Sovereign Man, Notes from the Field Date: March 1, 2012 Reporting From: Santiago, Chile

Notes from the Field

Date: March 1, 2012
Reporting From: Santiago, Chile

Earlier this week, the British government announced that Barclays PLC, one of Britain’s oldest and largest banks, was facing an $800 million penalty for engaging in a tax avoidance scheme. Barclays had been exploiting loopholes in legislation in order to avoid paying a higher tax rate, and the government is now drafting legislation to close these loopholes.

Hang on a sec. Full stop.

If the government has to pass legislation in order to ‘close the loopholes’, then the loopholes right now are obviously legitimate. Hence Barclays tax avoidance practices that were perfectly legal.

After all, that’s what tax avoidance is– legally avoiding taxes by exploiting loopholes and legitimate deductions in the tax code. Tax evasion, on the other hand, is willful misdirection or underreporting of income that violates tax code. Barclays engaged in the former.

How is it that the Treasury can penalize Barclays for having done something that is perfectly legal? Technically, it can’t. That’s why the legislation being proposed to close these tax loopholes is going to be RETROACTIVE.

In other words, since the British government can’t legitimately penalize Barclays, they’re going back in time to change the law to make what Barclays did illegal… all to collect some extra dough.

In related news, the Treasury also announced that recent tax receipts have failed to meet expectations. Despite Britain’s constantly increasing tax rates (now as much as 50%), income tax revenues dropped by $810 million from a year ago, a 4.68% decrease.

British government, meet the Laffer Curve. Even the guy flinging spitballs in the back of a high school economics class can tell you that raising tax rates often decreases overall tax revenue.

Consider that, with a 0% tax rate, government revenue would be zero. Similarly, at a 100% tax rate in which people didn’t keep a single penny of what they earned, government revenue would also be zero because nobody would have an incentive to work!

Working up from 0, and backward from 100, would yield similar results. At 1% tax rate, the government would collect a bit of revenue. At a 99% tax rate, a small handful of people might work, also generating some revenue for the government.

Economist Art Laffer is credited with describing this relationship between tax rates and government revenue, however philosophers going back to the 14th century also examined the idea.

Laffer’s point was to show that there’s an equalization between the government taking a small piece of a big pie (low tax rates, huge incentive for economic productivity), and a big piece of a small pie (high tax rates, very little incentive for economic productivity).

Britain is trying to take a big piece of a rapidly diminishing pie. As the pie gets smaller, they keep increasing the size of their slice by upping tax rates… which is the exact opposite of what they should be doing.

There are a lot of other places in the world that are happy to take a smaller slice of a big pie. In Hong Kong and Singapore, where tax rates are very low, both of those governments are awash with surpluses.

Even in Bulgaria, income tax rates are a flat 10%. It’s such a low rate, it’s not even worth the effort to avoid. People have an incentive to pay simply because it’s so cheap and easy.  It’s perhaps for this reason that Bulgarian Finance Minister Simeon Djankov has been openly courting UK investors to relocate to Bulgaria.

Meanwhile, back in the UK, the British government is fighting hard to shake every pound they can out of the people. Revenue & Customs (the British IRS) is launching a whopping 30 new task forces, going after everybody from used car outlets to flea market sales booths.

This is so absurd, it seems like a headline from the Onion: “British Treasury Preparing Task Force for Flea Markets”. Unfortunately it’s true.

Look, here’s a simple truth. Governments are so bankrupt and desperate that they’re willing to do absolutely anything to confiscate people’s wealth. They’ll steer away from sound economic policy, completely reject the rule of law, and even go back in time… just to keep the party going a little while longer.

International diversification– selectively diversifying your assets and interests across sound jurisdictions– is a very solid strategy to protect yourself against such runaway government theft.

This includes things like buying property abroad, storing physical gold and silver in a non-bank secure storage facility overseas, and opening a foreign bank account.

If you think that taking such steps (and making the appropriate disclosures) makes you a target, you may be right. But by doing nothing, you’re still going to be a target. Just ask any flea market salesman in the UK.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
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Sovereign Man, Notes from the Field Date: February 29, 2012 Reporting From: Santiago, Chile

Notes from the Field

Date: February 29, 2012
Reporting From: Santiago, Chile

In Warren Buffett’s latest round of gold-bashing last weekend, he described all the gold in the world as a useless cube that would fit snugly within a baseball infield.If you owned such a cube, you would only be able to ‘fondle’ it… but generate no investment return.  The same ‘value’, meanwhile, would allow the owner to purchase all the productive farmland in the United States plus 16 Exxon Mobils, in total yielding over $800 billion annually.Granted, Buffett’s views on gold are perhaps stymied by his poor experience investing in silver some 15-years ago. But still, he fails to see some obvious fallacies in his logic.

Most assets left unmanaged will fail to produce an investment return. The virtuous farmland that Buffett extols in his hypothetical example does not magically spawn corn, nurture it, harvest it, sell it, and deposit the proceeds into its owners’ pockets. Our farmland here in Chile certainly does not.

No, it takes a lot of work, a lot of experienced people, a lot of know-how, and a little bit of luck. All of this has to be managed.

Even the baseball field that Buffett references (when trying to give his investors an idea of the scale of all the gold in the world) is an asset. Simply left sitting there, a baseball field will soon be overtaken by erosion, weeds, and the dilapidation that comes with neglect.

Maintained and well-managed, however, a savvy owner of a baseball field can lease it out to the local little league. Or pull a Kevin Costner and turn it into a tourist attraction. None of this happens without appropriately managing the asset.

Even Exxon Mobil, with all of its royalties and intellectual property, requires tens of thousands of employees to manage the company’s assets, collect the profits, and ensure shareholders get paid.

Likewise, a huge cube of gold left alone in a baseball infield will fail to produce any investment return. When managed, however, gold is like any other asset– it can be leased, traded, loaned out, used as collateral, etc.

More importantly, though, the reason that many gold investors purchase the metal to begin with is because physical gold carries no counterparty risk.

Unlike paper currencies which are issued at will by corrupt central banks, or even Exxon Mobil, whose success depends heavily on the management team’s goodwill and diligence, a one ounce gold coin in your pocket will still be a one ounce gold coin tomorrow. This is the entire premise behind money as a store of value.

As my friend Tim Price told me over drinks in London several months ago, fiat currency is simply an abstraction of the concept of money; paper money conjured out of thin air cannot be real money, it’s merely an idea based on confidence and collusion.

Curiously, only a tiny percentage of worldwide money supply is actually physical paper– most ‘money’ is in digital form, simply entries in a computer… a few bits of code which constitute your net worth. In this way, our currency is actually an abstraction of an abstraction of the concept of money.

To this I would add that the entire financial system is underpinned by a complex network of hypothecated debt and derivative instruments whose notional total exceeds (by many multiples) the entirety of world GDP. In this manner, we are talking about abstractions of abstractions of abstractions.

Gold is real. It exists. And it scarcity dictates that it is a reasonable store of value, particularly in a world of abstract money.

There’s a lot of talk right now, for example, about rising oil prices which have created uncomfortably high gasoline prices. In gold terms, however, gasoline prices are in a deflationary spiral. The chart below shows unleaded gasoline prices in grams of gold since January 1976:

and for the last five years:

Priced in grams of gold, gasoline is near an all-time low. [In fact, there's a great site run by my friend Charles V. that shows this trend with a variety of commodities and retail goods.]

Buffett (and others) argue strongly that investors should be in stocks… that a company like Coca Cola or productive farmland is a better long-term investment than a useless hunk of metal.

He’s probably right. Except that the useless hunk of metal isn’t really an investment. It’s an anti-currency… appropriate for those who want to sit out of the market and be in cash without having to be in cash.

Until Tomorrow,

Simon Black

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Maine’s New Governor….Meet the Man we need for sure…28 February, 2012 via E-Mail

Meet Maine ‘s New Governor — In case you haven’t heard about this guy before, his name will stickin your mind!

The new Maine Governor, Paul LePage is making New Jersey ‘s Chris Christie look like an enabler.He isn’t afraid to say what he thinks. Judging by the comments, every time he opens his mouth, his popularity goes up.

He brought down the house at his inauguration when he shook his fist toward the media box and said, “You’re on notice! I’ve inherited a financially troubled State to run. Observe…cover what we do…but don’t whine if I don’t waste time responding to your every whim just for your amusement.”
During his campaign for Governor, he was talking to commercial fishermen who are struggling because of federal fisheries rules. They complained that 0bama brought his family to Bar Harbor and Acadia National Park for a long Labor Day holiday and found time to meet with union leaders, but wouldn’t talk to the fishermen. LePage replied, “I’d tell him to go to hell and get out of my State.” The Lame Stream Media crucified LePage, but he jumped 6 points in the pre-election poll.

The Martin Luther King incident was a political sandbag, which brought him National exposure. The ‘lame stream’ media crucified him, but word on the street is very positive. The NAACP specifically asked LePage to spend MLK Day visiting black inmates at the Maine State Prison. He told them that he would meet with ALL inmates, regardless of race, if he were to visit the prison. The NAACP balked and then put out a news release claiming falsely that he refused to participate in any MLK events. He read it in the paper for the 1st time the next morning while being driven to an event and went ballistic because none of the reporters had called him for comment before running the NAACP release.

He arrived at that event & said in front of a TV camera, “If they want to play the race card on me they can kiss my ass”, and he reminded them that he has an adopted black son from Jamaica and that he attended the local MLK Breakfast every year that he was mayor of Waterville. (He started his morning there on MLK Day.)
He then stated that there’s a right way and a wrong way to meet with the Governor, and he put all special interests on notice that press releases, media leaks, and all demonstrations would prove to be the wrong way. He said any other group, which acted like the NAACP could expect to be at the bottom of the Governor’s priority list!

He then did the following, and judging from local radio talk show callers, his popularity increased even more: The State employees union complained because he waited until 3 P.M. before closing State offices and facilities and sending non-emergency personnel home during the last blizzard. The prior Governor would often close offices for the day with just a forecast before the first flakes. (Each time the State closes for snow, it costs the taxpayers about $1 million in wages for no work in return.)

LePage was CEO of the Marden’s chain of discount family bargain retail stores before election as governor. He noted that State employees getting off work early could still find lots of retail stores open to shop. So, he put the State employees on notice by announcing: “If Marden’s is open, Maine is open!”
He told State employees: “We live in Maine in the winter, for heaven’s sake, and should know how to drive in it. Otherwise, apply for a State job in Florida !”

Governor LePage symbolizes what America needs; Refreshing politicians who aren’t self-serving and who exhibit common sense.

THE LAW IS THE LAW!

I really love this one.

This is one of the better e-mails I have received in a long time! I hope this makes its way around the USA several times over!!!!! HERE IS WHAT Governor LaPage said,

“THE LAW IS THE LAW So “if” the US government determines that it is against the law for the words “under God” to be on our money, then, so be it.

And “if” that same government decides that the “Ten Commandments” are not to be used in or on a government installation, then, so be it.

I say, “so be it,” because I would like to be a law abiding US citizen.
I say, “so be it,” because I would like to think that smarter people than I are in positions to make good decisions.
I would like to think that those people have the American public’s best interests at heart.

BUT, he said, “YOU KNOW WHAT ELSE I’D LIKE?
Since we can’t pray to God, can’t Trust in God and cannot post His Commandments in Government buildings, I don’t believe Government (Federal, State and Local) and its employees should participate in Easter and Christmas celebrations which honor the God that our government is eliminating from many facets of American life.
I’d like my mail delivered on Christmas, Good Friday, Thanksgiving & Easter. After all, it’s just another day.
I’d like the” US Supreme Court to be in session on Christmas, Good Friday, Thanksgiving & Easter as well as Sundays.” After all, it’s just another day.

I’d like the Senate and the House of Representatives to not have to worry about getting home for the “Christmas Break.” After all it’s just another day.

I’m thinking a lot of my taxpayer dollars could be saved, if all government offices & services would work on Christmas, Good Friday & Easter. It shouldn’t cost any overtime since those would be just like any other day of the week to a government that is trying to be “politically correct.”
In fact….I think our government should work on Sundays (initially set aside for worshipping God….) because, after all, our government says that it should be just another day….”

What do you all think???? If this idea gets to enough people, maybe our elected officials will stop giving in to the “minority opinions” and begin, once again, to represent the “majority” of ALL of the American people.
SO BE IT………..Please Dear Lord, Give us the help needed to keep you in our country! ‘Amen’ and ‘Amen’ Touché!