Last week, I discovered a new rap artist named Tahir Jahi had recorded and released a song called “Man Make Da Money” on his MySpace page. No, this isn’t another “bling-bling” materialistic tune – though those can be good, too – but a rap song critical of…the Federal Reserve?
You bet! Jahi heaps scorn upon the president under whom the Federal Reserve Act of 1913 was passed, Woodrow Wilson, and bemoans the transition from sound money to government fiat currency. Here are some lyrics of interest:
If you don’t know where this nation is headed
our nation is controlled by a system of credit
Woodrow Wilson is the one you can thank
birthed the Federal Reserve a privately owned bank
Each dollar bill includes interest from lender
got rid of gold, paper is legal tender
No Constution, will use our little clause
control the nation’s money who cares about its laws
Jahi is not the only rap artist to criticize America’s central bank, either. The much more well-known Prodigy, of the legendary hip-hop group Mobb Deep, also voiced his opposition to the Fed and support for Republican presidential candidate and anti-Fed crusader Ron Paul. Now Prodigy’s in jail on weapons charges.
But anti-Fed expression in media goes beyond the world of hip hop and of music in general. Last year’s Mad Money – the movie; not to be confused with the CNBC show hosted by mad inflationist Jim Cramer – was, in the opinion of radical free-market economist Doug French, an anti-Fed film. Here’s what he said in an article written for LewRockwell.com, the most widely read libertarian site on the Internet:
Heroically, Mad Money portrays the higher-ups at the KC Fed as pompous and clueless, while normal entrepreneur Junior (Mathew Greer), owner of Junior’s Blues BBQ joint where the three ladies meet to hatch their plans over Budweiser and peanuts, is the sharpest guy in the movie.
It’s about time us hard-money folks had an anti-Federal Reserve movie to enjoy. I’m with Lew, “May this be only the first of a string of anti-Fed movies.”
And finally, there is a new novel out: The Flight of the Barbarous Relic. I was sent a promotional copy of this book, and I haven’t been able to put it down. It tells the story of a free-market, gold-standard-loving economist who “sells out” and becomes Fed chairman, much like Alan Greenspan. The difference is, this fictional Fed head plots the destruction of the fiat-money based monetary system. The novel is a suspense thriller that deals with the government’s efforts to thwart a return to sound money and explains why a fiat-money system is good for only one class of people: those in power. I haven’t finished the book yet, but so far, I’ve found it enormously entertaining, and I highly recommend it.
Mainstream economists like to pretend that monetary theory is something only they care about. They’re deluding themselves, though. There is a growing awareness of the damage caused by the Federal Reserve System among the general public, and Ron Paul’s historic presidential campaign – largely fueled by anti-Fed, pro-free market rhetoric – showed this. Now, these pop-culture anti-Fed works are driving the point home. When will anti-Fed beliefs reach critical mass, and how will the government react when they do? The Flight of the Barbarous Relic offers some insights into this question.
The economy of South Africa has been in an upswing since September 1999, the business quarter after Nelson Mandela was elected to his second term as president of the new republic. During this decade just past, the nation has diversified from its traditional mining and minerals base and transformed itself into a pragmatic, fiscally conservative, mostly free market economy, with a few minor problems along the way.
In the second quarter of 2008 South Africa’s gross domestic product (GDP) rose by 4.9%. The largest chunk of that growth, 2.3%, arose from manufacturing, including surging metals and automotive industries; the remainder was balanced across all sectors, including mining (0.8%) and agriculture and finance (each 0.5%). In the midst of a global slowdown, such figures are impressive, made more so by the fact that South Africa is a net exporter hungry for international markets not only for their commodities but for their value-added exports, as well. To top it off, the government is running a surplus.
The 2008 commodities boom has been good for South Africa, which produces around 80% of global platinum and 10% of gold as its two largest exports. Other major commodity exports include chromium, vanadium, manganese, titanium, coal—oh, yes, and diamonds. South Africa remains one of the top four diamond mining nations in the world and is rapidly becoming a center for grading and cutting both diamonds and colored gemstones, as well.
The percentage of the nation’s GDP that’s earned by mining and quarrying has fallen steadily as South Africa has diversified its industry base, dropping from around 14% in the 1970s and 1980s to its current level of 5.8%. However, at 21% of total exports, it’s still a major source of income for the nation and one of the largest employment sectors, as well.
Measuring the trade balance is difficult in a rather small economy where diamonds and colored gemstones are routinely imported then re-exported later, so monthly fluctuations are best ignored. The June trade data, the most recent figures available, show a deficit of US$1.9 billion, one of the largest on record.
However, the commodities boom brought not only benefits for export nations but also high inflation, and South Africa has been hit much harder in that regard than Australia, Canada or New Zealand. Consumer prices including foods are 13.4% higher in July 2008 than they were in July 2007, while producer prices surged 18.9%, trimming profit margins boosted by the boom.
In an attempt to fight that inflation, South Africa has jacked their intrabank interest rate to a jaw-dropping 12.0%. Retail credit, of course, is even higher, with credit cards soaring to 25% to 27% p.a. while mortgage rates in double digits have homebuyers staggering. Remember that this is a nation where unemployment has not fallen below 20% since the turn of the century, and the government statistics for the second quarter of 2008 show that 23.1% of the nation’s workers aren’t. The apartheid here has nothing to do with race; there’s seven percentage points difference between the male and female unemployment levels.
South Africa’s developed infrastructure suffered decades of neglect during the turmoil of bringing down apartheid, and in January 2008 this neglect came home to roost with a vengeance when the electrical power supply proved unable to meet the rising demand, resulting in “load shedding” (read blackouts) across the nation. This was bad enough in shopping malls and residential areas, with defunct traffic lights causing massive gridlocks in Johannesburg and frustrated commuters setting the electric trains afire in Pretoria.
But when the underground mines were warned their power supply could not be guaranteed, they quit production at a loss of export revenue estimated at US$82 million per day. Platinum prices soared to $2,276 per ounce—not good news for automakers, which purchase more than half of the world’s platinum for the manufacture of catalytic converters. However, as coal to provide that electricity is one of those mined resources that were shut down, this obviously wasn’t going to work, and the mines reopened five days later on 90% power rationing.
Eskom, the national utility company supplying 95% of South Africa’s electricity, is scrambling to expand their reserve capacity, although “load shedding” isn’t going away anytime soon. Meanwhile, small businesses are investing in generators, and the civil population has been asked to cut back on their electricity usage as much as possible to keep the wheels of industry turning.
Power to the people. Power from the people.
On June 17, President Bush signed into law a $1.2 billion military tax relief package, which includes an Exit Tax on U.S. citizens and long-term green card holders who expatriate from the United States. The Exit Tax is part of the Heroes Earnings Assistance and Relief Tax Act (HEART) of 2008.
An American citizen or a lawful permanent resident giving up the citizenship or green card is now subject to a tax. The United States is probably the only country on the planet that taxes citizens on their worldwide income, no matter where those citizens happen to live.
Before this tax was introduced it was easy for individuals to renounce their American citizenship or surrender their green card to escape from the global U.S. tax liability. This tax applies to U.S. citizens who expatriate and lawful permanent resident who loose their permanent resident status, voluntarily or otherwise, on or after June 17, 2008.
Those who renounced their American citizenship or lost their permanent residency before this date are outside the purview of this tax. Such persons were treated as citizens or lawful permanent residents if they remained in the country for specific periods.
The exit tax includes a capital gains tax on the unrealized gain in an expatriate’s worldwide assets and a transfer tax on all gifts and bequests from an expatriate to any U.S. person during the life or upon the expatriate’s death if the expatriate:
- Has an average annual net income tax liability that exceeds $ 139,000, over the past five years subject to some adjustments; or
- Has a net worth of more than $2 million on the applicable date; and/or
- Fails to certify under penalty of perjury that he has complied with all federal tax obligations for the past five years.
The exit tax introduces the imposition of what can be described as mark-to-market on the basis that the expatriate sold all his or her worldwide assets for the fair market value on the day before expatriation. The exit tax is subject to an exclusion of $600,000 on the market value of all the assets owned by the expatriate in addition to a few applicable exemptions.
The exit tax applies to any expatriate that:
1. Has an average annual net income tax liability that exceeds US$139,000 adjusted annually for inflation for the five preceding years ending before the date the expatriate loses American citizenship or looses permanent resident status
2. Has a net worth of US$2 million or more on such date
3. Fails to certify under penalty of perjury that he or she has complied with all U.S. federal tax obligations for the preceding five years or fails to submit any proof of compliance the IRS demands.
With the exit tax, Congress has made the most significant change to the anti-expatriation rules since their inception in 1966. In doing so, it has sent a clear message: as American citizens and permanent residents, you have enjoyed many privileges, and if you want to exercise your right to leave, you’ll pay dearly for the privilege.
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