The Panama Papers

713a3bf3b4f11189c343857ff640f697There is much to be learned from the famous “Panama Papers,” both in their content and in the manner of their disclosure.  The superficial reading, widely published, is that lots of bad people used a certain Panamanian law firm to help hide their ill-gotten wealth.

Naturally, we presume that everyone with a foreign bank account is at least engaging in criminal tax evasion, and probably stole the money to begin with.  The presumed criminals in this case include, not Russian President Putin himself, but his “close associates.”

One theory is that the attempt to smear Mr. Putin was so amateurish that it must have been planned, counterintuitively, by Russian intelligence.

Bank accounts not readily available for confiscation (remember Cyprus) are always in “offshore tax havens,” which has that wonderful Pirates of the Caribbean ring to it.  The mere fact of Mitt Romney owning a blind trust in the Caymans was enough to smear him as a tax dodging fat cat.  A blind trust, hello!  Does anybody on CNN even know what that is?

Here is an editorial in the Wall Street Journal reminding us that, for many of the nationalities featured in los papeles, honest people move their money offshore because their government is corrupt.  Simon Black takes this a step further, warning ordinary Americans to take their money offshore.

Last year, the US government stole more money and private property from its citizens through civil asset forfeiture than all the thieves and felons in the country combined.

The legal issue in each case is whether any tax laws were broken.  The more interesting issue, especially for public figures, is where they obtained the money in the first place.  This may also involve illegal, or at least suspicious, activity.

Oddly, few Western politicians have been implicated.  This could be the result of Western media controlling the disclosures, or our own crooks could simply be using a different law firm.

Some have suggested that this firm was targeted specifically because of its client list.  It is a referral business, after all.  One theory is that the attempt to smear Mr. Putin was so amateurish that it must have been planned, counterintuitively, by Russian intelligence – a “false flag leak,” if you will.

The one indisputable victim here is Panama itself.  The EU and the IMF have long wanted to crack down on Panama as a “tax haven,” as they have previously cracked down on Switzerland.  Financier George Soros supports global tax regulation, and he also supports the agency that broke the story, the ICIJ.

You know this was the motive because the first thing printed in The Economist was a call for – get this – a global registry of beneficial owners.  Do you really think the global tax police will be looking for their own masters’ money?  No, no, no, querido.  They will be looking for your money.

See also:  New World Currency

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Alien Invasion

You fled the daily dangers of a threadbare dictatorship – the violence, the corrupt officials, and the armed factions. You came here in search of a better life, to find work, and safety, and a future for your children. No one can blame you for that. We welcome you, but with some trepidation.

Immigration without assimilation is just another name for “invasion.”

We fear that you will import the very attitudes and beliefs that made a wreck of your former home. Maybe not you, personally, but many of your kind seem to reject our culture and our way of life. Worse, they affect a moral superiority, as if they are the righteous ones and we are somehow evil because we have been successful.

We fear that, once you have the numbers, you will recreate your native laws and institutions. Stop and think about that, for a moment. It will not serve your interests to make in our home a replica of the very system which you have fled. You would only be carrying the seeds of your own (and our) destruction. If you can’t grasp that, maybe you don’t belong here. Maybe you should go back to California.

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Dependency Ratio

Jeremiah sees red whenever he reads about the dependency ratio. China must engineer a baby boom, so that they will have enough young workers to support a billion retirees. Europe must admit hordes of migrants, in hopes they will pay into the retirement fund. Economists talk about the dependency ratio as if it were an iron law of demographics, and it’s not. It is merely the artifact of a badly designed retirement program.

Despite the term “trust,” the Social Security system contains nothing that remotely resembles the common law trust. It is merely a system of taxation and appropriation sprinkled with trust terms – John Attarian

The dependency ratio only matters because Social Security, and other systems around the world, are passthru systems. Workers paying into it today are paying directly to those who have already retired. These retirees, in turn, have spent their working lives supporting someone else. The system needs at least two workers for every retiree, which means an ever-expanding workforce.

This is an absolutely insane proposition on which to base a retirement system. If the workforce actually doubled every generation, the population boom would overwhelm the planet. More likely, some generation soon will decide to stuff it. That will leave Jeremiah, having paid into the system all his life, holding the bag. It is literally a Ponzi scheme.

The correct design, of course, is to accumulate the contributions over time, so that the cohort drawing benefits in any given year is roughly the same cohort that paid in. This decouples the system from the vagaries of demographics. Whatever boom or bust in the workforce today, will be matched to the later demands of their retirement.


This design would also allow the fund to invest in high yielding projects over long timeframes. A national retirement program should be a big winner, not the bankrupt loser we have. For comparison, look at Singapore’s Temasek, the Ontario Teachers’ Pension Plan, or Berkshire Hathaway.

Far from being “worthless IOUs,” the investments held by the trust funds are backed by the full faith and credit of the U. S. Government – Social Security Administration

The solution for China, just starting down the slope with a 1:3 ratio, is to implement an accumulating system instead of a passthru one, and not plan on a workforce of 3 billion. For our Western welfare states, the old system must be phased out – so as not to strand Jeremiah – and replaced with a new one.

This means America will need political leaders who can handle a trillion dollar fund, and resist the temptation to pillage it for “emergencies.” Our track record is not promising.

See also: For the Last Time, the Social Security Trust Fund is Real

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Demonize Sloppy Accounting

The Economist describes Bernie Sanders’ candidacy as the biggest-ever student prank. It was certainly amusing watching his interview with Bill Maher, wherein both tried heroically to “undemonize” socialism. Regular readers know that Jeremiah takes a nuanced view of socialism, allowing for redistribution but debunking the statist agenda.

Mr. Maher made the point that Social Security, Medicare, et alia are “socialist” programs – and we like them, so socialism is groovy, right? Well, no. These programs have epic problems, which could be fixed using free market methods. See How to Control Health Costs, for example.


The important thing is to talk about specific policies, regardless of the demonic label, and this is where Sen. Sanders went badly wrong. He repeatedly used the charlatan’s formula, “we can pay for X by taxing Y,” where X is a free pony and Y is something we don’t understand. Like, we can pay for free college by taxing speculation on Wall Street. Yes, he actually said that. Cue cheers from the college kids (except the finance majors).

The right way to analyze this proposal is by splitting it, just as you would split a transaction in double entry accounting. If free college is a good idea, then the funding side can be considered separately. If taxing “speculation” is feasible, then we should do it anyway and reduce the deficit.

Free college might not be a good idea, if costs continue to rise and quality continues to fall, as they have been doing under the current subsidized (but not free) system. The likeliest outcome is that employers will respect a state college degree even less than they do today, if such a thing is possible. This is not to pick on free college, but merely to show that universal free stuff is not always a good idea.

Turning to the funding side, we should definitely tax those bad speculators on Wall Street. They’re the folks who make the price of heating oil go up in the winter. We should put a big fat Tobin Tax on them. What could go wrong?


Filed under Economy

Eating the Golden Goose

SwedenThe Mises Institute has a rundown on Swedish socialism. It’s a good example of why policy should be informed by the whole picture, and not tabloid stereotypes. The article shows that the Swedish economy had historically been very successful, and was harmed by its socialist policies.

It is a mistake to draw conclusions from any nation’s experience at a point in time, without considering the trend. Sweden’s past success carried it for many years after the fatal policies were implemented. The comments to the article are good, too, from many people with firsthand experience.

Nordic Socialism has frozen a once entrepreneurial and prosperous people in time.

This line about freezing the economy at a point in time is reminiscent of Jeremiah’s Freeze-Frame Economics. Socialists implicitly believe that the nation’s productive capacity will run on unchanged, and unimpeded by their redistribution program.

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Syrian Hypocrisy Roundup

Hungary is getting a lot of flak for closing its borders to Syrian refugees. Never mind that Austria closed its own border, creating the backup in Hungary. Never mind that Greece, which has a treaty obligation to control the European border, waves them through.

Although you [The Economist] clearly understand the difference between refugees and economic migrants, you continually elide that distinction – Simon Diggins

People have noticed that the migrants are mostly able-bodied young men. From a humanitarian perspective, this means that the women and children, the old and the weak – the people most in need of help – are abandoned in Syria.

Best practice is to settle refugees near home and temporarily, with the goal of resolving the crisis and keeping families together. Transplanting a nation’s labor force is a different project entirely, and of dubious humanitarian value.

For the effort, however, Angela Merkel was tipped for the Nobel Prize. Never mind that Turkey is already hosting 2.5 million refugees, and never mind that Europe has no common immigrations policy.  This prize offer, like the one inflicted on President Obama, is intended to be a bribe.


Finally, we note that our own inept policy in Syria (as in Libya) is what changed a harsh but stable dictatorship into an anarchic hellhole, causing the refugee crisis. It also ended decades of American dominance in region.

Speaking of Russia, has anyone noticed that the “axis of common sense” led by Hungary is all the old Warsaw Pact nations? Hmmm.

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That Old Time Religion

Camille Paglia says that an empire is ripe for the fall, right around the time its citizens gain total freedom of sexual expression. We may assume that hers is not a moral judgment, but an empirical one – correlation, not cause.

There [comes] a time when these fine gradations of gender identity—I’m a male trans doing this, etc.—this is a symbol of decadence, I’m sorry.

The correlation model holds up pretty well, for falling empires in general. Rome is a favorite example. Paglia adds Egypt and Babylon. America, as we have shown, started going to hell in the 1970s, and has declined pari passu as our society has become more liberal.

The reactionary right believes there is a causal link. America’s military and economic might depended on the “moral fabric” of our society, which was frayed by evils like abortion, gay marriage, and women’s rights. Plenty of evangelists take this line, along with moralizing enemies abroad.

Policies are being pursued that place on the same level a multi-child family and a same-sex partnership … This is the path to degradation. – Vladimir Putin

Jeremiah rejects all this, of course. We define morality in purely civic terms. It means going to work, paying taxes, serving your country, and being politically active. The sexually repressive definition, which goes by the name of “family values,” is spurious.

Here, then, is a scary thought. What if there is a causal link, and the link is repression? What if the kind of regimentation that produces good soldiers and engineers, also produces bigotry and discrimination? That would mean that a liberal society is always a weak society.

We disregarded the old institutions and the old values, including some we should have kept – like fortitude and self-reliance.

There are counterexamples, like northern Europe, but circumstantial evidence weighs heavily in favor of the reactionaries. We must understand that these people see “good old American values” as a package deal. Gays were in the closet, and we had 5% GDP growth.

Social liberals have made the same conflation. We disregarded the old institutions and the old values, including some we should have kept – like fortitude and self-reliance. Once again, we have arrived at the set theory definition of centrism. The right wants all of the old values back, including the bad ones, and the left wants none, overlooking the good ones.

America needs social norms and institutions that reinforce productive behavior. We need families (of any kind) that stick together, and kids that stick with math. People are saying that we will fail because we have forgotten our values. Let’s not fail.

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Filed under Center Field, Education