politics

Is it time to buy US? II: February deficit $223 billion

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I lamented in May 2010 that the US federal budget deficit was $83 billion, or about $8.90 per person per day.  Now the Washington Times (hat tip: the American Thinker) reports that the US government has posted its largest monthly deficit in history, $223 billion in February.  Now that means that the US government borrowed nearly $26 per person per day.  Clearly, the fundamentals that have caused the US dollar to depreciate against commodities is getting much worse not better:  the US government is borrowing three times as much money as what it was only 10 months ago.  This is proof that the debt death spiral is a reality in our times.

Now here is what has been happening:  (1) the US government borrows money but doesn’t find sufficient lenders whether domestic or foreign, so the Federal Reserve bank lends to them the remaining shortfall.  This is called quantitative easing because the money is created out of nothing.  But that is not the end of QE: for Bernanke is also buying old debt as it turns over and finds no new borrowers (see “Hyperinflation when?“).  QE greatly increases the amount of greenbacks that are in the money base:  view (chart below) and be afraid and weep.  (2) Next, commodities go up in price because too many dollars are chasing too few goods–food riots start happening in poorer countries.  (3) Then, consumer prices go up.  (4) Lastly, workers will get cost of living adjustments if indeed their employer can pay them at all.  In any case, the last thing to adjust to this whole mess is people’s take home pay.  But unfortunately, the adjustments will be too little too late because the next round of QE has already taken place and the spiral of hyperinflation has reached the next stage even before they receive their next pay cheque.

The newly elected Republican Congress?  They swept into power with Tea Party momentum.  But they can’t or rather they won’t fix anything.  Their puny little efforts to reduce the deficit are a joke.

My investment approach remains steady (current portfolio is up 88% above book) :

Short:  US dollar

Long:  Canadian oil & gas; Canadian gold mining; physical gold and silver (via Sprott Physical Gold Trust, Sprott Physical Silver Trust)

Finally, in my opinion, those who are telling people it is a great time to exchange your loonies for greenbacks and to go long on US stocks are really not doing their readers a favor; they seem ignorant of the fundamentals.  Yet even Warren Buffet’s famous and flippant advice about gold is little better.  What, pray-tell, Mr. Buffet, do you suggest to the American people regarding how they might protect themselves from this robbery?  Remember these words of Alan Greenspan (hat tip: Monty Pelerin):

The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. Deficit spending is simply a scheme for the confiscation of wealth.

… the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.

Society of Biblical Literature pro-union

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I’ve decided that the latest decision by the Society of Biblical Literature, save someone from SBL apologize, is the last straw for me.  SBL has become a pro-union association not a professional association.  Consider this e-mail that I received:

Friday, March 4, 2011

Dear SBL Members and Annual Meeting Participants,

We write today for two reasons. First, we want to share our excitement about our upcoming Annual Meeting inSan Francisco. This meeting marks an important moment in our history, as we resume holding concurrent Annual Meetings with the American Academy of Religion and several other affiliated and related organizations. These concurrent gatherings will maintain the “traditional” meeting dates – the weekend before the U.S. Thanksgiving holiday, this year November 19-22. The Call for Papers has been issued, proposals are being submitted, special sessions planned, the layouts of the Exhibit Hall and Employment Center are being finalized, and registration is soon to open. At this point, it looks to be not only another excellent Annual Meeting but a momentous one.

Second, we want to share some information about one of the hotels selected six years ago for our meeting. The labor contract between the hotel workers at the Hilton San Francisco Union Square as well as a number of other San Francisco hotels lapsed in August of 2009, and they are in the process of negotiating a new agreement. While the negotiations are pending, the hotel staff, represented by Unite Here, continue to work under the terms of the expired agreement. Service at the Hilton Union Square has not been affected and the hotel advises us that they are confident a new agreement will be in place prior to our Annual Meeting. It is our hope that the hotels and the union come to terms soon and ratify a new contract that is fair to all parties.

In the meantime, Unite Here has urged a boycott of the Hilton Union Square until a new contract is ratified. Our Council, sensitive to the SBL’s respect for the rights, dignity, and worth of all people has considered how to respond to this boycott. After careful reflection, we have concluded that we will continue our arrangement with the Hilton Union Square but on a modified scale. In addition to the fact that cancelling the contract with the Hilton would be a significant financial liability to SBL and AAR, the Hilton will serve to provide much needed sleeping rooms for our growing meeting. It is important to note, however, that out of deference to the union’s position, SBL and AAR have agreed to move several functions to other nearby hotels.

Again, our hope is that the union and the hotels are able to ratify a new contract well in advance of our meeting. We are closely monitoring this situation and will keep the membership posted on any new developments.

Sincerely,
The SBL Council

Well, in consideration of the struggle that wage earners in the private sector have to pay their taxes so that unionized public employees can have high paying salaries with excellent health care benefits and pensions, I am in solidarity with those folks, going to allow my membership to SBL to lapse.  I calculate being able to save roughly $2500 in conference fees, airfare, restaurants and book buying.

Craig Carter has some interesting comments.

The right of expatriation

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Thanks to a reader comment I was able to find an excellent resource for expatriating from the United States:  http://renunciationguide.com .  The website is by US expatriates who wish to extend the wisdom of their experience to others who are contemplating the voluntary loss of their US citizenship.  In addition, they provided some interesting research on the history of expatriation in the United States.

According to renunciationguide.com, the United States is only one of two countries that requires not only residents but citizens living abroad to pay income taxes.  The only other country is Eritrea, which has made it a practice to harass loved ones in your country until you pay up.  The authors write:

Interestingly, a Canadian court in Toronto ruled in 2007 that the imposition of the 2% tax on its citizens abroad was illegal and that a dual Canadian-Eritrean citizen should be paid back the money he had given.

So in becoming a Canadian citizen on Monday, I will also hope that the Canadian government would protect me, if necessary, from the tax regime of the IRS, which may attempt to tax my Canadian sources of income, and if I were to die, to tax my inheritance in such a way as would strip my wife’s rights as a Canadian citizen to inherit her husband’s property (nearly all my assets are Canadian based).

Renunicationguide.com, however, asks the question if there is a right of expatriation in the US Constitution:  “It’s not there. And it’s not in the Declaration of Independence, either.”  Now here I have to differ.  Consider these lines:

When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

So begins the Declaration of Independence.  Now in asserting the right of the people of the 13 colonies to expatriate from England, the Declaration of Independence sets an important precedent that makes it clear that liberty is a God-given right and that to be able to loose oneself from the shackles of government which constrict that liberty is the right of the people.  It is therefore not explicitly stated, but the precedent of declaring independence from the King of England would justify any individual who in the course of seeking life, liberty and the pursuit of happiness wished to be released from obligation to his native country; everyone has that right, given to him not by the Congress nor by the country of his choosing, but by the Creator Himself.

Thus, the right of expatriation, while not explicitly argued for by the founding documents of the US, is nevertheless a premise enshrined in the Declaration of the Independence.

Renunciation of US citizenship: On avoiding the new $450 renunciation fee (update 2)

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UPDATE:  Please note that my belief in this post, that by indicating that I’d relinquished my US citizenship by becoming a Canadian citizen, I could avoid the $450 renunciation fee panned out, and I received the CLN without paying).

I’ve been pretty upset that it would cost me $450 to renounce my citizenship now that the US consulate in Toronto has instituted a fee.  But today I was looking at the various government websites:  Consider this website from the US state department and its explanation of how to renounce US citizenship:

Section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481) governs how a U.S. citizen shall lose U.S. nationality. Section 349(a) states:

A person who is a national of the United States whether, by birth or naturalization, shall lose his nationality by voluntarily performing any of the following acts with the intention of relinquishing United States nationality:(5) making a formal renunciation of nationality before a diplomatic or consular officer of the United States in a foreign state, in such form as may be prescribed by the Secretary of State; or(6) making in the United States a formal written renunciation of nationality in such form as may be prescribed by, and before such officer as may be designated by, the Attorney General, whenever the United States shall be in a state of war and the Attorney General shall approve such renunciation as not contrary to the interests of national defense.

Now perhaps it would interest readers to know that this government website is not telling the whole story: The U.S.C. 1481 lists several other ways that a natural born US citizen may lose their citizenship. Here is the full text (emphasis mine):

§ 1481. Loss of nationality by native-born or naturalized citizen; voluntary action; burden of proof; presumptions

(a) A person who is a national of the United States whether by birth or naturalization, shall lose his nationality by voluntarily performing any of the following acts with the intention of relinquishing United States nationality—

(1) obtaining naturalization in a foreign state upon his own application or upon an application filed by a duly authorized agent, after having attained the age of eighteen years; or
(2) taking an oath or making an affirmation or other formal declaration of allegiance to a foreign state or a political subdivision thereof, after having attained the age of eighteen years; or
(3) entering, or serving in, the armed forces of a foreign state if

(A) such armed forces are engaged in hostilities against the United States, or
(B) such persons serve as a commissioned or non-commissioned officer; or
(4)

(A) accepting, serving in, or performing the duties of any office, post, or employment under the government of a foreign state or a political subdivision thereof, after attaining the age of eighteen years if he has or acquires the nationality of such foreign state; or
(B) accepting, serving in, or performing the duties of any office, post, or employment under the government of a foreign state or a political subdivision thereof, after attaining the age of eighteen years for which office, post, or employment an oath, affirmation, or declaration of allegiance is required; or
(5) making a formal renunciation of nationality before a diplomatic or consular officer of the United States in a foreign state, in such form as may be prescribed by the Secretary of State; or
(6) making in the United States a formal written renunciation of nationality in such form as may be prescribed by, and before such officer as may be designated by, the Attorney General, whenever the United States shall be in a state of war and the Attorney General shall approve such renunciation as not contrary to the interests of national defense; or
(7) committing any act of treason against, or attempting by force to overthrow, or bearing arms against, the United States, violating or conspiring to violate any of the provisions of section 2383 of title 18, or willfully performing any act in violation of section 2385 of title 18, or violating section 2384 of title 18 by engaging in a conspiracy to overthrow, put down, or to destroy by force the Government of the United States, or to levy war against them, if and when he is convicted thereof by a court martial or by a court of competent jurisdiction.
(b) Whenever the loss of United States nationality is put in issue in any action or proceeding commenced on or after September 26, 1961 under, or by virtue of, the provisions of this chapter or any other Act, the burden shall be upon the person or party claiming that such loss occurred, to establish such claim by a preponderance of the evidence. Any person who commits or performs, or who has committed or performed, any act of expatriation under the provisions of this chapter or any other Act shall be presumed to have done so voluntarily, but such presumption may be rebutted upon a showing, by a preponderance of the evidence, that the act or acts committed or performed were not done voluntarily.
On Monday, February 28, 2010, I will complete the naturalization process of applying for Canadian citizenship, having attained 18 years of age.  I did this application with the intention of relinquishing my US citizenship. I will then take the following oath of allegiance to the Queen Elizabeth and her heirs:
I swear or affirm that I will be faithful and bear true allegiance to her Majesty Queen of Elizabeth the Second, Queen of Canada, Her Heirs and Successors, and that I will faithfully observe the laws of Canada and fulfill my duties a Canadian Citizen.
I will therefore have committed the first two acts listed of a possible seven which make it clear that I am no longer an American citizen.  No oath before a consular authority is necessary according to the current statute.  As evidence of this act, I will create a video tape before swearing that my intention in taking the oath of Canadian citizenship is to relinquish my American citizenship.
UPDATE 1:  the following website deals with this manner of relinquishing citizenship and says that the presumption is that the person taking on citizenship in another country is not doing so to relinquish his US citizenship.  However, there is a procedure to indicate to the State Department, as in my case, the intention is to lose citizenship:
An individual who has performed any of the acts made potentially expatriating by statute who wishes to lose U.S. citizenship may do so by affirming in writing to a U.S. consular officer that the act was performed with an intent to relinquish U.S. citizenship. Of course, a person always has the option of seeking to formally renounce U.S. citizenship abroad in accordance with Section 349 (a) (5) INA.
This website thus verifies that the act of taking the oath of citizenship in Canada, if done with the intent of relinquishing US citizenship, counts as one of the seven ways of losing one’s US citizenship according to USC 1481.
Update 2:  Today a consular officer called me from the US consulate in Toronto.  She confirmed what I’ve said in this post, that relinquishing US citizenship and renouncing US citizenship are two different processes that are treated in a different manner by the consulate (including the fee structure).

The New Berlin Wall II : New fee for those wishing to renounce US citizenship

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One year ago, I announced that I had applied for Canadian citizenship with intention of renouncing my American citizenship.  I wrote that the US has tried to erect a Berlin Wall to keep American citizens from expatriating:

Since 2008, the US has placed particular restrictions on wealthy people who wish to expatriate.  If I were to own 2 million in assets or if my average net income tax over the last five years were $139,000 , I would be a “covered expatriate” upon renouncing my citizenship.  The law penalizes these individuals with exorbitant expatriation tax that boggles the mind.  Why?  To keep them in the USA.  So it is a Berlin Wall designed to keep people from leaving the US.

Now the US government has piled another bunch of useless rubble against that Berlin Wall.  I read in the US Consulate in Toronto’s website the following (emphasis mine):

Renunciation: We accept applications to renounce U.S. citizenship and forward them to Washington DC for a decision, which takes several months. This process CANNOT be expedited. You may contact us by mail, fax or email to request information and proper forms. Once you are ready to renounce, you must make a special appointment by emailing us … and proposing a date at least two weeks in advance. All renunciation appointments are at 10:30 a.m. We will respond and confirm the date and time of your appointment or propose a new date depending on staff and appointment availability. Note that there is now a US $450 fee to renounce U.S. citizenship, payable at the time the renunciant takes the Oath of Renunciation from the consular officer inside the Consulate.

Well, this is embarrassing isn’t it?  The US prides itself in being the best country in the world, the one where everyone and his brother wants to live.  But now they will just add one more insult to injury to their citizens living overseas: in order to escape the jurisdiction of the US, escaping citizens must pay $450.  Well, from the standpoint of fleeing the greediest government in the world, that will soon become desperate for revenue because of hyperinflation, it’s probably a small price to pay.

In any case, my citizenship application to Canada was accepted, I took the citizenship test Wednesday February 16, and I have been invited to a citizenship ceremony next Monday, on February 28.  I’ll be contacting the US Consulate in Toronto tomorrow.  Au revoir.