Wealth International, Limited

Offshore News Digest for Week of March 13, 2006


Note:  This week’s Financial Digest may be found here.

Global Living & Business Taxes Asset Protection / Legal Structures Privacy Law Opinion & Analysis

GLOBAL LIVING & BUSINESS

HONDURAS IS A COUNTRY FOR DREAMERS

Honduras is a country for dreamers, where Caribbean breezes lift fresh ocean air through your windows, the sunlight glints off the water at odd angles, and the sound of waves lapping at the shore is just hypnotic enough to spirit away the dissonance of the 21st century. All year round, temperatures hover in the 80s – with cooler, forested areas inland. Jaguars, armadillos, toucans, and herons complete this scene of a wild, untamed paradise. The Bay Islands – and the coral reef surrounding them, which is second in size only to the Great Barrier Reef – have been a well-kept secret of divers.

Not only is Honduras a place of great natural beauty, but property prices are reasonable, the cost of living is low, crime is almost nonexistent, and health care is top-notch and inexpensive. In addition, it is home to some of the best-preserved Mayan ruins in the world. The country’s landscape is varied – the coast meets a backdrop of high-country mountains and cloud forests that slope down into valleys at intervals to make way for rivers. Vast expanses of land on a central plateau are farmed for coffee, tobacco, wheat, fruits, and vegetables. Large cattle ranches occupy much of the flatlands. Along the Mosquito Coast, a waterlogged terrain produces fields of mangroves. Mahogany and other hardwood trees flourish farther inland.

Just as the landscape is varied, so too are the populated communities. Some spots in the country will certainly interest you more than others. Some regions are almost inaccessible, while others are overcrowded. In several communities, the best property buys are long gone, but in others you can still find great bargain deals.

If you choose to retire in Honduras, the Honduran government will not tax your U.S. Social Security and pension payments. In fact, as a foreign resident, you will be entitled to tax breaks. And the government encourages foreign investment in the tourism industry – a promising sector that has been largely neglected until now – with attractive tax incentives. If you are involved with a government-approved tourism project – that could be anything from a restaurant to a hotel to a souvenir shop – you will pay no income tax on your profits for 20 years no matter how much you make.

Though its history is riddled with stories of colonial domination, war, and conspiracy, in recent years Honduras has shown remarkable, sustained peace. The last two democratic elections have proven to be models for the peaceful transfer of power – no mean feat for a young democracy struggling to gain a foothold in an enormous world economy. Tremendous natural resources and a willing work force have also come together to put Honduras on a path toward prosperity.

Link here.

WHY BULGARIA?

Because no other European country offers better value for your money!

Located in South Eastern Europe, Bulgaria is bordered by Greece and Turkey to the South, Romania to the North and Macedonia and Serbia to the West. Its Eastern Border is formed by the beautiful Black Sea Coast. A country of outstanding natural beauty the environment remains unspoilt and is incredibly varied. A relatively small country, a few hours drive will take you from the snow covered central Pirin mountain Ranges to the long sandy beaches of the Black Sea coast.

Forming the heart of several of ancient histories greatest civilizations Bulgaria’s rich culture is reflected in a vast number of architectural treasures. Only Greece and Italy have a greater number of historical monuments. Throughout the country you will find ancient Greek sites, Roman amphitheatres and Byzantine churches. The country is home to 160 monasteries, 36 cultural centres and 40,000 listed archaeological monuments. Seven sites have achieved a coveted place on the UNESCO world heritage list.

Bulgaria is a modern European country, it has major cities and resorts where the facilities are as good as anywhere in Europe , yet not over developed. Bulgaria is said to have one of the lowest costs of living in Europe. A wonderful meal for 2 including wine will rarely exceed around £7.00 (apx. $12). The cost of a 10 minute journey in a taxi will only be about £1.00 (apx. $1.75). Cigarettes cost just 40p per packet and a day out in a museum or the theatre will cost just a couple of pounds. A quality beer will cost 25p! First time visitors to Bulgaria are surprised by its diversity and its stunning natural beauty. For years a real effort has been made to preserve the country’s rich and unspoilt flora and fauna. As a result, Bulgaria is ecologically one of the purest countries in Europe, with exceptionally clear air and water resources. There are 7 national parks, more than 3000 protected natural sites and 17 bio-spherical reserves. There are also 419 protected animal species and 63 protected types of plant.

The 380 kilometers of beaches are amongst some of Europe’s cleanest and safest. Many of them have been awarded prestigious “Blue Flag” status. The region enjoys average summer temperatures of between 25-30º. The season extends from April to October. Coupled with the renowned low cost of living it is easy to see why the Black Sea coast provides and an ideal summer destination – and is surprisingly easy to access from an ever increasing number of European Airports. Even though the Black Sea coast is an established tourist area, with resorts such as Sunny Beach attracting tourists since the late 1950’s, it has recently become one of the fastest growing summer tourist destinations in Europe. So fast growing in fact that last year demands for tourist beds outstripped supply by 20%!

The property prices in Bulgaria are considerably lower than those elsewhere in Europe. A brand new apartment right on the sea front in a popular holiday town can currently be purchased for around £35,000 (apx. $60,000) with rural properties selling for even less than £7,000 (apx. $12,000). Buying property in Bulgaria is also a great investment as prices are steadily increasing and are set to go up considerably when Bulgaria joins the EU. Foreign nationals and foreign legal entities may acquire ownership title over buildings and limited ownership rights over property in the Republic of Bulgaria. Foreign individuals cannot own land (this is a Constitutional prohibition until they join the EU). However, the Foreign Investment Law removed the restrictions on acquisition of land by locally-registered companies with foreign participation. By setting up or joining a company incorporated under the Bulgarian legislation foreign persons can acquire full land ownership rights including ownership rights on agricultural land.

Bulgaria ceased being a communist country in 1989, shortly after the fall of the Berlin Wall. Since then wide sweeping reforms have taken place. Already a full member of NATO, Bulgaria has been invited to join the EU in 2007. It is a fast growing market economy. The country is best known as a tourist destination for both summer and winter holiday makers and for its wine making. The EU is currently investing millions of pounds to help improve Bulgaria’s infrastructure (this is very visible on the Black Sea Coast where the main Coastal road is being widened and re-surfaced to provide better access for the rapidly developing tourist industry. Since the introduction of the currency board in 1997 Bulgaria has been a politically stable country with a developing economy. The conditions and guarantees for foreign investors have generated excellent business opportunities and investment growth potential.

Link here.

PRINCE ALBERT OUTLINES HIS PLANS FOR MONACO’S FUTURE

Sitting in his official office at the palace, an ornate room with views over the scores of luxury yachts moored in Monaco’s famous harbor, Prince Albert II, the territory’s Sovereign Prince, looks like a besuited, bespectacled businessman. He speaks in a flat American accent, moulded in part by his mother, by his years as a student at Amherst College, New England and time in Wall Street. An etched portrait of Prince Rainier, “Le Patron” as les Monegasques refer to him, hangs alongside scenic oil paintings of Monaco. Small tables are littered with objets d’art and official photographs of the Grimaldi family.

The prince has given few interviews since his enthronement. But, having assiduously avoided courting the media all of his life, it is now a necessary evil if he is to promote his vision of Monaco. And he has very definite views on how to squeeze maximum potential from every precious inch of his tiny territory which, covering just 1.95 sqare kilometers, is smaller than London’s Hyde Park. After the first months of his reign, the Prince has clearly defined the first priorities of his policy – a reinforcement of international recognition of Monaco by opening new diplomatic missions and the accreditation of consulates into embassies in the Principality. Monaco’s economic development is also a major part of his plans. A strategy which is based on historical sectors like tourism or non-polluting industries but which would also be enhanced with the arrival of new activities with strong added values, such as high technology.

Of Monaco’s 33,000 residents, only about 7,000 are Monegasque, the rest are immigrant. Some 1,800 are British with the strongest progression of 20pc since 2000. Along with stricter rules over residency, Prince Albert has also pledged greater financial transparency. Monaco was severely criticized six years ago by the French over its secretive banking system on which much of the principality’s prosperity has been built, but which has led to accusations of money laundering. He sighs. “You know I am getting tired of seeing Monaco associated with opaque financial transactions or, you know, ‘a sunny place for shady people’,” he says, quoting Somerset Maughan.

So not everyone is welcome. Sir Mark Thatcher, the 52-year-old son of former prime minister, Baroness Thatcher, who was convicted in a South African court of helping to finance a failed coup in Equatorial Guinea, has recently had his application for a renewal of his temporary residency refused. He is the most high-profile figure to fall foul of Prince Albert’s desire to clean-up Monte Carlo’s image. To, as he put it in his inaugural speech to his people “place morality, honesty and ethics” at the center of all policy.

He is hot on environment. He drives a Toyota Prius hybrid electric-petrol car, is promoting solar energy and better recycling facilities and has ratified the Kyoto protocol. He even envisages that in the future, perhaps way in the future, Monaco’s famous Grand Prix gas-guzzling Formula One cars will be powered by more environmentally friendly means. He does not even have a yacht in his own harbor. “Oh, I’d feel really bad taking up a space that could be used by our visitors,” he says. Besides, he does not own one anyway.

Link here.

PROJECT WOULD OPERATE INTERNATIONAL FINANCE CENTER IN DOMINICAN REPUBLIC

Firms linked with the international financial system informed the Dominican Export and Investment Agency that studies in the country for creating an International Finance Center were completed. The study was finalized after three years of studies by a group of investors headed by Dominican entrepreneur, Gaetan Bucher. The entrepreneur was accompanied by Vicen Colvin (Deloitte-London) and Read Mccaffrey (Patton Bogas-Washington) who are strategic advisers of the project, and which is planned for the Eastern zone of the country, between Boca Chica and San Pedro de Macoris.

Bucher claimed that establishing the headquarters in the country of the International Financial Center will improve the good image of the DR abroad that tourism has already achieved, and will strengthen the national economy. Bucher affirmed that the country was chosen for its excellent climate favoring investment and for the fact that the government actively promotes investments worldwide, and also thanks to the political and social stability that reigns in the Dominican Republic.

The center will benefit from starting with a clean slate – a new legal framework and an independent regulatory structure will be served by state-of-the-art information architecture. It will operate from a $850 million complex built on a 17 square kilometer greenfield site, bordering the Caribbean Sea. The Independent Financial Centre of the Americas will house private and commercial banks and an electronic exchange, called LAIFEX, to clear and settle emerging market debt and other tradable products.

Links here and here.

ASIA HOLDS “A WEALTH OF INVESTMENT OPPORTUNITIES”

While significant market advances have already been made in Asia, there are still an “overwhelming number” of untapped investment opportunities to be found in the region, according to Fidelity International, the investment trust manager. Although the booming economies of India and China continue to attract worldwide attention, Fidelity International says that investors should not overlook attractive investment opportunities offered by other individual markets, such as Singapore, Thailand, Korea and Taiwan.

Fidelity points to a number of key factors that make Asia (ex Japan) a land of investment opportunity: (1) Asia has 54% of the world’s population but only 14% of the global GDP, highlighting the potential for growth. (2) Increasing consumerism as the demographics change, fuelled by births after 1980 and rising per capita income. (3) Low correlation between different Asian markets. (4) China as the region’s economic powerhouse.

“Asia is too significant to ignore and should be considered as an integral part of a core diversified portfolio. The region is a rich tapestry of unique and lowly-correlated countries offering substantial scope for investment diversification,” observed Stephen Westwood, Head of Investment Trusts, Fidelity International. “Structural changes in Asia are creating a wealth of opportunities across various sectors. An investment trust such as Fidelity Asian Values offers investors the opportunity to benefit from Asia as it continues to develop.”

Link here. Data shows taxation is cooling China’s property market – link.

THE REVOLT OF THE SECOND GENERATION OF U.S. HISPANIC IMMIGRANTS

Samuel Huntington argued in his book Who Are We? that Hispanic immigrants were a threat to the national identity of the U.S. because, unlike other ethnic groups, they were not assimilating into the host nation. The news that Univisión Communications, the Spanish-language media conglomerate, is up for sale is one more indication of how wrong this well-respected gentleman is. Univisión controls more than 80% of the Spanish-language market but because second generation Hispanics prefer English programming and therefore its long-term prospects for growth are small – unless it too assimilates.

There appears to be no reason why owner Jerrold Perenchio should sell. His conglomerate, which includes T.V., radio and music, is a money-making machine. In 1992, Mr. Perenchio bought Univisión for $500 million. Today, the media conglomerate has a market capitalization of $10 billion. However, the demographics are not working in favor of Univisión. Births are outpacing immigration as the key factor in the growth of the Hispanic population in the U.S. The Hispanic market continues to grow strongly, but native-born Hispanic Americans, rather than new immigrants, are the real force behind this expansion. And – you guessed it – second generation Hispanics speak English and to an increasing extent prefer to read and watch English-language media.

Anyone who is remotely familiar with the Hispanic market has known this for quite a while. Studies indicate that American-born Latinos now represent 60% of all Latinos; that the second generation is bilingual, has a higher level of education and earns more money than their immigrant parents; and that the third generation does not even speak Spanish. Mr. Perenchio may have other reasons to sell, but it is obvious that the television network, which mainly caters to first-generation Hispanics, cannot continue to expand in any major way unless it does something drastic. The challenge posed by a second generation that has turned away from the Spanish-language media – and not just competition for new electronic media – may be the reason why the network’s advertising revenue has recently been growing at about one third the rate of T.V. revenue in general.

Of course, no group assimilates without impacting the host culture. But that has been the history of the United States. Hispanics are not a threat to the identity of the nation. They are a confirmation that there is no such thing as one “national identity” in the U.S., i.e., an identity that one group imposes on every other group. There is, rather, a flexible, porous culture that continually adopts new shapes within a basic set of institutions made up of liberal democracy, private enterprise, and the rule of law. Like other immigrant groups before them, Hispanics seem to be adapting to that creed while at the same time adding new layers to the complex prevailing culture.

Link here.

TAXES

U.S. STATES URGED TO CURB SENIOR TAX BREAKS

The cost of income tax breaks for senior citizens – offered in at least 40 states – could double as a share of the budget in many states as baby boomers retire over the next two decades, a new study predicts. In 20 years, when one in five Americans will be 65 or older, Kentucky, Mississippi, North Carolina and Pennsylvania will spend more than 7% – as much as most states spend on prisons – on senior tax preferences, according to the March 6 report by the Center on Budget and Policy Priorities, an advocacy group for low- and moderate-income people. This revenue dent will occur just as age-related expenses, including Medicaid and state pensions, are growing, the study warns.

Such findings lead the Center, along with AARP, a leading advocate for the elderly, to argue that states should roll back senior tax preferences – or at least not adopt new ones – because aging boomers do not all need tax breaks. Baby boomers are wealthier on average than younger people and wealthier than elderly people were decades ago when many of the tax preferences were passed, they argue. Economists, though, contend any state revenue loss from tax preferences for seniors is far outweighed by the value to states of attracting boomer retirees – or keeping ones that already live there. On average, retirees spend more than younger people and pay more taxes, including sales and property taxes. In addition, they require fewer state-funded services and create jobs.

Nine states – Florida, Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming – have no income tax. Of the 41 states with an income tax, 27 exempt some Social Security income, the report found. 31 states exempt some pension income, and 37 offer special income-tax deductions or credits based on age. In addition, 25 states provide special property-tax exemptions or credits for the elderly. In the 1970s, when many senior tax preferences were first established, some 25% of people over age 65 had fixed incomes below the poverty level. Today, only 10% of the elderly are poor, and in the next two decades, the percentage is expected to be even lower.

Link here.

IRS DECISION TO OUTSOURCE DEBT COLLECTION RAISES PRIVACY CONCERNS

The IRS announced last week that it has awarded contracts to three firms to participate in the first phase of its private debt collection initiative – a controversial decision opposed by privacy advocates. The contracts have been awarded to the CBE Group Inc., Linebarger Goggan Blair & Sampson, LLP, and Pioneer Credit Recovery, Inc. A total of 33 firms took part in the competitive bidding process that resulted in the contract awards. The IRS has been authorized to hire private firms to collect federal tax debts to assist the agency in its collection of back taxes by the 2004 American Jobs Creation Act.

Under the rules governing the new contracts, private firms will not be authorized to take enforcement actions such as liens, levies or seizures. In addition, private firms will not be authorized to work on technical issues such as offers in compromise, bankruptcies, hardship issues or litigation. The IRS also says that it will assign to the private firms cases in which the taxpayer has not disputed the liability. The private firms will contact taxpayers to make payment arrangements.

However, despite the IRS insisting that private firms will be subject to “stringent” taxpayer protection and privacy rules, the decision to outsource tax debt collection to private companies was described President Colleen M. Kelley of the National Treasury Employees Union (NTEU) as “a sad day for America’s taxpayers.” “American taxpayers can no longer have the confidence that federal tax collections are not based on personal gain,” Kelley commented. “Taxpayers deserve much better than this program. Their personal, sensitive and private information should not be divulged by our government.” IRS Commissioner Mark W. Everson disputed these claims, noting that the majority of state governments already use private firms to help collect delinquent taxes.

Link here.

COSTA RICA NEGOTIATING DOUBLE TAX AVOIDANCE AGREEMENTS

Forthcoming tax law may or may not affect expats.

As Costa Rica prepares for its controversial switch from a territorial tax system to one where it will collect tax on worldwide income, it has emerged that the country’s authorities have begun negotiations with several countries to avoid the double taxation of income. The director of the Revenue Service Francisco Fonseca has said that negotiations towards double taxation avoidance agreements with Israel, South Korea and Switzerland are in their early stages. Costa Rica is also in negotiations with Canada and Spain for similar agreements. Currently, Costa Rica is not a party to any double taxation treaties. However, it has signed an exchange of information treaty with the U.S. with a view to promoting the interchange of tax information and to ensure that the correct level of taxation is levied in both countries as well as to eradicate tax evasion.

Last month, the long-delayed Costa Rican fiscal reform plan cleared its first legislative hurdle in the national assembly following its first reading. The tax plan will introduce some major changes if passed, notably a switch to worldwide taxation from the current territorial tax system. Opponents of the tax plan fear that a move to a global tax system will deter wealthy foreign expats and investors from locating to or investing in Costa Rica, although it is thought that recent amendments to the legislation will allow foreigners to deduct tax paid on income earned abroad. However, the issue of expat taxation remains somewhat uncertain.

Link here.

SURVEY FINDS THAT IRELAND AND THE NETHERLANDS LEAD THE WAY IN TAX COMPETITIVENESS

Despite repeated complaints from industry over the growing UK tax and red tape burden, a recent survey has found that the UK remains significantly more competitive than France, Germany, Belgium or Spain. However, it has a long way to go before reaching the levels of tax competitiveness achieved by Ireland and the Netherlands. A survey of senior tax executives in 50 large UK-based companies carried out by KPMG found that 54% placed Ireland in the top three countries for tax competitiveness, with 50% choosing the Netherlands. Luxembourg attracted the vote of 32% of the respondents, while the UK polled 14%. Belgium and Spain both scored 4% while France and Germany received no votes.

The majority (two-thirds) of the respondents expressed the view that taxation was a consideration when deciding where to locate operations, and over 70% said that tax issues have become more important for international business planning over the past two years. However, it is the clarity and simplicity of a country’s tax system, rather than its tax rates, which appears to be the deciding factor for multinational firms. Only 68% of companies looked for low tax rates, compared with 88% which looked for clarity of interpretation of tax legislation and 84% which looked for consistency in tax-related judgements.

This is evidenced by the fact that corporate tax rates in both the Netherlands and in Luxembourg are (marginally) higher than in the UK, at 31.5% and 30.4% respectively. However, both countries are considered to benefit from a more stable and predictable tax regime than companies experience in the UK. Meanwhile, Ireland combines a tax system famed for its simplicity with a corporate tax rate of only 12.5%.

Link here.

U.K. CHANCELLOR BROWN SHOULD GET OVER HIS TAX AVOIDANCE FIXATION, SAYS ACCOUNTANT

UK accountant and business advisory firm PKF LLP has warned that the Government’s fixation with anti-avoidance legislation is both counterproductive and, ultimately, damaging to the UK economy. The Chancellor, Gordon Brown, should stop interfering with the taxpayer’s right to manage their affairs in a tax-efficient way and focus on fraudsters instead, says PKF.

HM Revenue & Customs estimates that the UK tax avoidance industry costs the exchequer approximately £10 billion a year, equivalent to £350 a head for the 29 million taxpayers in the UK. But PKF points out that as this is only a small percentage of the estimated total tax losses from avoidance and evasion of £75-100 billion, it would appear that the Government could reap richer rewards if they concentrated on law breakers rather than those who try to plan their affairs within the law.

Peter Penneycard, national director of tax at PKF, says, “The noble art of tax planning has been transformed by this Government into something that ‘dares not mention its name.’ Each Budget introduces yet more aggressive anti-avoidance measures aimed at preventing law-abiding taxpayers from managing their businesses in a tax-efficient way. Last week’s announcement about yet more measures targeting film investment partnerships is likely to be the tip of the iceberg of new rules for this year.

“These measures often only add complexity and costs to businesses and HMRC’s increasingly invasive attitude is creating a climate of fear amongst honest businesses. In the short term, this may be a cheap way to collect more tax but it fails to tackle the much bigger issue of tax evasion. If you are rich enough, the simplest solution is to become a non-domicile and set up shop in Monaco where Prince Albert rather than Gordon Brown can benefit from your wealth. At the other end of the scale, you could just hide it under the bed. Businesses are shying away from doing anything that tangles them up in the red tape associated with employing staff or taking up new investment incentives – which is clearly not good news for the long-term future of the economy.”

“The corporate tax take is now at the highest level it has ever been, so, there is really no need for the Government to keep turning the screws on businesses that seek to be tax-efficient within the law. Treating taxpayers like potential felons benefits neither the economy nor the exchequer.”

Link here.

ASSET PROTECTION / LEGAL STRUCTURES

KNOCK KNOCK KNOCKING ON HAVENS’ DOORS

Offshore funds have hit the headlines in recent weeks, following the disclosure that (U.K. Minister of Culture) Tessa Jowell and her husband David Mills had taken a mortgage on their home to invest in a hedge fund. These funds are cloaked in glamour and mystique, and often tainted with a hint of scandal, amid the presumption that they are used to either launder illicit money or escape tax. However, many assumptions relating to offshore investments are confused or plain wrong, not least the belief that you do not need to pay income tax on returns. Offshore investments make most sense for those working outside the UK and who are therefore not liable for UK tax. They can receive their returns without deduction of UK tax.

However, if you live and work in the UK then you are liable for income and capital gains tax on investments wherever in the world they are held. It is not the case that you only pay tax when you repatriate your savings. Some individuals choose to hold money in offshore havens, away from the prying eyes of Her Majesty’s Revenue & Customs, because they plan to evade tax. However, this is illegal and set to become more difficult.

Many bank and building societies set up offshore branches offering deposit accounts after the introduction of separate taxation of husbands and wives in 1990. At that time, all savings accounts were subject to composite rate tax (CRT), which could not be reclaimed by a non-taxpayer. It made sense for families with a non-working spouse to hold the investments in their name offshore where interest could be received gross once he or she had their own personal tax allowance. However, in 1991 CRT was abolished, so there was no longer any tax incentive to hold money in these accounts. Some people continued to leave cash in offshore havens such as Luxembourg and Gibraltar to keep their affairs secret from the taxman. This ended last year when a new EU Savings Tax Directive required all financial institutions in EU member states, plus some neighboring territories, to disclose information about investments to the relevant tax authority – or charge a punitive withholding tax.

It is not just EU states that have signed up to this directive. Some tax havens have also agreed to follow suit. These include Jersey, Guernsey, the Isle of Man, the British Virgin Islands, the Cayman Islands, Switzerland, Liechtenstein, Monaco and San Marino. Fears that the Revenue could start prying into money earned abroad, and on which it suspects UK income tax should have been paid, triggered a mini-exodus of funds to financial centers outside those which have signed up for the directive, such as Singapore, Bermuda and Dubai.

Some UK residents may wish to invest abroad for entirely legitimate reasons. Offshore funds are not subject to the same restrictions as onshore ones, and therefore can take more adventurous, if also highly risky, positions. There are no onshore hedges, so anyone looking for hedge fund exposure has to invest offshore. Similarly, the bulk of property funds are offshore, as are a range of specialist funds.

Link here.

EC seeking to extend savings tax directive to Far Eastern financial centers.

The European Commission is seeking to include the booming Asian financial centers of Hong Kong and Singapore within the ambit of the European Savings Directive according to a report by the Wall Street Journal, citing a Commission official. As originally drafted, the STD aimed at a uniform “information exchange” regime to apply across the EU, with all countries agreeing to report interest on savings paid to the citizens of other Member States to those States’ tax authorities. Many of the UK’s offshore financial centers have been forced to join the STD, along with the Netherlands Antilles, Aruba and some European centers (Andorra, Monaco, Liechtenstein and San Marino and Switzerland), although most of these places have opted for a “transitional” withholding tax at 15% until 2009 (20% from 2008).

As expected, wealthy investors are finding it easy to circumvent the directive. One of the most obvious “loopholes”, as many describe it, is the fact that the provisions of the directive apply to individuals, but not to companies or trusts. Billions of euros in assets have also reportedly flown east in the past year in order to escape the prying eyes of European tax authorities. However, it would appear that the EC has designs to outmanoeuver the more tax-savvy investors by broadening existing tax agreements between Hong Kong, Singapore and various EU member states so that Europe could request cooperation and information on potential EU tax evaders when avoidance of European taxes is being probed. At present, these agreements only extend cooperation to EU countries if it can be shown that domestic tax avoidance in the Far Eastern centers has taken place.

Link here.

IRS WARNS OF ESCALATING IDENTITY THEFT SCAMS

The IRS, noting an escalation in identity theft scams, is raising alarms about emails designed to dupe taxpayers into revealing personal financial information. IRS and Treasury Department officials have noticed an increase this winter in the frequency and sophistication of “phishing” schemes that use the tax agency’s logo to lure victims. In a phishing scam, identity thieves send -mail masquerading as official communication from a government agency, bank or other institution in an attempt to solicit personal data from victims. The data could include financial account numbers, passwords, credit card numbers or other information. The thieves use the information to steal a person’s identity and commit financial crimes, like using the victim’s credit cards or opening new ones, applying for loans or filing fraudulent tax returns. Phishing emails purporting to come from the IRS often tell taxpayers they are due a refund and direct them to a false IRS Web site. The email address may include “irs.gov”, such as tax-refundsirs.gov or adminirs.gov.

The IRS does not communicate with taxpayers via email, nor does the IRS ask people for passwords, personal identification numbers or other secret account information. Taxpayers who file their tax returns electronically might get an emailed acknowledgment when the return is accepted, but that email would come from the company providing tax software or professional preparation services, not the IRS. Taxpayers can check the status of their refund through the IRS Web site. That tool asks taxpayers for their Social Security number, filing status and the exact refund due.

Link here. IRS owes Brit a tax refund. A tad phishy, eh? – link.

OECD CONSULTS ON TRANSFER PRICING GUIDELINES

As part of its procedures for monitoring the implementation of its 1995 Transfer Pricing Guidelines, the OECD Committee on Fiscal Affairs has invited comments on the application of transactional profit methods. The OECD is particularly concerned with comparability issues encountered when applying the transfer pricing methods authorised by the 1995 TP Guidelines (i.e., the profit split methods and the transactional net margin method which are described in Chapter III of the 1995 TP Guidelines). It is expected that the ultimate outcome of the review of transactional profit methods should be a revision of TP Guidelines.

Under the profit split method, the total profit of the transaction made between the non-arm’s length parties is allocated on a fair basis to each of the parties. Profits are usually calculated before taxes and interest and some cases gross profit is used. The allocation will depend on such factors as functions performed, assets used and risks assumed by each of them, in other words, each of their contributions. Under the transactional net margin method (TNMM), an arm’s length net profit margin is determined and applied to the total cost of the transaction in order to calculate the notional net profit. Adding this notional net profit to the total cost gives the transfer price.

Link here.

MICROSOFT TO HIDE DATA OF IRISH SUBSIDIARIES THAT HAVE ENABLED IT TO SAVE $BILLIONS IN U.S. TAXES

Microsoft has taken steps to shield from the public the value of Tax Haven transactions of two Irish-registered subsidiaries that have enabled it to save billions of dollars in U.S. taxes. The company applied to the Irish Companies Office to re-register its Round Island One and Flat Island Company subsidiaries as companies with unlimited liability. Unlimited companies have no obligation to file their accounts publicly.

The move to change the legal status of the subsidiaries follows a November 2005 report in The Wall Street Journal and weeks after the U.S. Treasury Department said it was developing new rules to prevent U.S. groups transferring intellectual property and patents abroad as a way of minimizing their exposure to U.S. tax. Flat Island Company made a profit of $802.4 million in 2004 on sales of $2 billion, but paid no tax. It issues licences for software in Europe, the Middle East and Africa.

Ireland’s low corporate tax rate of 12.5% on trading profits has been a magnet for multinational companies who are responsible for 90% of Irish exports and a significant contributor to the success of the modern Irish economy, commonly known as the Celtic Tiger. In addition, an Irish tax exemption on patent income, has promoted the parking of U.S. multinational company overseas profits in Ireland, through transfer pricing and other accounting measures. Ireland is the most profitable location of U.S. multinationals and in the period 1998-2002, the profits of U.S. companies with Irish facilities doubled.

Microsoft’s effective global tax rate fell to 26% in its last fiscal year from 33% the year before. Nearly half of the drop was attributed to “foreign earnings taxed at lower rates,” Microsoft said in an SEC filing last August. Microsoft leaves much of its profit in Ireland, including $4.1 billion in cash, avoiding U.S. corporate income taxes. But it still can count this profit in its earnings. Microsoft did not explain why it chose to re-register the two subsidiaries when questioned about the move.

Link here.

SOME SOVEREIGN STATES, LIKE PANAMA, ARE MORE SOVEREIGN THAN OTHERS

Monaco is not a dependency, but how independent is it really? Many European countries treat it with suspicion, convinced that it is more a haven for dubious business. The view has been expressed that Monaco’s sovereignty is hostage to the fundamental interests of France. (French residents living there have been subject to French taxes since 1963). The learned British Judge, Lord Denning, stated that by international law “every sovereign state has no sovereignty beyond its own frontiers. The Courts of other countries will not allow it to go beyond the bounds. They will not enforce any of its laws to purport to exercise sovereignty beyond the limits of its authority.” But sovereignty is beset with problems because there does appear to be degrees of it as this century has already shown.

Panama’s sovereignty is absolute but, according to Simon Chesterman, executive director of the Institute for International Law and Justice at New York University, there are, in fact, “… different and complicated forms. The idea that sovereignty means all states are equal is the great fiction of international law.” George Orwell, who wrote another piece of related fiction, Animal Farm, would have understood and Monaco, as well as another finance center, Andorra, prove the point. Both are sovereignties with seats at the UN but their foreign policies are controlled by France.

The origin of sovereignty has brought about misunderstandings. History, after all, is a confused heap of facts according to Lord Chesterfield. The concept of sovereignty stems from the Treaty of Westphalia in 1648 under which a prince, or sovereign, was identified with the territory he governed. This premise formed part of the marrow of international law and led to the conviction that sovereigns are equal and always had the final word regarding their realms’ affairs. This, of course, has had important consequences in the field of offshore financial services where courts in different places have claimed exclusive jurisdiction, causing a conflict over the application of laws. As if to reinforce Mr. Chesterman’s case, when Albert II, Monaco’s new prince, was enthroned last November, the only head of state to attend and not give Prince Albert the cold shoulder was, ironically, the president of Iceland.

The OECD, when talking about taxation, speaks of “harmonization” but you could just as easily substitute the word “standardization”. There are countless examples (the OECD initiative is not one of them) where standardization makes sense and brings with it dependability, certainty and orderliness. Although much of the business done offshore calls for this approach (such as regulation and supervision of banks and professionals) it is also true to say that some of the business does not because, by its very nature, it falls into a special category requiring a different approach. Bureaucrats are not the only ones who fail to appreciate the difference. Some practitioners are equally guilty or simply choose to ignore the fact. Template tactics, as I call them, can have unfortunate consequences for clients.

Henry Mintzberg, in his book, Managers Not MBAs, argues that the average MBA course offers “specialized training in the functions of business, not general educating in the practice of management.” He sees management as a craft and he is right and focusing one’s skills will make it easy not to cross the boundary line of one’s abilities. Incessantly, people travel to foreign shores where they then ask for advice about their domestic taxes which can be dangerous if the offshore practitioner, for whatever motives, does not point out that tax reservations should be addressed before flight reservations are made. Once, in a less complex world, one could be well versed in several disciplines. The 21st century makes this a very difficult goal to achieve and I am convinced that the offshore arena, in particular, calls for specialization, whether it be mutual funds, captive insurance or private banking. The complexities (ever increasing) of each service demands it if one is to be able to provide best advice.

Professionalism of a high degree comes, however, at a price. Recognizing real value is how the old, traditional private banks have not only lured but kept their clients. They have given a superlative service supported by an abundance of knowledge. Private bankers argue that wealth management services given by big banks lean towards the impersonal. You might say that self-interest would have them say that, but having experienced working for both a monolithic and also a minuscule financial services institution, I strongly support the contention.

The OECD’s tax harmonization initiative just celebrated its 10th anniversary. There is a lot at stake. The IMF, when it made its last estimate, reckons that $5 trillion is held offshore. Initially, the OECD decided on the stick, rather than the carrot, approach but found that this was not realistic – especially when the U.S. perceived an intention to clamp down on tax competition. The new message is about “mutual benefits” but the crucial problem remains - the OECD is guilty of double standards. After all, non-committed Austria’s Federal Chancellor, Wolfgang Schüssel, is presently President of the Council of the EU. It is because of this background that Panama, while a participant in the initiative, has publicly declared that its agreement depends on universal compliance.

Unlike the Cayman Islands and similar dependencies, Panama remains on the periphery of the OECD’s ability to use the stick and throw away the carrot. This realization by many has fuelled the growth in Panamanian offshore business. Such growth offshore is frustrating for many tax-hungry OECD members who have enough difficulties collecting revenue from a captive domestic population. Panama is also fortunate not to suffer from hurricanes and it would seem to me, in a similar context, that any future pressure from the OECD is likely, figuratively speaking, to bring the isthmus perhaps light rain, but never hurricanes. Not so for those dependent finance centers in the region that have both atmospheric and OECD pressure to deal with.

Link here.
Torrijos to unveil Panama Canal master plan this month – links here and here.

PRIVACY

YOU CAN SURF BUT YOU CAN’T HIDE

Curious about which of your neighbors is into adult “entertainment”, gambling or is on the prowl for a date? Maybe you need some marks for your insurance agency, car dealership or mortgage brokerage? You will find this and more at a new Web site called Responderinfo.com. If you were visiting some dubious sites and you are dumb enough to submit your real name and address when asked, can a neighbor find out? Yup. This latest privacy intrusion is the brainchild of Larry P. Organ, 46, a master of separating people from their personal data. If you are wondering how you get on all those spam lists, you can credit people like Organ, who claims a database of 76 million names.

How does he get your name and information? By enticing you to hand over your personal data on Web sites he owns that lead you to mortgage offers, cell phone services, online colleges, sweepstakes and other goodies. (He cuts deals with other Web sites for data on their visitors, too.) In turn, he peddles that information to data-mining firms as evidence of your likely responsiveness to marketing pitches. If you do not specifically ask not to be contacted by marketers – “opt out” in the terminology of spammers – it is all perfectly legal, and list brokers such as Organ can resell the data many times over.

Organ’s creation is the most recent method marketers are using to gather personal data despite antispam laws and privacy restrictions. Another technique is “age verification” portals, used to screen out minors from, say, watching an R-rated movie trailer. The systems verify names, birthdays and zip codes against driver’s licenses and government databases. Not clearly stated is that the personal information is often retained by the client, who can use it to hound the consumer with marketing offers.

Organ says he’s getting 4,000 to 5,000 people “playing around” on Responderinfo.com daily. Car dealers are buying 100 to 200 names within a zip code. He sees his service as helping small businesses that cannot afford or do not need big data lists. Whether the service is fruitful for buyers is another matter. Emails sent to several people on the list bounced back as undeliverable, and those who did respond were none too happy that their Internet habits were exposed to the world, much less to marketers. “I do not like anyone on the Internet having access to my information, especially my phone number, which is unlisted,” emails a writer in Los Angeles. In that case she might have refrained from recently entering various online food contests that required her name and address. Even in Cyberspace there is no free lunch.

Link here.

THE TERRORIST IN THE MIRROR

Terrorism, like beauty, is in the eye of the beholder. And if you look in the mirror, you just might behold a terrorist. “Surely you are joking,” you are thinking. Alas, no …

Consider the saga of Walter Soehnge, of Providence, R.I., who found himself under suspicion of being a terrorist because he paid off his credit card bill. A few months ago he decided to bring down his credit card balance to save on interest payments, so he sent in a payment for $6,522. Shortly afterward, wehn Mr. Soehnge checked his account balance, the payment had not been credited. He contacted the bank to find out what had happened. He was told that the amount he had sent in was much larger than his normal monthly payment. And that raised a huge red flag – one that had to be reported to the federal government’s Department of Homeland Security as a potentially “terrorist-related transaction”. The irony is that at least some of the 9-11 hijackers reportedly ran up large credit card bills that they never paid off. In other words, paying off your credit bill makes you a terrorist suspect – and so does NOT paying it off.

Nuns are also potential terrorists. Last November, checks written by the nuns at the Holy Name Monastery in St. Leo, Florida, began bouncing. The nuns contacted their bank, a local branch of Wachovia, and were informed that their account had been frozen in an anti-terrorism investigation. There was no warning from Wachovia – the bank simply refused payment on 22 checks, and deducted a fee for every bounced check. The nuns learned that the problem was that an 80-year-old nun at the convent who is a signatory to the account did not have her Social Security number and photo ID on file. That fact obviously made her a potential comrade-in-arms to al Qaeda and its ilk.

After considerable inconvenience, both Mr. Soehnge and the Holy Name Monastery were able to regain access to their financial accounts. However, buried deep within the bowels of the Homeland Security Administration, FinCEN and perhaps even the NSA, there almost certainly exists a record of the investigations that will be shared with other government agencies, such as the TSA (which is itself a division of the HSA). Will Mr. Soehnge and the good nuns from the Holy Name Monastery be permitted to board an airplane next time they wish to travel? Or have their names been added to the secret watch list of suspected terrorists maintained by the National Counterterrorism Center that now numbers 325,000 names? If they have been swept into the net cast by the nation’s anti-terrorism laws, they may not be permitted to board.

Other than persons who pay off (or fail to pay off) their credit card bills, and nuns, who else might be considered a terrorist? On at least 14 occasions, babies in their mothers’ arms have not been allowed to board flights because their names showed up on a terrorist watch list. Naturally, the babies are detained pending an investigation. The FBI’s counter terrorism unit has targeted the Catholic Workers Group for investigation because of the group’s “semi-communistic ideology”. FBI agents in Indianapolis were so alarmed by the announcement of a “Vegan Community Project” that they called in the agency’s counter-terrorism unit to investigate it. Obviously, anyone who engages in any kind of civil disobedience is a potential terrorist. Indeed, the USA PATRIOT Act states that any act that has the potential to damage property and that “appears to intended” to influence the policy of a government by intimidation or coercion constitutes “terrorism”. A Supreme Court allows the government to designate any business or group as a “terrorist organization” – perhaps yours – and seize its assets, with no right of appeal.

Are you a potential terrorist? Look in the mirror. If you see a face gazing back at you, the answer is “yes”. If you think this situation is ridiculous – and threatening – you should take two steps that I consider essential for all persons wanting to protect themselves from an out-of-control government, ASAP. (1) Establish an offshore nest egg. An offshore bank account is a good start, but since you can be forced to repatriate the assets in an offshore account, an investment like a Liechtenstein insurance policy that provides statutory asset protection under (Swiss) Liechtenstein law is even a better idea. [Ed: W.I.L. clients enjoy similar protections.] (2) Investigate places to live outside the U.S. I lived in Austria for nearly three years. Austria is a lot different from the US, and I had to make some major adjustments, but there were no terrorist watch lists and no charitable organizations having their assets confiscated without a court hearing.

There is no time to waste. It is just a matter of time before another terrorist incident in the US emboldens our leaders to crack down even harder against anyone who can see their reflection in the mirror … perhaps you.

Link here.

HOUSTON POLICE CHIEF WANTS SURVEILLANCE CAMERAS IN PRIVATE HOMES

The age of Orwell’s telescreen is upon us as surveillance cameras that festoon our streets, shopping malls and airports are now moving into our private homes as the panopticon prison is erected. “Houston’s police chief is suggesting putting surveillance cameras in apartment complexes, downtown streets and even private homes,” the Associated Press reports. “Chief Harold Hurtt today said it’s another way of combatting crime amid a shortage of officers. Scott Henson with the American Civil Liberties Union calls Hurtt’s proposal to require surveillance cameras as part of some building permits – ‘radical and extreme.’”

In the meantime, Homeland Security grants are being used to blanket major cities and even small sleepy communities with arsenals of spy cameras. All over the U.S., Canada and Britain, surveillance camera systems are being installed on street corners, in public bathrooms, in residential neighborhoods, and even in parks and forests. We are asked to trust the government underlings who control them that they are working for our best interests as said underlings are caught using the cameras to spy on naked women in their homes.

In the UK, government programs encourage citizens to spy on their neighbors and report suspicious activity as part of a CCTV channel subscriber package. Homeland Security funding is being utilized to fund this mass expansion of the surveillance state in the U.S. as city and state officials clamor at the teat of Big Brother to milk the cash cow of the police state and win the contracts for installing more and more sophisticated spy cameras. The government demands to know everything about our private lives and catalogue, file and index every aspect of our existence, yet government itself becomes more and more secret with each passing day as it engages in escalating criminal activities.

The agenda behind surveillance cameras is not simply to track the movements of certain individuals. There are not enough watchers to catalogue all the information. The cameras are about behavior control and creating an omnipresent atmosphere whereby the citizen consciously regulates his own behavior so as not to seem suspicious. The surveillance cameras are there to make a statement. We are the prison guards, you are the prisoners.

This is the prison without bars. This is the panopticon, a prison so constructed that the inspector can see each of the prisoners at all times, without being seen. This is a portrait of the accelerating movement by western governments to erect giant, powerful, all-pervading mass surveillance, tracking and control grids that will keep all populations firmly under the baleful and watchful gaze of Big Brother.

Link here.

LAW

HOW “STRUCTURING” A FINANCIAL TRANSACTION COULD PUT YOU IN THE SPOTLIGHT

Many people are aware that the U.S. Government requires that certain types of information be reported when large quantities of cash are moved in or out of financial institutions (e.g., banks, savings and loans, credit unions, etc). Often people conducting high-value financial transactions will ask the bank teller “What is the dollar amount required to file a report with the government?” The response is a Cash Transaction Report, CTR, (IRS Form 4789/FinCEN Form 104) is required to be filed for any amounts cumulatively exceeding $10,000 for a single day.

Once informed, customers often lower the amount of the transaction to less than $10,000. Generally, the new amounts deposited or withdrawn reflect values such as $9,900, $9,800, or $9,500. However, once the change in amount is made, the financial institution is obligated to file a Suspicious Activity Report (SAR) without alerting or notifying the customer of this fact. The reason why this happens is because “structuring” deposits or withdraws to avoid detection is a money laundering technique.

USC 31 §5324, “Structuring Transactions To Evade Reporting Requirement Prohibited”, defines what constitutes a violation of this statue: Any person who, for the purpose of evading the CTR reporting requirements, (1) cause or attempt to cause a domestic financial institution to fail to file a report; (2) cause or attempt to cause a domestic financial institution to file a report that contains a material omission or misstatement of fact; or (3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.

Thus, “structuring” financial transactions to avoid filing requirements is a form of money laundering and subject to penalties and forfeitures under the current laws and regulations. In fact, many of the SAR submissions are based on people behaving in this fashion and our focus for this month’s link chart reflects such a case. In this case, once the party acted in that manner, then from that point forward all of her financial transactions were reported as SARs.

The analysis clearly shows how people try to structure their transactions to avoid Cash Transaction Report (CTR) filing requirements. If large volumes of cash are derived from legitimate purposes (e.g., restaurants, bars, churches, etc.), there should be no concern about depositing or withdrawing the money. The CTR forms are not currently used for tax purposes or any other government oversight other than to help detect and expose money laundering activities. Structuring transactions, providing false information, or trying to avoid CTR filings will result in SAR filings – which are highly scrutinized by governments throughout the world.

Link here.

AMERICA’S AND THE U.S. CONSTITUTION’S DOUBLE DEFEAT

America and the U.S. Constitution suffered a double defeat. (I say that as a conservative and as a Republican who regrettably voted for Bush). The U.S. House of Representatives passed a renewal of the USA PATRIOT Act, the single most unconstitutional law ever enacted. Over in the U.S. Senate, Republicans on the Senate Intelligence Committee reached a malodorous agreement with Pres. Bush on an outrageous proposal that would ratify the president’s unconstitutional wiretapping without court orders. Instead of investigating and curbing the president’s illegal acts, these political toadies want to enact a law that blatantly violates the Fourth Amendment guarantee against unwarranted search and seizure.

The renewal of the so-called PATRIOT Act is particularly disturbing, since for a time it was thought that there was a real chance in Congress for reforms that would protect civil liberties. That was crushed when weak-kneed Republicans that had talked reform folded under Bush pressure. What is going on in the U.S. Congress? Have they lost their minds? Are they so blind that they cannot read the plain meaning of the words in the Constitution? Are the members of my own Republican party so crippled by crass political considerations that they will do anything George Bush demands, even when it clearly violates their oaths to uphold the Constitution against all enemies?

History shows that a national crisis and implied threats, real or imagined, often serve as justification for curbing liberties. The 1933 Reichstag fire, the beginning of the end of the rule of law in Germany, was just such an historic sham, engineered by the Nazis and a power grabbing Adolf Hitler. Think about what has happened in the U.S. since the terrorist attacks of Sept. 11, 2001. The excesses of the PATRIOT Act and Bush’s secret wiretapping and surveillance by the National Security Agency, are prime examples of illegal acts justified by questionable threats. Yet most Americans do not seem to care. Yes, the threat of terrorism is all too real, but the Bush government’s over-reaction has done what terrorists could never do alone – destroy our liberties without any real increase of security. And do not be fooled by these anti-terrorism claims. These laws are being used for easy police action, usually in secret, against any “crime” they choose.

And for those of us who oppose the new American police state, we are warned by Prof. David Cole of Georgetown University Law Center, who noted in The Nation magazine that the very name of the USA PATRIOT Act “implies that those who question its sweeping new powers of surveillance, detention and prosecution are traitors.” In today’s absence of what the Supreme Court once described as “wise and human rulers”, the Constitution is our only protection – and that is being shredded daily into meaninglessness by unprincipled pygmy politicians in Congress and the White House. Time to seek that offshore haven.

Link here.

F.B.I. GUILTY OF WIRETAP LAW VIOLATIONS TOO

The F.B.I. found apparent violations of its own wiretapping and other intelligence-gathering procedures more than 100 times in the last two years, and problems appear to have grown more frequent in some crucial respects, a Justice Department report said. While some of these instances were considered technical glitches, the report, from the department’s inspector general, characterized others as “significant”, including wiretaps that were much broader in scope than approved by a court and others that were allowed to continue for weeks or sometimes months longer than was authorized.

In one instance, the F.B.I. received the full content of 181 telephone calls as part of an intelligence investigation, instead of merely the billing and toll records as authorized, the report found. In a handful of cases, it said, the bureau conducted physical searches that had not been properly authorized. The inspector general’s findings come at a time of fierce Congressional debate over the program of wiretapping without warrants that the National Security Agency has conducted. That program, approved by President Bush, is separate from the F.B.I. wiretaps reviewed in the report, and the inspector general’s office concluded that it did not have the jurisdiction to review the legality or operations of the N.S.A. effort.

But, the report disclosed, the Justice Department has opened reviews into two other controversial counterterrorism tactics that the department has widely employed since the Sept. 11 attacks. In one, the inspector general has begun looking into the F.B.I.’s use of administrative subpoenas, known as national security letters, to demand records and documents without warrants in terror investigations. Some critics maintain that the bureau has abused its subpoena powers to demand records in thousands of cases. In the other, the Office of Professional Responsibility, a Justice Department unit that reviews ethics charges against department lawyers, has opened inquiries related to the detention of 21 people held as material witnesses in terror investigations.

As with the F.B.I.’s use of administrative subpoenas, civil rights advocates assert that the Justice Department has abused the material witness statute by holding suspects whom it may not have enough evidence to charge. The new ethics inquiries are reviewing accusations that department officials did not take some material witnesses to court within the required time, failed to tell them the basis for the arrest or held them without any attempt to obtain their testimony as supposed witnesses in terror investigations, the inspector general said. Representative John Conyers Jr. of Michigan, ranking Democrat on the House Judiciary Committee, characterized the report as “yet another vindication for those of us who have raised concerns about the administration’s policies in the war on terror.”

Link here.

NIGERIA MOVES TO DELIST ITSELF FROM MONEY LAUNDERING NATIONS

The Federal Government has submitted a new bill to set up a financial intelligence unit that could get the country removed from the world’s money laundering blacklist. Nigeria is one of the only two countries blacklisted by the FATF, an inter-governmental body combating money laundering and terrorist financing. The second country is Myanmar. Nigeria is ranked as one of the world’s most corrupt nations and was placed on the FATF’s list of non-cooperating countries in 2001. Deficiencies cited by the FATF included the failure of the Federal Government to fully criminalize money laundering, the lack of customer identification requirements, inadequate reporting requirements, the absence of anti-money laundering measures applied to stock brokerage firms and other financial institutions and high level of government corruption.

Reforms by government since then, including the establishment of Economic and Financial Crimes Commission in 2003, have not been enough to get Nigeria delisted. Since then, the EFCC has recovered or seized assets valued at hundreds of billions of naira and in other foreign currency as well from various people guilty of fraud inside and outside the country. The agency has also secured a number of convictions, including that of a former inspector general of police, Tafa Balogun.

Link here.

ST. KITTS & NEVIS SHOULD REDUCE ITS ECONOMIC CITIZENSHIP PROGRAM, SAYS U.S.

This was one of the measures suggested by the U.S. State Department to combat money laundering and other financial crimes within the Federation. The annual report, release March 1, suggested, among other measures that, “The Federation is at major risk for corruption and money laundering, due to the high volume of narcotics trafficking activity through and around the islands and the presence of known traffickers on the islands. … An inadequately regulated economic citizenship programme adds to the problem. The government of St. Kitts/Nevis continues to be vulnerable to money laundering and other financial crimes. St. Kitts/Nevis should continue to devote sufficient resources to effectively implement its anti-money laundering regime. Specifically, St. Kitts/Nevis should determine the number of Internet gaming sites present on the islands. Oversight of these entities is crucial, as they are vulnerable to abuse by criminal and terrorist groups. Additionally, St. Kitts/Nevis should curtail its economic citizenship programme,” said Volume II of the International Narcotics Control Strategy Report (INCS) report.

Link here. St. Kitts & Nevis citizenship-by-investment program information here.

BARBADOS MAY BE A CONDUIT FOR TERRORIST FUNDING, SAYS U.S.

A new report on money laundering is suggesting that money may be leaving Barbados in aid of terrorism, without the authorities knowing about it. The 2006 International Narcotics Control Strategy Report released last week by the U.S. Bureau for International Narcotics and Law Enforcement Affairs, says the U.S. also believes government needs to do more to prevent money laundering in the offshore sector. The report has acknowledged the existence of anti-terrorism legislation which criminalizes the financing of terrorism, and it says that the government has circulated the names of UN lists of suspected terrorists and terrorist organizations.

“In 2005, the Government of Barbados (GOB) found no evidence of terrorist financing. Intelligence suggests that a small amount of money is leaving Barbados via an alternative remittance system,” the report says. “However, the GOB has not taken any specific initiatives focused on alternative remittance systems or the misuse of charitable and nonprofit entities.”

As for the issue of money laundering in the offshore sector which the Central Bank of Barbados has estimated is a $32 billion industry, the American government says while authorities here have taken steps in recent years to strengthen anti-money laundering legislation, they must also steadfastly enforce the laws and regulations it has adopted and consider adopting civil forfeiture and asset sharing legislation. Government is also being encouraged to adequately staff its Financial Intelligence Unit as a first step toward bolstering its ability to prosecute anti-money laundering cases.

Additionally, the American Government says Barbados should ensure adequate supervision of non-governmental organizations and charities, work to improve information sharing between regulatory and enforcement agencies, and continue to provide adequate resources to its law enforcement and prosecutorial personnel to ensure Mutual Legal Assistance Treaty requests are efficiently processed.

Link here.

PHILIPPINES SHOULD BE SEIZING MORE ASSETS, SAYS U.S.

The U.S. has reiterated the need for the Philippines to enact laws against terrorism and terrorist financing as part of global efforts to stop money laundering and terrorism. In its 2006 International Narcotics Control Strategy Report, the U.S. State Department called the Philippine government’s attention to the absence of “comprehensive” legislations on counterterrorism and freezing and forfeiture of assets suspected of being used in illegal activities even before a court order is issued. “To conform with international standards and become a more effective partner in the global effort to staunch money laundering and thwart terrorism and its financing, it (Philippines) should enact and implement new legislation that criminalizes terrorism and terrorist financing,” suggested the U.S. annual report.

In 2000, the FATF placed the Philippines on its list of Non-Cooperative Countries and Territories for lacking basic regulations against money laundering. The country was removed from the NCCT list only last year after being able to implement in March 2003 the needed amendments to the Anti-Money Laundering Act (AMLA) of 2001, which the FATF earlier deemed as “inadequate”. The U.S. report recommended the creation of an asset forfeiture fund, which may be used by law enforcement agencies in investigating alleged illegal activities and in procuring much-needed equipment. [Ed: i.e., as is already done in the U.S.]

“Cash smuggling,” according to the U.S. report, remains a major concern for the Philippines, which it said is exacerbated by the large volume of foreign currency remitted to the Philippine by overseas Filipino workers (OFWs). Under AMLA, any amount in excess of $10,000 equivalent must be declared by an individual or entity upon arrival or departure from the country. Because OFW money (most of which comes in smaller quantities than $10,000) are often brought in person by OFWs or by designated individuals on their return home – not through any alternative remittance system – there is no declaration requirement and the amounts are difficult to calculate, it added. This also results to a “systematic abuse” of the currency declaration requirements and a large amount of “unreported cash” entering the Philippines, the report pointed out. OFW remittances reach an average of $8 billion annually. There are about 8 million Filipinos working overseas.

Link here.

SANDRA DAY O’CONNOR SAYS U.S. RISKS EDGING NEAR TO DICTATORSHIP

Sandra Day O’Connor, a Republican-appointed judge who retired last month after 24 years on the Supreme Court, has said the U.S. is in danger of edging towards dictatorship if the party’s rightwingers continue to attack the judiciary. In a strongly worded speech at Georgetown University, Ms. O’Connor took aim at Republican leaders whose repeated denunciations of the courts for alleged liberal bias could, she said, be contributing to a climate of violence against judges. Ms. O’Connor, nominated by Ronald Reagan as the first woman supreme court justice, declared, “We must be ever-vigilant against those who would strong-arm the judiciary.”

She pointed to autocracies in the developing world and former Communist countries as lessons on where interference with the judiciary might lead. “It takes a lot of degeneration before a country falls into dictatorship, but we should avoid these ends by avoiding these beginnings.” In her address to an audience of corporate lawyers, Ms. O’Connor singled out a warning to the judiciary issued last year by Tom DeLay, the former Republican leader in the House of Representatives, over a court ruling in a controversial Terri Schiavo “right to die” case. After the decision last March that ordered a brain-dead woman in Florida, Terri Schiavo, removed from life support, Mr. DeLay called for the impeachment of judges involved in the case, and called for more scrutiny of “an arrogant, out-of-control, unaccountable judiciary that thumbed their nose at Congress and the president.” Such threats, Ms. O’Connor said, “pose a direct threat to our constitutional freedom”, and she told the lawyers in her audience, “I want you to tune your ears to these attacks … You have an obligation to speak up.”

She noted death threats against judges were on the rise and added that the situation was not helped by a senior senator’s suggestion that there might be a connection between the violence against judges and the decisions they make. The senator she was referring to was John Cornyn, a Bush loyalist from Texas, who made his remarks last April, soon after a judge was shot dead in an Atlanta courtroom and the family of a federal judge was murdered in Illinois.

Although appointed by a Republican, Ms. O’Connor voted with the supreme court’s liberals on some divisive issues, including abortion, making her a frequent target for criticism from the right. After announcing that she intended to retire last year at the age of 75, she was replaced in February this year by Samuel Alito, who is generally regarded as being more consistently conservative. In her speech, she said that if the courts did not occasionally make politicians mad they would not be doing their jobs, and their effectiveness “is premised on the notion that we won’t be subject to retaliation for our judicial acts.”

Link here.

SENATOR RUSS FEINGOLD, A PECULIAR POLITICIAN

Senator Russ Feingold is an embarrassment to the U.S. Senate, which makes him an authentic hero of the Republic. The Wisconsin senator gets up and says out loud what half of the country is thinking and talks about every day. This President broke the law and lied about it. He trashed the Constitution and hides himself in the flag. Feingold asks, Should the Senate not say something about this, at least express our disapproval? He introduces a resolution of censure and calls for debate. Well, that tore it in the august chamber of lawmakers. Democrats scurried away like scared rats. And Republicans chortled at the thought. You want to censure our warrior President, the guy who defends us every day against terrorist attacks? Let us have a vote right now, the Republican leader demanded. Yuk, yuk.

The joke is obvious to everyone in the Washington club – politics trumps principle, especially when it is about something as esoteric as the Constitution. It is a nonstory, the club agrees, not a constitutional crisis. The Washington Post runs an obligatory account on page 8, quoting Mr. Anonymous Democrat Strategist on the unwisdom of Feingold’s gesture. The New York Times story on page 24 quotes the esteemed constitutional authority Dick Cheney. The House Repubican leader (who replaced the corrupt House leader who resigned) denounces Feingold’s resolution as “political grandstanding of the very worst kind.” Like the Republican impeachment of Bill Clinton for fellatio in the White House? Go away, Feingold, let us get back to the people’s business. The real story – naturally overlooked by cynical editors – is that an honest truth-teller is loose in the fun house and disturbing the clowns. Man bites dog, senator defends Constitution.

Feingold has a reputation for such quaint deviations – a naïf who voted against the war in Iraq and the Patriot Act. On principle! How naïve is that? He talks like he might run for President, yet he seems tone-deaf to the artful resonances of power politics – the cutesy games insiders play and the press cherishes. Hey, what is this Constitution thing anyway? The senator is peculiar in this era of decaying democracy. There was a time, believe it or not, when his type was a familiar presence in the Senate. I think of Sam Ervin of North Carolina, a conservative Democrat on most matters but always a lion on the Constitution. Ervin is remembered for his heroic role in the investigation of Watergate. Old-timers remember that before Watergate, Senator Sam led courageous hearings on the illegal spying on civilians by the Army and FBI (Democratic scandals predating Nixon).

When liberalism was in flower, the Senate always included a good mix of such maverick voices. They were party loyalists but departed on principle in ways that sometimes kept the majority honest. Voted against the President’s war in Vietnam and never let up. We might ask why the Republican Party has not produced a similar collection of independent thinkers. We might mourn the fact that pursuing a career in the Senate no longer seems compatible with stubborn self-directed character. The media, instead of kissing off Feingold as a dumb politician, might do a little honest reporting on the substance of what he is saying.

For the moment, however, let us celebrate the man. Amid scandals in high places, Senator Feingold is fresh air. The country should rise up and sing.

Link here.

OPINION & ANALYSIS

ANARCHY, VIOLENCE AND THE STATE

When the subject of anarchy comes up, the most common objection to a stateless society is that violence will inevitably increase in the absence of a centralized state. This is a very interesting objection, and seems to arise from people who have imbibed a large amount of propaganda about the nature and role of the state. It seems hard to imagine that this conclusion could ever be reached by reasoning from first principles, as we will see below.

There are several circumstances under which the use of violence will either increase, or decrease – and they tend to resemble the basic principles of economics. For instance, people tend to respond to incentives, and tend to be drawn to circumstances under which they can gain the most resources by expending the least effort. There are several circumstances under which violence will tend to increase, rather than decrease – and interestingly enough, a centralized state creates and exacerbates all such circumstances.

For example, in a stateless society, it is impossible to “outsource” violence to the police or the military, since they do not exist. With the government, however, those who wish to gain the fruits of violence – i.e., tax revenues, the regulation of competitors, the blocking of imports and so on – can lobby the government to enforce such beneficial restrictions on the free trade and choices of others. They will have to pay for this lobbying effort, but they will not have to directly fund the police and the military and the court system and the prison guards in order to force people to obey their whims. This “externalization of costs” is an essential ingredient in the expansion of the use of violence.

The existence of a centralized state vastly increases both the profit and the prevalence of violence. The fact that the violence is masked by obedience in no way diminishes the brutality of coercion. All moralists interested in one of the greatest topics of ethics – the reduction or elimination of violence – would do well to understand the depth and degree to which the existence of a centralized state promotes, exacerbates and profits from violence. Private violence is a negative but manageable situation. But as we can see from countless examples throughout history, public violence always escalates until civil society is utterly destroyed. Because the state so directly profits from violence, eliminating the state can in no way increase the use of violence within society. Quite the contrary – since private agencies do not profit from violence, eliminating the state will, to a degree unprecedented in human history, eliminate violence as well.

Link here.

U.S. CONGRESS SPENDERS OUTNUMBER SAVERS BY 21 TO 1

The National Taxpayers Union Foundation (NTUF) has conducted a study of Congressional members’ spending wish-lists, which shows that attempts to spend more money out-number attempts to save it by 21 to 1 in the current Congress. The NTUF’s “BillTally” analysis is a unique cost accounting system that computes a “net annual agenda” for each Member of Congress (and has done so since 1991). The results are based on each Senator’s or Representative’s individual sponsorship or cosponsorship of pending legislation, and provide an in-depth look at the fiscal behavior of lawmakers, free from the influence of committees, party leaders, and rules surrounding floor votes. All cost estimates for bills are obtained from third-party sources or are calculated from neutral data. Within the first seven months of the 109th Congress, NTUF identified 1,059 House and Senate bills with a budget impact of plus or minus $1 million.

Highlights of the study include: (1) Through the 2005 August recess, over 21 bills in the House were introduced to raise spending for every bill to lower spending. This is actually an improvement from the previous Congress (2003), during which the ratio was 23 to 1. In the Senate, 30 spending-hike bills were introduced for every spending-cut bill, worse than the 22 to 1 ratio in 2003. (2) The average House Republican’s wish list would increase federal spending by a net $11.0 billion, half of what he or she proposed in 2003 but still a far cry from 1995’s average of minus $18.2 billion. The typical GOP Senator advocated a $5.1 billion agenda, roughly one-fifth of what he or she sought in spending hikes during the opening of 2003. (3) The average House Democrat had a $444.7 billion agenda, the highest of any of the past seven Congresses. Senate Democrats, however, brought their average down to $34.3 billion, roughly one-third of 2003’s level and the lowest since the 106th Congress (1999).

Link here.

IS ANOTHER 9-11 IN THE WORKS?

If you were President George W. Bush with all available U.S. troops tied down by the Iraqi resistance, and you were unable to control Iraq or political developments in the country, would you also start a war with Iran? Yes, you would.

Bush’s determination to spread Middle East conflict by striking at Iran does not make sense. Bush lacks the troops to do the job. If the U.S. military cannot successfully occupy Iraq, there is no way that the U.S. can occupy Iran, a country approximately three times the size in area and population. Iran can respond to a conventional air attack with missiles targeted on American ships and bases, and on oil facilities located throughout the Middle East. Iran has human assets, including the Shia majority population in Iraq, that it can activate to cause chaos throughout the Middle East. Polls of U.S. troops in Iraq indicate that a vast majority do not believe in their mission and wish to be withdrawn. Unlike the yellow ribbon folks at home, the troops are unlikely to be enthusiastic about being trapped in an Iranian quagmire in addition to the Iraqi quagmire. And Bush’s polls are down to 34%, with a majority of Americans believing that Bush’s invasion of Iraq was a mistake.

If you were being whipped in one fight, would you start a second fight with a bigger and stronger person? That is what Bush is doing. Opinion polls indicate that the Bush regime has succeeded in its plan to make Americans fear Iran as the greatest threat America faces. The Bush regime has created a major dispute with Iran over that country’s nuclear energy program and then blocked every effort to bring the dispute to a peaceful end. It is obvious that Bush intends to attack Iran and that he will use every means to bring war about. Yet, Bush has no conventional means of waging war with Iran. His bloodthirsty neoconservatives have prepared plans for nuking Iran. However, an unprovoked nuclear attack on Iran would leave the U.S., already regarded as a pariah nation, totally isolated.

Readers, whose thinking runs ahead of that of most of us, tell me that another 9-11 event will prepare the ground for a nuclear attack on Iran. Some readers say that Bush, or Israel as in Israel’s highly provocative attack on the Jericho jail and kidnapping of prisoners with American complicity, will provoke a second attack on the U.S. Others say that Bush or the neoconservatives working with some “black ops” group will orchestrate the attack. Fantasy? Let us hope so.

Link here.

EVERY MAN NEEDS A THEORY

If we are right about the way the world works, history keeps bumping and grinding, perhaps in secret … grinding all human conceits exceedingly fine and exceedingly sure. Who knows what ends are purposed by the mighty gods? But, who doubts that they can be avoided? Today, dear reader, we offer what you might call a General Theory of Grinding. We begin by insisting that every man needs a theory as much as he needs a pair of pants – perhaps more. Without it, he is ridiculous or at least semi-functional. All we humans have to judge the world around us are our eyes and ears, but what do these senses pick up? They pick up a rush of color, light, sound – raw data.

Without a theory, this “data” is meaningless. It is just “noise”. We need theories to interpret it and give it meaning. These theories transform the rising edges of a woman’s mouth into a smile and a growing complex of bright red light into a double-decker bus headed for Waterloo Station. How would we know what would happen if we stepped in front of it? We have never done it before. We have never seen anyone do it. Yet, we have a theory that tells us that if we position ourselves in front of a moving bus, we will be crushed by it.

Among other things, the gods are currently grinding down the boom in real estate, support for the Iraq war, consumer incomes and spending power, the U.S. balance sheet … and the empire itself. Support for the war in Iraq is deteriorating. A new poll shows two-thirds of Americans already think the war was a “mistake”. History is grinding away, slowly but surely, at our war president.

When the war was first announced, Americans were fully behind it, and suspicious of anyone who was not. We lost a good number of dear readers because they could not put up with our standoffish attitude to the war. But, we were never really “against” the war. That suggests a degree of earnest do-goodism of which we are incapable. We take the world as we find it. We let the gods do their work. We only try to understand what they are up to, not stop them. Maggie Thatcher said an attack against Iraq was too “uncertain”. She argued against British involvement. The cynical French remembered Algeria. They wanted nothing to do with it.

While we shared many of their views, we saw the war as a historical necessity. Every empire needs to find a way to look ridiculous. It has to lose its pants, in other words, when the theory holding it up finally disintegrates. Nature loathes a monopoly. A successful empire has a monopoly on the use of organized force. Nature conspires against it, tries to undermine it and eventually ruins it. Every great empire also needs to take Baghdad at one time or another. The English took it. The Mongols took it. The Romans took it several times. Why shouldn’t we?

Would that not be a good way to weaken the empire, too? It would cost a fortune, stir up enemies, and tie up the imperial army in a futile campaign against nobody of importance. If you wanted to destroy the U.S. Empire, it would seem to be the perfect project. All nature needed to accomplish her dirty plans was an American administration foolish enough to undertake it. In Bush, Cheney and Rumsfeld, she found her stooges.

Links here and here.

MONEY, BANK CREDIT, AND ECONOMIC CYCLES DEMOLISHES THE CASE FOR FIAT CURRENCY, CENTRAL BANKING

Can the market fully manage the money and banking sector? Jesús Huerta de Soto, professor of economics at the Universidad Rey Juan Carlos, Madrid, has made history with this mammoth and exciting treatise that it has and can again, without inflation, without business cycles, and without the economic instability that has characterized the age of government control. Such a book as this – a complete comprehensive treatise on economic theory – comes along only once every several generations. It is sweeping, revolutionary, and devastating – not only the most extended elucidation of Austrian business cycle theory to ever appear in print but also a decisive vindication of the Misesian-Rothbardian perspective on money, banking, and the law.

Jörg Guido Hülsmann has said that this is the most significant work on money and banking to appear since 1912, when Mises’s own book was published and changed the way all economists thought about the subject. Its five main contributions: (1) A wholesale reconstruction of the legal framework for money and banking, from the ancient world to modern times. (2) An application of law-and-economics logic to banking that links microeconomic analysis to macroeconomic phenomena. (3) A comprehensive critique of fractional-reserve banking from the point of view of history, theory, and policy. (4) An application of the Austrian critique of socialism to central banking. (5) The most comprehensive look at banking enterprise from the point of view of market-based entrepreneurship.

Those are the main points but, in fact, this only scratches the surface. Indeed, it would be difficult to overestimate the importance of this book. De Soto provides also a defense of the Austrian perspective on business cycles against every other theory, defends the 100% reserve perspective from the point of view of Roman and British law, takes on the most important objections to full reserve theory, and presents a full policy program for radical reform. It was Hülsmann’s review of the Spanish edition that inspired the translation that led to this Mises Institute edition in English. The result is astonishing: an 875-page masterpiece that utterly demolishes the case for fiat currency and central banking, and shows that these institutions have compromised economic stability and freedom, and, moreover, are intolerable in a free society.

Link here.

PARADOX AND PARANOIA IN THE WAR ON TERROR

The philosopher enters town, mean-faced, gun at the ready. He walks down Main Street and blazes away at all he sees. Corpses are soon piling up in the dust. Blowing the smoke from his barrel the great thinker walks away. Did he kill the right guys? Yes, he did. David Runciman’s virtuoso essay, The Politics of Good Intentions: History, fear and hypocrisy in the New World Order, tackles the world’s present discontents head-on. The politics of risk, the war on terror, 9/11, Afghanistan, Iraq, al-Qaeda, neoconservatism, George Bush, Tony Blair – everywhere Runciman sees hypocrisy, cant, sloppy thinking and sloppier speaking. But the anger is controlled, informed by history and philosophy, never a rant.

Did the modern world really begin with 9/11? No it did not, unless you want to believe so. What began on 9/11 was the coming of age of an excuse, an outbreak of aggression after the repressive diplomacy and enforced reasonableness of the Cold War. September 11 offered a new and simplistic world view for “a few immensely powerful, intensely paranoic states” – in truth, America. That state was described by a Bush aide as no longer one in which “solutions emerge from a judicious study of discernible reality.” Instead, it was one in which “when we act, we create our own reality … we are history’s actors and you, all of you, will be left to study what we do.”

Runciman seeks out the basis of this grotesque solipsism amid the noise of the past five years. He takes as his starting point the familiar phenomenon of a leader who rules by generating fear of the unknown, rooted in some iconic catastrophe to which such fear can be related. The “war on terror” was ideal for this purpose, a war that had no enemy and could thus never be won, a war that need never end. As in George Orwell’s Nineteen Eighty-four, such a war empowers a leader to fight any battle he chooses, and to require any sacrifice, since he can declare the existence of the State to be at risk.

The villain of Runciman’s piece is Tony Blair, Dick Cheney’s “preacher on a tank”. The central thrust is that 9/11 did not represent a new pattern in world-historical affairs since, as many neocons had been asserting, a similar threat had been around for a decade. No new intent or strategy separated the 2001 attack on the World Trade Center from the 1993 one. The only difference was in technical competence. September 11 was rather a suitably dramatic event to which the word “new” could be attached. Newness is vital to a leader who wants to persuade the public that the old certainties no longer apply and that it is vulnerable to new risks. As Ulrich Beck has pointed out, a new risk is a political elixir. It harnesses fear to privileged knowledge to require new obediences.

In plotting his way through the morass, Runciman is always putting political philosophy to practical purpose. He accepts that democracy can impede a government needing to take decisive action in time of emergency, but points out that freedom has always accepted a measure of risk in its honour. Trouble occurs when democracy is cited in aid of minimizing risk, when an electorate can be so alarmed that any curbing of freedom seems justified. So seductive is today’s preemptive paranoia that democratic institutions can seem wimpish obstacles to precaution. Runciman disagrees. Especially when hysteria is the rule of the day, democracy must be on guard. It must retain judicial oversight, time-limits on emergency laws, disclosure and vigorous parliamentary debate. These must be supplemented by “a free press protected from monopoly influence and offering as wide as possible a range of political views”. This in turn depends on there being “an inquisitive public driving the market for news”.

He takes up the cause of more recent theorists of the new world order and subjects the neoconservative world view to incisive analysis. He simply disagrees when Blair demands that we “believe that September 11 changed the world; that Bali, Beslan, Madrid and scores of other atrocities … are part of the same threat and the only path to take is to confront this terrorism, remove it root and branch.” The fact is that neither Bush nor Blair can offer “any good reasons why this view of the future should be true.” All they can do is echo Cheney’s incantation in 2004, “There never was a time when terrorism was just a nuisance; there never can be a time when terrorism is just a nuisance.” It is hard to imagine history ever being so maligned in the cause of paranoia. But this is the final paradox, that the war on terror is without limit and without restraint, and yet it is something that can somehow be “won”.

The essay resolves itself into a study in common sense. There is no war on terror. There is no enemy army and there can be no negotiation, no treaty and no peace. Terrorism is indeed a nuisance, a weapon of war, a technique of conflict as old as war itself. To demand its “rooting out” is as ridiculous as rooting out bombs, or machetes, or revenge, or poverty, or fanaticism. This obsessive chapter in post-Cold War belligerence has reduced itself to no more than waiting for Osama bin Laden to do something next. It is the most nihilistic of narratives.

Link here.
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