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

W.I.L. Offshore News Digest :: December 2009, Part 1

This Week’s Entries :

ZIMBABWE: A FRESH START

Economy is recovering rapidly now that the central bank has gone out of business.

The long agony of Zimbabwe perhaps hit its nadir with the abandonment of the Zimbabwe Dollar as the local currency this past February. This did not reduce the citizens to bartering – notes of other currencies such as the U.S. dollar and euro are now filling the transactional function of money.

Without a local currency whose quantity in circulation can be increased at whim, a major avenue of theft by Robert Mugabe and his cronies is gone. Price controls and foreign exchange controls were ended ... there was nothing left to peg prices, of real goods or foreign currencies, to! Consequently, “Supermarket shelves, bare in January, are now bursting with products.”

Quite a story, and perhaps a lesson for what awaits the U.S. and other “developed” countries whose central banks and politicians are probing how much currency destruction they can get away with without collapsing the whole system.

In February 2009 Zimbabwe was the only country in the world without debt. Nobody owed anyone anything. Following the abandonment of the Zimbabwe Dollar as the local currency all local debt was wiped out and the country started with a clean slate.

It is now a country without a functioning Central Bank and without a local currency that can be produced at will at the behest of politicians. Since February 2009 there has been no lender of last resort in Zimbabwe, causing banks to be ultra cautious in their lending policies. The U.S. dollar is the de facto currency in use although the euro, British Pound and South African Rand are accepted in local transactions.

Price controls and foreign exchange regulations have been abandoned. Zimbabwe literally joined the real world at the stroke of a pen. Money now flows in and out of the country without restriction. Supermarket shelves, bare in January, are now bursting with products.

I recently visited Zimbabwe in the company of a leading Australian fund manager. As a student of monetary history, I was interested to see what had happened to a country that had suffered hyperinflation. How did the people cope? How is the country progressing now? The current Zimbabwean situation is complicated by the fact that President Robert Mugabe is determined to stay in power whatever the cost.

The first part of this article deals with economics, the hyperinflation and current situation, which is a picture of recovery and potential vigorous growth. The second part deals with politics, both the historical aspects as well as current developments, which are extremely fluid.

We were fortunate to have private interviews with the Prime Minister, Morgan Tsvangirai, and a wide range of business leaders. This provided a quick picture of Zimbabwe past and present.

There are common denominators in all hyperinflations. Generally government finances reach a point where large budget deficits cannot be financed by taxes or borrowings. The choices come down to austerity (with the government cutting back its spending) or by funding the deficit by creating local currency through the printing press, leading to the inflation tax. This is always a political decision, but the line of least resistance is the printing press. Cutting government expenditures and laying off bureaucratic staff is anathema to most politicians.

In Zimbabwe, Robert Mugabe has made it his mission to remain President for life. This has caused him to infiltrate his supporters into the army and police force. He also used Government finances as a way of funding patronage. His use of the printing press was liberal and nobody was prepared to stand up against him. This eventually led to inflation gathering momentum to the point where the armed forces were getting rebellious – they wanted more money. When Mugabe caved in to these demands, the Zimbabwe Dollar plunged.

Shortly after Mugabe was elected President in 1980, the Zimbabwe Dollar was worth more than the U.S. Dollar. The ongoing abuse of the financial system eventually produced a runaway inflation. The largest bank note issued in Zimbabwe was for 100 trillion Dollars and is pictured below. These notes are now collector’s items and I had to part with US$2 to a street vendor to acquire the note depicted below.

The worst trauma for ordinary people during the hyperinflation was lack of food. This was due mainly to the imposition of price controls. If the cost of production of an item was $10 and the price controllers instructed that the item could only be sold for $5, the business would soon go bankrupt if they sold at the controlled price. The result was that production and imports just dried up, hence the empty shelves in the supermarkets.

People survived by shopping in neighboring countries and relied on assistance from South Africa and the aid agencies. Companies survived the hyperinflation with great difficulty and often by ignoring laws. Although companies were left without debt post February 2009, they were also left deficient in working capital and had dilapidated plant and equipment. Regular repairs and maintenance could not be afforded. Most companies now require urgent recapitalization.

There has been a major exodus of Zimbabweans over the years, estimated at about 3 million prior to 2008. Many of these were qualified people who were subjected to Mugabe’s campaign of terror. During the latter stages of the hyperinflation there was a further exodus because people were starving. Most of these people went south into South Africa. The current population of Zimbabwe is estimated to be between 10 and 12 million people, so the numbers that have fled the country are significant relative to the total population.

Current economic activity is strongly supported by remittances from Zimbabwean migrants to their families in Zimbabwe. Once the political situation settles down, it is likely that many of these migrants will wish to return to Zimbabwe. Some have already done so. Many activities that perished in the hyperinflation, such as insurance, are now starting to resuscitate.

Credit financing activities are starting to revive. Visa credit cards are once again operating successfully in Zimbabwe, others will surely follow. Banks have had both sides of their balance sheets devastated by hyperinflation and now have no lender of last resort to call on. They are understandably cautious in lending the deposits that are slowly filtering back into the system. Banks also lost much of their equity capital. Barclays Bank survived because it had 40 branches where the bank owned the real estate and had a strong parent. These properties plus some foreign currency holdings represent the equity capital on which the bank currently operates.

In a country with no debt, only assets, people and companies are under-geared. With the ultra cautious lending policies of the banks, there is a huge opportunity for foreign investors in the credit purveying industry.

There has been a sharp rise in economic activity since February. Real wages have risen substantially compared to a year ago. Whatever workers were paid in Zimbabwe Dollars during the hyperinflation bought virtually nothing. Now even the minimum wage of around $100 per month allows for basic purchases. A 10kg bag of maize meal, a staple in the local diet, costs $3.50 and lasts for two weeks. Demand for products and services is increasing rapidly. Corporate profits are rising, leading to greater tax revenues for the Government, augmented by rising VAT taxes. Greater Government revenue allows for greater Government spending.

This self-reinforcing loop will continue. The improvement in the economy will become dramatic once Mugabe leaves the scene. At that time aid agencies, NGOs, charities and foreign governments will start injecting large volumes of funds and assistance into the country. They refuse to commit any meaningful funds while Mugabe is still the President.

With Mugabe out of the way and the economy recovering strongly, one could reasonably anticipate that a large proportion of the Zimbabweans living overseas will return to the country bringing welcome skills and capital. Indeed foreigners will also be attracted to investing in the country in those circumstances.

It is fascinating to see how rapidly the economy is recovering. It is a great testament to what can be achieved in a free enterprise environment by the elimination of controls combined with the institution of new money that people trust. It needs to be money that their Government cannot create via the printing (or electronic) press.

The economic future of Zimbabwe is likely to be in mining, agriculture, tourism and service industries, especially those providing infrastructure and maintenance facilities. There remain many problems, not the least being chronic unemployment, but the future looks bright beyond the Mugabe horizon. The population is amongst the best educated in Africa and most people can speak English. With the Zimbabwe’s natural assets, there is scope for realistic optimism about the economic future, especially once the current political difficulties are overcome. The population has been brutally traumatized by the hyperinflation and the political situation. They really deserve a decent change of fortune.

The Political Situation

To understand what has happened and is happening in Zimbabwe, it is necessary to look at some history. Modern Zimbabwean history began in 1890 with the arrival of the Pioneer Column of white settlers under Leander Starr Jameson at the behest of Cecil Rhodes. Initially they were searching for gold but when nothing of importance was found, they turned to pegging land for farms. The initial settlers were fortune hunters, grabbing land at every opportunity.

Prior to the arrival of the white settlers, the Shona tribe occupied the northern part of the country called Mashonaland, and the Ndebele tribe were ensconced in the south, called Matabeleland. In 1896 these tribes rebelled against white rule in one of the most violent episodes of resistance in the colonial era. In Matabeleland a somewhat dubious settlement was negotiated but in Mashonaland the Shona chiefs were hunted down until all resistance ceased. No peace treaty was ever signed with the Shona tribe.

The Shona, in particular, have never forgotten this. Mugabe, who is from the Shona tribe, has made it his life’s work to recover for his people the land that was “stolen” by the whites. He has repeated this statement on many occasions.

A book by Martin Meredith titled Mugabe: Power, Plunder and the Struggle for Zimbabwe published by Jonathan Ball, gives a very readable account of the recent history of Zimbabwe up to 2006, prior to the worst of the hyperinflation. It is required reading for anyone wishing to gain a balanced understanding of what has happened in that country with an emphasis on the period since independence was granted in 1980.

Returning to the white settlers, there was always an unfair division of land between whites and blacks. This was accentuated after the Second World War when Rhodesia benefited from an influx of white immigrants. Farming boomed as a result of better equipment, better farming methods and better seeds. The number of white farmers increased from 4,700 in 1945 to 8,600 in 1960, increasing the demand for white occupied land. The black population was also expanding and African grievances over land eventually swelled to voluble protest. This is the background to the land invasions on white farms over the last decade. Mugabe was making good his promise to return the land to his people.

In 1962 Ian Smith’s Rhodesian Front party swept to power on their policy of maintaining the status quo for the white farmers. During the 1960s Britain was in the process of granting independence to its various colonies. Smith attempted to negotiate independence for Rhodesia but Britain would only accede to this if it was on the basis of democratic (one person, one vote) elections. Smith was intent on entrenching white minority rule “forever,” so Britain refused.

On 11 November 1965 the Smith government made a Unilateral Declaration of Independence which they claimed had precedent in the USA Declaration of Independence in 1776. This triggered a range of reactions. Sanctions were imposed by Britain and the United Nations. The black population was outraged, leading to the formation of black resistance movements aimed at changing the government.

Smith introduced the Law and Order (Maintenance) Act which allowed the government to literally do anything without recourse to the courts or rule of law. One of his first acts was to imprison four black nationalist leaders without trial or publicity. Mugabe was one of these four and he spent the following 11 years in prison. He was released in 1974 during a brief ceasefire between the Rhodesian forces and the liberation movements. Mugabe took the opportunity to escape across the border into Mozambique where he became leader of the resistance movement and was instrumental in organizing many terrorist raids on farms in Rhodesia.

The terror war became increasingly vicious on both sides. Rhodesian forces regularly crossed into neighboring territories, dealing brutally with the local population suspected of harboring terrorists. The neighboring countries eventually insisted that a peace deal be consummated. They would no longer tolerate liberation movements on their soil. Mugabe reluctantly agreed. The guerrilla war had spread to all corners of Rhodesia, forcing Smith to also come to the negotiating table.

In early 1980 the country became independent and changed its name to Zimbabwe. Mugabe stunned everyone by gaining 63% of the popular vote at the first elections. Despite claims of vote rigging and intimidation of voters, the numbers were so overwhelming that it was conceded that Mugabe had won and he was elected President of Zimbabwe. People just wanted peace.

Mugabe, despite initial claims of moderation, set about entrenching himself as president, a position he wanted to claim for life. Surprisingly Mugabe did not repeal the Law and Order (Maintenance) Act that the white regime had used to cover its many evil acts. Mugabe relied on its terms to justify the terrible things that he perpetrated over the ensuing 3 decades.

These atrocities are recorded in Martin Meredith’s book Mugabe and there is no point detailing them now. Suffice to say that he was bent on eliminating his opponents and intent on punishing anyone who criticized him. His Zanu-PF people infiltrated the army and the police force and were at his beck and call to act as thugs when required. Faithful people were rewarded with a range of patronage that he dispensed.

He found a compliant partner in the Governor of the Reserve bank, which became Mugabe’s source of funds to pay his people and to dispense his patrimony. Needless to say, much of the money came from printing new Zimbabwean dollars, which caused inflation to gradually increase. Finally the army and police forces to got cranky, publicly demanding much higher pay. ...

Clearly Mugabe was responsible for the hyperinflation. The causes were those always present in these events. A weak economy, large government budget deficits, inability to borrow funds combined with the political decision not to cut Government spending. Governments are reluctant to lay off government employees, especially those related to the armed forces. The latter might invite a military coup. The only source of funding left is the creation of new money.

A very important factor in assessing the current situation is that Mugabe no longer has his own private source of funds to continue with his system of patronage. The army, police force and civil servants are paid by the Unity Government. Mugabe’s power base must be disintegrating rapidly. He has also become very unpopular. It seems unlikely that he could win an election again, even if he managed to get his thugs to resort to intimidation. People identify Tsvangirai and the MDC with the new monetary disposition and the improved economy, while Mugabe is correctly blamed for the trauma of hyperinflation.

There is also the question of sanctions. In recent speeches Mugabe has said that it was time for sanctions against Zimbabwe to be removed. This is nonsense. It is Mugabe and 200 of his associates who are under sanction by the U.S. and other countries under the Zimbabwe Democracy and Economic Recovery Act. This prevents them and their families from travelling overseas and freezes their external bank accounts.

This combination of circumstances, combined with the fact that he is 86 years old, suggests that Mugabe must be under pressure to resign. It is a logical deduction that behind the scenes Mugabe must be attempting to negotiate a form of amnesty against prosecution. The next month is important as the SADC, which guaranteed the terms of the recent Unity Government, has given Mugabe until 6 December 2009 to comply with all outstanding issues. Details of developments and current Zimbabwe news can be found at ZimbabweSituation.com.

THE BEST PLACES IN THE WORLD TO START A BUSINESS

There is quite literally a world of opportunity out there ... and this goes especially for business.

Simon Black tosses off his nominations for the best places in the world to do business, naming six in all. A couple of surprises – Cyprus and the United Arab Emirates – but, heck, that just goes to show how dymanic the world’s business environment has become.

And what about starting a business now? Yes, there has been a slowdown in the OECD countries, as overindebted consumers retrench. (Their governments have yet to follow suit.) As Black puts it: “Western consumers were concerned with which expensive car to buy. Today, the problem has shifted to preservation of wealth. In the East, consumers used to be concerned with putting food on the table. Now they need to know which car to buy.”

Entrepeneurs feed on opportunity, which comes from change. And change we have. As for the jurisdictions given and their fit: “As I travel, I see many places that are extraordinarily compelling for talented entrepreneurs because of a combination of business opportunities, tax advantage corporate structures, and low cost of doing business.”

I hold it as a guiding principle that there is quite literally a world of opportunity out there ... and this goes especially for business. Years ago, there were limited consumer markets available where entrepreneurs could sell their products and services. Today, the playing field has truly leveled.

Emerging Asian economies have a burgeoning middle class that numbers in excess of 1 billion people with discretionary spending power. The Persian Gulf region is home to millions of tremendously wealthy individuals with a strong propensity to consume. Former communist states like Russia have developed significant wealth and consumptive behavior.

Moreover, groups of countries have formed large trading blocks to facilitate commerce in the region, opening up enormous markets to entrepreneurs. The European Union and South America’s Mercosur are two such examples.

The Internet and global logistics solutions have brought all of these consumers together with entrepreneurs. Mainstream media in the west has routinely run stories about doom and gloom in the global economy, but as I put boots on the ground around the world, I can see with my own eyes that the economy is not dead.

I recently spent about 3-months in Asia, and I am penning this essay having just left Monaco, traveling across Southern France on my way to Spain. There are clearly certain elements of economic slowdown around the world, but I can say with certainty that both businesses and consumers are still out in force.

Fundamentally, business is about offering a valuable product or service that solves a problem or meets the needs of customers. In the west, the economic slowdown has affected discretionary spending to a degree – consumers are spending less. More importantly, though, what they are spending their money on has changed.

Consumers will always have problems that need to be solved and these problems change over time. Years ago, western consumers were concerned with which expensive car to buy. Today, the problem has shifted to preservation of wealth. In the East, consumers used to be concerned with putting food on the table. Now they need to know which car to buy.

A good entrepreneur can adapt quickly to changing market conditions in order to meet the needs of customers. As long there are consumers, there will always been needs to fulfill, problems to solve.

As I travel, I see many places that are extraordinarily compelling for talented entrepreneurs because of a combination of business opportunities, tax advantage corporate structures, and low cost of doing business. I outline some below:

Singapore – As one of Asia’s financial capitals, Singapore has developed a reputation for stability and opportunity. As an English-speaking jurisdiction with a strong financial infrastructure, it seems as if Singapore was literally created for entrepreneurs.

By submitting a valid business plan to the government through an online, streamlined process, foreign entrepreneurs can acquire residency (and eventually citizenship) as well as a host of government incentives and funding guarantees. It also makes a great base to take advantage of the growing Asian consumer market.

Panama – With a large English-speaking population and close proximity to the United States and South America, Panama is a great place to structure a business. Its corporate entities and zero-tax environment are very favorable for entrepreneurs, and with a spate of capital-intensive projects in the region, the country is ripe with opportunity.

Many foreign companies, for example, are profiting from the Panama Canal expansion project, as well as several highway infrastructure projects. Labor costs are incredibly low, and like Singapore, there are residency-through-investment programs that are great for entrepreneurs.

Cyprus – As a small English-speaking island nation in the European Union, Cyprus-based businesses have access to the nearly half-billion European consumers across the continent. Starting a company there is quite simple, and with a transparent 10% flat tax on income, it is easily one of Europe’s best business jurisdictions.

U.A.E. – Dubai has received a lot of bad press lately, but frankly, it is still a good place to do business. In the years to come, Abu Dhabi will be even better. The two emirates are English speaking, have absolutely no tax whatsoever, and an incredible store of consumer wealth.

It is possible for foreigners to start a business in one of the many free zones with very little paperwork or hassle, and there is a vast pool of talented employees in the region. Fortunately for entrepreneurs, there are few cumbersome labor laws to deal with in the emirates, so hiring and firing employees is incredibly simple, based solely on contracts.

Malaysia – How do you spell cheap? Labor costs nothing in Malaysia, and as home to one of the region’s emerging offshore centers, entrepreneurs will find a low-cost, low-tax domicile with access to over one billion consumers in the region.

There are certainly other places that I would strongly consider as a great place to do business; these are only a few, and I rate them on the viability of their corporate structures, cost of doing business, and local opportunities available. I firmly believe, though, that opportunity is everywhere, even in places where the economy is failing.

In business, an entrepreneur just needs to be able to spot the opportunity, and the more one travels, the more opportunities become apparent. I do my best to discuss the opportunities that I see on the ground in this letter, and I welcome your feedback and ideas based on what you are seeing.

THE HONDURAS ELECTIONS: THE STRAIGHT STORY

The were tested in 2009, and now realize how powerful they really are.

The Honduran presidental election on June 28 resulted in the removal of the standing president and his exile. Another Latin American coup? The ex-president had buddied up to Chavez, Ortega and Castro, and had violated Honduras’s laws and constitution. His removal was a victory for due process and the rule of law, not arbitrary military force. But that is not how the Obama administration seemed to relate to the process. Some have wondered whether Obama disapproved of the removal of a leftist comrade from power – but that is the subject for another day. Here is the straight information about what actually happened on that election day.

2009 has been a historic year in the evolution of the democratic Republic of Honduras, and November 29th may be the day that turned things back on track.

The people of this tiny nation in Central America did not realize how powerful they really are until they were tested. Already one of the poorest nations in the Western Hemisphere, Honduras suffered some devastating blows this year; on May 28th an earthquake measuring 7.3 on the Richter scale shook most of the country.

Centering just 30 miles North West of the Caribbean Bay Islands, there was thankfully very little damage; some bridges collapsed on the mainland and a few buildings suffered damage, but no lives were lost and no injuries reported. While small shakes are not uncommon in the region, a major earthquake has never occurred before.

Just one month later, on June 28th, the country woke up to another kind of shock; the President of the country had been removed from power and the Presidential Palace in the early hours and taken out of the country.

Buddy of Chavez, Ortega and Castro removed ... legally.

Unlike the month before, this action was seen as a cause for celebration; the unpopular President Zelaya, who ran on a conservative platform, had become increasingly unpopular as he gravitated to the leftist ideals and friendship of Chavez, Ortega and Castro. The action was precipitated by his violation of the law and the constitution, which requires immediate removal from power in this case. So, acting on orders of the Supreme Court, the Attorney General and Congress, he was removed.

Without checking the legality of these actions the U.S. and the world jumped to the conclusion that Honduras had relapsed into a military coup.

Perhaps understandably, and without checking the legality of these actions, the U.S. and the world jumped to the conclusion that Honduras had relapsed into the kind of military coups that were not uncommon decades ago in other Latin American countries. Honduras was severely berated by most of the world – essential aid was cut off, visas cancelled, tourism collapsed, jobs were lost ... and a poor country got poorer.

The General Election was scheduled for November 29th and the party candidates had been elected last year, under Zelaya’s presidency, but Zelaya was determined to create unrest and stop the election from occurring. He was not successful in that endeavor; the people of Honduras stood up to his bullying tactics, and insisted on the elections going forward.

The U.S. backed off its first condemnation and insistence that Zelaya be restored to power, if the elections were determined to be free and transparent with observers from outside Honduras. Here’s what happened:

The World Responded

The world responded with observers from 36 countries answering the call and coming to Honduras to observe the November 29th election. I was honored to be one of the 495 international observers who witnessed firsthand how the people of Honduras selected their next President. In the Bay Islands there were representatives from Columbia, Canada, Holland, Ireland, Italy, the United States and the United Kingdom. Just a few of the international organizations who sent observers are: It should be noted that both NDI and IRI are funded by the U.S. government.

The election was conducted under authority of the TSE, the Honduran Supreme Electoral Tribunal, and a 4-member body appointed by Congress under Zelaya’s presidency, which is independent of the Executive Branch. This is the only body which can authorize national elections; even a President cannot call for any type of national ballot.

Also instrumental in the organization and process was the Union Civica Democratica, an umbrella and civil society organization which is non-political and gives no endorsements. They oversee social welfare, rule of law and human rights. UCD was charged with ensuring a free and transparent election with safety and security for everyone and no political pressure by any party.

There was to be equal reporting opportunity by the media – small radio and television stations in less populated areas were to be given the same opportunities as major conglomerates.

Military and Police are not allowed to vote

It is a crime to disrupt an election, punishable by up to seven (7) years in prison. The people responsible for the security and safety of the election, the military and the police, are not allowed to vote, under the constitution.

In anticipation of any disruptions an additional 17,000 reservists were called into action throughout the country and contingency plans were in place with the police, military and political parties cooperating as never before.

There were multiple layers of security at all polling stations. The most vulnerable time for disruption is when the voting materials are being distributed to the sites, and there was an unprecedented level of security for the convoys, who delivered by road, boat and air to each of the 5,300 polling stations throughout the country.

This election was the most high-tech election ever in Honduras, a typically low-tech country. In past elections, when the polls closed the ballot boxes were sealed with tape and delivered to a central source, where they were opened and counted in the presence of all the political parties.

The problem with this system is that it often took days to receive and count all the votes from isolated regions, and the opportunity for fraud increased due to the delays in reporting.

In this election, each polling station counted its own votes and had a secure, coded cell phone which the head of the polling station used to call in the results to election central in the capital city of Tegucigalpa on a line which only accepted the prescribed network of phones and required additional access codes for each reporting site.

So, the results were immediate and the ballots followed as soon as possible. The tabulation was recorded in the presence of all the political party representatives.

The political parties are: The following is a description of how the polling stations were set up and the oversight was handled. There has been so much inaccurate reporting of events from Honduras that I believe it is important to report exactly what happened, why it happened and how it happened from personal observation on the inside of the election.

At each polling station there was a representative from the 5 political parties who observed and facilitated to voting. They elected a president, secretary, recorder and 2 Vocals, or other observers. Also present was an International Observer who had complete access to any and all parts of the voting station, surrounding area and documents.

These observers could ask any clarifying questions of any of the personnel and had a form to fill out with their observations. Also present at each location were at least two (2) military and two (2) police personnel. Only two (2) voters were allowed in the voting area at a time, so although the process wasn’t particularly efficient, it was extremely thorough and secure. The polls closed at 5 p.m., at which time each of the election officials voted, following exactly the same process, except they were recorded separately in a different book.

The president then ordered the official materials box opened and he read a checklist to the official representatives. They checked the materials and followed a prescribed sequence for invalidating all unused ballots, stamping each unused ballot and counting them, recording the numbers and placing them in color-coded bags inside the official box.

The first ballot box was opened and the president brought out the votes one at a time and declared them valid or invalid, seeking affirmation from each national observer. All ballots were stamped. The number of ballots cast was then recorded. This process was repeated for each ballot box, so that all ballots, used or unused, valid or invalid, were accounted for…and no-one went home until the numbers matched.

All materials were secured according to the checklist, even each stamp and the official ink. The box was sealed and ready for transport to election central. The final act was for the president to call in the results.

It was a very long day, but one I will never forget and am honored to have been a part of. There was no pressure or interference of any kind and nothing even remotely violent. All of our members reported similar observations that the election process in Honduras is VERY transparent and fair.

There are multiple layers of verification to ensure that only the properly registered person voted and that the defined electoral process is followed to the letter. The polling places were accessible to all citizens. The military and police provided security but were not a hindrance to the process.

They were in fact very helpful, professional, and courteous. The people working the polling stations were well trained and committed to having a fair and clean election. The general demeanor of the people at all the polling places was one of happiness.

There was a sense of pride among the voters as well as those working the polling stations. I would like to also show a statement written by the Washington Senior Observer Group reporting their observations throughout the country:

Statement on the National Elections in Honduras

November 29, 2009

Washington Senior Observer Group

At the invitation of the Union Civica Democratica and the Supreme Electoral Tribunal (TSE), the Washington Senior Observer Group traveled to Honduras to participate as international observers in the Honduran national elections of November 29, 2009. We joined over 600 observers from at least 31 countries who were present to observe and support the democratic process.

Members of this observer group visited over 75 different polling centers and entered hundreds of classrooms where the voting took place. We spoke with literally thousands of Hondurans. We witnessed the enthusiastic desire of thousands of Honduran citizens to cast their ballots. Many took time to thank us for our presence today.

Without exception, they expressed confidence in the electoral system, pride in exercising their right to vote, and a profound hope that their election is a decisive step toward the restoration of the constitutional and democratic order in Honduras.

The voting stations were accessible to all, adequately supplied with carefully-controlled voting materials, and fully staffed and supported by national observers from participating political parties. We witnessed no voter intimidation by any group, individual, or party.

While there was there was a police and military presence to provide security, we noted how the military and police conducted themselves in a professional manner. Incidents reported to us, such as late openings and locked voting stations, were quickly resolved and did not significantly disrupt the voting process. Our observations coincide with those reported by other observers and by the media throughout Honduras.

We witnessed a free, fair and transparent voting process conducted by committed and conscientious citizens. We commend all members and volunteers of the TSE for the professional and independent manner in which they conducted today’s elections. ...

On a personal note, and my lasting memory of this historic day, as I said goodbye to the Honduran officials in my polling station, they all stood and applauded me for my participation and for caring enough about them to spend my day observing and reporting their election. I will NEVER forget that.

A President named Pepe

The new President-elect of Honduras is Porfirio Lobo, known to all as “Pepe.” He is the candidate of the National Party. The removed President Zelaya and the interim President Micheletti are with the Liberal Party.

What will the U.S. do now?

President Obama agreed to recognize the Honduran election as long as it was fair and transparent. Done, and reported as such. 61% of registered voters cast their ballots in this election and Pepe won with well over 50% of the vote, so he is clearly the choice of the Honduran people. One of the first public statements Pepe made after claiming victory was that he will help form an interim unity government within 30 days to finish the current government term; a requirement of the U.S. government.

On December 2nd, the Honduran Congress complied with yet another requirement of the U.S. government, and voted 111 to 14 in favor of upholding the Supreme Court decision to remove Zelaya and not return him to the Presidency to serve out the remaining two (2) months of his term. That would seem to fulfill the requirements the U.S. government imposed on Honduras this time around. Will the U.S. now allow the small but courageous country and people of Honduras to move forward?

PRACTICAL INTERNET PRIVACY – POSTSCRIPT

More tips.

Paul Green wrote a comprehensive introduction to internet and telecommunications privacy this past August. Here he follows up with an equally useful set of “more internet privacy related tips, extras, and favorite solutions.”

It is easy to feel overwhelmed by the comprehensive list of apparently necessary protective steps. A closer look reveals that (a) there are certain key privacy enabling technologies, in particular virtual private networks (VPNs), and (b) laying low on the internet is a discipline and a state of mind as much as a bag of tricks. Once your mental filter is set to “protect” then you start to retrain your habits towards lowering your profile.

I am glad so many found the article “Practical Internet Privacy” helpful. Thank you for the email. Many also mentioned the earlier article on ethical problems with intellectual “property” – some even professed to a “conversion” on the matter ...

In line with this, I am pleased the privacy article has been copied far and wide on blogs and newsletters. But please note that I have no connection with “PrivacyWorld,” who credited themselves – not LewRockwell.com – leading others in good faith and better manners to credit them. The same goes for another “anti-illuminist” site which replaced links with MLM junk – leaving my name on it. Always check your sources. ...

Here then, are some more internet privacy related tips, extras, and favorite solutions.

Remember that the idea is to maintain “two sets of books” – that you do not need or even want everything you do to be private:

Internet Privacy Recap

For those things you do want to “privatize,” here are the basics again: In this way, you can take control of your “data trail” or “data dossier” – the sum total of what converging databases, retained logs, and available government and private records hold about your life. With Google (backed by the NSA/CIA), Facebook, banks, cards, telcos and internet providers all helping to build up that profile for the state anyway – you can choose what they get and what they don’t.

State-of-the-Art Surveillance

In the U.S., it is possible that a small independent internet provider might not be retaining or passing on your data – certainly a privacy advantage, if available. But the big players, including their local affiliates, certainly do. They still have “NSA rooms” and most of what they did illegally has since been legalized, together with retrospective immunity.

However, technology is now making even this obsolete. Surveillance is morphing into little more than a bump on a fiber-optic cable:

Most internet traffic passes through a relatively few exchange points and, internationally, there are only about 30 main fiber-optic highways. Maybe you remember last year, when millions had their internet cut off due to mysterious cable damage?

It is a simple matter to tap fiber-optic cables at key points and from there via dedicated cables, send traffic straight to the NSA. This agency has at least three major supercomputer data centers. One reportedly takes up 6 acres underground, with the latest in Utah taking up a million square feet.

A CNet surveillance article here is supported by up-to-date tech details here from a presentation at this year’s Black Hat security conference. The analysis is good – but I doubt if, in practice, surveillance is so well implemented.

Super secrecy – aside from helping cover-ups – helps to create an exaggerated aura of invincibility. The good news is that governments are not omnipotent. In that regard, they are merely significant but also incompetent wannabes – and thank God, always doomed to failure sooner or later. Our job is to make it sooner, while in the meantime treating them as obstacles to be overcome. Here is one way:

Bypassing Censorship

Military, government and big corporate environments often block access to unapproved websites – with Australia, China and some other governments even filtering their whole countries.

On a public or shared computer in some of these places, you may not be able to install a VPN connection. So here are some other practical ways around censorship:

Website names work very much like a phone directory – the name is used to look up the actual number (“IP address”). Censorship often targets these directories (called Domain Name Servers – “DNS”). So, one trick is to access a website directly through its IP address and not use the name.

For example, “lewrockwell.com” is really 216.92.238.25 – just put that number in your browser address bar and see. To use links, you would need to overwrite the “www.lewrockwell.com” bit with “216.92.238.25”. So, a link to the earlier article would be http://www.lewrockwell.com/orig9/green-p2.1.1.html but it would also be http://216.92.238.25/orig9/green-p2.1.1.html

Another easy way to bust the censors is to visit www.microsofttranslator.com and enter the banned website address there. Click on Translate, from English to English, and there you are – the “translated” website appears, links and all, with nobody any the wiser. Try other translators if that one stops working.

But, what if they have filtered not just the main web address, but even any reference to the site?

Well, you would normally avoid government-funded freebies that log everything. One such service is Ultrasurf – linked to the Falun Gong run GIF Inc, and headed by an NSA scientist to break Chinese censorship.

But here, your only objective is to get through from a public military system or library. So why not let military socialism, corporate fascism and Chinese communism fight it out – while you pass through the midst of them?

Ultrasurf is fast, and does get through – one click and a new censor-busting browser window will open. All tracks – at least at your end – are wiped when you close.

Lastly, there are many free “anonymous” web-based proxies available, such as the one used in the Sarah Palin hack described next. Some may be blocked and to get through, you might need to choose an SSL (secure) one. Just do not expect it to be fast and do not rely on any privacy promises.

The Great Sarah Palin Email Hack

Apart from hitting the news, the real greatness of this hack is as a text book example of what not to do.

It happened a year ago, but I only recently came across how it was done: Here are the details.

Sarah Palin used Yahoo email. She followed all their “security” steps and answered all their intrusive personal “security” questions accurately – and it got her hacked. Her personal security information was actually public information distributed all over the net. The one good thing she did (we are told) was to use the email for only trivial email content.

The hacker was very easily found. This is partly because the “free anonymous proxy” service he used kept logs. Plus, his own personal info was all over the net.

I almost felt sorry for the lad – not only in hot water with his State Representative father, but also unanimously derided by his peers (for getting caught). And now the hypocritical state is prosecuting aggressively.

Data Backup Privacy

Here is a privacy tip for international travel: Maybe you do not need to transport sensitive data at all.

With UltraVNC installed, you can access your main computer from a normal web browser anywhere in the world, on any computer. Just enter the main computer’s IP address, followed by your chosen password, to use it via the remote computer’s keyboard, mouse and screen. The connection can easily be encrypted, you can transfer files and you can chat.

I also use this for small business customers so they do not have to go in to the office as much. It is quite easy to set up, but non-tech users might need tech help to set up their router (tech-talk: forward port 5800 – that is it).

Another tip in case a computer with sensitive data is stolen, including by customs, is to remember that deleted files remain intact on your free disk space for some time, and are easily recovered.

To prevent this, CCleaner has a setting to securely empty your recycle bin (Options>Settings). Also, the main window has a tick box for an occasional secure wipe of all free disk space. A single or three-pass secure wipe should be more than enough – any more will take ages. The “geek mythology” that more are needed at least seems to be busted.

With Windows, Mac, or Linux, encrypting the whole system disk can be done – but is inconvenient, degrades performance, and increases the risk of data loss in the event of system or disk problems. There is also the trend in the U.S., UK and other places of demanding passwords under penalty of imprisonment.

Instead, you could work on or save critical data only on removeable storage. Windows users can encrypt using Truecrypt. CCleaner can securely delete files on both system and backup drives. For backup, the tiny concealable “microSD” cards are ideal – here are inexpensive 8Gb or 16Gb options, with USB adapter kit included.

Internet Shutdown

In the U.S., a bill is being pushed right now to enable a complete internet shutdown. Other governments have bestowed on themselves similar “emergency powers.”

However, this would also hurt government and associated big corporate interests. Therefore, except in a very worst-case scenario, blanket shutdowns are likely to be temporary, or only targeted at certain areas.

In which case, one answer might be satellite access – billed to an outside address, of course.

Or, if landline phones still work, there are numerous free (call cost only) dial-up internet numbers. These are accessible internationally, often with no signup needed. It is outdated, slow and costly but does work, even with a VPN – making it also a privacy option of last resort.

Some are suggesting a return to the old BBS pre-internet communication system, which is a good idea, but still depends on a functional phone line.

An alternative might be a wireless mesh network linking wireless routers, either independent of any broadband provider or sharing a single satellite uplink. Directional antennas can extend wireless range to a half mile – or even much more. Wireless amplifiers are also available, or routers like the Linksys WRT54GL can be upgraded with firmware to boost power output.

If all else fails, it is back to carrier pigeons – with memory sticks or SD cards. ...

Privacy and Security

Bloated Windows “security suites” are widely promoted because major magazines, websites, retail stores and manufacturers all get advertising revenue and/or a commission on the annual fee.

Particularly avoid manufacturers like Packard Bell, who even remove the uninstaller (use the removers I linked to). They make nothing from the much better but free products (with optional upgrade) like Antivir, CCleaner, Malwarebytes and Spybot.

As I write this section, within the last three working days I have twice solved major problems primarily by removing Norton. Today, I had the same thing with the “Kaspersky” security suite – and not for the first time.

One more Windows privacy and security tip:

In addition to the simple cleanup steps I outlined, techies often use a program called “HiJack This!”. Proceed at your own risk. Leave any antivirus entries (or install that afterwards) and anything called “lexbce” alone. Start-up entries can be thinned down to less than a dozen – far less than in the above video.

Privacy, Security and Windows/Mac/Linux

They are all useable for internet privacy purposes.

Viruses do occur on Macs, but only Windows really needs an antivirus program. Windows currently represents 92.54% of computer users.

Except for one Vista laptop, the eight computers in my own large household are all XP. Microsoft may rightly be unpopular, but XP is fast, works with everything and has the biggest choice of software – official and unofficial. Virus or spyware problems are for us extremely rare and easily dealt with.

Although Microsoft is receiving NSA “assistance” yet again, Windows 7 is at least better than Vista – any NSA “backdoors” or “watermarks” would soon be uncovered, and cause an immediate outcry. Avoid the 64-bit version, for a year or two at least.

Mac users generally get to enjoy “security through obscurity.” In other words – they are too few to target.

But Macs do go wrong and it can be more serious: Experienced help is harder to find, much more expensive, you may have to wait longer for it, and it may be harder to recover vital data. You also have less choice of both hardware and software – with fewer games for the young at heart being just one example.

Having said all that, it may suit your needs exactly and, for many, a Mac is a pleasure to work with. A Mac may put a spring in your step and not just because of a considerably lighter wallet. ...

Linux had a promising boost on early netbooks, which then shocked Microsoft into competing.

Sadly, the reverse legal environment and mostly volunteer base have made it the “too many cooks” OS. Except for business servers, it can often be a case of one geek proving his worth to another – with little market pressure to please users. Then, the already steep learning curve goes vertical when you have a problem. You are less likely to have virus problems than even a Mac, but more likely to have operating problems.

Despite this, there are many variants. One great distribution is called “Dream Linux”, with an attractive, user friendly, Mac type appearance. Then there is “Ubuntu” – by far the most popular flavor of Linux. The best branch of this may be the semi-commercial Linux Mint, which has a good non-IP based business model, that would probably be standard were it not for the pro-IP legal environment.

With most Linux distributions, you can safely start up your computer from a “Live CD” and get a foretaste – before deciding whether to actually install from the same disc. You might really like it.

VPN Services

Having taken some time to select VPN services for myself, the one service I can definitely recommend is Perfect Privacy. There are many others, including some to be avoided:

This is a long list of VPN services and here is another with some good comments amongst the spam.

CryptoCloud seem to be sound, have a healthy attitude towards IP legal threats, but use a non-published modification of OpenVPN. Xerobank, Cryptohippie and Metropipe are all loosely associated with the old Laissez Faire City DMT/Alta. Check the reviews, but they may be OK. I still like SwissVPN but they are in the Swiss surveillance net, do keep logs and do not allow file sharing. There is also a limited free service called Alonweb – but they are very new.

Services like the Swiss TunnelDrive use a type of VPN called PPTP or “poptop”. For basic privacy this is fine – it would take hours or days of focused effort to crack, though it can be done. There is a post to solve a couple of PC security problems with this type here.

I recommend you avoid the U.S.-based “StrongVPN” (terms of service, logs). Particularly avoid “Securenetics”, as it is almost identical to “FindNot” – which recently disappeared along with customers’ money. There is another free service called “ItsHidden”, but the hosting location suggests it may be set up to create a cloud of users to cover extreme porn.

Note that, although preferable, it is not essential to pay for a VPN privately. The VPN service will get your real IP address anyway, and your internet provider will see the VPN connection also (though nothing else). PayPal or a third-party card payment service should be OK. There is no reason to directly supply a VPN service with any personal details, of course.

Earlier, censorship using website “Domain Name Server” lookups was mentioned. I want to emphasize that these “DNS” lookups also lend themselves to surveillance of the websites you visit, even if you have a VPN active. So for Windows, common Linux distributions, and under some circumstances Macs – do make sure you check your VPN connection for “DNS leaks.” Details, tests and recently updated fixes are here: OpenVPN, and PPTP.

On privacy related forums, setting up a personal VPN is sometimes mentioned. The problem with this is the loss of any “crowding” effect: Normally it would be difficult for targeted surveillance of a VPN server to match incoming and outgoing connections. But with a private VPN, it is easy to identify the source of the single incoming connection and to monitor all outgoing connections.

File-Sharing Privacy

Very nasty plans indeed are afoot to enforce copyright on the internet.

However, in response to this kind of threat, the VPN market has recently been boosted by file sharers. This is good news as it means more choice and a bigger crowd to get lost in.

Other than by using a VPN, a good file sharing defence would be an unencrypted wireless router which anyone could have accessed. Young file sharers in France are currently promoting open wireless nationwide to foil legal attacks.

Often, this is not as risky as the media will tell you, because the media/IP complex desperately wants all activity uniquely identified. For a targeted company or in a built-up area, caution is advisable. Otherwise, it may be more likely that a computer is stolen than a white van parked outside, hacking it for hours.

Some routers now have an isolated open Wi-fi hotspot option, to share a fixed portion of available internet bandwidth – an ideal solution.

One interesting new development to watch is the emergence of encrypted anonymous file sharing, by using a program called Anomos.

Phone Call Privacy

Here are two good alternatives for making private landline or mobile calls over the net:

• With laptops, usually your internet connection will be wireless. This means you can plug an IP phone (reviews here) into the unused network socket for Internet Connection Sharing (Control Panel > Network Connections > “Set up a home or small office network”). You might need a special “crossover” type cable. As a privacy safeguard, only plug the IP Phone in after your VPN is connected, or make sure a button needs to be pressed before the line goes live.

• On my own system, I just plug in a USB phone or headset (alternative). My daughter uses this USB cordless phone (alternative). Do not run the CD – these particular USB phones just plug in and work fully with the “X-Lite” free soft-phone (alternative). Note: When installing X-Lite, disable “Run at start-up”. Always start manually, after the VPN is connected.

I actually did a U.S. radio interview recently using this setup, through a Luxembourg VPN. The studio called up my anonymous international number and it worked for an hour as well as any normal phone call. In this scenario, possible privacy concerns are a lower priority, and Skype might have been preferable, for higher audio quality. Note: Sign up and use Skype only with a VPN, turn off the “Run at start-up” option and only start manually after your VPN is connected.

There is one more option for internet calls:

Some IP phones actually incorporate a VPN connection. They are not commonly available, however. Snom phones are expensive and require technical know-how, but the 800 series can establish OpenVPN connections. Other, mostly Chinese, phones include the ability to connect using the simpler PPTP type of VPN. There is one model available in the U.S. and Europe.

Internet Call Providers

For internet phone calls, you will need a call provider. Layers of privacy here can include: private payment, calls routed through another country or political region, privacy standards within that country, using a VPN service with no logs, and optionally, further call content encryption.

For both sides of the Atlantic, I like the call provider Link2VoIP. They are Panama owned, with a base in Canada and offices in the U.S. They have call servers in Canada, Dallas, Panama and Amsterdam (okay for northeastern U.S.). Call prices are very good.

They do have to log outgoing calls to charge you, but there may be some protection in the Panama legal base. However, for real privacy, pay with a money order and be virtually anonymous.

Best of all, having written most of the above recommendation already, I discovered Link2VoIP day-to-day management is in the hands of a regular LewRockwell.com reader.

In Europe, USD/CAD money orders are not obtainable (strangely, except in Albania), so here are some other options:

10876.ch is Swiss-based and like Nomado in Belgium, you can pay for calls using an anonymous “Paysafecard” voucher, obtainable across Europe (and in Mexico). “UKash” is a similar European (and Canadian) payment service that can be used for a number of internet call providers. Most are “Betamax” resellers, but Xeloq is one good independent service based in Amsterdam.

Most VoIP services in Switzerland (like Peoplefone, Sipcall, NetVoip) can be paid over the counter at any Swiss Post Office. A day trip to Switzerland might be well worthwhile to fund a private number, outside the EU. (Note that “Switzernet” actually uses French call servers.) Switzerland does have a surveillance system called Onyx but, at least officially, it is not tied to the EU or Echelon.

With the premium version of X-Lite (“Eyebeam”) and other software or IP phones, you can have two or more lines. That means one account with a phone number could be used for incoming calls, while another without a number, could call out.

So, if you obtained a free U.S. (alternatve), UK, IT or worldwide (alternatve) incoming number, you could then use any other outgoing call provider. Operation is seamless in practice, and the separation offers even greater privacy. Often you can set your own outgoing caller ID – or turn it off completely.

Mobile Call Privacy

Here, using the iPhone with Wi-fi remains a favorite option – preferably with GPRS and the cell connection disabled. The new iPod Touch models are almost identical to the iPhone. They still do not have a built-in handset, but do now come with a separate wired headset/mic as standard.

There are some new apps available to make SIP calls: Check out iPico, Acrobits, and note that SipPhone has been renamed to iSip.

HP iPaqs can work well also, and the newer 210 series can be used as a normal handset. The front speaker/earpiece it is not officially supported, so it needs a simple fix, which also solves other reported audio problems.

Several new Android smartphones are set to break on the scene this year. Android does include a VPN client and SIPdroid is free SIP internet calling software.

Remember, unless at a random Wi-fi hotspot, you would use these phones only after connecting with their internal VPN. Be sure to take the more basic precautions also.

A VPN Router Solution

The Draytek 2820Vn router is a simple, always-on, VPN router for a whole household or office. It could maybe even fit in a laptop bag for travelling.

With all features in one place, it is not expensive for a complete solution. There is little retail presence in the U.S. (Draytek US) but it is on Amazon. Or, Broadbandbuyer UK will ship to the U.S. and Europe.

You can connect to any of four broadband sources: wired network (workplace, existing modem/router etc.); ADSL (broadband phone line); wireless USB cellular broadband; plus, it can even connect to a nearby Wi-fi signal. Any or all computers in your house or office can be plugged in, or connected to it via wireless.

There are two internet phone sockets for use with regular (including cordless) telephone sets. All calls can go out via the VPN connection and it additionally offers encrypted calls, including ZFone.

It does use the simpler “PPTP” type of VPN, which is fine for avoiding routine logging. Individual computers can still connect through it with their own OpenVPN connection.

It will require at least basic tech ability to set up.

Use of the stronger OpenVPN standard within modified routers is currently messy, although it can be done by the (very) tech minded. The best hope for a reasonably useable solution appears to be “TomatoVPN” which is currently being improved to work with more VPN providers.

Identity Privacy

One way to register online with some privacy is to use generic details and look up a serviced office, apartment block or motel address. But there is an alternative:

Check out the FakeNameGenerator, which makes it even easier. This site randomly gives you a whole identity in a number of countries, including accurately formatted (unused) ID numbers and a working email address.

Payment Privacy

In addition to money orders and (on the UK/European side) Paysafecard and UKash, prepaid cards can also be private but may require some time, effort, and involve fees.

However, there are gift vouchers easily available which make private online purchases possible without any extra fees. An iTunes voucher, for example, would be the ideal way to credit or register a new iPhone, via an iTunes account (see YouTube).

Amazon is another good example: First set up a new account via your VPN. Then Amazon can be funded privately using gift cards available in supermarkets and other stores. Local “Coinstar” coin changing machines also issue various vouchers – some will even take notes. Western Union offices do charge a small fee.

Email Privacy

If your email content is often critical and you want to learn how to encrypt email, here is a tutorial for Gmail. Or, here is a tutorial for the free trial version of PGP – the main part keeps working after the trial. Remember, this is for content encryption only – without a VPN, your IP address (and therefore location) is clearly visible as well as the “to” and “from” email addresses.

If your content is occasionally confidential but you want something quick and easy, then here is a tip – do not send an email, share an email address:

First create a new free email account, preferably secure (https:) and offshore, then pre-share the details. All you do is save a draft, with or without attachments – for the other person to log in and pick up later. Ideally, one or both persons should use a VPN. The last one out deletes the draft.

This method provides the security of a needle in a haystack and interception is highly unlikely – no email is ever sent.

Privacy Hardware

The mobile privacy tool of choice, the Asus 1000HE netbook, is still available but has recently been superseded by the 1005-HA. This is a worthy successor – with battery life extended to a maximum 10.5 hours.

Of the three available variants, the top spec model unfortunately has a glossy screen. Reviews say it is not too reflective, but you could choose the even lower cost middle spec model – there is little noticeable difference (e.g. no Bluetooth, lower resolution webcam). Or, get a matt screen guard.

At home, you can always plug it in to a larger screen – even one like the Samsung 37” TV this article was written on. ...

Note that netbooks need an external DVD/CD drive.

Conclusion

I hope these methods will enable you to take some more privacy steps.

The objective is reasonable caution, not fear, in the face of current oppressive trends. These activities are the death throes of a failed system. The source of danger is real, but might be compared to Frankenstein’s monster – inevitably doomed, and not so smart.

Monoliths like the NSA, for example, with associated corporate workfare recipients, absorb and then slowly stifle human creativity in their hierarchical straitjackets. That is why, by God’s grace, as long as there are individuals who choose freedom we will always be one step ahead.

Finally, to defeat this present system, it is essential that legitimate private wealth remains in private hands. Remember the Golden Rule – who has the gold, makes the rules.

Particularly if you bank offshore, in fiat currency or precious metals, then these and other privacy measures are now absolutely essential. I look forward to sharing more on this with you.

CROOKS “TOO LAZY” FOR CRYPTO

The widespread use of encryption by criminals – long feared by intelligence and law enforcement agencies – has yet to materialize.

According to Mr. Mark Stokes, the man in charge of the UK’s largest digital forensics unit, most criminals are making it easy for forensic investigators to access their files. They are not using encryption, contrary to the fears of government authorities.

Why not? “It is just human nature to think they will never get caught,” according to Stokes.

The obvious lesson is to prepare for the worst, even it that worst seems unlikely. Especially if such preparations are not onerous. Encrypting one’s files and communications is not an overly-involved undertaking. But it does not happen automatically.

The widespread use of encryption by criminals – long feared by intelligence and law enforcement agencies – has yet to materialize, according to the man in charge of the [UK’s] largest digital forensics unit.

Mark Stokes, head of the Metropolitan Police’s Digital and Electronic Forensic Services (DEFS), told The Register that “literally a handful” of the tens of thousands of devices it handles each year from across the whole of London involve encrypted data. “We’re still to this day not seeing widespread use of encryption,” he said.

Despite the availability of scrambling products such as PGP, TrueCrypt and Microsoft’s BitLocker [see below], criminals are not making life difficult for forensic investigators to access their files.

“It is just human nature to think they will never get caught.”

“You’d think paedophiles would use it, but they don’t. It is just human nature to think they will never get caught,” said Stokes, an electronics engineer who uses TrueCrypt on his own home computer.

“I think it is just not easy to use. You have got to keep the password, people forget their passwords, and generally human beings are lazy and they cannot be bothered with it,” he said. “In the next five to 10 years as computers become faster and easier to use potentially it could become a problem, and that is something we have to keep our eye on.”

Stokes said that often there are forensic signs suspects have toyed with encryption, but not bothered to apply it to their systems.

On the rare occasions frontline police hand DFES encrypted kit, it carries out simple dictionary attacks in an attempt to guess the passphrases. When a more exotic mathematical approach is required, the work is outsourced to the supercomputers at GCHQ’s National Technical Assistance Centre.

Fears by authorities that mainstream take-up of encryption would hamper terrorism and serious crime investigations persuaded the government to introduce Part III of the Regulation of Investigatory Powers Act (RIPA) in 2007. It grants investigators powers to demand passphrases from suspects, with the threat of up to five years’ jail if they refuse or remain silent.

Last week we revealed that the first person known to be sentenced under RIPA Part III was a schizophrenic with no previous criminal record, who was arrested by counter-terrorism police after a model rocket was detected in his luggage.

DEALING WITH “AUTHORITY”

An opportunity to practice your Zen training.

Simon Black goes through an internal debate whenever he gets the treatment from government goons: “My instinct is to fight, argue, and question authority, but generally this only attracts unwanted attention and additional scrutiny.” Fully empathetic as we are, we suggest treating the goons as if they are human beings. If you get the totally humorless type that does not seem to buy you much, but in most cases at least the in-the-moment interaction – and as the enlightened teachers tell us, this moment is all we have – is not unpleasant.

Over the weekend in Vienna, I had the pleasure of dining with a very interesting gentleman (I will call him “Chris”) who is a subscriber and new inductee into the Atlas 400 club that I’ve mentioned before.

Chris travels extensively, like me, and we discussed how many countries are quickly becoming police states. In Europe, I would candidly put Finland towards the top of that unfortunate list. My entry into Europe from Thailand last week was marked with yet another atrocious experience at Helsinki airport.

For the third time in as many trips to Finland, as soon as I set foot off the plane I was “greeted” on the jetbridge by squad of armed government agents decked out in paramilitary gear and urban assault rifles.

Their collective arrogance and overinflated sense of self-importance became quickly apparent as they gleefully combed through a random selection of passengers and their personal items.

The next round of faux-security was the passport/immigration checkpoint. In most countries, this is a routine procedure that takes little more than 30 seconds. The Finnish authorities averaged over 2 minutes per person. ... I counted.

It was more of an interview than an immigration checkpoint – questions like “where is your mother from,” and “how much did you earn last year?” I wondered if they were going to ask my favorite color as well.

I jest, but the immigration officer’s demeanor and intensity suggested that he was quite literally making up his mind on the spot whether or not he would let people into his country.

Following immigration was another security screening – metal detector, x-ray, etc. In this case, though, each passenger received a wanding and full physical pat-down. ... I am not talking about the usual cursory touch either – this was a full-on, “you have the right to remain silent” pat-down usually reserved for violent felons.

As you could imagine, the Finnish security officials made every effort to intimidate passengers throughout the process ... and it works. Most people end up developing an innate fear of their government, and in many ways, I think developing a culture of fear may be the government’s ultimate aim with these sorts of programs.

If an individual has a real reason to be fearful of his government, it is time to relocate. On a downward slide, these issues don’t tend to get better with time, they get worse. It certainly begs the question, though, what is the right thing to do?

For people who understand the system, government security officials’ Stasi scare tactics are simply empty gestures enacted by little boys playing soldier. They actually believe they are doing God’s work, and that their jobs are not as worthless and pathetic as the rest of us realize.

Furthermore, they have a chip on their shoulder. Deep down I believe that most of these thugs got beaten up by the playground bully every day when they were kids ... now armed with a government-issued firearm and a bad case of self-righteousness, they are taking their revenge on the world.

Consequently, they routinely push the limits of their legal authority, preying on fearful citizens who are ignorant of the law and their own rights. Most of all, they would love nothing more than an excuse to abuse an intellectual dissenter.

My instinct is to fight, argue, and question authority, but generally this only attracts unwanted attention and additional scrutiny. My goal is to fly under the radar, not end up on some revolutionary watch list ...

In my case, when I deal with these goons I go through an intense personal debate. My instinct is to fight, argue, and question authority, but generally this only attracts unwanted attention and additional scrutiny.

My goal is to fly under the radar, not end up on some revolutionary watch list ... so generally I comply with the procedures and take action later – in this case, I doubt I will ever fly through Finland ever again. (If I happened to be detained for secondary screening, though, this is where the gloves come off ...)

The polar opposite of the “compliance strategy” would be this guy, who has become a bit famous for his opposition to Homeland Security checkpoints in the United States. “Am I being detained? Am I free to leave?”

His very visible loathing and disrespect for the DHS’s pretend authority is admirable, though in all fairness I would like to see him pull that off at an airport.

I’m really curious what you think – what is the right thing to do? Comply, and get it over with quickly? Or dissent in the face of authority, challenging them at their own game?

SHORT TAKES

Some Like it Hot: Get Some Culture in Dangriga, Belize

If you have never heard of the Garifuna, Punta Rock, or Maria Sharp Hot Sauce, then Dangriga holds some great surprises for you.

This little town of about 10,000 in the Stan Creek District of Belize is teeming with culture, thanks largely to the Garifuna, a people of Amerindian and African descent. The Garifuna population in Dangriga arrived in 1823 after fleeing a civil war in Honduras, and their exodus and arrival is re-enacted each November 16-19 during Settlement Day celebrations.

The Garifuna culture is a spicy blend of Carib Indian and African roots that thrives in Dangriga and surrounding communities.

Dangriga Music

The Caribbean world rocks to a distinctive style of music called Punta Rock, born and bred of the Garifuna cultural experience. Punta Rock features African drum styles still played on the streets of Dangriga using handmade wooden drums tied together with local vines. Add lots of bubbling keyboards, a little Reggae guitar scratch, and some Calypso-style social commentary, and you have Punta Rock.

Famous Punta Rockers from Belize include Titiman Flores, Andy Palacio and Pen Cayetano.

Dangriga Food

Seafood, chicken, coconut, rice, beans, and plantain are the stars in Garifuna cooking, and Dangriga boils over with tasty specialties. One of the best is hudut – fish cooked in coconut milk.

Belizean hot sauces are famous, and one of the best comes directly from Dangriga – Marie Sharp’s Hot Sauce, the most popular of which are made with a base of ... wait for it ... carrots! The fiery orange sauce puts the “peppa” in almost everything and has a unique taste that can be very addicting.

If you are looking for an authentic cultural experience, you will get it in Dangriga. It is a part of Belize that should not be missed.

The Best Thing Since Aspirin – Brazilian Tea

Next time you have a headache, try making a cup of Brazilian tea instead of popping a pill. You will get the same relief.

A team of researchers at Newcastle University in the U.K. have discovered that Hyptis crenata, a type of mint prescribed for thousands of years by Brazilian healers for pain, fever, and flu, is just as effective in treating symptoms as commercially produced pain killers.

No surprise – more than 50,000 plants worldwide are known to be used as medicine, and half of all prescription drugs on the market are based on molecules found in plants.

The Brazilian Hyptis crenata mint actually tastes more like sage when brewed into tea. Researchers used amounts traditionally prescribed by Brazilian healers in their research, and brewed dry leaves in boiling water for 30 minutes, then let the tea cool before drinking.

Results matched the effectiveness of a recommended dose of Indometacin, a synthetic aspirin-style drug.

Electronic Frontier Foundation Seeks Answers from Facebook Police

As law enforcement agents increase their reliance on Facebook and MySpace to nab suspects, legal watchdogs are demanding that officials disclose exactly how they use social networking sites.

In a complaint filed [December 1], the Electronic Frontier Foundation sued five U.S. agencies that failed to respond to freedom-of-information requests seeking documents laying out their use of social-networking sites in investigations, data collection, and surveillance.

The lawsuit, filed in federal court in San Francisco, comes as recent news reports show that federal authorities have stepped up their use of social-networking sites to investigate and arrest potential targets. In September, Mexican officials arrested a man suspected of bank fraud in the U.S. after he bragged on Facebook that he was living the good life in Cancun.

The FBI also rifled through Facebook for dirt on coder Aaron Swartz after he helped an open-government activist amass a public and free copy of millions of federal court records, according to Wired.com.

Even local authorities are joining the social-networking craze. Police in La Crosse, Wisconsin, are said to have charged a university student with underage drinking. Their evidence: A picture on Facebook of him with a can of beer in his hand. Adam Bauer said he suspects he was duped by an unknown person he had accepted as a friend. (The person’s friend request included a picture of an attractive woman.)

He was among at least eight people who said they had been cited for underage drinking based on photos on social-networking sites, according to The La Crosse Tribune.

The EFF said it filed the complaint after more than a dozen FOIA requests went unanswered. The agencies include the Department of Defense, the Department of Homeland Security, the Central Intelligence Agency, the Department of Treasury, and the Office of the Director of National Intelligence.

“Although the Federal Government clearly uses social-networking websites to collect information, often for laudable reasons, it has not clarified the scope of its use of social-networking websites or disclosed what restrictions and oversight is in place to prevent abuse,” the complaint stated

Germans Devise Attacks on Windows BitLocker

Findings demonstrate the limits of the encrypted file protection method.

German researchers have devised five methods that determined attackers can use to bypass hard-drive encryption in recent versions of Microsoft operating systems.

The methods, laid out by a research team from the Frauenhofer Institute for Security Information Technology, can be used to access files protected by BitLocker drive encryption contained in Windows Server 2008 and pricier versions of Windows Vista and Windows 7. BitLocker prevents files or entire volumes from being accessed without a user password being entered first.

The researchers stress that the strategies are useful only for targeted attacks, such as those used in industrial espionage, where an attacker is willing to devote considerable effort to breaching a single individual’s security.

They are not of much use in opportunistic attacks, such as those when an attacker happens upon a lost laptop. Still, they said their findings are useful because they demonstrate the limits of the protection.

“Designers as well as users of disk encryption solutions should be aware of these attack strategies in order to realistically assess how much security they get out of trusted computing,” they wrote. “The most important lesson to be learned is that even with trusted computing a system needs additional physical protection for good security.”

Among the methods discussed is what they call a “hardware-level phishing attack,” in which a target machine is replaced with a counterfeit one that provides precisely the same messages and prompts that the original machine would have produced. The imposter machine captures user input and relays it to the attacker, who then uses it on the real machine.

A Microsoft spokesman said the company is looking into the report (PDF). More from The H Security here.

Norwegians Plan to Harpoon Twitter

Group accuses it of breaching privacy laws.

The Norwegian Consumer Council, which has a legal battle with Apple under its belt, said social networking sites’ terms and conditions are unfair.

“None of the international social networks adhere to even the most basic contractual and privacy principles that apply in an offline environment,” spokesman Hans Marius Graasvold told Out-Law.

“We cannot allow these social media and other types of online services set the agenda for what should be the future of online contracts and also online privacy. We need to step up to the test now and do something about it now.”

Despite its recent privacy tweaks, the Council plans a formal complaint about Facebook in the new year. Gripes about Twitter and LinkedIn are likely to follow.

“Practically no consumers read the terms of online services,” Graasvold said. “The very few that read them don’t understand them. That would not be a huge problem if the terms of service were actually consumer-friendly and in line with traditional contract law and privacy principles.”

In October, the Council warned Amazon it will have to radically change its terms and conditions if it wants to sell Kindle e-readers in Norway.