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Our May 15, 2007
Newsletter
Edition
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IN
THE NEWS:
.
MOODY'S UPGRADES DOMINICAN REPUBLIC CREDIT
RATING - May 2, 2007
.
NEW
YORK, May 2 (Reuters) - Moody's Investors Service upgraded on Tuesday
the Dominican Republic's debt ratings saying the country posted a
stronger-than-expected recovery from its banking and currency crisis in
2003. Macroeconomic stability has been restored, and the country
is experiencing above-trend growth with GDP increasing at an average
annual rate of 10 percent during 2005 and 2006, Moody's analyst Mauro
Leos said in a statement.
.
http://www.reuters.com/article/bondsNews/idUSWNA165120070502
.
EDITORS NOTES:
The April 30 edition of Latin Business Chronicle reports:
Exceptional economic growth with single digit inflation forecasted to
continue through 2007, combined with a stable exchange rate, has laid
the basis for welcoming new investors, says Kevin Manning, an advisor
to U.S.-based energy company AES and a former president of the American
Chamber of Commerce. Last year, the Dominican economy grew by
10.7 percent, more than any other country in Latin America. It was also
the best performance in more than 25 years.
.
But
that is only part of the economic story. Want to know how to
protect yourself against a continuing devaluation of the US Dollar
(inflation)? The answer is to invest in other countries (in other
currencies) and in terms of asset classes as a hedge - real estate and
gold. Interestingly enough, the Dominican Peso has appreciated
against the US Dollar by about 3 percent this year. Does this
mean the Dominican Peso is a stronger currency? Not really, but
rather the US Dollar is heading for the basement. However, unlike
the case of Americans finding investments in Europe now extremely
expensive because of the strength of the Euro (and devaluation of the
dollar), the currency exchange rates between the US Dollar and
the Dominican Peso have remained within a fairly tight band recently,
making the Dominican Republic still very affordable for US citizens,
not to mention that the Dominican Republic still has some of the lowest
real estate prices in the entire Caribbean, but that may not last for
too long. While real estate in the DR is about 30 percent less
expensive than elsewhere in the Caribbean, the Dominican Republic has
been the focal point for an array of large-scale developments
including: Donald Trump's $2 billion condominium complex, Trump at Cap
Cana, and the new Aquabella Beach, Spa and Marina on Juan Dolio Beach
-- a 170 unit, twenty story affordable luxury development with units
starting at $220,000. Eddie Shapiro, Founder and CEO of Nest
Seekers International says: As the overall cost of living in the
Dominican Republic is relatively low, and with virtually no significant
restrictions on foreign nationals owning real estate there, it is
becoming an increasingly popular target for luxury real estate
purchases. My company's rapid growth in this region demonstrates
the new dominance of the Dominican Republic in the international real
estate market -- I believe this real estate trend is bound to continue
for some time.
.
Is
the Dominican Republic real estate market just another bubble waiting
to pop? Well, considering that the overwhelming majority of
purchases by foreigners are done for CASH, the answer is probably
not. Which is to say, the real estate market in any country, just
as any other market - such as the stock market for example, will have
its ups and downs. BUT, when you have a real estate market that
has run up primarily due to cheap no money down, no equity financing,
the run up is based on borrowed money and shaky ground to say the least
(and we are now starting to see the fallout in the US). However,
when any market is based on primarily CASH buyers, this fact alone
eliminates the possibility of foreclosures and vast amounts of
abandoned properties being sold at auction later on. You do not
need a doctorate degree in economics to figure that one out. And
while it is true that the DR has become a new hot spot for higher end
luxury properties, it is also true that there is plenty of very
reasonable priced middle class housing as well. Many, many of our
clients have gotten out of the US bubble in the nick of time, sold
their US$450,000 garage sized home in the US, have bought a larger
better home in the Dominican Republic (for half the price or less of
the US property) - and put the remainder in the bank to draw a monthly
income from the interest. It may sound unbelievable, but it
happens to be true.
.
.
WHY
DOESN'T THE US GOVERNMENT LIKE ONLINE GOLD?
By
Charles Arthur - May 3, 2007 - The Guardian
.
Because
in its view E-Gold, a company offering an online money transfer system,
has been a highly favored method of payment by operators of investment
scams, credit card and identity fraud, and sellers of online child
pornography. Now it has charged E-Gold and its parent company,
Gold & Silver Reserve, along with their three owners, with money
laundering and unlicensed money transmission. The move brought an
angry denunciation and denial from E-Gold's founder, Douglas
Jackson. The problem with E-Gold, for the US federal authorities,
was that absolutely anyone could create an account using any name
(including a fake one), and then wire money from person to person or
place to place, swapping it in and out of digital e-gold and into real
currency. In a kinder, simpler world, it would be ideal. But in
January 2006 Business Week magazine noted US officials' concern that
E-Gold was being used by criminals. (The FBI had raided it in December
2005.) That article also brought an angry response from Jackson,
who said: The article chose to focus through anecdote and suspicion
only on an exception - criminal abuse - and ignores the overwhelming
majority of e-gold usage. No date has been set for any trial.
.
http://technology.guardian.co.uk/weekly/story/0,,2070573,00.html
.
.
E-GOLD
FOUNDER FIRES BACK AT INDICTMENTS
By
Dawn Kawamoto, CNET News, May 1, 2007
.
In
a lengthy rebuke, the founder of online-payment system provider E-Gold
and its parent company disputed a four-count indictment that accused
the company of turning a blind eye to child pornography and stolen
credit card numbers. E-Gold founder Douglas Jackson said he
vigorously denies the charges a federal grand jury handed down Monday
against E-Gold, parent company Gold & Silver Reserve, himself and
company directors Barry Downey and Reid Jackson. The grand-jury
indictment alleged that the defendants engaged in money laundering,
operated an unlicensed money-transmitting business and conspired to
commit the offenses. It accused the defendants of allowing transactions
to be processed between 1999 and December 2005, with very little
restrictions or checks on an account holder's identity, even when they
knew that a transaction was the result of criminal activity such as an
investment scam or child pornography. With regard to child
pornography, the government knows full well that their allegations are
false, yet they highlight these irresponsible and purposely damaging
statements in order to demonize E-Gold in the eyes of the public,
Jackson said in a statement. He noted that Nevis-based E-Gold is
a founding member of the National Center for Missing and Exploited
Children's Financial Coalition Against Child Pornography. He said the
payment system is structured to allow the company to track transactions
more closely than other heavily regulated systems. Gold &
Silver Reserve also operates an online-exchange service, OmniPay, that
follows a policy of accepting money payments only by bank wire, Jackson
said. If bank wires aren't already clean, then what is? Jackson
asked. He also denied the money-laundering allegations, saying
E-Gold runs a closed-payment system that does not accept money payments
in any form and does not own any form of national currency. As
part of the indictments, the government issued warrants to seize most
of the accounts that E-Gold and its parent company personally held,
representing approximately $1.5 million in E-Gold funds. The seizures
resulted in both companies losing most of their operating funds,
Jackson said.
.
http://news.zdnet.com/2100-9588_22-6180552.html
.
.
GOLD
UNDER ATTACK BY U.S. GOVT., COULD THE U.S. BAN GOLD AGAIN?
By
Dan Denning- May 3, 2007
.
Did
you see that the U.S. Department of Justice indicted on-line firm
e-gold on charges of money laundering, conspiracy, and operating an
un-licensed money transmitting business? The government claims e-gold's
easy-to- use private transaction service makes it easier for criminals
to launder money. For good measure, the Feds added that a digital
payments system in gold would be favored by terrorists, child
pornographers, and other real or imagined enemies of the Nation state
and civil society. Did it occur to the Feds that maybe people
want to use gold as money because they have no confidence in the
fraudulent, counterfeit product currently printed by the U.S.
Treasury? Governments fear gold because it competes with their
own paper currency as a viable and preferred means of exchange AND a
store of value. So, under the guise that only people with something to
hide would use a digital payment system backed by gold, the U.S.
government is hoping to obscure what the very existence of a company
like e-gold signals: a growing lack of trust in the money of the
American government. As we mentioned yesterday, the huge bull
market in resources and resource stocks is also a sign of U.S. dollar
diversification. Investors and foreign governments are storing (and
hoarding) their wealth in more tangible sources of value rather than
U.S. currency or bonds. If anything, the Department of Justices attack
on e-gold is a sign that officials in Washington are getting nervous.
They don't want any competition for the dollar. They have lawyers and
jails and are willing to use both. Incidentally, we asked a
lawyer friend of ours who works for the DOJ what he thought of this
case. Off the record he wrote, I wonder how, with all that anonymity
(in the creation of e-gold accounts), the government will show that the
company knew that they were receiving money from these illicit sources.
This is the crux of the case. Knowingly receiving stolen property is a
crime and having any involvement with kiddy porn is probably enough for
a jury to convict anyone, but I would venture a guess that every bank
in the world, without exception, possesses proceeds from criminal
gains. However, most depositors don't inform the teller where the
deposited money came from. The U.S. government has ruined
American money. It is the biggest fraudster of them all. People are
seeking alternatives like e-gold to protect themselves from the
governments monopolistic debasement of the currency. Trying to make
alternatives to that money illegal or criminal doesn't change the fact
that the money is suspect. It just alerts the public that something is
horribly wrong with Americas currency. This is good for gold, if you
can keep it. Which brings us to an obvious question. Can the U.S.
government again make gold ownership illegal? Will the U.S. government
again confiscate gold?
.
http://www.dailyreckoning.com.au/e-gold/2007/05/03/
.
EDITORS NOTES:
Such a service is a very interesting and valid idea, and some of our
clients have told me they have such an account (there are a few similar
companies to E-Gold out there, just to be clear). The number one
and number two reasons for doing so? Privacy or anonymous account
ownership, and the ability to maintain some assets in gold plus have
the ability to pay for bills or purchases without having to convert it
into a paper currency. In other words, a very easy way to pay
someone electronically in gold. Not a bad idea really, although
the limitations to it has been that the number of persons or merchants
tied in are not to the extent of the current major bank issued credit
cards, making for a somewhat limited use in terms of who are members or
have accounts, But, obviously the hope of the founders was it
would catch on.
.
The
above article by Dan Denning raises the issue of possible gold
confiscation as one of his points, but I see another more pressing
angle to all this. Which is to say, I have to think that the
repeat of private gold confiscation by the US government (which DID
take place under the Roosevelt administration during the depression) is
less of a possibility, but rather a crack down on any sort of anonymous
asset movement system, as a modus operandi for the war on taxes as the
new paradigm going forward. You did not hear of that new
war? Actually it is my terminology, but basically it involves the
new undeclared war underway regarding taxation issues, money movements,
asset transfers, dual citizenship, tax havens, and related items.
A somewhat odd thing really when you think about it. I mean, tax
havens have been around for 40 or 50 years in some cases, and the newer
ones about 25 years. All of a sudden now it is a problem or cause
for concern (no one seemed to curdle their cream over it before, during
the 1960s, 70s or 80s)? According to the information provided,
this E-Gold service has been around for something to the order of 10 to
15 years (they say it started in the early 1990s). And now, all
of a sudden, it too is a den of iniquity? Maybe, but then again
who knows? The owner of this service seemed to have set it up so
that if he did not know who the underlying clients were, and that was
the whole point I would imagine (privacy). And of course, the
owner of E-Gold says cash, money orders and even checks were not
permitted - ONLY bank wire transfers as a way to initially fund an
account. And with that he asks a valid question - Does this mean
that all those banks whereby such persons had a bank account to begin
with are guilty of money laundering as well?
.
The
bottom line, this is nothing more than the same thing in an on-going
theme or agenda. Which is to say, now that banking and tax havens
have gone on-line and become truly democratic the result (it is not
just for the super wealthy anymore as the middle class have figured how
to log-on big time), is that the politicians are restless. In any
event, I honestly do not know if the founder of E-Gold, or his
partners, is guilty of any wrong doing or not. I can say though,
he was guilty of being naive. The business was set up and
operated out of Nevis, and I have to guess it was perfectly fine and
legal as far as the government in Nevis was concerned. But to maintain
an office and work out of Florida? To keep customer records and
accounting files inside the US while operating an offshore gold
service? Come on, what was this guy thinking? That he could
offer an anonymous and non-reportable way for people to own and move
gold around electronically - and do it from within the confines of the
bankrupt welfare state? Did he think the constitution was going
to protect him? That document has been folded up and put behind
the cabinet along with grandmas old spice cake recipe. And the
charge that the business was un-licensed? It was licensed - in
Nevis. The problem was, his business was there, but he was
not.
.
.
OFFSHORE
CENTERES TRY TO DISPEL EVASION IMAGE
By
Jeremy Grant in Washington - May 8, 2007
.
To
many people the Cayman Islands represent little more than a location
for a sun-soaked Caribbean getaway. But to Max Baucus, a US
senator, they are where millions of unpaid US tax dollars could be
stashed - and he claims to have a photograph to prove it. At a
Senate hearing into offshore tax havens last week, the Montana Democrat
held up the image of a five-story building in the Caymans, enlarged for
the benefit of the television cameras present. Over 12,000
corporations are lodged in there and the suspicion is that they are
shell companies whose sole purpose is to evade US taxes, he
thundered. He then turned to an official testifying from the
Government Accountability Office, the investigative arm of
Congress. I'm going to ask you to go down there. I want you to
root around and come back and tell us what you can find. Offshore
tax havens are once again in the sights of Congress. Alarmed at the
growth of the so-called tax gap - the amount by which US taxpayers are
estimated to be underpaying their taxes and under-reporting their
income - some lawmakers are pointing the finger towards the Caribbean
and other offshore tax havens. They suspect that US citizens are
using bank secrecy laws and the ability to channel income through
tax-free offshore vehicles to evade reporting income to the Internal
Revenue Service. Jeffrey Owens, director of the centre for tax
policy and administration at the Organisation for Economic Co-operation
and Development, said an increased reliance by investors on shell
companies with opaque structures based offshore could make it hard for
domestic tax authorities to track income. Asked how big the
problem was, he confessed to senators: We just don't know. Yet
such congressional concern comes as offshore financial centres have
been cleaning up their acts, narrowing the gap between offshore and
developed jurisdictions - including the US - against which they are
often unfavourably compared. A report out last month commissioned
on behalf of the International Trade and Investment Organisation, a
group of small countries with international finance centres, pointed
out that many offshore centres have better standards than larger
onshore ones. Alden McNee McLaughlin, the Caymans' minister for
international financial services policy, recently said the islands
deeply resent the idea that because we are not located onshore we are
illegitimate.
.
Offshore
financial centres have improved their standards as a result of an OECD
harmful tax competition initiative, launched in 1996. In 2000 it
published a blacklist of 35 tax-haven countries, which prompted
offshore centres to make commitments to remove harmful tax practices,
improve transparency and exchange information. The British Virgin
Islands recently abolished its system of bearer shares, which conceal
the identity of the beneficial owner in a company. Yet many US states,
including Delaware, do not require companies to show such
information. The US has implemented tax information exchange
agreements with tax-free jurisdictions since the 1980s. However,
Reuven Avi-Yonah, a tax expert at the University of Michigan, points
out most of them are of limited value in closingthe overall tax gap
because they are restricted to criminal matters, which form only a very
small part of overall tax collection issues. The agreements
sometimes require the subject matter to be criminal in both the US and
the tax haven, which would never be the case for pure tax evasion.
.
http://www.ft.com/cms/s/159eea62-fd01-11db-9971-000b5df10621.html
.
.
IRS CURTAILING OFFSHORE AUDITS - By Edmund L. Andres -
May 3, 2007
.
The
Internal Revenue Service is curtailing audits of many people who use
offshore tax havens, even when agents see signs of tax evasion, because
agents fear they cannot meet a three-year deadline for finishing an
examination, congressional investigators have found. In a report
that was to be released Thursday, the Government Accountability Office
found that tax investigators are so hobbled by dilatory tactics by
offshore taxpayers and other problems that it takes almost two and a
half years to complete a typical audit. Many investigators told
the accountability office, the investigative arm of Congress, that the
safest way was often to stop an audit prematurely and sometimes to
refrain from starting one in the first place. The tax service
reported that almost $300 billion in investment and business income was
moved out of the United States in 2003. Analysts at the Joint Committee
on Taxation have estimated that the annual outflow has shot to more
than $400 billion since then. Of that, only a small portion went
to tax havens that impose few taxes of their own and provide little
information to the U.S. authorities. Most went to countries with tax
treaties and agreements to exchange financial data with the United
States. The report did not provide a breakdown of how much money went
to specific countries. The new report was requested by the Senate
Finance Committee, where Democrats and Republicans are looking for more
ways to crack down on people who move their profits overseas. The
tax agency has estimated that the government loses about $300 billion a
year from companies and people who underreport incomes. While much of
that so-called tax gap stems from people inside the country, often
self-employed people or family-owned businesses, Democratic lawmakers
contend that the government could be losing tens of billions of dollars
a year from offshore tax evasion. Tax analysts say it is almost
impossible to know how much the government is losing from international
tax evasion. The agency's estimates of money moved offshore are
based on transfers that are reported by financial institutions like
banks and investment firms that handle such transactions. But
those estimates leave out at least two potentially big pots of taxable
income: transfers of money that are not reported to the government and
overseas profits made by Americans on money that is already outside the
country.
.
http://www.iht.com/articles/2007/05/03/business/offshore.php
.
EDITORS NOTES:
Remember I said there was a new, shall we say, war that is currently
underfoot, which I called the war on taxes. But here we have the
politicians on the attack on one side, whereas the tax collection arm
of the government (Internal Revenue Service) saying they cannot be
bothered - and a report recently issued saying that ONLY a SMALL portion of the US$400
Billion leaving America annually is actually going to tax havens. So,
to borrow a popular phrase from an American television commercial - I
ask the question: Where's the Beef?
.
However,
a few items from this article call my attention. The first is: The new
report was requested by the Senate Finance Committee, where Democrats
and Republicans are looking for MORE WAYS TO CRACK DOWN on people who
move their profits overseas. US senator Max Baucus, says he knows
where millions of unpaid US tax dollars could be stashed - and he
claims to have a photograph to prove it. How about five thousand
photographs of all the pork projects and absolutely stupid ways the
politicians have been squandering tax payer funds all these
years? We told you about the US$500,000 given to study the
best use of the sidewalks in front of the Kennedy Center in Washington,
D.C. Here is a even better one: a subsidy to already-wealthy oil
companies that was slipped into the 2005 energy bill without the
knowledge of most lawmakers and even most of the Senate-House
conferees. This giveaway, slated to go to a consortium named the
Research Partnership to Secure Energy for America, or RPSEA, will cost
taxpayers as much as a billion dollars and basically means US taxpayers
are paying energy companies to go and find gas. That's right -
taxpayers are subsidizing energy companies to go find more of the
product that those same companies will turn around and sell to
consumers - at non discounted prices I might add. How about a
photograph of a smiling oil and gas company executive shown receiving a
US Government check? US senator Max Baucus, says he knows where
MILLIONS of unpaid US tax dollars COULD be stashed. I know of a
place where US$1 BILLION Dollars
of tax payer money IS for sure stashed and its offshore too, although
instead of an office building in a tax haven country, it involves an
offshore drilling platform owned by some of the oil and gas
companies. But I
digress.
.
The
second items is: annual outflow has shot to more than $400 billion
since then (since 2003 in terms of the amount of money flowing out of
the US). Indeed, a contact of mine at the US Federal Reserve Bank
has told me that 2006 set a new record in terms of outbound wire
transfers. Of course, the third quote is: analysts say it
is almost impossible to know how much the government is losing from
international tax evasion. The truth is they have NO idea, but
since they are going broke, the easiest political targets are tax
havens, so-called tax cheats, and so on. Indeed, as already
mentioned, the fourth quote from the article states: Of that, only a
small portion went to tax havens that impose few taxes of their own and
provide little information to the U.S. authorities. Most went to
countries with tax treaties and agreements to exchange financial data
with the United States. So, if MOST of the financial outflows did
NOT go to tax havens (in fact the words, only a small portion, is used)
why are we so concerned about tax havens again? Could it be that
this theme plays well with a beguiled public being faced with higher
taxes, less social welfare benefits and a more sanguine economic
outlook for the future, but just like a Shakespearean play - could it
be an attack full of sound and fury, signifying nothing (with no
substance)? What if all this was nothing more than a diversion
tactic to deflect attention away from the real problem, such as all
that money the politicians have been wasting all these years? Is
it really true that the tax havens and so-called tax avoiders are to
blame for the financial mess the social welfare state nations are
in? Maybe it is a topic that just plays well at the box office of
public opinion, while just yet another case of the facts and the
rhetoric spouted to the public being worlds apart.
.
.
MINISTERS
ACT TO STOP LIGHTS GOING OUT IN 2015
By
Larry Elliott and Mark Milner - May 2, 2007
.
Fears
that Britain could be plunged into an energy crisis by 2015 will result
in the green light being given by Christmas for a new generation of
nuclear power stations, senior Whitehall sources are indicating.
With more than a fifth of the UK's electricity generating capacity due
to be closed down in the next eight years, ministers are planning to
fast-track Labour's energy strategy with the publication of two white
papers this month. But ministers have been persuaded of the need
to act quickly. We are concerned that unless we act soon, the lights
could go out in 2015 in the event of a really hot or really cold spell,
said one Whitehall insider.
.
http://business.guardian.co.uk/story/0,,2070133,00.html
.
EDITORS NOTES:
So the lights might go out in London - eh? I thought that was
something that only was a concern in Third World countries?
Londoners: Check your flashlight batteries.
.
.
JETBLUE
EMPLOYEES ARRESTED FOR CREDIT CARD FRAUD
By
Edith Honan - May 1, 2007
.
NEW
YORK (Reuters) - Four JetBlue employees and a New York City corrections
officer were arrested on Tuesday on charges of splurging with credit
cards forgotten by passengers rushing to catch their flights,
prosecutors said. The arrests come as the low-cost airline
struggles to rebuild customer confidence after a February storm
triggered the cancellation of some 1,200 JetBlue flights and left
passengers stranded or fuming on grounded planes for hours. A
probe by Manhattan District Attorney Robert Morgenthau found that the
five, who included three customer service agents and a flight
attendant, went on shopping sprees using credit and debit cards that
belonged to JetBlue customers. The cards, one of which the
employees gave to the corrections officer, were used to make purchases
at liquor stores, restaurants and shops, including Bloomingdale's and
Victoria's Secret. Investigators were tipped off to the scheme on
June 7, 2006, after a law student who was flying from New York to
Boston forgot his credit card at the JetBlue terminal at John F.
Kennedy Airport. The card was later used to rack up charges of more
than $500.
.
http://www.reuters.com/article/domesticNews/idUSN0132104120070501
.
EDITORS NOTES:
I call your attention to a previous newsletter whereby we reported on
the very recent US State Department Report for Americans Traveling
abroad, alerting Americans to the lurking dangers in foreign lands (the
Swiss, if you recall, were singled out and Americans in essence were
warned not to be fooled by all that yodeling and chocolate
making). One key item mentioned in the very recent US State
Department report was the warning to Americans about and the propensity
for Credit Card Fraud when traveling in FOREIGN countries. I will
say no more.
.
.
FDA URGES NEW ADULT WARNINGS ON
ANTIDEPRESSANTS - May 2, 2007
.
WASHINGTON
(Reuters) - All antidepressants should carry new warnings about an
increased risk of suicidal thoughts and behavior in young adults ages
18 to 24 during initial treatment, U.S. health officials proposed on
Wednesday. The warning should appear in a black box that already
cautions about the chances of suicidal behavior in children and teens
who take the drugs, the Food and Drug Administration said. It
also should state that adults 65 and older who are treated with the
drugs have a decreased risk of suicidal thoughts and actions, and
emphasize that depression and some other psychiatric disorders are
themselves the most important causes of suicide, the FDA said.
Studies
showed a slight increase in suicidal thinking and behavior among young
adults during early treatment, which was generally the first one to two
months, the FDA said.
.
http://www.reuters.com/article/domesticNews/idUSN0234004820070502
.
EDITORS NOTES:
So, anti-depressant drugs will make you even more depressed? Is
that what they call an oxymoron? Also, the US Food and Drug
administration tells us that Depression is the most important cause of
Suicide. I would have never guessed. I always thought it
was acid rain or swamp gas. In any event, I do not know
what to say about such a revelation other than - your tax dollars at
work (and thank goodness such important funding and research is taking
place). I wonder if they have discovered that a very high
calorie, high fat diet leads to obesity? That might be the next
finding after millions of tax payer funds are spent on research of
course.
.
.
ECONOMY SEARCHES FOR A NEW S-WORD - By Sue Kirchhoff, May
1, 2007
.
Stagflation
light. Slowflation. A variety of terms are floating around to describe
the current state of the economy: growth that's too slow and inflation
that's too high for Federal Reserve comfort. The nicknames refer
to the stagflation of the late 1970s and early '80s, when the country
endured not only disco, but double-digit price increases, slow growth
and high unemployment. Then, as today, high energy prices were hitting
consumers in the pocketbook. The footprint of the U.S. economy
right now is a mild stagflation. There's nothing like the episode
of the '70s and early '80s, but this is a mini version of it, says
Allen Sinai, chief global economist and president of Decision
Economics. Sinai worries that inflation pressures are becoming
embedded in the economy, particularly in the huge services sector,
where wages are rising as workers seek more compensation to cover
rising costs. At the same time productivity, the measure of output per
worker, is increasing more slowly than it had been.
.
http://www.usatoday.com/money/economy/2007-05-01-slowflation-usat_N.htm
.
.
BERNANKE:
ISOLATIONSIM WILL HARM U.S. ECONOMY
By
Martin Crutsinger - May 2, 2007 - The Associated Press
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WASHINGTON
- A move to protect threatened American industries and workers from
foreign competition would be a serious mistake that would jeopardize
the sizable benefits of free trade, Federal Reserve Chairman Ben
Bernanke said Tuesday. Restricting trade by imposing tariffs,
quotas and other barriers is exactly the wrong thing to do, Bernanke
said in remarks prepared for an audience at Montana Tech in Butte,
Mont. In the long run, economic isolationism and retreat from
international competition would inexorably lead to lower productivity
and lower living standards for U.S. consumers, Bernanke said. As
Americas trade deficits have soared, Congress and the Bush
administration have come under increased political pressure to erect
trade barriers against a flood of imports that critics contend have
contributed to the loss of more than 3 million manufacturing jobs since
2001. The Fed chairman said that restricting imports might
temporarily slow job losses in affected industries, but those benefits
would be outweighed many times over by the costs, which would include
higher prices for consumers and increased costs, and thus reduced
competitiveness, for U.S. firms. He said that a number of
economic studies have found that those costs to the rest of society
almost invariably far exceeded the benefits received by the industry
being protected. The better approach to dealing with job losses
in such industries as textiles, which have been hurt by foreign
imports, is to improve government retraining programs, Bernanke said.
He said it was important to also improve the quality of education that
future workers receive so they will be prepared for the jobs of
tomorrow.
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http://www.gwinnettdailypost.com/
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EDITORS NOTES:
Fair enough, a return to high tariffs may not solve the long-term
situation and the truth is, it probably is a bit too late for that
anyway. But my favorite quote from Mr. Bernanke is: The better
approach to dealing with job losses is to improve government retraining
programs. Government training? With what money?
Municipalities have been laying off school teachers by the dozen
lately. And when exactly is the government planning on doing this
anyway? Before or after they start checking on tainted food
coming into the US from China? Bernanke also said: It is
important to also improve the quality of education that future workers
receive so they will be prepared for the jobs of tomorrow. Nice
thought, but too bad many families are having trouble coming up with
the US$30,000 per year in University tuition. Since Mr. Bernanke
is fond of fairy tales, he might consider a career change, such as
editor of the children's book division of a major publishing house.
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DOES
IT MATTER ANYMORE IF THE U.S. HAS A COLD?
By
Daniel Gross - May 6, 2007
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For
the past several decades, the United States has functioned as the main
engine of growth in a global economy that has been moving with
synchronicity. We're going through the longest stretch of
concerted growth in decades, said Lakshman Achuthan, managing director
at the Economic Cycle Research Institute in New York. So you
might think that a sharp slowdown in growth in the United States - the
domestic economy grew at a measly 1.3 percent annual clip in the first
quarter this year, less than half the 2006 rate - would mean trouble
for the rest of the global economy. Right? Wrong. As the
U.S. growth rate has declined sharply in recent quarters, the rest of
the world is growing rapidly. India is blowing the door off its hinges.
The Chinese economy is expanding at a double-digit pace. In the United
States, the Federal Reserve has held rates steady since last June, and
its next move will most likely be a rate reduction to stimulate growth.
The European Central Bank and the Bank of Japan, meanwhile, have been
raising rates - lest their once-suffering economies overheat and spawn
inflation. The U.S. slump in the first quarter didn't pull down
growth in Europe or Asia, said Brad Setser, senior economist at Roubini
Global Economics.
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The
seemingly countervailing trends - deceleration in America, full speed
ahead abroad - have led some economists to wonder whether the United
States and the rest of the global economy are going their separate
ways. Some even suggest - shudder - that changes in the global economy
have made the United States a less-central player. Four or five
years ago, there was an important switch in the global economy, said
Stephen King, an economist based in London for HSBC. Since then, other
parts of the world have really grabbed the growth baton from the
U.S. Until relatively recently, when the United States sneezed,
the world caught a nasty cold. Today, King says, the United States has
sneezed, but the world has gone shopping. King notes that
emerging markets like China, India, Central and Eastern Europe and the
Middle East are injecting life into the European and Japanese economies
through their enormous purchases of capital goods - all those
construction cranes in Dubai, bullet trains in China, oil rigs in
Russia. Emerging markets' share of global capital spending has risen
from 20 percent in the late 1990s to about 37 percent today, he
said. Western Europe is benefiting from rising trade with Eastern
Europe, Russia, Asia and the Middle East. As a result, the euro zone,
America's largest trading partner, is simply not as reliant on the
United States as it used to be, Setser said. Europe is clearly no
longer growing on the back of U.S. domestic demand growth, he said. As
other economies increasingly trade with one another, the United States
plays a diminished role.
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http://www.iht.com/articles/2007/05/06/business/USecon.php
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EDITORS NOTES:
In some previous newsletters we discussed the Great Depression of the
1930s and how the two worst off countries were the US and Germany, but
not all countries were suffering, at least not to the same
extent. Quoting from the article: Today when the US sneezes
- the rest of the world goes shopping. Maybe not a wild eyed
spending spree per say, but we can certainly surmise that simply
because the US is in an economic funk, stagflation or whatever you want
to call it - that the rest of the world will not necessarily be in dire
straights. On the contrary, and why you need to consider where
the growth is going to be. Want to know why Four Million Dollars
homes cannot be sold in Florida these days, but people are snapping up
Million Dollar properties in the Dominican Republic, Argentina and
elsewhere (and paying cash I might add)? Some very simple advice
is to go where the money is, the double digit economic growth and
affordable living.
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FARM-RAISED
FISH GIVEN TAINTED FOOD
By
Rick Weiss - Washington Post Staff Writer - May 9, 2007
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The
tainted Chinese ingredient that was incorporated into U.S. pet food and
later made its way into chicken and pig feed was neither wheat gluten
nor rice protein as advertised, but was seriously contaminated wheat
flour, government investigators said yesterday. The finding adds
a new layer of fraud to an already seamy tale of international
deception.
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http://www.washingtonpost.com/wp-dyn/content/article/2007/05/08/
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EDITORS NOTES:
And if all the rest of the nonsense is not bad enough, now the food
supply is contaminated as well. Secretary of Agriculture Mike
Johanns said at the Food Marketing Institute conference in Chicago on
Monday, May 7, 2007 that it's safe to eat pork and chicken from animals
whose feed was mixed with contaminated pet food that sickened or killed
cats and dogs. Hey Mikey - you eat it. I'll get a spoon for
you.
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READERS
WRITE IN:
.
Dear
Sir, Your articles are on the money in views. Unfortunately
they are not long enough and leave me wanting more information. I
have recently returned home and I don't know about the rest of them but
I am getting out of here. Keep up the good work and thank you for
your emails.
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EDITORS REPLY:
Thank you for the positive comments, and I will use the same phrase
often quoted by the folks who believe in UFOs - you are not
alone. In terms of wanting more information, I can only offer a
list of books I have been reading lately (for what its worth): A
Game As Old As Empire - 2007 By Steven Hiatt. Depression, War And
Cold War - 2006 By Robert Higgs. The Constitution In Exile - 2006
By Judge Andrew P. Napolitano. Buck Wild - 2006 By Stephen
Slivinski. China: The Balance Sheet - 2006 By The Center for
Strategic and International Studies. State Of War - 2006 By James
Risen. Blackwater - 2007 By Jeremy Scahill. In regards to
information, I do agree that a brief newspaper article is often not
enough. But, there are some excellent investigative journalists
out there writing some very good books, and the research is very
enlightening to say the least.
.
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ANOTHER
READER WRITES:
.
I
am considering the Dominican Republic or Costa Rica for
retirement. I will have about 50k in pension yearly can you
compare the advantages of both these countries and pros and cons of
retiring there -I also have 3 small children.
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EDITORS REPLY:
Well, this is probably one of the most common questions that we
hear. However, I do think the problem is that there is no one
correct answer that is applicable to everyone or one size fits
all. In other words, there are both positives and negatives to
every place you might consider relocating to. The goal is to find
a country that scores the highest on your own personal check list (be
it cost of housing, be it climate, proximity to your previous home in
terms of visits for friends and family, be it economics, and so
on). Both Costa Rica and the Dominican Republic can be worthwhile
places to consider, but each may score differently on that large wish
list or check list that you should prepare for yourself. My
advice is to investigate both and based upon what you find, decide from
there which of the two suits you the best.
.
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ANOTHER
READER WRITES:
.
Where
can I go to get specific information about these kinds of properties
that you mention?
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EDITORS REPLY:
Many people think we are real estate brokers because I do write about
the topic quite often (because I know are clients have an interest),
but the truth is, our office does assist clients with Title Searches,
Real Estate Sales Contracts, and closing as well (Title Transfer, etc.)
and we have two lawyers on staff dedicated almost exclusively to real
estate matters, but - we are not real estate brokers or agents.
We do also provide a property search service for those clients that do
not speak Spanish or do not have the time (or patience sometimes) to
scour the market. So, in this regard, for a flat fee, we do try
to find the lowest priced properties (our fee is not based on
commission or finding the highest priced properties out there) based
upon a client criteria. However, to answer your question
directly, ALL the properties I mentioned in terms of Santo Domingo (or
the greater metropolitan district in general) came directly out of
local newspaper real estate classifieds or those glossy real estate
magazines that you can find for free in some of the local supermarkets
or malls as well. Some of the properties we are familiar with
because we have looked them over for clients, but not all. So, in
this regard, if you take the time to review local real estate
classifieds and or other sources (which are in Spanish) you can find
very similar properties. Remember, some of the very higher end
luxury properties marketed to foreigners in English do NOT represent
the entire real estate market. Many of our clients have bought
these kind of luxury properties and are happy that they did, but there
is a wide variety of other very nice homes or apartments to consider as
well (and more often than not, they are not in tourist areas). In
this regard, I have to say that the Dominican Republic really does have
something for everyone (and every pocketbook) when it comes to real
estate.
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ANOTHER READER
WRITES:
.
John
- Hi, as always, enjoyed your current articles. Regarding
retirement stability, add the federal government to the list of
un-stability, pending layoffs, etc. I work with the
military. I have over 25 yrs of total federal service now, and am
inching toward that 30-year brass ring the government promises
you. I recently attended a pre-retirement conference for
government workers. With 30 years of government service, I will
only make about $1500/mo for all that time!! The government says
that the rest of your retirement pay will come from Social
Security ( yeah right, if it will still be there when the Boomers all
retire soon), and your own personal TSP (Thrift Savings Plan) that you
choose to buy into. Today, we had a briefing of a new and
improved civil service performance for pay system that is more in line
with the civilian company counterparts. Reading between the
lines- they want to make it easier to remove more senior, higher
earning government workers, so they can reduce the grade levels for
cheaper pay, newer workers. I have looked online at the OPM job
website often for the past few yrs for other government jobs, and a
common thread emerges. All of the DOD civilian jobs (i.e.
Army/Navy/AF/Marines) have these new pay bands that eliminate the old
GS pay levels. They now range from different pay levels, but no
definite closing dates or exact locations. It appears that they
are stockpiling lots of applicants when they can start axing the more
senior GS members. It appears Washington has decided that they
must choose between honoring senior federal workers retirements or
continuing to keep improving the life of Iraqi's and winning the war on
terror!!! So for all you GS employees in the DOD,
grab your socks and hold on!! If you think I am overreacting, I
have already been downsized from the Air Force in 92 when they closed
bases and laid off thousands of military, and by the Post Office.
.
EDITORS REPLY:
Well, the funny thing is that we started seeing ex-military or DOD
people many years ago and a surprising percentage of our clients fit
this category. I spoke with many of them at length and the
impression I found was that first off, since they worked for the
government they know the kinds of nonsense that goes on (and are not
complimentary about the government, at least not in private) and
secondly, many have already lived or been stationed overseas
before. Because of that, or because of having the experience of
living abroad, they know that they can have a better life for less
money when living outside of Amerika. And so, I think you will
find a high proportion of these kinds of people retiring in Panama,
Mexico, Ecuador, etcetera, etcetera. Which is to say, the irony
is, some people you would think might be the most patriotic (those that
have served in the military or government service) are in fact the most
likely candidates for expatriation. As Mr. Ripley used to
say: Believe It or Not.
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