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Our April 2,
2007 Newsletter
Edition
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Surviving the
Possible Dollar Crisis:
.
We
often have clients that write in about banking matters, and
specifically of late, a large number of people asking if they should
divest themselves of the US Dollar and hold other currencies
instead. Which is to say, many people are indeed concerned about
a falling US Dollar. In addition, the current US Federal Reserve
Chairman, Ben Bernanke, very recently has been quoted as saying that
core inflation remains uncomfortably high and that the US Central Bank
continues its focus on inflation. If you are wondering why this
has happened, and one banking option to help you out, the following may
be of interest.
.
Ever
since the so-called stock market correction of 1987, and every time
after that date when there was either an economic or even other kind of
political crisis, the previous Fed Chairman, Alan Greenspan, opened the
proverbial floodgates by lowering interest rates. Surprisingly,
one would expect that a rash of easy money would cause consumer price
inflation, but it did not. What happened? Well, basically,
as you are already aware, American companies have been moving
manufacturing operations overseas to low wage jurisdictions as a
practice over the last twenty years. No surprise there.
However, because the same goods were being made with dramatically lower
wages, those companies could earn an even higher profit margin WITHOUT
increasing prices, or in some cases, actually lowering them. So,
over the years, retail consumer prices in the US for washing machines,
television sets, cell phones, clothing, shoes, car batteries and just
about anything else you can think of - have either stayed the same, or
have come down. But the other side to this story, and a key
component of the inflation numbers, is also domestic wages in the
US. Which is to say, for most average middle class citizens,
wages have really not gone up, or certainly not in tandem with the true
rate of inflation (as opposed to the much lower official inflation
reports as indicated by government statistics). In addition,
because companies can now use the threat of outsourcing or job transfer
to a lower wage jurisdiction, this has actually placed a downward
pressure on US domestic wages as well (see the news article below
regarding US retailer Circuit City). So the outcome has been,
very low officially reported inflation statistics (using the narrow
band of consumer prices which omit healthcare, education costs, fuel
and a number of other things that tend to skew the numbers
downward). In brief, all that inflated money was not seen being
reflected in consumer prices or wages, the traditional statistics we
think of when inflation is discussed.
.
If
the cheap money or inflated money supply did not go into consumer
prices, then where did it go? Good question, and the answer is it
went into assets, first US stocks and then US real estate in the form
of a classic economic bubble. Alan Greenspan himself passed
comment on the stock market bubble in 1996 declaring irrational
exuberance, which is a code term for speculation and a bubble market in
the true economic definition. Of course, the so-called dot.com
bust that occurred in the early part of this current decade did wipe
out about 7 Trillion Dollars of paper stock market profits and one
might say, officially signaled an end to the stock market bubble.
Unfortunately though, another bubble was forming in the real estate
market, which only lately has started to come into correction (although
many might predict there is more fallout to come). But the story
does not end there I must report. You see, aside from lowering
interest rates, the US Federal Reserve or Americas Central Bank, has
been printing money like no tomorrow. After all, when you
bring interest rates down to almost zero (one percent is close enough
to zero I think), then you cannot go any lower or use reduced interest
rates as an economic stimulus mechanism - but you can still print more
money, and so they did. While the very low interest rates (and
subsequent low mortgage interest rates) helped the real estate bubble
grow, overprinting of the money supply probably was the fuel additive
that really fired up the asset price increases (in real estate) over
the last few years. Of course, we are now going full circle and
are starting to see food costs and other traditional consumer price
inflation numbers going up as well (consumer prices are reported to
have jumped the first quarter of this year, and food costs especially
are where consumers will notice it). This makes sense, as the
asset bubbles deflate (stock market and real estate) there is nowhere
else to go but back into traditional consumer prices (and of course raw
commodities priced in US Dollars, such as sugar and cocoa for example,
have gone up to compensate for the devaluation or over printing of the
Dollar as well, which is being reflected in higher end product prices -
items such as breakfast cereal and so on).
.
So,
what do you do and what can you do when possibly the Central Bank of
your own country and maybe even your own government (in terms of fiscal
policy) is your worst financial enemy? The answer is to safe keep
your money in another country, with another government, and more
clearly stated, in another currency. Gold of course is one
traditional safe haven commodity during periods of inflation and many
of our clients have indeed done well buying gold over the years, but it
does not pay interest. So, if you want to try and maintain your
purchasing power, and need or want interest income, then the logical
answer is some form of interest bearing investment, albeit in another
currency. But where do you go to do this? Surely, in the
case of US citizens especially, local domestic banks in the US do NOT
offer savings accounts, time deposits or money market accounts in other
currencies. Therefore, you need to go abroad, but the problem is
that most banks in Europe will shut the door on you if you show up with
a US (and sometimes a Canadian) passport (most notably the banks in
Switzerland). But with that said, we have found a very well run,
small private bank in Europe (in old Europe, as Donny Rumsfeld used to
say) introduced to us by one of our long standing clients, that is
offering some very interesting money market accounts for investors (and
they are not so rude to you because of your passport). Of course,
this is a bank that caters to a certain kind of well-heeled person with
very personalized service (you might say, Swiss Banking the way it used
to be, not like it is today) and the account minimums for the money
market fund accounts start at US$25,000. However, if this what
you are looking for, they offer USD accounts paying slightly over 4
percent, Pound Sterling over 3.75 and New Zealand Dollars paying over
5.5 - Plus the time deposits or certificates of deposit are paying even
higher interest (check out the rates on two year USD, and one year
Aussie plus New Zealand Dollars especially). But the most
interesting of all is a special flex account, made up or divided among
a basket of four different currencies, which so far has yielded an
annual return of over 10 percent (so you get currency diversification
and higher yield in one account). Plus, I guess I forgot to
mention - in a country with some of the highest taxes in Europe, bank
accounts owned by foreigners (non EU countries) are locally
TAX-FREE. Interested? If so, send an email to: info@ascot-advisory.com
with PRIVATE BANK in the
header and please include your full name, address, telephone and email
and fax (if you have one). We will forward your details onto the
bank and an account officer from the banks private banking area will
follow up with you. But please only do so if you are seriously
interested and can qualify (they also offer safe keeping of securities,
gold and brokerage account services for account minimums of
US$100K). This bank has been around for over 30 years, customers
are assigned a private account officer that actually does things right
the first time, and they are the real deal in terms of true private
banking. If you have six digits in liquid assets and are
currently dealing with a bank that sends you to a call center in
Bangladesh or directs to an ATM machine instead of talking to a real
live human being - this will possibly become your new favorite European
bank without a
doubt.
.
.
DOMINICAN
REPUBLIC OCEAN VIEW REAL ESTATE:
.
One
of our clients recently called and said: HELP - Donald Trump has
invaded the country and I cannot find anything to buy in my price
range. Well, the honest answer is, the secret is out about the
Dominican Republic and I suppose it cuts both ways (Donald Trump has
purchased property in Punta Cana that he is planning to develop, and
one thing for sure is, I doubt it will be cheap). Which is to
say, certainly our clients that have purchased real estate in the past
have seen some attractive appreciation. On the other hand, new
buyers will find prices higher than they were in the past, and of
course some newer upscale properties almost stratospheric. With
that said, there are of course some reasonably priced properties on the
market, but one of the things we have noticed is an increasingly large
number of Americans and Canadians who are buying into higher end gated
communities (presumably planning for a place to get to - if getting is
required). With this idea in mind (the gated or secure community
concept), Joanne Hammond from the North Coast sent us a note regarding
some very nice new projects going up in that area. Prices range
from about US$110,000 for higher end one bedroom condos and go up from
there for the two and three bedroom models. But, some
commonalities for these new projects include a private Beach Bar -
Jacuzzi and or Club House for owners, high end kitchens (mahogany
cabinets) and baths, Air Conditioning, Telephone - Internet - Cable
services pre-installed, 24 hour security, and so on. On the topic
of housing, we recently had a chance to review a 5-Bedroom, 3500 square
foot home with an incredible ocean view for about US$500,000. If
that sounds like a high price tag, consider some of the other new homes
going up in some projects for about the same size (in many cases, much
smaller) for US$800,000 or more. So, the point is, if you are
looking for Caribbean beachfront or ocean view property, take your time
and look around. Should you wish to contact Joanne about some of
these properties, you can do so directly as follows:
.
Ms.
Joanne Hammond
Ocean
Side Realty
Direct
Telephone 809-571-1043 or Her Cell Phone 809-657-4141
Email:
joanne.remaxdr@gmail.com
.
.
.
IN
THE NEWS:
.
GERMANY
ENACTS HIKE OF RETIREMENT AGE FROM 65 TO 67 - March 30, 2007
.
Germany
enacted Friday a hike in its retirement age from 65 to 67, with the
Bundesrat upper house putting its seal on the legislation, which aims
to head off a crisis in ageing German society. With Germans
living longer, there are no longer enough active workers in the
workforce to fund pensions for the older generation, so the line
between the two groups is be gradually moved between 2012 and 2029.
.
http://www.eux.tv/
.
EDITORS NOTES:
We have talked about this before, and ALL of the so-called modern
industrialized welfare states have the same demographic problem.
Also, many of these pension schemes are nothing more than Ponzi
programs, which is why having LESS younger workers currently paying, in
relation to the number of older people taking out a pension check,
throws the whole thing into financial disarray. Keep on eye out,
as my bet is, they will be upping the eligible retirement age even
further in ALL the so-called wealthy welfare states (they already have
in the US and you can bet you have not seen the last age increase - to
be eligible for full benefits). Of course, one solution being
pushed (both directly as the case in Europe, and indirectly with a
blind eye towards illegal immigration in the US) is to increase young
immigrant workers (legal and illegal) as a way to get sufficient
numbers of younger workers in the door and in the system making welfare
contribution payments. So, now this would seem logical in
explaining why the politicians in the US Federal Government have been
almost ignoring the illegal immigration issue (in the US).
According to the news article directly below, illegal immigrant workers
in the US (using phony social security documents) have paid in US$65
BILLION during 2004 alone and this represents 10 percent of the Social
Security Programs cash flow. So, here is my analysis.
Business wants the illegal aliens, whom they can pay less, and it keeps
downward pressures on labor costs (why should we pay you US$10 per hour
when we can hire an illegal for US$4). The US Government knows
darn well that this US$65 Billion is FREE money, because the illegal
immigrants cannot go back and try to claim this money later on.
So, business is happy and the Federal Government is happy (at least as
far as the free money coming into Social Security). Who are the
losers in this? Well, the states and local municipalities for one
- which is WHY your local municipal real estate taxes are going
up. Which is to say, the direct costs of illegal immigration are
borne by the states in terms of public education and medical care
(Medicare and Medicaid are Federal Government welfare programs, but
they are administered at the State level and that money trickling down
from Uncle Samuel to the States has been drying up, leaving a huge
deficit). Want to know why the various States in the US are now
enacting their own immigration laws and cracking down? Financial
necessity is the answer - It is all about
economics.
.
.
SOCIAL
SECURITY LIABILITY FORESEEN
By
Stephen Dinan - The Washington Times - March 29, 2007
.
Un-credited
contributions to Social Security grew by nearly $300 billion from 2000
to 2004, a giant increase attributable mostly to illegal aliens using
erroneous Social Security numbers, and one seniors group said this will
become a major liability if those aliens are legalized. Our
government would willingly bankrupt the system even sooner by giving
billions of dollars to people who broke the laws of the United States,
said Shannon Benton, executive director of the Senior Citizens League,
which is releasing a report today based on the Social Security
Administration's numbers. Democrats and President Bush have
promised to try this year to pass an immigration bill that includes
legal status for the estimated 12 million to 20 million illegal aliens
now in the country. Under current law, illegal aliens are not entitled
to benefits for illegal work, but the bill says if they gain legal
status in the future they can go back and get credit for the work done
while illegal. In 2004, un-credited earnings -- Social Security
tax payments that can't be matched to valid Social Security numbers --
totaled $65 billion -- about 10 percent of the program's total income.
The amount of un-credited earnings stood at $301.8 billion in 1999, but
had grown to $585 billion by 2004, according to the Senior Citizens
League report.
.
http://washingtontimes.com/national/20070328-105704-6443r.htm
.
.
HALLIBURTON
PLANS TO HIRE 13,000 AMID MOVE TO DUBAI
By
Jim Krane, Associated Press Writer - March 14, 2007
.
DUBAI,
United Arab Emirates - Halliburton plans to hire more than 13,000 new
workers this year in the U.S. and elsewhere as it splits its
headquarters between Houston and Dubai, an executive said in a memo
obtained by The Associated Press on Wednesday. The oil service
firm's announcement this week that its chief executive officer, Dave
Lesar, would lead the company from a new headquarters in the Arab Gulf
state raised an outcry among some in the United States. A number
of congressional Democrats raised fears that the move would mean job
cuts in the United States and suspicions that Halliburton Co. was
trying to avoid U.S. taxes. The firm says it will remain incorporated
in Delaware and that the move would not affect its tax burden.
.
http://www.chron.com/disp/story.mpl/ap/tx/business/4631723.html
.
.
MANY HOUSTON OIL COMPANIES GOING WHERE THE
BUSINESS IS: United Arab Emirates. Houston Chronicle,
Midland Reporter-Telegram - 03/18/2007
.
HOUSTON
-- Halliburton Chairman and CEO David Lesar will likely see some
familiar faces when he opens a new corporate headquarters for the
oilfield services giant in Dubai. A number of other Houston oilfield
services firms, including Baker Hughes and Schlumberger, have recently
opened or expanded offices in the United Arab Emirates. And their goals
are all the same: to be near oil-rich nations in the Middle East and to
increase their business in the fast-growing Eastern Hemisphere.
.
http://www.mywesttexas.com/
.
EDITORS NOTES:
So, Halliburton is now moving its corporate headquarters to Dubai and
is not the only petroleum industry company to do so? They want to be
close to where the oil is because supposedly the wells are running dry
in Texas? Can that be right? Dr. Hubbard, and his Peak Oil
theory, was correct? Or is it something else? Indeed, Dubai
has NO income tax and no sales tax, even though Halliburton denies they
are making the move for this reason and of course will continue to be
taxed as a US corporation (so they say). However, aside from
this, the larger picture centers on Houston and many, many other US
cities as well. Which is to say, first we had outsourcing of
manufacturing, and now we have what can be called service companies
moving as well. In addition, according to Mr. Ali Daneshy in a
March 17 news article: India offers Dubai formidable technology
and human resources just a two-hour flight away. It also has a strong
and economical manufacturing base. Dubai and India can easily develop a
combination of business, technology, and manufacturing that could rival
Houston's. How long before Halliburton decides to use India's cheap
labor for its manufacturing needs? Other service companies will follow
suit. Aside from the comments by Mr. Daneshy - it has also
been reported that skilled engineers are in short supply in the US, and
need to be hired from India, Thailand and other so-called third world
nations whereby there are plenty of higher educated (and lower
salaried) engineers. So, what does this all mean for the future
of the United States? Who will be left behind if all the
companies and higher tech level jobs are someplace else, and the
workers who do those jobs someplace else as well? And in
addition, it would seem to be quite ironic that such companies are
seeking university graduates from so-called poor third world nations -
does it not?
.
You
can think whatever you like, but I see a very different US economically
and socially twenty years down the road, and I do not mean
better. Indeed, all of the modern industrialized first world
nations have the same problems, but the amount of government plus
individual personal debt of citizens in the US makes it even
worse. And of course we have the politicians, who seem to want to
corral all the middle-class people looking to get the heck out (while
they still can), as they (the politicians) are caught in a quagmire of
trying to fund increased social welfare costs for all the senior
citizen baby-boomers, while the jobs and tax revenues continue
disappearing. Seems to me, one would not wish to be one of the
people left behind, faced with higher taxes, no job and if a job -
lower wages (see the Circuit City story below), possible cuts in social
welfare benefits, inflation, a devalued currency (I think I should stop
here before I run out of space). Maybe that is why the good
Senator Levin is pushing for a new so-called Tax Abuse Bill aimed at
getting the US Treasury involved in a myriad of so-called tax evasion
matters, which apply to countries that do not disclose banking and
other information. Could it be the next game plan is to pull the
window down and stop the flight of capital out of the country, right
about the same time middle- class citizens begin to wise up?
Could it be that in the near future, your bank tells you they cannot
complete a wire transfer to Costa Rica for you - because that country
is listed as being uncooperative in US tax investigations (not to
mention all the other countries on the list)? Can it be that
large politically connected corporations can skip on out of town, but
the average Joe will not be permitted, or he will be allowed, but he
cannot take his money? Stay tuned, this sounds like one of those
- what do they call it? A mystery wrapped in an enigma, or is it
enema? I forget. In any event, Dubai is seemingly becoming
the country of choice for the wealthy and famous, of course zero income
tax does not hurt. Michael Jackson (Wacko Jacko, so say the
British) recently moved there. And in a country with sweltering
heat, they have an indoor ski slope so you can practice some
skiing. Even the bus stops are air-conditioned. What a
country.
.
.
JUDICIAL WATCH UNCOVERS CHERTOFF
IMPLETMENTATION MEMO ON SECURITY AND PROSPERITY PARTNERSHIP -
March 20, 2007
.
Judicial
Watch, the public interest group that investigates and prosecutes
government corruption, today released Department of Homeland Security
(DHS) records obtained under the provisions of the Freedom of
Information Act containing Secretary Michael Chertoff's September 22,
2005 Implementation Memorandum for the Security and Prosperity
Partnership (SPP). The records describe the agencies within the
Department of Homeland Security responsible for executing the
partnership's security agenda. According to the memorandum signed
by Secretary Chertoff: The Security and Prosperity Partnership has, in
addition to identifying a number of new action items, comprehensively
rolled up most of our existing homeland security-related policy
initiatives with Canada and Mexico, and ongoing action and reporting in
the various U.S.-Canada and U.S.-Mexico working groups led by DHS
should now be driven by a single agenda: the SPP. The
records also contain an information paper describing ten Prosperity
Pillar Working Groups, and the organization of the U.S.-Mexico Critical
Infrastructure Protection Work Group. Unlike previous records produced
by other federal agencies, the DHS records are heavily redacted to
withhold the names of the U.S., Mexican and Canadian government
officials carrying out the partnership's agenda across all three
countries.
.
http://www.prnewswire.com/
.
JW
OBTAINS DOCS RE. BORDER & TRAVEL - By Tom Fitton, March
16, 2007
.
Judicial
Watch, the public interest group that investigates and prosecutes
government corruption, today released Department of Homeland Security
records obtained under the provisions of the Freedom of Information Act
(FOIA) detailing the objectives and agenda of the Security and
Prosperity Partnership Traveler Screening Systems Working Group.
The US members of the working group included representatives from the
Department of Commerce, several agencies of the Department of Homeland
Security, the Department of State and the Department of Transportation.
The working group was tasked to develop deliverables to support
partnership initiatives including: 1) developing technical standards
for travel/nationality documents; 2) testing biometrics technology and
recommending screening enhancements for travelers bound for North
America; and, 3) exploring means of identifying third-country nationals
who overstayed. The working group also reached a conceptual agreement
for a One Card to facilitate cross-border movement between Mexico, the
United States and Canada.
.
http://www.theconservativevoice.com/article/23517.html
.
EDITORS NOTES:
Two things here. First off, one of the above articles says:
Unlike previous records produced by other federal agencies, the DHS
records are heavily redacted to withhold the names of the U.S., Mexican
and Canadian government officials carrying out the partnership's agenda
across all three countries. So, why is it exactly we are not
allowed to know who in all three governments are involved with
this? Oh well, there must be a good reason, especially in a free
democracy. Secondly, stay tuned for the new border crossing
E-Z-Pass. No fuss, no muss, no visa, just come on down.
Now, morally or ethically I have no problem with this.
Economically though, it concerns me. If 40 Million poor people
(and I am quite sure all law abiding, hard working folks every one of
them) have the chance to cross over (as it were) without hiding in the
back of pick-up truck or crawling through dirty sewers - now all
legally of course - what do you think they would have the tendency to
do? Stay where they are OR hop on the Greyhound bus? Of
course this brings us back to one of the previous articles above.
Which is to say, I will wager to bet, the border crossing E-Z-Pass
thingy coming in 2010 is aimed at appeasing the incredibly large
illegal immigrant population, and it makes political sense in terms of
the US Social Security issue. Meaning, the typical illegal
immigrant is young (probably under the age of 25). So, even IF
you tell these people they can become eligible to legally cross the
border, work, pay into Social Security, and collect pension benefits
later on, it really becomes a problem 40 years down the road. And
as typical of politicians, all the guys (and gals) currently in office
will be long dead and buried by then, making it someone else's
problem.
.
Regardless,
this still brings us back to the issue of downward pressure on
wages. I have a number of clients in a few different professions,
and one gentleman who is a pharmacist, is concerned. He says - I
make about US$3,500 per month working for one of the large pharmacy
chains (the one with the cute television commercials). He goes on
to ask: What is going to happen if a Mexican pharmacist comes up and
offers to do my job for US$1,000 per month? Will my current
employer say no? This is an interesting question and scenario to
ponder indeed, and has nothing to do with racism and everything to do
with economics. Of course the bureaucrats and politicians (the
ones whose names are not blocked off with a black marker on the DHS SPP
working group list) have said it will never happen. But my mind
does wonder, as the track record of politicians lying to the public, or
maybe we should simply say, not keeping their word, is a bit spotty at
best. I guess we will have to wait and see how all this works out.
.
.
CIRCUIT
CITY TO FIRE 3,400, HIRE LESS COSTLY WORKERS - By Mark Clothier
.
March
28 (Bloomberg) -- Circuit City Stores Inc., the second-largest U.S.
electronics retailer after Best Buy Co., fired 3,400 of its
highest-paid sales people and will hire replacements willing to work
for less. The company said its eliminating jobs that paid well
above market rates. Those who were fired can apply for the lower pay,
company spokesman Bill Cimino said today. He declined to give the wages
of the fired workers or the new hires. Circuit City, based in
Richmond, Virginia, also hired Goldman, Sachs & Co. to study a sale
of its 900 Canadian stores. The moves will reduce 2008 expenses
by $110 million and trim $140 million in annual spending in 2009. Sales
may be volatile during the first half of this fiscal year as the new
sales people learn their jobs, the company said today in a
statement. The fired employees will get severance pay. Today's
job cuts, as well as plans announced last month to close 600 stores and
cut 400 jobs, will result in a $145 million pretax charge in the fiscal
2007's fourth quarter. Circuit City pays about $10 to $11 an
hour, on average, said Rick Weinhart, an analyst with BMO Capital
Markets Corp. in New York. Entry level pay probably is close to $8 for
inexperienced workers, he said. Executive Pay - Chief Executive
Officer Philip Schoonover was paid $8.52 million in fiscal 2006,
including a salary of $975,000. Best Buy CEO Brad Anderson received
$3.85 million, including a $1.17 million salary. Circuit City is
trying to save money after reporting its first loss in six quarters in
December. Its stock, which rose 1.9 percent today, has fallen 21
percent over the past 12 months as profit from selling flat-panel
televisions plummeted. Circuit City, along with Best Buy, was
forced to slash TV prices during the 2006 holiday season after Wal-Mart
Stores Inc., Home Depot Inc. and CostCo Wholesale Corp. began selling
flat panels for less.
.
http://www.bloomberg.com/
.
EDITORS NOTES:
Here is a news story as reported by Bloomberg News - whereby a large US
retail chain is firing not such a small number of employees so they can
go out and employ cheaper ones (the laid off employees were earning
about US$10 - $11 per hour, at least this is considered to be an
exorbitant wage). And I wonder where they will find employees
willing to work for less?
.
.
QUEEN
BEATRIX ALSO A DUAL NATIONAL
By
Marina Brouwer and Patrick Dorder - March 6, 2007
.
Two
passports, dual nationality: more than one million Dutch citizens hold
Dutch nationality and at least one other. Nothing out of the ordinary
one would think, but this situation has prompted a fierce discussion,
which was initiated by the far-right populist Freedom Party led by
Geert Wilders. Should people holding dual nationality be allowed to
become an MP, a deputy minister or a minister? And is this debate
unique to the Netherlands? In Europe, Denmark and Austria demand
immigrants give up their nationality when they apply for
naturalization. Germany discourages dual nationality, but has no legal
barriers preventing anyone from holding high public office. The
United States - a melting pot par excellence - has no problem with
politicians holding dual nationality. Famous examples that come to mind
are former Secretary of State Madeleine Albright (US - Czech) and
California Governor Arnold Schwarzenegger (US - Austrian). However,
dual-nationality candidates for security-sensitive senior government
posts are subjected to a more thorough background checks.
Australia does have stricter rules. Its constitution dictates that MPs
and members of government cannot hold multiple nationalities. Professor
D'Oliveira suspects that Geert Wilders, the initiator of the Dutch
debate, has something similar in mind. But it will not be easy: First,
I would like to ask him about the dual nationality of Queen Beatrix and
Maxima, the new princess consort, (Princess Maxima also holds
Argentinian nationality). Argentina is one of the countries that forbid
its citizens to give up their nationality. They have multiple
nationalities. Our own queen, the previous queen and the one before her
- Beatrix, Juliana and Wilhelmina - all held British in addition to
Dutch nationality. And they would be expected to give that up. Why
would a deputy minister have to give up their dual nationality, but not
the queen?
.
http://www.radionetherlands.nl/currentaffairs/
.
EDITORS NOTES:
And the dual citizenship, dual nationality debate rages on. Now
we hear that Madeline Albright was a citizen of the Czech Republic
while acting as US Secretary of State. Imagine that. And to
think there is debate about average US citizens seeking dual
nationality. Interestingly enough, Ms. Albright was high up in
the government, in charge of the US State Department, AND responsible
for US foreign policy no less. The hypocrisy alone is enough to
give you a headache.
.
.
COLUMNIST
RUNS FOR THE BORDER - By Mariel Garza,
03/10/2007
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WITH
little fanfare, something momentous occurred the other day. This
thoroughly American girl became a Mexican-American in the truest sense.
For the cost of $13 and several official documents, I applied for and
was granted Mexican nationality. I didn't do it as a political
statement. I didn't do it because I want to rid myself of my United
States nationality. I didn't do it because I love my father's native
land more than my own. Rather, I did it for the same reason that
generations of Americans have done crazy, risky, and brazenly glorious
things: I did it because I could. And I could because it's not
only Americans who are worried about the sheer number of Mexicans
settling on this side of the border. Many Mexicans are worried about it
too. When a good chunk of your population suddenly ups and takes off
for another land, and when your economy depends on these expats sending
billions of dollars back, you'd be stupid not to be at least a little
concerned. And to maybe think up ways to lure some of them back,
especially the prosperous ones. To that end, the Mexican
government decided about a decade ago to make it easy for expats and
their offspring who had made lives - legally - in the U.S. to reclaim
their nationality. At that time, Mexicans who became U.S. citizens lost
both their Mexican citizenship and their nationality. (Mexico
differentiates between nationality and citizenship, though the former
essentially guarantees the granting of the latter, should one want it.)
What was most remarkable about the law change is that it applied not
just to former Mexicans, but also to their kids - no matter if they
were born in Guadalajara or, like me, in Indianapolis. I don't
know how many people have exercised this option. I only know one other
person who's done it - an architect friend who doesn't use it in any
practical sense. It just appeals to the jet-setter in him to have dual
nationality. But I can tell you that the Mexican consulate in Los
Angeles has an entire Nacionalidad department for processing
applications such as mine. On my numerous trips to the departments I
waited among handfuls of other Americanized offspring of Mexican-born
parents.
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http://www.dailynews.com/marielgarza/ci_5407204
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EDITORS NOTES:
Thirteen bucks for Mexican Citizenship? I guess it really is true
- things are cheaper in Mexico. You can't even buy a decent pair
of bedroom slippers for thirteen bucks anymore - can you? In any
event, the Mexican Government is not so dumb. The article infers
that the Mexican Government wants to lure back their prosperous, best
and brightest (at least that is the way I interpret it). Imagine
that? Check out your family tree, maybe there is a mariachi in
there someplace. But seriously, you have to give the Mexican
Government credit for being so utterly brilliant. They send a
large portion of their poor people to the US (and there will be more
with what I like to call the E-Z-Pass deal being proposed), the US tax
payers end up footing the bill to pay for a whole number of social
welfare or US government benefits (medical care, free public education,
plus food stamps - if they qualify with phony social security
documents, etcetera and so on) AND to boot, all these Mexicans send
cash back home every month, boosting the Mexican economy. You
have to love it. And now, those that have made it, or otherwise
have obtained an education and a few dollars (or otherwise have become
members of the US middle class, economically speaking) are invited to
come on back - for thirteen dollars. I am not trying to be
sarcastic as I think the whole thing is genius, pure genius. Too
bad the US politicians are not so smart. Maybe one should
consider moving to Mexico, those guys seem like they know what they are
doing.
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CITY NATIVE DISCUSSES TRADING IN U.S.
CITIZENSHIP TO LIVE FULL TIME IN MEXICO
By Grant Welker, Herald News Staff Reporter - 03/25/2007
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Millions
of immigrants come to the United States in search of better
opportunities, but Fall River native Earl Mel Suneson did the opposite,
moving to Mexico while in his 20s, and thrived. The 85-year-old, who
was born and raised on President Avenue, offers a unique viewpoint on
immigration and nationalism at a time when both have become popular
topics in the area. Suneson moved to Mexico almost 50 years ago
after marrying a Mexican woman. He made riches developing land in
Puerto Vallarta, the Pacific resort city halfway down the coast.
He is a Mexican resident, not an American, Suneson points out early on.
He certainly isn't anti-American and says he won't criticize the
country as a non-resident, but he doesn't understand how a person could
split their loyalties to different countries and have dual-citizenship.
He was offered dual-citizenship when in Texas, but declined, to the
shock of the naturalization worker who asked. People are willing
to die for this, I was told, Suneson said. But I can't see how
someone could have an allegiance to more than one country. For
years people would ask Suneson where he came from and would ask what an
American was doing living in Mexico. So, finally, he started telling
people he was Swedish, which is technically his nationality. It worked,
and he never got the same response from people again. Many of his
fellow Mexicans have a sense of envy and animosity toward Americans, he
said. It started when the United States took land that is now Texas,
New Mexico, Arizona and California from Mexico in the 1800s. Today,
it's the wealth and the way Americans need to have it their way,
Suneson explains. He also addressed the perception in the United
States that Mexico and its people are poor. The standards of living are
very different, but Mexico isn't exactly a third-world country, he said.
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http://www.zwire.com/
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PALM
BAY MULLS SERVICE CUTS
By
Linda Jump, Florida Today, March 21, 2007
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PALM
BAY - As their city manager talked of cutting Fourth of July fireworks
and closing the community center in the wake of proposed property tax
reform, the council members who have the final say on the budget
worried such speculation was nothing more than scare tactics.
Councilman Ed Geier said angrily that he doesn't want to indicate that
the city plans to eliminate any services. I don't want to hear
anything about proposals to close anything, he said. He was
reacting to City Manager Lee Feldman's list of examples of areas that
could be affected if the city loses nearly half of its property tax
revenue if a House proposal is enacted. The list was discussed
Tuesday at a special meeting of the city council on that centered on
the potential local impact of property tax reform. I plan to give
council a list of services they can pick and choose from as policy
alternatives, Feldman said. He offered several examples that
clearly agitated the council, include saving $590,000 a year by closing
the community center, $750,000 by not building another fire station as
planned and $618,000 by reducing fire response teams from four to three
members. Other examples include saving $414,000 by eliminating
school crossing guards, $716,000 by cutting special events such as the
Fourth of July celebration and December holiday parade, $167,000 by
closing the paintball park and $536,000 by eliminating most of the
economic development department. We're running on a whole lot of
assumptions, Councilman Andy Anderson said. That may be, Feldman
said, but city leaders will have some hard financial choices if the
state legislature adopts proposed property tax reforms. He said
the city could lose 45 percent of its current property tax income, or
about $11.8 million, if two House proposals to eliminate some property
taxes on homesteaded properties and roll back taxes to 2001 levels are
approved. He said about 19 percent of the city's budget comes
from property taxes. To make up for that loss, the city would
have to be promised 1.6 cents of a state-proposed 2.5 cents sales tax
increase, something that city officials, doubt would happen.
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http://www.floridatoday.com/
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PUSH
AHEAD ON PROPERTY-TAX REFORM - March 18, 2007
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Cities
and counties finished up work on budgets last week, and school
districts will do the same in coming weeks. Since these local
governments collect the lion's share of property taxes, property owners
will be keenly interested in the result. They should brace themselves
for higher tax bills, from either a hike in rates, inflationary
increases in real estate values or both. That will put property
owners in the proper mood for watching the Iowa Legislature as it
tackles the perennial issue of property taxes. The Legislature's
consideration of property taxes as local budgets are being drawn up
should keep the discussion focused on why this issue keeps rising to
the surface: Property taxes pay for the vast majority of local
services, including schools, law enforcement, streets, libraries and
parks. Communities struggle to pay for the rising cost of these
services, yet taxpayers are increasingly wary of rising property taxes.
Making matters worse, the property-tax system is shot through with
inequities and burdensome complexities.
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http://desmoinesregister.com/
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EDITORS NOTES:
First we told you that local municipal governments are raising property
taxes through the roof, literally in some cases. Now of course
the backlash is taxpayer revolt, excuse me, reform. Of course, no
or less money translates into no or reduced government services, and of
course there is talk in Palm Bay - Florida about canceling July
4th. Can you imagine? I can speculate the good citizens of
Palm Bay being told the following: We hereby announce
cancellation of July 4th, our sacred national holiday, because we
cannot afford it. I have to tell you; it is not easy being
broke.
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NEW
BUDGET MEANS MORE TAXES
By
Jon Kyl, Tucson Citizen - March 29, 2007
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If
there's one thing every American on a budget knows, it's that you can't
have it all.
Americans
know that if you increase spending in one area of your budget, you have
to limit spending somewhere else - or risk going into debt. And
we know that, if you're already in debt, you have to cut back to pay
the money you owe. The budget claims to balance the federal
budget by 2012, and produce a surplus, while spending approximately
$150 billion more than the president's proposed over the next five
years. At first, proponents argue that all of this could be
accomplished by closing or narrowing the tax gap, which is the
difference between what the government expects to collect in taxes and
what it actually collects. But as The New York Times recently
reported, even Senate Budget Committee Chairman Kent Conrad conceded
that reducing the so-called tax gap would not provide enough money on
its own. Without any way of paying for these spending increases,
Democrats are left with their old standby: raising taxes - and the
budget proposal does just that. By failing to extend the 2001 and
2003 Republican tax relief initiatives; the budget will result in a
$900 billion tax increase over the next five years - the largest tax
increase in U.S. history. Beginning in 2010, millions of American
families would face punishing tax increases. Families with the lowest
incomes would face the heaviest increases.
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http://www.tucsoncitizen.com/daily/opinion/46400.php
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EDITORS NOTES:
The budget will result in a $900 Billion tax increase over the next
five years - THE LARGEST TAX INCREASE IN US HISTORY. I hate to
say I told you so, but no one likes a wise guy (so, just this once, I
will keep quiet). One of clients recently wrote in to say that
AMT stands for All More Taxes. Sounds about right.
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READERS
WRITE IN:
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John
- I was considering buying a condominium in Panama and enter the
Pensionado Program but have since discovered that their real estate
property taxes were very high. Being 2.15% for values over
$250,000. For a $350,000 condo that would be $7300US per year!!
Add to that a property purchase tax of 2 percent, $7000USD or
more, I start to lose that hope of escaping North American
taxes. The once 15-year moratorium on property taxes in
Panama is now 5 years and my reasons to expatriate start to
vanish. May be its time to move on to another country wherever it
is? They are learning the trick pluck the goose only enough so
that it doesn't squawk. In Panama I don't believe you can deduct
mortgage expenses against any income you may have. Do you think
the formula may be better in the Dominican Republic? I must keep
in mind what you said - it is humid, humid, humid, and sticky in Panama
City with no air conditioning in most condos. Or am I too late
and missed the boat, as construction prices seem to be going through
the roof?
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EDITORS REPLY:
Well, first off, I have lived in Panama, and we have a representative
office in Panama, and our clients are quite active in terms of company
formation and other things as well. In short, there are a number
of attractive things about Panama, but if focusing exclusively on real
estate - you certainly are correct in that the 15-year tax-free deal on
real estate is coming to a close (in terms of real estate or property
taxes). And in addition, it is also true that people that
benefited from zero real estate property taxes will be getting hit with
a new tax bill fairly soon. If you are retired, this may be an
important factor when calculating your expenses. Plus it is
extremely humid in Panama City, but of course the mountain areas
(Boquete, Volcan, Baru, etc.) are very pleasant and why such places
have been inundated with foreigners in recent years.
However, one correction I want to make is that almost ALL of the new
higher end apartments are outfitted with central air or split
air-conditioning units, although that may be a rare thing in lower
income housing. But there still are some real estate bargains in
Panama. Howeverm perhaps it is true that you would need to focus
on some of the, shall we say, undiscovered areas (read no tourists).
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In
any event, you ask about the Dominican Republic. Well, I do think
that per square meter (or square foot if you prefer) you still get more
for your money in Santo Domingo as opposed to Panama City. Which
is to say, a new apartment in Panama for that has 1,000 square feet,
will cost the same as a 1,500 square foot new upper end apartment in
Santo Domingo. Also, you can still find very nice 2,000 square
foot (and up) middle class homes in Santo Domingo for about US$140,000
or so. Very recently we found a small home is a nice upper middle
class residential area for a client, selling for about US$90,000.
It needed a little bit of an upgrade and TLC, but a decent buy just the
same considering the neighborhood and the price. However, I do
think one of the major differences that you ask about has to do with
annual real estate taxes. IF a single family residential home in
the Dominican Republic is your primary residence, and is valued at RD$5
Million Pesos or less (about US$152,000) then you pay ZERO annual
property taxes. If over that amount, then you pay a tax based on
the percentage of the value over RD$5 Million. So, if your
housing budget is in that price range, I would have to say that the
Dominican Republic is going to be a less costly place in comparison to
the same valued home in Panama (in terms of the real estate taxes).
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ANOTHER READER
WRITES:
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In
this article by John Schroder - Author of the Ascot Advisory News
letter, he states in the second paragraph: Real Estate ownership
is not reported, is not required to be reported and is a non-taxable
asset for American or Europeans in terms of any world-wide taxation
reporting initiatives. My question is, is this stated in the IRS
rules anywhere, or is this a secret? If you purchased property in
a foreign country and then sold it at a profit, are you saying that you
don't have to pay taxes on the profit? Please advise.
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EDITORS REPLY:
Well, the comment was strictly made in terms of the reporting of assets
held abroad and for Americans (US citizens are technically required to
report bank accounts, brokerage accounts, and so on) - and it is not a
secret, unless of course you do not know about it, or you have not read
the code to cipher what it says (and what it does not say). Which
is to say, the ownership of real estate itself was not a reportable
asset as were (is) financial assets or accounts. But, capital
gains are of course another matter, and it has always been the case
that capital gains were subject to US taxation, if a US citizen owned
that asset regardless where it was located. Of course, some
people did report ownership to try and take advantage of certain kinds
of deductions that might be available, but that is another matter and
for another reason. With that said, I hate to mention anything in
the newsletter or in articles because I feel like some politician picks
up on it, and six months later there is some new bill or change to the
US tax code. Of course I am referring to this Tax Abuse Act
presented by Mr. Levin and Mr. Obama, which NOW will specifically
require the reporting of real estate held abroad by juridical
entities. So, perhaps all of this is a mute point. Then
again, there are still some very legal and legitimate ways to hold
title to a number of assets, and for obvious reasons, I will not be
talking about them here.
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