Can Offshore Banking Be Considered a Mortal Sin?

Today's comment is by Bob Bauman, Legal Counsel and Senior Writer for The Sovereign Society.

Dear A-Letter Reader,

It's reported that Pope Benedict XVI is working on an encyclical that strongly condemns wealthy individuals who exercise the freedom to use tax havens and offshore bank accounts.

The Times of London reports that the Pope will argue that tax avoidance and tax evasion is morally unjust because it supposedly prevents governments from collecting revenues to help society's least fortunate people. (One might ask whether the Pope knows of the billions in taxes that have supposedly gone to help the poor of the world, much of that from the pockets of American taxpayers?)

This is one Catholic who wishes the Pope had better economic advisors so that he might understand the beneficial role tax havens play in the world economy. Is His Holiness familiar with trusts, family foundations and hedge funds? Surely the Vatican Bank, a scene of many financial scandals, could enlighten him about globalism and its many benefits - job creation, better wages, and a rise in the standard of living.

Columnist Walter Williams writes: "Pope Benedict could benefit from a bit of schooling. Tax avoidance is legal conduct whereby individuals arrange their affairs so as to reduce the amount of income that is taxable. Tax avoidance can run the gamut of legal acts, such as investing in tax-free bonds, having employer-paid health plans, making charitable gifts, quitting a job and banking in another country. Tax evasion refers to the conduct by individuals to reduce their tax obligation by illegal means. Tax evasion consists of illegal acts such as falsely claiming dependents, income underreporting and padding expenses."

The Church certainly has not been the last word on economic matters throughout the ages. Example: According to the Council of Vienne (1311), a person who charged interest on a loan was to be punished as a heretic and was guilty of committing a mortal sin.

Perhaps the current Pope should check the Vatican encyclical files before he issues his next one.

In his 1991 encyclical, which caused quite a stir, Pope John Paul talked of the future of a world without the godless Communism he did so much to destroy. He spoke about freedom, society and faith. His was a definitive statement of classical liberal ideas, particularly in the economic sphere.
The Pope reasserted basic principles: human rights, limits on state power, the common good, moral imperatives of freedom, peace, justice, charity and the universality of truth.

But this great man, who knew firsthand the twin tyrannies of Nazi fascism and Soviet Communism, also denounced the failure of socialism, endorsed free-market principles and warned of problems inherent in a democracy bereft of morality. He praised the rule of law, productivity of individual initiative and warned of the dangers of uncaring, all powerful bureaucratic governments.

His Holiness said these things, one can assume, because he believed that for faith to flourish, free individuals must enjoy the liberty to prosper. And property and free choice are integral to that prosperity.

By choosing to join the debate concerning tax havens on the side of the radical left, Pope Benedict calls into question his economic knowledge and judgment - and leads one to wonder who his advisors on offshore matters are.

It is traditional in the Catholic Church to pray for the Holy Father at each Mass. We should all continue to do so. Amen.

That's the Way It Looks from Here,

BOB BAUMAN, Legal Counsel
BaumanBlog.SovereignSociety.com

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More U. S. Companies on the World's Shopping List

While the value of private equity deals fell to just US$19 billion in August, down sharply from US$131 billion of transactions in June, foreign buyers are stepping up to the plate. They're accounting for more than one quarter of all U.S. buyout deals so far in 2007 - the most in four years.

In fact, foreign firms have spent nearly US$300 billion already this year on buyouts of U.S. based companies.

Putting a whole new twist on "globalization," firms from as far a field as India, Dubai and Singapore have announced blockbuster deals for U.S. assets.

Rather than exporting more "stuff" to U.S. consumers - these emerging market companies are now exporting their cash to buy bargain-priced U.S. companies, as the greenback plunges toward fifteen-year lows.

Recently, India's Tata Motors made a bid for Ford's Jaguar and Land Rover automotive divisions. Dubai World made a US$5 billion investment in Las Vegas' MGM Mirage. Meanwhile, the contract electronics firm Flextronics of Singapore bought its U.S.-based rival Solectron in a deal valued at US$3.6 billion.

These are just a few examples of the growing appetite among foreign buyers looking to acquire U.S. assets on the cheap.

A large number of these deals are being done by emerging Asian companies who are flush with cash and searching for attractive investment opportunities beyond their own borders. According to the Financial Times, a "key driver for Asia's giants is the need to expand beyond domestic markets."

One investment banker put it this way, "Asian corporations also have strong balance sheets and ample access to finance." And the evidence seems to bear this out. While Wall Street and Europe are still suffering from the sub-prime induced credit crunch contagion that continues to roil credit markets on both sides of the Atlantic - companies across the Pacific so far seem immune.

According to a recent report by credit rating agency Moody's, "Asian firms are largely protected from these credit market disruptions since they can source funding from banks and local bond markets."

According to Bloomberg, the report said "Moody's is seeing no evidence so far of a reduction in the ability or willingness of the banking sector in Asian to lend to corporates."

Maybe some of Wall Street's hedge fund clients that have suffered steep losses as a result of distress in the banking sector should instead look east to establish new lines of credit.

As my colleague, Eric Roseman commented on Monday: Asian banks are apparently still open for business.

MIKE BURNICK, Senior Editor & Global Markets Analyst
BurnickBlog.SovereignSociety.com

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Privacy & Rights

Surf the Internet...Go to Jail Part II

In yesterday's A-Letter, I described how you could be found guilty and imprisoned for possession of child pornography, and not even know it, thanks to automatic "caching" features in Internet software.

If you read my comment yesterday, you already know it's possible to have pornographic images saved on your PC if porn spammers have your email address. You also could have child pornography secretly saved on your hard drive if you've ever frequented what should be a legal adult site - even if you never saved any photos or movies.

To protect yourself from the porn police, the best precaution is to turn off all forms of Internet caching. This isn't always easy to do, because several different cache files are created automatically every time you go online. For that reason, I recommend using a program like Window Washer (www.webroot.com) to delete these files automatically.

You can also clear these files yourself. In Firefox, go to Tools/Privacy and uncheck all the boxes under History. Then click on "Always clear my private data when I close Firefox." Click on "Settings" and make certain "Cache" is checked to be deleted.

In Internet Explorer (which I hope you're not using, because it's notoriously insecure), click on Tools/Internet Options. Under the "General" tab, click "Delete Cookies" and "Delete Files" and click yes to delete "offline content." Click "Settings" and set the amount of space to use for the Temporary Internet files folder to one megabyte. (Unfortunately, you can't set it to zero). Under history, insert zero. Since you can't set the size of the Temporary Internet files folder to zero, delete these files every time you use Internet Explorer.

Next, delete the content you view online stored in directories created by the Java programming language, which is used in many Internet pages. Find the file "javaws.exe" on your computer, and click on it. This brings you to the "Java Control Panel." On the "General" tab, click on the "Delete Files" tab under "Temporary Internet Files." Delete downloaded applets, downloaded applications and other files. Then click on "Settings" and set the amount of disk space to use to zero.

I can't promise these precautions will remove every trace of pornography from your PC that you may have unintentionally stored. But they will go a long way toward proving that you had absolutely no intention of "possessing" illegal images.

MARK NESTMANN, Privacy Expert & President,
The Nestmann Group
www.nestmann.com