, hospital, or clinic to see if anybody else has written anything about them, whether good, bad, or indifferent. Keep in mind that some positive references may have been written by those who have been paid to do so.

For those seeking medical care in Mexico, an excellent reference is the book, Mexico Health and Safety Travel Guide, by Robert H. Page, M.D. and Curtis R. Page, M.D. Phone 866-MedToGo.

Going Overseas For Imaging and Diagnostic Care

One of my cousins recently had an MRI. The cost? $5,000. He had good insurance (with a large employer) but he was still $1,000 out of pocket. $5,000 for a 20 minute procedure. At the rate of two MRI procedures an hour, this one machine would generate roughly $20 million a year in revenue (8 hour day). Good work if you can get it.

In some cases it can make sense to go overseas for imaging and diagnosis of some conditions, especially under the following circumstances:

(1) You lack funds or insurance to pay for imaging (particularly in the U.S.) but have a condition where imaging would be very useful, and you do have enough money for overseas imaging.

(2) You have diagnosis and treatment options in your home country, but think you might have better alternatives in a country with different treatment regimes (for example going to Europe for prostate cancer treatment). Some treatments may be available overseas that are not available in your home country.

(3) You have had treatment of a condition and have had poor outcomes and would like a second opinion.

(4) You feel the quality of care you have received in your home country is poor or you have too much of a wait to receive it.

You might be surprised to know that even now, some X-rays for some U.S. hospitals are read by radiologists in India. Of course, many health care providers in the U.S. are foreign born, and received all or much of their training overseas.

Overseas Nursing Care

For older readers, nursing care is something to consider in their waning years. If you are fortunate enough to live in a country with a good elder-care system, you may never need to consider leaving your country to find a decent place to grow old in once your health begins to limit your ability to provide your own care.

However, some readers will find it necessary to make some tough decisions. In the U.S., for example, before the government will pay for nursing home care, you have to spend all your money above $2500 before they begin to pay. This almost guarantees that nursing home residents cannot go back to live independently -- they do not have any money left, since they had to spend it all on their nursing home care.

Many people prefer assisted living care while they are still more ambulatory, but Medicare does not pay for it.

I have been in quite a few nursing homes in the U.S., and I can say that I have only seen a couple that I liked at all. Only one that I would have considered living in myself.

Keep in mind that some of the complaints about nursing homes in Mexico also can apply to nursing homes in the states. Speaking from personal experience, my mother suffered from various forms of abuse, some of which was at the hands of nursing home employees, theft by nursing home workers of her possessions, and poor medical care. And this was while I kept a hawk's eye on her care, all in a nursing home that was regularly inspected only a few miles from my home! I should also mention that one of the state nursing home inspectors locally was convicted of taking bribes from nursing home owners, and that the bookkeeper in my mother's home was convicted of embezzling from patient's accounts. You really cannot get much worse than that. Why not consider Mexico for a fraction of the cost?

One of the biggest complaints of nursing home residents in the U.S. is that they are lonely, so that should come as no surprise that it would also be a complaint in Mexico. However, the attitude toward old people seems to be different in Mexico.

Many people would hesitate to move to Mexico because their family members are living nearby, and they assume they would come to visit them regularly, but would not do so if they moved to Mexico. On the other hand, many relatives basically stop visiting you once you move to a nursing home, particularly if you live more than an hour from them. Family visits can become rare once you live in a nursing home -- with some people, their relatives would visit no more seldom if they lived in Mexico than if they lived in the U.S. It is sad but true, and I have seen in many times.

Another option for living in Mexico is to live independently in a house or apartment, and hire a live-in caretaker. Wages will vary, but should be no more than $3-5 per hour. In many areas, $15 or $20 a day would be considered a very good wage for a caretaker.

When considering a nursing home in another country, it would be wise to choose one located not too far from your home country. Many people, when they get older, do not tolerate cold weather, so choosing a warm climate can be a smart move as well.

I would suggest that anyone considering an overseas nursing home arrange to stay in a home for several weeks on a trial basis, before making the final move. Food, medical care, staff, cleanliness, freedom from stress, activities, and weather are some of factors that will influence your happiness in a nursing home. It is likely that you will not be as happy in any nursing home as you were in your own home, but if you cannot live independently any more, you have to live someplace where you can get assistance.

Alternative Care Overseas

Mexico has been known for a long time as a center for alternative cancer treatments. An introductory discussion can be found here.

The Cancer Cure Foundation website contains information on cancer clinics using a wide variety of treatments in many different countries. The same website also has their own listing of Mexican alternative care clinics effective for curing your cancer. This is true whether you are in the U.S. or overseas. Conventional treatment may be very effective in many cases, but it is also true that many people die from conventional treatment. Unfortunately we do not know how many. It is difficult to say whether alternative treatment may be more effective in your own particular case, but it certainly is worth investigating.

What If You Already Have Great Insurance?

Many people confuse good insurance with good medical care. The difference is that insurance only guarantees payment, not the quality of the care. Even if you (or your insurance company) pays a fortune, the quality of your care is not guaranteed.

A lot of people also seem to have an inordinate, and often unearned, faith in their health care providers, and do not realize that consumer protection and standards of service in some ways are inadequate in the medical business.

In some cases it may be possible to get better care overseas for less than the cost of your co-pays and deductibles in your home country, particularly if you are from the U.S. Most overseas providers are not in such a big hurry to process everybody. House calls and office visits that are extremely thorough and unhurried and can take an hour or longer (as much time as is necessary) are a thing of the past in the U.S., home of the 5 minute office visit. So do not let your "good" insurance get in the way of your care.

Purchasing Pharmaceuticals Overseas

Many people, particularly in the U.S., pay very high prices for pharmaceuticals.

As an aside, almost every European country has price controls on pharmaceuticals. The U.S. does not. Many companies sell identical drugs in Europe for a fraction of what they cost in the U.S. In poorer countries, the prices are often even far lower than that.

Some pharmaceutical companies have campaigns to scare people into thinking that all drugs purchased overseas are dangerous, subject to counterfeiting and so on. Counterfeit drugs are to be found, but it is probably not nearly so common as you might be led to believe. Many drug companies insinuated that drugs purchased in Canada were dangerous. To the best of my knowledge, oversight of pharmaceuticals in Canada is at least as good as it is in the U.S.

Counterfeiting might be a concern when purchasing drugs on the street in some African country, or perhaps in India, but otherwise it probably is not that common. India, by the way, has a huge generic drug industry, and large, reputable companies like Ranbaxy, Dr Reddy, etc, which export many pharmaceuticals to the U.S. Brazil and Thailand also have many large generic drug companies. In some places, purchasing pills in individual blister packs might be safer than purchasing pills which come in bulk, if you do have a concern.

For those living in the U.S., the most convenient place to purchase pharmaceuticals is Mexico. Many border towns have large pharmacies which cater extensively to U.S. citizens crossing the border to save on their prescriptions. In Mexico it often is not necessary to have a prescription for most drugs, or if you do need one in some cases there will be a doctor in the pharmacy who will write a prescription for you on the spot.

If you happen to be traveling to another country and regularly take prescription drugs which are expensive, it is worth visiting a local pharmacy to check the price of drugs locally. You might be able to stock up, and save hundreds of dollars.

If you are in Mexico, one of the best places to get pharmaceuticals is Farmacia Similares. They sell primarily generic drugs, and have better prices than I have seen elsewhere. Some of the large pharmacies in border towns are also competitive, but check around. Prices can vary drastically from one store to another, but Farmacia Similares seems to be a great bet.

If you do purchase a quantity of pharmaceuticals overseas (like in Mexico) and return to the U.S., you will sometimes be asked by the border personnel if you have purchased pharmaceuticals in Mexico, particularly if you walk across the border. Your response is a judgement call -- good to be honest, but you did come to save some money, and if the U.S. had price controls on pharmaceuticals the whole exercise would not have been necessary.

If you do plan to purchase some pharmaceuticals overseas, you should know the generic names of the drugs you plan to purchase, since they often go by different names in other countries, particularly if you have been purchasing the name-brand versions. You should also know the dosages appropriate for you, since different dosages are often available in other countries. I have noticed that over-the-counter medicines are often more expensive in Mexico than in the U.S. The real savings are in prescription drugs.

Do Your Research

This article is meant to encourage you to do further research for your own particular needs. There are a few unscrupulous providers in other countries, but plenty of wonderful ones as well.

Supposedly we have great consumer protection in the U.S., but we have also had estrogen (prescribed for over 30 years, in some cases may create more problems than it solves), Phen-fen, Vioxx (greatly elevated heart attack risk), Celebrex (ditto), and many other products which were approved by regulatory authorities and prescribed by thousands of physicians.

It should be painfully clear by now that no country has a monopoly on consumer protection. Do not trust any particular health care provider just because they are wearing a white coat and have "MD" after their name. Their treatment protocols may prove to be perfect for your situation, but that is to be determined by your own research, not by blind faith.

Best of luck in your search for good care, wherever you may find it.

A couple of commenters on the article opined that JCI accreditation was hardly a guarantee for quality facilities. One suggested the Kosansh.com portal as having integrated ratings for doctors and hospitals, points system for community participation, search by treatment, price, destination, types of rooms, secured sharing of medical records and more. Another suggested visiting a hospital's central supply department before considering surgery, as they are the ones that decontaminate and sterilize your surgical instruments prior to using them on you.


When does the madness stop?

Few things are more aggravating (and nauseating) than anti-free marketers blaming problems deriving from interfering with the market on "the free market." A recent example is the erstwhile "Dr. Doom," Henry Kaufman, claiming our current travails are due to the "Libertarian" Greenspan Fed.

First of all, any Libertarian worthy of the name maintains the Fed should not even exist, so the accusation is nonsense on its face. A libertarian Fed chairman is like a Bible-thumping atheist or a red sweater that is also blue -- an impossibility. More generally, Mike "Mish" Shedlock asks the logical question of how can constant meddling in the markets -- and the Fed does nothing but meddle constantly -- be construed as a sign of Libertarianism? Shedlock's analysis goes well beyond the fed, as he efficiently eviscerates the whole putrid panoply of regulatory layers which greased the skids for today's crises.

In "How libertarian dogma led the Fed astray" Henry Kaufman launches into tirade against the "Libertarian Fed" and the "prevailing economic libertarianism". I have a question for Kaufman:

Since when is constant meddling in the markets a sign of Libertarianism?

The idea that Greenspan or the Fed is Libertarian is absurd.

Greenspan never left the markets alone. At every crisis (real or imaginary) Greenspan slashed interest rates. Here are two prime examples: In 1999 the Fed threw money at non-existent problems such as the Y2K scare. That policy decision helped fuel the Dot-Com bubble. When the Dot-Com bubble burst Greenspan stepped on the gas in 2001-2002 to bail out banks at risk because of poor loans to both Latin America and the internet companies. That policy decision fueled a massive housing bubble not just in the U.S. but worldwide.

Every step of the way, the Greenspan and Bernanke Fed micro-mismanaged interest rates as if they knew better than the free market where rates should be. The reality is the Fed does not know where interest rates should be only the free market knows.

Fed Uncertainty Principle

When it comes to interest rate policy, some think the Fed simply follows the markets. If that is the case, why do we need the Fed?

In actual practice, the Fed neither leads nor follows the market. However, the Fed does massively distort the market, a perfectly valid reason we do not need the Fed. For a complete discussion of this idea, please read the "Fed Uncertainty Principle".

Bully Pulpit Silliness

Kaufman goes on with numerous anti-Libertarian rants including a discussion of how "adherence to economic libertarianism inhibited the Fed from using the bully pulpit or moral suasion to constrain market excesses."

Please! Kaufman wants the Fed to get on the bully pulpit (as if that does a damn thing) when 18 months ago the Bernanke Fed did not think the housing crisis would spillover into the real economy. Hells bells, slashing interest rates to 0% and throwing trillions of dollars at problems did not do a thing to contain the crisis yet we are somehow supposed to believe that better use of a bully pulpit could have prevented this crisis?

Fannie Mae and Freddie Mac

Many right now are arguing for regulation of Fannie Mae and Freddie Mac. The idea is preposterous. There is virtually no need to regulate Fannie and Freddie for the simple reason that Fannie Mae and Freddie Mac should not even exist.

The first thing any regulator in his right mind would do to Fannie and Freddie is to shut them down on account of systemic risk. Instead, in order to get "credit flowing" Congress is throwing $trillions of taxpayer dollars down a black hole and upping the amount of dollars that Fannie and Freddie can lend. So much for regulators acting responsibly even when we know Fannie and Freddie are excessively leveraged and making risky loans.

Rating Agency Madness

Please consider the rating agency problem where the agencies rated the most ridiculous garbage AAA. Was this due to lack of regulation? Of course not.

The rating problem stems from regulation by the SEC that mandated all debt be rated. Prior to that regulatory change by the SEC, corporations buying debt paid rating agencies for their ratings. The rating agencies had a vested interest to rate well or they went out of business.

The SEC turned this model upside down, sponsored Moody's, Fitch, and the S&P, and the big three started getting paid not on how well they rated debt but on how much debt they rated. Is it any wonder everything got rated AAA?

The cure is not more regulation of rating agencies, the cure is to return to a model where rating agencies get paid by the quality of their work, not the quantity of it. In addition, the SEC sponsorship of Moody's, Fitch, and the S&P has to go. For more on this issue, please see "Time To Break Up The Credit Rating Cartel".

Glass-Steagall Scapegoat

Like many others, Kaufman rails against the removal of Glass-Steagall. On this point, there is merit to the idea that conflicts of interest arise when the granting of credit -- lending -- and the use of credit -- investing -- by the same entity, can lead to abuses.

However, it is also important to note that the Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC), and all of the moral hazards along with it.

Because of FDIC, money flowed to the worst banks offering the highest rates on CDs and savings accounts. This in turn provided funding for the worst projects such as building numerous condo towers in Florida, Las Vegas, and San Diego, along with off balance sheet financing of SIVs, and various mall projects that should never have been funded.

In simple terms, FDIC traded small more frequent bank failures that could quickly and easily be absorbed by the system into the massive mess of bank failures we see today. Moreover, the correct response would have been to let failed banks go bankrupt. Instead, regulators are compounding the problem by keeping zombie banks alive. This is the same failed regulatory response Japan took and it is unquestionably delaying the recovery while adding to the national debt.

Fractional Reserve Lending The Main Problem

Finally, it is extremely important to point out that it is fractional reserve lending, not the repeal of Glass-Steagall that is the root cause the massive credit expansion that has now blown up.

Fractional reserve lending is nothing more than a fraudulent Ponzi scheme that allows money (credit really) to be borrowed into existence when it is mathematically impossible for that credit to be paid back.

All Ponzi schemes eventually blow up as this credit bubble just did.

Excessive Regulation

Every economic problem we face can be traced back to excessive regulation, not the lack of regulation. Kaufman concludes with ...
We should, therefore, fundamentally re-examine the role of the Fed and the supervision of our financial institutions. Are the current arrangements within the Fed structure adequate -- from its regional representation to its compensation for chairman and governors to its terms of office for governors? How can the Fed's decision-making process be improved? If we were to create a new central bank from the ground up, how would it differ? At a minimum, the Fed's sensitivity to financial excesses must be improved.
Missing The Boat

The Fed is a failed institution. Fannie Mae is a failed institution. Freddie Mac is a failed institution. Fractional reserve lending is a fraud.

The correct policy decision is to abolish all of them, not to add layer after layer after layer of regulators watching over other regulators, who in turn watch over still other regulators, where some "god-like" super-regulator at the top supposedly has infinite wisdom and knows exactly how to regulate.

Thus, the correct question is not "If we were to create a new central bank from the ground up, how would it differ?"

The correct question is "How do we get rid of the Fed and phase out fractional reserve lending?"

The ultimate irony is that Kaufman blames Libertarianism when the very existence of the Fed is 180 degrees removed from Libertarianism. There is not a true Libertarian in existence who thinks the Fed is a good idea.

The problem with regulation is easy to describe: Regulation typically fails, often spectacularly. And every time it fails, people come out of the woodwork begging for more of it.

When does the madness stop?


The high tax cartel will not rest until fiscal sovereignty and financial privacy are abolished.

Members of the European Parliament have called on the G20 to agree on coordinated and concrete action to "close down all tax and regulatory havens," which is a stronger recommendation than a previous call to "deploy sanctions" against the malfeasants. And we suppose if the new suggestion gets implemented and still fails to meet their goals, the same people will call for ... what, invasion?

One gets inured to such crap after a while, but sometimes we still get taken aback by the arrogant covetousness of the socialists and their like. They have no concept that they should have to earn the proceeds which they plan to use to improve the world. No, you owe it to them, and if you do not fork it over they will hunt you down. And anyone who helps you as well. We can see the 1980s-style ad campaign: "This morning I went out and announced an addtional 10% in taxes to be paid by the citizenry. After all, I need it. I deserve it."

Members of the European Parliament have called on the Group of 20 nations to agree on coordinated and concrete action to "close down all tax and regulatory havens" and shut onshore tax and regulatory loopholes which permit "widespread tax avoidance" in major financial centers.

The European Parliament has adopted a resolution on the outcome of the G20 Summit pledge to reform remuneration schemes in a more sustainable way as part of the financial regulatory review. However, this resolution also called on the next G20 Summit to go much further than it did earlier in April when the leading nations threatened to "deploy sanctions" against offshore and low tax jurisdictions to "protect public finances and financial systems."

"Parliament welcomes and fully supports the request made by the EUROLAT Parliamentary Assembly on April 8, 2009 to the EU-LAC (Latin American and Caribbean) countries 'to act at once to abolish all tax havens on their territory and to work at international level for the abolition of the rest and for sanctions against companies and individuals resorting to their services,'" said a press statement issued by the European Parliament on April 24.

While the European Parliament stated that it welcomes the G20's declaration that the "era of banking secrecy is over" and supports automatic exchange of information as the most effective tool to tackle tax avoidance, MEPs recommend that the EU should adopt at its own level "an appropriate legislative framework regarding tax havens" and called on its international partners to do the same.

Most offshore financial centers won something of a reprieve from the G20 after being accused of virtually bringing the world to its knees by allowing major global financial institutions to conduct risky business outside of the glare of onshore regulators. Only four territories -- Costa Rica, Malaysia (Labuan), the Philippines and Uruguay -- were named on the new OECD "blacklist" and these have since been removed following commitments to adhere to minimum standards in tax transparency.

However, opponents of the G20/OECD campaign believe that the offshore territories are merely being made the scapegoats for regulatory failings in the major economies.

In a Strategic Memorandum released by the Center for Freedom and Prosperity on March 30, Daniel J. Mitchell of the Cato Institute argued that the collective actions of the "high tax" states, such as the United States and the "old" member states of the European Union, and multilateral bodies such as the OECD, will deal a blow to those who support international tax competition and financial privacy.

"These so-called havens are being assaulted by international bureaucracies such as the OECD " he observed. "These events do not bode well for supporters of fiscal sovereignty and financial privacy."

EU lawmakers: No more bank secrecy by 2014.

Luxembourg and all other European Union governments should give up banking secrecy within the next five years, lawmakers at the European Parliament said on Friday (April 24).

In addition to the Grand Duchy, the campaign targets Austria and Belgium. These three countries are the only ones in the EU that withhold customers' information from other countries, making it easier for people to commit tax fraud.

Countries like Luxembourg impose a withholding tax on savings accounts of non-residents. These taxes should end, according to lawmakers who voted 351 to 27 in favor of the measures.

Belgium has said it plans to lift its bank secrecy rules in 2010. Luxembourg recently relaxed its rules, but is still considered to be a tax haven by some.


Claims procedural defects, lack of level playing field.

Switzerland is claiming the OECD "grey list" of non-compliant tax havens was promulgated in a high-handed and procedurally defective manner -- "contrary to the decision making process of the OECD." The Swiss spokesman also implied that proposed implementation and monitoring of the list was not "multilateral, impartial and transparent," i.e., the playing field was not level.

The Swiss government has stepped up its row with the Organisation for Economic Cooperation and Development over the country's place on a "grey list" of states that have agreed to OECD tax standards but have yet to comply fully.

The way the OECD published the list contravened its own procedures and was published without Switzerland's consent, the country's President and Finance Minister Hans-Rudolf Merz said in a letter to OECD Secretary General Angel Gurria dated April 28.

"The way in which the OECD Secretariat prepared and communicated the list was contrary to the decision making process of the OECD," Merz said.

All countries should be treated equally and allowed sufficient time for the negotiation and ratification of agreements necessary to comply, Merz said. "Implementation and monitoring of the OECD standard must be truly multilateral, impartial and transparent," said Merz. "There must be a level playing field for all jurisdictions."

In March this year, international pressure forced Switzerland, the world's largest offshore banking center, to ease its strict bank secrecy rules and commit to international tax and data standards, meaning more information on suspected tax evaders will be shared with other countries.

The countries the OECD examined in its survey had to prove they were acting very fast to fulfil their commitment, Gurria told Swiss newspaper Le Temps in an interview in French published on the paper's website, when asked how Switzerland could get off the so-called "grey list."

This OECD list -- endorsed by the G20 in early April -- includes bank secrecy strongholds like Switzerland, Luxembourg and Liechtenstein that have committed to cooperate more on fighting tax dodging but have not yet adopted transparency standards. The countries have to incorporate OECD standards in 12 tax treaties to be placed on the "white" list of compliant countries and avert sanctions.

EU to Renegotiate Anti-Fraud Deal with Switzerland

The European Union will seek to renegotiate its anti-fraud agreements with Switzerland and four small countries to include in them sharing tax information ... The move follows a pledge by Switzerland to adhere to standards drawn up by the OECD aiming to crack down on countries that do not fully cooperate in cross-border tax evasion cases.

EU Taxation Commissioner Laszlo Kovacs said he would ask the bloc's 27 governments to approve a mandate for the executive European Commission to negotiate updated agreements with Switzerland, Andorra, Monaco and San Marino, all with a strong tradition of banking secrecy.

"I am 100 percent sure of receiving the mandate," Kovacs told a news conference.

The EU has already started similar negotiations with Liechtenstein.

In the wake of global financial crisis, the G20 group of nations agreed that countries should sign up to global rules on sharing tax information, with a commitment to cooperate when cheating is suspected.

Faced with the threat of being added to a blacklist, Luxembourg, Switzerland, Austria, Monaco and others signed up to standards drawn up by the Paris-based OECD just ahead of the G20 summit in London earlier this month.


Switzerland is fighting hard to protect Swiss bank UBS's client names from disclosure to the U.S. It has offered "easier access" in future tax cases if the U.S. will drop the current case. U.S. Treasury Secretary Geithner has "acknowledged the suggestion in a positive way." We shall see.

Switzerland wants the U.S. to drop a lawsuit aimed at forcing UBS AG to disclose client names as the two countries open talks to improve the exchange of information on tax dodgers, Finance Minister Hans-Rudolf Merz said.

Merz said he made the request in a meeting on April 25 with Treasury Secretary Timothy Geithner who "acknowledged the suggestion in a positive way." Negotiations with the U.S. over a new agreement are scheduled to start tomorrow in Bern, and Merz told reporters he expects to reach a deal by end of the year.

"We are of the opinion that the U.S. side should withdraw their charges," Merz said at a press briefing after the meeting with Geithner. "We would give U.S. authorities an easier access. In this situation, they should withdraw their charges."

UBS, reeling from the biggest writedowns of any European lender, was sued by the U.S. in February in an effort to force disclosure of the identities of as many as 52,000 American customers who allegedly hid their Swiss accounts from U.S. tax authorities. The bank, which received government aid in October, said this month that clients at the main wealth management unit withdrew 23 billion Swiss francs ($20 billion) in assets.

The Swiss government, under pressure from the U.S. and Europe to soften bank secrecy and stop protecting tax evaders, is renegotiating tax agreements after adopting international standards on the exchange of information last month.


Singapore says it will "improve" disclosure in the future when foreign governments come inquiring about tax evaders, bringing its standards in line with OECD requirements sufficent to get off the OECD "grey list."

Singapore will revise its laws this year to improve disclosure on foreigners evading income taxes in their home countries, the nation's finance minister told his Japanese counterpart, according to a Japanese official. Singapore agreed at the beginning of March to bring its tax laws in line with OECD standards after the Paris-based group put it on a "grey list" of countries that have not signed international accords to combat tax evasion.

Japanese Finance Minister Kaoru Yosano welcomed Singapore Finance Minister Tharman Shanmugaratnam's pledge, the Finance Ministry official told reporters after the two met on Monday.

World leaders said at a Group of 20 summit this month that they would crack down on tax havens, including sanctions against non-cooperative jurisdictions, by using information from the OECD. Singapore's government has previously denied suggestions that the country is a tax haven. It has strict bank secrecy laws and has been promoting itself as a rival financial center to Hong Kong to attract banks such as UBS, Credit Suisse and Citigroup to manage money for rich local and foreign clients.

Tharman also told Yosano that he hoped officials could agree on a broad range of measures, including expanding currency swaps, at a meeting of the Association of Southeast Asian Nations (ASEAN), China, South Korea and Japan on May 3, according to the official.

Asian countries pledged last year to pool bilateral currency swap arrangements under the Chiang Mai Initiative in an $80 billion multilateral fund that could be tapped in emergencies. ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.


Indonesia has announced it plans to station officials in various countries which serve as effective tax havens for domestic Indonesian companies. The target of the intelligence gathering operation seems to be companies which have the form of offshore operations but where substance behind that form is lacking. A transfer pricing scheme is cited as an example, where records were kept in Hong Kong or Macau, "even though they operated in Indonesia."

Indonesia plans to install tax officials in countries considered tax havens for recalcitrant local companies, which regularly evade taxes and cause the country significant losses in potential revenue. Director general of taxation Darmin Nasution said ... the placement of tax officials was part of a breakthrough effort to help stem state losses in potential tax revenue paid by big corporations.

"We [the Finance Ministry] have sent a letter to the Foreign Ministry requesting placement of tax officials in several capitals in the world," said Darmin, who was recently been nominated senior deputy governor of the central bank. "We do not need to place [our officials] in all capitals, only those related to our economic activities even ... if they are not tax havens. China and Singapore, for example."

According to the tax office, some countries have cut their tax rates in attempt to attract investment from neighboring countries. Although these countries might not be categorized as tax havens, they had caused revenue loss of neighboring countries, Darmin said.

The tax office is preparing a list of countries categorized as tax havens that will be issued soon.

"Maybe our [tax] laws are not wide enough to provide room for us to determine what we can do to tax havens. But we are sure of finding solutions to that," said Darmin.

A tax haven is a place where taxes are either nonexistent or deliberately low, with the aim of intentionally evading tax payment. Notorious tax havens include countries such as Mauritius in Africa, the Cayman Island in the Carribean, the British Virgin Islands, Bermuda in the Caribbean, Switzerland, Seychelles, Hong Kong and Macau.

"Many countries or investors operating here are not registered here [in Indonesia]. Businesses deliberately blur the line between their country of origin and the countries they operate within, in order to avoid paying tax," said Darmin.

He said such an approach resulted in lost tax revenue, which had been occurring for the past 10 years. Darmin cited the example of the Asian Agri Group and transfer pricing, where they kept records in Hong Kong or Macau, even though they operated in Indonesia.

"It is not easy to trace because it is hard to get information from a company that is a unit of one of our companies here," he said.

He added the tax office could not rely on other institutions, including Indonesian embassies, to investigate these cases due to the amount of time and resources such an investigation would require. Due to these considerations, the tax office must place officials overseas.

"They are not auditors, more a kind of economic intelligence as we are unable to check [tax files] abroad. But we can collect information from abroad," said Darmin.

Indonesia's income tax rate for the corporate sector is at 28% this year, and will be cut to 25% in 2010, under the income tax law endorsed last year. The figure is relatively high in comparison to neighbouring countries.

A recent meeting of the Group of 20 countries (G20) in London agreed to force tax havens to give up their privileges or risk being financially ostracized by developed economies. Tax evasion and corporate information secrecy provided by tax havens has been blamed by governments and economists for exacerbating the economic downturn.


This rather interested snippet of U.K. Parlimentary debate "illustrates the attitude of the British parliament and the government towards the Overseas Territories in general and the Cayman Islands in particular." Between the lines one can see why U.K. territories chose to retain their current status over independence, even as it comes at a cost.

Thursday, 23 April 2009, the 2008 Foreign Affairs Committee (FAC) Report on the British Overseas Territories was debated in Westminster Hall – part of the British Parliament usually reserved for non-contentious debates.

The report was introduced for debate by FAC chairman Mike Gapes, who said that it had been more than 10 years since the last report on overseas territories by the Committee. “That is probably far too long,” Gapes said. “We initially thought that it would last only a few months; but in fact, it was far more detailed and intensive than we originally envisaged.”

Much of the debate centered on the situation in the Turks and Caicos Islands, where the constitution is expected to be partially suspended within the next month or so by means an Order in Council, following a highly critical interim report by the Commission of Inquiry into government corruption.

Labour Member of Parliament, Jeremy Corbyn, questioned the use of an Order in Council to achieve that outcome. “It is an extremely undemocratic process that bypasses any democratic accountability either in the Turks and Caicos Islands or here,” he said.

Mr. Gapes responded, “I do not believe that the Government had much alternative in the short term but to act quickly with regard to the interim report.”

The FAC had also received allegations about corruption in other overseas territories, including in Bermuda and Anguilla and Mr. Gapes asked Gillian Merron, Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs, to reassure the House that the Government are looking closely at these matters.

Ms. Merron said that the FCO has instructed Governors to review the Turks and Caicos Islands commission interim report and to ensure a thorough assessment of any systematic controls that need improvement in their territory.

“From my discussions with representatives of the territories, I am in no doubt about how exercised they themselves are about the report on Turks and Caicos Islands, because they wish to keep their reputation. I hope that we can use the report to great benefit across the overseas territories,” she said.

The FAC had recommended that the Governors of those territories should use their reserve powers to bring in more external investigators or prosecutors to strengthen their investigative capacity. The Government accepted that recommendation, but stressed that using reserve powers to bring in those people would be a last resort. ...

Another of the FAC’s recommendations was that the Foreign and Commonwealth Office consider transferring the responsibility for the terms and conditions of employment of chief justices to the UK Ministry of Justice.

“That was not accepted by the Government,” Mr. Gapes said.

The FCO had, however, agreed to consider whether judges in overseas territories would be less vulnerable to interference if they were on longer, non-renewable contracts, with appropriate safeguards in case of incapacity. Mr. Gapes asked Ms. Merron to update the House in this regard, but she failed to cover this point in her responses.

The FAC recommended that the British Government should encourage Bermuda, the British Virgin Islands, the Cayman Islands and Gibraltar to continue to improve their financial regulation and the investigation of money laundering. The Government accepted that recommendation.

However, they did not accept the National Audit Office conclusion, which was supported by the Committee, that they had been complacent in managing the risk of money laundering in Anguilla, Montserrat and the Turks and Caicos Islands, where the UK is directly responsible for regulation.

In her contribution to the debate, Ms. Merron said, “I recognise that the UK’s OT relationship needs improvement.”

She pointed out that the FCO has revised the requirements on those being appointed to governorship to ensure that they have the right capabilities for the job and that they are clear about their responsibilities for good governance. “We have also made it clear—I hope that this will be welcome—that Governors who raise concerns about good governance will have support from the FCO,” Ms. Merron added. “The Government are committed to working closely with the overseas territories to ensure security and good governance,” she concluded.

As much of what was said illustrates the attitude of the British parliament and the government towards the Overseas Territories in general and the Cayman Islands in particular, Cayman Net News will be serializing the transcript of the debate in its entirety. Part One starts on page 16 of this issue.


Presidential race favorite announces idea. Would be first flat tax in Latin America.

Simplified "flat" (they are not usually totally flat) income tax rate schedules have been implemented in various Eastern European and Baltic countries, and Russia, as a method of attracting foreign investment and as a gereral fiscal stimulous. The technique can be deemed successful by those standards, notwithstanding that the influx of "hot" foreign money brought its own set of problems. The leading candidate to become the next Panamanian President in September, Ricardo Martinelli, is now proposing to make Panama the first Latin American experiment for the flat tax idea.

Panama has already been quite successful in attracting outside capital. Apparently Martinelli is not willing to stand still in today's capital short world.

Ricardo Martinelli, the Panamanian businessman who is leading the race to become the next President of the Central American country is proposing to revamp the tax system with the introduction of a 'flat tax.' Frank De Lima, Martinelli's senior economic advisor, told Dow Jones Newswires in a recent interview that the opposition Democratic Change candidate is still considering the rate at which the flat tax will be imposed, but it will likely be fixed somewhere between 18% and 22% for companies and between 12% and 17% for individuals.

In another pro-business tax proposal, Martinelli wants to abolish a 1.4% tax on gross revenues, approved by Panama's legislature in February 2005 as part of a major fiscal reform package which sought to raise additional revenues to reduce the country's level of debt. Martinelli also wants to increase the number of deductions available for business in the tax system, although it is intended that the proposed reforms would be revenue neutral.

Currently, taxation in Panama, which is governed by the Fiscal Code, is on a territorial basis; this is to say, that taxes apply only to income or gains derived through business carried on in Panama itself. An entity which has its activities or assets outside Panama will automatically escape taxation.

The rate of income tax in Panama is 30% on chargeable income up to PAB100,000 (US$100,000) rising to 42% on income over PAB500,000 for companies that are registered with the Official Registry of National Industry or that have government contracts. But the territorial nature of Panama's tax system has succeeded in attracting 120,000 corporate entities, of which the majority can be considered to be "offshore".

Aspects of Panama's tax system have been called into question by the OECD, which recently placed the country on its "grey list" of territories which have not yet achieved prescribed minimum standards in tax transparency (i.e., signing a minimum of 12 tax and information exchange agreements).

Tax is also one of the issues holding up a free trade agreement with the United States. Signed by President Bush in 2007, the U.S. Congress is refusing to ratify the agreement until "specific actions to meet ILO labor standards and resolution of the tax haven issue" are resolved, as Rep. Charles Rangel, the New York Democrat who chairs the influential House Ways and Means Committee, said recently.

It is unclear, however, how Panama's proposed flat tax would fit into this mix if Martinelli wins the popular vote on May 3. The supermarket tycoon is currently the favorite to replace President Martin Torrijos, whose term expires in September.

Flat taxes, which reduce the complexities involved in progressive tax systems, have become a popular means of attracting foreign investment in certain parts of Europe, and have been a key ingredient in the transformation of several economies, notably the former Eastern Bloc nations of Estonia, Slovakia and Russia. The flat tax revolution has yet to reach the shores of Latin America. But while Panama is one of the more successful economies in the region, Martinelli must be hoping his proposals will achieve similar results.


Even if you have not done anything wrong you have something to worry about.

Publically available evidence is scant in this case, but we do know a 16 year old North Carolina boy was arrested in March on charges that he made a bomb threat from his PC. He claims that someone spoofed his PC's IP address and framed him. Maybe so, or maybe the charges have merit. That is not the point.

The point is that the kid has not been given a forum to defend himself. It is not clear when formal charges will be brought. His mother has had little access to him since the arrest. Under the Patriot Act the government can deny basic due process rights to anyone, starting with habeas corpus. Without that they can lock the door and throw away the key.

A morbidly humorous aspect to this shameful episode is the willingness by some to defend the Patriot Act, e.g., it was "written with good intentions" but "it has gone too far in some cases" like the present one.

These morons do not get it. Access to due process should not depend on human judgement. The "probable cause" latitude granted police these days pretty much gives them a blank check to make arrests. Once in custody a detainee should be guaranteed the opportunity to defend him/herself in a timely manner. If a case is being built let that fact be presented as a reason for continuing a detention. There is no inherent reason to treat terrorism suspects any differently than any other criminal suspect.

Oxford, North Carolina – 16-year-old Ashton Lundeby's bedroom in his mother's Granville County home is nothing, if not patriotic. Images of American flags are everywhere – on the bed, on the floor, on the wall.

But according to the United States government, the 10th-grade home-schooler is being held on a criminal complaint that he made a bomb threat from his home on the night of February 15.

The family was at a church function that night, his mother, Annette Lundeby, said. "Undoubtedly, they were given false information, or they would not have had 12 agents in my house with a widow and two children and three cats," Lundeby said.

Around 10 p.m. on March 5, Lundeby said, armed FBI agents along with three local law enforcement officers stormed her home looking for her son. They handcuffed him and presented her with a search warrant.

"I was terrified," Lundeby's mother said. "There were guns, and I don't allow guns around my children. I don't believe in guns."

Lundeby told the officers that someone had hacked into her son's IP address and was using it to make crank calls connected through the Internet, making it look like the calls had originated from her home when they did not. Her argument was ignored, she said. Agents seized a computer, a cell phone, gaming console, routers, bank statements and school records, according to federal search warrants.

"There were no bomb-making materials, not even a blasting cap, not even a wire," Lundeby said.

Ashton now sits in a juvenile facility in South Bend, Indiana. His mother has had little access to him since his arrest. She has gone to her state representatives as well as attorneys, seeking assistance, but, she said, there is nothing she can do.

Lundeby said the USA Patriot Act stripped her son of his due process rights. "We have no rights under the Patriot Act to even defend them, because the Patriot Act basically supersedes the Constitution," she said. "It was not intended to drag your barely 16-year-old, 120-pound son out in the middle of the night on a charge that we cannot even defend."

Passed after the September 11, 2001, terrorist attacks on the U.S., the Patriot Act allows federal agents to investigate suspected cases of terrorism swiftly to better protect the country. In part, it gives the federal government more latitude to search telephone records, e-mails and other records.

"They are saying that ‘We feel this individual is a terrorist or an enemy combatant against the United States, and we are going to suspend all of those due process rights because this person is an enemy of the United States,”" said Dan Boyce, a defense attorney and former U.S. attorney not connected to the Lundeby case.

Critics of the statute say it threatens the most basic of liberties. "There is nothing a matter of public record," Boyce said "All those normal rights are just suspended in the air."

In a bi-partisan effort, Rep. Jerrold Nadler, D-New York, and Rep. Jeff Flake, R-Arizona, last month introduced in the U.S. House of Representatives a bill that would narrow subpoena power in a provision of the Patriot Act, called the National Security Letters, to curb what some consider to be abuse of power by federal law enforcement officers.

Boyce said the Patriot Act was written with good intentions, but he said he believes it has gone too far in some cases. Lundeby's might be one of them, he said. "It very well could be a case of overreaction, where an agent leaped to certain conclusions or has made certain assumptions about this individual and about how serious the threat really is," Boyce said.

Because a federal judge issued a gag order in the case, the U.S. attorney in Indiana cannot comment on the case, nor can the FBI. The North Carolina Highway Patrol did confirm that officers assisted with the FBI operation at the Lundeby home on March 5.

"Never in my worst nightmare did I ever think that it would be my own government that I would have to protect my children from," Lundeby said. "This is the United States, and I feel like I live in a third world country now."

Lundeby said she does not think this type of case is what the Patriot Act was intended for. Boyce agrees. "It was to protect the public, but what we need to do is to make sure there are checks and balances to make sure those new laws are not abused," he said.


It’s all in the public interest, you see.

Although not specifically about the offshore financial world, this news items highlights too many examples of how government really works to pass up. When government is not directly feathering its own nest or extending its reach into our pockets and lives, you can bet it is making sure its sponsors are getting taken care of. That is how the fascist corporate/government collaborative state works.

Copyright terms have always been a transparent joke. The original justification for granting copyright protections, similarly to patents, was to encourage widespread sharing of innovative ideas and works with the public. Content creators would be able to earn a living and, perhaps secondarily, be given enough time to make sure they obtained due credit for their creations. What is an appropriate term? Unclear, of course, and therefore arbitrarily set. (Note that trademarks are a related but distinct domain, and have an infinite life as long as they are adequately defended.)

Originally the U.S. set the copyright protection term to 56 years, after which the works would pass into the public domain. With the Copyright Act of 1976, copyright was extended to last for the life of the author plus 50 years, or 75 years for a work of corporate authorship. The Copyright Term Extension Act (CTEA) of 1998 -- aka "the Sonny Bono Copyright Term Extension Act" and "the Mickey Mouse Protection Act" -- extended these terms to life of the author plus 70 years and for works of corporate authorship to 120 years after creation or 95 years after publication, whichever endpoint is earlier. Copyright protection for works published prior to January 1, 1978 was increased by 20 years to a total of 95 years from their publication date. Care to guess what happens when the revised extensions start to run down?

Now what about the public interest, government's purported reason for existence? Clearly copyright holders benefit from having their franchise summarily extended if they are still profiting from the content when its protection is about to expire. But will content creators somehow be encouraged to work still harder and create still more stuff if copyright terms are extended further, or indefinitely? No. That is not even an opinion.

The issue is currently front and center in Europe, where the entertainment companies are about to succeed in getting the EU to follow the U.S. lead in extending copyright terms. A widely publicized 2006 U.K. study concluded that a term extension was not justified. Continental academics reach similar conclusions. One group "found that a copyright term extension would be a bad idea with costs for consumers, competitors, and society as a whole." But the extension is set to pass anyway, the public be damned. What a shocker.

A small by significant sidenote: When the U.K. study came out "the labels simply shifted their focus away from national governments to the EU." How convenient that the EU was created to make the labels' job easier.

The European Parliament late last week agreed to extend musical copyrights from their current 50-year term to 70 years. So all that early rock 'n roll about to pass into the public domain? Don't count on using it in your documentary for another two decades -- and there is nothing to say that the term will not be extended again.

While the vote is a big victory for the music labels who can continue to market major artists like The Beatles (let's face it, the obscure stuff from the 1950s is not selling in measurable quantities anymore, and it is not playing on the radio), the movie industry looks set to cash in soon, too. In passing the term extension, Parliament also asked the European Commission "to launch an impact assessment of the situation in the European audiovisual sector by January 2010, with a view to deciding whether a similar copyright extension would benefit the audiovisual world."


The current musical term extension push began in February 2008, when European Commissioner Charlie McCreevy of Ireland announced his support for a near doubling of the term of protection from 50 to 95 years. The move was opposed by countries like the UK, which would only go along with a maximum term of 70 years, so the European Parliament eventually agreed to go with the lower number.

While dropping 25 years from the proposal has a whiff of "compromise" about it, it has never been clear why any sort of term extension should be passed. The whole issue was looked at quite carefully by the UK's Andrew Gowers during his hugely publicized report on intellectual property. Gowers concluded in 2006 that no such term extension was needed -- at which point the labels simply shifted their focus away from national governments to the EU.

But Gowers was operating in a UK context. Groups of continental academics have come to similar conclusions when looking at the data. One group, headed by Prof. P. Bernt Hugenholtz of the University of Amsterdam, found that a copyright term extension would be a bad idea with costs for consumers, competitors, and society as a whole. Despite being commissioned, paid for, and published by the European Commission, Hugenholtz's work was not even mentioned when McCreevy made his proposal (though music industry work was considered).

This led Hugenholtz to blast off an angry letter about a process which "seems to reveal an intention to mislead the council and the Parliament, as well as the citizens of the European Union. In doing so the Commission reinforces the suspicion, already widely held by the public at large, that its policies are less the product of a rational decision-making process than of lobbying by stakeholders."

Another group of academics fired off an open letter to the Times of London in which they complained that the new plan would only pad the pockets of "record companies, aging rock stars or, increasingly, artists' estates. It does nothing for innovation and creativity."

But forget Gowers and European academics -- what claim do those pushing the idea of term extension make? The official legislative dossier tells us: "Once their performance fixed in a phonogram is no longer protected, around 7,000 performers in any of the big Member States and a correspondingly smaller number in the smaller Member States will lose all of their income that derives from contractual royalties and statutory remuneration claims from broadcasting and public communication of their performances in bars and discotheques."

A tremendous loss to the German public domain is therefore enacted in order to help, for example, just 7,000 performers in all of Germany. And how much will these musicians make? According to Commissioner McCreevy, an average of just €2,000 a year.

But, according to the UK-based Open Rights Group, this is not about session musicians anyway. Writing in the Telegraph recently, the group's executive director said:
"That argument is hard to swallow. Firstly, two-thirds of the money that a recording generates is made in the first six years after publication. We might conclude that if artists want to survive in their later years, record companies should ensure they invest in a pension, not depend of the vague hope of earnings from ancient recordings.

"Secondly, an analysis of the figures shows where the money really ends up. About 80 percent will go to recording companies. Of the rest, nearly all would go to big stars, and a very small percentage to the small artists the Directive claims to be all about."
Another UK academic at the University of Bournemouth says that a slightly lower 70% of all new revenues will go to the record labels, not the performers. In any event, most of the money goes to labels that have already had five decades to profit from the songs in question. Under the new law, artists could regain their rights to songs that are no longer offered for sale to the public, but in the era of digital distribution, why would a label not just throw its whole back catalog up on iTunes?

Sweet Harmonies

The extension still needs approval by the European Council (made up of the EU member states), but the only real sticking point there appears to have been the 95-year period. With the term reduced to 70 years, that measure looks set to pass into law.

When the UK government balked last month at the 95-year term, British music trade group BPI called on the government "to match its supportive rhetoric with concrete action, by moving heaven and earth to reach an agreement under this EU Presidency that will deliver an improved term of copyright for performers and music companies."

Heaven and earth appeared to have been moved, all in the name of "harmonization" of copyright terms. Only a day before the vote last week, international music trade group IFPI made the harmonization point clearly:
"Europe has always prided itself on being a champion of culture, yet the EU is lagging behind many other parts of the world when it comes to protecting its recordings," it said. "European artists, performers and producers are provided with a 50 year period of protection for their work to enable them to benefit from the recordings they have made. This is a much lower level of protection than many other countries around the world which provide for between 60 and 95 years' protection."
Even within the EU, terms are grossly unequal in duration (authors get life plus 70 years, for instance, for their books). While this might sounds like an argument for "harmonizing" terms downward, it never is; harmonization moves only in the upward direction. It is a transparent strategy that Big Content has been pushing for years -- encourage countries to extend copyright terms, then browbeat others into following suit by going on about "competitive disadvantage."

As for the public domain, there is no point even arguing about it -- such groups simply take it for granted that copyright is a natural state and that "falling out of copyright" is an obvious evil.

As IFPI put it last week, "More treasures of Europe's recorded music heritage are falling out of copyright every year. These are the recordings which have contributed so much to Europe's reputation for creativity and cultural diversity. With today's longer life spans, artists and performers are beginning to see their recordings falling into the public domain in their lifetime. Every year, an increasing number of artists are being deprived of part of their income."

But deprivation goes both ways. Every time that a term extension is passed, the public is deprived of the chance to remix, mashup, sample, share, and otherwise build upon the cultural work of a half century before.


I.R.S. to Pursue Foreign Banks Assisting Tax Evasion

The I.R.S. is preparing to pursue foreign banks suspected of facilitating tax evasion by wealthy Americans, an I.R.S. official said on Monday (April 27).

UBS, Switzerland's largest bank, acknowledged in February that it helped American clients conceal assets from the United States government. It agreed to pay a $780 million fine and to identify some of its American clients.

"We have identified other offshore banks that are engaged in similar activities," Daniel Reeves, an agent with the I.R.S. Offshore Compliance division, told a conference in Miami. He declined to say which other banks could face cases, but confirmed the entities being investigated were foreign-based.

We will be watching to see whether these banks will be revealed to have a U.S. presence or not.

German Cabinet Agree to Proceed With Anti-Tax Avoidance Law

Detailed records of all dealings with tax havens would have to be kept.

A classic bureaucratic solution to a perceived problem: Rather than outright ban the activity, require that it be documented in excruciating detail in real time.

Angela Merkel's grand coalition has finally agreed draft legislation against tax evaders, presented in cabinet on April 22, after weeks of behind the scenes wrangling.

The new draft legislation will require individuals and businesses above a certain size to keep detailed records, ready for immediate audit by the tax authorities, of all their dealings in so-called tax havens. Tax havens are defined as those countries who have not yet submitted formally to OECD guidelines with regard to the exchange of information for tax purposes. Failure to comply can lead to immediate withdrawal of tax allowances with regard to those transactions. Such allowances could include capital gains tax exemptions, tax-deductible expenses or tax exempt dividend payments.

The coalition government intend to require parliamentary consultations on the draft to be completed no later than the beginning of Parliament's summer break and, after consent of the Bundesrat, the new tax regulations will be issued.

Argentina’s April Tax Take Set to Match Last Year

Argentina's nominally impressive achievement, however, was accomplished via some legerdemain: Much of the increase in the last two months has been attributed to the nationalization of state pensions. The government also wants to raise a bunch of other taxes. It is safe to say the country's reputation for governmental profligacy remains intact.

Argentina's April tax revenues will likely exceed ARS20 billion (USD5.4 billion) according to the country's tax director, Ricardo Echegaray.

Despite a major loss of income from falling export levies, Mr. Echegaray has announced that Argentina is still on course to match the ARS20.24 billion collected during the same period of last year -- proving that economic growth is still sustainable during the current downturn.

Achieving such a total seemed unlikely in January, when tax revenue hit its lowest level since 2006. However, significant growth in February and March -- which saw tax revenues jump by 23% -- reversed the slump. Much of this increase though has been attributed to the nationalization of state pensions.

Although Echegaray has declared the tax collection to be acceptable in light of the economic crisis, the country's executive branch is still seeking permission from the government to raise taxes on a number of consumer items.

The executive has sent a bill to Congress, which, if approved would increase the taxes levied on items including laptops, cell phones, air conditioners, electric heaters and Global Positioning Systems. The move would also affect certain VAT exemptions, and would raise the cost of some luxury consumer items by as much as 50%.

According to the executive, the tax increases would compensate for the losses being made in other areas at present.