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(Especially noteworthy articles’ headings highlighted in gold.)
PURCHASING PARADISE
More Americans choose to live in Nicaragua, as locals question the loss of their homeland.
SAN JUAN DEL SUR, Nicaragua – The rutted road to this sleepy port cuts through some of the hemisphere’s poorest terrain, past barefoot farmers, ox-drawn plows and rickety shacks in sugar cane fields. But once here, heaven is for sale. “You gotta go see Paradise Bay! It will take your breath away!” reads one of the English-language billboards hawking property.
In the latest twist – some would say mixed blessing – in Nicaragua’s complicated relationship with the U.S., the country’s Pacific coast is turning into a hot new destination for U.S. vacationers and retirees, who are snapping up property faster than you can say “gringo”. For years, Yankees have lived part-time or year-round in Mexico, Costa Rica and Panama. But their embrace of Nicaragua is remarkable for many reasons.
Latin America’s poorest country after Haiti, Nicaragua is an unlikely spot for comfort-loving U.S. citizens. And while Americans are popular here, not all Nicaraguans love the U.S. government, which backed the corrupt Somoza dynasty for decades before funding rightist Contra rebels in a 1980s civil war that killed 30,000 people. Moreover, leftist Daniel Ortega, the ex-revolutionary whom the Contras tried unsuccessfully to oust, was just re-elected president after 16 years out of office – although he now welcomes foreign investment and promises his government will not confiscate private property as it did during his previous term. All that makes Nicaragua even more attractive to some adventurous newcomers.
Despite its poverty, Nicaragua has the lowest crime rate in Central America, note boosters such as Scott Kelly, 37, who studied dozens of countries before moving here last year to open a computer software company, Nica Geeks. Though real estate prices have risen 5-fold since 2000, they are half those of Costa Rica or Panama, and a fraction of those in the U.S. Only about 7,000 U.S. citizens live in the New York State-sized country of 5.6 million. But that is triple the number three years ago and residential sales to Americans are increasing 25% a year, said Raul Calvet, a Nicaraguan consultant to foreign developers.
The U.S. presence underscores an increasing porousness regionwide. “You have got people moving in both directions as investors, as individuals, as families,” said Richard Feinberg, a Latin America expert at the University of California, San Diego. “Americans are bringing dollars and know-how, and contributing to the local economy.” While many locals benefit, he cautioned, “others will suffer dislocations.” That apparently is the case in San Juan del Sur, a small, unassuming town on a pretty crescent beach that locals call “Los Estados Unidos Pequeños” (The Little United States ...
Link here.TOP 10 BIG BROTHER COMPANIES
How much would you sell your private data to a company for? Would you take $1,000 to let someone see every site you have visited over the past year? Today, many major companies spend millions collecting a variety data on individuals such as what charities you donate to, your political beliefs, your shopping habits, your educational data and your contact information. And you never get to decide how much your privacy is worth to you, because these companies are not asking your permission.
Here we highlight 10 of the worst corporate offenders when it comes to invading privacy. We hope that by helping to bring to light some of the personal privacy infringements that these companies are engaged in, more people will begin to select the companies they do business with on the basis of their privacy policy. If that starts to happen, real consumer-driven change is possible. So without further adieu, here are the top ten big corporate privacy offenders:
This Top 10 list is intended to highlight some of the worst actors among big business. If this article leaves you with anything, I encourage you to become more educated about the privacy policies of the companies you do business with, and consider making consumer decisions on the basis of what you learn.
Link here.AN IRON CURTAIN IS DESCENDING ... AROUND THE U.S.
“Why are you traveling so often to Canada?” the tough U.S. border guard barked. I was on Amtrak, going from New York to Montreal, as I had done dozen of times before over several decades. This was my first experience (summer 2006) of the increasingly standard and intrusive “U.S. Exit Interviews” on trains crossing the border. I have been hassled on every train crossing since then, most recently January 2007.
The U.S. now has a combined FBI-compiled file of all arrests and charges at all government levels for millions of Americans, and this is instantly viewable by police in many jurisdictions, including border officials of the U.S. and most other countries. In some cities, local police can access this file via one’s license plate. The files do NOT show the favorable disposition of arrests that did not lead to charges or of dismissals and findings of innocence. “And what is this entry stamp from Canada, with no country of departure? Was that from Cuba? You know U.S. citizens may not travel to Cuba – you could be imprisoned and fined.”
This line of questioning has been part of every exit interview since. The first time, the guard took my passport and kept it for about 30 minutes. Others – Canadians and foreigners as well as U.S. citizens – were getting similar queries, but mine took much longer. Two weeks after I returned from Canada, the Canadian immigration agent called me. “We have fully investigated your dossier – you have been approved and are welcome to return when you wish.” Since that time, I continue to be hassled by the U.S. “exit” police, but I am always dealt with quickly and politely by the Canadians. It is clear from my experience, as well as that of U.S. Green Party and peace activists barred from entering Canada during anti-globalization demonstrations two years ago, that a million or more former peaceniks and other radicals will now see more and more attempts to keep them at home.
Most Americans are unaware of the new police state procedures of U.S. officials who seek to keep millions of Americans from traveling, including trips across the border to our North, once thought the least difficult international frontier in the world to cross. There are now regular stops at “internal” checkpoints for cars traveling toward, away from or near the border in states from Maine to Washington. This includes permanent checkpoints on interstates 100 or more miles from the border in New York and Vermont, as well as moving patrols who stop motorists in all parts of the border states. Civil libertarians and others in the border states, including conservative farmers, have protested this dramatic departure from the assumed tradition of allowing Americans freedom of travel – certainly freedom to leave their own country. Homeland Security admits that few terrorists (some say none) have been apprehended by this dubious process, but various “sex offenders and other criminals” have been caught, and drugs and other contraband seized. This is in addition to the “exit interviews” of Americans leaving by train or bus, which are now routine.
One group, aside from dark-skinned people and Muslims, targeted by the internal checkpoints, are students and other young people. Persons under 18 cannot cross a U.S. border alone, unless they are with a guardian and have notarized letters from a parent, as well as a passport issued in their own name. Persons between 18 and 21 may be questioned about their intention to engage in behavior (sex or drinking or marijuana use) strongly penalized in the U.S., but either decriminalized or lightly punished in Canada. Up until three years ago, unaccompanied persons over 16 were seldom checked. Student groups, including bus tour groups, now report very close scrutiny from the U.S. Exit police. Some bus companies now refuse to take groups of students under 21 across U.S. borders because of hassles they face.
The big media story about all this has been the new requirement that all U.S. air travelers returning home must now have passports, including those coming from Canada, Mexico and the Caribbean, and that citizens of those countries must also have passports when coming by air. Similar requirements for passports at land and sea crossings will go into effect sometime after next January 1. (These measures have been strongly protested by Canada and Mexico, to little avail.) Aside from the expense of passports, having to have passports even to go and come from Canada or Mexico will limit a very large number of Americans from international travel, period.
One group that gets very special attention are registered sex offenders, of whom there are now just over 600,000 in the U.S. The public generally approves of all measures to limit or control this group of pariahs – including those convicted of minimal offences like prostitution and public sex, or in some cases even urinating in public. Beyond sex offenders, though, virtually all the 5 million plus persons who are on parole or probation for state and federal felonies will be unable to keep or get passports. Another large group are the 4 million or so who are “child support delinquents”. At least 2 million (mostly male, but some female) or so “deadbeats” meet the minimum requirement of being $5,000 or more behind in their payments, which triggers (since 1994) automatic passport cancellation or denial. Among these are at least a half million teenage fathers, mostly very low income school drop-outs, often unemployed and sometimes homeless. By some estimates, between 13 and 20% of all black men are forbidden to hold or keep passports.
Most media attention about new U.S. travel restrictions has focused on harm to tourism and other business. A Canadian government website dedicated to international trade, Strategis.Ca, estimates that there has already been an 8% reduction of U.S. visitors to Canada and a 7% reduction of Canadian visitors to the U.S., but that this will rise to 14% or more by the end of 2007 for visitors in both directions. Gay tourism to meccas like Montreal and Vancouver is decidedly down – some say as much as 30%. This would reflect the greater likelihood that gay men and women, like non-whites and the poor, would fall afoul of U.S. laws more frequently due to discrimination.
At the beginning of the Cold War, Winston Churchill made his famous comment about an iron curtain descending across Europe. Like many others, I experienced this iron curtain. I faced incessant exit and entry police interrogations in places like East Berlin and at the Soviet borders. In those days, such long waits to get OUT of a country, as well as to get in, were limited to the “Communist” block primarily. Now that virtually all travel barriers have fallen throughout Europe – including Eastern Europe, and with travel in and out of China or Vietnam far easier than before, it is around the U.S. that the iron curtain seems to be descending. As in the Soviet or Chinese blocks before (or more recently in Cuba), the elites could travel, but the various dissidents, deviants and ordinary folk could not. This sad fact is becoming increasingly the case for many U, S, citizens today.
So far, very few liberals or libertarians have taken note of this chilling trend to limit travel for huge numbers of Americans. Unless protests against these measures grow quickly, it will be too late to stop or even slow them down. America, like Russia and China before it, will become a prison for many of its people.
Link here.BONO WANTS THE REST OF US TO FUND HIS WORLD IMPROVEMENT SCHEMES
U2 is no stranger to using offshore structures to minimize taxes.
During the final concert of U2’s world tour on December 9, Bono, the Irish rock band’s lead singer, launched into One, a song about a love affair gone sour. “Did I disappoint you or leave a bad taste in your mouth?” he sang to 47,000 fans in Honolulu. As if on command, some of the fans held aloft their cell phones and sent text messages of support to ONE, the U.S. group that is lobbying the U.S. Government to donate an additional 1% of its budget to ending poverty. Bono made the same tie-in for the lobbying group during most of the 131 concerts on the Vertigo tour, which began in March 2005 and was seen by 4.6 million fans in worldwide. They sent about 500,000 text messages of support to ONE, according to the group.
While Bono was making his appeal, U2 was racking up $389 million in gross ticket receipts, making Vertigo the second-most lucrative tour of all time, according to Billboard magazine (after the Rolling Stones’ current tour). Revenue from the tour is funneled through companies that are mostly registered in Ireland and structured to minimize taxes. “U2 are arch-capitalists ... but it looks as if they are not,” says Jim Aiken, a music promoter who helped stage U2 concerts in Ireland during the 1980s and ‘90s. “Bono’s campaigns reflect a great amount of concerns that U2’s audience also has, such as AIDS and malaria in Africa, and that cannot help but have a beneficial effect on record sales,” says Simon Garfield, author of Expensive Habits: The Dark Side of the Music Industry, a book about the business of rock. U2 has sold about 9 million copies of the album linked to the Vertigo tour, How to Dismantle an Atomic Bomb. In addition, U2 sells merchandise at the concerts, such as a $30 T-shirt with a photo of the band on the front.
With his trademark wraparound sunglasses and cowboy hat, Bono is as famous for exhorting world leaders – from U.S. President Bush to Japanese Prime Minister Abe to Irish Prime Minister Bertie Ahern – to give money to Africa as he is for his music. He was awarded a knighthood in December by the Queen and his name has been mentioned as a contender for the Nobel Peace Prize. The 46-year-old Dublin native, born Paul Hewson, is also focusing on his investments. The most recent example is Product(RED), a marketing agreement with half a dozen companies that are selling a special RED line of clothing, mobile phones and other merchandise and donating 40% of the profit they make from the products to a charity that pays for AIDS drugs for Africans with HIV.
Bono’s own dealings have not always followed the altruistic ideals he espouses, says Richard Murphy, a British adviser to the Tax Justice Network, an international lobbying group. Murphy points to the band’s decision to move its music publishing company to the Netherlands from Ireland in June 2006 in order to minimize taxes. The move came six months before Ireland ended an exemption on musicians’ royalty income, which is generally untaxed in the Netherlands. “This is somebody who is exceptionally rich taking the opportunity to shift his tax burden to somebody else but then asking governments around the world to spend that tax take in the way that he would like,” Murphy says.
During the 1990s, U2 used non-executive directors who were resident in an offshore tax haven to limit the amount paid by the four band members. “We pay a great deal of tax around the world and in Ireland we do not pay any more taxes than we have to,” says Paul McGuinness, U2’s manager. “U2 were never dumb in business,” Bono says in Bono on Bono. “We don’t sit around thinking about world peace all day.”
What a business it is. Bono’s empire encompasses real estate, private-equity investments, a hotel, a clothing line and a chain of restaurants. He also owns a stake in 15 companies and trusts, including concert-booking agencies, record production firms and trusts that are mostly registered in Ireland. U2 was one of the first successful bands in the world to have obtained all rights to its own music. In addition, Bono shares three homes with his wife and four children. While Bono promotes charitable causes, he does not disclose whether he personally gives any money to them and, if so, how much. “{We] don’t focus on charity too much – that’s private; justice is public,” he told the Dublin’s Sunday Independent newspaper in June 2005.
Link here.COMPUTER TIPS AND PRIVACY
Here are some computer tips for those of us who are anti-state, anti-war, and pro-market. First off, I am not against Microsoft software, I use Windows 98. It is just that Mozilla and other programs work much better and offer more security from hacker viruses, spam, and trojans than Microsoft products.
Download Firefox. Do it NOW. Never use Internet Explorer (MS IE6 or IE7) again. I also use Opera as a back-up but it does not have the features Firefox does. It is important to never use Internet Explorer because hackers target it since it is widely used. An amazing Firefox “add-on” is the capability to spell check your typing inside a web browser page by adding this important add on: US English Dictionary. I am using it to correct my spelling as I type.
The following Firefox add-ons are critical to simplify your Internet browsing experience. ADBLOCK can clear out tons of junk off web pages. And while you are at it download the ADBLOCK filter update here. You can make ads and images on web pages disappear. “Fasterfox” is a must. It will speed up your surfing. For Windows XP, Keyscrambler is a must have. [Ed: There as some reports that this does not work properly.] “Flashblock” is perhaps the greatest add-on. It replaces flash animations with a button that you can choose to click. It cuts way down on the amount of Flash crap you have to wade through to view a site. Firefox 2.0 has a wonderful tiny URL creator, available here.
The most important thing for privacy advocates who have the bandwidth is called TrackMeNot. It protects against search data profiling by issuing randomized queries to popular search engines with fake data. I clear all my cookies and other private data when I close Firefox, but I relish the idea that I am clogging search engines with random queries such as “Light Works, been variously dated, Brand name products, Current Unlisted Number, Translate this page, statement continually executes, will forward your details, your international removal, Dutch Auctions Prove More Efficient, Blind Books ...”
For emailing, get Thunderbird. You can transfer all your email and addresses from Outlook Express. It is wonderful, although I use Yahoo! for most of my email and especially for the bulk filtering capability. Enigmail is the plug-in you will want to get for smooth encryption. If everyone used encryption, the National Security Agency would go out of business. They cannot decrypt everything. While you are at it, get disposable email address from yahoo.com for all your forms and subscriptions on the internet. Keep your real email address private. When you forward e-mails to people, it is important to use the “bcc” function on your e-mail program. Read why here.
Recall if you may that Alberto Gonzales wants all ISPs to stockpile at least 6 months worth of browsing history so that the powers that be can better find out if you have been on unpopular sites. For a simple introduction into computer privacy, first read and understand this web page. For totally private browsing, use TORPARK, available here. You can even download the program into a flash drive and use it while surfing on public computers. You get a secure and encrypted tunnel to a site you are viewing, and you will leave NO tracks behind.
For communications point-to-point, you MUST get Pretty Good Privacy (PGP) or its open source counterpart. Make certain you use a strong pass phrase. I use GnuGP, an open source encryption program that meshes with Thunderbird. Test the system a lot before you use it. PGP or GNU PGP is not intuitive. To the best of our knowledge, the NSA cannot break PGP with existing computer power.
For communications to others use chains of “Mixmaster” anonymous re–mailer (more here). Many users of anonymous re-mailers use a program called Quicksilver, an email client which makes the Mixmaster program work with your ISP’s e-mail system. Make certain you send test messages to USENET (Use a *.test group) and try sending e-mail to yourself before using it for sensitive communications. Mixmaster 3.0 is still in a development stage and not ready for routine use. For “light” anonymity purposes, try the German web-based re-mailer “Anonymouse”. Test it first to make sure you understand how it works. For example, post to a USENET test group and send email to yourself.
For safeguarding sensitive files on your PC, use a disk encryption utility such as Scramdisk. I recommend using Triple DES as the encryption cypher when you first use Scramdisk to create a container. Erase files and spare disk space using Eraser. You can set up this utility to wipe your swap file, temporary internet files, and disk free space. Windows “delete” is NOT secure, you must wipe the files with Eraser.
If you use these tips you will have a much more secure and private Internet experience. And Bush and his minions will not be able to tell either what you are doing with or where you are surfing to on your computer.
Link here.WELCOME TO SINGAPORE – THE SWITZERLAND OF SOUTHEAST ASIA
I have been meeting with numerous private banks, lawyers, accountants and real estate consultants in Singapore. Let me say, I am totally impressed with this city-state. I am convinced Singapore will continue to grow exponentially over the next decade and beyond and increasingly draw huge sums of global capital inflows. The country is incredibly efficient, highly literate and the entire population speaks English fluently. This is just a great place to do business.
It is also a great place to invest. The economy thrives on the heels of booming regional trade. Singapore also looks like a smaller version of Switzerland – only with lush palm trees and a warm climate year-round. This city is extremely clean and well-organized. And compared to smog-laden Hong Kong, Singapore still enjoys fresh air. That is one of the main reasons why many Hong Kong executives have moved there since 2000. Singapore’s economy thrives on international shipping, financial services and technology manufacturing. This central hub acts as a bridge between regional trading partners in nearby Malaysia, Vietnam, China, Thailand and Indonesia. Shipping is definitely a major source of revenue for Singapore, and once you visit here, you will easily see the signs of a major shipping hub.
Driving the influx of foreign capital and international investors to Singapore is the its low corporate and individual tax rates, same as in Switzerland (see article summary above). Singapore has been steadily slashing its top income-tax rate, from 55% at independence in 1965 to 28% in 2000 and 20% in 2007. Singapore’s corporate tax rates are heading lower by at least one percentage point in 2007, according to government finance officials. Currently, Singapore’s corporate tax rate is 20%. The city-state also imposes a national sales tax, currently at 5%. Singapore may raise it to 7% this year to cover government spending plans instead of raising individual and corporate tax rates.
Singapore’s People’s Action Party (PAP), founded by Lee Kuan Yew, has controlled the island since gaining independence from the U.K. in 1965. The country’s mixed population of Chinese, Malays and Indians has accepted decades of the PAP’s often authoritarian rule in exchange for phenomenal economic growth that has transformed this former British trading outpost into one of the world’s most prosperous states. Singapore’s economy grew 7.7% in 2006, making it one of the fastest-growing regional markets after China and Vietnam. Singapore, unlike most advanced economies in the OECD continues to serve as a model economy harboring a positive budget and trade surplus. The local currency, the Singapore dollar, remains Asia’s strongest unit versus the U.S. dollar this decade.
Watch out Switzerland. Singapore’s banks are moving in!
But what impresses me most as a global investor is how Singapore is quickly emerging as THE private banking haven in Asia. Over the last decade, Singapore has built up an impressively financial services industry that challenges their rival, Hong Kong and is attracting lots of mutual fund and hedge fund business, including prime brokers and big international banks. Singapore is now Asia’s 3rd-largest financial center, after Japan and Hong Kong, and it is gaining market share.
Private banking has emerged as a leading source of revenue for Singapore. In fact, over the last five years, Singapore has matured as a leading private banking destination for international investors, drawing deposits away from kingpin Switzerland. Unlike Switzerland, where an estimated one-third of all private banking deposits are held, Singapore is not under constant political pressure from the European Union’s Financial Action Task Force (FATF), which is constantly attempting to strip away Switzerland’s tax advantages and privacy. That is luring many European and international investors to Singapore.
Link here.CAN YOU LOSE MONEY IN A FUND YOU HAVE LONG SINCE EXITED?
Fraudulent conveyance rears its ugly head in Bayou Group hedge fund bankruptcy.
That may happen in the strange case of Bayou Group, the $450 million hedge fund in Connecticut that filed under Chapter 11 in May 2006 after hiding losses for years with rosy phony profit reports. A receiver for the fund has sued investors who got out before it crashed to get them to return all their money – principal as well as profits – so he can divvy it up among all investors. In past cases cashed-out investors in hedge funds have been forced to hand back just profits. But never has a court required that hedge fund principal be returned, too.
If the receiver succeeds, the implications for hedge fund investors are huge, says Carole Neville of Sonnenschein Nath & Rosenthal, representing 26 Bayou redeemers. In total the receiver is seeking from 122 redeemers $122 million in principal, money that would reimburse Bayou investors who stayed until the bitter end for some of the $250 million they lost.
The case revolves around the issue of fraudulent conveyance, a legal concept that goes back to an old English statute made famous in a 1601 ruling against a man who gave his sheep to a relative to keep them out of creditors’ hands. Bayou allegedly committed a similar sin when it used money from new investors to pay old redeeming ones to create the impression it had plenty of cash. The law generally requires shifted assets to be shifted back, less any value the scamster got in exchange for them. In other words, profit is returned. It does not matter whether the recipient was an unwitting participant in the scheme.
But when the fight is over principal, a different standard applies. The Bayou receiver, Jeff J. Marwil of law firm Winston & Strawn, is relying on a section of the bankruptcy law that he says can force such unwitting participants to forfeit all their money if they should have known about the scam because of red flags. The law places the burden of proof on the accused, forcing redeemers to show they could not have suspected fraud from such clues. Marwil claims many investors were “tipped” by investment advisers to get out, and that there were plenty of red flags, too. For instance, the no-name outfit called Richmond-Fairfield that audited Bayou’s books was formed by a Bayou cofounder.
Philip Bentley of law firm Kramer Levin Naftalis & Frankel, representing 67 redeemers, says his clients did not know about the fraud but that it does not matter anyway. His argument in a nutshell is that he who bails out first gets to keep the loot. A decision is expected in February on a motion in U.S. Bankruptcy Court in New York to dismiss the suit. Appeals are likely.
Link here.SAILING AROUND THE WORLD FOR FREE
If you want to experience owning a boat, go into a small, dark closet with a large, wet dog, and tear up $100 bills. Ask any boat owner if this is true, and you will most likely receive a grim nod and a wry smile. However, if you are smart, you can experience the joys and trials of boating life without having to tear through your savings. It is simple. Sail on someone else’s boat.
Around the world, large yachts are being built faster than bored people can leave their jobs to become qualified crew. Since there are more available boats than available crew, the average person with little or even no experience can get a free ride on a yacht, as long as they do not look like an axe murderer. There are many different positions that crew can choose from on boats of all sizes. At the bottom of the crewing job pile (and the easiest to get) is a position on a cost-sharing boat. This is where the crew pitches in some money (usually $20-70 a day) to help the owner cover food, fuel, and marina costs. Beware of the boat that advertises “cost-sharing” of $1000 or more for a week. In this case, the boat owner is usually trying to make money and calling it a cost-share instead of a charter. In a true cost-share arrangement, you are simply paying your own way and the owner makes no profit from you.
The next step up for crew would be a totally free ride, where the owner covers all costs. In this situation, the captain can sometimes be a professional skipper, or the owner. This free ride arrangement is frequently available when boats need repositioning or delivery. In exchange for your help moving his boat, the owner covers food, boat costs, and some will even pay your return airline ticket home. Other skippers require you to deposit money with them to ensure you can get yourself home at the end of the trip. A delivery is a great way to gain experience and sea time, without having to pay for it. Sea time is needed if you wish to pursue any sort of a career on boats.
With a little bit of luck and some experience, you can be paid to live on someone else’s boat and eat their food. This is a job, so you will naturally spend a lot of your time working. On professional yachts this means polishing, sanding, and lots of cleaning. Most boats prefer at least a one-year contract. Depending on the boat, the owner is often nowhere to be seen. When he does come aboard with his guests, then the real work begins. If you feel ready to take this route, there are many crew placement agencies available in the major ports that can assist you.
Should you land a paying job, keep in mind that many boats are registered offshore your wages may be tax-free. [Ed: Not so for U.S. citizens.] Since all your living expenses are covered, you can save almost all your paycheck. If you prefer not to go at it alone, you can take your significant other with you and work as a team. Usually one person is the cook, the other the professional captain. This combination is actually preferred on many yachts, and does not necessarily have to be a married couple.
The easiest way to get a job on boat is to go where the boats are. Boats tend to move around the same way every year, ending up at the same places to avoid hurricanes and follow trade winds. These places are overflowing with crew hungry boats and are known as “cruising bottlenecks”. Just show up and get yourself down the marina to walk around the docks, and start talking. Although Internet crew lists have made it easier to find a boat without leaving your desk, dock walking is still a great way to network and get jobs. The biggest market in the United States is in Fort Lauderdale, Florida at the end of the hurricane season as boats prepare to head south for the high season (End of October). Newport, Rhode Island also has a fair number of boats headed south for deliveries on or around November 1.
So get out there, and give it a try. One word of advice: Make sure you do not just take the first boat that comes along. Use your best judgment, especially if you are female, because once you are on the boat it can be difficult to jump ship in the middle of the ocean.
Link here.HOW THE BABY BOOMERS ALMOST SAVED THE WORLD ... AND WHY THEY FAILED
In the 1960s, the first half of the Baby Boom generation began to emerge from childhood into – well, teenhood. Already liberated (or corrupted, depending on who you asked) by Elvis and Little Richard, this tsunami of youthful rebellion continued on the road to heaven (or hell), which was apparently paved with massage oil, bricks of hashish, and 45-rpm records – the fabled “sex, drugs, and rock ‘n roll.” Long hair, peace, and love were in. Racism, being uptight, and waging war were out. Naturally, our parents were horrified. Not everyone fit these stereotypes, but enough did that one might speak of the tenor of the times.
Instead of Burning Man, Boomers had Woodstock and the Summer of Love. Instead of rap and video games, Boomers grooved to Stevie Wonder (and a thousand other artists who were focused, as much as anything, on love and peace) and staged massive anti-war protests. “Do your own thing” was the generation’s affirmation of personal freedom and rejection of all forms of repression. “Do whatever you want as long as you aren’t hurting anyone else” was another oft-heard sentiment.
Boomers took the “not hurting others” part seriously and rejected the racist and sexist attitudes of their elders, supporting integration, civil rights, and gender equality – despite sometimes violent opposition. As the Vietnam War raged, Boomers not only embraced peace and compassion, but put real energy into anti-war demonstrations and marches, and in political opposition to President Johnson and other war-mongering Democrats. Boomers supported Eugene McCarthy and even Richard Nixon, who was not much in harmony with Boomer ideals but said he had a “plan” to end the war, although he, uh, could not tell us what it was. Best of all, many Boomers supported Nobody. The Nobody for President movement, begun in 1975, brought the voting choice “none of the above” into the limelight, along with the subversive idea that we might actually be better off without anyone ruling us.
It was easy to see a more free, peaceful, and compassionate world emerging as this Baby Boom generation moved into the future. The Boomers’ personal respect for the choices of others seemed to ensure that freedom would blossom as the younger generation gradually became the adult majority. Boomers’ willingness to visibly and energetically oppose war and other evil made a warmer, more humane future believable. The sense of connection with others shown by many Boomers reinforced that sense of being on the verge of a better, healthier world. Surely, the repression, conformity, racism, and war-mongering of previous generations were about to give way to a more open, free, compassionate, and peaceful world.
So what happened? I believe the answer is surprisingly simple. With tragic consequences, Boomers failed to embrace non-coercion, at least where government was concerned – and that one mistake sabotaged everything positive the Boomers stood for, including peace, love, and freedom. Failing to reject coercion eventually even corrupted the Boomer’s positive stance on sexuality. When a 17-year-old can be sentenced to 10 years in prison because his 15-year-old girlfriend initiated oral sex, you know that the use of government coercion to “protect” us has gotten so far out of hand as to almost defy description. And this is only one example of how “compassion” becomes “tyranny” when enforced by government power.
Compassion is not something you “enforce”. Compassion does not long survive coercion, and attempts to provide compassion via coerced taxation reminds of the ‘60s anti-war saying that “killing for peace is like f*cking for virginity.” One does not make progress towards a goal by using methods that undermine or destroy the goal.
Compassion is a natural and voluntary emotion that, in a healthy person, leads to appropriate action within the context of his or her own life. Compassion and coercion are diametrically opposed. Whenever coercive government begins doing something for alleged reasons of compassion, you know a disaster is in the making.
By supporting government power (“But only good government power, man!”) the Boomers of all stripes played into the hands of Power itself. The power elite adapted instinctively, dancing around the issues like Cassius Clay danced around opponents in the ring, shifting from the Red Menace to the War on Drugs to the War on Terror; moving from the Great Society to Compassionate Conservatism. “You want GOOD power? You want a warm, cuddly, mommy-daddy government that will make everything OK? You GOT it, boys and girls! We feel your pain! We promise to solve every problem, to leave no child behind, and to make all the bad people be nice. So on election day, be sure to vote!”
The Clinton presidency finally brought a Boomer to the White House. Yet pot smokers continued to be arrested and imprisoned by the hundreds of thousands, and every other evil of America’s coercive power machine also continued without a hitch. The Bush II presidency which followed gave us another Boomer. In comparison, the Eisenhower years of the 1950s really were a golden age. To say it plainly: Boomers, as a group, failed to understand that love and freedom require each other. Like millions before and since, Boomers were seduced by the idea that compassion can be imposed at gunpoint by the State – not that this scam is ever described so directly by proponents.
Emphasizing love at the expense of freedom leads to horrors, because freedom is a necessary part of love. Even seemingly minor reductions in freedom begin the process of corrupting love, because love and coercion are polar opposites. More of one always means less of the other. For that reason, it is equally true that freedom without love also leads to horrors. A free society absolutely requires a sense of connection with others (love) to function. A million people who do not give a bleep about each other will never create a healthy, functional free society, no matter how many of them have read Ayn Rand.
Link here.YET ANOTHER CARL LEVIN BILL TO “STAMP OUT OFFSHORE TAX EVASION BY AMERICANS”
A bipartisan trio of U.S. Senators have introduced legislation that targets the $100 billion in revenues they claim is drained from the U.S. Treasury every year by offshore tax haven and tax shelter abuses. The “Stop Tax Haven Abuse Act” is being backed by long-time offshore foes Carl Levin (D-Michigan) and Norm Coleman (R-Minnesota) the Chairman and senior Republican of the Permanent Subcommittee on Investigations. It is also being supported by Sen. Barack Obama, (D-Illinois).
For more than four years, Levin and Coleman have led an in-depth Subcommittee investigation into offshore tax havens, abusive tax shelters, and the professionals who design, market, and implement these tax schemes. Citing experts, they have estimated that up to $70 billion in tax revenues is lost every year through individual offshore tax avoidance, and an additional $30 billion from corporate offshore tax planning initiatives. “Abusive” tax shelters add tens of billions of dollars more, they said.
“With a $345 billion annual tax gap and a $248 billion annual deficit,” said Levin, “we cannot tolerate a $100 billion drain on our Treasury each year from offshore tax abuses. We cannot tolerate tax cheats offloading their unpaid taxes onto the backs of honest taxpayers. Offshore tax havens have declared economic war on honest U.S. taxpayers by helping tax cheats hide income and assets that should be taxed in the same way as other Americans. This bill provides a powerful set of new tools to clamp down on offshore tax and tax shelter abuses.”
“It is simply unacceptable that some individuals are using offshore tax havens and secrecy jurisdictions to shelter trillions of dollars in assets from taxation,” said Coleman. “This is a basic issue of fairness and integrity,” said Obama. “We need to crack down on individuals and businesses that abuse our tax laws so that those who work hard and play by the rules aren’t disadvantaged.”
The Stop Tax Haven Abuse Act is a strengthened version of a bill that Levin, Coleman, and Obama introduced in the last Congress. “None of these offshore schemes would work,” said Levin, “without the secrecy that prevents U.S. agencies from enforcing our laws. Our bill offers innovative ways to combat offshore secrecy. We can’t let the offshore tax havens hide $100 billion in U.S. tax revenues which are needed to protect our troops, fund health care and education, and meet the other needs of American families.” Among other measures, the 68-page bill would:
CARIBBEAN PROPERTY MAGAZINE REBORN AS AN ONLINE EZINE AFTER A DECADE-LONG HIATUS
0nce a hard copy publication about lifestyles and real estate in the Caribbean, Caribbean Property Magazine is undergoing a rebirth as a monthly online ezine. It is about living, working and investing in the Caribbean region. The ups and downs; the good and bad. Every article is written by someone actually living the dream. Each contributor has made the break and is here ... bathed in the Caribbean sunshine, enjoying the beaches and the rainforests, making it work amongst the many different cultures, languages and island nations which populate and surround the Caribbean Sea. How did they do it? Read each month and find out. Each month we will focus on a particular country. This month we look closely at Dominica.
An unexpected welcome to the first organic country in the world.
Expectations can be painful, and really need to be handled with care. But occasionally, surprisingly, they are met and then some! Having finally moved to the Commonwealth of Dominica after two years of digging ourselves out from the British Virgin Islands, where we had lived for 18, Dominica is so much more than we ever expected. The intense heat of the hurricane months in the BVI does not seem to reach Dominica. In the cool mountains of Dominica we wear track suits in the evenings and early mornings all summer, and yet are still only a 10 minute drive from an empty Caribbean bay and a cool refreshing swim.
And I mean empty! The numbers of cruise ship visitors touring the island is insignificant compared to the infrastructural meltdown that takes place in the BVI during the daily cruise ship visits. In a world where governments run expensive marketing campaigns to teach us how to conserve our fast depleting energy reserves, Dominicans are naturally way ahead of us. You rarely see one person in a car. If you are driving somewhere, you pick up as many people as you possibly can. Importation duty on cars runs as high as 140%, and consequently there are very few cars on the road.
Women do not use the pumps and taps inside their homes for their clothes washing, they take their laundry to the fast flowing rivers, and make it a social gathering. Outside of Roseau (the principal town) there is little fresh food in the village stores. They are simply meeting places for the local community with a few rusting tins of vienna sausage. Food ripens on the trees and on the ground everywhere you go. Households sell their surplus on the roadside. You pick it, or buy it when you need it and put it in the pot. No chemicals, no packaging, no storage, no waste. Once a week we go down to town. It is hot and noisy and full of exhaust fumes, just as we expected. Our errands get crossed off the list as fast as possible so that we can return to the cool green mountains. And as we scurry out of the bank mid-morning we hear the sound of a conch shell blowing – the universal call in Dominica from a fisherman with a fresh catch. In half an hour the fisherman has sold his entire catch.
Dominica has recently outlined a plan to be the first completely organic country in the world. Part of our decision to move here was to be able, for the first time, to eat freshly grown, organic food. Our expectations have been more than met. We did not expect a lifestyle that made so much sense in a world gripped by the dawning understanding that we are running our planet dry.
Link here.PROS AND CONS OF COUNTERFEIT MONEY
Have you ever thought that counterfeiting money could be good for the economy and that the counterfeiter could be considered an economic genius or even a national hero? I received an e-mail from Nic Corsetti, a friend of mine, describing exactly how that might happen. From Nic:
“Let us say that I invent a printing press that allows me to produce counterfeit money (say U.S. dollars) by the trillions – these dollars look EXACTLY like real ones, so no one can tell the difference, not even the government or the bank. So I start off the first year by counterfeiting $3 trillion:
“Obviously, this is a lot of work, so I hire a whole network of employees and consultants to help me achieve those lofty goals in a reasonable time period. The apparent benefits would be huge.
“Benefits:
“This is such a good plan, I decide to let some of my best friends in on the action. So I pick 12 of my closest cronies and give them identical printing presses and instruct each of them to buy stocks, bonds, and real estate with their counterfeit money. I tell them to loan the money to anyone who asks. Now we are really getting somewhere.
“Even with all of that there is STILL NO INFLATION! Cheap imports keep prices from rising and the best part is that those foreigners keep taking this counterfeit money as if it were real money. No one can tell the difference, anyway. This goes on and on – we have really created a tremendous virtuous cycle where everything just gets better and better.
“After a few years of counterfeiting, I am quite certain that a ‘new era of goodwill and fortune’ would be announced and that I, Nic Corsetti, would rightfully be hailed as the first economic grand wizard to have permanently vanquished recessions. But what is the catch? Where is the hole in this story? If counterfeiting is such a great idea, why is it not legal? Actually, it is legal.
“I, Ben Bernanke, hope these printing presses do not break down and that people keep accepting these counterfeit dollars, or this economy might implode. This is my only fear right now.”
As proof of the ingeniousness of legal counterfeiting, Alan Greenspan has been hailed as an economic hero and knighted by the queen of England for his “contribution to global economic stability.” Printing presses do work (for a time), and Greenspan’s timing was perfect, as discussed in an “Interview With Paul Kasriel”: “[Greenspan] was fortunate in two very big ways. First off, he was fortunate to preside over the economy at a time when productivity was soaring and the global supply of goods was expanding rapidly because China had entered the world trading arena. In that environment, the Fed could create large amounts of money and credit without causing inflation other than in asset prices.”
By the way, so many others have acquired the magic printing presses that the Fed is now basically irrelevant when it comes to credit expansion and contraction. Synthetic money is now being created in massive amounts in numerous places. For example, GSEs are now running their own printing presses. Want a $500,000 mortgage? Boom, you got it. No one cares if you can pay it back, either. It is foolproof as long as home prices only go up. Multiply that by the hundreds of thousands and it all adds up, and much of it done with 0% down, and most of it based on the belief that housing prices only go one way: up. The day of reckoning comes when home prices sink. A collapse is now underway, and it has hit the subprime market especially hard. Those credit problems are guaranteed to spread.
Some may object to the term “synthetic money”, but the important thing is not what we label it, but rather the general idea of what is happening. And without a doubt enormous amounts of money (credit/debt) are being borrowed into existence with increasing leverage and risk. Broker dealers (via junk bond offerings) have figured out how to create their own synthetic money backed by essentially nothing. As yields collapsed, increasing leverage had to be used to generate the same returns. Such offerings have exploded along with mammoth growth in hedge funds all wanting a piece of the pie.
Some 20,000 hedge funds are now doing things with leverage because yields are too low. Various carry traders have created synthetic dollars of sorts by borrowing yen and investing in U.S. dollar-denominated assets such as U.S. Treasuries. This has been building and building and building on itself so that no one even knows how many printing presses are actually running. The day of reckoning on carry trades will come when the Bank of Japan is forced by the market to raise rates rapidly and there is a mad scramble to get out of dollars and back into yen. Rest assured, these events will be anything but orderly when they happen.
Initial sponsorship of “legal counterfeiting” came from the Fed and central bankers in general, but once Wall Street got hold of the magic printing presses, things have gotten more than a little out of hand. This is what happens when you have money backed by nothing and borrowed into existence. This is also what gold lovers see when they recommend gold.
Ponzi schemes can only go so far before they collapse on their own accord, and it is important to recognize what is happening now with stock buybacks, leveraged buyouts, and various carry trades for what it is: one giant Ponzi scheme. This scheme will end the way they all do when the willingness or ability to take on more debt stops and/or when the willingness to further speculate stops. When either of those happens, there will be a mad rush for the exits and no more buyers for “overpriced tulips” will be found. Be prepared.
Link here.IONESCO AS POLITICAL CONSULTANT
Every time I go to the United States (I have just returned from two weeks in Washington), I am astonished by the antic security, by the proliferation of admonitions and alarms and inchoate fear. Now it is illegal to carry toothpaste on airplanes. I find myself wondering: Is this just another spasm of periodic hysteria, like Prohibition, the Sixties, and a Commie Under Every Bed? Or is it calculated political programming?
Most of it impinges at best lightly upon reality. For example, measures for security at airports are largely useless ... if their purpose is to increase security. Think about it. Time and again the public-address system warns that vehicles left unattended in passenger-loading zones “may be ticketed and towed.” Why? By the time anyone notices that the truck is unattended, by definition the driver will be somewhere else. He will certainly be able to walk a hundred yards before the tow-truck arrives – and push the button. Boom. In the case of a suicide bomber (which is what we are worried about, no?) it does not matter anyway. Boom. For that matter, at any airport you can drive up, load a hundred pounds of suitcases containing god knows what onto a baggage cart, and go into a crowded waiting area. Boom.
Most of security is just theater. Over and over, the PA system tells you not to leave baggage unattended or it may be destroyed by security personnel. This doubtless serves to make legitimate passengers watch their luggage. Who cares? None of this keeps a terrorist from leaving a baggage cart and walking for two minutes, far enough to be outside the blast radius. No, I am not giving ideas to terrorists. Everything in this column is obvious to anyone with a three-digit IQ.
It gets sillier. If you ride Metro, Washington’s subway, you will incessantly hear things like, “Passengers! Look up from your papers occasionally. Be alert! Report any suspicious behavior to Metro employees.” Yeah, sure. As a security measure, this is worthless. Why? First, a terrorist would be careful not to look suspicious. Second, what is suspicious behavior on an urban subway? You have got rastas, Goths, spike-haired young in leathers, semi-derelicts, blacks from the slums, people from India, Guatemala, Morocco, drunks, stoners, people talking to Mars through the transmitters the CIA put in their teeth, and swarthy men speaking languages you cannot identify. What is suspicious? How do you implement this in the real world?
Urban subways at rush hour – which, of course, is when a terrorist would strike – are madhouses. People are packed so tight they can hardly move. Everybody is thinking, “Come on, come on, get this damned thing moving.” Suppose you are aboard, and you see what appears to be a forgotten briefcase. What do you do? You could scream, “Bomb!” However, the odds are much better than 999 to 1 that it is not. The briefcase turns out to contain two sandwiches and a report from Agriculture on locust infestations in Chad. You probably go to jail. And of course a terrorist would leave the briefcase on a timer to give himself a few minutes to leave the subway and be walking innocently up the street when the thing went off. Say, five minutes. Real world: What are the chances that anyone will notice the briefcase, take it seriously, and clear the train, in five minutes? Zero.
It is theater. If people actually reported strange behavior however defined, or if Metro cleared trains for forgotten briefcases until the bomb squad arrived, trains would never run. Are security measures going to keep terrorists out of the U.S.? I just finished reading De Los Maras a Los Zetas, by a Mexican crime reporter. (I do not think it is available in English.) He talks mostly about the drug trade, but mentions the smuggling of illegal immigrants. In particular he tells of a tunnel going under the border (estimating that at any one time about 40 such tunnels are active) through which, he says, about 150 illegals a day passed. All it takes is $2000 or so and you are in the U.S. There is no border security, boys and girls. Not against anyone serious.
Now, yes, we may well see more terrorist attacks on the U.S. We certainly ask for them. Or they may be prevented by other means. But dramatic announcement on the subway are going to prevent nothing. Nor are color-coded terror alerts that you hear every five minutes in airports. What does anyone do differently when the level is orange instead of green? Cancel reservations? Wear body armor?
On examination, most of the measures purportedly taken to stifle Terror do not. Opening mail without a warrant? Pointless once the terrorists know you are doing it, but effective in intimidating honest citizens. The same with warrantless wiretaps and searches. Does the gutting of habeas corpus make us safer against terrorists? Or merely suppress dissent by citizens? The whole business looks remarkably like malign vaudeville, like mummery intended to accomplish two things. The first is to persuade the foolish that the nation is At War. Actually only the president is at war. The second, and I would like to be wrong about this, is to train the public to obedience. The formula is simple: Keep ‘em scared and you can do anything. It works. Americans are rapidly becoming accustomed to Soviet-style surveillance, to the state’s power to search and spy without restraint, to being barked at and ordered about by low-level federal employees. People deserve what they tolerate.
Link here.WHERE IS THE BEST PLACE TO HIDE MONEY? A BURGLAR TELLS
I had quite the interesting conversation with a person who happened to be a former burglar. I figured that if you wanted to know the best place to hide your money from a burglar, a former burglar was the person to ask. I started off simply and was not surprised by the answer to the question “where is the best place to hide your money?”
“At the bank,” he said with a sly grin When I rephrased and asked where the best place to hide money and valuables in the house would be if you had such items there, I was taken a bit by surprise by his answer. “It does not matter how clever you think you are or where you hide it in your house, if I have enough time, I would be able to find where you stash your valuables,” he said bluntly. He then explained that what was much more important than the actual place where you hide your valuables is that you understand a burglar’s motivations. Basically, he has two:
When you begin to think of it from this perspective, how you should hide your money changes a bit. Obviously, you do not want to leave all your money in the places where the burglar will first look, like dresser drawers, drawers by phones, desks, closets, a safe (if not bolted down), boxes, jewelry boxes, purse, etc.). That being said, you also do not want to hide all of your money too well for the following reason: “If I cannot find money and valuables in the normal places I usually find them, I would continue to tear the house apart until I found something. Remember, the first rule is to to steal money and valuables. We will keep looking until we find something.”
Your best strategy, then, is to actually leave some money in obvious places for the burglar to quickly find (the same applies if you keep all your money in the bank). This can not only save your other stash of money, but may actually keep the burglar from destroying your place as he looks for where you have hidden your money. If they believe they may have found the cash that you have in the house, they are much less likely to keep looking. In the end, if you hide all your money well, you may win a moral victory, but you will likely have much more damage done to your place that will end up costing you more in the long run. The next obvious question was, “How much money should you leave for the burglar to find?”
“It depends on the area where you live. If you are in a upscale community and only leave $100, I would assume there is more and keep looking. In a different part of town $100 would convince me I found all the money that was there and leave.” When it comes to hiding valuables, his suggestion is to mark an envelope in an easily accessible drawer or with files by your computer with “Bank Safe Deposit Box” on the outside and a list of items on the inside. This will tip off the burglar that your most valuable items are stored at the bank and will discourage him from tearing up your house looking for them.
So where is the best places to hide money? His number one recommendation for money was in toys in a young child’s room. As he explained, young children do not have money, they have an abundance of toys and most parents do not trust a child around money. Therefore, parents will rarely hide money there. In addition, when money is hidden, it is usually hidden away neatly and securely – a child’s room is rarely a neat place making it an unlikely place for money to be hidden. Plus with all the stuff in a child’s room, it is not someplace that a burglar can search quickly and get out.
If you have a safe, it should be professionally bolted down so it cannot easily be removed. If you leave some token money for the burglar to find in the places they normally look for money, then anyplace you would not normally consider a place to hide valuables will usually keep those valuables safe. The underside of trash cans, inside laundry detergent, inside false packaging (But only if the packaging appears real and is in the appropriate place. “When you find a Campbell’s soup can in the bedroom, you have a pretty good idea there is money inside”) were some examples he gave.
You also need to be smart. He related one time a person had left wads of money inside the empty battery areas of electronics around the house. The problem was that although he had not found the hidden money at first, the electronics themselves were worth money and he took those to sell. Only when he got home and was checking that everything worked did he find the hidden cash.
One last tip. Make sure that your significant other (or someone close) knows where your hiding places are. If something unfortunate happens to you and nobody knows where your hidden stash is, it is unlikely that they will be able to find it if a burglar is not. Worse, it could end up being accidentally thrown away.
Link here.THE WORLD DROPS ITS GUARD
A new level of complacency has set in. It is not just a financial-market thing – extremely tight spreads on risky assets and sharply reduced volatility in major equity and bond markets. It is also an outgrowth of the increasingly cavalier attitude of policy makers. That is true not only of central banks but also by the global authorities charged with managing the world financial architecture. Meanwhile, by flirting with the perils of protectionism, politicians are ignoring some of the most painfully important lessons from history. After four fat years, convictions are deep that nothing can derail a Teflon-like global economy. That is the time to worry the most.
I am especially concerned about a new lax attitude that has crept into the mindset of the so-called stewards of globalization – namely, the IMF and the broad collection of G-7 finance ministers. Last spring, in an uncharacteristically bullish lapse. I was especially encouraged that the Wise Men had finally woken up to the perils of ever-mounting global imbalances – namely, the widening disparity between America’s gaping current account deficit and large and growing surpluses in China, Japan, Germany, and the major oil producers. With great fanfare at the April 2006 G-7 and IMF meetings, institutional support was thrown behind a new framework of multilateral surveillance and consultation – in my view, materially raising the odds of an orderly, or benign, rebalancing of an unbalanced world.
Unfortunately, the multilateral approach is now rapidly losing momentum. With the global economy and world financial markets turning in yet another good year, suddenly, the urgency to act is now seen as less critical by the stewards of globalization. Complacency has claimed an important victim – thereby undermining the major rationale for my bullish change of heart on the global prognosis. Meanwhile, central banks – basking in the warm glow of success on the inflation-targeting front – are pouring more and more fuel on the global risk binge. The Federal Reserve seems to settling for a long winter’s nap, likely to keep monetary policy on hold through at least the end of this year, according to our U.S. team. An inflation-targeting Bank of Japan seems to be of a similar mindset, mainly because of the distinct possibility of a minor deflationary relapse. A one-party Japan has little tolerance for central bank independence, especially in light of a still very fragile state of affairs. That leaves the European Central Bank as the only one of the three major central banks that is likely to make any type of a policy adjustment in 2007. But should the view that the European economy will continues to surprise on the upside be drawn into question for any reason – hardly a trivial possibility – the risks are that the ECB policy path could quickly tip to the downside.
There is nothing wrong with this picture from a strict inflation-targeting perspective. But that is just my point. At low levels of inflation, and persistent risks of deflation in Japan, inflation targeting produces an exceptionally low level of nominal interest rates. That, in turn, continues to fuel the great liquidity binge that underpins an extraordinary degree of risk taking still evident in world financial markets. Central banks have circled the wagons in taking an agnostic position on this state of affairs. As a former senior central banker put it to me indignantly the other day, “Who are we to judge the state of markets?” That is indicative of what I believe is a very narrow perspective of the role and purpose of central banking. Most importantly, it relegates financial stability to a secondary consideration at precisely the time when financial globalization and innovation could be inherently destabilizing.
The orthodox view of modern-day central banking is premised on the belief that hitting the narrow target of CPI-based price stability is sufficient to address anything else that might come along. Never mind that this approach has produced a most unfortunate string of asset bubbles – first equities, now property, and next those that may well be bubbling up to the surface in the form of a tightly correlated compression of spreads on a host of risky assets. Never mind the explosion of worldwide derivatives, whose notional value has now reached some $440 trillion – over nine times the size of the global economy. Central bankers will tell you that the liquidity and risk-distribution benefits of derivatives far outweigh the lack of transparency and limited information they have on the incidence and concentration of counter-party risk. Never mind the power of the carry trade, which has been given a new lease on life by the politically-compromised Bank of Japan. Never mind the potential “canary in the coal mine” that may well be evident in America’s sub-prime mortgage market. All in all, increasingly complacent central banks are telling us that these concerns are not actionable issues for monetary policy. That could well be a blunder of tragic proportions.
A similar complacency is evident on the political front. As the pendulum of economic power in the developed world has swung from labor to capital, the pendulum of political power is now swinging from the right to the left. As pro-labor politicians now move into action, trade protectionism is increasingly getting the nod as a legitimate policy response. Nowhere is this more evident than in Washington D.C. I have spent a good deal of time in there the past couple of weeks and sense that Congress’s anti-China sentiment is most assuredly intensifying. I have taken the other side in the debate at several forums in Washington – but to little or no avail. This takes complacency to an even more worrisome level. U.S. politicians feel completely justified in ignoring some of the most painful lessons of history. And, ironically, the broad consensus of investors feels equally justified in ignoring the possibility of a protectionist outcome. Such an inconsistency is yet another example of a world in denial.
I have been relatively constructive on the global outlook over the past 10 months. The call did not work out all that badly. That was then. New and worrisome political forces are coming into play at precisely the time when the stewards of globalization have gone back into hibernation. Meanwhile, central banks are refusing to take away the proverbial punchbowl when the party is getting better and better – instead, egging on the risk-takers when risky assets are priced for all but the absence of risk.
Enough is enough. From where I sit, it no longer makes sense to maintain an optimistic prognosis of the world. This is more of a structural call than a cyclical view. I remain agnostic on the near-term outlook, and certainly concede that the Goldilocks-type mindset currently prevailing could put more froth into the markets. But complacency is building to dangerous levels ... always one of the greatest pitfalls for financial markets. And yet that is precisely the risk today, as investors, policymakers, and politicians all seem to have dropped their guard at the same point in time. The odds have shifted back toward a more bearish endgame. I have a gnawing feeling we will look back on the current period with great regret.
Link here.IRS URGED TO GO AFTER ONLINE AUCTION ENTREPENEURS
When it comes to paying income taxes, eBay’s legions of small-time entrepreneurs are on an honor system in which they are supposed to declare their profits to the IRS. Many users, however, ignore the law or are unaware of their obligation. Now a growing chorus of tax experts is hoping to crack down on the cheating by requiring eBay – and other online auctions, such as those on Yahoo, Ubid.com and Amazon – to track users and report their gross sales to the federal government. Armed with such information, the IRS could better seek any taxes owed, potentially reaping millions of dollars in extra revenue for the U.S. Treasury.
But requiring eBay to out its sellers to tax collectors could send a shockwave across its vast online bazaar. Paying Uncle Sam could significantly reduce their profits or even make their businesses money-losers. The latest call for more aggressive tax collection was heard last week at a congressional committee hearing focused on closing the tax gap, the hundreds of billions of dollars in taxes that go unpaid each year. Nina Olson, the national taxpayer advocate [sic] for the IRS, spoke of the heavy burden put on the nation by the shortfall and then cited undeclared online sales – particularly on eBay, given its size – as part of the problem. “The IRS must have the tools needed to address under-reporting of this income,” said Olson, whose job is to voice taxpayer concerns to the federal government.
eBay has 97 million U.S. users, who, in 2006 sold $25.2 billion in merchandise, exceeding the GNP of many countries. More than 720,000 Americans make their primary or secondary income from the Web site, according to a 2005 study. How many eBay users pay the taxes they owe on their online earnings is unknown. But experts suspect the percentage is low.
Virtually all tax filers – 96% – pay what is owed on income that is reported to the IRS by a third party, such as when a bank reports interest earned on a savings account, according to the IRS. However, when a third party does not tip off the government, compliance drops dramatically, to below 50%. The remedy, according to many federal officials, is to expand reporting requirements. The question is, which businesses and what kind of income should fall under the rules?
As part of his proposed federal budget for 2008, President Bush made what many believe is the first step to more vigorously collect taxes on online sales. Although vaguely worded, the proposal would require “brokers”, or middlemen, to collect taxpayer identification numbers from clients and report their sales of personal property to the IRS on a 1099 form if sales surpass 100 transactions or more than $5,000 annually. eBay and other auction sites are not currently considered brokers. But definitions can be changed.
In November, a citizen advisory group for the IRS recommended as much. Expanding the definition to include online auctions, the group said, would open the door to reporting and increased tax compliance. Paul Heller, chairman of the citizen advisory group, made up of accountants and tax preparers, applauded the president’s proposal, but called it so nebulous that it is unclear what kind of businesses he is targeting. Heller, a vice president for JPMorgan Chase, suspects that the provisions are at least partly aimed at Internet sales. “I have no idea who it would be referring to,” Heller said of the proposal, “if not online auctions.”
Jennifer Zuccarelli, a spokeswoman for the Treasury Department, declined to name any companies the Bush proposal applies to. All she would say is that the provisions would affect both online and offline commerce, without discrimination as to the medium. Other than Internet sales, tax experts said that art galleries and consignment stores could be potential targets of the Bush proposal. Hani Durzy, a spokesman for eBay, insisted that his company would be unaffected if Bush’s ideas are enacted as written. eBay does not meet the definition of a broker, he said, because it never takes possession of the merchandise its users sell. In any case, Durzy said eBay does not even know whether any given transaction is completed and therefore cannot report authoritatively about a user’s sales to the IRS.
David Yaskulka, marketing chairman for the Professional eBay Sellers Alliance, an industry group of more than 500 big eBay sellers, said it would not bother him if eBay reported sales information about its users to the IRS. In his experience, big sellers already pay their fair share. His concern is that legislation will unfairly target eBay. All sales venues, online or off, should be treated the same, he said.
Link here.THE U.S. ALREADY HAS A FLAT TAX, AND ITS RATE IS 40%
The U.S. has a national flat tax, albeit one with bumps and potholes. Both parties have a vested interest in the theatrical possibilities created by the idea of graduated tax rates. This “idea” should not be confused with reality.
Democrats argue that taxes on the rich should be raised because others need the money. This wins votes from the legions of voters who are not rich. Republicans argue, with great piety, that high taxes crush incentives and should be reduced, and that only then will the American way see a new dawn. Politicians talk this way because they generally talk about only the federal income tax, which offers graduated rates from 10% to 35%. Politicians rarely talk about what real people experience – the true maze of taxes and government benefits. If someone put them all together, we could see what the actual tax burden was. Well, two researchers did it. In a study for the National Bureau of Economic Research, Boston University economists Laurence J. Kotlikoff and David Rapson have found that the all-in marginal tax rate is 40%, give or take a bit.
Most workers will pay about that much on each dollar of income when all taxes – federal and state income taxes, sales taxes, taxes for benefit programs, and others – are considered. As a consequence, a 30-year-old couple earning only $20,000 a year has a marginal tax rate of 42.5%, while a 45-year-old couple earning $500,000 pays at 43.2%. There are some exceptions. A 30-year-old couple earning $50,000 a year, for instance, pays 24.4%, and a 60-year-old couple making $150,000 a year faces a tax rate of 47.7%. The average marginal tax rate on incomes between $20,000 and $500,000 is 40.3%, the median tax rate is 41.8%, and the standard deviation of all of those rates is 5.3 percentage points. Basically, most of us pay about 40%, plus or minus 5.3 percentage points.
Link here.FEELING, EMOTION, INTELLECT
What do “logical” and “rational” mean? The freedom movement prides itself on being logical and on behaving rationally, but these are relative terms. A human action can only be rational or logical in the context of the situation, and of one’s history, desires, preferences, beliefs, and expectations – all interpreted through the rules of logic as one understands them, and perhaps especially as one does not understand them. Which is to say, as one’s unconscious sees them.
For example, you are in charge of the government (or at least have serious influence) in a large nation, and you have strong, long-held ties to oil companies and government contractors. You can use your government position to initiate or lobby for war overseas (if in areas with oil deposits or potential pipelines, so much the better) generating huge income for favored companies and perhaps for yourself as well (e.g., Dick Cheney’s famous stock options). At the least, you gain the gratitude of multi-billion dollar corporations. The downside of all this is the moral and financial bankrupting of your own nation, the imposition of a police state to monitor and quell dissent, the death of thousands of your own citizens, the death of hundreds of thousands of civilian men, women, and children (plus thousands of foreign soldiers) in the war zones, and the near-eternal contamination of the area (and eventually the entire Earth) with poisonous and radioactive depleted uranium.
But hey, is that really so bad? With scarcely a moment’s reflection, you decide you can live with it. An entire logical structure grows around the issue in your mind, smothering any feeling you might have for the victims, making the war seem necessary and even righteous. The mass killing seem almost like mercy ... a sad but necessary sacrifice for the greater good. Advancing your own agenda is entirely secondary. It is scarcely worth mentioning. It becomes increasingly hurtful when others suggest you have such an agenda. Soon you begin to wonder if those who oppose you should even be allowed to speak.
Where does logic lead you? The scenario above (with much variation) has been played out repeatedly in American history, as Stephen Kinzer describes in Overthrow: America’s Century of Regime Change from Hawaii to Iraq. U.S. government treatment of the American Indian Tribes, in particular, would also fit the basic thread of Kinzer’s book.
How can such intelligent creatures behave so unintelligently? How can humans be so cruel and destructive? The answer is that when our natural ability to feel is disrupted, our behaviors are disrupted as well – because the primary purpose of feeling is to guide behavior. Those bizarrely-oversized upper brains of ours produce such high-wattage symbolic intelligence that we are easily blinded to the other abilities of our brains and bodies, and their importance.
There are actually three distinct brains within us, each experiencing the world in its own way. The lowest level is sometimes called the ancient reptilian brain, and it can be seen at work in lizards and other reptiles and in amphibians – and in any animal, really, because all vertebrates have this level of functioning. It is however the main level available to, e.g., a lizard, and so lizard behavior showcases the character of this lowest level of consciousness, which, as you would expect, includes autonomic functions, midline body control, hunger, mating instincts, raw terror (the feeling in a night terror, for example) and fight-or-flight responses.
The second level of consciousness involves the limbic system or palleomammalian brain. Your dog or cat is a good example of this second level at work. Mammals in general have well-developed second-line consciousness. This level includes expressive emotions – feelings of grief, sadness, joy, and love, among others. Complex social behavior in mammals, including primates, is largely (although not entirely) regulated by second line feeling and perception. One reason dogs and humans get along so well is that there is significant overlap in the social rules of both species, as laid down in the limbic system of each.
The third line of consciousness, based largely in the neocortex, is dramatically expanded in humans – no surprise given the dramatically expanded physical size of that part of our brains. This level of consciousness allows for symbolic thought and complex symbolic language, highly developed deep-time navigation (revisiting the past and simulating the future to learn from experience and to plan ahead), and other characteristics mostly, or most strongly, found in humans.
All three levels work together and communicate with each other. A healthy human has all three levels active and connected. An intertwining stream of threads from all three levels moves constantly into our consciousness, so that we experience the world in part through the most ancient (and therefore most wise, in some respects) part of our brains – brains that were powerful enough to keep our ancestors alive through hundreds of millions of years. We also experience each moment with the middle brain – the limbic system – which has also been our home and our selves for many millions of years, despite being much younger than the beginnings of the ancient reptilian brain. Finally, we have this enormous upper brain and the highly-developed third-line consciousness it allows for.
Three levels, all active, and each conscious in its own fashion. Each with its own agenda and logic. The older, lower levels form the core of our humanity, and create the largest part of our experience. Intellect is the newcomer, and the gigawatt version that humans carry is still something of an experiment. The three levels work together smoothly, each making an important contribution to the whole. Full, normal adult consciousness involves fluid input from all three levels.
Except for one thing. Not a small thing, either. This is the most important fact of human life today, and has been for thousands of years. The character of the human world, and of the human condition, is tied to this one reality, chained down by it, crushed and stunted by it, infected and withered by it into something almost unrecognizable. The results are visible throughout history and nearly everywhere in today’s world. This one thing is a magic trick, really. ...
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