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

END OF AN ERA?

The UBS escapade shows what smart taxpayers have known for a while: The offshore tax-dodging game is not what it used to be.

This piece from Forbes effectively sums up the new world of offshore secrecy, post the the various scandals that have surfaced this year. To us the bottom line is no different than it was when W.I.L. started: (1) Follow your home country's tax and reporting laws. (2) Do not rely on secrecy as part of your asset protection strategy; at best it should be the proverbial frosting on the cake. (3) Do your international offshore business with institutions which have no legal or physical presence in your home country. A Swiss banker is quoted below: "In the history of law, the winning side has generally been the one with the greater clout." When the home country can take a lot of the financial institution's assets hostage, that constitutes "clout."

This year's events should show to even the most dimwitted that the Swiss bank secrecy of legend is now a myth. A word to the wise is sufficient. Hopefully a couple of pages spelling it out to the less-than-wise does the trick as well. Note: The piece from William Grigg posted below is essential accompanying reading.

Aged men in speedos and their topless wives are sunbathing at the Utoquai lido on the Lake of Zurich, a timeless ritual of summer in the Swiss financial capital, where $2.3 trillion (assets) UBS makes its home. It is all so soothing: UBS porters usher multimillionaire Brazilian farmers up the private elevator, the corporate head of communications is off on vacation, and an elite cadre of UBS trainees, flown in for a seminar, is getting whisked away from the elegant Hotel Steigenberger Bellerive au Lac for another night of fine dining.

But in America UBS is engaged in a gritty fight. It is trying to avert criminal charges that it helped U.S. clients hide assets and evade taxes, clients like California billionaire Igor M. Olenicoff, who has confessed to hiding $200 million with the help of UBS. One UBS banker has pleaded guilty and is cooperating; his statements suggest widespread wrongdoing at the bank. The bank admits compliance problems but denies any wholesale fraud by the institution.

The contrast is all so surreal -- and marks a fading era of secret offshore accounts in Switzerland and other tax havens. Authorities have been chipping away at offshore locales for years. Now they are making some real headway. While offshore cheating will not disappear, to be sure, and UBS will survive, the new message to taxpayers is that an offshore account "is not impregnable," says Nathan J. Hochman, head of the Department of Justice's Tax Division.

The top federal tax rate is half of what it was 30 years ago. Should ffshore accounts not be on the decline? They probably would be but for the fact that the Internet and the globalization of business make these accounts so much more accessible. "It is not just the highest-net-worth people anymore," Hochman observes, pointing to the recent conviction of the owner of Buddy's Carpet in Cincinnati for a tax evasion scheme that involved insurance and offshore accounts in Nevis, the West Indies and elsewhere.

U.S. enforcers and their counterparts in other developed countries have swapped information and pressured tax-haven jurisdictions and banks to cough up data and adopt strict "know your customer" rules. Some of this has been packaged as a way to fight terrorism or drugs and arms trafficking or corrupt politicians -- not tax evasion. So it is understandable if the average offshore cheat might have ignored the gathering risk.

But information is information. And now that it exists, the tax cops want it. In July the IRS served a John Doe summons on UBS, demanding it turn over the names of the American owners of 19,000 undeclared Swiss accounts with $18 billion in assets. (Taxpayers are supposed to confess to ownership of offshore accounts by checking a box on Schedule B of the 1040.) Given that a Swiss bank is now expected to know its customers, UBS cannot easily insist that it does not know the beneficial owner of, say, a shadowy Panamanian corporation that is the titular owner of an account. Says Jack A. Blum, who has advised Congress and the IRS on money laundering and tax evasion for nearly three decades: "Increasingly, the banks have gotten themselves into the situation where they have the data and they are now being forced to cough that data up."

In February it leaked out that Germany's secret service had paid $6 million to buy a compact disc from a man who had worked for Liechtenstein's LGT Group. On the CD: client files, complete with memos detailing questionable practices. The information he sold outed some 1,400 customers, leading to the fall of Deutsche Post's chief executive and ongoing investigations of hundreds of suspected tax dodgers in France, Italy, Spain, Australia, the U.K. and the U.S.

While the IRS has long had a program (recently beefed up) to pay informants, the Germans' decision to pay for hot documents -- and other countries' willingness to use them -- was a big step for the Europeans, who rarely take as hard a line against evasion. "You are still able to hide your money, but at terrific risk," says Blum. No surprise that attitudes will not change easily. Liechtenstein, which makes its living on bank secrecy, has a warrant out for the informer's arrest. How Switzerland will respond to this new world of summons and squealers is still unclear.

At a Senate subcommittee hearing on tax haven banks in mid-July, the bank was suitably contrite. Mark Branson, the new chief financial officer at UBS's Global Wealth Management, admitted that "misconduct occurred" and announced the firm would be exiting the business of providing Swiss accounts to Americans, meaning they will have to move their money to UBS units registered by the Securities & Exchange Commission in the U.S., Switzerland or Hong Kong -- or to a rival bank. UBS is still negotiating how many names it will turn over.

If the bank spits out more names, it will reduce its risk of a ruinous U.S. criminal prosecution or of being kicked out of an IRS program -- known as the qualified intermediary program [see this posting] -- that is essential to its ability to do business internationally. But if UBS appears too eager to turn over all the names, it could run into resistance from Switzerland's own bank privacy laws, on which the nation's wealth has been built.

How will this play out? Says Peter Honegger, a partner at Swiss law firm Niederer Kraft & Frey: "I would bet on Swiss bank secrecy." If he is right, UBS might be allowed to turn over at most a small subset of the American names -- those considered guilty of tax fraud as the Swiss define it. This is, after all, the country that a quarter-century ago provided refuge to billionaire commodities traders Marc Rich and Pincus Green after they were indicted in the U.S. for tax evasion.

Yet a number of what might be called realists at smaller Swiss private banks are not convinced Swiss pols will stick up for the nation's bank secrecy and traditions this time. The reason: Global banks like UBS and Credit Suisse have substantial assets to protect in other, more powerful legal jurisdictions such as the U.S. In the U.S. UBS has 2 million clients and manages $700 billion in assets. "In the history of law, the winning side has generally been the one with the greater clout," writes Konrad Hummler, a board member of Switzerland's National Bank and a managing partner at Wegelin & Co.

Regardless of what its countrymen decide, UBS, if found at fault, will have to pay dearly to buy its way out of trouble in the U.S. Accounting firm KPMG paid $456 million in fines, penalties and restitution to avoid a criminal indictment for promoting abusive tax shelters. What might it cost the bigger UBS?

UBS's American clients will also have to pony up. UBS argues that under existing regulations, it had no legal obligation to tell the IRS about Swiss accounts owned by Americans so long as they did not hold U.S. securities. But that does not get the owners of those secret accounts off the hook. U.S. citizens with foreign accounts worth more than $10,000 in total must file annual reports even if the accounts hold no U.S. property and even if they earn no taxable income. Luckily for UBS's clients, the government prosecutes fewer than 2,500 tax cheats a year and the IRS has a liberal "voluntary disclosure" policy. A taxpayer probably will not be prosecuted if he fesses up and pays back taxes before the IRS begins an audit or criminal investigation.

Clients of banks other than UBS and LGT should not get too smug. The IRS is looking at eliminating the loopholes UBS used to justify not reporting those 19,000 U.S. accounts.

GIVING UP OR TAKING A LONG TRIP?

Vern Jacobs thinks the new exit tax and the efforts of the government to crack down on offshore tax evasion will generate a “brain drain” more than a money drain.

Veteran offshore commentator Vernon Jacobs -- editor of the The Jacobs Report newsletter -- logically notes that the tighter the government tries to tighten the offshore vise, the more people will worry about what will happen next. Some will decide they better get some assets offshore while they still can. Others will decide to move overseas, especially the ambitious ones who expect to generate a net worth in excess of the recently passed U.S. expatriation exit tax exemption of $2 million.

COMMENT: It seems like all this discussion about going offshore is futile. The U.S. government is now using strong arm tactics to bully other countries like Switzerland into disclosing all of their U.S. customers and everyone with an offshore account will be audited and put on some kind of government blacklist.

REPLY: For now, the IRS and the Congress is mostly looking for people who have not paid taxes on income that has been diverted into offshore accounts. I see no indication that they are harassing people who are reporting their offshore income and filing the required returns.

But -- the tighter the government tries to tighten the vise, the more people will worry about what will happen next. More people will begin to put some assets into offshore accounts or business entities. People who can afford the fees will do that in a tax compliant way but they will do it gradually and will most often set up an offshore business to justify their international diversification and travel.

People who do not feel they can afford qualified professional help will use the Internet and will invest in IBCs or foreign foundations and will gamble on not being caught in the offshore witch hunt. I doubt that any of those folks have accounts with UBS. And we still do not know how much the Swiss government will cooperate with the IRS John Doe summons.

The government has just passed an expatriation exit tax to stop wealthy people from leaving, but they left a pretty good sized exemption available for anyone with a net worth of less than $2 million. People who are young, optimistic and willing to take some risks will probably see this as a temporary opportunity to move to a more hospitable country. Instead of losing a few people with a very large net worth, we may lose a lot of the people who create jobs and wealth.

Laws almost always have unintended consequences and often have the opposite result from what was ostensibly intended. It seems to me that the new exit tax and the efforts of the government to crack down on offshore tax evasion will generate a "brain drain" more than a money drain. I read that it is happening in England and I suspect we will soon see a lot more people leaving the U.S. in the next few years. The simple way is to just move offshore while keeping U.S. citizenship and taking the time to acquire a second citizenship in another country that uses a territorial system of taxation or that employs a national consumption tax.

Of course, to do that, you either have to have a good retirement income or have a job overseas or you need to own a business that can be operated from anywhere in the world. And, you need to be pretty free of family ties.

Just my two cents.

Response to “Giving Up” Query

An international tax lawyer Vern Jacobs has known for many years appended this comment to the above post.

A few additional thoughts on the crackdown on offshore accounts.

Note that this attention to unreported accounts is not unique to the U.S. government. Most of the Western European governments are operating in this mode. Remember, it was the German government that started this round of investigations by bribing a bank official to divulge the names of German nationals who failed to report "offshore" (i.e., non-German) accounts. And most of the other high-tax European nations immediately asked Germany to release a list of their residents who had unreported bank accounts. So anyone thinking they can continue to hide assets by leaving the U.S. had better give serious thought to where they are going and where they need to be able to travel to on short notice.

Also, the UBS developments seem to be affecting IRS policy. We have been told by our local IRS office that they are no longer processing voluntary compliance cases involving unreported foreign accounts (whether or not the accounts are at UBS or LGT). Those cases now need to be cleared through the IRS National Office. I am curious whether other practitioners on your list have received the same message.

Finally, in general I agree about the potential for brain drain. I think it caught the UK government by surprise that the proposed changes to their residence and remittance rules would cause such a large flight of investment professionals. Just as I think it shocked Congress when UBS quickly decided to leave the U.S. personal banking market in the face of threats against banking confidentiality. As you say, governments seem to have little appreciation that talented people and organizations may "vote with their feet" when faced with oppressive regulation.

ALL ABOUT INVESTING IN AGRICULTURAL LAND

This is a primer on investing in agricultural land, in the U.S. and around the world. A critical element to the investment case is that, unlike in the 1980s, the demand for agricultural land is solidly underpinned by contemporary global economic conditions. Opportunities for the individual passive retail investor to participate in the asset class are limited. But if you are included to work your own piece of land, wherever in the world, it looks like there will be a good market for your output.

“You can never make any more of it.” ~~ Old Scottish saying

Back then, there was land -- lots of land. And it cost practically nothing.

In the early 1880s, my great grandfather, a former French cavalry officer, made the long trek from Roubaix, in Normandy, France, to a new life in the American West. Finishing his journey at Beaver Creek, a tiny settlement in Montana, just over the border from North Dakota, in 1883, he and his partner established the firm of Grisy & Wibaux, intending to graze there some 10,000 head of cattle.

First filing claims for the two large ranges on Beaver Creek, and then the whole valley, they proceeded to build a ranch house followed by further separate homesteads. The enterprise prospered. While I have not been able to discover exactly how much land they owned (there is one transfer in the records of the Bureau of Land Management dated August 18, 1887 for some 160 acres), I expect the figure was well into the thousands of acres.

Just those 160 acres would be worth between $48,000-$80,000. Maybe even more if they have good water rights.

Now, there is considerably less land available. And it is getting expensive; very expensive.s

As the world's population grows, so the supply of agricultural land around the globe diminishes. In the U.S. alone, while half of the 2 billion acres of the country's land is working agricultural land, every minute of every day, two acres of farmland are being taken out of production and turned to other uses, in particular, development. Each year, globally, some 12.3 million to 19.7 million acres of farmland, out of a worldwide total of 3.7 billion acres, falls fallow because of "deteriorating quality."s

Available, quality, agricultural land is increasingly hard to find. Prices, everywhere, are going up.

By the end of August 2007, the average price of cropland in the U.S. over the prior year had increased some 13%, doubling in the decade from $1,340 an acre in 1998 to $2,700 in 2007. [See Cropland Values by State chart.]

Farmland values continue to rise. In the Seventh Federal Reserve District (Illinois, Indiana, Iowa, Michigan and Wisconsin -- some of the best farmland in the U.S.), the Federal Reserve Bank of Chicago reported that "the year-over-year increase in District ['good'] farmland values" had "eased to 14 percent in the first quarter of 2008." But that is still 14% -- the 3rd-largest such increase since 1980. Cash rental rates have "soared higher this year compared with those in 2007, rising 21 percent."

In the Eleventh Federal Reserve District (Texas, Northern Louisiana and Southern New Mexico), over the same period, the value of dry cropland rose 21.1%, irrigated cropland rose 14% and ranchland 10.8%. Finally, in the Tenth District (Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the northern half of New Mexico and the western third of Missouri), the percentage rises in the value of similar farmland over the same period have been even steeper [see chart].

In Canada, the rise in value of farmland for the six months ending December 31, 2007, was some 7.7%, more than double that for the previous six months [see chart].

While there have always been, and will continue to be, investors willing to make transnational land purchases, a new category of player is appearing on the field of play: sovereign states seeking to secure food supplies for their countries. ...

Although it is difficult to determine whether investors in the private sector -- both individuals and companies -- are currently really any more active cross-border than they have been (they have always been active), their agricultural land transactions certainly appear to be receiving more exposure in the press than they have before. ...

According to Robin Maitland, a senior partner with Strutt & Parker, a leading property consultancy in the U.K., over the last year, in Scotland alone, some 25% of agricultural land sales have been to non-U.K. residents. Often purchases have been by Irish and Danish investors, for whom the cost of such land in their home countries can be 50% more than it is in the U.K.

With cost of agricultural land having risen some 40% in the U.K. in the last year, and with supply remaining extraordinarily tight, Mr. Maitland says the reverse is also true, with U.K. investors looking for possible opportunities in, for example, the erstwhile Eastern Bloc.

And while Landkom's recent investment (the lease of some 100,000 hectares [247,105 acres] of farmland) may have helped put Ukraine in the agricultural spotlight, according to the Financial Times, we may soon also see both Russia and Kazakhstan making "a mark on world agriculture and food markets in coming years."

The price of agricultural land in the U.S. has risen strongly for several reasons, not least because of rocketing crop (and commodities) prices and a growing demand for biofuels.

Combine these, however, with a weak dollar and strong export markets, and agricultural land in the U.S. is now increasingly seen as an attractive investment proposition, particularly as a hedge against inflation. From having been "an asset class for ultra-pessimists only," it is now "hot" property.

While U.S. pension funds, endowments and family offices have always had an interest in farmland and agriculture, once again, various recent transactions and news items, in this "space" in particular, appear to have caught the eye of the press. And this is only what has been reported!

In December of last year, TIAA-CREF, the largest manager of retirement funds in the U.S., spent some $340 million on farmland across seven states. And George Washington University has announced that it "plans to earmark $100 million for agricultural investments during the next year, with some, if not all, allocated ex-U.S.

The Hancock Agricultural Investment Group, part of Canadian Manulife Financial Corp, and one of the largest institutional managers of agricultural real estate in the U.S., recently posted an annualized total return of 12.3% over the 10 years to end-2007 from its U.S. directly held, investment-grade properties alone. The group oversees some 140,000 acres of farmland in the U.S. and 7,600 acres of farmland in Australia.

Looking beyond just returns (currently extremely attractive), and a potential continuing hedge against inflation, an investment in farmland can provide two further significant benefits.

First, it can provide returns with less volatility than those from other classes of asset. According to Agcapita GP Corp, a Canadian farmland investment partnership, over the last 15 years, farmland returns have exceeded stock and bond market returns with up to 60% less volatility.

Second, because there is low and negative correlation between farmland yields and those from stock and bonds, such an investment can provide the important benefit of diversification. In addition, correlation even with conventional real estate is very low.

As with timberland, while direct ownership and management (i.e., being a farmer), is a possibility, such a route is similarly fraught with difficulties. One of the most significant of these is the issue of diversification in the farmland itself -- especially with a single investment. A well-diversified holding of farmland (row crop, permanent crop, pasture and even timber) will, therefore, not only require a significant investment, but may also involve land holdings in a number of different locations.

For institutions and "instividuals" (i.e., the very rich), the Hancock Agricultural Investment Group can establish an individually managed account with a minimum commitment of $50 million.

UBS, through UBS AgriVest LLC, can also provide individually managed farmland investment portfolios for those willing to invest a minimum of $50 million. And for those seeking to invest a smaller minimum amount, UBS AgriVest LLC also manages commingled accounts. If you already own land, then a number of U.S. banks, including JPMorgan Chase & Co., Bank of America Corp and U.S. Bank will, for a fee, manage your farm for you.

For those interested in Canada, and suitably qualified, an investment in farmland in, for example, Saskatchewan, can be made through the likes of the Agriculture Development Corporation or through Agcapita GP Corp.

And for those seeking more international diversification, then Emergent Asset Management and Landkom are certainly innovative in their approaches.

Except for access via a private equity, or other, fund, the only other option is to invest in land indirectly. This is, however, a very loose proxy, with, as any such investment being, primarily, an investment in what the land produces, as opposed to being an investment in the land itself.

Vis-a-vis the exceptions, there are, ex-U.S., the likes of BlackRock's agricultural fund or the Schroder Alternative Solutions -- Agriculture Fund. For "indirect" investment, there are a number of pure agricultural commodity ETFs and ETNs to choose from. [A list is given in the article.]

Conclusion

The market in agricultural land in the U.S. is currently experiencing a boom -- a boom fueled, not least, by sky-high commodity prices, a strong and increasing demand for ethanol and the continually diminishing amount of agricultural land actually out there.

With the inexorable rise in the price of domestic agricultural land, investors are starting to look seriously ex-U.S. for opportunities. Investors in countries experiencing similar land market conditions, and those countries concerned about securing sources of food for their growing populations, are also looking at acquiring land internationally. What we are seeing now is just the start of such a search and the start of such investment.

While there is nothing to say that both the demand for ethanol and/or the price of commodities may not crash, it appears that, even if they did, then, rather than as in the 1980s, the demand and, indeed, requirement, for good quality agricultural land is now very much more solidly underpinned by contemporary global economic conditions.

Afterword

Wibaux, formerly Beaver Creek, became an important railhead for the transshipment of cattle at the end of the 19th and into the early 20th century, with hundreds of thousands of cattle passing through on their way to the yards in Chicago.

My great grandfather, however, returned to France, but kept in contact with one particularly good friend from his American West days -- Buffalo Bill Cody. My family used to have a watch Colonel Cody gave my great grandfather, but, along with everything else, this was lost when the family's château was razed following the Normandy landings in World War II.

THE ECONOMIC SHOW TRIALS BEGIN

In his "Pro Libertate Blog," William Grigg contrasts the government bailout voted in for the thieves who have looted Fannie Mae and Freddie Mac (see the lead piece in this week's Financial Digest for Grigg's analyis of the financial implications of the bailout), which was unaccompanied by sanctions against or even any criticism of the offending parties, with the "show trial" hate campaign heaped on the alleged super-rich who dared to try and keep some of their assets out of the U.S. government's grasp by storing them offshore. Needless to say, the Freddie/Fannie cabal is well insinuated into Washington political circles, while the designated scapegoats are not.

One might ask: Where is the shame? Grigg posits: "They can no more feel honest shame than a chimpanzee can compose a cantata." That is as good a theory as any out there.

Could it be that our ruling elite has effectively transcended hypocrisy? As the aphorism informs us, hypocrisy is the tribute that vice pays to virtue. It is the product of a person's capacity for decent shame, the fig-leaf garment concealing one's naked corruption.

Shame being a vital precursor to hypocrisy, those who rule us -- not only the politicians, but the banksters and image-molders as well -- cannot be accused of hypocrisy. This would be a bit like criticizing the fashion sense of somebody who is color-blind. This does not mean, however, that they should be allowed an indulgence for the evil that they do.

Last week, during a brief digression in the ongoing efforts to socialize the losses suffered by the super-rich kleptocrats at Fannie Mae and Freddie Mac, Congress conducted an authentic Orwellian hate-fest directed at "super-rich" people who had earned their money through legitimate enterprise.

The Fannie/Freddie nomenklatura built huge profits through the government-subsidized generation and "securitization" of bad mortgages and criminally corrupt bookkeeping. Last week's hearings by the Senate Subcommittee on Investigations focused on people who had made large sums of money through honest, productive commercial activity -- and then tried to preserve their honest earnings for their posterity by protecting it in bank accounts in Liechtenstein.

Congress and the ruling elite it serves are eagerly stealing everything in sight, through taxes, subsidies, and inflation. But as last week's Senate hearings-cum-show trial illustrate, they are tuning up the machinery of mass hatred in anticipation of scapegoating authentic capitalists for the ongoing economic collapse.

Sounds just like Atlas Shrugged, no?

The fault, we will be told, lies not with our corrupt and incurably profligate government, or the incorrigible official counterfeiters at the Federal Reserve, or the government-subsidized corporatist interests who are their clients -- but rather those who greedily insist on keeping what they earn instead of paying their "fair share" in the name of the "common good."

The calculation here is that a hate campaign of that sort can keep the public from noticing how the phrase "common good" always seems to refer to policies that confer benefits on one particular elite. And it is quite likely that members of that elite have their own numbered accounts in places like Switzerland and Liechtenstein. Which is probably another reason they are so eager to go after well-heeled people who are not part of their club.

As I have noted before, Liechtenstein, unlike the United States, is a relatively free country. It is presided over with a gentle hand by Prince Hans-Adam II, rather than being ruled by a degenerate fascist oligarchy like the one entrenched in Washington. Hans-Adam II is on record saying that a top tax rate higher than 6% is "tyrannical." This puts him well ahead of any other political leader I can think of in pursuing the truth, which is that taxation is always and everywhere nothing but officially sanctioned theft.

As would be the case in any civilized country, Liechtenstein's banking secrecy laws were designed to protect the assets of depositors from the scrutiny of predators serving the ruling class. Many foreign depositors have, in accordance with the sound and commendable laws of that estimable alpine country, set up foundations to protect their earnings from rapacious tax-gatherers in their own afflicted nations.

Unfortunately, a squalid little creature named Heinrich Kieber who had been a clerk at Liechtenstein's LGT Group, pilfered several CDs worth of data regarding foreign depositors from the United States and Europe. [In his image caption, Grigg calls Kieber an "SOS" -- someone who should be Slapped On Sight ... he only uses a closed fist on a real man.] Driven by a variant of the invidious impulses that 60 years ago would have led him to rat out those who protected Jews from the Gestapo, Kieber -- as viscous as he is vicious -- oozed into the offices of Germany's BND intelligence service and sold his stolen information for $7.3 million stolen at gunpoint from German taxpayers.

Kieber conducted similar transactions with ruling criminals in London, Paris, Rome, and Washington. His information This led to last week's hearings [week of July 14-18], chaired by the loathsome Senator Carl Levin (D-Michigan), who -- in the interests of "bipartisanship" -- gave a prominent co-starring role to the even more repulsive Senator Norm Coleman (R-Minnesota). Kieber himself, who has been taken into the "witness protection program," testified by way of a videotaped statement from a secret location.

The target of Comrade Levin's show trial was the reported $1.5 trillion cached by wealthy Americans in offshore accounts, including those in Liechtenstein, Switzerland's UBS, and elsewhere. Those banks, Levin complained, had employed "tricks" that made it "impossible for the Internal Revenue Service to follow the money, bring tax cheats to justice, and bring back into the U.S. treasury the tens of billions of dollars owed to Uncle Sam."

Well, sure: The banks that sought to protect the assets of Jews during WWII employed the same methods to protect the assets of honorable people from the contemporary tax gestapo, who are the true moral heirs of the Nazi officials who sought to seize the assets of persecuted Jews. Impeding the efforts of criminals to steal wealth is not a "crime," and it is interesting that Levin did not use that word to describe the "tricks" he protested.

And, if I can be permitted a brief digression, Levin's statement that the money should be brought "back to the U.S. treasury" in order to pay "the tens of billions of dollars owed to Uncle Sam" is a Marxist lie sandwiched between two crusty slices of chutzpah.

For the purposes of this discussion, we will refer to the fraudulent fiat currency issued by the Fed as "money."

Any quantity of "money" honestly earned does not belong to the Treasury; it belongs to the individual or enterprise that earned it, until he or they decide to spend it for some purpose. Accordingly, that money cannot go "back" to the Treasury, although it can be diverted there to be wasted on corrupt government undertakings of various kinds.

Furthermore, taxes are not "owed" to the federal government; they are seized by the federal government. One "owes" money to another party from whom he has received goods or services pursuant to a legitimate contract. "Contracts" imposed through duress (such as extortion pay-offs) are illegitimate. Those of us who pay taxes do so not because a legitimate contract exists between us and the Regime that extracts our wealth. We do so because of a desire to stay out of prison, or to avoid violent death at the hands of the State's hired killers.

Levin is a nearly ideal representative of the parasite class. His mind, or what passes for it, is entirely hostage to collectivist assumptions. Just as a dog cannot discern colors, Levin cannot see anything amiss in extending official protection to a foreign criminal (Kieber was convicted of fraud in Liechtenstein) so he can testify against those who have done no injury to persons or property, or in treating foreign bank officers as if they were under Washington's jurisdiction by demanding that they testify before his committee.

All of this is being done, Levin insists, to bring "tax cheats to justice." Leaving aside, for the nonce, the fact that the word "justice" when uttered by the likes of Levin is like the word "love" in the mouth of a whore, the cruel fact is that tax avoidance is impossible for anyone who conducts business using the Federal Reserve's fraudulent scrip.

This brings us to one history-making admission offered last week by Fed Commissar Ben Bernanke beneath the avuncular but relentless cross-examination of Rep. Ron Paul (R-Texas) during Bernanke's recent congressional testimony.

"Inflation is a tax," Rep. Paul observed during his colloquy with Bernanke. "And if the Federal Reserve, and you as chairman, have this authority to increase the money supply arbitrarily, you are probably the biggest taxer in the country."

"I couldn't agree with you more that inflation is a tax," admitted Bernanke, quickly seeking to evade responsibility by saying that "inflation currently is too high."

The criminal syndicate over which Bernanke presides imposes taxation without representation or accountability. Furthermore, it exports that inflation world-wide, thanks to the fact that the instrument of debt the Fed calls the "dollar" is the world's reserve currency. This means that nearly everyone who uses the dollar to conduct business is paying the tax called inflation. This is a unique form of withholding, in that the Fed steals an increment of value from each dollar before it ends up in the hands or accounts of private actors in the economy.

Where a government exercises the power to tax through inflation, no other taxes are "necessary," including the income tax. Furthermore, where governments tax through inflation, no tax evasion is possible, as long as people conduct business in that adulterated currency.

The redoubtable G. Edward Griffin points out that former Fed Chairman Beardsley Ruml admitted that, because of the Fed's ability to tax via inflation, "Taxes for Revenue are Obsolete" -- the title of an essay Ruml published in the January 1946 issue of American Affairs. As Ruml wrote,"given control of a central banking system and an incontrovertible currency [that is, a fiat currency not backed by gold], a sovereign national government is finally free of money worries and need no longer levy taxes for the purpose of providing itself with revenue. All taxation, therefore, should be regarded from the point of view of social and economic consequences."(Emphasis added.)

Thus, where Washington is concerned, taxation exists purely for the purpose of social manipulation through vulgar redistribution of wealth, not to pay the operating costs of government. And as carried out by the IRS, taxation is an instrument of intimidation and terror used to compel social conformity.

By keeping their money in dollars, or any currency "pegged" to the dollar, so-called "tax cheats" are not evading taxes. They, like the rest of us, are being taxed through the Fed's relentless inflation. Their only hope to evade being taxed by the Fed would be to take the advice offered by Jim Rogers last fall: Get out of dollar-denominated assets entirely.

There are only two ways to acquire wealth: It can be earned through mutually beneficial voluntary action, or it can be stolen through force and fraud. Any effort to acquire wealth that involves any degree of force or fraud is theft.

Senator Levin and his comrades, who are preparing to bail out the politically favored thieves running Fannie and Freddie, spent many taxpayer-funded hours last week dilating upon the supposed iniquity of those "super-rich" Americans who seek to protect what they earn from people whose professional lives are nothing but one prolonged exercise in theft.

It would avail nothing to point out such hypocrisy to Levin and his ilk. They can no more feel honest shame than a chimpanzee can compose a cantata.

ESCAPE ARTIST ANNOUNCES ITS RETURN

EscapeArtist.com recently restarted publishing its Escape From America e-zine. The publisher announced the return with this email:

Escape From America Magazine has made a very welcome return after a six month break.

During that time we were deluged with emails asking what had happened to our online magazines. Well, we have been hard at work making improvements and we think you will love the results.

Escape From America Magazine has a fresh new look with new sections and remains the great forum it has always been for expatriates to share their experiences of living overseas.

We have also been working on a completely new publication, Before You Go Magazine, and you can see the first issue of this exciting new publication now.

This new magazine was developed in response to your requests for more in-depth and totally unbiased articles and a reduction of exposure to advertising. Before You Go Magazine strives to be the first choice online publication for anyone wanting to travel off the beaten path or for those who are actively looking for a new nation to call home. International business and finance will be regular features, along with articles on how to make a living or start a business overseas. For added interest there are reports on fascinating cultures and customs from around the world. In fact, Before You Go Magazine has something for everyone.

Before You Go is available by paid subscription only but we would like you to take a look now, free of charge and tell us what you think.

You can login and access the member-only area at www.bygmagazine.com using the email address freetrial@bygmagazine.com and the password freetrial. All we ask in return is for your comments on the style and quality of the articles which you can send via the contact form. There is no requirement for you to register your email address or enter credit card details. This first issue is totally free to EscapeArtist eZine subscribers.

There are six great articles in the first issue:

I Remember Rio - The most beautiful ugly city in the world
Mexico Without Tears - No hassle living and travel
The Paradise Island of Koi Sumui - Retire to a Tropical Island for $10.000 a year or less!
The Vanishing Batak Tribe - Philippine mountain people facing extinction
Destination Argentina - Three reasons to go and three reasons not to go
Fish or Bear Paw - What is really going on with the Chinese Stock Market?

So there you go. The rest of the email gives a few more details and offers you the opportunity to subscribe to Before You Go at half-price though the end of August.

WHO ELSE WANTS QUALITY HEALTH CARE, AT AFFORDABLE PRICES?

Escape From America Magazine recently restarted with an issue dated June 2008. We had thought that the November/December 2007 issue was the last one before the publication took its brief vacation. It turns out there was a January 2008 issue, which mysteriously was not announced (to us, anyway). That issue includes this piece explaining how much cheaper health care is south of the border.

If the great weather, lower cost of living, and improved quality of life cannot convince you to move to Latin America, try this (and it may be the most compelling reason of all): affordable, quality health care. All the politicians in the U.S. are talking about it. Upcoming elections may hinge on it. It is something everyone needs and deserves.

Lest you think "affordable, quality health care" is an oxymoron, read on ...

Nearly 47 million U.S. citizens -- 16% of the population -- are without health insurance. That is according to data compiled in 2005, so I suspect that number must be much higher now, two years later and in the midst of an economic slump in the U.S. Adding insult to injury, the average annual cost for a family health insurance policy in the U.S. is about $11,000. And how much does the average family spend on medical care and services each year? About $13,000, says the Kaiser foundation, an organization that tracks health care expenditures. Imagine how much the average 50 or 60-year-old spends ...

For those of us who are getting older and starting to think about the very real possibility that we will be facing some sort of major medical issues in the coming years, none of this is good news. Not only is the cost of insurance sky high, but so is the cost of medical care in the U.S. Sure, there is Medicare, but it does not pay for assisted living centers or other long-term care if you should need it. And yes, you can buy a long-term care insurance policy, but those are not inexpensive ... and if you already have a health condition, you may not be eligible.

So, it should come as no surprise that many from the U.S. are finding options in countries like Mexico. Here, health insurance is much lower than in the U.S. My husband and I recently spent $2,100 for a comprehensive policy for the two of us, with a low deductible that even covers us when we travel internationally.

For those who do not want (or cannot afford) to spend that much, Mexico offers a government health plan, called Instituto Mexicano del Seguro Social (IMSS). For about $300 per year, you get complete coverage, including prescription medications. And yes, foreigners can obtain IMSS coverage. The downside is that you can obtain service only at government hospitals and clinics -- not at the better-equipped private hospitals. Many foreigners in Mexico use IMSS as a major medical or catastrophic care fallback plan, but see private doctors and pay out-of-pocket for routine care. An office visit to a private physician averages $40. I spent $60 recently for a mammogram. Quality? My husband and I are overwhelmingly happy with the personal, top-notch care we have received in the six years we have been living in Latin America.

There is good news, too, for those looking for long-term care. As USA Today recently reported, a growing number of U.S. citizens are moving across the border to nursing homes in Mexico, where "the sun is bright and the living is cheap."

Retirement homes in Mexico are a relatively new concept -- Mexicans typically care for older family members in their own homes. But Mexican business people are seeing opportunities in building assisted living facilities that cater to the expat. Since both labor costs and health care costs are low in Mexico, a stay in an assisted living center here can cost 1/4 what it may cost in some areas of the U.S.

The USA Today article looks at several facilities in and around Ajijic, in the Lake Chapala area. This is a logical location for assisted-living facilities: There is a large expat population in the area, the climate is mild, and nearby Guadalajara is a major medical center for Mexico, ensuring availability of excellent doctors and nursing staff. Plus, the international airport at Guadalajara is readily accessible for visiting family members from the U.S.

The assisted-living "business" in Mexico is in its infancy, as I mentioned, and there are still some kinks to work out. For example, there is little regulation, and standards can vary, so it pays do to your homework. But the owners and managers of these types of facilities are learning fast. With millions of U.S. baby boomers heading into retirement, and with U.S. health insurance and health care costs continuing to climb, assisted-living and gerontology services for expat retirees are poised to be growth businesses in Mexico for decades to come.

If you have been considering Mexico as a second-home or retirement destination, it is definitely time to take a serious look. Mexico is rolling out the red carpet for you. With easy-to-obtain residence permits, a staggering range of money-saving benefits once you hit 60, and inexpensive, high-quality assisted-living care in your twilight years (or for aging parents you may be caring for), la vida buena south of the border looks better every day.

BABBLE ROUSER

Despite coups, corruption and kidnappings, cell phone maverick Denis O’Brien keeps pouring money into the world’s poorest, most violent countries. His bet: Give phones to the masses and they will fight your enemies for you.

This is an amazing story, even by Forbes standards. Denis O'Brien has prospered taking risks that would daunt almost anyone else. He sets up cell phone networks in the poorest countries in the world, using speed, smarts, an apparent appetite for a good fight, and sheer audacity to end around corrupt governments and other obstacles that come with such territory. And O'Brien does good while doing well. The quality of life of the populations he services are undoubtedly improved -- far more effectively than their governments have done, we might add, and without any public [stolen] money.

Denis O'Brien professes not to understand why wall Streeters think his telecom business is risky. He says this while sitting in an office in Papua New Guinea that is protected by razor wire and a half-dozen guards carrying shotguns and pistols. O'Brien's Jamaica-headquartered company, Digicel Group, began offering cheap cell phone service recently in this Pacific hellhole. The murder rate in PNG is one of the highest in the world, corruption is rife, and the government recently threatened to seize 130 cell towers that O'Brien had erected at a cost of $120 million.

Is there anyplace as inhospitable to capital as PNG? Haiti would qualify. O'Brien has put money in there, too -- several hundred million dollars. Five of his workers in Haiti have been kidnapped so far. In East Timor O'Brien is pursuing a license despite a rebel uprising this year that left the country's president with a bullet in his chest. And then there is Fiji, where he had to abandon cell towers for a time after a coup.

He concedes a bit to the worrywarts by noting that his experience in Fiji was a "nightmare." But he is not about to stop putting capital in dangerous places. "If you just focus on risk, you can't do a thing," he says. A swashbuckling entrepreneur of 50 who swears often in his Irish brogue, O'Brien has built a $2.2 billion personal fortune by dominating the mobile business in a dozen poverty-stricken countries (in all, he is in 27 countries and territories). Combining shrewd political instincts, a relentless drive to cut costs and a little Irish charm, he has put phones into the hands of 7 million people in seven years.

He sums up his strategy thusly: "Get big fast. [Damn] the cost. Be brave. Go over the cliff. [The competition] doesn't have the balls."

O'Brien does not let government obstructionism or corruption deter him. He dots countries with cell towers, sometimes before rulers even grant a license, then slashes the price of mobiles on opening day to get the masses using them fast. It is a bet that poor people who have never had phone service before will not let the politicians take their phones away without a fight. Thus does O'Brien avoid the fate of many Western investors in corrupt, violent countries -- being forced to sell out on the cheap. That is what happened to Royal Dutch Shell's oil well on Russia's Sakhalin Island and to AES's power plants in Kazakhstan

In an April riot in Port-au-Prince, Haiti the mob not only spared Digicel stores from its burning and looting but even gathered in front of a few of them and cheered. Says a jubilant O'Brien, as he reads an email on the news, "They're calling us the Company of the People."

If riots and coups are not risk enough, O'Brien is moving into El Salvador and Honduras to confront a rival with far more resources. Mexican mobile phone titan Carlos Slim Helú, the second-richest man in the world, is already selling in those countries. "I don't think about Slim every day," says O'Brien, who claims he has taken 20% of the market in El Salvador in one year. (Slim, in turn, has bought a cell phone company in Jamaica, setting up a battle on O'Brien's home turf.) O'Brien is also eyeing the U.S., where only 80% of the population has a cell phone. He says he could close the gap fast by selling cheap handsets activated with codes on prepaid phone cards, as he does in poor countries. "They're snobbish," he says of the U.S. operators' disdain for such tactics. ...

Digicel is [O'Brien's] biggest gamble ... Total revenue: $2 billion. The Caribbean operations backing his bonds just announced $505 million in operating profit (earnings before interest, taxes and depreciation), double the year-earlier figure, on $1.6 billion in revenue for the year ended in March. His goal: cell service in 45 countries in two years, generating more than a billion in operating income.

In April O'Brien was in the midst of a 5-day, 4-country visit (via his Gulfstream G550) to keep tabs on his assets. "Why does no one think about reducing costs in this company?" he fumes. In Western Samoa, where Digicel has captured 32% of the population in 18 months, O'Brien lashes out at staff, flown in from various countries, for sins like buying eight vans instead of six (potential savings, $44,000). Next a staffer reports happily that people in the Kingdom of Tonga are apparently buying the rumor, spread by Digicel, that it will launch in October. "Keep spreading it," O'Brien advises. (Digicel began the invasion in May, taking competitors by surprise.)

Then he hears of plans to invite the king of Tonga, not the prime minister, to cut the ribbon at a store. "Weren't they throwing stones at him a while ago?" O'Brien wonders. Indeed, antimonarchist rioters managed to burn down much of the capital. But no time to dwell on the king -- O'Brien has to fly to three more countries today, and his next meeting is in Vanuatu, 3,200 miles away. "Every man for himself," he yells to two dozen young staffers as they rush to vans heading to the airport.

O'Brien inherited business smarts from his father and a rebellious streak from his mother. ... After university in Dublin, and a Boston College M.B.A., O'Brien became a banker, then set out to build a QVC-like channel for all of Europe. When that collapsed he went into hock, started a Dublin radio station, 98FM, and began selling ads furiously. That was the forerunner to Communicorp, today one of the largest radio networks in Europe.

He dipped into the cell phone business in 1995 when he won a license in Ireland to set up a mobile phone network, Esat Telecom. A government investigation into a former communications minister accused of a variety of corrupt dealings is looking into whether O'Brien won the license on a bribe. O'Brien hotly denies he did so and says that at Digicel -- incredibly given the countries it is doing business in -- he has never been asked for a bribe, much less greased any palms.

In any case he loaded Esat up with debt and got 550,000 customers in three years. In January 2001 he sold the company for $2.9 billion to BT Group -- $300 million of it going to him and $250 million to his workers (even the janitors had options). ...

Shortly after unloading Esat, O'Brien spotted a 3-inch-square ad in the Financial Times inviting bids for a mobile license in Jamaica. He likes to say he was drawn to the region because of all the Irish "troublemakers" banished there by the English after a 1649 invasion. But the real pull was that this was a country where only the elite had access to phones. In a place like that, he could get the masses to love him.

He paid $48 million for a license and rolled out a battle plan he would use on other invasions: spend lavishly on the network (1,000 towers in Jamaica), build clean stores with cheery staff (a rarity in many developing countries) and lure customers by offering new services like per-second billing and big discounts from the competition (80% less for phones and 50% less for calls).

O'Brien also drew on his inner P.T. Barnum, throwing cell-tower parties with live reggae music and starting an "American Idol"-type contest called "Digicel Rising Stars," in which the best amateur performers are chosen by national vote (using Digicel phones, of course). Only 10% of Jamaicans used cell phones before Digicel arrived. Now 90% (2.4 million people) do. 3/4 of them are using Digicel phones.

He is expanding across the Caribbean. In Trinidad & Tobago, where the state mobile phone firm was dragging its feet on connecting Digicel calls to its own customers, O'Brien harangued government officials to speed things up, even phoning one Christmas night to complain. After the launch the state firm started dropping Digicel calls anyway, making its new competitor look bad. O'Brien took his case to the people, taking out ads in T&T's papers listing life "Before Digicel" and "After Digicel" and held a press conference. The state firm eventually relented. In its first four months Digicel bagged 600,000 customers and is narrowing the gap now with the state in market share.

In June 2005 O'Brien bought a license in Haiti. The country has no nationwide electric grid to power cell towers, so Digicel had to deliver barrels of diesel to its sites, sometimes by donkey. Customs officials refused to release 75 cell towers from a warehouse for nine months, relenting only a few weeks before launch (and after Haiti Chief Ghada Gebara paid a visit to a hard-to-find government official at his paramour's house). Then a familiar problem: a refusal by the two rival incumbent firms to connect Digicel calls with its customers.

In May 2006 O'Brien launched anyway with a clever come-on: Customers with phones from rivals could trade them in for a free Digicel one. Hundreds of people lined up outside Digicel stores for three weeks in scorching heat. "Let the people know we give a damn about them," O'Brien lectured staffers. Within days he had struck a deal to slap the Digicel logo on water bottles, then had workers hand them out along the lines while dancers gyrated to live music from flatbed trucks.

In one week Digicel had 120,000 customers, and its rivals agreed to interconnect. O'Brien now has 2 million Haitian customers, 64% of the market.

By the end of 2006 private equity firms were circling Digicel. The company had 4 million customers in 22 Caribbean countries and was generating $220 million a year in operating income. O'Brien was sitting on a beach in Barbados looking over two buyout offers for $3.8 billion when it hit him: Why not buy the whole company himself? One month later he sold $1.4 billion in bonds, enough to buy minority investors out of their 22% stake, put a few hundred million into the business and pocket $800 million for himself, free and clear. Total debt: $2.8 billion. O'Brien prefers to think positively of the tight budgets that borrowing demands: "If you have limited resources, you have to be more clever, more skillful, more defiant." Tell him many big telcos have a lighter debt burden and he snaps: "They're doing nothing but sitting on their arses."

O'Brien was soon moving into the Pacific. Digicel staffers flew to Tonga to inspect a state mobile outfit for sale, only to discover crucial documents had been burnt in those antimonarchist riots. (O'Brien bought the firm anyway.) In Fiji Commodore Frank Bainimarama had just seized power and subjected Digicel's chief there to a four-hour interrogation. Would the $20 million Digicel spent there go down the drain? No. A week after the coup O'Brien was sitting on a veranda with the new ruler, sipping tea. "Everyone was saying, ‘Don't go. It's unsafe,’" he says. "But that's exactly the time to go in."

Government officials in Papua New Guinea were not so amenable at first. Soon after Digicel won a license in an auction in 2006, telecom minister Arthur Somare invalidated it on a hazy procedural ground. Lawsuits quickly followed, and O'Brien kept his license. (We should point out here that Somare is a son of the prime minister.) In any case Somare then submitted a bill to parliament to nationalize O'Brien's operations. The fight got so bad that the man who oversaw the original auction, Thomas Abe, received anonymous threats against his family and had to move houses several times.

Digicel had a lot to lose. It had erected dozens of towers and poured concrete for dozens more. O'Brien used this to his advantage. He brought members of parliament into Digicel's main office to show them a wall map of PNG with pushpins representing planned cell sites in villages that never had a landline connection. The plan to nationalize Digicel was defeated.

Somare was not through. A few months later he decreed that Digicel could not beam microwave transmissions from its towers, potentially rendering them useless. O'Brien's response: He launched his service on the sneak, selling phones for a heavily subsidized $6, 1/5 the state monopoly's price. He gave away a chip that allowed state phones to run on Digicel's network. He also gave away $6 prepaid phone cards -- 250,000 of them in only 10 days.

Within five months Digicel had 350,000 customers, 200,000 more than the state firm, and letters began to pour into newspapers ridiculing the state for threatening a rival. "Childish and pathetic," sniped one letter. An editorial called for competition to shake up the water and electricity monopolies, too. O'Brien contacted friends in foreign embassies to lobby the government to not touch the company. "The EU funds PNG. So do Australia and New Zealand. So we used diplomacy," he says. A former PNG army commander was quoted ominously in a magazine saying governments that ignore the people's will are often toppled by coups.

The threat from the state has now largely faded away. Says auction overseer Abe, "Fishermen and farmers are calling me to say, ‘Good for you for standing up to the government.’" Indeed, it is hard to overstate the impact cell phones are having on poor citizens. Fittler Larsen, a impoverished betel nut seller in a PNG squatter settlement of 20,000, is making more money now that he can call wholesalers to check if new shipments have arrived. "I used to spend half a day getting supplies," says the 19-year-old, standing barefoot amid half-naked kids. "Now I can stay here and sell more."

Back in the Caribbean, O'Brien bought a license in Panama and visited Nicaragua twice in quest of one ... O'Brien, never one to suffer doubts, proclaims, "You run like MacArthur from island to island -- and you conquer. This is going to be a very big business."

VERIZON REFUSES PHONE RECORDS QUERY

Refuses to address Maine legislator’s question on customer records because of “national security,.” even though it has now been given immunity.

The telecommunications companies have now officially been given immunity from their past lawlessness, when they supplied private customer information to the U.S. government despite never having been shown a warrant or other court order. But they still will not say what they actually did, in this case citing, Nixon style, murky "national security" considerations.

One would hope there is a legislator out there with enough spine to make them show evidence for their point, but one would hope in vain so far.

Now that Congress has given immunity to telecommunications companies that helped the government spy on Americans in suspected terrorism cases, a Maine legislator is asking Verizon anew if it turned over any customer records to the federal government. As it has in the past when faced with such queries, Verizon Communications says it is not commenting on matters involving national security.

State Rep. Herbert Adams posed the question about phone records on July 18, eight days after President Bush signed into law a bill that overhauled government eavesdropping rules and granted immunity to telecommunications companies that helped the government monitor Americans in suspected terrorism cases.

The law in effect nullified a lawsuit by Maine which sought to know what kind of phone customer information was turned over to the National Security Agency as part of its anti-terror efforts. That and several other similar cases brought by consumers, privacy advocates and others had been consolidated before Congress granted immunity.

Adams, a member of the Legislature's Utilities and Energy Committee, posed similar questions about phone records to an executive for FairPoint Communications earlier this year. FairPoint is taking over Verizon's landline phone and Internet service in northern New England. While FairPoint said it had not turned over records, it said it could not speak for Verizon.

Adams posed the question anew on July 18, saying that Verizon could answer "under protection of Federal law (and) without fear of lawsuits."

"At any time prior to the 2008 sale of FairPoint Communications, did Verizon ever surrender, voluntarily or under subpoena, any individual or aggregate customer information to any agency of the U.S. government?" says his letter.

A copy was furnished to company spokesman John Bonomo, who said there would be no response. "We do not comment on matters involving national security," Bonomo said in an email to The Associated Press.

Adams, D-Portland, had anticipated his query would not be answered. "Possibly tens of thousands of Mainers have had their private phone records leaked to the federal government without their knowledge or say-so, and now none of them may ever know," he said.

SPECULATION OVER BACK DOOR IN SKYPE

There has long been speculation that VoIP service Skype contains a back door into its nominally encrypted communications protocol. The protocol is closed source, so the question is not readily resolved without the company's help ... and Skype has refused to explicitly affirm or dispute the speculation. Following a recent meeting between Skype officials and the Austrian government, such speculation has been revived and intensified, albeit not outright resolved.

According to reports, there may be a back door built into Skype, which allows connections to be bugged. The company has declined to expressly deny the allegations. At a meeting with representatives of ISPs and the Austrian regulator on lawful interception of IP-based services held on 25th June, high-ranking officials at the Austrian interior ministry revealed that it is not a problem for them to listen in on Skype conversations.

This has been confirmed to heise online by a number of the parties present at the meeting. Skype declined to give a detailed response to specific enquiries from heise online as to whether Skype contains a back door and whether specific clients allowing access to a system or a specific key for decrypting data streams exist. The response from the eBay subsidiary's press spokesman was brief, "Skype does not comment on media speculation. Skype has no further comment at this time." There have been rumours of the existence of a special listening device which Skype is reported to offer for sale to interested states.

There has long been speculation that Skype may contain a back door. Because the vendor has not revealed details of its proprietary Skype protocol or of how the client works, questions as to what else Skype is capable of and what risks are involved in deploying it in an enterprise environment remain open.

Last week, Austrian broadcaster ORF, citing minutes from the meeting, reported that the Austrian police are able to listen in on Skype connections. Interior ministry spokesman Rudolf Gollia declined to provide heise online with a comment on the matter. He did, however, offer general comments on the meeting, which were, however, contradicted by other attendees.

In contrast to statements from the interior ministry, the meeting was not attended solely by technical staff. Those present included lawyers, regulatory experts and staff at the regulator. Neither were the ministry representatives mere technicians, rather they were high-ranking officials in management positions. They demanded from the ISP representatives present an "Austrian industry solution" for accessing data traffic. They called for ISPs to allow the interior ministry to install network bridges and Linux computers in their network centers. These would be used to copy and filter data traffic and forward it to the interior ministry via an encrypted connection. To facilitate filtering, ISPs should assign fixed IP addresses to customers being monitored.

it was made clear that should ISPs oppose these demands, monitoring legislation would be revised at some future time-point to prescribe the use of the ETSI ES 201 671 Version 3.1.1. monitoring standard. This would be legally binding and would require significantly more time and effort and be more expensive to implement. The reason given for not updating the legislation right away was that, in view of the present absence of terrorist activity, it would not currently be possible to mobilise political support for such a move. The officials are reported to have made clear that they were well aware that their monitoring plans would only catch the more gauche end of the criminal spectrum. Professionally organised criminals would utilise encryption algorithms that would not allow easy decryption.

It was also put about that two major ISPs had already succumbed to this pressure. The network bridges requested by the interior ministry have reportedly already been installed on their systems. This was confirmed by both companies, off the record. UPC/Inode was willing to "definitively deny" that a network bridge had been installed on its network and stated that there were also no plans to do so. Monitoring was carried out in individual cases only and only when instructed by a court order.

According to Mobilkom Austria, "the authorities have no access and will not be granted access." Likewise its fixed line affiliate Telekom Austria. Mobilkom has informed heise online, that, in response to a court order, on a single occasion it stored the total data traffic for one customer over a number of days and forwarded it to the police. In such cases, the interior ministry now wants to replace the use of physical media, with the inevitable delays this entails, with an encrypted connection. ISPs will, however, remain responsible for separating the monitored data stream from overall traffic.

For reasons of redundancy, Mobilkom's network does not have a central point from which all traffic can be accessed. Because the plan has now been made public, the money-saving idea of assigning fixed IP addresses to customers who are to be monitored is unlikely to be able to be implemented. More expensive solutions are likely to be required, though it remains unclear who will bear the ensuing costs.

For those with the patience, the Slashdot discussion may be found here. The discussion includes references to multiple Skype alternatives, including those using open source protocols.

THEY DIDN’T ATTACK SWITZERLAND

Switzerland's policy of armed-to-the-teeth neutrality has led to it being a very prosperous and safe nation. Not surprisingly, their defense policy is everything the U.S.'s is not. Here are a few salient details.

Switzerland has not been in a foreign war of any kind since 1815. This would be astounding, even miraculous, for any nation. But Switzerland borders Germany. And France. And Italy. And Austria. And Liechtenstein. Now Liechtenstein has rarely lashed out in Blitzkrieg in a desperate bid to reign über alles, but all of Switzerland's other neighbors have spent their entire histories invading other countries.

In addition to the encircling foreign marauders, Switzerland itself is composed of four different ethnic groups (German, French, Italian, Romansh) that get along as well as, e.g., Germans and French. They do not even speak the same language.

Yet the Swiss peace prevails through the centuries. The Kaiser did not attack the Swiss. Hitler did not attack the Swiss (though he thought about it a lot). Stalin started to pursue some refugees into Liechtenstein at the end of World War II, but retreated rather than face the Swiss-Liechtenstein alliance. Terrorists do not attack the Swiss.

Nobody attacks the Swiss. Not even the Swiss attack the Swiss; their crime rate is minuscule.

The features of the Swiss system for keeping the peace are simple. They have a president with no power to declare war (of course ours cannot either, but no one has told him). They have a very small professional army, even small per capita. And they have very strict gun control -- by which they mean that every Swiss male must have a gun, except for those who also have to carry a missile launcher or a mortar. Swiss women are not subject to compulsory military service, but many of them frequent the rifle ranges anyway. In the event of any attack on Switzerland, the whole Swiss population becomes the army.

As an additional deterrent against megalomania, the Swiss have rigged the tunnel vaults of their banks for demolition. Any dictator attacking Switzerland will find the gold in his numbered bank account buried in rubble hundreds of meters under mountains swarming with snipers and missile launchers. It is known that Hitler had a numbered account ... maybe that was in the back of his mind when he chickened out.

Switzerland has also provided for defense of the lives of its civilian population against nuclear terrorism. Realizing during the Cold War that nuclear weapons in the hands of power-mad politicians posed a potential public health threat, the Swiss started a nationwide shelter-building program in 1960. By 1991, there were enough shelter spaces in Switzerland to protect everyone in their home or apartment, and also at their workplaces and schools. A Swiss citizen is never more than a few minutes from a fallout shelter with an air filter.

The entire Swiss shelter program was accomplished for somewhere on the order of 35 dollars (1990 dollars) per year per capita. The U.S. spends vastly more every year to support a military capable only of intervening in Third World nations that do not have WMDs.

The huge U.S. war machine could not even intercept civilian airliners on 9-11, let alone credibly stop nuclear-tipped cruise and ballistic missiles from a major power. Nor are there bunkers with filtered air supplies under our glass cities or particle-board suburbs. The only civil defense in the U.S. is for the President and the backup supply of bureaucrats under Iron Mountain. Everyone else is nuclear fodder, except for those provident few (such as the Mormons) who build their own shelters to protect their families.

Switzerland does not send troops to intervene in other nations. Switzerland does not spend tens of billions of dollars yearly to fund dictators around the world, nor did Switzerland donate hundreds of billions of dollars to the Warsaw Pact through bank "loans." Switzerland does not send billions of dollars worth of weaponry every year to the warring tribes in the Middle East. Switzerland has no enemies. Yet the Swiss are armed to the teeth and dug into every hill and under every building.

The U.S. intervenes everywhere, spies on everyone, supports every faction in every fight. We have as many enemies as there are hate-filled people in the world. We have a vastly expensive conventional army (though the best units are marching back and forth in Middle Eastern deserts, Afghanistan, Korea, and other "strategic" places). We have vast numbers of offensive nuclear weapons for murdering the civilian populations of cities (but against whom will we retaliate in the event of an anonymous nuclear terrorist attack?).

But we have no civil defenses for our children, no shelters, no thought-out plan for recovery from attack. In fact, when we suffered a few thousand dead on 9-11, we panicked and did ten times more economic damage to ourselves than the terrorists had. We also let ourselves be suckered into joining a Middle Eastern tribal war without end, on transparently fraudulent grounds.

Worse, our fears have destroyed much of our own Constitutional freedom. Would we be braver now, if a few anonymous smuggled nuclear bombs killed millions? Or would we just descend tamely into dictatorship without a struggle?

Our Founding Fathers studied the Swiss when they designed our system of government. Maybe it would pay us to study the long Swiss peace again ... before it is too late.

A WEAK AND DEPENDENT PEOPLE

Jacob Hornberger, founder and president of The Future of Freedom Foundation, explains the connection between government bailouts and the citizenry's subservience. The Romans did the same thing with "bread and circuses," and the game has been going on ever since.

With its coming bailout of homeowners and mortgage lenders, the federal government refortifies its role as daddy for the American people and the people's role as child-adults who are dependent on their daddy to take care of them.

The bailout, while strengthening the federal government, makes the American people weaker than ever. A people who look to the government for their sustenance and to protect them from their own mistakes and from the adverse vicissitudes of life will inevitably be a weak people.

The economic question is: How long can these paternalistic programs continue? Is the final day of reckoning just being delayed? After all, do not forget that these programs of unfunded liabilities stretch all the way back to the New Deal in the 1930s. Every few years, a new crisis materializes, only to be jerry-rigged by the feds. Most everyone assumes that the process can go on forever.

The government gets its money in one of three ways -- taxation, borrowing, or printing it (i.e., inflation). Regardless of which method is used, it all comes from the pockets of the American people.

It is fairly easy for public officials to issue these types of bailout plans. They just have to pass a law that doles out the goodies. But consider all the potential liabilities the federal government has incurred as part of being the people's daddy. People's retirement (Social Security). People's healthcare bills (Medicare and Medicaid). FDIC insurance for people's bank accounts. The savings and loan bailout. The home mortgage bailout. And countless more.

Most everyone assumes that while there might be a crisis here or there, the federal government will easily be able to deal with it. But what happens if there is a perfect storm of several industry-wide collapses? For example, instead of a few banks failing what happens if there are bank runs on 90% of the banks? How is the government going to cover everyone's losses? By taxing everyone? So, let us see: Someone loses $50,000 because his bank (and everyone else's) fails. To get the money to pay him off (and everyone else), the government taxes him $50,000. How does he come out ahead with that kind of "insurance"?

But hope springs eternal and faith in the power of Caesar never fails. People honestly believe that despite the fact that the federal government has had a system in place ever since the New Deal that sustains and protects weakness, it will go on forever. All that is needed is a new paternalistic program every few years.

Oh, do not forget that the national debt, which continues to grow each day, is now at $9.5 trillion or about $31,000 per person. Five years ago, it was at about $26,000 per person. What if the day came when that debt had to be paid off? Could your family handle the tax to pay off its share of the debt? What if it came on the day that banks were failing on an industry-wide basis? What if it came when the Baby Boomers were all retiring and demanding their Social Security payments?

But why think about such unpleasantries? Heck, maybe if we are lucky we will all be dead when the day of reckoning finally arrives, leaving our children's generation to deal with the problems.

No one can say though that federal officials are dumb. People who are bailed out are likely to be very grateful to their federal daddy for having helped them out. How likely is it that bailout recipients will ever challenge the government at a core level? Who is going to bite the hand that feeds him? Oh sure, people will carp about governmental inefficiency or call for reform of this or that government program, but when it comes to questioning such things as torture, wars of aggression, occupations, warrantless searches, and socialist bailouts, the lips of weak and dependent child-adults are likely to be silent or kissing the boots of their federal providers. That is why Roman officials used "bread and circuses" as they extended the reach of their Empire around the world.

Our American ancestors understood that the more powerful the government is, the weaker the people will be. Thus, it should not surprise anyone that for more than a century Americans lived without such socialist programs as Social Security, Medicare, Medicaid, income taxation, welfare, mortgage bailouts, and the like. Americans also believed it was morally wrong to use government to take money from one person in order to give it to another person.

As federal officials prepare to enlarge their socialist feeding trough once again, alas, the principles of economic liberty and limited government are lost on the weak and dependent child-adult Americans of today who are preparing to do the feeding.

OPENOFFICE.ORG 3.0: WHAT TO EXPECT?

We have reviewed recent major new releases of the Opera (version 9.5) and Firefox (version 3.0) browsers in the last month. OpenOffice.org is soon set to join the parade -- in fact, it appears that OO.o version 3.0 is "widely regarded as an important milestone in the project's development."

Microsoft Office basically lost us after the Office 97 release, and the advent of OpenOffice.org as a credible (and open source/open standards) alternative in the last couple of years has been a godsend. Having said that, we have had trouble taking a out-and-out liking to the suite. It feels bloated, and testing reveals that it is more of a memory and CPU-cycle hog than Office, notwithstanding the later's typical Microsoft feature-creep. This article focuses on the features of OO.o 3.0, but, heartenly, the writer concludes after testing the latest beta: "I also noticed a great improvement in speed, which has always a bane in previous OpenOffice.org versions."

The article contains many large screenshots showing the features being explained.

Around 3 month ago OpenOffice.org released its 2.4 boasting quite an impressive arsenal of advancements. However if you thought 2.4 was major release, then you have seen nothing! Come September, OpenOffice.org will release its 3.0 version! That must be quite a big jump! The upcoming 3.0 version is widely regarded as an important milestone in the project's development. Here are some of the advancements I am most excited about:

Writer [The suite's word processor]: With version 3.0 Writer comes with a plethora of interesting advancements. You will have the option of different views, either single page, multiple pages side by side, and book view. A zoom slider has been added on the bottom right corner of the screen, which is admitingly something we saw in Office 2007 first, but definitely a welcomed feature. Slick new notes feature that lets you add colored notes and comments on the margins instead of the old inefficient notes method, which I never used! Changing language spell check is now easily available in the menu -- very handy for multi-language documents. Someone like me needs such flexibility with English/Arabic documents I alway have.

Native Mac OS X Support: I remember once a friend was complaining about Arabic integration in MS Office on his Mac (or lack of it), so I suggested OpenOffice.org. Little did I know that there were other packages that we needed to install (X11 and whatnot). We had to jump through a lot of hoops to get it working. With OpenOffice.org 3.0 this is not an issue anymore, OpenOffice will natively support Mac OSX!

Microsoft Office 2007 Import Filters: I used so simply loath receiving a document with a filetype ending with "x" (docx, pptx, xlsx)! What a retarded extention, it sends shivers down your spine. Well not anymore, with OpenOffice 3.0 you can directly import them and start editing away! Although, up to now the importation is not perfect, but we know who to blame over there ...

New Theme in Calc [The suite's spreadsheet]: Now we get a much more polished glass theme and translucency! Here is a comparison between the old and new.

Presenter Different Screens: This always seemed logical to me, am not sure if is available in Office or not, but it is great to see in OpenOffice 3.0. Basically in presenter you get to see a different screen than what is on the projector. You get preview of the next slide, elapsed time, notes and comments.

Native Tables in Impress [the suite's presentation module, similar to MS PowerPoint]: Tables has been OpenOffices's Achilles heal when compared to Microsoft Powerpoint. One had to resort to clumsy drawing of the tables! Not anymore!

Import PDF: Although still not implemented in the beta version I installed, this feature is expected to be up and running in the final release come September.

OpenOffice has long had a good, native PDF export facility. This ability to import PDF files is something we are looking forward to. Here is a review of a beta version of the PDF import extension.

Conclusion: OpenOffice 3.0 is a major milestone for the project, there are tons of other new features. I also noticed a great improvement in speed, which has always a bane in previous OpenOffice.org versions.

If you cannot wait until September, why don't you download the beta version and try it out, so far it has been very much stable for me. You can download OpenOffice.org 3.0 beta here.

HOW TO MAKE THE RIGHT DECISION IN ANY SITUATION

Some helpful advice in negotiating life's twists and turns from the people at Lifehack (great name).

Which job should you take? What car should you buy? Should you ask him to marry you? Are you ready for another baby? Is this house right for you, or should you keep looking before you make an offer?

Life is full of hard choices, and the bigger they are and the more options we have, the harder they get.

As it happens, our brains are fairly binary. They can react very quickly when presented with two options, especially when one is clearly better. Stand here and drown in the rising waters or jump onto that big rock and be safe? Easy choice.

When presented with more options, though, we choke up. Jump onto the rock or climb the tree? We do not know which is clearly better, and research shows that most people will not choose at all when presented with several equally good options.

Practice, experience, and rules of thumbs can help us to make those split-second decisions (for example, "When in doubt, go left" has done pretty well for me so far). Fortunately we do not normally face immediate, do-or-die decisions -- we usually have the luxury of working through a decision.

Getting Past Pros and Cons

The old chestnut of decision-making is the list of pros and cons. You make two columns on a piece of paper and write down all the positive things that will come of making a choice in one column and all the negative things in the other. In the end, the side with the most entries wins.

But this strategy does not take into account the different weight that each positive or negative might have. If one of your pros is "will make a million dollars" and one of your cons is "might get a hangnail," they do not exactly cancel each other out.

Some people counter this problem by assigning point values to each item in their list. A huge income might be worth +20 points, while a tiny risk might be only –1. This helps make a more realistic assessment of your options.

But pros and cons are not always apparent or obvious, and the whole list-making process does not sit well with many people -- especially impulsive, "seat-of-the-pants" who might feel unnaturally hampered by the formality of the pro and con list.

Here are some other strategies for making big decisions. Not all of them will work for every person or for every decision, but they all have something to offer to help you clarify your thinking and avoid "decision paralysis" while the water rises around you.

Analyze Outcomes

Working through a big decision can give us a kind of tunnel vision, where we get so focused on the immediate consequences of the decision at hand that we do not think about the eventual outcomes we expect or desire.

When making a choice, then, it pays to take some time to consider the outcome you expect. Consider each option and ask the following questions:

• What is the probable outcome of this choice?
• What outcomes are highly unlikely?
• What are the likely outcomes of not choosing this one?
• What would be the outcome of doing the exact opposite?

Thinking in terms of long-term outcomes -- and broadening your thinking to include negative outcomes -- can help you find clarity and direction while facing your big decision.

Ask Why – Five Times

The Five Whys are a problem-solving technique invented by Sakichi Toyoda, the founder of Toyota. When something goes wrong, you ask "Why?" five times. By asking why something failed, over and over, you eventually get to the root cause.

"Why did my car break down? A spark plug failed. Why? It was fouled. Why? I did not get a tune-up. Why? I was too busy playing GTA4. Why? Because I am miserable and lonely and the people in the game are the only ones that really love me.

See? Your car broke down because you are a sociopath.

Although developed as a problem-solving technique, the Five Whys can also help you determine whether a choice you are considering is in line with your core values. For instance:

Why should I take this job? It pays well and offers me a chance to grow. Why is that important? Because I want to build a career and not just have a string of meaningless jobs. Why? Because I want my life to have meaning. Why? So I can be happy. Why? Because that is what is important in life.

Notice that you sometimes have to change how you ask "why" to keep the questions focused inward rather than outward to irrelevant external factors. It would not do any good to ask "Why does this job pay well and offer me a chance to grow" since the important thing is that it does, not why it does.

Follow your instincts

Research shows that people who make decisions quickly, even when lacking information, tend to be more satisfied with their decisions than people who research and carefully weight their options. Some of this difference is simply in the lower level of stress the decision created, but much of it comes from the very way our brains work.

The conscious mind can only hold between 5 and 9 distinct thoughts at any given mind. That means that any complex problem with more than (on average) 7 factors is going to overflow the conscious mind's ability to function effectively -- leading to poor choices.

Our unconscious, however, is much better at juggling and working through complex problems. People who "go with their gut" are actually trusting the work their unconscious mind has already done, rather than second-guessing it and relying on their conscious mind's much more limited ability to deal with complex situations.

The Choice is Yours

Whatever process you use to arrive at your decision, your satisfaction with your decision will depend largely on whether you claim ownership of your choices. If you feel pressured into a choice or not in control of the conditions, you will find even positive outcomes colored negatively. On the other hand, taking full responsibility for your choices can make even failure feel like a success -- you will know you did your best and you will have gained valuable experience for nest time.

Previous	Back to top	Next