Offshore News Digest for Week of September 8, 2003

BOOK REVIEW: JAMES BOVARD’S TERRORISM AND TYRANNY: TRAMPLING FREEDOM, JUSTICE, AND PEACE TO RID THE WORLD OF EVIL

If you want to know what is really going on in President Bush’s War on Terror read this book. What is so valuable about Bovard’s work is that it is just plain, fact-based, footnoted reporting. He is not a polemicist, and you will find no shrill arguments, no straw men, no rants, no name-calling such as you find in most of the quickie political books that people grind out these days. Instead, you get a sober recitation of the facts set within a philosophical framework that exactly matches that of the Founding Fathers.

These facts are damning, but they also often would be hilarious if the consequences were not so serious. Certainly some of the grand goof-ups at American airports would make a Hollywood comedy, and the baldfaced lies and surrealistic comments made by government officials would intrigue and depress George Orwell. One Cabinet official, during the government’s campaign to get people flying again, publicly boasted that he was flying without bodyguards, when in fact his flight had been salted with undercover air marshals.

The bizarre Justice Department of Attorney General John Ashcroft defends itself by saying that even though people are arrested in secret, on charges that are secret, and are being held in places that are secret, the department is not guilty of secrecy because it admits what it is doing.

WAR ON THE BILL OF RIGHTS

The erosion of sections of the Bill of Rights quickened when the president signed the USA PATRIOT Act on October 26, 2001. With Attorney General John Ashcroft insisting on the crucial need for speed, the House passed the 342-page document by a vote of 356 to 56, although few had the chance to read it. Several members later said that parts of the new law seemed unconstitutional, but in view of the coming elections, they did not want to be attacked as “unpatriotic” by their opponents. In the Senate, only one senator, Wisconsin’s Russ Feingold, voted against the PATRIOT Act. In the House, dissenter David Obey of Wisconsin said bitterly, “Why should we care? It’s only the Constitution.”

The Act has radically extended government electronic surveillance -- on and off the Internet -- with often reduced judicial review. Among the extraordinary unilateral incursions in the Bill of Rights taken by John Ashcroft: Government agents can now listen in on conversations between lawyers and their clients in federal prisons without a prior court order. And there is the PATRIOT Act’s designation of two American citizens, so far, as “enemy combatants”, held in military brigs in this country, without charges and without access to lawyers, and unable to appear personally in court hearings. They are being held indefinitely for interrogation about their possible knowledge of or links to terrorism.

Jonathan Turley, a professor of constitutional and public-interest law at George Washington University, wrote in a column in the August 12, 2002, Los Angeles Times: “Attorney General John Ashcroft’s announced desire for camps for U.S. citizens he deems to be ‘enemy combatants’ has moved him from merely being a political embarrassment to being a constitutional menace.” Actually, ever since Ashcroft pushed the PATRIOT Act through a supine Congress, he has subverted more elements of the Bill of Rights than any attorney general in American history.

FIERCE FIGHT OVER SECRECY, SCOPE OF PATRIOT ACT

As the second anniversary of the September 11, 2001, attacks approaches, the Bush administration’s war on terror has produced a secondary battle: fierce struggles in Congress, the courts and communities such as these over how the war on terror should be carried out. At the heart of this debate is the USA Patriot Act, the law signed by President Bush 45 days after the terror strikes that enhanced the executive branch’s powers to conduct surveillance, search for money-laundering, share intelligence with criminal prosecutors and charge suspected terrorists with crimes.

Yet the paradox of this debate is that it is playing out in a near-total information vacuum: By its very terms, the Patriot Act hides information about how its most contentious aspects are used, allowing investigations to be authorized and conducted under greater secrecy. As a result, critics ranging from the liberal American Civil Liberties Union to the conservative Eagle Forum complain that the law is violating people’s rights but acknowledge that they cannot cite specific instances of abuse.

Anti-terror law puts burden on banks, clients.

Beginning next month, your word and a handshake will no longer be good enough to open a new bank or brokerage account. New USA Patriot Act regulations designed to thwart terrorist financing require financial institutions to retain more personal data on their customers and to take rigorous steps to verify their identities. The measures are the latest regulations that some experts say are costing the industry hundreds of millions of dollars and increasingly casting bankers in the uncomfortable role of beat cop in the fight against terrorism.

Customers who supply inaccurate birth dates, Social Security numbers or other personal data could have their account application denied or their funds frozen, a prospect that has added to criticism that regulations related to the Patriot Act of 2001 go too far in prying into the personal lives of consumers.

The growing regulatory burden falls hardest on small community banks, which lack automated systems and often market themselves on the promise of friendly service and close relationships with their customers.

Patriot Act halts would-be investor.

Shortly after he graduated from college in May, French Clements of San Jose, California, tried to open an online brokerage account with Harrisdirect, where his stepfather has an account. A day after he completed the online application, however, he got a brief e-mail from Harrisdirect saying, “We regret to inform you that we are unable to approve your application at this time: The customer’s identity not properly authenticated per the USA Patriot Act.”

Later, a spokeswoman from Harrisdirect provided an explanation: “The address he was using did not match what was in his history with Equifax, so he didn’t get the four questions.” After graduating from Fordham University in New York, Clements moved back to San Jose. “He never got to the authentication because his address didn’t compute,” says John Ford, chief privacy officer with Equifax.

Patriot Act available against many types of criminals.

Crisscrossing the country to defend the USA Patriot Act from the slings and arrows of conservatives and liberals alike, Attorney General John Ashcroft praises the law as invaluable to the war on terrorism and national security. Virtually unmentioned, however, is the fact that the Patriot Act extended the government’s powers well beyond the terrorism arena. The creatively named law -- USA Patriot stands for “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism” -- also handed FBI agents and prosecutors a broad new arsenal for going after garden-variety criminals.

Already, they have used “sneak-and-peek” warrants, wiretaps, Internet surveillance and other Patriot tools in pursuit of thieves, computer hackers, drug dealers and money launderers. And they are exploring how the law can be used in other realms.

PUT SUNSET PROVISIONS ON NOSEY NATIONAL SECURITY LAWS

Politics make strange bedfellows, the saying goes. So does the threat of excessive government nosiness. Defenders of CAPPS II and other intrusive Bush administration counterterrorism measures like the PATRIOT Act say that critics are falling victim to pre-9/11 “head-in-the-sand” thinking. That is always a possibility.

But it is also downright certain that some government officials will take advantage of post-9/11 fear and anger to expand government powers and sacrifice personal privacy rights beyond what is necessary to fight terrorism. And, once government people are granted powers, they do not like to give them up once the crisis has passed.

So, what makes sense? For starters, Grover Norquist, of Americans for Tax Reform, suggests that any changes in the law, particularly with regard to national security, during a time of war or national crisis should be “term-limited” to the end of the crisis or to no more than two or three years, whichever comes first.

HONG KONG DROPS UNPOPULAR INTERNAL-SECURITY BILL

Yielding to public pressure to an extent seldom seen in China, Hong Kong’s chief executive announced today that he was withdrawing internal-security legislation that had provoked huge protests in July. Tung Chee-hwa, the chief executive, said that while he still believed that legislation was needed here to protect China’s national security, he would not introduce a new bill until a clear public consensus supported the legislation.

Lawmakers said that the withdrawal of the bill made it unlikely that any security bill could be enacted before next summer's Legislative Council elections. Pro-government parties have feared that their support for the security bill could cost them seats in those elections if the bill remains controversial until then.

China’s enlightened response to protests.

China’s new leaders have shown themselves to be more enlightened than their predecessors in responding to mass protests in Hong Kong but are just as conservative about stepping up the pace of democratisation. This came through from a recent briefing held by Ms. Liu Yandong, who is in charge of the Chinese Communist Party’s (CCP) united front activities.

According to her, the new leadership under General Secretary Hu Jintao did not label the massive July 1 demonstration “counter-revolutionary”, as leaders from a previous era might have. Instead, she told a select audience of cadres and others invited to the briefing in Shenzhen on Beijing’s policy towards Hong Kong, they chose to describe it as “patriotic”.

But on greater democracy for Hong Kong and calls for universal suffrage in electing its chief executive by 2007, and a fully elected legislature by 2008, Beijing stood firm. According to Ms. Liu, the new leaders ruled that democratisation should “proceed gradually in accordance with Hong Kong’s reality”.

GAMBLING OPERATORS CONTINUE ISLE OF MAN EXODUS

The Isle of Man is facing a crisis of confidence after the three gaming operators it awarded licences to just two years ago have now departed its shores for a less restrictive environment. Analysts at UBS Warburg had previously indicated that the restrictions of the licence might cause problems for operators, with specific reference to MGM Mirage, which it said would be unlikely to achieve profitability in the near to medium term as the Isle of Man licence does not allow operators to advertise in regions where online gambling has not yet been regulated.

This prevents gaming companies from targeting US consumers, which typically generate six pounds out of every ten in revenue for operators, making it a tremendously lucrative market despite the fact that the law has not yet been made clear and there remains a groundswell of support for anti-online gambling bills, though none have yet been passed.

WEB SITE HELPS HUNT FOR STOLEN NAZI ART IN US MUSEUMS

A web site sponsored by the American Association of Museums will allow US repositories to compare their collections between art looted by the Nazis between 1932 and 1946. Prestigious museums including the Metropolitan Museum of Art and the Chicago Institute of Art are already indexing the objects they own and using the searchable registry at this address.

PUERTO RICO FEDERAL CORPORATE TAX CUT PROPOSAL DISCLOSED

Members of the Congress came back to Washington this week after their August “recess” and Governor Calderon’s Economic Development and Commerce Secretary, Milton Segarra, came to the nation’s capital to lobby them on the governor’s top federal proposal: tax exemption for profits that companies in States receive from special manufacturing subsidiaries in Puerto Rico established as “controlled foreign corporations” (CFCs).

Segarra and other Calderon lobbyists are now promoting a revised version of the proposal that Calderon unveiled two years ago because the earlier versions encountered overwhelming opposition from federal officials. Some of the changes in the revised proposal close loopholes -- one of the major deficiencies in earlier versions.

BERMUDA MOPS UP AFTER HURRICANE FABIAN

Thousands of residents of Bermuda were still without power on Sunday as the mid-Atlantic British colony cleared felled trees and debris from Hurricane Fabian’s devastating hit. There was no official estimate of damage yet, but Fabian’s 120-mph winds appeared to have damaged or destroyed the roofs of several thousand homes and businesses when it roared over the 22-square-mile island on Friday.

At one point, some 25,000 homes and businesses -- out of 32,000 customers of the Bermuda Electric Light Company, or BELCO -- were without power. By Sunday afternoon, power had been restored to 11,000 of those customers, said a BELCO spokeswoman.

Bermuda starts rebuilding after fabian.

Page of links to hurricane-related stories here.

SURVEY SHOWS RISE IN BAHAMIAN BUSINESS OPTIMISM

According to the Bahamas Semi-Annual Economic Outlook survey, carried out by the Coalition of Private Sector Organisations, an umbrella group representing the Chamber of Commerce, the employer’s confederation and various tourism organisations, more than 40% of firms recorded losses last year, and 36% anticipate further financial difficulties in the remainder of 2003. Nevertheless, the survey still found “cautious confidence” amongst many firms.

The statistics would appear to support this, and while half of those polled considered the Bahamian economy weak or very weak, this was an improvement on the 64% who thought the same in the last survey. Similarly, only 1% of respondents had a positive outlook six months ago, whereas almost 20% of firms now share this view. Though 43% retained a negative outlook, this was almost 10% lower than the previous poll.

GERMANY AMONG MOST FAVORED NATIONS FOR EXPATS

A new survey by ORC Worldwide, a human resources consulting firm, put Germany as the most popular European destination after the UK, which came second overall. The US topped the list, rising from third place the last time the survey took place, 14 years ago. China soared from 24th place in 1989 to second place this year. Germany was in fourth place in both surveys.

ORC warned international business was at risk if the mobility of expats is limited by new visa limitations resulting from the US war on terrorism. The company said China’s spectacular leap from 24th to second most popular destination confirmed the “phenomenal growth” of business and external investment in its economy.

EU ECONOMY HURT BY TAXES

n March 2000, EU leaders, assembled in Lisbon, outlined an ambition and set a target for the European Union: to create the most competitive economy in the world by 2010. Yet, three years later, the EU has not made much progress towards this goal. With an average tax burden consuming almost 45% of GNP, workers in the current 15 EU member states are 20% less efficient than U.S. workers. And this will get worse because many European countries have huge government unfunded liabilities, particularly for pensions. By 2050, Europe will have 75 pensioners for every 100 workers. And since pensions in France, Germany and Italy are paid out of current tax revenue; tax will have to soar to fund this unsustainable system.

As the result of these anti-growth policies, unemployment remains very high and Europeans often try to make ends meet by shipping their savings to lower tax jurisdictions. But beware Europeans; the EU now wants this money too.

Today, the EU is at a crossroads. First, it can take the road of good tax policies, cut tax rates and stop punishing productivity and savings. This is the judicious choice made by Ireland in the 1980s. Ireland’s approach was a big success. The “poor man of Europe” is now the“qCeltic Tiger” with the second-highest living standards in the EU behind tax haven Luxembourg. Interestingly, the EU reacted quite strongly when Ireland cut corporate taxes and continues to point at Ireland’s 12.5% rate as an example of “fiscal dumping”. The EU’s second option is to undermine tax competition by making it impossible for money to escape Europe’s high-tax economies. Not surprisingly, this is the preferred choice of most Union leaders.

COURT RULING THROWS INLAND REVENUE’S PURSUIT OF TAX CHEATS INTO CHAOS

The Inland Revenue has abandoned all its inquiries into the most serious and large-scale tax evasion cases because of a court ruling that tax inspectors must now issue formal cautions to suspected tax evaders, just as they would in criminal cases. Before, they did not need to caution suspects or reveal the evidence against them. The sudden change was described by one senior tax inspector as “the worst defeat we [the Revenue] have suffered for 80 years”.

“Another implication of the judgment is that a taxpayer under investigation is no longer obliged to assist the Revenue in the preparation of reports,” said Syd Kalinsky, senior partner with accountant King & King.

BONDS SEIZURE SHOWS “DIRTY MONEY” IS BIG BUSINESS

LONDON: The seizure of suspected U.S. bonds worth $6 billion from an international drug-trafficking gang suggests how extensive and sophisticated the global money laundering business has become, experts say. It hardly matters whether the bonds are genuine or fake, they added. Either way, their discovery shows that organized criminals wield the kind of financial power that many legitimate companies can only dream of. “If these bonds are real, it means that otherwise legitimate brokers, accountants, lawyers and businessman have helped this gang turn their drug money from cash into bonds, either knowingly or unknowingly,” said Jeffrey Robinson, author of several books on financial crime, on Friday. “If the bonds are counterfeit, it means there’s a gang producing these things in such quantities that they’re going to undermine the legitimate financial markets with phoney paper.”

If the money were viewed as profit, it would put the gang up there with some of the biggest companies in the world. By comparison, oil giant Exxon Mobil made a net profit of $11.5 billion last year, making it the world’s most profitable company, while Microsoft made $10 billion.

The suspected bonds were seized in raids in and around London in the past two months as part of Operation Hobart, which also involved officers from Colombia and Ecuador. Nine people were arrested in Britain and have been charged with drugs offences. A further four were held in Latin America.

RON PAUL ON PAPER MONEY AND TYRANNY

All great republics throughout history cherished sound money. This meant that the monetary unit was a commodity of honest weight and purity. When money was sound, civilizations were found to be more prosperous and freedom thrived. The less free a society becomes, the greater the likelihood its money is being debased and the economic well-being of its citizens diminished. Alan Greenspan, years before he became Federal Reserve Board Chairman in charge of flagrantly debasing the U.S. dollar, wrote about this connection between sound money, prosperity, and freedom. In his article “Gold and Economic Freedom” (The Objectivist, July 1966), Greenspan starts by saying: “An almost hysterical antagonism toward the gold standard is an issue that unites statists of all persuasions. They seem to sense ... that gold and economic freedom are inseparable.” Astoundingly, Mr. Greenspan’s analysis of the 1929 market crash, and how the Fed precipitated the crisis, directly parallels current conditions we are experiencing under his management of the Fed. Yet here we are today with a purely fiat monetary system, managed almost exclusively by Alan Greenspan, who once so correctly denounced the Fed’s role in the Depression while recognizing the need for sound money.

If honest money and freedom are inseparable, as Mr. Greenspan argued, and paper money leads to tyranny, one must wonder why it is so popular with economists, the business community, bankers, and our government officials. The simplest explanation is that it is a human trait to always seek the comforts of wealth with the least amount of effort. This desire is quite positive when it inspires hard work and innovation in a capitalist society. Productivity is improved and the standard of living goes up for everyone. This process has permitted the poorest in today’s capitalist countries to enjoy luxuries never available to the royalty of old.

But this human trait of seeking wealth and comfort with the least amount of effort is often abused. It leads some to believe that by certain monetary manipulations, wealth can be made more available to everyone. Those who believe in fiat money often believe wealth can be increased without a commensurate amount of hard work and innovation. They also come to believe that savings and market control of interest rates are not only unnecessary, but actually hinder a productive growing economy. Concern for liberty is replaced by the illusion that material benefits can be more easily obtained with fiat money than through hard work and ingenuity. The perceived benefits soon become of greater concern for society than the preservation of liberty. This does not mean proponents of fiat money embark on a crusade to promote tyranny, though that is what it leads to, but rather they hope they have found the philosopher’s stone and a modern alternative to the challenge of turning lead into gold.

Big business and banking deserve our harsh criticism, but not because they are big or because they make a lot of money. Our criticism should come because of the special benefits they receive from a monetary system designed to assist the business class at the expense of the working class. Labor leader Samuel Gompers understood this and feared paper money and a central bank while arguing the case for gold. Since the monetary system is used to finance deficits that come from war expenditures, the military industrial complex is a strong supporter of the current monetary system. Liberals foolishly believe that they can control the process and curtail the benefits going to corporations and banks by increasing the spending for welfare for the poor. But this never happens. Powerful financial special interests control the government spending process and throw only crumbs to the poor.

BIG BLIND BROTHER: TAMPA ABANDONS FACIAL RECOGNITION POLICING

After a highly publicized and controversial two-year test, the Florida city is discontinuing the use of facial recognition technology. The technology had been used in conjunction with closed-circuit cameras installed in Ybor City, Tampa’s historic “entertainment” district. Theoretically, the technology scans faces in the crowd, matching them to criminal databases.

When the program was introduced in June, 2001, it was met with a barrage of criticism from privacy advocates, including the Center for Individual Freedom. Those concerns had nothing to do with the program’s cancellation, according to Tampa Police Department statements. The program was cancelled because after two years of operation, it produced no positive identifications. It produced no arrests. Not one. Not any. “It was of no benefit to us, and it served no real purpose,” Tampa Police Captain Bob Guidara told reporters, fairly clearly.

Identity software a “failure”, says Australian professor.

But Roger Clarke, a University of NSW visiting professor and data surveillance and privacy expert, told a conference at the Cyberspace Law and Policy Centre at UNSW that biometrics should be banned until software error rates are published and improved. He said the limitations of the software meant it was unlikely terrorist attacks could be prevented.

Some of the more embarrassing biometrics failures include computers approving pictures of someone’s face rather than their actual face, and different people of non-Caucasian backgrounds being identified as the same person.

PRIVACY AND HUMAN RIGHTS 2003 REPORT ISSUED

The annual report by EPIC and Privacy International reviews the state of privacy in over fifty-five countries around the world. It outlines legal protections for privacy, new challenges, and summarizes important issues and events relating to privacy and surveillance. It is the most comprehensive report on privacy and data protectione ever published.

The 2003 edition of Privacy and Human Rights looks at the expansion of government surveillance authority. The report finds increased data sharing among government agencies, the use of anti-terrorism laws to suppress political dissent, and the growing use of new technologies of surveillance.

Privacy and Human Rights 2003: An International Survey of Privacy Laws and Developments is available free on-line here, or it can be purchased from the EPIC Bookstore here.

FTC ISSUES REPORT QUANTIFYING EFFECTS OF IDENTITY AND FINANCIAL ACCOUNT THEFT

About 3.3 million American consumers discovered within the last year that their personal information had been used to open fraudulent bank, credit card or utility accounts, or to commit other crimes, according to the Federal Trade Commission’s first national survey on identity theft. The FTC said these cases had collectively cost businesses $32.9 billion and consumers $3.8 billion.

In addition, 6.6 million people fell victim to account theft in the last year. Unlike identity theft, in which the criminal uses personal information to open and use accounts that are in the victim’s name, account theft entails using stolen credit or A.T.M. cards, or financial records, to steal from the victim’s existing accounts. Such account-theft cases, the survey found, caused $14 billion in business losses and $1.1 billion in consumer losses. The vast majority of these cases, almost 80%, involved credit card fraud.

The survey found that in the last five years, the rate of identity and account theft was highest on the West Coast, at 14% of those surveyed, and lowest in the Midwest, at 10%. The South and the Northeast had rates of 13% and 12%. About 26% of victims said they knew the identity of the thief. Of those who knew, a quarter said it was someone employed by a company that had access to personal information, and about 18% said it was a friend, a relative or someone who worked in the victim’s home.

FTC survey summary here.

FTC identity theft web site here.

MS, eBay, Amazon et al join ID theft busters.

Microsoft, eBay, Amazon.com and Visa are among founder members of the Coalition on Online Identity Theft, which is dedicated to fighting ID theft. “Most identity theft comes from offline sources, such as personal information and documents thrown away by the trusting consumer in their usual trash disposal,” Harris Miller, Information Technology Association of America -- which will do the administration for the coalition -- president, said. “While a small percentage of the problems come from online sources, recent email frauds have involved notifying a consumer about a fictitious account problem and asking the individual to supply a user-id and password, social security number, credit card information or other sensitive data.”

IRWIN SCHIFF WINS TEMPORARY REPRIEVE IN BOOK-SELLING SPAT

LAS VEGAS: A federal appeals court has temporarily blocked a lower court’s order preventing anti-tax author Irwin Schiff from selling books that argue paying income tax is voluntary. In an emergency stay, the 9th U.S. Circuit Court of Appeals on September 3 prevented a federal judge from enforcing a preliminary injunction against Schiff. The injunction also stopped Schiff from giving lectures and required him to turn over a list of his customers to the federal government.

A contempt hearing had been scheduled for September 4 in U.S. District Court in Las Vegas. The hearing, which concerned allegations that Schiff had failed to turn over the customer list, was postponed until the 9th Circuit issues a ruling. U.S. District Judge Lloyd George issued the preliminary injunction in June, blocking Schiff from selling his latest book, The Federal Mafia: How Government Illegally Imposes and Unlawfully Collects Income Taxes.

“[The stay] restored sanity to the First Amendment,” Schiff said. “I believe our constitutional rights are going down the tubes. The government was prosecuting me because they don’t like what I believe.”

MACHINES WILL MAKE CRIMINAL OF EVERY U.K. DRIVER

The U.K. government plans to put a computerised spy in every car. The hi-tech gadgets will record each time a motorist drifts over a speed limit, wanders into a bus lane or even stops on a yellow line ... and issue fines accordingly. The system, called Electronic Vehicle Identification, is outlined in an 85-page dossier drawn up by the Association of Chief Police Officers on the orders of Transport Secretary Alistair Darling. The Government claims the microchip will allow them to make roads safer and cut crime.

Tory Shadow Trade Secretary Tim Yeo said the implications of the plan were nightmarish -- adding: “It risks turning every motorist, however safe a driver, into a criminal. It is far too draconian.”

If the plan is approved by the Government it could become law by 2007. And even if they decide to drop the idea, talks are already under way in Brussels that could see a similar system imposed on the U.K. by the EU.

UK GOVERNMENT TO OPEN AN E-FILE ON EVERY CHILD IN ENGLAND

The British Government yesterday announced that it would be issuing unique ID numbers for all the country’s children, and that local databases of all children would be set up in order to facilitate information sharing between child- (and not so child-) related agencies. The objective, depending on which Government songsheet you happen to be listening to, is either to provide child-centred services better, helping children to “develop their full potential” or to tackle child abuse more effectively in the wake of the “tragic death of Victoria Climbié”.

That reprise of Climbié’s short and unhappy life in the UK, after arriving from the Ivory Coast, illustrates the mismatch between the problem and the solution proposed. Climbié was not initially known to the relevant local authority, and would not have had an ID number, had they existed at the time. The authority was alerted after the first detection of injuries, within a few months of her arrival in the country, and her subsequent death was caused by that authority’s failure to act in any meaningful way.

EU RATTLES SABERS OVER US USE OF AIRLINE PASSENGER DATA

The wheels may be coming off the deal cobbled together between the EU and the Department of Homeland Security to give US authorities access to airline data, in the shape of Passenger Name Records (PNRs). The US unilaterally announced that it would require this data on incoming flights earlier this year, and in response the European Commission agreed to supply it on a “transitional” basis. The transitional period would however now seem to be ending.

Last Tuesday (2nd September) the Commission lined up with Commissioners Frits Bolkestein and Chris Patten, agreeing that the US had failed to give binding commitments that the PNR data would not be used in ways that breached the EU’s Data Protection Directive, and has refused to limit the use of the data to the combatting of terrorism. According to Bolkestein’s letter “only a tightly worded undertaking both about the way that US Customs and Border Protection (CBP) will use the data and about the conditions under which the data may be shared with and used by other agencies is acceptable.”

ASIAN DEBT WITHDRAWAL THREAT TO US DEFICIT

Economists fear that Asian investors, who are the largest foreign owners of US Treasuries, may cut their holdings of US government debt, withdrawing a key source of financing for America’s large current account deficit. The worries have been fuelled by recent sharp falls in the price of US government debt. Marcel Kasumovich, head of G10 foreign exchange strategy at Merrill Lynch, said there had already been a “noticeable shift” downwards in the amount of debt issued by mortgage financiers Freddie Mac and Fannie Mae being bought by foreign investors.

Asian investors have piled into the US Treasury markets in recent years, helping to push Treasury prices high and interest rates low. China, Japan, South Korea and Hong Kong owned a combined total of about $696 billion in Treasuries at the end of June, up from $512 billion in December 2001, according to data from the US Treasury.

Asian countries use the income they receive from exporting goods to the US to buy American assets, which helps keep their currencies weak compared with the dollar. This helps keep the price of Asian goods down in the US.

Deficits are anathema to the bond market.

BusinessWeek has gone out of its way, like Federal Reserve Chairman Alan Greenspan, to try to cheerlead the U.S. economy out of recession (“What bonds are saying”, American News, Aug. 4). The bond market is telling us what it told us in 1990, 1987, and 1985: It hates huge federal deficits as far as the eye can see. If the fiscal doves want to continue to run the printing presses day and night, the bond market is going to respond with higher interest rates.

The new economic reality.

August was supposed to be a bad month, but stocks rose anyway. September is supposed to be the worst month of the year, but stocks are surging anyway. When will the bears wake up and smell the coffee? We are in a bull market. It has legs. It also has rising profits and productivity, lower taxes, and historically low interest rates. Investors are pouring money into stock prices. Think of it as rational exuberance. Economic pessimists had better beware -- and that includes Democrats on the presidential campaign trail. Broad, positive economic moves like this tend to last a long time.

SWISS HOPEFUL OF CONCLUDING EU DEAL THIS YEAR

The Swiss foreign minister Micheline Calmy-Rey believes it is “very realistic” that negotiations on the second set of Swiss bilateral agreements with the European Union could be concluded by December. She met with the Italian foreign minister Franco Frattini on Monday in Rome. Bern has been negotiating with the EU for more than a year to become an associate member of both the Schengen and the Dublin agreements on crime and asylum. The Swiss foreign minister is also due to travel to Berlin and London in October as part of the Swiss government's ongoing efforts to speed up negotiations.

The EU on its side, would like to persuade Switzerland to end its banking secrecy and agree to the automatic exchange of information on savings as part of an EU drive against tax evasion and fraud.

SWISS RIGHTWING SAYS EU IS KEY ELECTION ISSUE

The rightwing Swiss People’s Party says the question of whether Switzerland should join the European Union is the most important issue in October’s general election. But political analysts believe the People’s Party is simply exploiting rival parties’ inconsistency on EU membership to win seats.

SHANGHAI TO OPEN UP SERVICE INDUSTRY TO HONG KONG COMPANIES

Beijing-backed newspaper Wen Wei Po quoted a policy-making expert as saying the Shanghai government had submitted a proposal to the Central Government and expected it to be approved as soon as next month. It did not specify any particular sectors or give details of how much the service industry would be opened.

The service industry accounted for about 51% of Shanghai’s 540.8 billion yuan (HK$509.76 billion) gross domestic product, the paper said. Shanghai’s population is 13.2 million. Under the proposal, 17 of China’s service sectors such as banking, accounting and insurance will be opened to Hong Kong companies in 2004 -- a few years ahead of the World Trade Organisation agreements to open them up to all foreign investors. Market watchers said it was too early to gauge the impact and benefits of Shanghai's move.

SOUTH AFRICAN INVESTORS WARMING TO AMNESTY SAYS ISLE OF MAN BANKER

After an initially luke-warm response to the South African exchange control amnesty, Robin James, chairman of Singer and Friedlander in the Isle of Man, has noted a radical shift in opinion among South African investors who are now much more keen to take advantage of the scheme.

One of the major reasons for the shift in opinion amongst South African investors according the S&F chairman was the realization of a growing trend towards transparency in the international banking system after pressure from governments and global and regional organizations.

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UN REPORTS BIGGEST REDUCTION IN FOREIGN DIRECT INVESTMENT FOR 30 YEARS

Foreign direct investment has plunged by 21% in 2002, dropping substantially for the second year in a row, according to the UN agency United Nations Conference on Trade and Development (UNCTAD). The two-year fall in the amount invested by companies abroad has been the biggest reduction in foreign direct investment for 30 years, since the oil crisis of the l970s.

The news comes as trade delegates are gathering for talks in Cancun, Mexico, which will begin debating measures to make it easier for foreign multinationals to invest abroad -- plans that are fiercely opposed by many poor countries. The annual UNCTAD report says that, among developing countries, those in Africa and Latin America were most affected by the fall-off in investment. The United States showed the largest drop in investment from overseas, falling from first to fifth position worldwide with a drop of 80% in foreign investment compared to 2001.

Overall, world foreign investment dropped to $651 billion compared to $1.4 trillion in 2000 and $840 billion in 2001. The fall was led by the sharp reduction in mergers and acquisitions, which dropped by nearly half to $370 billion in the past year.

Hong Kong remains Asia’s leading investment destination.

Hong Kong has retained its position as the best-performing host economy for foreign direct investment (FDI) in Asia and as the region’s second largest FDI destination, according to the World Investment Report 2003 released Friday by UNCTAD.

FDI flows to Asia and the Pacific declined for the second consecutive year, from US$107 billion in 2001 to US$95 billion in 2002. Hong Kong’s FDI in 2002 reached US$13.7 billion, down from an adjusted US$23.7 billion in 2001. However, Hong Kong maintained its position as the second largest recipient of FDI in Asia, behind the Chinese Mainland, it said.

Malta is world’s fifth largest recipent in foreign investment.

Malta has become the world’s fifth largest recipent in foreign investment, after investment markets fell to $651 billion in 2002, a drop blamed on the slow global economy. This information was revealed by the United Nations Conference on Trade and Development during its annual World Investment Report release on Thursday. The U.N. study found that more than half the world’s countries saw investment decline, with the United States and Britain hit hardest. The main factor behind the decline was slow economic growth in most parts of the world and dim prospects for recovery, at least in the short term. It also cited a drop in merger values.

Foreign investment slowdown afflicts South Africa.

Foreign direct investment in SA slumped to 10% of its 2001 levels last year, a much more dramatic drop than globally, where it slowed 21% in the same period, according to the annual World Investment Report released by the United Nations.

The report says SA was an under-performer in its potential and performance in attracting foreign investment in the 1999-2001 period. Due to SA’s low savings rate, attracting foreign direct investment is one of government’s foremost economic priorities, with President Thabo Mbeki meeting twice a year with an advisory group of prominent international businessmen to discuss the issue.

GOLD PRICE FIXING CONSPIRACY TRIAL MAY PROCEED, COURT RULES

More on this story here (PDF file).

US TO SUSPEND STRICTER VISA RULES

Washington is set to postpone anti-terror regulations that had threatened to block visitors from Western nations from traveling to the United States unless they had the right kind of passport. Effective October 1, nationals from countries on the Visa Waiver Programme (VWP) -- whose nationals do not normally require a US visa -- would have had to travel with machine-readable passports (MRPs) or get a US visa.

But the US is now set to extend by one year the target date for tightening the rules. The extension is a recognition that many passports still cannot be read by computerized scanners and that not all travelers are aware of the new rules, according to state department officials. In some Western European countries, including France and Spain, more than a third of all passports in circulation do not have so-called machine-readable features. The majority of passports from Switzerland are not machine-readable.

American officials said the move to postpone enforcement of the rules followed a vigorous debate between the State Department, where senior officials felt that enforcement of the rules had to be delayed to avoid turmoil for foreign travelers, and the Department of Homeland Security, where officials believed that the new passport rules were a valuable antiterrorist tool and needed to be enforced as quickly as possible.

IMMIGRATION DATA OVERWHELMS U.S. GOVERNMENT CAPABILITIES

The government is gathering more information on immigrants and foreign visitors than ever before. But the efforts may be doing little to protect Americans, experts say. Without the intelligence and interior enforcement to back up the information gathering, the same problems exist that led to the September 11 attacks.

“We still do virtually nothing to enforce immigration laws within the U.S.,” said Ira Mehlman, Los Angeles-based spokesman for the Federation for American Immigration Reform. “Once people get here, they have pretty much carte blanche to stay here and do whatever they want.” Even if such efforts were enforced, they might not protect Americans from September 11-style attackers, who were mostly educated men from middle-class families who entered the U.S. legally and had no criminal record, according to the report, America’s Challenge, by the Migration Policy Institute.

The report said programs such as special registration, in which male visitors from 25 mostly Arab and Muslim countries were required to report to their local immigration offices, could scare potential informants away.

As of August 1, no foreign student or scholar was allowed into the U.S. unless they had been entered into the Student and Exchange Visitor Information System, commonly called SEVIS -- a monumental task that required college officials to log hours upon hours of data entry time. Federal regulations also require schools to track students even after they arrive. Thirty days after the beginning of a school’s fall semester colleges are required to report whether foreign students have registered for class, and whether they are taking the number of course units stipulated in their immigration papers. But school officials are not sure what the federal government will be able to do with the information.

FLIERS TO BE RATED FOR RISK LEVEL

In the most aggressive -- and, some say, invasive -- step yet to protect air travelers, the federal government and the airlines will phase in a computer system next year to measure the risk posed by every passenger on every flight in the United States.

The new Transportation Security Administration system seeks to probe deeper into each passenger’s identity than is currently possible, comparing personal information against criminal records and intelligence information. Passengers will be assigned a color code -- green, yellow or red -- based in part on their city of departure, destination, traveling companions and date of ticket purchase.

The new system, called Computer Assisted Passenger Pre-screening System II (CAPPS II), has sparked so much controversy among both liberal and conservative groups that the TSA has struggled to get it going. Delta Air Lines backed out of a testing program with the agency earlier this year, and now the TSA will not reveal which airlines will participate when it tests a prototype early next year. If all goes as planned, the TSA will begin the new computer screening of some passengers as early as next summer and eventually it will be used for all domestic travelers.

CUBA TRIPS, CIGARS SINK NEW JERSEY BAR APPLICANT

A self-described liberal idealist who says his three visits to Cuba in violation of federal law were acts of civil disobedience has been denied admission to the New Jersey Bar by the state Supreme Court. Zachary Sanders, who passed the New Jersey bar exam in July 2001, first was given a thumbs down by the Committee on Character, which rejected his argument that he had a right to disobey what he called the “immoral and unjust” embargo on trade and travel to Cuba.

A three-lawyer committee said, “it was crystal clear ... that Mr. Sanders believes himself to be absolutely morally justified in breaking the law.” The panel said it viewed him as one who “detaches himself from responsibility to obey the law by endeavoring to distinguish the morality of the law from its legality.”

“In my estimation, being a lawyer does not mean blindly following unjust and immoral laws,” Sanders wrote to the high court in November 2002, after the Committee on Character recommended that he not be admitted. “A healthy respect for the rule of law, and one’s duty to comply with it as an officer of the Court, does not prevent one from engaging in civil disobedience.” Sanders went on to cite injustices codified in law, such as “slavery, Jim Crow segregation, the Japanese internment camps, and the displacement of Native Americans.”

In a rebuttal brief, John Janasie, the first assistant ethics counsel with the Office of Attorney Ethics, argued Sanders’ actions had nothing to do with civil disobedience. “He was selectively choosing to violate the laws of the U.S. in the pursuit of his personal interest and hoping not to get caught,” wrote Janasie.

BUSH URGING WIDER U.S. POWERS IN TERRORISM LAW

On the eve of the second anniversary of the September 11 terrorist acts President Bush called for a significant expansion of law enforcement powers under the USA Patriot Act, saying that his administration was winning the war on terrorism but that “unreasonable obstacles” in the law impeded the pursuit of terror suspects.

With his speech at the F.B.I. training academy in Quantico, Virginia, where he spoke to a cheering crowd of federal investigators and troops from the nearby Marine training base, Mr. Bush plunged directly into the debate over whether the Patriot Act’s provisions were too far reaching. He argued that they did not reach far enough and promised, “We will never forget the servants of evil who plotted the attacks, and we will never forget those who rejoiced at our grief.”

Mr. Bush proposed letting federal law enforcement agencies issue “administrative subpoenas” in terrorism cases without obtaining approvals from judges or grand juries, expanding the federal death penalty statutes to cover more terrorism-related crimes and making it harder for people suspected in terrorism-related cases to be released on bail.

Bush’s counterterror proposals could be a hard sell.

President Bush, seeking still greater powers to fight terrorism, appears to have calculated that the renewed memories of the September 11 attacks evoked by their second anniversary will be enough to outweigh rising concerns over civil liberties.

Mr. Bush’s proposal for stronger counterterrorism laws faces a hard sell in Congress, as the administration tries to persuade skeptical lawmakers in both parties that the authorities will not abuse their growing power to investigate and lock up suspects. The political climate has changed markedly since the original Patriot Act was passed overwhelmingly by the House and Senate. Some 160 communities around the country have voiced formal objections to the legislation, civil rights groups have sued to have it overturned, and it has become a rallying point for Democratic presidential candidates on the campaign trail who say it smacks of Big Brother tactics.

Anti-terror laws increasingly used against common criminals.

In the two years since the nation began giving law enforcement agencies fresh powers to help them track down and punish terrorists, police and prosecutors have increasingly turned the force of the new laws not on al-Qaida cells, but on people charged with common crimes. The Justice Department said it has used authority given to it by the USA Patriot Act to crack down on currency smugglers and seize money hidden overseas by alleged bookies, con artists and drug dealers.

Federal prosecutors used the act in June to file a charge of “terrorism using a weapon of mass destruction” against a California man after a pipe bomb exploded in his lap, wounding him as he sat in his car. A county prosecutor in North Carolina charged a man accused of running a methamphetamine lab with violating a state law barring the manufacture of chemical weapons. If convicted, Martin Dwayne Miller could get from 12 years to life in prison for a crime that usually puts a person behind bars for about six months.

Civil liberties and legal defense groups, though, have been bothered by the string of cases, and say the government will soon routinely be using harsh anti-terrorism laws against run-of-the-mill lawbreakers. “Within six months of passing the Patriot Act, the Justice Department was conducting seminars on how to stretch the new wiretapping provisions to extend them beyond terror cases,” said Dan Dodson, a spokesman for the National Association of Criminal Defense Attorneys. “They say they want the Patriot Act to fight terrorism, then, within six months, they are teaching their people how to use it on ordinary citizens.” Prosecutors are not apologizing.

Congressional bills would repeal parts of Patriot Act, but Bush threatens vetoes.

More than a half-dozen bills to roll back portions of the law are pending in Congress. One passed the Republican-controlled House in July on a stunning 309-118 vote, with support from small-government conservatives as well as civil rights liberals. It would cut off federal funding for “sneak and peek” searches, which involve secret entries and delayed notice to suspects. The bill has little chance of becoming law, as President Bush is prepared to veto any significant changes in the Patriot Act, but the House action may have signaled a change in the climate.

Despite opponents’ criticisms, said Justice Department spokesman Mark Corallo, opinion polls show that “the people understand that this (Patriot Act) is a bill that protects life and liberty, that does not affect their civil liberties. (It) allows us to more effectively target terrorists.”

But American Conservative Union spokesman Bob Barr says the public is turning against its most intrusive provisions because Americans are starting to realize how extreme the law is.

Shilling for Ashcroft.

A U.S. attorney’s presentation in Indianapolis exemplifies how Attorney General John Ashcroft is turning the nation’s front-line federal prosecutors into a politicized lobbying team to defend an ill-conceived law. Certainly, prosecutors serve the public when they offer factual explanations of a controversial law and how they enforce it, as U.S. Attorney Susan Brooks of Indiana’s Southern District did Wednesday. But her multimedia show -- complete with “God Bless America” playing over photos of the 9-11 terrorist attacks on New York City -- was over the top, designed to stir emotions and build support for the USA Patriot Act.

As political appointees, U.S. attorneys can be expected to support the policies of their bosses -- the attorney general and the president. But as public officials responsible for prosecuting violations of federal crimes, they should be above engaging in lobbying for partisan gain, as Ashcroft has essentially directed them to do.

Ashcroft visit to Boston sparks protest.

Standing at the dais in historic Faneuil Hall, speaking in front of a teleprompter, US Attorney General John Ashcroft referenced the historic debates that took place in the room and said he was honored “to talk about freedom in a setting like this.” But as he launched into a speech promoting the USA Patriot Act Ashcroft never acknowledged the constant noise that crept in from outside: the muffled din of protesters chanting and banging drums.

The hastily organized crowd outside had grown to several hundred by the time Ashcroft arrived just after 9:00. Many protesters said they had learned about his appearance from websites such as Moveon.org. Harvard Bookstore had sent an e-mail to patrons, urging them to demonstrate. One trio of coworkers from a mutual fund company glimpsed the protest from their 12th story window and decided to take part. “It’s important to come out and use the civil liberties we have left,” said Celine Suarez, 24, an environmental analyst.

SEPTEMBER 11 AND SWITZERLAND

The security measures taken by Washington in the wake of the terrorist attacks two years ago have had far reaching consequences. The attacks did not just upset the world’s political stability, they had a major effect on the global economy.

The aviation industry was the first to suffer. Switzerland’s national carrier, Swissair, which was already in financial difficulty at the time of the attacks, was a major casualty.

The US congress voted in the ‘Patriot Act’, which gives the government almost unlimited powers to hunt down suspected terrorists and seize their assets. As one of the world’s major financial centres, Switzerland naturally found itself in the spotlight. A particular concern is the US’ apparent unwillingness to differentiate between terrorist money, dirty money, or the proceeds of tax evasion.

“DIRTY MONEY AND NATIONAL SECURITY” CONFERENCE HELD AT BROOKINGS INSTITUTION

The conference, sponsored jointly by Brookings, the Center for International Policy and the Caux Round Table, featured leading academic, private sector and government figures. Senator Charles Grassley (R-Iowa), in a speech relayed by U.S. Sentate Caucus on International Narcotics Control staff director Eric Akers, stressed that money laundering and terrorist financing are legitimate threats to national security that the United States cannot fully confront alone.

Sen. Grassley also highlighted the economic instability that dirty money can cause, by reducing tax revenues, competing unfairly with legitimate businesses, damaging financial systems, and disrupting economic development.

CITIGROUP’S LOW-TECH USA PATRIOT ACT SOLUTION

On April 30, a year and a half after Congress passed the USA Patriot Act to combat terrorism, the U.S. Treasury finally told banks, mutual funds and brokerage houses what is required by the various anti-money laundering statutes within the law. Then Treasury said to get it done by Oct. 1. That left banks just five months to scramble. Citigroup, responsible for 200 million customer accounts, even tried to secure an extension.

Citigroup’s biggest problem is one of the Act’s simplest requirements -- all banks must implement a Customer Identification Program to verify the identity of new depositors, no matter how small. Evidence that the customer’s identity has been verified, along with information from a driver’s license or passport, must be kept on file for five years after the account has been closed. Sounds easy, but Citi’s computer systems are not up to the task.

Citi will be able to comply by resorting to pen and paper. Citi employees will have to collect information manually and enter it whenever the new systems are installed. It is a low-tech solution to what was supposed to have been a high-tech war on terrorism.

EU COMMISSION TO EXPAND INFORMATION SHARING RULES ON DIRECT TAX

The European Commission has proposed new measures to improve cross-border information sharing procedures between member states concerning fraud in the sphere of direct taxation (income tax, corporate tax and capital gains tax). The move would increase the amount of activity members could undertake on each others’ behalf and corrects weaknesses present in the existing Directive on Mutual Assistance.

Frits Bolkestein, Commissioner for Taxation, comments: “The progressive removal of cross-border tax obstacles for individuals and businesses operating within the Internal Market must not provide increased opportunities for tax dodgers and cheats. Every taxpayer must pay what he or she owes and strengthened co-operation between Member States is the best way to ensure this.”

DANGER OF OVER-REGULATION FOR ISLE OF MAN BUSINESS SAYS EXPERT

A Douglas-based legal expert has argued the case for a UK style regulatory impact assessment system in order to better quantify the regulatory impact of legislation on business in the Isle of Man, the IoM Online reports.

“In the UK the government has asked that no proposal for regulation which has an impact on businesses, charities or voluntary bodies should be considered without a regulatory impact assessment (RIA) being carried out. Why don’t we do it here?” enquired advocate Janice Turnbull.

ARGENTINA SECURES 3-YEAR IMF AID PACT

Argentina has clinched a new 3-year International Monetary Fund aid deal, the government said on Wednesday, seen as vital to help the economy recover from its worst ever economic crisis. The aid deal to refinance $21 billion worth of debt with multilateral lenders comes just a day after Argentina defaulted on a $3 billion debt to the fund and after months of tortuous negotiations.

It also paves the way for Argentina to get down to restructuring $90 billion worth of defaulted debt held by creditors from Milan to Tokyo -- and repair credit lines severed after last year’s record sovereign default made it a financial pariah. The agreement did not include either a timetable for utility tariff increases or compensation for banks that lost billions of dollars due to last year’s devaluation -- both of which the IMF had long been demanding in return for aid.

President Nestor Kirchner said the agreement includes a 3 percent budget surplus target for 2004 -- a figure considered low and an IMF cave-in by many analysts. The surplus determines how much the government will have on hand to pay its privately held debt.

Fixing Argentina.

Argentina’s currency crisis and economic depression have been caused by the bad policies of its government -- not by banks, speculators, the IMF (despite the bad advice it has given), or other scapegoats. The De la Rúa and Duhalde governments have made several gigantic blunders: increasing tax rates, freezing bank deposits, devaluing the peso, and forcibly converting dollar bank deposits and contracts into pesos (“pesofication”).

At present, all property is potentially subject to government control or confiscation. There is little reason for anybody to produce, save, or invest in Argentina. The country is returning to the failed economic model that caused so much trouble in the 1980s and had to be jettisoned from 1989 to 1991.

Fixing Argentina’s currency and economy requires reversing those blunders and returning to policies that respect private property and encourage the private saving, investment, and initiative that create economic growth. The main steps necessary in the short term are: officially dollarize, converting all peso assets, liabilities, and prices into dollars; to the extent possible, reverse the damage done by pesofication of deposits; reconstruct the financial system; and drastically reduce tax rates.

Full text of policy analysis here (PDF file).

SOUTH AFRICA EMBASSIES TOLD TO WOO EXPATS TO HELP BUILD NATION

South Africa’s embassies abroad have been told to spend “a lot of time” mobilizing South African expatriates who could assist with nation-building, Deputy Foreign Minister Aziz Pahad has disclosed. Pahad said too many human resources and too much financial capital had left South Africa. It was a challenge to attract the capital back to assist in the development of Africa.

South Africans were making a major contribution to many countries abroad. “Wherever you go in the world, South Africans are running the hospitals, South Africans are running the service industries like tourism. South African nurses are out there in their thousands. Teachers are out there in their thousands, architects, engineers, our construction companies are sweeping through the Middle East and the Gulf states,” said Pahad. It was estimated there were 10,000 South Africans in the United Arab Emirates alone.

OFFSHORE GROWTH SET TO BE UNSPECTACULAR

International financial centers Hong Kong, Bahamas and the Netherlands Antilles are all showing signs of decline as the total funds held across the offshore world fell for the first time in four years. Three years of growth saw deposits and fund assets rise by 13% from 1998. But 2002 was a sharp contrast, with falls of 2.1%, according to analyst Datamonitor. Part of this was due to equity market falls but worryingly Datamonitor identified a “slowing” of assets moving offshore and predicted “unspectacular growth” in the next few years.

But the industry is not thought to be in a long-term decline, despite threats from anti-money laundering regulation, tax initiatives, negative publicity and the economic downturn. “Our key finding is that while the deposits market is chugging along, the funds market has declined seriously,” said Michele Gorman, Datamonitor fund analyst and author of the Offshore Financial Services Databook 2003.

Yet the findings reveal worrying trends that investors are shying away from moving assets offshore as a result of anti-money laundering laws, the EU Savings Tax Directive and declining asset pools.

RESEARCH SHOWS BOOST IN REFERRALS TO OFFSHORE ADVISORS

Research conducted by AXA Isle of Man has found that financial advisors carrying out offshore business have experienced a boom in referrals from professional advisors in the past year. According to the findings more than one in four offshore IFAs are presently receiving business referrals from contacts in the legal and accounting professions, and of these over half say they have noted a marked increase in referrals in the last twelve months.

CORNERED RATS AND THE PLUNGE PROTECTION TEAM (PPT)

Conventional Wall Street media and Washington establishment types are quick to denigrate those of us who theorize about the establishment of a secretive PPT organization to manipulate the markets. But it is a matter of public record that the Working Group on Financial Markets (WGFM), which we allege to be the parent to the PPT, was formed under the Reagan administration. It was done by Executive Order on March 18, 1988. The purposes of the group are to “[enhance] the integrity, efficiency, orderliness, and competitiveness of our Nation’s financial markets and [maintain] investor confidence.”

The WGFM was formed in the aftermath of the crash of 1987 as a natural effort by government bureaucracy to do for the economy what it thinks it is supposed to do -- intervene and manipulate the workings of the marketplace so as to create an ordered economy, an economy that is to the greatest possible extent devoid of volatility, disruption, severity, loss, etc. The fact that severe market volatility was largely a result of government manipulation of the money supply and interest rates was merely blanked out on by the WGFM and its creators. A study of our nation’s economic history will show to any objective observer that there are natural fluctuations inherent in the free-market that humans must always put up with, but which are always self-corrected if the forces of the market are simply LEFT ALONE.

For the past 12-14 years, the PPT has been used by Washington to control the price movements of the NYSE through the buying of S&P futures as former Fed governor Heller advocated. Whenever a crisis appears especially threatening, the PPT swings into action to shore up equity prices on the exchange. The fact that eventually such rigging will destroy the integrity of the markets as free institutions of trading is for someone in the future to worry about. Well that future is rapidly approaching us. And it concerns the new theoretical wrinkle I alluded to above. This is purely hypothetical on my part. I have no verification to prove the claim that follows. But if the reader will keep an open mind and think logically, he should come to the same conclusion that I have.

COMING TO TERMS WITH HOW RUSSIAN MEGARICH GOT THAT WAY

Russia got its first official millionaires and billionaires in 2002. That many a former communist apparatchik and well-connected political insider had accumulated enormous wealth through fixed privatization schemes and outright corruption was a well-known fact. But few ventured to declare their personal wealth.

This class of super-wealthy Russians is mostly alien to their own country: Most have real estate and other assets abroad, and their children live and study in foreign countries. Conditions have never been right for them to feel comfortable in their home country. Creation of personal wealth has been a traumatic experience for Russia and few dare show the extent of their opulence to their fellow citizens for fear of reprisals. Their guilt does not let them sleep in peace.

By Russian standards, 60% of the population lives below the poverty line, and another 10% would be considered to be living in poverty if judged by Western standards. Then, we get the Russian middle class -- at 20-28% -- and, finally, the economic elite, a mere 2 percent. Much of that “elite” would be considered upper-middle-class by Western standards.

AMERICANITUS: LITIGATION FRENZY DRIVING UK IT CONTRACTORS UNDER

Litigation against independent IT contractors is forcing many firms out of business as they try to cope with the costs of fighting lengthy legal battles. Even where the consultant is not at fault, the cost of specialist legal representation and expert evidence can run into hundreds of thousands of pounds to defend a legal action arising out of a mistakes such as the accidental erasure of a client’s hard drive.

According to recent research, the number of professional indemnity claims made by small IT consultants has soared by more than 40% in the last four years as dissatisfied clients increasingly resort to legal action.

WHAT THE JOINT INQUIRY INTO 9/11’S REPORT SAYS ABOUT TODAY’S NEEDS

The report of the Joint Inquiry into Intelligence Community Activities Before and After the Terrorist Attacks of September 11, 2001 describes a systematic failure of the United States intelligence community to respond to the then emerging terrorist threat.

While it offers no smoking gun, the report’s main value is as a reminder of what the intelligence community needs to do to maximize its effectiveness in combating terrorism. The Bush Administration and Congress should heed the lessons ingrained in the Joint Inquiry’s report and apply them to current debates about intelligence policy -- as new programs are coming online, others are being developed and Congress considers the future of potentially valuable research and development efforts.

Struggling to strike a balance.

America has made much progress in protecting itself in the two years since the September 11th terrorist attacks. But more needs to be done, in Europe too.

Two years after the attacks America is unquestionably more secure. Two-thirds of known al-Qaeda leaders have been captured or killed, according to President George Bush -- though Osama bin Laden, the network’s leader, remains at large if a newly released videotape is to be believed. Thousands of armed air marshals have taken to the skies, cities have been practicing responses to biological or chemical threats, and security at America’s borders has been tightened -- too much so, grumble some foreigners, who recently persuaded America to postpone by one year new rules that would force European visitors to America to obtain new, electronically scannable passports. Most tellingly, perhaps, there have been no more big terrorist attacks on American soil, though the national threat level continually hovers on either yellow (elevated) or orange (high).

THE DAY NOTHING CHANGED

For the past week I have been reading through 35 years worth of Reason back-issues, in advance of the magazine’s upcoming Jade Anniversary special. Viewing history through this lens, an action-reaction pattern quickly emerges: Huge unforeseen event rocks Washington, the government devises some over-reaching program to address it, then Reason throws a dart (or several). Several years later, maybe, the rest of the country comes around to the magazine’s point of view.

Of course the magazine has been wrong before, and I have heard rumors that the government has done a worthwhile thing or two in its history, but the basic formula holds: crisis creates government expansion, which compels citizens to change their behavior and sacrifice some freedom. What is striking to me about the two years since that atrocious morning, in comparison to the lesser crises from 1968-2000, is how little we have been asked -- or forced -- to do or change. My guess is that, aside from inconvenience at airports, more than 99% of the people reading this column have not been concretely affected by any of the new enforcement or prevention measures introduced since the September 11 massacre.

Should we be concerned about this seeming dissolution of National Unity, and lack of government-mandated sacrifice? I think not.

Reflections two years later.

As I sit here early this morning, I look out the window and see a dark night/early morning in the city. A few brave souls motor their cars along the highways and roads. Lights of the city flicker around. It is a quiet world. I love this time of day for thinking and contemplating. And today, two years after the tragedy of September 11, 2001, is a good day to take time to reflect.

LET’S REVIVE AN OLD AMERICAN TRAIT: MINDING OUR OWN BUSINESS

Minding our own business and not sticking our noses into other people’s business is an old American trait now out of style. We need to bring it back. It is a very good rule that can save us all a lot of trouble.

We have become a nation of busybodies, meddling in affairs both domestic and foreign that do not concern us. I have seen environmentalists who do not even live in a town appear before a town council and attempt to tell the elected officials what they ought to do in their town. People are always trying to tell property owners what they can and cannot do with their own property.

The federal government, naturally, is the worst busybody, sticking its nose not only into every aspect of our lives but also into the lives of people in foreign countries. This is the most dangerous form of meddling possible and has already cost us hundreds of thousands of lives and trillions of dollars while not improving the world one whit.

BIG BROTHER’S IN THE HOUSE

Big Brother technology that already allows people to be tracked through their mobile phones could soon be installed in household objects, tipping off police if they are stolen. Televisions, DVD players and computers could be fitted with microchips identifying their location and their normal proximity to each other, automatically alerting police if they change unexpectedly, according to Nigel Linge, a professor at Britain’s Center for Networking Telecommunications Research.

Linge said he was well aware of the potential implication for civil liberties of the intrusive potential of the new technology, but at present he was focusing only on the technical aspects.

BRITISH POLICE PROPOSE UNIVERSAL DNA DATABASE

Police in Britain have called for debate on the possibility of collecting genetic codes from every U.K. resident. The information would be stored in a database as a means to fight crime, but civil liberties groups are opposed to the idea. Police believe the database would help them tackle unsolved crimes and that public opposition to the plan is not as widespread as politicians and civil liberties campaigners say it is.