September 2005 Selected Offshore News Clips

(Especially noteworthy articles’ headings highlighted in gold.)

WILL THE NEW NATIONAL ID TRACK YOUR MOVEMENTS?

By the end of September virtually unaccountable bureaucrats inside the Department of Homeland Security will likely have decided whether the new de facto national ID card will broadcast your sensitive identification information wherever you go – Minority Report style. This comes as a result of the REAL ID Act. REAL ID was signed into law in May. As a result of negotiations over the intelligence-reform bill passed last December, the law had been attached to the first “must-pass” bill of 2005, which turned out to be “emergency” spending for the Iraq war. Thus a vote against this national ID would have been spun as a vote “against the troops” as well.

REAL ID gave the Department of Homeland Security (DHS) the sole right to issue “design requirements” for driver’s licenses, needing only to “consult” (that is, ignore) state officials and the Department of Transportation. Though the official publication of the design requirements is still some months off, DHS is expected to make an internal decision on one of those requirements, regarding “machine-readable technology” standards, by early fall. And there is a lot of pressure on DHS from the surveillance-technology industry to make radio-frequency identification (RFID) microchips the required machine-readable technology.

FID technology in an identification card consists of an embedded microchip and antenna that broadcasts identity information, decodable by specially designed readers. On an identifying document such as a driver’s license, RFID is an unnecessary, dangerous technology in today’s information-rich world. RFID-enabled identity cards can broadcast identifying information to persons and institutions without the knowledge or consent of the license holder. That information, such as a name, birth date, identification number, or even digital photo, could then be cross-referenced through commercial and government databases to gain increasingly sensitive identity information on the individual. That kind of technology on essentially mandatory government documents can lead to identity fraud, endangering the victim’s finances, privacy, and even physical safety.

ESCAPE TO NEW ZEALAND

We landed in New Zealand true immigrant style. When we left for New Zealand, known as the land of the “Long White Cloud”, we allowed our family of five just two bags each. One was for clothes and one for everything else we wanted to bring to this “new land”. We had no jobs, no relatives, and knew no one. We left everything we had known in the U.S. including a large house overlooking San Francisco Bay, good paying jobs, cars, computers, furniture, friends and family. (This decision from two people with advanced degrees!) For us, moving to the South Pacific has been the best decision we ever made.

Once in New Zealand, we rented a car and traveled 6000 kilometers (about 3600 miles) around New Zealand’s two primary islands. Everywhere we looked, the scenery was stupendous, the people were friendly and the lifestyle seemed pretty laid back. In most cities in New Zealand if you travel 20 minutes to work, you are a “heavy duty commuter”. We started collecting details on this small, spectacularly beautiful country. The range of communities in New Zealand varies from very “outback”, “rural” or even “rugged” to pretty cosmopolitan. Traveling around New Zealand, we could tell that the majority of the country is still very agriculturally oriented. Sheep, cows, apple trees, kiwi fruit, grapevines and now olive trees abound. There are three major cities. New Zealand has a population just over 4,000,000 and its land mass is about the size of Colorado. It costs less to live in New Zealand, but the wages earned are also lower.

We decided after comparing numerous checklists, trying to evaluate every angle and most of all trying to crystal ball the future … to “just do it”. Deciding to move to another country is only the first step in “making it happen”. For us, moving to New Zealand was a risk, but also an adventure. We approached the entire process with an eye to experimentation. After all, what would happen if we tried and failed at any juncture? Though you may not think it at the time, you can always go backwards. But few people ever do. Jobs, houses, cars are obtainable in any country as long as you are able to put your enthusiasm into looking for them.

WORKING IN PARADISE (MARGARITA ISLAND, VENEZUELA)

I have gotten lots of e-mails from people wanting to “get out of Dodge” … i.e., leave the U.S. Many of them have not reached retirement age and have asked if they can get work here on Margarita Island – often they do not include any information about their skills, present employment, trade, no other information, just “can I get a job there?” Naturally, I could not answer their questions. Most foreigners could not live on a local salary as wages are low compared with the U.S., Canada, Europe, etc. A hotel manager may make the equivalent of $250 a month and a really good salesman might earn about $350 a month.

Consequently, the best way to get a good paying job here is to create one! It is reasonably easy to start a small business here on Margarita, even with the bureaucracy involved. In most cases much easier than in the U.S. No OSHA, very limited involvement with things like Workman’s Comp., Liability Insurance, Employees Medical Insurance, Fire Insurance, Fire Marshal inspections, City Ordinances, Zoning, City Council, State Taxes, Federal Taxes, County Taxes, Tax Taxes and on and on.

Let’s assume you are desperate to escape the escalating prices and bureaucracy in the U.S. or elsewhere, but do not have a lot of money to start. You might consider something as simple as a food cart selling hot dogs, corn dogs, sandwiches, stuffed baked potatoes or something similar … most food stands here just sell Arepas. A stainless steel cart will cost between $200 used and up to $1,000 for a really nice new one. Your permit will be a few dollars, and possibly a couple of hundred for legal work and accounting. Add the cost of stock, location rental (could be flat rate or percentage of sales) and you are looking at a couple of thousand dollars to set you up to make a living in Paradise! One of the most successful restaurateurs in Mexico started just this way. If you qre not into food sales, maybe a spray tanning booth on the beach or an “Olde Time” photo shop, or a “banana boat” … none of these types of businesses are here, and Margarita Island is a major tourist destination.

Isla Margarita Revisited

After my article that was published in Escape Artist, I got a landslide by faithful readers who inquired as to what I had found on this beautiful Caribbean island south of Caracas. As a result, I had a 10 day reunion with a handful of inquiring minds that could not wait to discover Margarita Island Venezuela. If you do not want beautiful beaches, affordable living, wonderful weather, this place is not for you.

You need to get out of your head that this is a third world country. Yes, many parts look like Mexico, same with the architecture, but the shopping centers, pharmacies, big grocery stores, department stores, etc are as nice (or nicer) than some of the U.S. best. The only thing Margarita Island is lacking from the U.S. is congestion, smog and prices. However, many things like electronics and appliances are about the same, maybe a little higher. Where the real value is lies in property, gas, cost of living, taxes, insurance, etc. Gas is still around $0.12 a gallon, cigarettes (Marlboro) are $1 a pack, beer is $3.20 a case of 30, car insurance is less than $100 a year, property taxes the same or less and groceries are very inexpensive. Anything and everything else you want is there. Cellular, Direct TV, shopping centers, restaurants, casinos, nightclubs, everything!

A good 90% of the roads are in great condition. Far better than Mexico’s old roads or Costa Rica [Ed: that is not saying much]. Some divided highways, very few accidents even tho you do not need to stop for red lights and drinking and driving is acceptable unless you are extremely drunk. From what I saw, their accident rate and DUI’s are about 1% of ours. Everybody drives aggressively passive and very polite unless you are holding up traffic. Then you get the horn. Should you bump another car and he pays for your car and you pay for his. What a concept? Not one ambulance chaser on the island. Wow, did I love that!

Since this trip was to research property, we were very impressed with price’s compared to the rest of the world. I found one penthouse for sale for $110,000 asking and this was brand new but not completed. Structure was there but needed everything, tile, appliances, furniture, cabinets, etc. The good thing was, you would get it exactly the way you wanted it. You would be hard pressed to put another $40,000 into it. So for $150,000 you have a brand new custom 3000 sf, 4 bed/4 bath penthouse with the 3000 sf sundeck on the roof that is perfect for a wet bar, hot tub, lawn, BBQ, putting green. For $55,000 I saw many condos, some on the beach, some with a nice view of the water. All were security gated with all amenities, 2 bed/2 bath, living room, kitchen, AC, yada, yada.

Escape from America’s latest issue’s table of contents may be found here.

CURRENCY CARDS: LIKE HAVING LIQUID GOLD IN YOUR WALLET

Traveling with large amounts of cash used to mean you would either have to sweat it out with a big bankroll in your pocket or get writer’s cramp signing a bucketload of travelers’ cheques. But not any more. Now, there are great ways to travel with cash stored in a credit card-sized piece of plastic that is NOT a credit card (though it looks like one). These currency/debit cards give you the confidence of cash, the ease of a credit card and all the privacy in the world.

A Swiss Travel Cash card looks like a credit card, but has no name on it, just a numerical code. The user also gets a PIN code. The user calls his or her banker, who loads the card with a maximum 10,000 euros, U.S. dollars or Swiss francs. It can then be used to withdraw cash all over the world. Even better, there are no monthly limits of withdrawal, although a limit per withdrawal may apply. And you can reload the card when you run out of cash.

Now, it is not free. When you purchase the card and load it for the first time, you pay a commission of 1%, not unlike an insurance premium in the event of loss or theft. Charges for each withdrawal are €3 or $3 (depending on the type of currency loaded in the card) worldwide, though local ATMs may add on their own charges. And when you reload it, you pay a commission of 1% on the reloading amount.

If you lose the card or it is stolen, the card is replaced and your current balance is credited to your new card – worldwide and at no charge. And anyone who finds the card will not be able to use it without knowing the PIN. If you have gold in a Swiss bank account, it can be sold for cash to come up with the Swiss Travel Cash in a matter of hours. You can use the card at more than 900,000 ATMs in more than 120 countries around the world. Your privacy is protected, as purchases are not made in the card user’s name. For more on this card, click here.

THE SQUEEZING OF LAWYER-CLIENT PRIVILEGE

In its agreement with the government that headed off an indictment, the accounting firm KPMG promised not to try to use “any claim of privilege” to keep information from prosecutors. The pledge did not get much attention, perhaps because waiving the privilege that protects communications between a lawyer and client is now commonplace for corporate defendants. But the privilege has been weakened in other ways, too, as more individual defendants try to argue that their actions were blessed by a lawyer and that, as a result, they did not know they were doing anything wrong.

Some lawyers say they are worried that weakening the privilege will mean that clients will be less candid, making legal advice less reliable. Other lawyers counter that anyone advising a company, an executive or an individual will give better advice because of the possibility that the advice may someday become public. But all agree that the privilege today is much more negotiable than in years past. “It’s clear that there’s this chill out there, that the privilege is vulnerable,” said R. William Ide III, a lawyer at McKenna Long & Aldridge in Atlanta and also chairman of an American Bar Association committee on lawyer-client privilege. “We don’t think it should be in play.”

But powerful forces have put in play the privilege protecting communications, as well as the so-called work product privilege covering documents and other work by a lawyer in anticipation of litigation. Examples abound in recent years of lawyers providing evidence – in cases involving HealthSouth, Tyco, Credit Suisse First Boston, Enron and others. A recent bar association report notes that while it is difficult to determine how frequently companies are asked by regulators and prosecutors to waive the privilege, those interviewed by the committee said “these requests, backed by an express or implied threat of harsh treatment for refusing, have become increasingly common.”

THE REPUBLICAN CHARADE: LINCOLN AND HIS PARTY

I want to take a look at this strange institution we know as the Republican party and the course of its peculiar history in the American regime. The peculiar history both precedes and continues after Lincoln, although Lincoln is central to the story. It is fairly easy to construct an ideological account of the Democratic party, what it has stood for and who it has represented, even though there has been at least one revolutionary change during its long history.

I generalize broadly, because all major political parties since at least the early 19th century have most of the time sought to dilute their message to broaden their appeal and avoid ideological sharpness. But we can say of the Democratic party that through most of its history it was Jeffersonian – it stood for, at least in lip service, a limited federal government and laissez-faire economy, and it represented farmers and small businessmen, the South, the pioneer West, and to some extent the Northern working class. This identity for the most part even survived the War to Prevent Southern Independence. Clearly, the party in the 20th century came to represent a very different platform – social democracy as defined by the New Deal and the Great Society – and a considerably different constituency. In either case, onlookers have had a pretty good general impression of what the party stood for.

It is nearly impossible to construct a similar description of the Republican party. The party that elected Lincoln was pretty clear about some things, like the tariff, although it may have been less than honest about the reasons. It was obfuscatory about other things. Since Lincoln took power, it has been difficult to find a clear pattern in what the party has claimed to represent. The picture becomes even cloudier when you compare words and behavior. This, I believe, is because its real agenda has not been such that it could be usefully acknowledged.

Apparently millions continue to harbor the strange delusion that the Republican party is the party of free enterprise, and, at least since the New Deal, the party of conservatism. In fact, the party is and always has been the party of state capitalism. That, along with the powers and perks it provides its leaders, is the whole reason for its creation and continued existence. By state capitalism I mean a regime of highly concentrated private ownership, subsidized and protected by government. The Republican party has never, ever opposed any government interference in the free market or any government expenditure except those that might favor labor unions or threaten Big Business.

There is nothing particularly surprising that there should be a party of state capitalism in the United States. And certainly nothing surprising in the necessity for such a party to present itself as something else. Put in terms the Founding Fathers would have understood, the interests Republicans serve are merely the court party – what Jefferson referred to as the tinsel aristocracy and John Taylor as the paper aristocracy. The American Revolution was a revolt of the country against the court. Jeffersonians understood that every political system divides between the great mass of unorganized folks who mind their own business – that, is, the country party – and the minority who hang around the court to manipulate the government finances and engineer government favors. It is much easier and quicker to get rich by finding a way into the treasury than by hard work. That is mostly what politics is about. Of course, schemes to plunder society through the government must never be seen as such. They must be powdered and perfumed to look like a public good.

Contrary to what we might hope, there was nothing in the New World to inhibit the formation of a court party. In fact, the immense riches of an undeveloped continent merely increased incentives for courtiers. The number of projects that could be imagined as worthy of government support was infinite. In America there were not even any firmly established institutions of credit and currency, control of which was always the quickest route to big riches. Neither was there anything in a democratic system to inhibit state capitalism. The great mass of the citizens could usually be circumvented by people whose fulltime job was lining their pockets by swindling the voters. Lincoln’s triumph is most realistically seen as the permanent victory of the court party, a victory that had been sought ever since Alexander Hamilton. The Lincoln regime eliminated all barriers to making the federal government into a machine to transfer money to those interests the party represented (and as many others as needed to be paid off to support the operation).

EMPIRE OF DEBT

America has changed. From a nation running a surplus and minding its own business, America is now the world’s biggest busybody, requiring the kindness of strangers to fund not only its overseas government follies, but also, the lifestyles of its over-indebted private citizens. The story of when America turned its back on what had made it a rich nation, and why, is told by two of the world’s best financial writers, Bill Bonner and Addison Wiggin, in their new book, Empire of Debt. The pair teamed up a year ago to pen Financial Reckoning Day: Surviving the Soft Depression of the 21st Century. Our readers are well acquainted with Bonner’s Mencken-like wit mixed with keen market insights and the occasional dash of Dr. Freud.

The irreverent Bonner and Wiggin write that the purpose of Empire “is to show that the U.S. is headed for trouble.” And that, “their burden is only to show that the people making important policy decisions are morons and frauds.” The authors have a penchant for old ideas, old rules and old investors like the soon-to-be 93-year-old Sir John Templeton who shares their view that stocks and houses are over priced, and contrary to what Dick Cheney says, that trade and federal deficits do matter. Most new ideas fail, and the new economy idea that debt is good, stock valuations will forever remain high and that you can get something for nothing is just chimera.

Bonner and Wiggin explain that typically the imperial power provides the public good of security and order but expects to earn a profit in the form of tribute in return. However, America has turned this equation on its head. America does not take tribute from dependent territories. It borrows from them. “Living standards rise in the U.S.,” the authors point out. “But they are rising on borrowed money, not on stolen money.” In 1952, the authors note, foreign sources provided just 5% of the Federal government’s borrowings, but by 2005 that percentage had grown 9-fold. History shows that central power weakens over time, while the subordinate states gain strength. Therefore, it is just a matter of time before they stop supporting the American empire with loans.

It is hard to know when the empire and its bubbles will collapse. Bill Bonner and Addison Wiggin do not pretend to know. But, Empire of Debt makes the wait more fun.

DOES FLAT TAX REVOLUTION THREATEN BERMUDA AND OTHER TAX HAVENS?

One of the gravest dangers that Bermuda faces is the widespread introduction of “flat tax” in developed countries. The extraordinary complex tax codes in the U.S. and the UK, for example, give endless reasons for tax advisers to recommend incorporation of global holding companies in Bermuda, and in other no-tax or low-tax regimes like Ireland, the Netherlands and Luxembourg. If the major tax jurisdictions were shorn of that complexity, the attraction of jurisdictions like Bermuda would disappear almost overnight. Until now, that prospect has been remote, so international accountants and tax advisers, and their very powerful corporate clients, have had every reason to take advantage of impossibly complex tax codes by making use of low-tax jurisdictions.

However, in a recent edition of the Wall Street Journal, senior economics writer Stephen Moore wrote that the flat tax “was an idea whose time has come”. Meanwhile, in the UK’s Daily Telegraph, George Trefgarne wrote that “whatever (UK Chancellor of the Exchequer) Gordon Brown says, the flat tax is coming. (It) is marching across Europe, just as other ideas have conquered the Continent every generation or so. This time, the revolution is being driven not by loathing of communism or some ancien regime, but by that mysterious magic of markets: competition. … A flat tax regime has been adopted in 11 countries and counting. As each citadel falls, another is forced to respond to the new-found vigour of its neighbour.”

Next up is Greece, which has “unbelievably rickety public finances, (but) the hope is that a flat tax rate of 25% will revive the moribund economy, reduce evasion, attract high earners and send revenues pouring into the coffers of Athens”. But Mr. Trefgarne also sees Germany as “a far bigger prize for the flat-tax revolution”. New Christian Democrat leader Angela Merkel, herself a product of the Soviet Bloc as a former East German, is challenging Chancellor Gerhard Schroder, and is far ahead in the polls. It would be a profound irony if Bermuda’s international position was eroded by Steve Forbes, the New York Times, and a “revolution” begun in the former Soviet Union.

SWISS EXPERIENCE PROVES TAX COMPETITION WORKS

Lots of factors influence where people decide to live, and where businesses choose to base themselves. Communications, language, location, infrastructure, culture and language all play a part. But one of them might also be tax. In recent months, tax competition has started to be hotly debated across Europe. Eastern Europe has been conducting a radical experiment in flat taxes, led by countries such as Russia, Estonia and Romania. Now it is spreading to western Europe as well. Greece has already said its planning a flat tax. In Germany, the opposition Christian Democratic Union, which might be in power by the end of this month, has toyed with a flat tax. And while the French have been cutting tax rates, the UK has been increasing them.

But is there really any need for countries to compete with one another on taxes? People or companies cannot easily up sticks and move from one country to another. There are ties of culture, family and language which bind people and businesses to their own country. High tax countries such as Sweden have not seen any more than a modest exodus of people. To push this debate forward, the OECD has done an experiment in whether tax rates determine where people live. Its conclusion is surprising: tax is indeed a big factor in deciding residence. And the more skilled people are, and therefore the higher their earning, the bigger role it plays. The tax laboratory rat was Switzerland.

Switzerland is well known for having low-ish taxes, particularly for wealthy foreigners. More importantly, for the experiment, each canton also levies its own income taxes, with the result that tax rates can vary from place to place. The differences can be quite substantial. With no disrespect to the people of Schwyaz or Berne, there is not a great deal to choose between one Swiss canton and another. There are all clean and efficient, if a tad dull. And people can, of course, move freely from one to another. They can also carry on working in one canton, but live in another, and so pay less tax. That is what makes the Swiss experience so interesting. The data, drawn from Swiss census returns, turned out to show that tax turned out to be a very important factor in where people live. “The most important finding of this study is that the community tax burden has a significant impact on highly-skilled migration,” it says. The implications are particularly worrying for the UK.

OFFSHORE TRUSTS COULD WELL BE DUE A RENAISSANCE

Are offshore trusts dead? It might seem so as high tax jurisdictions enact ever-more sophisticated anti-avoidance tax legislation and a blanket of bureaucratic money laundering compliance spreads across the globe, increasing administration costs. In fact, the reality is rather different and reports of the death of the international trust industry are perhaps exaggerated. Indeed, a renaissance may be ahead.

Tax-driven uses of offshore trusts continue to be circumscribed, so why do I believe there is a bright future? Because of a renewed interest in asset protection planning as entrepreneurs begin to wake up to the fact that divorce laws can decimate their wealth. As high-net-worth individuals realize that not only their own marriage breakdowns, but those of their offspring, represent a far greater threat to their wealth than any tax liability, so carefully crafted and administered offshore trusts combined with family protocols (“if you want to participate in my wealth you have to abide by my rules”) and prenuptial agreements will become the norm to protect inherited wealth.

Trusts are the modern incarnation of “uses”, a device designed to protect the landed estates of medieval landowners who went on crusades in the 12th century. As we enter the 21st century, perhaps the original purpose of trusts, that of asset protection, will reassert itself over the purely tax-driven planning of recent decades.

A MONOPOLY ON LIFE

Like a monkey that has been bitten by a scorpion, the doltish can always be counted upon to entertain the dull-witted with irrelevant chatter following a major crisis. So it is with the catastrophe in New Orleans, as partisan political interests oppose one another on such questions as were Republicans or Democrats more to blame. Or whether federal, state, or municipal governments were most at fault. Or did race or economic factors make for disparate treatment? As Thomas Pynchon so aptly expressed it, “if they can get you asking the wrong questions, they don’t have to worry about answers.”

One of the most important questions – going to the perverse nature of our institutionalized world – occurred in the recent flooding in New Orleans. It grossly understates the significance of this tragedy to focus attention only upon the utter failure of state and federal government agencies to respond. Standing alone, the sheer incompetence of government agencies and officials in the days following the flooding resembled the comic-opera buffoonery of a Marx Brothers film. That Jon Stewart’s insightful The Daily Show was the only newscast capable of putting such behavior in perspective, tells us much about the fallen state of our culture.

The speed and scope of private responses to this devastation contrasted with those of the political establishment, reflecting not simply the greater efficiency of spontaneously ordered systems, but fundamental differences in purpose. Millions of individuals from all over the world began sending food, clothing, blankets, fuel, money, water, medical supplies, and other life-and-death necessities to flooding victims. The disaster in the Gulf Coast is an object lesson in how compassionate and cooperative we can be toward one another when our thinking has not been infected by politically-contrived and manipulated conflicts.

The responses of the state stand in stark contrast to those of individuals. From the moment government officials awoke to the enormity of the disaster – a number of days after private persons had already begun their shipments of aid – their principal purpose has been not to aid, comfort, and rescue the victims, but to establish their authority and control over them. Political systems have always served as strange attractors to the control freaks and other misfits who have never become socially housebroken. People express surprise that government did not come to the aid of stricken people sooner. But aiding people is not what government is about. That is the function of the marketplace and other voluntary activity. The state is about menacing, threatening, commandeering, and killing.

It is interesting – albeit not pleasant – to observe a civilization in freefall. Panglossian optimists continue to hope – as they would at the death-bed of a loved one – for a miracle to reverse the terminal course. The belief that someone in authority can change all of this; that new leadership or new machinery can make us better than we are, continues to drive minds that have been conditioned in institutional thinking. Western civilization will not be saved by the same forces that are destroying it. Einstein said it best: “a problem cannot be solved by the same thinking that created it.”

If people can discover a sense of love and mutuality amongst them, how is the state to maintain the sense of continuing conflict upon which it depends? This is why the state must prevent the private shipment of truckload after truckload of private aid to victims. This is why flood victims – including those who want nothing more than to remain in their homes – must be turned into a criminal class, against whom state functionaries will “lock and load” their weapons and “shoot and kill … if necessary.” In the waning days of Western civilization, you and I are in a struggle between the individualized sense of humanity and the collective forces of structured order. The nature of this struggle has been no better expressed than by Gandhi; “The individual has a soul, but the State is a soulless machine, it can never be weaned from the violence to which it owes its very existence.”

EXPATS AND AN EXPANDING EU

The early and mid-1990s were a boom period for expatriate assignments in Central Europe. Billions of euros in foreign corporate investment were pouring into the top economies of the region and with these funds came sharp demand for qualified expats to fill upper- and middle-management positions. To sweeten the deal, many multinationals offered inflated salaries to workers who could set up new operations and get local employees orientated. But the demand and prospects for expatriate workers in top investment regions such as the Czech Republic, Hungary and Poland have shifted since this heady period, and one of the reasons for it is EU accession.

Since the fall of the Berlin wall, transnational corporations from Western Europe – predominately Germany, France, the Netherlands and the UK – and the U.S. have invested heavily in Central Europe. But some of these businesses, particularly those in the low-tech manufacturing sector, have already relocated further east and south in anticipation of the increased labor costs that will accompany EU status in the 10 accession nations: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. Moreover, many of the expatriate jobs that have not gone further afield have simply been absorbed by local staff. After all, one of the primary roles for expatriates in Central and Eastern Europe has been to work themselves out of a job by getting local workers up to speed.

But not all of the expatriate prospects in the accession countries have disappeared. While some jobs have moved to countries that are not yet due to join the EU (though Bulgaria and Romania have a target membership date of 2007), many expatriate employment opportunities have remained and others have sprung up. “There was a drop off in expatriates in the three big markets recently but apparently their numbers are leveling, so I’d say there is more room for expats to be there,” says Judy Warren, a human capital consultant for consulting firm Watson Wyatt Worldwide.

Warren, who lived and worked for two years as a consultant in Budapest, also notes, “In terms of the skills needed, the ability to speak English, without question, is the biggest requirement, and general business skills… A real strong business approach is what you’re looking at.” But she adds that it is increasingly required to be almost fluent in the regional language, particularly for expatriates who are vying for lower-level positions where the focus now is on recruiting local-language speakers. Outside of these multinational corporations, numerous technical, service and other industry sectors have grown in response to the influx of business investment, increased consumer choice and EU accession.

THE PRICE OF GOVERNMENT SECRECY

During 2004, the Bush Administration issued more secret court orders, spent $148 creating new classified documents for every $1 spent releasing old ones, invoked the “state secrets” privilege in court cases more frequently than ever before, and received 25% more requests for documents under the Freedom of Information Act. These are among the findings of a new “Secrecy Report Card” prepared by OpenTheGovernment.org, a coalition of organizations dedicated to lifting the “shroud of secrecy” from local, state and federal governments.

The report, written by Rick Blum, the organization’s director, charges that “Secrecy continues to expand across a broad spectrum of activities. Openness in our government and society is increasingly threatened. A keystone value of our democracy, openness more practically helps root out abuse of power, bad decisions or embarrassing facts that may put lives at risk.” Among such “embarrassing facts” is that “the military gave U.S. troops in Iraq body armor vests that failed ballistics tests”. Documented by reports obtained under the federal Freedom of Information act (FOIA), this decision was reversed and the body armor recalled once the story was about to hit the newsstands, the report says.

The report reveals that in 2004, the secretive Foreign Intelligence Surveillance Court – a key tool in the application of the USA Patriot Act – approved 1,754 orders and rejected none. The FBI must request such a court order before it can place anyone in the U.S. under surveillance, but since its founding in 1978 it has denied only four such requests.

For every $1 the federal government spent releasing old secrets, it spent $148 creating new ones – a $28 jump from 2003. In contrast, from 1997 to 2001, the government spent less than $20 per year keeping secrets for every dollar spent declassifying them. The government spent $7.2 billion securing classified information, more than any annual cost in at least a decade. With 15.6 million new documents stamped “secret” in fiscal year 2004, the government created 81% more secrets than it did in the year prior to the terrorist attacks of September 11, 2001. The government spent $460 to secure each of its classified documents, in addition to the cost of maintaining its accumulated secrets.

REPORT SUGGESTS U.S. STOCK MARKET MANIPULATION IS FOR REAL

Dow Theory Letters’s Richard Russell was artfully qualifying his sudden bullishness last week. He was just suggesting that “those willing to speculate” should buy Spyders, the S&P 500 tracking stock (SPY). And it may not work. (Russell played the 2003 bounce this way, too.) Russell is also making bullish noises on gold. And his comment that really got my attention was this: “You can be sure that the central banks don’t want to see an upside breakout in gold. … The primary trend of gold is bullish, however, and the primary trend is stronger than all the central banks in the world taken together. When gold’s time comes, gold will brush by the manipulations of the central banks and their friends, the gold banks.”

This suspicion of covert market manipulation by governments in alliance with favored private-sector firms has been voiced with increasing frequency by Russell and other letters. Indeed, several letters muttered about suspicious late-day rallies as detailed in our June 27, 2002, column. Of course, it is too wild an idea for most of the mainstream media. Now, two respected figures in the Canadian investment industry, John Embry and Andrew Hepburn of Toronto’s Sprott Asset Management, have published a report, “Move Over, Adam Smith: The Visible Hand of Uncle Sam”. It pieces together from published sources evidence that points to the existence of the long-rumored “Plunge Protection Team”, an informal group of U.S. government agencies, stock exchanges and large Wall Street firms.

The last episode Sprott thinks it has definitely traced was before the U.S. invasion of Iraq in March 2003. A U.S.-Japanese agreement to intervene to prevent any financial crisis during the war was announced by a Japanese official, perhaps because the government intervention in markets is openly admitted in Japan. The U.S. never acknowledged such an accord. Sprott does not necessarily oppose government intervention in principle – the apparent interventions after 9/11 or the 1987 crash, for instance – but says such intervention requires “the most stringent safeguards and transparency.” Instead, Sprott asserts that “what apparently started as a stopgap measure may have morphed into a serious moral hazard situation, with market manipulation an endemic feature of the U.S. stock market.”

All this raises two problems. First, possible corruption, as “… the major Wall Street firms evidently responsible for preventing plunges no longer must compete on anywhere near a level playing field.” Second, there is the matter of ultimate breakdown. “Displaying markedly low volatility, the Dow hovers comfortably above the 10,000 mark. Yet with severe trade and budget deficits, rising interest rates and stubbornly high oil prices, the reasons to be bearish on U.S. equities are numerous. Strangely, the market has an uncanny ability to maintain its footing when serious declines threaten.” If that is right, economic reality may eventually intrude and, as Russell says, “brush by” the manipulators – and the investors misled by them.

HIGH GROUND

When a rare thing has not happened for a while, people begin to think it never will. But after it has happened, they expect it to happen everyday. After 9/11, Americans bought duct tape and plastic to protect themselves from sleeper cells they believed lurked in Duluth and Farmington. Now, they keep their eyes on hurricanes and earthquakes. What kind of disaster is next, we ask ourselves? Of course, we do not know. But we will take a wild guess anyway: The disaster people least expect and most deserve, a financial one.

When you build a city below sea level, between two large bodies of water, in a hurricane zone, you have to expect that sooner or later you will get your feet wet. So too, when you live on borrowed time and borrowed money, you have to expect that sooner or later you will have to pay up. That would not qualify as a disaster except for the fact that so many people have staked their finances on the hope that tomorrow would never come. It will come as a disagreeable shock to them when it does.

One thing leads to another. The 9/11 attacks led to two responses – both of which have already weakened the empire. The Feds vastly increased their own spending at home and undertook a series of expensive, disastrous wars overseas. In historical terms, the empire needed to find a way to stay in business. An empire is essentially an international protection racket. It needs something to protect people from. After the demise of the Soviet Union, the American empire had no worthy enemies. It had to create them. As predicted in this space, in those terms, the war against Iraq has been a success: “Under the American and allied assault,” says the International Herald Tribune, “what had been a relatively small, conspiratorial organization has mutated into a worldwide political movement, with thousands of followers eager to adopt its methods and advance its aims.”

That this cost a lot of money goes without saying. The U.S. had little in savings to draw upon, so it drew instead on credit. Now that the storm in New Orleans has passed, the financial nightmare is about to begin, says the Financial Times. There is a big insurance gap, says the paper. Most people had storm insurance, but no protection against floods. Losses are expected to tally as much as $125 billion. Who has got that kind of money? Alas, the empire that sets out to save the entire world has not saved a penny for a rainy day. So, the flood leads to more debt.

All of this debt – private and public – builds up behind the levees like storm water. It rises day and night. We do not know when the dikes might give way, but readers are urged to stay on high ground … just in case.

INVESTMENT BANKS SWOOP ON GULF ARAB OIL BOOM CASH

Foreign investment banks are rushing to cash in on the oil boom in Gulf Arab states with the region’s capital market surging and local investors scouring the globe for deals. Some banks are gearing up for the launch on September 26 of the new Dubai International Financial Exchange (DIFX), trumpeted by local officials as a project that will transform the Gulf emirate into another New York or London. Even for those who are cautious about such ambitions, there is no denying the surge in share issues, mergers, and other business for investment banks. Bankers estimate there will be more than $150 billion in project finance alone over the next five years, if oil prices remain strong, from Gulf Arab states – Saudi Arabia, Qatar, the United Arab Emirates, Bahrain, Kuwait and Oman.

In the UAE, trading volume soared 343% on the Abu Dhabi stock market in 2004 and 1,238% on the Dubai market. The price of a barrel of crude has doubled in a two-year rally, driven by U.S. and Asian demand, to touch levels in real terms not seen since 1980, the year of the Iran-Iraq war. Middle Eastern oil exporters are estimated to have netted over $1 trillion in oil revenues in the past five years. There are questions about how long the boom will last but many banks find the potential rewards irresistible.[

While foreign banks have always vied for a piece of the pie in the world’s biggest oil-exporting region, a mix of factors, including soaring crude prices, is changing where bankers sit. “Traditionally, investment banking has been done by top tier international banks offshore, based in London,” said Omar Al-Salehi, Middle East head at UBS Investment Bank. “The region is changing and there are more deals, with the higher oil price and more privatization, so now people are reviewing whether to put bankers on the ground.”

Foreign banks are already big players in the region, taking up most of the top 10 positions in areas such as project finance, debt capital markets and merger and acquisitions advisory, according to data provided by Dealogic. But recent growth in these businesses is unprecedented. Volumes in regional project finance and merger and acquisitions in 2005 have already surged past the 2004 total and are double that of 2001. Nearly $11 billion has been raised in debt capital markets so far this year, more than double the 2001 figure, Dealogic data shows.

BOOMERS CAN RETIRE CHEAPER IN MEXICO AND COULD HELP REDUCE ILLEGAL IMMIGRATION

By one estimate, almost 20% of GDP will go to seniors by 2030. Baby boomers are the first generation of grasshoppers in U.S. history. Their parents and grandparents, scarred by the Depression, scrimped and saved. The boomers put it on plastic. With private household savings rates near all-time lows, bills are coming due and the facts are increasingly clear. Some boomers not only will not be able to afford the retirement they dream of, many will not even be able to afford the retirement they fear. The cost of retirement is also going up. In 1940, the median price for a house in Arizona was less than half the national average. Today, with two generations of retirees swelling its population, Arizona’s housing costs are well above the national average. Prices at assisted-living facilities are rising at more than twice the rate of inflation.

There are simple, though not painless, steps individuals can take to improve their prospects. Put the plastic away for a while, pay down debts, build up savings. Delaying retirement a few years gives you higher Social Security payments, lets you squirrel some money away and allows any investments you already have more time to grow. And you can always develop a more realistic set of expectations. Do they have to be golden years? What is wrong with silver? But do not underestimate the economic wisdom of migration.

Adventurous seniors already know this. Up to 1 million Americans live in Mexico (up 500% in five years, according to some figures), and tens of thousands more live in Costa Rica and Panama, countries that market themselves as retirement havens. An income that can barely cover a double-wide in Florida can swing a condo south of the border. For the price of a condo in Phoenix, you can often have a villa in Mexico. Seniors who go south have to be brave and smart. The laws are confusing and sometimes rigged against foreigners. Crime can be a problem, the tax systems are tricky and sometimes unfriendly, and those who do not speak Spanish are further disadvantaged.

Worse, because the U.S. does not extend Medicare coverage to seniors living overseas, they have to find their own healthcare solutions. Though healthcare and prescription drugs can be far cheaper south of the border, serious illness is a financial issue anywhere. As younger and active retirees become older and more frail, they often have to return to the U.S. to obtain better services. Still, helping seniors move to where costs are low could give Medicare a boost while giving seniors more choices. To that end, the federal government should smooth the path for seniors looking to retire abroad.

Panama is paradise for retirees.

Panama is one of the best places in the world for retirees today, combining a low cost of living, near-perfect weather and one of the world’s best discount programs for retirees, with up to 50% off everything from public transport to movies, mortgage rates, doctor’s visits, electricity, restaurants and airfares. When you compare Panama with its neighbors, you will see that it has more amenities than traditional retirement spots such as Mexico and Costa Rica, with lower costs and crime rates. In Panama, you will encounter less red tape and less interference from local authorities.

To encourage long-term foreign investment, Panama requires no special authorizations, permits or prior registration for foreign investors. The Investment Stability Law, passed in 1998, protects foreign investors from any change in tax, customs, municipal and labor rules for a period of 10 years after an investment is registered. Major companies doing business in Panama include Federal Express, DHL, Sears, Price Costco, BellSouth, Kansas City Southern Railways, Continental and American Airlines, Warranty Company of the Americas and Hutchison Whampoa. Plus, you will find just about every American franchise you can imagine on the streets of Panama City. And there are other incentives for foreigners to spend time there, invest there … or retire there.

Panama is also perhaps the most accessible retirement haven for Americans. There is a frequent nonstop service to Panama City’s Tocumen International Airport. It is a 2½-hour flight from Miami on American Airlines and COPA, Panama’s national airline, which also flies from Los Angeles and Orlando, Florida. Continental flies from Houston, and Delta flies from Atlanta. Aeroperlas and Mapiex Aero are two domestic carriers that offer daily flights throughout Panama. Beware, however, that as accessible as Panama is to the U.S., it is still a foreign country. There are certain cultural differences that you can either accept and embrace … or try to ignore and become miserable and frustrated.

Panama has one of the lowest costs of living in all Central and South America. A U.S.-style home can be built for about $40 per square foot, unskilled labor costs $6.40 per day, a full-time live-in maid costs $120 to $160 a month, a beer at a bar costs 35 cents, electricity is about 10 cents per kilowatt-hour, water bills are $18 per year, telephone service costs roughly $30 a month, Internet access is $14 a month, cellular-telephone service costs about $30 a month plus a per-minute charge of around 22 cents, and cable TV will cost you about $30 a month. The three best places to buy real estate in Panama are the mountains of Boquete, the beaches of the Pearl Islands, and the First World metropolis of Panama City.

HOT TIPS AND PEARLS OF WISDOM FOR THE WOULD-BE GLOBAL REAL ESTATE INVESTOR

Tip #1: Position yourself to profit from the Baby Boomer’s invasion of Panama. In 1980 when Costa Rica introduced its famed pensionado program, U.S. retirees swarmed the place … and property prices soared. If you had bought a beachfront lot back then, today that same slice of coast could be worth 10 times what you paid for it or more. Panama is positioning itself as the world’s next great retirement haven. The best place to position yourself to profit from the coming invasion of U.S. retirees is the country’s First-World metropolis of Panama City.

Tip #2: Tourists and investors are returning to Croatia. Croatia is the next Spain (which for decades has been the number-one beach destination among European tourists), though they do not want to be the next Costa del Sol. The government has put restrictions and regulations in place to protect against overdeveloping (critically, before it starts). But Croatia has more going for it than Spain (at least the coast of Spain). It has the potential to attract a wider variety of visitors and repeat visitors. The potential in this re-emerging market is great in both the short- and long-term for gains in property value, because it is under-priced today.

Pearls: 1.) Like-kind exchange it to defer capital gains tax at home. 2.) Contact a title insurance company before you buy your home or land. 3.) Use your 401(k) or IRA to fund your investment overseas. 4.) Avoid long-term rentals in countries where tenants’ rights are sacred – Paris, e.g. Short-term rentals to tourists are typically a better investment, in Paris and other cities including Buenos Aires, Bucharest (Romania), and Panama City

POWER UP YOUR RETIREMENT PORTFOLIO: MOVE IT OFFSHORE

Gresham House Investment Trust is the world’s top-performing mutual fund – up an amazing 1,812% since 1996. But chances are, your U.S. broker will never tell you about Gresham House, not to mention more than 50,000 other offshore mutual funds, plus hundreds of thousands of foreign securities, that are not traded on U.S. exchanges. Why not? Basically, it boils down to laziness. Most U.S. brokers do not want to deal with the extra work needed to invest offshore for their clients. There are also legal issues to consider. U.S. brokers are not permitted to promote securities that are not either registered with the SEC, or that qualify for an SEC exemption. But, it is perfectly legal – and potentially very profitable – for you to buy these “forbidden” investments. And one of the very best ways to do so is through your retirement plan.

With a handful of exceptions, U.S. law does not address what investments you can place into a retirement plan. Instead, it lists various “prohibited transactions”. Whatever is not prohibited is, in fact, permissible. And there are no specific rules prohibiting any offshore investment. In other words, you can achieve all the advantages of offshore investments – higher returns, currency diversification, privacy, asset protection and investment continuity in the event of a temporary shutdown of U.S. markets – and not pay a penny in U.S. tax until you actually receive the profits! Indeed, if you make the investments through a Roth IRA, you will NEVER pay tax on the profits (other than estate tax, and even that tax can be avoided with proper planning) – and it is all perfectly legal.

Actually, a retirement plan is now the only way a U.S. person can own offshore funds tax efficiently and make buying or selling decisions about those funds. This is a consequence of an obscure provision of the U.S. tax code that imposes draconian interest charges on tax-deferred dividends or capital gains from most offshore funds. In most cases, because of the complexity and high compliance burden of the IRS regulations, there is no easy way to avoid not deferring the tax due. The outrageous result is that it is possible to owe more tax and interest to the IRS than you made in profits from the offshore fund! But, if you buy the funds through your retirement plan, you do not have to worry about this tax time bomb. Skeptical? All of the funds I mentioned are based in London, where the concept of mutual fund investing was invented more than a century ago.

OUR GLOBAL HOUSE OF CARDS

Despite the advances of modern techology, we remain as vulnerable as primitive societies.

Perhaps it is natural to blame humans for natural disasters. The president is out of touch, the emergency services are uncoordinated, it is all a racist plot. The people who do this are either out of touch themselves – they have never coordinated more than a Sunday picnic or, more sadly, are victims of the disaster and are going through the first stages of grief. Katrina did not expose gaping holes in modern American society. It exposed weaknesses inherent in all today’s globalizing cities when faced with the forces of nature, chaos, call them what you will. Put simply, any human society is a house of cards. The more complex that society is – numbers of people, communication links, socio-economic levels, trade networks, income sources, resource needs, etc. – the higher the house, and the more cards that can collapse.

Looked at in this way, modern societies are not more robust and strong than less developed, simpler communities, but in fact are more vulnerable, requiring far more care and attention. Historically, large, complex civilisations have existed for a fraction of the time of simpler agricultural communities, and there is a reason: not, as we arrogantly assume, that they were less technologically advanced, clever and networked than us, but precisely because they were so advanced and complex, and hence a bitch to manage. New Orleans is a perfect example, and hence a timely warning for the future as the global population expands, its climate changes, and its cities become more mega.

Witness the fall. It took about 72 hours for a reasonably functional, high-tech, well-educated, urbane, globalised, wired and well-resourced population in the world’s richest nation to unravel and start behaving like a roving primate troop. This is not to criticize the people of New Orleans as individuals, it is to highlight how dependent we all are on social organisation and institutions. The death toll and damage caused by Katrina or any of the other recent major natural disasters has been far greater than any of the terrorist attacks for which we have so obsessively prepared, and a lot of that human suffering has occurred in the breakdown of social organization that follows.

Here are three of planet Earth’s recent lessons for its lodgers: 1.) Do not rely on your national government. 2.) Do not live in a stupid place. Large population centers below sea level or on major seismic fault lines really should start comparing the cost-benefit sums of gradual relocation versus catastrophic wipe-out. 3.) Love thy neighbor. We live in a giant, precarious and precious house of cards. How much of it blows down, and how soon, will depend on the strength of its bonds – not the concrete ones, but the compassionate, civil, and cerebral ones.

Where to hide from Mother Nature.

No corner of the United States is immune to lethal natural disasters. Still, some corners are safer than others. If an American wants to minimize his chances of dying at Mother Nature’s hands, where should he set up house? Slate crunched the numbers – and did some educated guesswork – to find where in the U.S. the odds of perishing in a natural disaster are closest to nil. How about rural Connecticut?

From Nineveh to New Orleans.

The surprising thing about New Orleans is not that the city should have been engulfed, but that it took so long for it to happen. Cities do not last. Those built in precarious places collapse. The rest are doomed to decay or suffer humanly induced destruction. It is only our historical myopia, which prevents most of us from seeing much of the past at once, that makes us think our cities are solid or enduring. We should know better, and there are plenty of authors rushing to put us right.

FAMILY PORTRAITS PAINTED IN CHINA MAKE TRADITION AFFORDABLE

A 4-year-old, rendered softly in oil paints, wears a white dress and smiles just slightly out of a heavy gilded frame. The portrait is one of 20 lining a small banquet room at the Grand Hyatt in Buckhead where North Carolina entrepreneur Hannah Davis is holding an open house. Davis’s fast-growing portrait business targets well-to-do families who want to continue the Southern tradition of family portraits but are not comfortable with the typical price tag of $10,000 to $20,000.

Davis’s hook: She commissions paintings in China, where the wages of artists, like other professionals’, are much lower than in the U.S. A 26-by-32-inch painting from Davis, such as the one of the white-clad girl, costs $3,500. A small painting can be had for less than $1,000. Davis commissions 60 child portraits a month through her Winston Salem-based firm. She is adding executive and pet portraits to her lineup. Her story illustrates that the opening of China’s vast labor market is changing the economy in ways nobody imagined. Not only are major industries like textiles being transformed by the cheap labor in China, but also a tiny niche business like child portraiture.

Private firms drive China’s growth.

Private business has overtaken the state sector to become the main engine of China’s economic boom and the source of most exports and new jobs created, according to a report from the OECD. In its first major economic study of China, the OECD drew a portrait of a successful transition from central planning to the free market, with rising private ownership delivering sustained growth and productivity. Once dominant state-owned industries continued to languish, it said.

A crucial question being asked by observers of the evolving political and economic situation in China is whether the rise of the private sector will eventually undermine the Communist Party’s iron grip on political power. The report did not broach this issue, and as yet there is no sign that the government is prepared to relinquish its dominant role in the economy through ownership of major companies in strategic industries like energy, steel, transport and finance.

Instead, the report said, China is developing a hybrid economy where, alongside private business, huge state-controlled industries still receive favorable treatment from the government. These state-run companies will continue to be partly privatized to provide new capital, increase competitiveness and bring in new management skills, but the government will retain control.

AMERICAN LIFE UNDER A NATIONAL ID CARD

If you have done nothing wrong, then you have nothing to fear from these surveillance policies in the Patriot Act. There it was – the one line that is continually uttered by those who are determined to turn America into the society of Big Brother. It is the one line that will instantly bring out my own urge to kill anyone who has said it. My patience has run paper thin for such short-sighted, quivering, knee-jerk reactionaries who are willing to sacrifice our precious liberties for some false sense of momentary security.

Now, during a radio interview on the subject, sitting in my office on the opposite end of the telephone, I heard it said by my host. I had been feeling the frustration growing throughout the interview as he dismissed my fears of an allseeing, controlling government that can invade my own home without a search warrant or even a court order issued by a real judge. To him it was perfectly fine to pat down little old ladies and children in airports, while those fitting the profile of a terrorist could walk by, protected by political correctness. Its OK that all of our personal lives, our bank accounts, records of books weve read and videos weve rented could be searched. And above all, to him, the greatest idea yet devised for protecting freedom in this nation was the creation of a national ID card. Now, he said, we can control who comes in to this nation, where they go and who they are dealing with. And if you have done nothing wrong you have nothing to fear!

I lost it.Have you any idea what living under a national ID card will be like? Have you given it the slightest thought beyond your own selfish, primal fear of some unstated threat, I shouted into the telephone and over the airways. Well, I spend a majority of my time looking into this issue and let me tell you what I have found to be true. And then, you tell me if this will be a nation you want to live in. It was surprising to me that my host let me talk at this point. Perhaps the murderous tone in my voice warned him to stay quiet. Nevertheless, he let me continue. …

TAX EVASION OR AVOIDANCE? COPING WITH NEW EU RULES

Let us look at three examples of the impact the new EU rules could have on non-residents.

British national. Thailand resident. House in UK. Bank deposits in Channel Islands. All EU nationals who hold money on deposit in EU jurisdictions, and who do not meet the requirements designated by their native country’s judiciary, will essentially suffer. They will be forced to disclose all their holdings or pay 15% (escalating to 35% by 2011) via withholding or retention taxes on their income gains. This will be in addition to punitive inheritance, wealth, estate and gift taxes. Once their incomes, investments and bank deposits are a matter of public record, it will be practically impossible to hide or dispose of those assets. Secondly, and importantly, their partners, children and heirs will see inheritances affected through death duties and probate levied on estates not suitably protected in advance.

European passport holder. Director of a Thai company. Monies in Swiss numbered account. Although not strictly under the new enforcement provisions yet, Swiss banks are likely to be forced to disclose assets held on behalf of numbered accounts by as soon as summer 2006. They will be compelled to offer clients the choice of either (a) disclosure of information on the account holder’s behalf, (b) exempt qualifying individuals who can produce respective tax certification proving they are not EU residents for tax purposes, or (c) not disclose any information whatsoever. In which case, they will deduct 15% in retention taxes for the next three years, 20% in capital gains for the following three years, and a massive 35% in retention tax penalties from 2011 onward.

Americans, Canadians and other non-EU nationals holding offshore deposits? While not necessarily affected by the EUSD directive now, they should be aware of considerable implications for various nationalities who have moved their money “offshore” or, who have their salaries from overseas paid into EU-member state bank accounts. This will apply especially to those who hold MasterCard, Amex, Diners Club or U.S.-domiciled Visa credit/debit cards. Pressure is mounting from various directions.

WHERE TO RETIRE MAGAZINE FEATURES PANAMA

The title of a feature story in Where to Retire magazine is “Retiring in Panama”. “Pacific beach towns, Caribbean isles and fertile highlands are among places drawing retirees.” Where to retire is a subscription based magazine published 6 times a year and reaches over 100,000 subscribers. It is not available on the Internet. The article has 8 full pages of content and photos of Panama. It covers the Mountains, beaches and city. Click on the images (included in article) in order to read the story.

HURRICANES SPAWN DEBATE ON MILITARY ROLE IN DOMESTIC LAW ENFORCEMENT

Military units have been battling the ravages of hurricane winds and flooding for nearly four weeks along the Gulf Coast. Now their leaders must navigate a different turbulent path: Congress. Political leaders led by President Bush are considering how and when the military should take greater control of relief efforts during national disasters. And one answer may be to ensure that the president has the authority to bring in the armed forces during extraordinary circumstances.

The White House said Monday that Congress should considering setting the circumstances – some level of significant natural disaster or terrorist attack – that would designate the military as the lead agency in the response. White House press secretary Scott McClellan said the push is “one of the lessons learned” from Hurricane Katrina. McClellan would not say precisely what the president wants that trigger to be other than an extraordinary catastrophe. But putting the military in charge should not require a request from a governor or presidential action, he said.

House Majority Leader Tom DeLay, R-Texas, sounded a sharp dissent. “I don’t want the federal government to take over disaster response, believe me,” DeLay said in a telephone interview from his home in suburban Houston. DeLay said he could not support a system that did not allow local first responders to remain in charge during a catastrophe. Asked why, he replied, “Bureaucracy. Bureaucracy. Bureaucracy.”

Sen. Mary Landrieu, D-Louisiana, sounded a note of caution as well. Landrieu said that while the military has a strong role to play, “we do have a democracy and a citizenship that has elected mayors, county commissioners and governors, particularly. I’m not sure the governors association or all the mayors in America would be willing to sort of step aside.”

NUN TERRORIZED BY TERROR WATCH

Sister Glenn Anne McPhee is a busy woman. As the U.S. Conference of Catholic Bishops’ secretary for education, Sister McPhee oversees Catholic education in the U.S., from nursery school through post-graduate. Her job includes working with the Department of Education, speaking frequently at conferences and scrutinizing religious textbooks to clear them with the teachings of the church.

For nine months in 2003 and 2004, Sister McPhee also took on the task of clearing her name from the government’s no-fly list, an endeavor that proved fruitless until she called on a higher power, the White House. “I got to the point I could hardly go to the airport, because I couldn’t anticipate what would happen and I couldn’t do anything,” she said. “I missed key addresses I was to give. I finally got to the point where I always checked my bag, because after I got through the police clearance, then they would put me through special security where they wand you from head to foot all over. They would dump out everything in your bag, then roll it into a ball and hand it back to you.”

McPhee is not the first high-profile individual to be caught by the government’s watch lists. Sen. Edward Kennedy and former presidential candidate John Anderson both found that their names matched names on the list, but like McPhee, were able to resolve the problem by contacting powerful officials. But, thanks to documents obtained under the Freedom of Information Act, her ordeal offers one of the most illuminating illustrations of the failures of the airport screening system that has come to light since 9/11. The Electronic Privacy Information Center plans to release the results of the FOIA request this week, handing the latest black eye to a government initiative aimed at preventing terrorists from boarding commercial flights that originate in the U.S.

EPIC obtained the call logs of the Transportation Security Administration, the agency in charge of maintaining and enforcing the no-fly list, and found a pattern of complaints from citizens who charged they were mistakenly scooped up time and time again by the anti-terrorist program. In addition, innocent people whose names wound up matching the suspect list, like McPhee, found they had no way to fix the situation, short of pulling strings.

Stuck on the No-Fly List.

The Transportation Security Agency uses two different watch lists. The best known is the no-fly list, a list of people who are not allowed to get on a plane. The other is called the selectee list and contains the names of people whose boarding passes will always be marked with SSSS and who have to undergo intensive extra screening of their person and carry-ons. According to TSA documents obtained by the Electronic Privacy Information Center, call-center employees were at one time told they could only clear the names of those who incorrectly matched the no-fly list. Travelers who were on the selectee list were simply told that they were not on the no-fly list and there could be a number of reasons they were selected for extra screening. The boilerplate language did not mention the possibility that their names matched those on a watch list different from the no-fly list.

he TSA has since revised its policy and now helps those whose names are similar to those on both the no-fly and selectee list, according to spokeswoman Deirdre O’Sullivan. TSA cannot remove names from the no-fly list, but it can put names on a cleared list, which can help travelers bypass red tape. Erroneous entries on the watch lists can only be removed by the law enforcement or intelligence agency that put the name on the list.

FBI TO GET VETO POWER OVER PC SOFTWARE?

The Federal Communications Commission thinks you have the right to use software on your computer only if the FBI approves. No, really. In an obscure “policy” document released around 9 p.m. ET last Friday, the FCC announced this remarkable decision. According to the three-page document, to preserve the openness that characterizes today’s Internet, “consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement.”

Read the last seven words again.

The FCC did not offer much in the way of clarification. But the clearest reading of the pronouncement is that some unelected bureaucrats at the commission have decreeed that Americans do not have the right to use software such as Skype or PGPfone if it does not support mandatory backdoors for wiretapping. (That interpretation was confirmed by an FCC spokesman on Monday, who asked not to be identified by name. Also, the announcement came at the same time as the FCC posted its wiretapping rules for Internet telephony.)

What is also worth noting is that the FCC’s pronunciamento almost tracks the language of the 1996 Telecommunications Act. Almost. But where federal law states that it is the policy of the U.S. to preserve a free market for Internet services “unfettered by federal or state regulation,” the bureaucrats have adroitly interpreted that to mean precisely the opposite of Congress said. Ain’t that clever?

JUST AS EXPECTED, BUSH WANTS MORE POWER

It should come as no surprise that on the heels of hurricanes Katrina and Rita, Bush is asking for more dictatorial power. Just as 9-11 provided the supposed justification of the gutting of our Constitutional rights through the “Patriot” and other related Acts, now Bush wants to be allowed to send in the military to respond to “national disasters” without anyone’s authority but his own.

This notion is so wrong for so many reasons, it will no doubt be seriously considered by our geniuses in Congress and may even become law. Ignoring for the moment that this will mean that while our National Guard is deployed overseas, the military will be “assisting” us here at home – a topsy-turvy use of resources that only to Bush & Co. would seem logical – it also means that upon the slighest pretext, the Commander-in-Chief could declare an emergency, direct the invasion of any state by the military and – if Katrina is any example, confiscate all weapons. Folks, this is why the 2nd Amendment was added to the Constitution. This is what Great Britain did and why state militias were formed in the first place.

Once again, the state governors should not take this lying down. Any such law should be rejected and if passed by Congress, declared immediately unConstitutional. Further, the states should begin reimplementation of state militias. Otherwise, we will be naked and defenseless when the army comes knocking at our doors.

Our weak, gutless and witless Congress will not doubt rubber-stamp this crazy notion as a supposed “necessary response” to the Katrina mess. If so, our days as a free nation are truly numbered. The problem is, we the people have basically asked for it. By complaining of the failure of the government to act more responsively to Katrina, the government is responding to that complaint by a demand for more power. In an earlier article, I said we should be careful what we ask for as we just might get it. Well, here it comes.

AMERICA IS RUNNING OUT OF TIME

George W. Bush will go down in history as the president who fiddled while America lost its superpower status. Bush used deceit and hysteria to lead America into a war that is bleeding the U.S. economically, militarily, and diplomatically. The war is being fought with hundreds of billions of dollars borrowed from foreigners. The war is bleeding the military of troops and commitments. The war has ended the U.S. claim to moral leadership and exposed the U.S. as a reckless and aggressive power.

Focused on a concocted “war on terrorism”, the Bush administration diverted money from the New Orleans levees to Iraq, with the consequence that the U.S. now has a $100 billion rebuild bill on top of the war bill. The U.S. is so short of troops that neoconservatives are advocating the use of foreign mercenaries paid with U.S. citizenship. U.S. efforts to isolate Iran have been blocked by Russia and China, nuclear powers that Bush cannot bully. The Iraqi war has three beneficiaries: (1) al Qaeda, (2) Iran, and (3) U.S. war industries and Bush-Cheney cronies who receive no-bid contracts. Everyone else is a loser.

The Bush administration is churning out red ink in excess of $1 trillion annually. The federal budget deficit is approaching $500 billion. The U.S. trade deficit is approaching $700 billion. The budget deficit is being financed by foreigners, primarily Asians who now hold enough U.S. government debt to exercise power over U.S. interest rates and the value of the dollar whenever they decide to use the power that Bush has placed in their hands. The trade deficit is being financed by turning over the ownership of U.S. assets and future income streams to foreigners, making Americans forever poorer from the loss of accumulated wealth.

When the dollar goes, it will affect costs, profits, interest rates and living standards in dramatic ways. Costs and interest rates will soar, and profits, living standards, equity values, bond prices and real estate will plummet. These unpleasant events await only Asia’s decision to curtail its support for U.S. red ink. That will happen when this support no longer serves Asia’s interest. When Asia pulls the plug on the dollar, the U.S. government will find that monetary and fiscal policy are powerless to offset the consequences. Compared to U.S. budget and trade deficits, terrorists are a minor concern. The greatest danger that the U.S. faces is the dollar’s loss of reserve currency role. This would be an impoverishing event, one from which the U.S. would not recover.

An intelligent government sincerely concerned with homeland security would find a way to halt the global labor arbitrage that is stripping the American economy of high value-added jobs and manufacturing capability. The loss of tax base that results when U.S. companies outsource jobs and relocate production abroad makes it ever more difficult to balance a budget strained by war, natural disasters, and demographic impact on Social Security and Medicare. Global labor arbitrage is rapidly dismantling the ladders of upward mobility and thereby endangering American political stability. This threat is far greater than any Osama bin Laden can mount.

Time is running out for Republicans and Democrats to escape from the distraction of a pointless war and to focus on the real threats that endanger the United States of America.