By Ronald Kessler
The Secret Service has been plagued by high turnover rates because of mismanagement, a NewsMax investigation has found.
According to current and former agents, the Secret Service has senseless transfer policies that drive agents to quit before retirement and add to the government's costs. This comes at a time when, because of threats from terrorists, the need for the Secret Service has never been greater.
In particular, the agents cite numerous situations where agents are denied transfers to cities where their spouses work, while other agents are forced to transfer to those same cities. Often, the agents who want to transfer have offered to pay their own moving costs. Instead, the Secret Service pays $50,000 to $100,000 each to move agents who do not want to be transferred to those cities.
Other poor management practices stand in contrast to the way the FBI does business.
"We sign up to take a bullet, but that's not the hardest part of the job," Jessica Johnson, a former Secret Service agent, told NewsMax. "It's not anything that we normally face. The risk is there. But what makes the job very difficult is the mismanagement. If the Secret Service were better managed, you'd have a lot better workforce, a lot more people who don't quit," Johnson said.
Current and former agents say the Secret Service is oblivious to the fact that since 9/11, the private sector has been offering hefty salaries to anyone with a federal law enforcement background. For those who want to keep their government pensions, opportunities have expanded as well at other federal law enforcement agencies. Secret Service and FBI agents are prized catches.
Sacrificing Quality Agents
The FBI has taken steps to retain agents, while the Secret Service has not. In contrast to the Secret Service, after an FBI agent is with the bureau three years, unless he or she chooses to go into management, the agent can stay in the same city for the rest of his or her career. An agent going into management can stay in the same city for five years.
The Secret Service, on the other hand, typically transfers agents three to four times during a 25-year career. An agent who enters management may move five to six times. The rationale is that agents need to obtain experience in different offices, but agents say experience in one office does not translate to another office.
Decades ago, the FBI had the same policy. The bureau scrapped it because the constant moves were not necessary and led many agents to leave the bureau, wasting taxpayer dollars on moving costs and the cost of training new agents to replace those who left.
Not having to transfer as often, FBI agents can better work out living arrangements with spouses. The FBI at least tries to take into account situations where a spouse must work in a particular city, sometimes addressing these as hardship cases.
A Secret Service agent for almost 10 years, Johnson quit early this year partly because of what she called poor management practices. She said the agency is mostly run by agents who are "old school" and think everyone wants to be a Secret Service agent at any cost.
"In the old days, the Secret Service was a great gig," Johnson said. "People lined up to join. They had applications on the shelves for years. People would drop everything at the drop of a hat to get a Secret Service job. It was great pay and offered stability. Well, times have changed, but their mentality hasn't. People can go out and make a lot more money in the private sector, a lot more money on their own, for much less risk. Management's attitude is almost as though we should literally be thanking them every day we wake up and have a job."
The Secret Service did not respond to NewsMax's requests for comment or for percentage statistics on agent turnover.
Resignations on the Rise
Agents say resignations before retirement have increased substantially in recent years. In all, the Secret Service has close to 3,000 agents who protect the president and other national leaders as well as visiting foreign dignitaries. The agency also investigates crimes ranging from counterfeiting to fraud involving financial institutions, computers, telecommunications, and electronic funds transfers.
Out of around 140 agents in the Los Angeles office alone, agents say that every other month an agent quits before retirement. Nationally, an agent transfers to another federal law enforcement agency two or three times a week, one agent said. That does not include agents who leave for the private sector or retire.
The Secret Service asked an analyst, then based in Washington, to study the problem of retention and the costs associated with agent turnover. She found it was an increasingly serious problem. The cost to the government of training a new agent is at least $50,000.
"The higher-ups basically dismissed her findings, saying, ‘Oh, we don't have any kind of retention problem,'" said a current agent. "They didn't want to hear it."
"Who's going to admit there's a problem?" Johnson said. "They just want to hear that everything's fine."
Internally, the Secret Service tries to hide the actual turnover rate by counting in its statistics only agents who leave the government, rather than those who accept jobs at another federal law enforcement agency, according to agents. Those who remain with the government account for the greatest portion of the turnover.
Johnson, who is now a real estate investor, described trying to raise the issue during her exit interview.
"The supervisor who was giving me the exit interview was literally saying, ‘Tell me if there are any problems we should know about,' as he was starting to escort me out the door," Johnson said. "I said, ‘Well, yes, I'm sure you hear this a lot,' and I began to lay out examples of unnecessary burdens imposed on agents."
The supervisor became defensive.
"He started going on about how the military does more, and there are civilians who sacrifice more than we do in the service," she said.
In recent years, agents say a dismissive culture and a disregard for the need to retain agents have remained constant. They say that Secret Service directors stay for two or three years, then leave without changing the culture. Mark Sullivan, the current director, was sworn in on May 31, 2006.
Johnson said she accepts that by its very nature, a Secret Service agent's job is demanding. She was assigned to protect President Clinton, who was constantly traveling all over the world. She could hardly ever plan anything in her personal life because her schedule was his schedule.
"If you're on what we call the ROTA [travel rotation] for that month, then you could be called out at any time, with very little notice, to travel anywhere — in-country, out-of-country, to support a protective mission," she said. "So if the president was going to Timbuktu, you could get one or two day's notice before you'd fly off. It's very hard to make plans during that time. Depending on how your office does it, you could get the ROTA back to back."
If a former president dies, for example, and a protectee goes to the funeral, "Your New Year's leave is canceled because you have to go stand post," she said. "And that's something we sign up for."
Johnson is single and found prospects for marriage slim while in the Secret Service.
"It was hard enough when I just had a master's degree, my own house and a career, and then add to that a gun and a badge, and I'm traveling all over the world," she said. "Oh and by the way, were you going to transfer with me? Were you going to move around the country following my career?"
The ‘Juice' Required for Change
What Johnson and others resented was that the Secret Service ignored opportunities to lessen necessary burdens that go with the job. Secret Service upper-management simply doesn't want to be bothered with taking an agent's wishes into account, they say. Nor does the agency have an open process for listing anticipated vacancies and agents' preferences for transfers. All are kept secret. If an agent has "juice" — connections to higher-ups — he or she is bumped ahead of others, agents say.
In contrast, the FBI, which has 12,500 agents, maintains online lists of requested transfers to each field office so that agents can see who is ahead of them. FBI agents say connections play no role in transfers. Because of the open lists, if the FBI did engage in such under-the-table preferential treatment, the agents would know about it.
The fact that the Secret Service's computer program for listing agent transfer preferences and bidding on promotions is an antiquated DOS-based program symbolizes how much the Secret Service cares about agents' wishes, agents say.
Johnson said that the agency's high-handed approach and preferential treatment for those who have "juice" contribute to low morale and a high turnover rate.
"One agent wanted to take leave on Christmas, and her supervisor said, ‘Nobody gets their first holiday off; you're going to work,'" Johnson said. "She had volunteers who wanted to work her assignment during Christmas. Plenty of people who wanted the overtime. Instead, she was forced to cancel her plans to see family. The volunteers were the same grade, same pay, and same or better experience; but they weren't allowed to take her trip."
About a year ago, the Secret Service imposed limits on overtime pay and then often denied agents the opportunity to use compensatory or flex time which they had earned in lieu of overtime pay. When flex time is taken, it usually must be taken within a week. If an agent has other duties already scheduled, the agent may be forced to forfeit the flex time. After seven years, an agent based in a major city might make upwards of $110,000 a year without overtime.
The most senseless management policy has to do with transfers. Essentially, according to agents, the Secret Service moves agents around like pieces on a checkers board without regard to their wishes. The exception is when an agent has "juice." Because agents rightly feel they are being treated unfairly, that situation contributes to poor morale in the Secret Service.
After two years on the Clinton detail based in Chappaqua, N.Y., Johnson wanted to transfer back to California, where she grew up.
"All of a sudden, they said they can't transfer anyone out of New York," she said. "They said they have no one to replace me. At the same time, they're sending out an e-mail that says anyone, regardless of where you are in your career track, if you would like to go to Los Angeles, New York, or San Francisco, raise your hand and you're there.
So I write the little memo and I raise my hand. I jump up and down, and they tell me, ‘Oh, well, we can't replace you. So you can't go.'"
At the same time, Johnson said, agents who are her friends in the Los Angeles office were sending her copies of e-mails they were receiving from management saying they had to leave Los Angeles to go to protective details.
"A year later when I went to my management, they said, ‘Oh well, L.A.'s full. How about the New York field office?'" she said.
When the Secret Service finally agreed to transfer her to Los Angeles after three years in New York, "I find out that we were 11 bodies short in L.A. So how did we go from being full to being 11 bodies short in four months?"
In other cases, the Secret Service disregards situations where a spouse has a job in another city. Johnson and others described one situation where an agent who was based in Los Angeles began dating a doctor in Hawaii. Eventually, they married, and the agent put in for a transfer to Hawaii, where his wife had an established medical practice.
"We have an office in Hawaii, so it's easier for him to transfer than it is for her," Johnson said. "But the management we had in L.A. at the time had no ‘juice.' He was told he couldn't be transferred to Hawaii. He quit because he said his marriage was more important." About a month later, after he moved to Hawaii, he applied to return to the Secret Service. The head of the Hawaii office, who had the requisite "juice," re-hired him.
"Here you're being told you can't transfer; and the bottom line was, it was all about who your boss is," Johnson said.
In another case, an agent in Los Angeles married a doctor whose specialty made it difficult to find a position there. Finally, she obtained a job in Denver. The agent asked for a transfer to Denver and offered to pay for the move himself, which would have saved the government about $75,000 in moving costs. The agent was denied a transfer. For the past year, the agent has been flying to Denver once or twice a month to see his wife and young daughter.
"He was willing to go to an office that had serious management issues just to be near his family and pay for it himself," Johnson said. "They still said no."
Meanwhile, the service asked for volunteers to transfer to Denver. Now several other agents are being transferred to Denver at a cost to the government upwards of $100,000 each. Some have greater seniority while others do not. Agents point out that even when another agent has more seniority, the Secret Service is losing out when agents quit because the agency refuses to transfer them to a city where their spouse has a job.
"If the opening isn't available at that moment, then they can say, ‘Oh, sorry, that office is overstaffed. Here are your only options,'" a current agent said. "Then sure enough, while you're still on orders to move somewhere else, orders come out for someone else to go to the same city."
In fact, agents are often "force transferred" — meaning they have no choice except to move or quit — when other agents actually want to go to those same cities.
"There are people who literally pass each other in the air because, let's say one person is leaving Detroit and the other person is leaving Kansas, and they're both being forced to switch," Johnson said. "They're making these people pay to move to a spot where they're literally having the other person in the other city move to replace them. I mean it's just mindless."
Another example of the Secret Service's high-handed way of doing business involves an agent who was based in Washington, D.C. and is married to a Navy lawyer. When the Navy gave her orders to transfer to San Diego, the Secret Service agreed to transfer him there. But after they purchased a home near San Diego, the Secret Service told the agent his transfer orders were being changed. Instead, he was to report to the Los Angeles field office.
The agent asked to transfer to a closer office in Santa Ana, but that request was denied. He has been commuting between San Diego and Los Angeles — a two-hour drive each way — every day.
Meanwhile, Johnson said, the Secret Service has trouble finding qualified applicants to replace those who are driven away.
"Getting a number of applicants is not a problem. Getting qualified applicants is always a problem," she said. "Because of the high standard they have, a large portion of the population wouldn't qualify to be an agent. They've done various things trying to recruit good people, but the bottom line is that their policies are driving away the good people they already have."
"If this were a private company, they couldn't survive," a current Secret Service agent says. "But it's the government, and nobody's accountable. Somebody probably gets a big fat bonus because we meet our hiring goals, but nobody loses out on a bonus because we had a high attrition rate. What we need is people from outside to shake up the Secret Service."
Ronald Kessler is chief Washington correspondent of NewsMax.com.View his previous reports and get his dispatches sent to you FREEvia e-mail. Go Here Now.
Wednesday, March 28, 2007
Bush Alone
By Robert D. Novak
Townhall.com
WASHINGTON - Two weeks earlier on Capitol Hill, there was a
groundswell of Republican demands -- public and private --
that President Bush pardon the convicted Scooter Libby.
Last week, as Alberto Gonzales came under withering
Democratic fire, there were no public GOP declarations of
support amid private predictions of the attorney general's
demise.
Republican leaders in Congress (asking not to be quoted by
name) early last week predicted Gonzales would fall because
the Justice Department botched firing eight U.S. attorneys.
By week's end, they stipulated that the president would not
sack his longtime aide and that Gonzales would leave only
on his own initiative. But there was still an ominous lack
of congressional support for the attorney general.
"Gonzales never has developed a base of support for himself
up here," a House Republican leader told me. But this is
less a Gonzales problem than a Bush problem. With nearly
two years remaining in his presidency, George W. Bush is
alone. In half a century, I have not seen a president so
isolated from his own party in Congress -- not Jimmy
Carter, not even Richard Nixon as he faced impeachment.
Republicans in Congress do not trust their president to
protect them. That alone is sufficient reason to withhold
statements of support for Gonzales, when such a gesture
could be quickly followed by his resignation under
pressure. Rep. Adam Putnam, the highly regarded young
chairman of the House Republican Conference, praised
Donald Rumsfeld last November, only to find him sacked
shortly thereafter.
But not many Republican lawmakers would speak up for
Gonzales even if they were sure Bush would stick with him.
He is the least popular Cabinet member on Capitol Hill,
even more disliked than Rumsfeld had been. The word most
often used by Republicans in describing the management of
the Justice Department under Gonzales is "incompetent."
Attorneys general in recent years have ranged from skilled
political operatives close to the president (most notably
Bobby Kennedy under John F. Kennedy) to non-political
lawyers detached from the president (such as Ed Levi under
Gerald Ford). Gonzales is surely close to Bush, but nobody
has accused him of being skilled at politics. He puzzled
and alarmed conservatives with a January public speech in
which he claimed that he would take over from the White
House the selection of future federal nominees.
The saving grace that some Republicans find in the dispute
over U.S. attorneys is that, at least temporarily, it blurs
debate over an unpopular war. But the overriding feeling in
the Republican cloakroom is that the Justice Department and
the White House could not have been more inept in dealing
with the president's unquestioned right to appoint -- and
replace -- federal prosecutors.
The I-word (for incompetence) is used by Republicans in
describing the Bush administration generally. Several of
them I talked to described a trifecta of incompetence:
the Walter Reed hospital scandal, the FBI's misuse of the
Patriot Act and the U.S. attorneys firing fiasco. "We
always have claimed that we were the party of better
management," one House leader told me. "How can we claim
that anymore?"
The reconstruction of his government after Bush's re-
election in 2004, though a year late, clearly improved
the president's team. Yet the addition of extraordinary
public servants Josh Bolten, Tony Snow and Rob Portman
has not changed the image of incompetence.
A few Republicans blame incessant attack from the new
Democratic majority in Congress for that image. Many more
say today's problems by the administration derive from
yesterday's mistakes, whose impact persists. The answer
that is not entertained by the president's most severe GOP
critics, even when not speaking for quotation, is that
this is just the governing style of George W. Bush and
never will change while he is in the Oval Office.
Regarding the Libby-Gonzales equation, unofficial word from
the White House is not reassuring. One credible source says
the president never -- not even on the way out of the Oval
Office in January 2009 -- will pardon Libby. Another
equally good source says the president never will ask
Gonzales to resign. That exactly reverses the prevailing
Republican opinion in Congress. Bush is alone.
Townhall.com
WASHINGTON - Two weeks earlier on Capitol Hill, there was a
groundswell of Republican demands -- public and private --
that President Bush pardon the convicted Scooter Libby.
Last week, as Alberto Gonzales came under withering
Democratic fire, there were no public GOP declarations of
support amid private predictions of the attorney general's
demise.
Republican leaders in Congress (asking not to be quoted by
name) early last week predicted Gonzales would fall because
the Justice Department botched firing eight U.S. attorneys.
By week's end, they stipulated that the president would not
sack his longtime aide and that Gonzales would leave only
on his own initiative. But there was still an ominous lack
of congressional support for the attorney general.
"Gonzales never has developed a base of support for himself
up here," a House Republican leader told me. But this is
less a Gonzales problem than a Bush problem. With nearly
two years remaining in his presidency, George W. Bush is
alone. In half a century, I have not seen a president so
isolated from his own party in Congress -- not Jimmy
Carter, not even Richard Nixon as he faced impeachment.
Republicans in Congress do not trust their president to
protect them. That alone is sufficient reason to withhold
statements of support for Gonzales, when such a gesture
could be quickly followed by his resignation under
pressure. Rep. Adam Putnam, the highly regarded young
chairman of the House Republican Conference, praised
Donald Rumsfeld last November, only to find him sacked
shortly thereafter.
But not many Republican lawmakers would speak up for
Gonzales even if they were sure Bush would stick with him.
He is the least popular Cabinet member on Capitol Hill,
even more disliked than Rumsfeld had been. The word most
often used by Republicans in describing the management of
the Justice Department under Gonzales is "incompetent."
Attorneys general in recent years have ranged from skilled
political operatives close to the president (most notably
Bobby Kennedy under John F. Kennedy) to non-political
lawyers detached from the president (such as Ed Levi under
Gerald Ford). Gonzales is surely close to Bush, but nobody
has accused him of being skilled at politics. He puzzled
and alarmed conservatives with a January public speech in
which he claimed that he would take over from the White
House the selection of future federal nominees.
The saving grace that some Republicans find in the dispute
over U.S. attorneys is that, at least temporarily, it blurs
debate over an unpopular war. But the overriding feeling in
the Republican cloakroom is that the Justice Department and
the White House could not have been more inept in dealing
with the president's unquestioned right to appoint -- and
replace -- federal prosecutors.
The I-word (for incompetence) is used by Republicans in
describing the Bush administration generally. Several of
them I talked to described a trifecta of incompetence:
the Walter Reed hospital scandal, the FBI's misuse of the
Patriot Act and the U.S. attorneys firing fiasco. "We
always have claimed that we were the party of better
management," one House leader told me. "How can we claim
that anymore?"
The reconstruction of his government after Bush's re-
election in 2004, though a year late, clearly improved
the president's team. Yet the addition of extraordinary
public servants Josh Bolten, Tony Snow and Rob Portman
has not changed the image of incompetence.
A few Republicans blame incessant attack from the new
Democratic majority in Congress for that image. Many more
say today's problems by the administration derive from
yesterday's mistakes, whose impact persists. The answer
that is not entertained by the president's most severe GOP
critics, even when not speaking for quotation, is that
this is just the governing style of George W. Bush and
never will change while he is in the Oval Office.
Regarding the Libby-Gonzales equation, unofficial word from
the White House is not reassuring. One credible source says
the president never -- not even on the way out of the Oval
Office in January 2009 -- will pardon Libby. Another
equally good source says the president never will ask
Gonzales to resign. That exactly reverses the prevailing
Republican opinion in Congress. Bush is alone.
Just Who Is Gouging Whom?
by Alexander Green, Investment Director, The Oxford Club
The new speaker of the House, Nancy Pelosi, calls oil company profits “obscene.”
And at first blush, many would agree. Over the past 12 months, for example, ExxonMobil has made pre-tax profits of $164 billion on sales of $369.5 billion. That’s a lot.
But are big profits bad?
Hardly. Companies exist to maximize profits. Profits are what keep workers employed. They keep companies innovating, creating new products and services. They keep the economy humming and the country strong. And they allow you and I to invest and secure our financial future.
Even the school teacher who plunks some of her retirement account in an S&P 500 Index fund benefits from Exxon’s rising share price – which is a direct result of Exxon’s rising profits.
Many will argue that there is nothing wrong with profits, per se. It’s just that Exxon is gouging us at the pump. They’re making too much.
But are they? After all, Exxon can’t dictate gasoline prices. Markets determine the price of oil. It’s supply and demand that sets the price at the pump.
Some Americans are skeptical on this point, I know. So I direct them to last year’s Supreme Court decision. The court ruled unanimously that oil companies have not been colluding to set prices.
Oil prices are high today because the economies of huge nations like China and India are developing rapidly. More oil is being demanded in the world market and there are few new sources of supply.
Hurricane Katrina destroyed a lot of oil processing capacity around the Gulf of Mexico too, so there has been less oil being processed. When less oil is supplied, gasoline prices rise.
What does the average oil company make today on the sale of a gallon of gas? Ten cents.
The federal tax on gasoline, on the other hand, is nearly twice that. Then there’s state gasoline taxes. (If you live in New York, for example, you’re paying 68 cents a gallon in taxes.)
If Exxon is gouging us at ten cents a gallon, what exactly is the federal government doing to us at 18.4 cents a gallon?
Who is gouging whom?
After all, Exxon has to compete with other oil companies both here and abroad. It has to spend billions on exploration, billions more on development, and further billions on refining and transportation.
As a result, it’s hardly making money hand over fist. Earnings at Exxon rose 9% last year but fell 4% in the fourth quarter, underscoring the challenges of rising costs and lower commodity prices.
And Exxon’s profit margins are only 10.7%. Profit margins at Microsoft, on the other hand, are 26%. Perhaps we should pass a windfall profits tax on software companies.
Because that’s what Big Oil’s opponents really want: a bigger federal gasoline tax. Why? To fund the search for alternative sources of energy.
That’s a fine sentiment. But will throwing around tens of billions of dollars in federal research grants really create alternative energy sources? If that were the case, shouldn’t Uncle Sam give grants to Dell to create more powerful computers, to Boeing to build faster aircraft, and to McDonalds to make low-fat French fries that taste good.
The federal government doesn’t need to do this, of course. These companies will continue to make higher quality products at better prices on their own. Why? Because they exist to maximize profits. (Profits, incidentally, that provide much of the tax base for the U.S. government.)
Trust me, we will have alternative energy sources eventually. Many scientists believe that near incredible advances in nanotechnology will allow us to solve all our energy needs with solar power within 20 years.
But it won’t be the federal government that solves the problem. It will be the private sector – and its relentless drive for profits.
The new speaker of the House, Nancy Pelosi, calls oil company profits “obscene.”
And at first blush, many would agree. Over the past 12 months, for example, ExxonMobil has made pre-tax profits of $164 billion on sales of $369.5 billion. That’s a lot.
But are big profits bad?
Hardly. Companies exist to maximize profits. Profits are what keep workers employed. They keep companies innovating, creating new products and services. They keep the economy humming and the country strong. And they allow you and I to invest and secure our financial future.
Even the school teacher who plunks some of her retirement account in an S&P 500 Index fund benefits from Exxon’s rising share price – which is a direct result of Exxon’s rising profits.
Many will argue that there is nothing wrong with profits, per se. It’s just that Exxon is gouging us at the pump. They’re making too much.
But are they? After all, Exxon can’t dictate gasoline prices. Markets determine the price of oil. It’s supply and demand that sets the price at the pump.
Some Americans are skeptical on this point, I know. So I direct them to last year’s Supreme Court decision. The court ruled unanimously that oil companies have not been colluding to set prices.
Oil prices are high today because the economies of huge nations like China and India are developing rapidly. More oil is being demanded in the world market and there are few new sources of supply.
Hurricane Katrina destroyed a lot of oil processing capacity around the Gulf of Mexico too, so there has been less oil being processed. When less oil is supplied, gasoline prices rise.
What does the average oil company make today on the sale of a gallon of gas? Ten cents.
The federal tax on gasoline, on the other hand, is nearly twice that. Then there’s state gasoline taxes. (If you live in New York, for example, you’re paying 68 cents a gallon in taxes.)
If Exxon is gouging us at ten cents a gallon, what exactly is the federal government doing to us at 18.4 cents a gallon?
Who is gouging whom?
After all, Exxon has to compete with other oil companies both here and abroad. It has to spend billions on exploration, billions more on development, and further billions on refining and transportation.
As a result, it’s hardly making money hand over fist. Earnings at Exxon rose 9% last year but fell 4% in the fourth quarter, underscoring the challenges of rising costs and lower commodity prices.
And Exxon’s profit margins are only 10.7%. Profit margins at Microsoft, on the other hand, are 26%. Perhaps we should pass a windfall profits tax on software companies.
Because that’s what Big Oil’s opponents really want: a bigger federal gasoline tax. Why? To fund the search for alternative sources of energy.
That’s a fine sentiment. But will throwing around tens of billions of dollars in federal research grants really create alternative energy sources? If that were the case, shouldn’t Uncle Sam give grants to Dell to create more powerful computers, to Boeing to build faster aircraft, and to McDonalds to make low-fat French fries that taste good.
The federal government doesn’t need to do this, of course. These companies will continue to make higher quality products at better prices on their own. Why? Because they exist to maximize profits. (Profits, incidentally, that provide much of the tax base for the U.S. government.)
Trust me, we will have alternative energy sources eventually. Many scientists believe that near incredible advances in nanotechnology will allow us to solve all our energy needs with solar power within 20 years.
But it won’t be the federal government that solves the problem. It will be the private sector – and its relentless drive for profits.
The Yen Carry Trade: Not All It's Cracked Up to Be
By Graham Summers
Read anything from the financial press for more than two pages and you're bound to see "carry trade" mania...
A carry trade is when you borrow money at a low level of interest, then use that money to buy securities yielding a higher rate of interest. Currently, the most commonly referenced carry trade involves the yen and the dollar. This carry trade has been popular among international investors twice before – once in the late '80s, and again in the mid '90s – but for brevity's sake, we'll address the most recent carry trade, which began in March 2001.
Having suffered an economic recession for much of the previous two decades, Japan attempted to fuel economic growth by lowering short-term interest rates almost to 0% (0.069% to be exact) in March 2001. At this rate, you could borrow $100,000 and pay $69 annually in interest.
Investors worldwide took advantage of this to borrow massive amounts of capital in yen. They then converted this capital to dollars and bought T-bills that were yielding between 4% and 5%.
It was a pretty sweet deal that got even sweeter when you leveraged your trade. Consider the following example...
Let's say back in March 2001, I had $10,000 in cash. I then borrowed $90,000 worth of yen from the Bank of Japan. After converting this money to dollars, I had $100,000 in capital, which I put into Treasury bills yielding 4%.
Over the next year, I made $4,000 in interest on my T-bills (4% of $100,000). I then sold my T-bills, converted the $90,000 I borrowed back into yen, and paid back my loan to the Bank of Japan (plus a tiny amount of interest). I kept the $4,000 for myself.
Now based on T-bill interest rates, I should have only made 4%. However, because I was using leverage (borrowed money), I actually made 40% ($4,000 on my original $10,000). So as long as the yen stays low compared to the dollar, I can make a killing.
This is precisely what some institutional investors and hedge fund managers have made a fortune doing for the past five years. They were essentially selling short the yen and going long other, higher-returning securities. This move continued to push the yen down.
However, the Bank of Japan started raising interest rates last July. Today, the short-term lending rate is 1.25%. And the yen has begun to rally. Between this and the hiccups in the market, investors have been returning funds to the Bank of Japan.
That's what triggered the news frenzy – which is way overblown.
The yen carry trade is now a buzz phrase with the talking heads. And it's become the scapegoat for any hiccup in the market. Everyday headlines ask, Will the carry trade last? What will happen to global liquidity?
It's true that the Bank of Japan has supplied the world with greater liquidity, but not nearly on the level most analysts would like you to believe.
The Japanese ministry of finance and the Bank of Japan believe that short-term, carry trade-related borrowings in the yen come to between $20 billion and $40 billion. That may sound like a ton of money... but it's not. It's about one-fifth of Wal-Mart's market cap.
Even when you add in individual Japanese investors, the total amount of money involved in the carry trade is believed to be around $170 billion. That's about one-tenth of the combined market cap of the S&P 500.
However, this $170 billion is spread out over various indexes, bonds, etc, throughout the entire world. It's just a drop in the sea of global liquidity. Consider that more than $65 trillion trades on the NYSE every day.
Make no mistake, if the yen continues to rise and the yen carry trade unravels, it will cause a shakeup in the marketplace. But don't believe the hype...
The yen carry trade has unraveled twice before, and the world didn't end. It won't this time either. And there are always going to be great investments out there for our money.
Read anything from the financial press for more than two pages and you're bound to see "carry trade" mania...
A carry trade is when you borrow money at a low level of interest, then use that money to buy securities yielding a higher rate of interest. Currently, the most commonly referenced carry trade involves the yen and the dollar. This carry trade has been popular among international investors twice before – once in the late '80s, and again in the mid '90s – but for brevity's sake, we'll address the most recent carry trade, which began in March 2001.
Having suffered an economic recession for much of the previous two decades, Japan attempted to fuel economic growth by lowering short-term interest rates almost to 0% (0.069% to be exact) in March 2001. At this rate, you could borrow $100,000 and pay $69 annually in interest.
Investors worldwide took advantage of this to borrow massive amounts of capital in yen. They then converted this capital to dollars and bought T-bills that were yielding between 4% and 5%.
It was a pretty sweet deal that got even sweeter when you leveraged your trade. Consider the following example...
Let's say back in March 2001, I had $10,000 in cash. I then borrowed $90,000 worth of yen from the Bank of Japan. After converting this money to dollars, I had $100,000 in capital, which I put into Treasury bills yielding 4%.
Over the next year, I made $4,000 in interest on my T-bills (4% of $100,000). I then sold my T-bills, converted the $90,000 I borrowed back into yen, and paid back my loan to the Bank of Japan (plus a tiny amount of interest). I kept the $4,000 for myself.
Now based on T-bill interest rates, I should have only made 4%. However, because I was using leverage (borrowed money), I actually made 40% ($4,000 on my original $10,000). So as long as the yen stays low compared to the dollar, I can make a killing.
This is precisely what some institutional investors and hedge fund managers have made a fortune doing for the past five years. They were essentially selling short the yen and going long other, higher-returning securities. This move continued to push the yen down.
However, the Bank of Japan started raising interest rates last July. Today, the short-term lending rate is 1.25%. And the yen has begun to rally. Between this and the hiccups in the market, investors have been returning funds to the Bank of Japan.
That's what triggered the news frenzy – which is way overblown.
The yen carry trade is now a buzz phrase with the talking heads. And it's become the scapegoat for any hiccup in the market. Everyday headlines ask, Will the carry trade last? What will happen to global liquidity?
It's true that the Bank of Japan has supplied the world with greater liquidity, but not nearly on the level most analysts would like you to believe.
The Japanese ministry of finance and the Bank of Japan believe that short-term, carry trade-related borrowings in the yen come to between $20 billion and $40 billion. That may sound like a ton of money... but it's not. It's about one-fifth of Wal-Mart's market cap.
Even when you add in individual Japanese investors, the total amount of money involved in the carry trade is believed to be around $170 billion. That's about one-tenth of the combined market cap of the S&P 500.
However, this $170 billion is spread out over various indexes, bonds, etc, throughout the entire world. It's just a drop in the sea of global liquidity. Consider that more than $65 trillion trades on the NYSE every day.
Make no mistake, if the yen continues to rise and the yen carry trade unravels, it will cause a shakeup in the marketplace. But don't believe the hype...
The yen carry trade has unraveled twice before, and the world didn't end. It won't this time either. And there are always going to be great investments out there for our money.
Is Flake-Gutierrez Really That Bad?
From The Center For Individual Freedom [cfif@cfiflistmanager.org] -
Arizona Republican Jeff Flake has teamed up with far-left Illinois Democrat Luis Gutierrez to introduce NEW Amnesty legislation that would give illegal aliens everything they want & with whipped cream and a cherry on top.
Of course there's really nothing new about this latest Amnesty offering other than the fact that Flake and Gutierrez are trying to "sell it" to the America people as something IT IS NOT -- a tough border enforcement bill.
Here's what Rep. Flake says about the bill:
"Our current immigration laws are at odds with reality. This bill addresses that problem by bolstering security, increasing interior enforcement, and creating a temporary worker program that's enforceable and fair."
But the only thing that is "at odds with reality" is calling the Flake-Gutierrez bill a tough border enforcement measure.
In fact, Ted Kennedy has already given his glowing stamp of approval to the Flake-Gutierrez Amnesty legislation, telling the Los Angeles Times that it's a "fair bill that strikes the right balance between protecting our security, strengthening our economy, and enacting laws that uphold our humanity."
And if glowing praise from Ted Kennedy is not enough to make alarm bells go off in your head, consider what others are saying about this latest Amnesty offering courtesy of Flake and Gutierrez.
Tom Tancredo has said:
"They keep changing the shade of lipstick, but like I've said time and time again, it's still the same old pig."
And here's what Columnist P.J. Byrnes had to say:
"This bill, if passed, would greatly reduce illegal immigration - simply by making all of it legal. In the same way, you could eliminate the crime of murder by saying it's no longer a crime. No more murders. Just a lot more dead people. No more illegal immigrants. Just 50 million more Mexicans, Guatemalans, Salvadorans, and Middle Easterners. Flake, who calls himself a 'conservative Republican,' should know better. He DOES know better. That's what makes his co-sponsorship of this bill so sickening."
According to Tom Bevan of Real Clear Politics:
"If you remember, back in January Republican Rep. Jeff Flake got booted off the House Judiciary Committee. At the time, Flake said the Republican leadership told him it was payback for his 'bad behavior' with respect to immigration reform. 'They know a comprehensive immigration package is coming with my name on it,' Flake told the Arizona Republic."
"Yesterday Flake made good on that promise, introducing a comprehensive immigration reform bill co-sponsored by Illinois Democrat Luis Gutierrez. They've given it a rather corny name, the STRIVE ACT of 2007 (Security Through Regularized Immigration and a Vibrant Economy)"
The Flake-Gutierrez Amnesty bill is so dangerous that the Minutemen flatly stated in an e-mail to their members that:
"Congress is in the coyote business."
You can be the judge of that yourself.
The Flake-Gutierrez bill, if passed, would do the following:
Every illegal alien who offers some kind of evidence that he or she has been living in the U.S. since June 1, 2006, would be eligible to start down the Yellow Brick Road toward U.S. citizenship.
In order to become citizens, illegal aliens would be required to pay a fine of $2,000 - a small price for violating our laws.
Flake-Gutierrez would require illegal aliens to pass a superficial "criminal background check." Translation: If your fingerprints are not on file with the FBI, then you've basically got it made.
But, as if the preceding weren't enough, Flake-Gutierrez would create a "worker importation program" that would allow up to another 400,000 "guest workers" to skip across the border, and ALL OF THEM WOULD LIKEWISE BE PERMITTED TO STAY.
And that's not all: Illegal aliens who aren't covered under the general amnesty could qualify for "the AgJOBS amnesty" -- simply by saying they had worked in agriculture in the U.S.
Oh, yes, the Flake-Gutierrez bill also includes amnesty for anyone who received a U.S. taxpayer-funded high school diploma or GED.
Think about it! Are there 12 people in the whole world who couldn't gain American citizenship under Flake-Gutierrez?
We've STOPPED Amnesty so many times... we can do it again!
Use the hyperlink below to send your urgent and personalized 57 Blast Fax messages to President George W. Bush and the leadership of the U.S. House of Representatives and U.S. Senate.
Tell them that the American people have defeated Amnesty before and that you refuse to be deceived with the latest Flake-Gutierrez attempt to reward 12-20 million illegal aliens with a path to citizenship and other benefits.
Demand one more time that they stop this idiotic talk of "compromise" and "comprehensive solutions." Tell them that the American people NEVER asked for "compromise" or "comprehensive solutions." Tell them the American people only want secure borders -- PERIOD!
And that means NO AMNESTY AND NO PATH TO CITIZENSHIP TO THOSE WHO HAVE BROKEN OUR LAWS!
http://www.cfiflistmanager.org/amnestyxxix.html
Arizona Republican Jeff Flake has teamed up with far-left Illinois Democrat Luis Gutierrez to introduce NEW Amnesty legislation that would give illegal aliens everything they want & with whipped cream and a cherry on top.
Of course there's really nothing new about this latest Amnesty offering other than the fact that Flake and Gutierrez are trying to "sell it" to the America people as something IT IS NOT -- a tough border enforcement bill.
Here's what Rep. Flake says about the bill:
"Our current immigration laws are at odds with reality. This bill addresses that problem by bolstering security, increasing interior enforcement, and creating a temporary worker program that's enforceable and fair."
But the only thing that is "at odds with reality" is calling the Flake-Gutierrez bill a tough border enforcement measure.
In fact, Ted Kennedy has already given his glowing stamp of approval to the Flake-Gutierrez Amnesty legislation, telling the Los Angeles Times that it's a "fair bill that strikes the right balance between protecting our security, strengthening our economy, and enacting laws that uphold our humanity."
And if glowing praise from Ted Kennedy is not enough to make alarm bells go off in your head, consider what others are saying about this latest Amnesty offering courtesy of Flake and Gutierrez.
Tom Tancredo has said:
"They keep changing the shade of lipstick, but like I've said time and time again, it's still the same old pig."
And here's what Columnist P.J. Byrnes had to say:
"This bill, if passed, would greatly reduce illegal immigration - simply by making all of it legal. In the same way, you could eliminate the crime of murder by saying it's no longer a crime. No more murders. Just a lot more dead people. No more illegal immigrants. Just 50 million more Mexicans, Guatemalans, Salvadorans, and Middle Easterners. Flake, who calls himself a 'conservative Republican,' should know better. He DOES know better. That's what makes his co-sponsorship of this bill so sickening."
According to Tom Bevan of Real Clear Politics:
"If you remember, back in January Republican Rep. Jeff Flake got booted off the House Judiciary Committee. At the time, Flake said the Republican leadership told him it was payback for his 'bad behavior' with respect to immigration reform. 'They know a comprehensive immigration package is coming with my name on it,' Flake told the Arizona Republic."
"Yesterday Flake made good on that promise, introducing a comprehensive immigration reform bill co-sponsored by Illinois Democrat Luis Gutierrez. They've given it a rather corny name, the STRIVE ACT of 2007 (Security Through Regularized Immigration and a Vibrant Economy)"
The Flake-Gutierrez Amnesty bill is so dangerous that the Minutemen flatly stated in an e-mail to their members that:
"Congress is in the coyote business."
You can be the judge of that yourself.
The Flake-Gutierrez bill, if passed, would do the following:
Every illegal alien who offers some kind of evidence that he or she has been living in the U.S. since June 1, 2006, would be eligible to start down the Yellow Brick Road toward U.S. citizenship.
In order to become citizens, illegal aliens would be required to pay a fine of $2,000 - a small price for violating our laws.
Flake-Gutierrez would require illegal aliens to pass a superficial "criminal background check." Translation: If your fingerprints are not on file with the FBI, then you've basically got it made.
But, as if the preceding weren't enough, Flake-Gutierrez would create a "worker importation program" that would allow up to another 400,000 "guest workers" to skip across the border, and ALL OF THEM WOULD LIKEWISE BE PERMITTED TO STAY.
And that's not all: Illegal aliens who aren't covered under the general amnesty could qualify for "the AgJOBS amnesty" -- simply by saying they had worked in agriculture in the U.S.
Oh, yes, the Flake-Gutierrez bill also includes amnesty for anyone who received a U.S. taxpayer-funded high school diploma or GED.
Think about it! Are there 12 people in the whole world who couldn't gain American citizenship under Flake-Gutierrez?
We've STOPPED Amnesty so many times... we can do it again!
Use the hyperlink below to send your urgent and personalized 57 Blast Fax messages to President George W. Bush and the leadership of the U.S. House of Representatives and U.S. Senate.
Tell them that the American people have defeated Amnesty before and that you refuse to be deceived with the latest Flake-Gutierrez attempt to reward 12-20 million illegal aliens with a path to citizenship and other benefits.
Demand one more time that they stop this idiotic talk of "compromise" and "comprehensive solutions." Tell them that the American people NEVER asked for "compromise" or "comprehensive solutions." Tell them the American people only want secure borders -- PERIOD!
And that means NO AMNESTY AND NO PATH TO CITIZENSHIP TO THOSE WHO HAVE BROKEN OUR LAWS!
http://www.cfiflistmanager.org/amnestyxxix.html
Thursday, March 22, 2007
The Hypocrit's Oath
I have long believed that the idea of man-made Global Warming is based on Junk Science and is nothing more than the latest chicken-little outcry by the left in their attempt to gain more power over us, squash individual freedoms and totally shut down American ingenuity that has solved more problems in the last 236 than any kingdom or any government has ever accomplished in the history of the world. It is now becoming more apparent that this is exactly what is going on.
In frequently testy exchanges Wednesday, former Vice President Al Gore bobbed and weaved under intense questioning from Republican senators, filibustering in an effort to avoid direct answers to probing questions, and at one point refusing to pledge he'd keep his own electricity bills in the same range as those of ordinary Americans.
One of the most contentious exchanges came when Inhofe challenged Gore to take a "Personal Energy Ethics Pledge" to consume no more energy than the average American household. Gore, who has been roundly criticized for running up astronomical electric bills at his Tennessee mansion with an electricity usage reportedly 20 times higher than the average American household, refused to take the pledge.
"There are hundreds of thousands of people who adore you and would follow your example by reducing their energy usage if you did," Inhofe said. "Don't give us the run-around on carbon offsets or the gimmicks the wealthy do," Senator Inhofe told Gore. "Are you willing to make a commitment here today by taking this pledge to consume no more energy for use in your residence than the average American household by one year from today?"
Senator Inhofe then asked Gore to take the "Personal Energy Ethics Pledge which reads: "As a believer:
that human-caused global warming is a moral, ethical, and spiritual issue affecting our survival;
that home energy use is a key component of overall energy use;
that reducing my fossil fuel-based home energy usage will lead to lower greenhouse gas emissions; and
that leaders on moral issues should lead by example; I pledge to consume no more energy for use in my residence than the average American household by March 21, 2008."
Again, Gore declined to take that pledge.
Here's more hypocracy:
Whose Ox Is Gored? The media discover the former vice president's environmental exaggerations and hypocrisy. Monday, March 19, 2007 12:01 a.m. EDT
The media are finally catching up with Al Gore. Criticism of his anti-global-warming franchise and his personal environmental record has gone beyond ankle-biting bloggers. It's now coming from the New York Times and the Nashville Tennessean, his hometown paper that put his birth, as a senator's son, on its front page back in 1948, and where a young Al Gore Jr. worked for five years as a journalist.
Last Tuesday, the Times reported that several eminent scientists "argue that some of Mr. Gore's central points [on global warming] are exaggerated and erroneous." The Tenessean reported yesterday that Mr. Gore received $570,000 in royalties from the owners of zinc mines who held mineral leases on his farm. The mines, which closed in 2003 but are scheduled to reopen under a new operator later this year, "emitted thousands of pounds of toxic substances and several times, the water discharged from the mines into nearby rivers had levels of toxins above what was legal."
All of this comes in the wake of the enormous publicity Mr. Gore received after his documentary "An Inconvenient Truth" won an Oscar. The film features Mr. Gore reprising his famous sighing and lamenting how the average American's energy use is greedily off the charts. At the film's end viewers are asked, "Are you ready to change the way you live?"
The Nashville-based Tennessee Center for Policy Research was skeptical that Mr. Gore had been "walking the walk" on the environment. It obtained public records showing that for years Mr. Gore has burned through more electricity at his Nashville home each month than the average American family uses in a year--and his consumption was increasing. The heated Gore pool house alone ran up more than $500 in natural-gas bills every month.
Mr. Gore's office responded by claiming that the Gores "purchase offsets for their carbon emissions to bring their carbon footprint down to zero." But CNSNews.com reports that Mr. Gore doesn't purchase carbon offsets with his own resources, and that they are meaningless in terms of global warming.
The offset purchases are actually made for him by Generation Investment Management, a London-based investment firm that Mr. Gore co-founded, and which provides carbon offsets as a fringe benefit to all 23 of its employees, ensuring that they require no real sacrifice on the part of Mr. Gore or his family. Indeed, their impact is also highly limited. The Carbon Neutral Co.--one of the two vendors that sell offsets to Mr. Gore's company, says that offset purchases "will be unable to reduce greenhouse gas emissions . . . in the short term."
The New York Times last week interviewed many scientists who say they are alarmed "at what they call [Mr. Gore's] alarmism on global warming." In a front-page piece in its science section, the Times headline read "From a Rapt Audience, a Call to Cool the Hype."
The Times quoted Don Easterbrook, an emeritus professor of geology at Western Washington University, as telling hundreds of experts at the annual meeting of the Geological Society of America that "I don't want to pick on Al Gore. But there are a lot of inaccuracies in the statements we are seeing, and we have to temper that with real data." Mr. Easterbrook made clear he has never been paid by any energy corporations and isn't a Republican.
Even James Hansen, a scientist who began issuing warning cries about global warming in the 1980s and is a top adviser to Mr. Gore, concedes that his work may hold "imperfections" and "technical flaws." Other flaws are more serious, such as Mr. Gore's depiction of sea level rises of up to 20 feet, which would cause Florida and New York City to sink below the surface.
Sober scientists privately say such claims are exaggerated. They point to the Intergovernmental Panel on Climate Change, a United Nations body that released its fourth report on global warming last month. While it found humans were the main cause of recent global warming, the report also indicated it was a very slow-moving process. On sea levels, the U.N. panel reported its s best high-end estimate of the rise in sea levels by 2100 was three feet. The new high-end best estimate is less than half the previous prediction, which was still far below Mr. Gore's 20 feet. Similarly, the new report shows that the panel's 2001 report overestimated the human influence on climate change since the Industrial Revolution by at least one-third.
In an email message to the Times, Mr. Gore defended his work as fundamentally accurate. But it's increasingly clear that far from the "consensus" on global warming we are told exists, scientists are having a broad and rich debate on many aspects of it. Nearly two decades after Mr. Gore first claimed that "we face an ecological crisis without any precedent in historic times," we don't know if that is really true.
Then there is the Gore zinc mine. Mr. Gore has personally earned $570,000 in zinc royalties from a mine his father bought in 1973 from Armand Hammer, the business executive famous for his close friendship with the Soviet Union and for pleading guilty to making illegal campaign contributions during Watergate. On the same day Al Gore Sr. bought the 88-acre parcel from Hammer for $160,000, he sold the land and subsurface mining rights to his then 25-year-old son for $140,000. The mineral rights were then leased back to Hammer's Occidental Petroleum and the royalty payments put in the names of Al Gore Jr. and his wife, Tipper.
Gore spokeswoman Kalee Kreider claims the terms of the 30-year Occidental lease agreement gave the Gores "no legal recourse" to get out of it. She said the Gores never thought about selling the land and would not comment on whether they ever tried to void the lease. "There is a certain zone of privacy once people go into private life," Ms. Kreidler said. She said critics of the arrangement should realize it should be viewed in a "1973 context, not a 2007 context. . . . There was a different environmental sensibility about all sorts of things."
But what about a 1992 context? That is the year Mr. Gore published "Earth in the Balance," in which he wrote: "The lakes and rivers sustain us; they flow through the veins of the earth and into our own. But we must take care to let them flow back out as pure as they came, not poison and waste them without thought for the future." Mr. Gore wrote that at a time when he would be collecting zinc royalties for another 11 years.
The mines had a generally good environmental record, but they wouldn't pass muster either with the standard Mr. Gore set in "Earth in the Balance" or with most of his environmentalist friends. In May 2000 the Tennessee Department of Environment and Conservation issued a "Notice of Violation" notifying the Pasminco mine its zinc levels in a nearby river exceeded standards established by the state and the federal Environmental Protection Agency. In 1996 the mine twice failed biomonitoring tests designed to protect water quality in the river for fish and wildlife. "The discharge of industrial wastewater from Outfall #001 [the Caney Fork effluent] contains toxic metals (copper and zinc)," the analysis stated. "The combined effect of these pollutants may be detrimental to fish and aquatic life."
The Gore mines were no small operations. In 2002, the year before they shut down, they ranked 22nd among all metal-mining operations in the U.S., with total toxic releases of 4.1 million pounds. A new mine operator, Strategic Resource Acquisition, is planning to reopen the mines later this year. The Tennessean reports that just last week, Mr. Gore wrote SRA asking it to work with a national environmental group as it makes its plans.
He noted that under the previous operator, the mines had, according to the environmental website Scorecard, "pollution releases from the mine in 2002 [that] placed it among the 'dirtiest/worst facilities' in the U.S." Mr. Gore requested that SRA "engage with us in a process to ensure that the mine becomes a global example of environmental best practices." The Tennessean dryly notes that Mr. Gore wrote the letter the week after the paper posed a series of questions to him about his involvement with the zinc mines.
Columnist Steven Milloy recalls talking with Mr. Gore in 2006 about the 1997 Kyoto Protocol he helped negotiate as vice president. "Did we think Kyoto would [reduce global warming] when we signed it? . . . Hell no!" said Mr. Gore, according to Mr. Milloy. The former vice president then explained that the real purpose of Kyoto was to demonstrate that international support could be mustered for action on environmental issues.
Mr. Gore clearly believes that the world hasn't acted with enough vigor in the decade since Kyoto, which may explain his growing use of the global-warming hype that concerns many mainstream scientists.
Mr. Gore has called the campaign to combat global warming a "moral imperative." But Mr. Gore faces another imperative: to square his sales pitches with the facts and his personal lifestyle to more align with what he advocates that others practice. "Are you ready to change the way you live?" asks Mr. Gore's film. It's time people ask Mr. Gore "Are you ready to change the way you live, as well as the way you lecture the rest of us?"
In frequently testy exchanges Wednesday, former Vice President Al Gore bobbed and weaved under intense questioning from Republican senators, filibustering in an effort to avoid direct answers to probing questions, and at one point refusing to pledge he'd keep his own electricity bills in the same range as those of ordinary Americans.
One of the most contentious exchanges came when Inhofe challenged Gore to take a "Personal Energy Ethics Pledge" to consume no more energy than the average American household. Gore, who has been roundly criticized for running up astronomical electric bills at his Tennessee mansion with an electricity usage reportedly 20 times higher than the average American household, refused to take the pledge.
"There are hundreds of thousands of people who adore you and would follow your example by reducing their energy usage if you did," Inhofe said. "Don't give us the run-around on carbon offsets or the gimmicks the wealthy do," Senator Inhofe told Gore. "Are you willing to make a commitment here today by taking this pledge to consume no more energy for use in your residence than the average American household by one year from today?"
Senator Inhofe then asked Gore to take the "Personal Energy Ethics Pledge which reads: "As a believer:
that human-caused global warming is a moral, ethical, and spiritual issue affecting our survival;
that home energy use is a key component of overall energy use;
that reducing my fossil fuel-based home energy usage will lead to lower greenhouse gas emissions; and
that leaders on moral issues should lead by example; I pledge to consume no more energy for use in my residence than the average American household by March 21, 2008."
Again, Gore declined to take that pledge.
Here's more hypocracy:
Whose Ox Is Gored? The media discover the former vice president's environmental exaggerations and hypocrisy. Monday, March 19, 2007 12:01 a.m. EDT
The media are finally catching up with Al Gore. Criticism of his anti-global-warming franchise and his personal environmental record has gone beyond ankle-biting bloggers. It's now coming from the New York Times and the Nashville Tennessean, his hometown paper that put his birth, as a senator's son, on its front page back in 1948, and where a young Al Gore Jr. worked for five years as a journalist.
Last Tuesday, the Times reported that several eminent scientists "argue that some of Mr. Gore's central points [on global warming] are exaggerated and erroneous." The Tenessean reported yesterday that Mr. Gore received $570,000 in royalties from the owners of zinc mines who held mineral leases on his farm. The mines, which closed in 2003 but are scheduled to reopen under a new operator later this year, "emitted thousands of pounds of toxic substances and several times, the water discharged from the mines into nearby rivers had levels of toxins above what was legal."
All of this comes in the wake of the enormous publicity Mr. Gore received after his documentary "An Inconvenient Truth" won an Oscar. The film features Mr. Gore reprising his famous sighing and lamenting how the average American's energy use is greedily off the charts. At the film's end viewers are asked, "Are you ready to change the way you live?"
The Nashville-based Tennessee Center for Policy Research was skeptical that Mr. Gore had been "walking the walk" on the environment. It obtained public records showing that for years Mr. Gore has burned through more electricity at his Nashville home each month than the average American family uses in a year--and his consumption was increasing. The heated Gore pool house alone ran up more than $500 in natural-gas bills every month.
Mr. Gore's office responded by claiming that the Gores "purchase offsets for their carbon emissions to bring their carbon footprint down to zero." But CNSNews.com reports that Mr. Gore doesn't purchase carbon offsets with his own resources, and that they are meaningless in terms of global warming.
The offset purchases are actually made for him by Generation Investment Management, a London-based investment firm that Mr. Gore co-founded, and which provides carbon offsets as a fringe benefit to all 23 of its employees, ensuring that they require no real sacrifice on the part of Mr. Gore or his family. Indeed, their impact is also highly limited. The Carbon Neutral Co.--one of the two vendors that sell offsets to Mr. Gore's company, says that offset purchases "will be unable to reduce greenhouse gas emissions . . . in the short term."
The New York Times last week interviewed many scientists who say they are alarmed "at what they call [Mr. Gore's] alarmism on global warming." In a front-page piece in its science section, the Times headline read "From a Rapt Audience, a Call to Cool the Hype."
The Times quoted Don Easterbrook, an emeritus professor of geology at Western Washington University, as telling hundreds of experts at the annual meeting of the Geological Society of America that "I don't want to pick on Al Gore. But there are a lot of inaccuracies in the statements we are seeing, and we have to temper that with real data." Mr. Easterbrook made clear he has never been paid by any energy corporations and isn't a Republican.
Even James Hansen, a scientist who began issuing warning cries about global warming in the 1980s and is a top adviser to Mr. Gore, concedes that his work may hold "imperfections" and "technical flaws." Other flaws are more serious, such as Mr. Gore's depiction of sea level rises of up to 20 feet, which would cause Florida and New York City to sink below the surface.
Sober scientists privately say such claims are exaggerated. They point to the Intergovernmental Panel on Climate Change, a United Nations body that released its fourth report on global warming last month. While it found humans were the main cause of recent global warming, the report also indicated it was a very slow-moving process. On sea levels, the U.N. panel reported its s best high-end estimate of the rise in sea levels by 2100 was three feet. The new high-end best estimate is less than half the previous prediction, which was still far below Mr. Gore's 20 feet. Similarly, the new report shows that the panel's 2001 report overestimated the human influence on climate change since the Industrial Revolution by at least one-third.
In an email message to the Times, Mr. Gore defended his work as fundamentally accurate. But it's increasingly clear that far from the "consensus" on global warming we are told exists, scientists are having a broad and rich debate on many aspects of it. Nearly two decades after Mr. Gore first claimed that "we face an ecological crisis without any precedent in historic times," we don't know if that is really true.
Then there is the Gore zinc mine. Mr. Gore has personally earned $570,000 in zinc royalties from a mine his father bought in 1973 from Armand Hammer, the business executive famous for his close friendship with the Soviet Union and for pleading guilty to making illegal campaign contributions during Watergate. On the same day Al Gore Sr. bought the 88-acre parcel from Hammer for $160,000, he sold the land and subsurface mining rights to his then 25-year-old son for $140,000. The mineral rights were then leased back to Hammer's Occidental Petroleum and the royalty payments put in the names of Al Gore Jr. and his wife, Tipper.
Gore spokeswoman Kalee Kreider claims the terms of the 30-year Occidental lease agreement gave the Gores "no legal recourse" to get out of it. She said the Gores never thought about selling the land and would not comment on whether they ever tried to void the lease. "There is a certain zone of privacy once people go into private life," Ms. Kreidler said. She said critics of the arrangement should realize it should be viewed in a "1973 context, not a 2007 context. . . . There was a different environmental sensibility about all sorts of things."
But what about a 1992 context? That is the year Mr. Gore published "Earth in the Balance," in which he wrote: "The lakes and rivers sustain us; they flow through the veins of the earth and into our own. But we must take care to let them flow back out as pure as they came, not poison and waste them without thought for the future." Mr. Gore wrote that at a time when he would be collecting zinc royalties for another 11 years.
The mines had a generally good environmental record, but they wouldn't pass muster either with the standard Mr. Gore set in "Earth in the Balance" or with most of his environmentalist friends. In May 2000 the Tennessee Department of Environment and Conservation issued a "Notice of Violation" notifying the Pasminco mine its zinc levels in a nearby river exceeded standards established by the state and the federal Environmental Protection Agency. In 1996 the mine twice failed biomonitoring tests designed to protect water quality in the river for fish and wildlife. "The discharge of industrial wastewater from Outfall #001 [the Caney Fork effluent] contains toxic metals (copper and zinc)," the analysis stated. "The combined effect of these pollutants may be detrimental to fish and aquatic life."
The Gore mines were no small operations. In 2002, the year before they shut down, they ranked 22nd among all metal-mining operations in the U.S., with total toxic releases of 4.1 million pounds. A new mine operator, Strategic Resource Acquisition, is planning to reopen the mines later this year. The Tennessean reports that just last week, Mr. Gore wrote SRA asking it to work with a national environmental group as it makes its plans.
He noted that under the previous operator, the mines had, according to the environmental website Scorecard, "pollution releases from the mine in 2002 [that] placed it among the 'dirtiest/worst facilities' in the U.S." Mr. Gore requested that SRA "engage with us in a process to ensure that the mine becomes a global example of environmental best practices." The Tennessean dryly notes that Mr. Gore wrote the letter the week after the paper posed a series of questions to him about his involvement with the zinc mines.
Columnist Steven Milloy recalls talking with Mr. Gore in 2006 about the 1997 Kyoto Protocol he helped negotiate as vice president. "Did we think Kyoto would [reduce global warming] when we signed it? . . . Hell no!" said Mr. Gore, according to Mr. Milloy. The former vice president then explained that the real purpose of Kyoto was to demonstrate that international support could be mustered for action on environmental issues.
Mr. Gore clearly believes that the world hasn't acted with enough vigor in the decade since Kyoto, which may explain his growing use of the global-warming hype that concerns many mainstream scientists.
Mr. Gore has called the campaign to combat global warming a "moral imperative." But Mr. Gore faces another imperative: to square his sales pitches with the facts and his personal lifestyle to more align with what he advocates that others practice. "Are you ready to change the way you live?" asks Mr. Gore's film. It's time people ask Mr. Gore "Are you ready to change the way you live, as well as the way you lecture the rest of us?"
Thursday, March 15, 2007
More Political Meddling at our Expense
Unmentioned in the furor over global warming and declining oil production in the United States: Tariffs that prevent importing ethanol. Sen. Chuck Grassley (R-Iowa) is even working on a new tariff that would block ethanol imports from Trinidad (currently exempt) because entrepreneurs are building sugar-based ethanol refineries there.
Even though it's far more energy efficient (and thus cheaper) to make ethanol from sugar instead of corn, our lawmakers want us to have less access to cheap, imported, sugar-based ethanol. Why? Because voters in Iowa grow corn for a living.
That's democracy in action. That's your tax dollars at work.
Even though it's far more energy efficient (and thus cheaper) to make ethanol from sugar instead of corn, our lawmakers want us to have less access to cheap, imported, sugar-based ethanol. Why? Because voters in Iowa grow corn for a living.
That's democracy in action. That's your tax dollars at work.
Wednesday, March 14, 2007
Cold Chills Global Warming Expedition
"Here are some links that support my skepticism of the global warming hype... This is an op-ed piece in the WSJ by Prof. Lindzen of MIT, the eminent climatologist and original global-warming skeptic. Prof. Lindzen's home page... has links to all his research and policy papers... [Here is a] point-by-point rebuttal of Al Gore's An Inconvenient Truth. It's detailed and technical with many cited references to scientific articles. Hope this helps.
Now, From Newsmax:
An expedition designed to show how global warming is heating the Arctic had to be called off after one of the explorers got frostbite, thanks to incredibly frigid temperatures that got as low as 100 degrees below zero.
Explorers Ann Bancroft and Liv Arnesen planned to make a 530-mile journey on foot across the Arctic Ocean, but they had to call off the trek after Arnesen suffered frostbite in three of her toes, and extreme cold temperatures drained the batteries in some of their electronic equipment.
According to The Associated Press, they had planned to call in regular updates to school groups by satellite phone and had planned online posts with photographic evidence showing the alleged effects of global warming on the Arctic regions. On their Web site www.bancroftarneson.com they claim that "Arctic climate is now warming rapidly" and added that "much larger changes are projected."
The cold truth, however, got in the way - the climate in the allegedly warming Arctic area turned out to be bitterly cold according to spokeswoman Ann Atwood, who helped organize the expedition. She told the AP that the two measured the temperature inside their tent at 58 degrees below zero one night, while outside temperatures were exceeding an astounding 100 below zero at times.
"My first reaction when they called to say there were calling it off was that they just sounded really, really cold," Atwood said. She added that Bancroft and Arnesen were applying hot water bottles to Arnesen's foot every night, but had to wake up periodically because the bottles froze.
Atwood admitted there was some irony that a trip to call attention to global warming had to be called off in part by extreme cold temperatures.
"They were experiencing temperatures that weren't expected with global warming," Atwood said. "But one of the things we see with global warming is unpredictability."
Now, From Newsmax:
An expedition designed to show how global warming is heating the Arctic had to be called off after one of the explorers got frostbite, thanks to incredibly frigid temperatures that got as low as 100 degrees below zero.
Explorers Ann Bancroft and Liv Arnesen planned to make a 530-mile journey on foot across the Arctic Ocean, but they had to call off the trek after Arnesen suffered frostbite in three of her toes, and extreme cold temperatures drained the batteries in some of their electronic equipment.
According to The Associated Press, they had planned to call in regular updates to school groups by satellite phone and had planned online posts with photographic evidence showing the alleged effects of global warming on the Arctic regions. On their Web site www.bancroftarneson.com they claim that "Arctic climate is now warming rapidly" and added that "much larger changes are projected."
The cold truth, however, got in the way - the climate in the allegedly warming Arctic area turned out to be bitterly cold according to spokeswoman Ann Atwood, who helped organize the expedition. She told the AP that the two measured the temperature inside their tent at 58 degrees below zero one night, while outside temperatures were exceeding an astounding 100 below zero at times.
"My first reaction when they called to say there were calling it off was that they just sounded really, really cold," Atwood said. She added that Bancroft and Arnesen were applying hot water bottles to Arnesen's foot every night, but had to wake up periodically because the bottles froze.
Atwood admitted there was some irony that a trip to call attention to global warming had to be called off in part by extreme cold temperatures.
"They were experiencing temperatures that weren't expected with global warming," Atwood said. "But one of the things we see with global warming is unpredictability."
The Real Reason Gas Prices are on the Rise
Richard Young, EditorIntelligence Report
Gasoline prices have gone up an average of 20 cents per gallon nationwide in the past two weeks. Okay, I guess that is supposed to be surprising considering the easing of prices at the pump over the last several months. But it doesn’t surprise me in the least.
You’ve probably heard it said that the world is running out of oil and that’s why it’s costing more. That’s just balderdash!
The world is swimming in oil and reserves are expanding. But still, prices are up from about $20 a barrel on 9/11 to around $60 a barrel today. Why? Because oil has become the ultimate weapon of Havenot revenge.
You see, there was a fundamental shift that occurred on 9/11—and it signaled the start of World War III. Since that day, we have lived and invested in a completely new environment. With a new set of rules. And a stark new reality. It’s the Haves versus the Havenots.
And oil is the dirty bomb of this new conflict.
Conventional wisdom sees oil—and commodities in general—as a simple see-saw of supply and demand. Tighten supply and prices rise to a point where demand slackens and prices drop and equilibrium is restored.
Any time a fundamental shift occurs, the biggest money is made by the earliest movers. And the biggest money lost is by those who stubbornly ignore the shift.
The appearance of the VW beetle in the early 1960s was a warning that Detroit ignored. Indeed, their ’60s models were bigger and bigger—even as their sales got smaller and smaller.
Look around. Fast food, the PC, the cell phone, next-day delivery of a new mattress, suburbia, low-commission stock trading—big or small, fundamental shifts create fortunes for those smart enough to get in early.
And they kill those who ignore or deny change.
The fundamental shift that occurred on 9/11 signaled the start of World War III.
Since that day, we have lived and invested in a completely new environment. With a new set of rules. And a stark new reality. It’s the Haves versus the Havenots.
Oil is the dirty bomb of this new conflict.
You’ve heard it said that the world is running out of oil and that’s why it’s costing more. This is balderdash.
What You Haven’t Been Told
The world is swimming in oil and reserves are expanding. The Saudis are bringing an extra two million barrels a day online next year and refining capacity is more than ample. Usage is down—people are cutting back.
But still, prices are up from about $20 a barrel on 9/11 to around $60 a barrel today. So: why? Because oil has become the ultimate weapon of Havenot revenge.
If you want to see this dirty bomb used at its cruelest, consider what “Father Joseph” Putin did in February 2004. He simply cut off the gas pipelines to Belarus. It was exactly what it appeared to be—an act of terrorism—a guerrilla maneuver in the greater World War III action.
The Gates of Hell—Not Supply and Demand
Conventional wisdom sees oil—and commodities in general—as a simple see-saw of supply and demand. Tighten supply and prices rise to a point where demand slackens and prices drop and equilibrium is restored.
Nice concept. But let’s look at reality.
Saddam Hussein’s dream of domination over the entire Middle East was based on taking control of nearly 40% of the world’s energy supplies. As mad as his plot was, the use of oil as blackmail now extends from Putin in Russia to Chavez in Venezuela, Morales in Bolivia, tribal chieftains in Nigeria and Ayatollah Khamenei in Iran.
In short, the rational era of supply and demand vanished on 9/11. The new, insanely vengeful era we now live in uses oil as the weapon of first resort.
Oil Stocks: A Slow Swim across a Shark Tank
As investors, then, we need to be very careful about using oil in our program to make a million dollars. We must not make the mistake of buying it “because we’re running out” or “because it’s going up.”
We’re not running out any time soon—and it isn’t even going up, not in a straight line, anyway. Oil’s price, as we’ve seen, is almost purely a reflection of how it is being used as a weapon. After all, Saudi oil costs just $3 a barrel. Call the other $50 or so the fear premium.
Safe. Fast. In That Order
For our purposes, this makes overseas oil exploration companies a very high risk. It also makes global and foreign oil stocks in general speculative.
No thanks. Here at Young’s Intelligence Report we’ve played oil the safe way. So let’s stay home and make 20% and a 6.5% annual yield in a U.S. pipeline company. Let’s stay home and ALSO make 247% in a Canadian tar sand stock. That’s what we’ve been doing. It’s time you did likewise.
Join Canada’s Oil Rush
Canada’s oil sands hold 175 billion barrels of oil—a treasure trove that rivals Saudi Arabia. The fact that the region is friendly to U.S. interests makes it even more valuable.
It costs about $20 a barrel to boil these tar sands down to sweet crude. The math, when oil is trading above $60, is compelling.
Gasoline prices have gone up an average of 20 cents per gallon nationwide in the past two weeks. Okay, I guess that is supposed to be surprising considering the easing of prices at the pump over the last several months. But it doesn’t surprise me in the least.
You’ve probably heard it said that the world is running out of oil and that’s why it’s costing more. That’s just balderdash!
The world is swimming in oil and reserves are expanding. But still, prices are up from about $20 a barrel on 9/11 to around $60 a barrel today. Why? Because oil has become the ultimate weapon of Havenot revenge.
You see, there was a fundamental shift that occurred on 9/11—and it signaled the start of World War III. Since that day, we have lived and invested in a completely new environment. With a new set of rules. And a stark new reality. It’s the Haves versus the Havenots.
And oil is the dirty bomb of this new conflict.
Conventional wisdom sees oil—and commodities in general—as a simple see-saw of supply and demand. Tighten supply and prices rise to a point where demand slackens and prices drop and equilibrium is restored.
Any time a fundamental shift occurs, the biggest money is made by the earliest movers. And the biggest money lost is by those who stubbornly ignore the shift.
The appearance of the VW beetle in the early 1960s was a warning that Detroit ignored. Indeed, their ’60s models were bigger and bigger—even as their sales got smaller and smaller.
Look around. Fast food, the PC, the cell phone, next-day delivery of a new mattress, suburbia, low-commission stock trading—big or small, fundamental shifts create fortunes for those smart enough to get in early.
And they kill those who ignore or deny change.
The fundamental shift that occurred on 9/11 signaled the start of World War III.
Since that day, we have lived and invested in a completely new environment. With a new set of rules. And a stark new reality. It’s the Haves versus the Havenots.
Oil is the dirty bomb of this new conflict.
You’ve heard it said that the world is running out of oil and that’s why it’s costing more. This is balderdash.
What You Haven’t Been Told
The world is swimming in oil and reserves are expanding. The Saudis are bringing an extra two million barrels a day online next year and refining capacity is more than ample. Usage is down—people are cutting back.
But still, prices are up from about $20 a barrel on 9/11 to around $60 a barrel today. So: why? Because oil has become the ultimate weapon of Havenot revenge.
If you want to see this dirty bomb used at its cruelest, consider what “Father Joseph” Putin did in February 2004. He simply cut off the gas pipelines to Belarus. It was exactly what it appeared to be—an act of terrorism—a guerrilla maneuver in the greater World War III action.
The Gates of Hell—Not Supply and Demand
Conventional wisdom sees oil—and commodities in general—as a simple see-saw of supply and demand. Tighten supply and prices rise to a point where demand slackens and prices drop and equilibrium is restored.
Nice concept. But let’s look at reality.
Saddam Hussein’s dream of domination over the entire Middle East was based on taking control of nearly 40% of the world’s energy supplies. As mad as his plot was, the use of oil as blackmail now extends from Putin in Russia to Chavez in Venezuela, Morales in Bolivia, tribal chieftains in Nigeria and Ayatollah Khamenei in Iran.
In short, the rational era of supply and demand vanished on 9/11. The new, insanely vengeful era we now live in uses oil as the weapon of first resort.
Oil Stocks: A Slow Swim across a Shark Tank
As investors, then, we need to be very careful about using oil in our program to make a million dollars. We must not make the mistake of buying it “because we’re running out” or “because it’s going up.”
We’re not running out any time soon—and it isn’t even going up, not in a straight line, anyway. Oil’s price, as we’ve seen, is almost purely a reflection of how it is being used as a weapon. After all, Saudi oil costs just $3 a barrel. Call the other $50 or so the fear premium.
Safe. Fast. In That Order
For our purposes, this makes overseas oil exploration companies a very high risk. It also makes global and foreign oil stocks in general speculative.
No thanks. Here at Young’s Intelligence Report we’ve played oil the safe way. So let’s stay home and make 20% and a 6.5% annual yield in a U.S. pipeline company. Let’s stay home and ALSO make 247% in a Canadian tar sand stock. That’s what we’ve been doing. It’s time you did likewise.
Join Canada’s Oil Rush
Canada’s oil sands hold 175 billion barrels of oil—a treasure trove that rivals Saudi Arabia. The fact that the region is friendly to U.S. interests makes it even more valuable.
It costs about $20 a barrel to boil these tar sands down to sweet crude. The math, when oil is trading above $60, is compelling.
The Truth Behind Tax Harmonization
Why You Want Tax Competition in an Unfree World
Today's comment is by Bob Bauman,
The Sovereign Society's Legal Counsel and a former Member of the United States House of Representatives from Maryland, (1973-1981).
I welcome the announcement of the Center for Freedom and Prosperity Foundation (CFP) of their upcoming, month-long tax competition education campaign. During this education drive, CFP will hold events in three of The Sovereign Society's recommended offshore jurisdictions, including Panama, Singapore, and Hong Kong. This education campaign is a crucial part of the never-ending campaign to maintain free market tax policies.
Our friend and associate, Dan Mitchell of the Cato Institute, will join CFP's Andrew Quinlan as they give presentations to emphasize value of tax competition. They will also advocate the resistance of the Organization for Economic Cooperation and Development (OECD) and European Union "tax harmonization" schemes. There will also be meetings with government officials, overseas Americans, and interested parties.
Tax competition among nations is vital. Tax competition not only offers potential tax savings to taxpayers, but it also constantly pressures high tax welfare states to keep their taxes lower, if only to compete for tax dollars and to keep taxpayers at home. Just as with any other product or service, if you live in a high tax nation (such as the U.S., U.K., France or Germany), you can move your financial activity elsewhere like Panama, Singapore or Hong Kong and save on taxes.
So it's a small wonder the tax collectors are having fits over globally mobile citizens.
The Truth Behind "Tax Harmonization"
I must hand it to the OECD and their leftist allies for their choice of a moral-sounding slogan.
Their slogan/euphemism "tax harmonization" really means they want every nation to be able to impose higher taxes, without their citizens being able to escape to lower tax jurisdictions. But that's not what they say publicly; they insist their motive is "fairness."
For many years the bureaucrats at the EU and OECD have acted at the behest of high-tax welfare states such as France and Germany, trying to curtail tax competition. In the late 1990s, both the EU and the OECD launched their assault with the baseless argument that it was "unfair" when jobs and capital migrated from high-tax nations to low-tax jurisdictions.
To stop this process, they urged various "tax harmonization" schemes, ranging from mutual agreed upon high tax rates among nations, to the collection and sharing of confidential financial data on every individual's offshore banking and investment activity.
The OECD claimed its campaign was a fight against "tax cheats" and it was not above using blackmail to gain its odious objectives. In 2000 the OECD published a "blacklist" of 41 so-called "tax havens" and outlined a series of punishments against them unless they agreed to rewrite their tax and privacy laws according to OECD orders.
The American political left has agreed with this phony argument.
President Clinton's Treasury secretary even referred to tax competition and capital mobility as the "dark side of globalization." Thanks to a concerted effort by free market groups, including The Sovereign Society, the Bush administration opposed the OECD's harmful tax competition project. Cato's Dan Mitchell observed: "This was a devastating blow to the OECD since any effort to create a global tax cartel had to fail if the world's largest economy did not participate."
With all the complaints about President Bush and his other policies, his administration has been able to thwart these "tax harmonization" advocates. Bush opposed proposals for a global tax authority run by the United Nations and also rejected the EU savings tax directive, another tax harmonization scheme that sought participation from six non-EU nations, including Switzerland and the United States.
This U.S. rejection forced the EU to scale back its proposal and its efforts to destroy financial privacy. However, it's still trying in vain to get places such as Hong Kong and Singapore to adopt such policies, which is yet another good reason for the CFP education drive.
A Global Battle Between Libertarians and Conservatives
You should understand that what is going on here is a global battle between the conservative and libertarian advocates. Libertarians want source-based (territorial) taxation and those high-tax leftists want residence-based (worldwide) taxation. The OECD, and its kooky allies, such as the so-called "Tax Justice Network," avidly support worldwide taxation that would allow governments to collect tax on any income their taxpayers earn worldwide. (That, unfortunately, is the current U.S, tax law.)
But to tax income earned outside their borders, a government's tax collection agency must be aware of the income. Hence, the supposed need to eliminate all financial privacy.
In contrast, under the territorial method of taxation, countries reserve the right to tax the income earned inside their borders, regardless of who earns the money. But they do not assert the right to tax income earned in other countries. While this may seem to be a rather obscure debate, known or understood by very few, the eventual outcome has profound implications for all of us.
BOB BAUMAN, Legal Counsel
Today's comment is by Bob Bauman,
The Sovereign Society's Legal Counsel and a former Member of the United States House of Representatives from Maryland, (1973-1981).
I welcome the announcement of the Center for Freedom and Prosperity Foundation (CFP) of their upcoming, month-long tax competition education campaign. During this education drive, CFP will hold events in three of The Sovereign Society's recommended offshore jurisdictions, including Panama, Singapore, and Hong Kong. This education campaign is a crucial part of the never-ending campaign to maintain free market tax policies.
Our friend and associate, Dan Mitchell of the Cato Institute, will join CFP's Andrew Quinlan as they give presentations to emphasize value of tax competition. They will also advocate the resistance of the Organization for Economic Cooperation and Development (OECD) and European Union "tax harmonization" schemes. There will also be meetings with government officials, overseas Americans, and interested parties.
Tax competition among nations is vital. Tax competition not only offers potential tax savings to taxpayers, but it also constantly pressures high tax welfare states to keep their taxes lower, if only to compete for tax dollars and to keep taxpayers at home. Just as with any other product or service, if you live in a high tax nation (such as the U.S., U.K., France or Germany), you can move your financial activity elsewhere like Panama, Singapore or Hong Kong and save on taxes.
So it's a small wonder the tax collectors are having fits over globally mobile citizens.
The Truth Behind "Tax Harmonization"
I must hand it to the OECD and their leftist allies for their choice of a moral-sounding slogan.
Their slogan/euphemism "tax harmonization" really means they want every nation to be able to impose higher taxes, without their citizens being able to escape to lower tax jurisdictions. But that's not what they say publicly; they insist their motive is "fairness."
For many years the bureaucrats at the EU and OECD have acted at the behest of high-tax welfare states such as France and Germany, trying to curtail tax competition. In the late 1990s, both the EU and the OECD launched their assault with the baseless argument that it was "unfair" when jobs and capital migrated from high-tax nations to low-tax jurisdictions.
To stop this process, they urged various "tax harmonization" schemes, ranging from mutual agreed upon high tax rates among nations, to the collection and sharing of confidential financial data on every individual's offshore banking and investment activity.
The OECD claimed its campaign was a fight against "tax cheats" and it was not above using blackmail to gain its odious objectives. In 2000 the OECD published a "blacklist" of 41 so-called "tax havens" and outlined a series of punishments against them unless they agreed to rewrite their tax and privacy laws according to OECD orders.
The American political left has agreed with this phony argument.
President Clinton's Treasury secretary even referred to tax competition and capital mobility as the "dark side of globalization." Thanks to a concerted effort by free market groups, including The Sovereign Society, the Bush administration opposed the OECD's harmful tax competition project. Cato's Dan Mitchell observed: "This was a devastating blow to the OECD since any effort to create a global tax cartel had to fail if the world's largest economy did not participate."
With all the complaints about President Bush and his other policies, his administration has been able to thwart these "tax harmonization" advocates. Bush opposed proposals for a global tax authority run by the United Nations and also rejected the EU savings tax directive, another tax harmonization scheme that sought participation from six non-EU nations, including Switzerland and the United States.
This U.S. rejection forced the EU to scale back its proposal and its efforts to destroy financial privacy. However, it's still trying in vain to get places such as Hong Kong and Singapore to adopt such policies, which is yet another good reason for the CFP education drive.
A Global Battle Between Libertarians and Conservatives
You should understand that what is going on here is a global battle between the conservative and libertarian advocates. Libertarians want source-based (territorial) taxation and those high-tax leftists want residence-based (worldwide) taxation. The OECD, and its kooky allies, such as the so-called "Tax Justice Network," avidly support worldwide taxation that would allow governments to collect tax on any income their taxpayers earn worldwide. (That, unfortunately, is the current U.S, tax law.)
But to tax income earned outside their borders, a government's tax collection agency must be aware of the income. Hence, the supposed need to eliminate all financial privacy.
In contrast, under the territorial method of taxation, countries reserve the right to tax the income earned inside their borders, regardless of who earns the money. But they do not assert the right to tax income earned in other countries. While this may seem to be a rather obscure debate, known or understood by very few, the eventual outcome has profound implications for all of us.
BOB BAUMAN, Legal Counsel
Emergency Medicaid
By Rebekah Addy, Ivanhoe Health Correspondent
ORLANDO, Fla. (Ivanhoe Newswire) -- How much do undocumented immigrants really cost the U.S. health care system? A new study from researchers in North Carolina takes a look at the figures.
Emergency Medicaid for undocumented and recent immigrants is increasing at a faster rate for the elderly and the disabled. However, the recent study reveals childbirth and complications associated with pregnancy account for the majority of cases in North Carolina.
Researchers from the Carolinas Center for Medical Excellence in Cary, N.C., looked at administrative claims of the emergency care given to 48,391 patients in North Carolina between 2001 and 2004. They report 99 percent of the claims they analyzed were for undocumented immigrants. Of those patients, 93 percent were Hispanic, 95 percent were female, and 89 percent were between ages 18 and 40.
Over four years, health care funding for pregnant women increased 22 percent. In the same period, funding increased 70 percent for families with dependent children, 82 percent for disabled patients, and 98 percent for elderly patients. Author C. Annette DuBard, M.D., M.P.H., told Ivanhoe, "I think it highlights a question of whether spending for labor and delivery services and emergency of pregnancy could somewhat be averted by expanding access for this populations to comprehensive prenatal care and family planning services."
Federal law excludes immigrants who have been in the United States less than five years and undocumented immigrants from Medicaid. However, children, elderly or disabled, families with dependent children and pregnant women do have some access to care in emergency situations with Emergency Medicaid, as long as they meet residency and state income requirements.
Dr. Dubard said, "It raises some information that hasn't been previously been out there that may be helpful to all of us in thinking about how to allocate the health care dollar and perhaps identify ways to prevent medical emergency rather then just responding to them."
Dr. DuBard explained states with similar Emergency Medicaid guidelines likely have similar figures.
This article was reported by Ivanhoe.com, which offers Medical Alerts by e-mail every day of the week. To subscribe, click on: http://www.ivanhoe.com/newsalert/.
SOURCE: Ivanhoe interview with C. Annette DuBard, M.D., M.P.H., The Journal of the American Medical Association, 2007;297:1085-1092
ORLANDO, Fla. (Ivanhoe Newswire) -- How much do undocumented immigrants really cost the U.S. health care system? A new study from researchers in North Carolina takes a look at the figures.
Emergency Medicaid for undocumented and recent immigrants is increasing at a faster rate for the elderly and the disabled. However, the recent study reveals childbirth and complications associated with pregnancy account for the majority of cases in North Carolina.
Researchers from the Carolinas Center for Medical Excellence in Cary, N.C., looked at administrative claims of the emergency care given to 48,391 patients in North Carolina between 2001 and 2004. They report 99 percent of the claims they analyzed were for undocumented immigrants. Of those patients, 93 percent were Hispanic, 95 percent were female, and 89 percent were between ages 18 and 40.
Over four years, health care funding for pregnant women increased 22 percent. In the same period, funding increased 70 percent for families with dependent children, 82 percent for disabled patients, and 98 percent for elderly patients. Author C. Annette DuBard, M.D., M.P.H., told Ivanhoe, "I think it highlights a question of whether spending for labor and delivery services and emergency of pregnancy could somewhat be averted by expanding access for this populations to comprehensive prenatal care and family planning services."
Federal law excludes immigrants who have been in the United States less than five years and undocumented immigrants from Medicaid. However, children, elderly or disabled, families with dependent children and pregnant women do have some access to care in emergency situations with Emergency Medicaid, as long as they meet residency and state income requirements.
Dr. Dubard said, "It raises some information that hasn't been previously been out there that may be helpful to all of us in thinking about how to allocate the health care dollar and perhaps identify ways to prevent medical emergency rather then just responding to them."
Dr. DuBard explained states with similar Emergency Medicaid guidelines likely have similar figures.
This article was reported by Ivanhoe.com, which offers Medical Alerts by e-mail every day of the week. To subscribe, click on: http://www.ivanhoe.com/newsalert/.
SOURCE: Ivanhoe interview with C. Annette DuBard, M.D., M.P.H., The Journal of the American Medical Association, 2007;297:1085-1092
Trading Carbon Credits for Fun and Profit
Today's comment is by Mike Burnick,
The Sovereign Society's Senior Editor and Global Markets Analyst.
Today, a decade after the Kyoto Protocol first kicked off global efforts to limit greenhouse gas emissions, the American free enterprise system is finally making global warming a top priority.
And why not ... after all there's a lot of money to be made from saving the environment.
We have seen a seismic shift in the U.S. lately, with government and industry more interested in cutting carbon dioxide gas emissions, and other man-made pollutants, that are suspected of causing global climate change.
In fact, three major energy industry trade groups have recently done a complete about-face. They've gone from fighting mandatory federal limits on greenhouse gas emissions - to now supporting legislation that could regulate greenhouse emissions sooner than most thought possible.
The Wall Street Journal reported this week that the Edison Electric Institute , a powerful lobby for the electric utility industry in the U.S., has joined the American Gas Association , and the Electric Power Supply Association (EPSA), to support federal government regulation on its industry members.
This is a significant shift on the part of American industry. For years, industry heads have pooh-poohed the very idea that carbon dioxide even caused global warming. It reminds me of the good 'ole days, when the American tobacco industry vigorously denied scientific evidence that smoking caused lung cancer.
But of course, there's a profit motive behind this sudden change of opinion.
Utility Industry Gets a Wake-Up Call
Utility firms that belong to the Edison Electric Institute generate 60% of electricity in the U.S., according to the Wall Street Journal. And the good folks at the EPSA represent the interests of 22 firms that sell electricity on wholesale markets across the country.
Together, these two organizations represent a very big block of the biggest carbon dioxide emitters in the United States. In fact, about 50% of America's electricity needs are provided by coal-fired power plants - the fossil fuel with the highest carbon content.
But why the sudden change of heart? For one thing, the change in control of Congress last fall was no doubt a wake-up call for the utility industry. Former Vice President Al Gore's well-received documentary "An Inconvenient Truth" has helped fire up public opinion in favor of environmental protection.
There's now a growing probability that Congress acts to pass some sort of emission controls before next year's election. And Paul Wilkinson, vice president of the American Gas Association, perhaps said it best: "We want to be at the table during the debate." In other words, key players want to help steer the debate as much as possible in the industry's favor. It's the American way.
U.S. States Hop Aboard the Carbon Credit Bus
This driving trend toward legislation to limit greenhouse gas emissions was already underway in state legislatures across the country. Last year, the State of California - the world's 12th largest carbon dioxide emitter -- passed the Global Warming Solutions Act that aims to cut greenhouse gasses 25% by 2020.
Oregon, New Mexico, Arizona and Washington State have joined forces with California to propose a "cap-and-trade" program that would allocate carbon emission credits among companies operating in these western states.
The idea is modeled after an emission-credit trading program in place among eight states in the northeast, including all the New England states, New York, New Jersey, and Delaware. So now the time seems ripe for a federal carbon credit-trading program -- to spell out nationwide rules for limiting greenhouse gasses.
There are a number of different schemes being considered by Congress, so it's too early to say what the final version will look like. But the basic idea is a carrot and stick approach - with a free market twist.
This free market twist is known as carbon credit trading...
Both the U.S. government and key industry players in the U.S. are suddenly becoming very environmentally-conscious. And why not, since the government is set to introduce a profit motive for American industry to clean up its act.
U.S. federal and state governments - now joined by the same utility companies that used to lobby vigorously against green legislation -- are now working together to reduce carbon dioxide and other greenhouse gas emissions. (Carbon dioxide is one of the key culprits for global climate change.) Just last year, California introduced and passed the Global Warming Solutions Act - aiming to cut greenhouse gasses 25% by 2020.
Following suit, Oregon, New Mexico, Arizona and Washington State have joined forces with California to propose a "cap-and-trade" program that would allocate carbon emission credits among companies operating in these western states. A similar program is now under way in northeastern U.S. states.So now the time is ripe for federal legislation - to spell out nationwide rules for limiting greenhouse gasses - and provide incentives for businesses to follow the rules. It looks like this government initiative will spark the era of carbon-credit trading.
Just What Are Carbon Credits Anyway?
Companies like electric utilities and manufacturers that produce carbon-based fuels or emissions, would require government permits for each ton of carbon they release into the environment. Firms should also be able to freely trade these carbon-credits amongst each other, so that a company that upgrades its operations to reduce emissions might wind up with surplus credits.
These extra credits may then be sold to less "environmentally friendly" firms in need of more carbon credits to cover their excess emissions of greenhouse gases - or else pay steep penalties to the federal government. This creates a potentially powerful profit incentive for American industry to clean up its act.
Obviously, it also creates a vast new medium of exchange - with carbon credits as the currency. And wherever there's a new medium of exchange, you can rest assured that someone will figure out a way to trade them on the open market to earn an extra buck or two.
The Wall Street Guys Are Drooling!
Of course, Wall Street Investment Bankers will have a field day. They are no doubt salivating as we speak, at the chance to figure out new ways to securitize carbon credits so they can be traded on financial exchanges around the world.
Think of all the millions ... even billions of dollars at stake. Global investors will have lots of new products in which to stash their hard earned cash, in search of incrementally higher investment returns.
In fact, the Chicago Climate Exchange (CCX), which began operations in late 2003, bills itself as North America's only, and the world's first, greenhouse gas emission registry, reduction and trading system. CCX recently announced plans for a new exchange traded fund based on carbon credits, potentially allowing individual investors to profit from this new market for the first time.
And we're going to need new profit opportunities, because one sure thing that's coming out of all this is higher utility costs to consumers .
In fact, the Wall Street Journal reports that one environmental group is forecasting an increase of anywhere from 3.5% to as much as 35% in the nation's electricity prices, depending on the shape and scope of the government plan that's finally adopted.
But what's a few bucks more in monthly utility costs when we're helping save the environment from poisonous greenhouse gases.
Besides, you can always offset your higher electric bill with a few well-timed carbon credit day-trades in your IRA!
MIKE BURNICK, Senior Editor
The Sovereign Society's Senior Editor and Global Markets Analyst.
Today, a decade after the Kyoto Protocol first kicked off global efforts to limit greenhouse gas emissions, the American free enterprise system is finally making global warming a top priority.
And why not ... after all there's a lot of money to be made from saving the environment.
We have seen a seismic shift in the U.S. lately, with government and industry more interested in cutting carbon dioxide gas emissions, and other man-made pollutants, that are suspected of causing global climate change.
In fact, three major energy industry trade groups have recently done a complete about-face. They've gone from fighting mandatory federal limits on greenhouse gas emissions - to now supporting legislation that could regulate greenhouse emissions sooner than most thought possible.
The Wall Street Journal reported this week that the Edison Electric Institute , a powerful lobby for the electric utility industry in the U.S., has joined the American Gas Association , and the Electric Power Supply Association (EPSA), to support federal government regulation on its industry members.
This is a significant shift on the part of American industry. For years, industry heads have pooh-poohed the very idea that carbon dioxide even caused global warming. It reminds me of the good 'ole days, when the American tobacco industry vigorously denied scientific evidence that smoking caused lung cancer.
But of course, there's a profit motive behind this sudden change of opinion.
Utility Industry Gets a Wake-Up Call
Utility firms that belong to the Edison Electric Institute generate 60% of electricity in the U.S., according to the Wall Street Journal. And the good folks at the EPSA represent the interests of 22 firms that sell electricity on wholesale markets across the country.
Together, these two organizations represent a very big block of the biggest carbon dioxide emitters in the United States. In fact, about 50% of America's electricity needs are provided by coal-fired power plants - the fossil fuel with the highest carbon content.
But why the sudden change of heart? For one thing, the change in control of Congress last fall was no doubt a wake-up call for the utility industry. Former Vice President Al Gore's well-received documentary "An Inconvenient Truth" has helped fire up public opinion in favor of environmental protection.
There's now a growing probability that Congress acts to pass some sort of emission controls before next year's election. And Paul Wilkinson, vice president of the American Gas Association, perhaps said it best: "We want to be at the table during the debate." In other words, key players want to help steer the debate as much as possible in the industry's favor. It's the American way.
U.S. States Hop Aboard the Carbon Credit Bus
This driving trend toward legislation to limit greenhouse gas emissions was already underway in state legislatures across the country. Last year, the State of California - the world's 12th largest carbon dioxide emitter -- passed the Global Warming Solutions Act that aims to cut greenhouse gasses 25% by 2020.
Oregon, New Mexico, Arizona and Washington State have joined forces with California to propose a "cap-and-trade" program that would allocate carbon emission credits among companies operating in these western states.
The idea is modeled after an emission-credit trading program in place among eight states in the northeast, including all the New England states, New York, New Jersey, and Delaware. So now the time seems ripe for a federal carbon credit-trading program -- to spell out nationwide rules for limiting greenhouse gasses.
There are a number of different schemes being considered by Congress, so it's too early to say what the final version will look like. But the basic idea is a carrot and stick approach - with a free market twist.
This free market twist is known as carbon credit trading...
Both the U.S. government and key industry players in the U.S. are suddenly becoming very environmentally-conscious. And why not, since the government is set to introduce a profit motive for American industry to clean up its act.
U.S. federal and state governments - now joined by the same utility companies that used to lobby vigorously against green legislation -- are now working together to reduce carbon dioxide and other greenhouse gas emissions. (Carbon dioxide is one of the key culprits for global climate change.) Just last year, California introduced and passed the Global Warming Solutions Act - aiming to cut greenhouse gasses 25% by 2020.
Following suit, Oregon, New Mexico, Arizona and Washington State have joined forces with California to propose a "cap-and-trade" program that would allocate carbon emission credits among companies operating in these western states. A similar program is now under way in northeastern U.S. states.So now the time is ripe for federal legislation - to spell out nationwide rules for limiting greenhouse gasses - and provide incentives for businesses to follow the rules. It looks like this government initiative will spark the era of carbon-credit trading.
Just What Are Carbon Credits Anyway?
Companies like electric utilities and manufacturers that produce carbon-based fuels or emissions, would require government permits for each ton of carbon they release into the environment. Firms should also be able to freely trade these carbon-credits amongst each other, so that a company that upgrades its operations to reduce emissions might wind up with surplus credits.
These extra credits may then be sold to less "environmentally friendly" firms in need of more carbon credits to cover their excess emissions of greenhouse gases - or else pay steep penalties to the federal government. This creates a potentially powerful profit incentive for American industry to clean up its act.
Obviously, it also creates a vast new medium of exchange - with carbon credits as the currency. And wherever there's a new medium of exchange, you can rest assured that someone will figure out a way to trade them on the open market to earn an extra buck or two.
The Wall Street Guys Are Drooling!
Of course, Wall Street Investment Bankers will have a field day. They are no doubt salivating as we speak, at the chance to figure out new ways to securitize carbon credits so they can be traded on financial exchanges around the world.
Think of all the millions ... even billions of dollars at stake. Global investors will have lots of new products in which to stash their hard earned cash, in search of incrementally higher investment returns.
In fact, the Chicago Climate Exchange (CCX), which began operations in late 2003, bills itself as North America's only, and the world's first, greenhouse gas emission registry, reduction and trading system. CCX recently announced plans for a new exchange traded fund based on carbon credits, potentially allowing individual investors to profit from this new market for the first time.
And we're going to need new profit opportunities, because one sure thing that's coming out of all this is higher utility costs to consumers .
In fact, the Wall Street Journal reports that one environmental group is forecasting an increase of anywhere from 3.5% to as much as 35% in the nation's electricity prices, depending on the shape and scope of the government plan that's finally adopted.
But what's a few bucks more in monthly utility costs when we're helping save the environment from poisonous greenhouse gases.
Besides, you can always offset your higher electric bill with a few well-timed carbon credit day-trades in your IRA!
MIKE BURNICK, Senior Editor
Ire and ICE
Le estan diciendo que: "You're under arrest"?
As you may know, I write relatively often about illegal immigration. Increasingly, in fact, given the, uh, "increasing" nature of the problem. But today, I get the distinct and rare joy to report that at least of few of these freeloaders got their comeuppance. Kind of.
In order to understand, though, you may need a little background. Read on... Nowadays, it's a common practice in any U.S. city you care to name for illegal immigrants to gather every morning at convenience stores like 7-Eleven and others. Their goal: To solicit cash day-work from the throngs of van-driving contractors who file into such places for a cuppa Joe or a doughnut on their way to their jobsites...
However, a group of two dozen illegals in Baltimore got more than they bargained for when they propositioned the unmarked vehicles of a group of U.S. Immigration and Customs Enforcement (ICE) agents!
The ensuing bust netted the agency:
* 6 men with U.S. criminal records - even though they aren't even citizens
* 8 who were in violation of "final removal orders" from immigration judges
* 1 that had been caught crossing the border FOUR TIMES.
How many of these men will be given paying work details in prison (at around a buck a day) remains to be seen. It should be all of them, but I'm betting it ends up being ZERO. Why? Because already, at least one immigrant advocacy group has started raising a stink about how the agents involved in the bust somehow unfairly targeted Hispanics - even though the bust-ees solicited the officers! All of the arrested men were Mexican, Honduran and Salvadoran (with one Peruvian in the mix).
The group, calling itself CASA, has declared the raid "illegal" in a press conference held at the 7-Eleven store where the bust took place. The fact that! no actu al ATTORNEYS appear to have made this claim on the group's behalf seemed unimportant to the newspapers reporting the story.
Of course, the newly-elected Mayor of Baltimore (Democrat Sheila Dixon) - instead of openly applauding the bust as a long-overdue first baby-step in controlling Baltimore's rampant illegal immigration problem - is using the incident to highlight what she calls the need for a "designated day-laborer center" in the city, according to a Washington Times article on the arrests...
Why doesn't she just come out and say what she means: That illegal immigrants should have a way to access all the benefits of being American - work, wages, entitlements, and equal protection of the law - without having to make any of the sacrifices? Like paying taxes, learning the English language, and abiding by the law.
Fittingly, the spontaneous bust came on the same day that ICE announced more than 750 arrests of illegals over a one-week span in Los Angeles. The Times article also cites the fact that the ICE removed more than 190,000 illegal aliens in 2006 - with 45% (90,000) of these having U.S. CRIMINAL RECORDS...
Now that's what I call a good start.
Reporting on deporting,
William Campbell Douglass II, M.D.
As you may know, I write relatively often about illegal immigration. Increasingly, in fact, given the, uh, "increasing" nature of the problem. But today, I get the distinct and rare joy to report that at least of few of these freeloaders got their comeuppance. Kind of.
In order to understand, though, you may need a little background. Read on... Nowadays, it's a common practice in any U.S. city you care to name for illegal immigrants to gather every morning at convenience stores like 7-Eleven and others. Their goal: To solicit cash day-work from the throngs of van-driving contractors who file into such places for a cuppa Joe or a doughnut on their way to their jobsites...
However, a group of two dozen illegals in Baltimore got more than they bargained for when they propositioned the unmarked vehicles of a group of U.S. Immigration and Customs Enforcement (ICE) agents!
The ensuing bust netted the agency:
* 6 men with U.S. criminal records - even though they aren't even citizens
* 8 who were in violation of "final removal orders" from immigration judges
* 1 that had been caught crossing the border FOUR TIMES.
How many of these men will be given paying work details in prison (at around a buck a day) remains to be seen. It should be all of them, but I'm betting it ends up being ZERO. Why? Because already, at least one immigrant advocacy group has started raising a stink about how the agents involved in the bust somehow unfairly targeted Hispanics - even though the bust-ees solicited the officers! All of the arrested men were Mexican, Honduran and Salvadoran (with one Peruvian in the mix).
The group, calling itself CASA, has declared the raid "illegal" in a press conference held at the 7-Eleven store where the bust took place. The fact that! no actu al ATTORNEYS appear to have made this claim on the group's behalf seemed unimportant to the newspapers reporting the story.
Of course, the newly-elected Mayor of Baltimore (Democrat Sheila Dixon) - instead of openly applauding the bust as a long-overdue first baby-step in controlling Baltimore's rampant illegal immigration problem - is using the incident to highlight what she calls the need for a "designated day-laborer center" in the city, according to a Washington Times article on the arrests...
Why doesn't she just come out and say what she means: That illegal immigrants should have a way to access all the benefits of being American - work, wages, entitlements, and equal protection of the law - without having to make any of the sacrifices? Like paying taxes, learning the English language, and abiding by the law.
Fittingly, the spontaneous bust came on the same day that ICE announced more than 750 arrests of illegals over a one-week span in Los Angeles. The Times article also cites the fact that the ICE removed more than 190,000 illegal aliens in 2006 - with 45% (90,000) of these having U.S. CRIMINAL RECORDS...
Now that's what I call a good start.
Reporting on deporting,
William Campbell Douglass II, M.D.
Life after Debt - Russia's New Millennium
By Eric Kraus
When John - a man who does as good a job as anyone on earth rendering arcane economic theory accessible to non-specialists - asked me to write a brief review of Russian financial opportunities, I shuddered. I write a Russian strategy review entitled Truth and Beauty (and Russian Finance) which runs to a good 25 pages per month. Frankly, explaining Russia to the outside world is no less a challenge than explaining the arcana of Fed policy....or Einstein's General Theory of Relativity. And in just five pages...I hardly know where to begin...
Since the beginning of the Putin era, the kind reader will have been repeatedly warned of Russia's impending collapse. Hair-raising stories in the financial press told of dysfunctional government, criminal oligarchs, industrial decline, corruption and chaos. Yet oddly enough, since 1998 Russia can boast the world's best-performing equity market (the RTS Index has appreciated from 58 to >1930, i.e. more than 37-fold!) as well as the fastest GDP growth rate of any country outside of Asia. Why?
Neither of the two usual explanations: "it's just a bubble," or "oil prices!" hold much water. Markets can temporarily move out of sync with their fundamentals, but they tend to snap back fairly fast - witness the Russian Bubble of 1996-97 (or NASDAQ 2000). For a "bubble" to grow continuously for almost a decade would suggest that it had an unusually strong skin. As for oil prices, certainly, they have been the icing on the economic but then oil prices are high for Venezuela and Saudi Arabia too, yet their markets are in the tank. Furthermore, relatively high oil prices in 1995-96 did not benefit Russia - the notorious Russian Oligarchs pillaged their own country, pumping their export revenues abroad. As Russia starved, a few unscrupulous operators such as Mikhail Khodorkovsky became fabulously rich.
The resultant 1998 debt-crisis marked a watershed - over the ensuing years, Russia prepaid the lion's share of her foreign debt, while the economy has doubled in size; at $310bn foreign exchange reserves are now the world's third largest; inflation has fallen into the single digits for the first time in 20 years while Russia is rated investment-grade by all rating agencies.
Russia's spectacular recovery from the crisis was made possible by some tough belt-tightening. First, they stopped borrowing. Under Putin the tax system was revamped, with a 13% flat tax on income (Russian immigration forms are available on request!), provoking a huge increase in tax receipts. The government ran massive trade and budget surpluses, and the $100bn "rainy-day" Stabilization Fund meant to buffer the effects of commodity price volatility is now large enough to last an entire monsoon; Russia could maintain 2006 budget spending unchanged for four years at any oil price - Including zero.
With real revenue per capita growing at more than 10% per year, there is an explosion in Russia's middle class - retail distribution is growing like wildfire as vast shopping malls mushroom up around the major cities, consumer lending is rising to European levels, mobile phone penetration has surged to over 100%...and with several hundred thousand new automobile registrations each year, traffic in St. Petersburg and Moscow's is grinding to a halt (ah, for the good old days, when one could have safely stopped to have a picnic in the middle of any Soviet street...) For the first time ever, the average Russian can enjoy the things that Americans have long taken for granted: buying a car, a new washing-machine, and escaping the cold Russian winter for a quick flight to the beaches of Egypt.
Politics
While investors in the G7 countries can usually pretty much ignore the politics, in the developing countries, this is often the top economic consideration. Thus, to understand the current situation, we need a brief historical overview:
Unlike America, which has enjoyed two really good centuries, Russia's last millennium was - to put it mildly - difficult. It began with the catastrophic Mongol invasions, proceeded through Tsarism, devastation in the Napoleonic Wars, a largely wasted 19th Century, then the Bolshevik revolution, with renewed devastation in the two World Wars - where Russian losses dwarfed those of any other combatant.
By the mid-1980s when Mikhail Gorbachev came to power, the Soviet Union was showing the strain.
Collapsing commodity prices, rising popular expectations, the Afghan war, and an increasingly-restive Eastern Europe were major challenges to the Communist Party. Yet vitally for the understanding of current Russian policy, the Soviet Union had seen off far worse crises since the 1917 Revolution; and in 1986-89, while it was shaky, it was nowhere near collapse. Instead, the Soviet Union was the first empire in history to voluntarily legislate itself out of existence.
While this voluntary liquidation was greeted as a millennial event in the West, for the average Russian, it was a period of intense misery. Prices soared as the rouble lost all value; with the social and industrial infrastructures collapsing, hunger stalked the streets. Russia was repeatedly humiliated on the global stage.
Although well-intentioned Western leaders had vowed to respect Russia's security concerns, nature abhors a vacuum; the temptation for NATO to forget Reagan's promises and advance NATO's forward bases up to Russia's borders "just in case" proved irresistible. For ordinary Russians, the good-hearted Western powers and indeed, the very term "democracy" gradually became synonymous with hunger, chaos and national humiliation.
Economically, the 1990s were a lost decade. Russia had neither the historical experience of capitalism nor the institutions necessary to support a sudden liberalization. Instead, privatization benefited only a tiny fraction of society as the brutal "Oligarchs" gained control of entire industries by corruption and violence.
Some of these same men are now belatedly spinning themselves as "heroes for democracy and transparency." That many in the West are ready to believe such fables demonstrates the power of well-managed PR!
At Yeltsin's invitation, the Russian regions gradually broke away from central control; the regional elite - generally Soviet-era bosses-turned-privateers - built their independent kingdoms. The supposed Russian "free press" was firmly under the thumb of the Oligarchs who first demanded that their tame journalists ensure the dubious reelection of a desperately unpopular Boris Yeltsin in 1996, then, after winning the election, turned their fire on each other in the "Banker's Wars", helping to bring down the "Young Reformers" government and ushering in the 1998 financial crisis.
When Yeltsin's surprise resignation on New Year's Eve 2000 catapulted then-Prime Minister Vladimir Putin into the presidency, the latter found himself at the helm of a badly-holed ship. The Western press gave Putin little chance of success, predicting that, like Yeltsin before him, he would be hamstrung by the all-powerful Oligarchs and their closest allies, the corrupt regional governors.
In fact, Mr. Putin was made of far sterner stuff than anyone suspected. He quickly moved to break the power of the most arrogant of the Oligarchs, while reducing the regional governors to dependency on the Kremlin.
Tax and fiscal policy were totally revamped, reform legislation pushed through a newly-compliant Duma, vital energy resources were at least partially reclaimed by the State (like in every other major oil exporter) - and suddenly, Russia was back in business.
From Politics to Geopolitics
Many in the West have voiced concerns about the supposed loss of democratic freedoms - some perhaps sincere, but others clearly to advance their personal agendas.
Yes, Russian democracy remains very imperfect, although it is not intuitively obvious why Vladimir Putin, who regularly polls above 80% approval ratings, is any less "democratic" than was Boris Yeltsin, who rarely managed to make it into the 2 digits! Perhaps the systematically negative tone to Russian coverage by the foreign press since 2000 may have something to do with the fact that, while Yeltsin craved the approval of the West, Vladimir Putin has been far more focused upon courting his Russian electorate.
In any event, of the most successful emerging countries which rose from grinding rural poverty to first-world wealth in a single generation, - first Singapore, Korea and Taiwan; now China, Vietnam and Russia - none was remotely democratic, at least during their early transition phases. Of course, as countries become richer, their rising middle classes gradually demand more political representation. Russia is not there quite yet.
The good news, on the other hand, is that any talk of a new cold-war is totally misguided. The Cold War was a confrontation of ideologies - today, like China, Russia has no desire to spread her politico-economic system to the rest of the world. Instead, Russia has entered into the hyper-competitive global capitalist game, and Mr. Putin intends to see Russia regain her status as a major economic, energy and diplomatic power in a multipolar world.
Comparing Russian with Chinese diplomacy, the Chinese appear happy to let Russia take the diplomatic flack, while they sit back, quietly and skillfully advancing their pawns. Russia, on the other hand, insistently demands her place at the top table because Russia feels herself to be a stake-holder in the current geopolitical system. No one in the Russian government is crazy enough to imagine that Russia can rule the world...nor even half of it. China, of course, may have other intentions.
It would be sheer madness for the West to continue antagonizing the Russian Bear, snatching defeat from the jaws of victory by pushing Russia into China's welcoming embrace.
Economics
From the investor's standpoint, Russia's recovery can be divided into three phases:
-In the immediate aftermath of the 1998 crisis, Russian Eurobonds offered yields of 50% per annum (Russia never missed a payment on her external debt). It was easy money, at least if one believed that the whole country was not about to disappear off the map!
-By 2000, the bonds were getting pricier, and it was time for a look at the blue chip natural resources stocks - mostly oil and gas. With Russia's top oil company, Lukoil trading at $6 (a P/E ratio of less than 2), and shares in the world's largest gas company - Gazprom - going for pennies, it was akin to shooting fish in a barrel.
Significantly, Russian domestic investors who - until then - had wisely avoided their own equity market were quick to recognize the new opportunities; they, and those few foreigners willing to make the leap of faith, enjoyed rich pickings.
-Now, seven years later, although the Russian RTS market index still trades at a tempting discount to its global emerging peers, the lowest-hanging fruit has already been picked. The blue chip equities still represent good value, but investors can no longer hope for 3-digit annual returns. Given the high taxation of oil exports, the Russian oil companies are becoming utilities - offering modest but unexciting profits at any realistic oil price, and the sharpest investors are looking further afield.
Russia's New Asian Century
Sometimes the accepted wisdom is right. The global economic center of gravity is currently shifting from the G7 countries towards the industrial powerhouses of Asia - also enriching countries such as Russia, Argentina and Brazil which supply the "Dragon economies" with the commodities they so crave.
Smart investors are surfing this wave. The commodities cycle turned in 2000 - although in nominal dollars commodities now seem expensive, their real inflation-adjusted prices are just now rising off of their historic lows. With Asian economies firing on all cylinders, commodities are set to run right off the charts.
The main engine for Russian economic growth will remain the supply of raw materials to the Asian dragons: not just oil and gas, but also metals (precious and industrial), ores and minerals, chemicals, fertilizers and forestry products. After 50 years as the world's top agricultural importer, Russia has become a significant exporter.
That said, as the Russian economy diversifies and Russia becomes a middle-income country, the best investment opportunities will be found the fastest-growing industries - companies oriented towards satisfying domestic demand: retail, construction, real estate, banking and insurance, telecoms, automobiles, etc. Yes, serious problems remain: creaking infrastructure, very uneven corporate governance (ranging from "international standards" to "simply dreadful"), too much bureaucracy and - like the world's other two fastest-growing economies, China and Vietnam, widespread corruption. Yet, over the past 8 years, investors have been richly rewarded for taking the risk - provided that is, that they are present on the ground in Moscow, run properly diversified portfolios, and keep a finger on the pulse.
Russia is a vital part of any emerging markets portfolio, and investors wishing to prosper over the coming years must have some exposure to these powerhouses of global growth. While US-listed ADRs allow direct purchase of the Russian blue-chips, it would be unfortunate to miss the mid-cap opportunities, and for those not inclined to follow the market full-time (including nights and weekends), it would be best to invest via funds. The Russian bear is back, flaunting his new horns!
When John - a man who does as good a job as anyone on earth rendering arcane economic theory accessible to non-specialists - asked me to write a brief review of Russian financial opportunities, I shuddered. I write a Russian strategy review entitled Truth and Beauty (and Russian Finance) which runs to a good 25 pages per month. Frankly, explaining Russia to the outside world is no less a challenge than explaining the arcana of Fed policy....or Einstein's General Theory of Relativity. And in just five pages...I hardly know where to begin...
Since the beginning of the Putin era, the kind reader will have been repeatedly warned of Russia's impending collapse. Hair-raising stories in the financial press told of dysfunctional government, criminal oligarchs, industrial decline, corruption and chaos. Yet oddly enough, since 1998 Russia can boast the world's best-performing equity market (the RTS Index has appreciated from 58 to >1930, i.e. more than 37-fold!) as well as the fastest GDP growth rate of any country outside of Asia. Why?
Neither of the two usual explanations: "it's just a bubble," or "oil prices!" hold much water. Markets can temporarily move out of sync with their fundamentals, but they tend to snap back fairly fast - witness the Russian Bubble of 1996-97 (or NASDAQ 2000). For a "bubble" to grow continuously for almost a decade would suggest that it had an unusually strong skin. As for oil prices, certainly, they have been the icing on the economic but then oil prices are high for Venezuela and Saudi Arabia too, yet their markets are in the tank. Furthermore, relatively high oil prices in 1995-96 did not benefit Russia - the notorious Russian Oligarchs pillaged their own country, pumping their export revenues abroad. As Russia starved, a few unscrupulous operators such as Mikhail Khodorkovsky became fabulously rich.
The resultant 1998 debt-crisis marked a watershed - over the ensuing years, Russia prepaid the lion's share of her foreign debt, while the economy has doubled in size; at $310bn foreign exchange reserves are now the world's third largest; inflation has fallen into the single digits for the first time in 20 years while Russia is rated investment-grade by all rating agencies.
Russia's spectacular recovery from the crisis was made possible by some tough belt-tightening. First, they stopped borrowing. Under Putin the tax system was revamped, with a 13% flat tax on income (Russian immigration forms are available on request!), provoking a huge increase in tax receipts. The government ran massive trade and budget surpluses, and the $100bn "rainy-day" Stabilization Fund meant to buffer the effects of commodity price volatility is now large enough to last an entire monsoon; Russia could maintain 2006 budget spending unchanged for four years at any oil price - Including zero.
With real revenue per capita growing at more than 10% per year, there is an explosion in Russia's middle class - retail distribution is growing like wildfire as vast shopping malls mushroom up around the major cities, consumer lending is rising to European levels, mobile phone penetration has surged to over 100%...and with several hundred thousand new automobile registrations each year, traffic in St. Petersburg and Moscow's is grinding to a halt (ah, for the good old days, when one could have safely stopped to have a picnic in the middle of any Soviet street...) For the first time ever, the average Russian can enjoy the things that Americans have long taken for granted: buying a car, a new washing-machine, and escaping the cold Russian winter for a quick flight to the beaches of Egypt.
Politics
While investors in the G7 countries can usually pretty much ignore the politics, in the developing countries, this is often the top economic consideration. Thus, to understand the current situation, we need a brief historical overview:
Unlike America, which has enjoyed two really good centuries, Russia's last millennium was - to put it mildly - difficult. It began with the catastrophic Mongol invasions, proceeded through Tsarism, devastation in the Napoleonic Wars, a largely wasted 19th Century, then the Bolshevik revolution, with renewed devastation in the two World Wars - where Russian losses dwarfed those of any other combatant.
By the mid-1980s when Mikhail Gorbachev came to power, the Soviet Union was showing the strain.
Collapsing commodity prices, rising popular expectations, the Afghan war, and an increasingly-restive Eastern Europe were major challenges to the Communist Party. Yet vitally for the understanding of current Russian policy, the Soviet Union had seen off far worse crises since the 1917 Revolution; and in 1986-89, while it was shaky, it was nowhere near collapse. Instead, the Soviet Union was the first empire in history to voluntarily legislate itself out of existence.
While this voluntary liquidation was greeted as a millennial event in the West, for the average Russian, it was a period of intense misery. Prices soared as the rouble lost all value; with the social and industrial infrastructures collapsing, hunger stalked the streets. Russia was repeatedly humiliated on the global stage.
Although well-intentioned Western leaders had vowed to respect Russia's security concerns, nature abhors a vacuum; the temptation for NATO to forget Reagan's promises and advance NATO's forward bases up to Russia's borders "just in case" proved irresistible. For ordinary Russians, the good-hearted Western powers and indeed, the very term "democracy" gradually became synonymous with hunger, chaos and national humiliation.
Economically, the 1990s were a lost decade. Russia had neither the historical experience of capitalism nor the institutions necessary to support a sudden liberalization. Instead, privatization benefited only a tiny fraction of society as the brutal "Oligarchs" gained control of entire industries by corruption and violence.
Some of these same men are now belatedly spinning themselves as "heroes for democracy and transparency." That many in the West are ready to believe such fables demonstrates the power of well-managed PR!
At Yeltsin's invitation, the Russian regions gradually broke away from central control; the regional elite - generally Soviet-era bosses-turned-privateers - built their independent kingdoms. The supposed Russian "free press" was firmly under the thumb of the Oligarchs who first demanded that their tame journalists ensure the dubious reelection of a desperately unpopular Boris Yeltsin in 1996, then, after winning the election, turned their fire on each other in the "Banker's Wars", helping to bring down the "Young Reformers" government and ushering in the 1998 financial crisis.
When Yeltsin's surprise resignation on New Year's Eve 2000 catapulted then-Prime Minister Vladimir Putin into the presidency, the latter found himself at the helm of a badly-holed ship. The Western press gave Putin little chance of success, predicting that, like Yeltsin before him, he would be hamstrung by the all-powerful Oligarchs and their closest allies, the corrupt regional governors.
In fact, Mr. Putin was made of far sterner stuff than anyone suspected. He quickly moved to break the power of the most arrogant of the Oligarchs, while reducing the regional governors to dependency on the Kremlin.
Tax and fiscal policy were totally revamped, reform legislation pushed through a newly-compliant Duma, vital energy resources were at least partially reclaimed by the State (like in every other major oil exporter) - and suddenly, Russia was back in business.
From Politics to Geopolitics
Many in the West have voiced concerns about the supposed loss of democratic freedoms - some perhaps sincere, but others clearly to advance their personal agendas.
Yes, Russian democracy remains very imperfect, although it is not intuitively obvious why Vladimir Putin, who regularly polls above 80% approval ratings, is any less "democratic" than was Boris Yeltsin, who rarely managed to make it into the 2 digits! Perhaps the systematically negative tone to Russian coverage by the foreign press since 2000 may have something to do with the fact that, while Yeltsin craved the approval of the West, Vladimir Putin has been far more focused upon courting his Russian electorate.
In any event, of the most successful emerging countries which rose from grinding rural poverty to first-world wealth in a single generation, - first Singapore, Korea and Taiwan; now China, Vietnam and Russia - none was remotely democratic, at least during their early transition phases. Of course, as countries become richer, their rising middle classes gradually demand more political representation. Russia is not there quite yet.
The good news, on the other hand, is that any talk of a new cold-war is totally misguided. The Cold War was a confrontation of ideologies - today, like China, Russia has no desire to spread her politico-economic system to the rest of the world. Instead, Russia has entered into the hyper-competitive global capitalist game, and Mr. Putin intends to see Russia regain her status as a major economic, energy and diplomatic power in a multipolar world.
Comparing Russian with Chinese diplomacy, the Chinese appear happy to let Russia take the diplomatic flack, while they sit back, quietly and skillfully advancing their pawns. Russia, on the other hand, insistently demands her place at the top table because Russia feels herself to be a stake-holder in the current geopolitical system. No one in the Russian government is crazy enough to imagine that Russia can rule the world...nor even half of it. China, of course, may have other intentions.
It would be sheer madness for the West to continue antagonizing the Russian Bear, snatching defeat from the jaws of victory by pushing Russia into China's welcoming embrace.
Economics
From the investor's standpoint, Russia's recovery can be divided into three phases:
-In the immediate aftermath of the 1998 crisis, Russian Eurobonds offered yields of 50% per annum (Russia never missed a payment on her external debt). It was easy money, at least if one believed that the whole country was not about to disappear off the map!
-By 2000, the bonds were getting pricier, and it was time for a look at the blue chip natural resources stocks - mostly oil and gas. With Russia's top oil company, Lukoil trading at $6 (a P/E ratio of less than 2), and shares in the world's largest gas company - Gazprom - going for pennies, it was akin to shooting fish in a barrel.
Significantly, Russian domestic investors who - until then - had wisely avoided their own equity market were quick to recognize the new opportunities; they, and those few foreigners willing to make the leap of faith, enjoyed rich pickings.
-Now, seven years later, although the Russian RTS market index still trades at a tempting discount to its global emerging peers, the lowest-hanging fruit has already been picked. The blue chip equities still represent good value, but investors can no longer hope for 3-digit annual returns. Given the high taxation of oil exports, the Russian oil companies are becoming utilities - offering modest but unexciting profits at any realistic oil price, and the sharpest investors are looking further afield.
Russia's New Asian Century
Sometimes the accepted wisdom is right. The global economic center of gravity is currently shifting from the G7 countries towards the industrial powerhouses of Asia - also enriching countries such as Russia, Argentina and Brazil which supply the "Dragon economies" with the commodities they so crave.
Smart investors are surfing this wave. The commodities cycle turned in 2000 - although in nominal dollars commodities now seem expensive, their real inflation-adjusted prices are just now rising off of their historic lows. With Asian economies firing on all cylinders, commodities are set to run right off the charts.
The main engine for Russian economic growth will remain the supply of raw materials to the Asian dragons: not just oil and gas, but also metals (precious and industrial), ores and minerals, chemicals, fertilizers and forestry products. After 50 years as the world's top agricultural importer, Russia has become a significant exporter.
That said, as the Russian economy diversifies and Russia becomes a middle-income country, the best investment opportunities will be found the fastest-growing industries - companies oriented towards satisfying domestic demand: retail, construction, real estate, banking and insurance, telecoms, automobiles, etc. Yes, serious problems remain: creaking infrastructure, very uneven corporate governance (ranging from "international standards" to "simply dreadful"), too much bureaucracy and - like the world's other two fastest-growing economies, China and Vietnam, widespread corruption. Yet, over the past 8 years, investors have been richly rewarded for taking the risk - provided that is, that they are present on the ground in Moscow, run properly diversified portfolios, and keep a finger on the pulse.
Russia is a vital part of any emerging markets portfolio, and investors wishing to prosper over the coming years must have some exposure to these powerhouses of global growth. While US-listed ADRs allow direct purchase of the Russian blue-chips, it would be unfortunate to miss the mid-cap opportunities, and for those not inclined to follow the market full-time (including nights and weekends), it would be best to invest via funds. The Russian bear is back, flaunting his new horns!
The Anti-Tax Haven Jihad
Today's comment is by Bob Bauman,
The Sovereign Society's Legal Counsel and a former Member of the United States House of Representatives from Maryland, (1973-1981).
I haven't studied Thucydides (471 BC - 400 BC) since my freshman year at Georgetown. But I remember this ancient Greek historian perfectly described the Athenian mood during the Peloponnesian war on the eve of the fateful decline of Athens' power. He said: "The ability to understand a question from all sides meant one was totally unfit for action. Fanatical enthusiasm was the mark of the real man."
Well in that sense, U.S. Senator Carl Levin (D-MI) is a "real man" because this politician is a certified fanatic when it comes to the subject of offshore tax havens. In the Athenian sense, Webster's definition of "fanatic" and "zealot" also describes Levin accurately. It says that "a fanatic and zealot both suggest excessive or overweening devotion to a cause or belief. Fanatic further implies unbalanced or obsessive behavior, as in 'a wild-eyed fanatic.' Zealot, only slightly less unfavorable in implication than fanatic, implies single-minded partisanship."
My less than flattering description of the owl-eyed Michigan senator is prompted by his introduction in the U.S. Senate of what he calls "The Stop Tax Haven Abuse Act," S.681. This billed is deceptively titled "A bill to restrict the use of offshore tax havens and abusive tax shelters to inappropriately avoid Federal taxation, and for other purposes." He is joined in this radical endeavor by the undistinguished Senator Norm Coleman (a sometime Republican from Minnesota) and the media darling presidential candidate of the moment, Senator Barack Obama (D-ILL). I say, shame on all of them, and may their ill-conceived bit of legislative trash swiftly receive the death it richly deserves.
Fear Not: This Bill Ain't Going Anywhere
Before I comment on the contents of this 68-page bill, let me offer an educated opinion about the chances of this monstrosity becoming law, based on more than 25 years on Capitol Hill (as both staff member and member of the House of Representatives).
Folks: this bill ain't going anywhere. With a narrow, one-vote Democrat margin in the Senate and President Bush's veto power, however shaky that may be, cooler heads are likely to prevail. Meanwhile, Levin and his Senate buddies can demagogue the issue and an ignorant, unquestioning media will report their blather as if it were truth.
Nothing fails like overreaching in politics. And the radical ideas embodied in this proposal amount to a legislative jihad against the free flow of international capital, expanding global investments, well established world banking practices and just plain common sense, economic and otherwise.
And that estimate does not even take into account the numerous inherent violations of legal and constitutional rights the bill embodies. That includes the provision which presumes all offshore financial activity equals tax evasion unless an individual can prove otherwise. This bill also effectively trashes the Fourth Amendment, which guarantees against illegal searches and seizures.
Legislative Monstrosities at Levin's Hand
But first a little background. Start with the fact that in 2001 Levin conned the gullible Bush White House into adopting some of the worst, post 9/11 parts of the PATRIOT Act. These Levin provisions helped destroy Americans' financial privacy and gave government police virtually unchecked power over U.S. financial and banking activity. Since then Levin, who clearly is the boss, and the supinely cooperative Coleman, jointly have used the U.S. Senate Permanent Subcommittee on Investigations, as a platform for their anti-tax haven jihad.
Last year the subcommittee conducted a Senate hearing circus that capped off a yearlong investigation that cost millions of taxpayer dollars. This so-called investigation produced a 401 page report that went so far as to advocate curtailing century old legal rights to create trusts, corporations and other entities to protect assets and advocated an end to all financial privacy.
"The Stop Tax Haven Abuse Act," S.681 builds on that trumped up hearing and report and goes over the edge in its zealous advocacy of destroying American freedoms, all under the ruse of collecting illegally unpaid taxes.
Millions of Americans enjoy the freedom of offshore financial activity. Nevertheless, but in their 2006 hearing based on only six cases, Levin and Coleman made the startling, illogical charge that US$40 to US$70 billion in U.S. taxes illegally was evaded each year by Americans' use of offshore financial activity. The Senators offered zero proof of such wild numbers, and even IRS Commissioner Mark Everson did not endorse these senatorial fantasies. In the latest propaganda barrage in support of their new bill, the supposed tax evasion amount has been magically boosted to US$100 million a year. Again, no proof offered.
Among other enormities in this legislation, the bill creates an unprecedented blacklist of 34 offshore jurisdictions presumed to be tax evasion sites. This presumption is based only on the fact they have high degrees of financial secrecy guaranteed by law. This legislation gives the U.S. Treasury free reign "to take special measures against foreign jurisdictions and financial institutions that impede U.S. tax enforcement." It also requires all U.S. financial institutions to report to the IRS any offshore financial activity by clients and impose taxes on offshore trust income used to buy real estate, artwork and jewelry for U.S. persons.
Anti-Offshore Garbage Aside, Here's What You Can Still Do Offshore
So not withstanding the slim chances that all this anti-offshore garbage will ever become law, please keep the following in mind...
It is legal to have and use an offshore bank account.
It is legal to create and donate assets to an offshore asset protection trust or family foundation.
It is legal to form and operate an international business corporation (IBC).
It is legal to acquire dual citizenship and a second passport.
It is legal voluntarily to end U.S. citizenship and thereby remove yourself from the U.S. tax system.
It is legal to purchase offshore life insurance and annuities that allowed deferred taxes.
It is legal to invest in offshore mutual and hedge funds, precious metals and real estate.
That's the way it looks from here,
BOB BAUMAN, Legal Counsel
The Sovereign Society's Legal Counsel and a former Member of the United States House of Representatives from Maryland, (1973-1981).
I haven't studied Thucydides (471 BC - 400 BC) since my freshman year at Georgetown. But I remember this ancient Greek historian perfectly described the Athenian mood during the Peloponnesian war on the eve of the fateful decline of Athens' power. He said: "The ability to understand a question from all sides meant one was totally unfit for action. Fanatical enthusiasm was the mark of the real man."
Well in that sense, U.S. Senator Carl Levin (D-MI) is a "real man" because this politician is a certified fanatic when it comes to the subject of offshore tax havens. In the Athenian sense, Webster's definition of "fanatic" and "zealot" also describes Levin accurately. It says that "a fanatic and zealot both suggest excessive or overweening devotion to a cause or belief. Fanatic further implies unbalanced or obsessive behavior, as in 'a wild-eyed fanatic.' Zealot, only slightly less unfavorable in implication than fanatic, implies single-minded partisanship."
My less than flattering description of the owl-eyed Michigan senator is prompted by his introduction in the U.S. Senate of what he calls "The Stop Tax Haven Abuse Act," S.681. This billed is deceptively titled "A bill to restrict the use of offshore tax havens and abusive tax shelters to inappropriately avoid Federal taxation, and for other purposes." He is joined in this radical endeavor by the undistinguished Senator Norm Coleman (a sometime Republican from Minnesota) and the media darling presidential candidate of the moment, Senator Barack Obama (D-ILL). I say, shame on all of them, and may their ill-conceived bit of legislative trash swiftly receive the death it richly deserves.
Fear Not: This Bill Ain't Going Anywhere
Before I comment on the contents of this 68-page bill, let me offer an educated opinion about the chances of this monstrosity becoming law, based on more than 25 years on Capitol Hill (as both staff member and member of the House of Representatives).
Folks: this bill ain't going anywhere. With a narrow, one-vote Democrat margin in the Senate and President Bush's veto power, however shaky that may be, cooler heads are likely to prevail. Meanwhile, Levin and his Senate buddies can demagogue the issue and an ignorant, unquestioning media will report their blather as if it were truth.
Nothing fails like overreaching in politics. And the radical ideas embodied in this proposal amount to a legislative jihad against the free flow of international capital, expanding global investments, well established world banking practices and just plain common sense, economic and otherwise.
And that estimate does not even take into account the numerous inherent violations of legal and constitutional rights the bill embodies. That includes the provision which presumes all offshore financial activity equals tax evasion unless an individual can prove otherwise. This bill also effectively trashes the Fourth Amendment, which guarantees against illegal searches and seizures.
Legislative Monstrosities at Levin's Hand
But first a little background. Start with the fact that in 2001 Levin conned the gullible Bush White House into adopting some of the worst, post 9/11 parts of the PATRIOT Act. These Levin provisions helped destroy Americans' financial privacy and gave government police virtually unchecked power over U.S. financial and banking activity. Since then Levin, who clearly is the boss, and the supinely cooperative Coleman, jointly have used the U.S. Senate Permanent Subcommittee on Investigations, as a platform for their anti-tax haven jihad.
Last year the subcommittee conducted a Senate hearing circus that capped off a yearlong investigation that cost millions of taxpayer dollars. This so-called investigation produced a 401 page report that went so far as to advocate curtailing century old legal rights to create trusts, corporations and other entities to protect assets and advocated an end to all financial privacy.
"The Stop Tax Haven Abuse Act," S.681 builds on that trumped up hearing and report and goes over the edge in its zealous advocacy of destroying American freedoms, all under the ruse of collecting illegally unpaid taxes.
Millions of Americans enjoy the freedom of offshore financial activity. Nevertheless, but in their 2006 hearing based on only six cases, Levin and Coleman made the startling, illogical charge that US$40 to US$70 billion in U.S. taxes illegally was evaded each year by Americans' use of offshore financial activity. The Senators offered zero proof of such wild numbers, and even IRS Commissioner Mark Everson did not endorse these senatorial fantasies. In the latest propaganda barrage in support of their new bill, the supposed tax evasion amount has been magically boosted to US$100 million a year. Again, no proof offered.
Among other enormities in this legislation, the bill creates an unprecedented blacklist of 34 offshore jurisdictions presumed to be tax evasion sites. This presumption is based only on the fact they have high degrees of financial secrecy guaranteed by law. This legislation gives the U.S. Treasury free reign "to take special measures against foreign jurisdictions and financial institutions that impede U.S. tax enforcement." It also requires all U.S. financial institutions to report to the IRS any offshore financial activity by clients and impose taxes on offshore trust income used to buy real estate, artwork and jewelry for U.S. persons.
Anti-Offshore Garbage Aside, Here's What You Can Still Do Offshore
So not withstanding the slim chances that all this anti-offshore garbage will ever become law, please keep the following in mind...
It is legal to have and use an offshore bank account.
It is legal to create and donate assets to an offshore asset protection trust or family foundation.
It is legal to form and operate an international business corporation (IBC).
It is legal to acquire dual citizenship and a second passport.
It is legal voluntarily to end U.S. citizenship and thereby remove yourself from the U.S. tax system.
It is legal to purchase offshore life insurance and annuities that allowed deferred taxes.
It is legal to invest in offshore mutual and hedge funds, precious metals and real estate.
That's the way it looks from here,
BOB BAUMAN, Legal Counsel
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