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Buy this essay and others in Jim's new book Being Sovereign.

The Indomitus Report
Volume 2, #35

30 November 2005
"Secret Plan"

Being Sovereign

It is somewhat annoying. In 1972, President Nixon claimed he had a "secret plan" for ending the war in Vietnam. If he were nominated by the Republicans, he would reveal the plan, he promised. And, indeed, the plan turned out to be "Vietnamization," a made up word meaning to leave the South Vietnamese in charge of their own defense.

While that plan might have worked in 1945 or even 1948, by 1972 it was far too late. The Vietnamese had been fighting to liberate French Indochina since 1918. Ho Chi Minh had appeared at Versailles to seek support from Woodrow Wilson, and was turned away by Mandell House. By 1972, the war for independence had already been going on for 54 years, against the French, the Japanese, the French, and the Americans.

In the event, the Vietnamization program was not "peace with honor," as Nixon promised, but simply an escape. The American forces left South Vietnam, the country was overrun by communist forces, and Saigon fell, taking with it most of the honor of the USA. Vietnamese allies were abandoned. Many of these individuals were murdered, raped, or tortured to death by the North Vietnamese - who were also harsh on the South Vietnamese of the Viet Cong. Millions of Vietnamese fled the country as boat people. Some few who were able to convert their wealth to gold managed to escape with some of their wealth intact. The rest lost everything. The world became witness to international indifference as the few countries that chose to accept refugees went through and picked out the most educated, and the rest were shifted from one refugee camp to another in neighboring countries.

So, when one looks at Bush's proposal for a "plan for victory," these recollections come to the fore. It is really heartbreaking to look forward to the betrayal of Iraqi allies. But, it seems inevitable.

Worse, the long-term plan for victory insists that a goal of USA policy in the definition of victory is a united Iraq. There is absolutely no reason for a united Iraq. Indeed, Kurdistan has as much reason to exist as Iraq. The Kurdish people have as much right to individual self-determination as anyone else. If they would have a Kurdish country, they should not be prevented in the name of American occupation.

The Bush Administration is facing the same difficulties that Johnson and Nixon faced. Many of these problems are self-imposed. Johnson tried to fight the war in Vietnam with a large number of "great society" social welfare programs, and a manned lunar program. The cost was excessive, and everyone could see that there was no way to finance all these activities and redeem the dollar for gold at $35/ounce.

Of course, the government at the time lied about it. But the negotiators to the Outer Space Treaty of 1967 were sent to make sure that all claims to territory were done away with, so that there would be no scramble for lunar territory as their had been a century earlier for African territory. There was to be an Antarctic-treaty like non-territoriality, and therefore no way to identify or patent land claims to individuals. Dreams of the high frontier were nullified, and Nixon was able to justify cancelling the last three Apollo missions. (It is certainly just as well. The Solar System will be settled by free enterprise, not by central committee.)

It is somewhat amazing how many parallels there are between Bush the younger and Johnson. Both have been fighting an increasingly unpopular war overseas, at the cost of thousands of American lives and tens of thousands of injured. Both have been losing popularity, leaving a legacy for their political party. Cheney, should he be foolish enough to run, would likely fare as well as Humphrey did in 1968. Both Johnson and Bush have manned lunar programs, though Johnson actually succeeded in getting men to the Moon on schedule. NASA doesn't do schedules any more.

Both Johnson and Bush have dramatically increased spending on social welfare. In Johnson's case, it was Medicare and other forms of socialism. In Bush's case, it is a ludicrous prescription drug benefit for seniors, which is likely to create tremendous difficulty for many seniors, combined with an unwillingness to commit his political capital to any sort of social security reform. Both Johnson and Bush inherited budget surpluses from their predecessors, though the Clinton surpluses were entirely smoke and mirrors - the national debt rose in every year of Clinton's surpluses. Both Johnson and Bush have overseen tremendous and unprecedented rises in deficit spending. The only saving grace this time seems to be a compression of the time scale.

It took from 1961 to 1965 to make sure that American forces were thoroughly committed in Vietnam, and to win some apparent victories. It took another seven years, until 1972 for a policy of withdrawal to be put in place, and another three years for it to be fully implemented and the very last American troops to be evacuated, as the embassy fell.

In the case of the "war on terror," the period from 2001 to 2005 was sufficient to embroil well over a hundred thousand American troops in a foreign war of occupation. Happily, the policy of withdrawal and replacing American forces with local troops has largely been put in place in Afghanistan, and seems to be the new policy for Iraq.

Does the president's "plan for victory," represent a compelling argument for continuing to send young Americans to kill and bleed and die? No. It reads very poorly. Clausewitz would not be impressed.

Are the American trained and supplied Iraqi troops ready to hold the line against al Qaeda in the war on terror? Nope. They have apparently picked up the habit of torturing captives, though, so much more brutality toward prisoners of war should be expected from all sides. Are the Iraqi government forces capable of defending their national government, maintaining a united Iraq, and defeating insurrection? Nope.

It doesn't help that the Bush administration has been mistakenly calling the belligerent forces insurgents. The term insurgent actually refers to a non-belligerent opponent of the civil government of a country. But, rather than turning to a dictionary and finding the term "insurrectionist" the Bush administration has invented the word "rejectionist." Where the word insurgent once appeared, now we find the word "rejectionist." Perhaps these Iraqis are rejecting the occupation of their country as a transplant patient might reject a foreign organ.

In any event, Iraq will split. It is not one country, and all efforts by the French and British to draw lines in the Middle East to divide up territory in the early 20th Century were based on European ideas rather than local ones. Iraq is going to be at least three countries: one Sunni, one Shi'ite, one Kurdish.

Since these results seem inevitable, why is the USA involved in this war in the first place? The arguments for weapons of mass destruction, close ties to al Qaeda, or ending the war on terror are baseless and in many ways fatuous. The war on terror has been advanced more under Bush than under any of his predecessors, but the number of terror incidents has increased exponentially. There is a good deal of evidence that the Bush government could have stopped the 11 September 2001 terror attacks, or dramatically reduced their impact.

Much as FDR clearly had the knowledge of the Japanese attack on Pearl Harbor weeks ahead of time, and was in a position to reduce the casualties and support a defense of civilian and military personnel and national assets, but chose instead to maximize casualties to provoke a pro-war reaction, Bush clearly had the ability to interdict the terrorists. Several of these guys were on no-fly lists already, some were wanded at the airports, and still they were permitted to fly. Even after the hijackings were taking place, response aircraft from the military were refused permission to go supersonic, thus preventing them from being in position to stop the last two planes from killing innocent people on the ground.

So, why go to war? To secure oil in the Middle East? Not at all. Just the opposite. Oil is still not being exported from Iraq in any significant amount. Oil prices, however, have risen dramatically since 2001, and since the invasion of Iraq in 2003. Oil prices are up, the Saudi royal family is much wealthier, the Carlyle Group has to be happier, and Bush and his cronies are much better off.

Before the war, cheap oil from the Caspian Sea region around Uzbekistan was threatening to bring back the mid-1980s low oil prices. Now, serious people are talking about $200 per barrel oil. Though, admittedly, these are the same sort of people who were talking about $100/bbl oil in 1980 with few exceptions.

Having been hoodwinked into an unjust war, Americans are going to be disappointed, once again, by the results they get from bad government. Once again, allies in a key region are going to find themselves betrayed. Once again, Americans are going to protest the war - protests that are going to result in riots. When the troops come home, the damage done should make obvious that the invasion was not quite the stunning success that the blitzkrieg tactics had suggested at first.

What should the foreign policy of the United States be? George Washington, Thomas Jefferson, and James Madison had it right. The policy should be trade and commerce with everyone, entangling alliances with none. The Department of Defense should defend the USA, not the interests of the Saudi royal family. James Monroe (who conquered Liberia and instituted the Monroe doctrine of interference in Latin America), Teddy Roosevelt, Woodrow Wilson, Franklin Roosevelt, and every president since have had the wrong policies. American troops are now occupying well over a hundred countries around the globe. American embassies are fortifications, not invitations to trade or commerce.

The bunker mentality and the group think approach to policy have got to go. Or, the United States will fall apart. The same sort of divisions that exist in Canada right now are very likely to shear that country apart along a dozen different fracture lines, and those lines are very likely to cross the border, especially in the West.

At this point, I'm reminded of Isaac Asimov's suggestion in his trilogy "The Foundation." It may be that the empire falling sooner would be better. The longer it holds onto power, the worse it decays, the more corrupt and decadent its behavior becomes, the more it inspires acts of perfidy and brutality in others. So, the longer the empire lasts, the longer the dark age to follow.

His point was not without historical precedent. The Greek civilization was certainly demented by Plato's "noble lie" and his bizarre idea for hereditary philosopher kings ruling over under-fed peasants in a "republic." But, if you look at the works of Anacharsis, Aristarchus, Archimedes, Archilochus, and Aristophanes, to name but a few, you can see the flowering of a great civilization. The Roman republic - which killed Archimedes before his calculus was widely known - and the Roman empire which destroyed and absorbed Greek culture - were a fall into barbarism. The development of calculus alone took over eighteen hundred years to re-occur.

The fall of the Greek culture of learning and commerce to the Roman brutality and empire beginning in 212 BC with the fall of Syracusa and the obliteration of Archimedes resulted in a dark age that included tremendous brutality, with crucifixes lining Roman highways with bleeding, tortured humanity until around AD 492. Thereafter, the Byzantine empire, which viewed itself as a continuation of Rome, returned to the traditions of learning and commerce which had made Greek civilization great, and was emulated and overshadowed by the Caliphate.

Don't be fooled into thinking that Pax Romana was any sort of golden age. The gold coins of Rome were debased. And, as Calgacus said before the battle of Grampians, the Romans make a desert and call it peace. As do all conquering empires.

Free Market Money

      "Just as the absence of competition has prevented the monopolist supplier of money from being subject to a salutary discipline, the power over money has also relieved governments of the necessity to keep their expenditure within their revenue. ... There can be little doubt that the spectacular increase in government expenditure over the last 30 years, with governments in some Western countries claiming up to half or more of the national income for collective purposes, was made possible by government control of the issue of money. On the one hand, inflation has constantly pushed people with a given real income into much higher tax brackets than they anticipated when they approved the rates, and thus raised government revenue more rapidly than they had intended. On the other, the habitual large deficits and the comparative ease with which budgeted figures could be exceeded still further increased the share of the real output governments were able to claim for their purposes."

      - F.A. Hayek, Denationalisation of Money - The Argument
      Refined: An Analysis of the Theory and Practice
      of Concurrent Currencies
      , 3rd Edition, 1990

One of the things that I most disliked about John Davison Rockefeller when I first read a biography on his life was his contention that competition is wasteful. It is not.

Competition is vital and excellent. All attempts to stifle competition fail, either promoting more competition or driving it underground. Competition is the key factor to make free markets work, and its absence is almost wholly the result of governmental interference in free markets. To the extent that any lack of competition arises without the interference of government, it is owing to initiatory force by quasi-governmental bodies or individuals acting in capacities that governments typically reserve for themselves.

The reason it is important to consider what Rockefeller thought is because he had lots of wealth. He was able to put his insidious and poorly conceived ideas into action. There is rather a lot of evidence that many very wealthy people of the 19th and 20th Centuries were dedicated socialists of one stripe or another. Rockefeller was certainly such a man. There is evidence that the fortunes of Carnegie, Ford, and many others have been turned to pro-Marxist and otherwise socialist causes.

The attacks on competition may be over presently, but no clear policy to encourage competition or disclaim monopoly power has been established, so a chilling uncertainty continues. Happily, this chilling effect has not been enough to prevent many competitors from arising in the free market money industry. Many companies are now undertaking the issuance of currencies backed by gold or silver. The development of competition in the issue of money brings a healthy discipline to the industry, and may ultimately prove the undoing of the barbarous relic of central banking. (My friend Jim Turk says that the barbarous relic is not gold, but central banking; I agree.)

Now, who would generally benefit if governments did not keep their expenditures within their revenues? People with money to lend government, including the banking cartel. Who would benefit from an amendment to the USA constitution providing that "the validity of the public debt of the United States shall never be questioned" even on the floor of the House or Senate? People with money to lend, including the banking cartel. (It is noteworthy that the said amendment was ratified under extreme duress, featuring bayonet drills, etc., and should probably not be counted as part of the constitution.)

Thus it is little wonder that major foundations and enterprises associated with the banking cartel have great enthusiasm for socialism and are found to be funding all sorts of socialistic groups and causes. Socialism is not merely stupidity, it is not merely a set of bad ideas, it is a tool of the ultra-wealthy bankers who seek to keep most of the available wealth for themselves, and to deny opportunities for change or improvement. And, of course, these people are going to be very badly harmed by the changes in technology that are sweeping the globe.

The impending collapse of the dollar is going to harm a great many people. Some of those who deserve most exceptional harm are the people who control the USA government and its various agencies. The collapse of the dollar is going to cause many tens of millions of people to refuse to file taxes, refuse to cooperate with the government, and switch to alternative currencies based on gold and silver.

Of course, among the dramatic and unpleasant responses the government is likely to make to a collapsing dollar would be the imposition of currency controls, the seizure of gold and silver as well as other things of value, and the return to mala prohibitum with regard to gold and possibly silver. Indeed, the current spate of eminent domain seizures, prompted by the recent dimwitted Supreme Court ruling suggests that local and state governments are already eagerly condemning and seizing property. Very recently, Yolo County, California seized a $60 million ranch in the county without explaining why that taking was in the public interest.

Just as clearly, such efforts to grab whatever wealth is available should turn many individuals against the government. As in the last days of Rome when tax farming was rampant, the current climate is encouraging many individuals to move their money out of reach of the tax authorities. Some are moving offshore, others are moving into encryption, and still others are creating new methods of trade and commerce that are very nearly impossible to detect, let alone measure or tax.

We'll continue our focus on Denationalisation next week.

Gold Mining

Here's how the stocks we presently suggest in this area look of late (early morning 5 December 2005):

Company Symbol

C$

US$

D

Exploring
Almaden AMM.TO

2.05

-

$0.31

Luzon LZN.V

0.105

-

-C$0.185

Pinnacle PNL.V

1.01

-

C$0.38

Western WNP.V

5.10

-

C$3.36

Holding
Lumina Resources LUR.to

0.24

-C$0.51

Northern Peru Copper NOC.to

1.75

-C$0.15

Regalito Copper RLO

-

5.69

$0.79

Silver Standard SSRI

-

15.18

$2.40

Vista VGZ.TO

5.99

-

C$0.99

Mining
Apex Silver SIL

-

16.85

$4.30

Newmont Mining NEM

-

46.48

$3.18

Northgate NXG

-

1.53

- 0.12

Tan Range TRE

3.91

3.34

C$2.91

Apex Silver tumbled on Friday. There was news out of Bolivia that the usual socialists had fomented a series of sit-ins and other protests, effectively closing the San Cristobal mine. The labor unrest ended, and worked resumed on Saturday. The market had not yet had time to react to the end of the strike at the time we looked at SIL's price.

Free Market Money

Gold has now moved firmly higher to $506.10/ounce (Monday 5 December 2005). The hallmark of gold above $500/ounce before year's end has been met. Indeed, our expectation of gold around $508 seems to have been met in early morning trading Monday.

Dow stocks lost ground Friday 2 December to close at 10,877.51. The Dow:Au ratio is now down to 21.49. Again, the Dow's recent gain was entirely inflationary. Gold's price rise has more than made up for the Dow.

Oil was $59.84/bbl, and it takes 8.46 barrels to buy an ounce of gold.

Silver has run up to $8.60/ounce. The Au/Ag ratio is down a bit to 58.85. Silver is still under priced at this level, and should continue higher.

Copper was trading above $2.05 early morning Monday 5 December. Ag/Cu ratio stands at 4.195. The related Au/Cu ratio is 246.88.

We've been talking about hyperinflation for some time. Here are some commodity price rises from late August to early December 2005. Silver is up 27.6% in a bit more than a quarter, or around 110% annualized. Per annum, copper is rising at 69%; aluminium at 102%; platinum at 47%; palladium at 177%; zinc at 117%. These are, of course, metals used in industry. Such rises suggest that the government's 22.8% annual inflation as reported for September is woefully inadequate.

Zinc is up again to $0.78/pound. The premium on pre-1982 pennies is now stands at 36%. The metal in $100 face value of pre-1982 pennies is worth about $136.20. Really, a simple centrifuge to sort the heavier copper pennies from the recent zinc junk and you've got free money.

Nickel metal was $5.92 early 5 December. Our proposed table to track metals against gold and silver shall await another issue.

U3O8 was $34.50/pound as reported from 28 November.

Schlumberger was $97.99 on the morning of 5 December. It is up $16.77 (or 20%) since our suggestion.

The four free market money stocks we've suggested in this sector are PVH, GBH, CGB, and MCG. Prices from Monday 5 December 2005.

Company Symbol gAu
D
Cyber Gold Bank CGB 0.217

+0.111

Gold Barter Holdings GBH 0.130

- 0.87

MicroCasino MCG 0.830

+ 0.317

Pecunix Venture Holdings PVH 0.025

- 0.025

Cyber Gold Bank has issued its second dividend and has more than doubled in price. Remember our rule to sell half your initial investment on a double. Doing so recoups your investment and lets you ride up with the rest of your invested funds to wherever the market takes you. It is, of course, not just our rule, but Doug Casey's as well. The latest issue of Doug's excellent International Speculator gives an excellent overview of prospects for resource stocks in a gold bull market. He also visits Southern Russia to look in on an interesting oil company and visits a Buddhist temple. If you aren't subscribing to Doug's newsletter, follow the link on his name above. It's well worth twice the price. (The same goes for Rick Maybury's excellent US & World Early Warning Report.)

The Gold Casino last sale was 104.60 grams of gold per share. These shares are over $1749 each at current gold prices.

Space Frontier

Those exact words might well have been said in December 1991, after twelve finalists had been chosen for the Space Travel Services "Ultimate Adventure" sweepstakes. The idea in May 1990 was to answer the very important question, "What would be the one thing we could do in the next ten years that would, more than anything else, change the way people think about space."

The question had been asked by Howard Stringer, bachelor of science in physics, University of Texas at Austin, MBA, University of Houston, subsequently Doctor of Chiropractic, Texas Chiropractic University. At the time, Howard was president of the Houston Space Society. He was enjoying a barbecue cook-out at my home, while our friends and we put together 1,100 copies of the May 1990 issue of The Colonist newsletter of the Houston Space Society. I gather from other conversations that our mutual friend Gary Oleson had suggested that Howard work on this sort of question and ask it of the core membership.

Being confronted with a profound question, and knowing that Howard would be a little embarrassed if my answer were flip, and being surrounded by several of our friends, I pondered. But, I didn't need to ponder very long. My reply was, "We could put one of our members in orbit."

The context of how to do so was already known. A Japanese journalist, Toyohiro Akiyama, had been chosen by his company Tokyo Broadcasting and was in Star City, Russia, training for his flight. It was well known that the Soviets were offering trips to Mir for about $10 million. Our mutual friend Art Dula had made several trips there already to negotiate various rocket rides for American satellites. So, we knew it could be done, and how much it would cost. Of course, in those days, the dollar hadn't collapsed, and $10 million was worth rather a lot of gold.

Howard wanted to know how we'd come up with the money, never even wondering who would provide the flight. It was well known within our community that NASA would not allow Americans to fly on the space shuttle as tourists. Our friend Alvin Carley was standing there and said, "We'll have a raffle. We're a charity. We can raffle off the tickets. So, everyone will want to join to qualify for a raffle ticket."

David Mayer said, "No. We'll have a sweepstakes. MTV just ran a 900 number sweepstakes for 99 cents a call, and got a million phone calls offering Bon Jovi's childhood home as the prize. If MTV can get a million bucks for some house in New Jersey, we can get $10 million for a trip into space." And so was born Space Travel Services.

There were some rewards. Shortly after our announcement, a woman wrote a letter to the editor of the Houston Post saying that she was going to the gym every day now. She was convinced for the first time that she had a chance to fly in space.

But, of course, the project was destroyed by the machinations of government. David and I were arrested on the false charge of felony gambling promotion of a lottery. Subsequently, the government admitted that we were conducting a sweepstakes, a legal marketing activity. The business was destroyed and I filed personal bankruptcy in May 1991.

I've waited fifteen years to see the reaction of an ordinary person to winning a trip into space. Fifteen years ago it would have been an American, perhaps an American woman, wife, mother, and ordinary employee of some company. Fifteen years ago, the United States government demanded, and the Harris County prosecutor executed an arrest of two innocent entrepreneurs doing their best to change how people think about space. Fifteen years ago, my dreams had to be crushed so the NASA space station program wouldn't be threatened, so George Abbey could continue to be the most important person in the development of space, and so a chilling effect could be spread over space tourism as an industry, and space sweepstakes as a funding mechanism.

Such is government, corrupt and putrescent, in the modern era.

Ms. Krause works for a company called Centurion, near Pretoria, South Africa. She is a data capturer. Her opportunity to be the first South African woman in space was won from a contest by eBucks and First National Bank promoting their "Greatest Rewards on Earth." Her trip is to be provided by one of the suborbital space tourism companies. The name of the rocket launch provider was not mentioned. A flight in two or three years time is projected.

According to the article, Mark Shuttleworth, Mike Melville, and Elon Musk are all South Africans. I didn't know that about Musk or Melville.

Also according to the article, there were 2.5 million entries received during the three-month competition. Only about 500 people worldwide have ever travelled in space.

Space tourism does change how people think about space. Now that ordinary people have the opportunity to fly in space, they have far more interest in it. NASA, of course, couldn't see this possibility. Indeed, to this day, NASA stands four-square against space tourism.

NASA delenda est.

SpaceDev closed at $1.60 on Monday 5 December. It was up ten cents from our first suggestion.

Delta Airlines has continued to fall. It last traded at .515 on 5 December at 16:00 eastern time. It is down more than 40% from our first suggestion. The other USA based air carriers are up on our suggestion to short, though some are off a bit with the renewed higher oil prices.

Launch Technology

      "Founded in early 2005, Zig Aerospace is dedicated to developing and providing flexible, reliable, and cost effective launch systems for nano-satellites. Located just sixty miles south of our Nation's Capital, Zig Aerospace was founded by a group of talented engineers motivated by the belief that launch vehicles do not have to be large, risky, or expensive."

      - David Gregory, Zig Aerospace

Zig Aerospace offers to put five kilograms of payload to a 250 kilometer low Earth orbit for about $200,000. The company uses the Z-1 rocket system based on a two-stage hybrid propulsion design. Of course, the company hasn't launched anything, yet.

Their nano-satellites are based on a California Polytechnic State University standard for CubeSat. A CubeSat is a very small satellite, based on a one kilogram payload bus.

What good is a kilogram or five kilograms of satellite? There are already hundreds of satellites in this weight range. These are useful for all kinds of data store and forward and remote sensing applications. A satellite doesn't have to be big to be useful - something computer scientists realized about computers a long time ago. Indeed, advances in computing make the value of small satellites increasingly great.

In their business plan, Zig Aerospace says, "...the market for launching small satellites, while existing, is supply-starved and under developed." This fact was uppermost in my mind in 1986 when I first proposed contacting academics about launch needs for Space Services. Ultimately the "University Pioneer" market study resulted in finding seven launches for the company's Starfire rockets. Later, I moved to Micro Satellite Launch Systems, which had the same marketing idea. In the fifteen years since then, the market has grown a great deal, and the capabilities of small satellites have expanded enormously.

David Gregory has a degree in mechanical engineering, with honors, from Tennessee Technological University. He did graduate work including analytical computer code for performance analysis of rockets funded by NASA's Marshall space center. He's also worked for the naval surface warfare (defense contractor welfare) center. He currently works there in the Aegis program.

Mr. Gregory's associates Zisen Liu and Max Lupton also work at the naval surface warfare center. Like Mr. Gregory, Mr. Liu is a mechanical engineer. Mr. Lupton is a chemical engineer. Additional technical support comes from Dr. Stephen D. Heister of Purdue University's school of aeronautics and astronautics, and Alan Blade, a computer scientist formerly with the naval surface warfare center and now with Goodrich Aerospace. It appears that none of these guys have any business experience, and none have any direct rocket launching experience.

NASA delenda est.

New Country Developments

      "My record just went gold in Taiwan."

      - Lindsey Lohan, "The Late Show with Conan O'Bryan,"
      7 December 2005

When I first visited Taiwan, it was 1969. My father was teaching physics at the national university in Hsinchu. The campus was very nice and the community of scholars was quite friendly. We hiked up Lion's Head mountain together, saw some marble quarries, and visited many sites of historic interest.

I remember very vividly a village which was sort of an artisans camp. There were wood carvers, ivory carvers, and many other hand craft experts. Some of the items were extremely intricate, others more mundane but still realistic. Quite a few carvings found their way back to our family home. However, the living conditions were fairly deplorable.

The memory of an open sewer running through the middle of a street of hardened dirt haunts my dreams. My recollection is vivid because another child of about my age, with Chinese features, was urinating into the sewer. This behavior was strongly at variance with my expectations about how people behaved on street corners.

The Kuomintang was still the ruling party, Chiang kai-shek was still dictator of Taiwan, and the Seventh Fleet was actively patrolling the straits. I remember my father filming us on the beach near some pillboxes. A uniformed local approached and instructed my father in no uncertain terms that this area was not appropriate for filming. I don't recall whether father's film was confiscated, but he put his camera away. On the same trip to the beach, one of my brothers collected some especially interesting seashells, and had a conversation with a sailor or marine from the USA fleet who was on the beach on shore leave, also looking for specimens for his seashell collection.

Geopolitically, it was a fascinating time. Around 900 million to a billion people lived in the People's Republic of China, but this tiny island of Taiwan with a population of perhaps 15 million was the recognized government of China. The Republic of China had been formed in the 1912. It was one of the governments of mainland China, resisted the Japanese during World War Two, resisted the communists after the war, and fled to Taiwan when its last stronghold at Chungking was sacked.

It was absurd in 1969 to have nearly a billion people with very limited international recognition and deliberate economic sanctions imposed by much of the world. The situation today is equally absurd, to have 23 million people with very limited international recognition and deliberate economic sanctions imposed by much of the world. The difference in population does not in any way reflect a different level of absurdity.

Taiwan is the largest and most prosperous of the pariah countries. Its status is a thorough indictment of the high sounding ideals and actual hypocrisy of the international organizations which refuse to accept the self determination of the people of Taiwan. Instead of recognizing Taiwan's people and country, it is generally kept out of international groups, or forced to participate under some pseudonym such as "Chinese Taipei."

Taiwan has a gross domestic product of US$576.2 billion, and per capita of $25,300 (both 2004 estimates). It has a very prosperous economy, with around 1% or less of the population below poverty. In 2002, the country produced nearly 160 billion kilowatt hours of electricity, over a quarter of this amount from nuclear power plants. An interesting speculation would be whether the PRC would be nuked by Taiwan in response to any invasion of Taiwan.

But, Taiwan never catches a break. Even agencies like the CIA, which lists Taiwan in its World FactBook does so almost as an afterthought at the very end of the alphabetical listing rather than among the Ts. So, how did it get to be this way?

Taiwan was occupied beginning some 30,000 years ago. However, it has only been regarded as a part of China since the Qing dynasty. Indeed, there is no record in Chinese culture of Taiwan which is not ambiguous prior to 1683 when a map indicating Taiwan a part of the lands of the empire was presented to emperor Kangxi. It was probably the Dutch who brought the island to the attention of the empire, in 1624 during the Ming dynasty. The Portuguese had named is Ilha Formosa or "beautiful island," in 1544, and the Dutch occupied and administered the island from 1642.

Taiwan was conquered from the Dutch for the Ming emperor by admiral Zheng Chenggong, a shipping magnate and wealthy pirate in 1662. However, at the same time, the Ming dynasty was falling to the Manchu. Zheng attempted to hold out for the Ming rulers in Taiwan, but the last Ming pretender was killed by the Manchu or Qing dynasty military. Zheng himself died in a fit of madness after learning of the brutal slaying of his father and brother at the hands of the Manchu. Taiwan held out for a while in Zheng's family, but was conquered in 1683.

The Qing dynasty ruled Taiwan as a prefecture, or two, until 1887 when it was made a province. During these two centuries, the Qing tried to limit colonization and set up a border between the highlands on the east side of the island and the plains to the West. The intention was to limit contact with the non-tax-paying aborigines in the uncontrolled highlands, not unlike Hadrian's Wall in Roman Scotland.

The Qing dynasty did not fare very well in the 19th Century. The Treaty of Nanking in 1842 ceded Hong Kong to the British in perpetuity. In 1849, the Portuguese declared Macao independent of China, which was accepted by the Chinese government in 1887. So, in 1871 when a Japanese ship from Okinawa was shipwrecked on the Southern tip of Taiwan and the Mu Dan people took the heads of all the crew members, Japan at first demanded compensation and then, being told that the Mu Dan territory was outside of Qing jurisdiction, sent troops in to commit atrocities there.

Subsequently, the island was invested by the French during the 1884-85 Sino-French war, and then ceded to Japan in 1895 as a result of the Sino-Japanese war. In the months leading up to the handover, the Taiwanese residents formed a Republic of Formosa. However, this republic was never recognized by any other country, and quickly submitted to Japanese authority. The aboriginal Taiwanese did not submit, though. As late as 1930 in the Wushe uprising, 150 Japanese officials were killed and their heads collected by the Sediq people. Japan's administration of Taiwan was brutal, repressive, and genocidal, outlawing the teaching of indigenous languages and demanding acculturation to Japanese customs. The final uprising was crushed by Japanese troops using poison gas.

Meanwhile, at the start of 1912, the government of China had switched from empire to republic. Sun Yat-sen declared the republic and was inaugurated in Nanking (now Nanjing) but was immediately opposed from Peking by Yuan Shikai. By 1914, when the First World War broke out, China was broken up into several regions each under the control of a clan war leader or warlord. Japan, allied with Britain and France in the First World War, captured the German territory of Shandong. China was forced to recognize Japanese control of Manchuria and part of Inner Mongolia. The post-war aftermath of that choice was widespread rioting and further unrest throughout the country.

As a result of the idiocy of the Wilson administration (largely the foreign policies of incompetent Mandell House) the Republic of China sought Soviet support in 1920. This event coincided with Ho Chi Minh seeking Soviet support for his revolution in French Indo-China. Sun Yat-sen's policy of cooperation with the Soviets for national unification of China was continued under Chiang Kai-shek, who was indoctrinated for several months in Moscow in 1923. Sun died in 1925, and Chiang dismissed his Soviet advisors after a kidnap attempt in 1926. In April 1927, Chiang established an anti-communist regime with its capital at Nanking.

By 1937, the Japanese were ready to consolidate their power in China. The conflict came to full boil after an incident in Peking between Chinese and Japanese troops on the Marco Polo Bridge. Japan then took Shanghai and Nanking. The massacres and rape of civilians by Japanese troops, the infamous rape of Nanking, would typify Sino-Japanese relations for years to come.

For part of 1937 and 1938, the Nationalist government of Chiang and the communist movement of Mao were united in opposition to Japan, at least partly as a result of a successful kidnapping of Chiang by the communists in 1937. However, the cooperation soon broke down. Starting in 1941, the USA began providing military aid to China, having already provoked Japan in many other ways. From 1943, American troops were stationed in China as part of the war effort.

After the war, the Republic of China (RoC) took possession of Taiwan from Japan. This result occurred owing to an order given by General MacArthur in the administration of conquered Japan. However, the RoC rule of Taiwan was extremely corrupt. On 28 February 1947, a cigarette seller was injured and a passerby was shot and killed by RoC authorities. There was an immediate uprising by the Taiwanese, which was brutally repressed by the RoC government. The 228 incident, as it was known, resulted in the deliberate massacre of some 30,000 Taiwanese by RoC troops brought over to the island on American ships.

At the same time, one of the worst episodes of hyperinflation was crippling the economy of China. When war with Japan broke out in 1947, there were 3.6 billion yuan in circulation. By April 1949, this figure had risen to 5.1 quadrillion yuan. The monetary inflation was the cause of a staggering price inflation. Richard Ebeling, writing in the December 2004 issue of The Freeman says that using a price index of May 1937 equal to 1, by April 1949 Shanghai prices had reached 151.7 trillion. And, of course, the government imposed price controls in a futile attempt to curb its own excesses at the cost of individual prosperity.

Chiang and his nationalist or Kuo-mintang party fled from Nanking to Canton, then Chungking, and finally to Taipei. They brought about 2 million refugees to Taiwan in 1949. The nascent UN, which had just recognized the existence of Israel, was still dominated by the post-war Allies, especially the USA and Britain. So, the exiled government of Chiang was internationally recognized as the proper governing authority for hundreds of millions of Chinese who were actually ruled by emperor Mao and the PRC.

Significant reforms of both countries took place in the 1970s and 1980s. Taiwan was expelled from the UN in 1971, and replaced by Peking. In 1979, the USA switched recognition from RoC to PRC. By 1987, both Chinese governments were well on the road to significant reforms. Martial law was lifted by Chiang's son during his rule of Taiwan. Capitalism was heralded as the new path for the PRC and everyone there was encouraged to become a millionaire.

By 1995, things got so prosperous on Taiwan that the government there admitted to the wrongdoing of the RoC in the 228 incident nearly fifty years earlier. Everything wasn't quite so rosy in the PRC, what with the massacre of civilians in Tianenmen Square. But, the handover of Hong Kong and Macau went fairly smoothly, under the "one China, two systems" theory. (Recent demonstrations by 250,000 people in Hong Kong suggest that everything is not entirely rosy with those struggling for a voice in their destiny.)

Nevertheless, Taiwan arrived at free market reforms fairly quickly. The government stopped printing money, and, wonder of wonders, price inflation ceased. Now Taiwan is a very prosperous country with major high technology industries. It has more or less a representative democracy, with several parties in a parliamentary style government.

It isn't all free markets forever. The legislature in Taiwan just had a second reading and is expected to approve on third reading a law setting maximum rate spreads for credit card debt. There have been long-standing complaints about corruption, going back to the earliest presence of the Republic of China on Taiwan after the Second World War. The current government is run by the Democratic Progressive Party, and won only 6 of 23 mayoral and county magistrate seats in the recent election. The president, Chen Shui-bian promises to win back support by making sure his government is clean and reform-minded, which appears to be a tacit admission of some corruption.

Taiwan Semiconductor has seen record high sales in November, up 4.9% from October and 31.1% from the year before. TSM is one of the companies (NYSE listed) in which one could invest if one views the Taiwan story as particularly promising. Finance.yahoo.com lists 34 stocks, 4 ETFs, 8 indices, and 10 mutual funds for "Taiwan" as a ticker symbol lookup. Another success story is AU Optronics (AUTO.ob), a major supplier of liquid crystal displays.

Next issue, Tibet. Then the Himalayas.

Longevity

In a recent fit of archival madness, monkeying around with papers which should have been shredded a dozen years ago, I came across a copy of the Houston Space Society newsletter. It was our declaration of independence from the Nationalist Socialist Space Society (founded by arch-Nazi Werner von Braun). In it was a Revolutionary War woodcut depicting very hot tea being forced down the throat of a British tea tax collector. Similar woodcuts depicted the tarring and feathering of British tax farmers - whose general warrants were an outrage to the colonists - and other examples of civil unrest.

I was recently reminded in a conversation that prosperous people don't rebel. The American colonists had been suffering from about 1722 through a depression that ultimately didn't lift until 1782. The crash which followed the South Sea Bubble and the inflationary John Law "Banque Royale" paper money resulted in stocks reaching about 5% of their earlier peaks. Stock prices in London and Paris did not recover their earlier highs for sixty years. So, in that context, after 40 years of depression, the colonists were still loyally supporting the British against the French, but in 1765, Patrick Henry warned that Caesar had his Brutus, Charles the First his Cromwell, and, amid cries of treason, suggested that George III would profit by their examples. A further ten years would be required to goad the American people into open revolution.

These points seem worthy of some consideration given the extent to which the nationalist socialists in power in DC have followed George III, Napoleon, Lincoln, Stalin, Hitler, Mao, and Pol Pot down the path of tyranny. "As a result of the War on Drugs and the War on Terror, the courts have restricted the applicability of the Fourth Amendment requirement of a warrant for searches and seizures of private papers and effects to where little is now left of this protection. For example, any business that is part of a 'heavily regulated' industry has been deprived by past court rulings of any Fourth Amendment protection, permitting warrantless searches limited only by their being conducted during regular business hours (Pearson and Shaw, Ibid.)."

In August, Durk and Sandy filed an amicus brief in the case of United States versus Gonsalves before the USA first circuit court of appeals. They argue that a warrantless search was made of a doctor's office and medical records were seized, but doctors are not part of a heavily regulated industry. I suspect that a large number of chiropractors who remember the depredations of the American Medical Association in previous years would argue otherwise. Indeed, the medical doctors crave licenses from the state, so it seems to me that they deserve all the kicking around they get as they kneel before magistrates. On the other hand, as Durk and Sandy point out, the medical records in a doctor's office have been the subject of considerable legislative protection.

Durk and Sandy conclude that the final nail in the coffin of the Fourth Amendment is perhaps being quietly driven even now. It isn't clear, but presumably there is some call to action being invoked by their essay.

For my own part, I'm not sure what to do. Making you aware of these facts seems to be among my duties as a commentator on this industry. I suspect that any prospect for reform by working within the system is long dead. The evidence for massive corruption on the part of legislators, agencies, and lowly bureau-rats is enormous. Yet, I am still resisting the urge to call for the vast effusion of blood that would be the inevitable consequence of any acts of rebellion.

Instead, I favor an alternative to open rebellion or violent revolution. I believe it is now possible to so secure private property through information technology that it may become practical to completely obviate the seizure of records. What good is a computer which has only random bits written to its hard drives? How can assets be seized if their location is unknown? How can wealth be traced from one country to another when the entire trail is obscured, encrypted, and hidden from view?

Utimately, the state has to have resources or it fails. Smashing the state is an alternative, but it is far better to consider such an approach after the state has been starved into weakness. The current budget deficits - amid talk in Congress of further tax cuts - combined with the trade deficit and the significant evidence of ongoing hyperinflation suggests to me that there is a poignant opportunity for a bloodless change in the power structure akin to the Glorious Revolution of 1688-89. Only, this time, instead of putting our faith in parliaments, we should hang onto our individual sovereignty.

The work of EZEZ is to develop management and technical consulting services to help individuals and businesses convert from fiat dollars to digital gold and silver. As part of that work, we are developing thorough updates to the online tutorials now found at ezez.com. Also as part of that work, in early November we acquired PVCSE.com - the private stock exchange that pays you a referral fee every time someone you refer buys a share of stock. I'm pleased to report that five stocks are now actively trading on the exchange.

FDA delenda est.

Legislatura delenda est.

Here's how our stock suggestions in the nanotechnology and life extension sector look right now (evening Thursday 8 December 2005).

Company Symbol US$ delta
CytRx CYTR 0.94 0.04
Accelrys ACCL 7.81 1.20
Dendreon DNDN 5.43 0.11
Elan Corp. ELN 12.84 5.61

Dendreon announced a public offering of shares at $4.50 on Wednesday. Its share price is largely unaffected.

Elan is close to hitting our first double in this sector. Tysabri is being priority reviewed by the FDA for another release. Hopefully this time Biogen, Elan's partner, won't be stupid and insist on pairing the drug with their own multiple sclerosis treatment, but let it stand on its own. (Standing alone, Tysabri has never had a single case of progressive multifocal leuko-encephalopathy, the rare brain disease identified in several cases where Tysabri was paird with Biogen's drug.) The news has been very good for Elan. Our spirits are high, along with our élan.

We casually mentioned the idea of shorting Pfizer and other major drug makers at the end of May. Pfizer was $20.98 on 8 December, down 26% since our suggestion. Merck is off 7.25% in the same period. News on Merck's fiasco Vioxx today seems to indicate that a study published in the prestigious New England Journal of Medicine was edited to delete negative data including evidence of heart attacks as a significant side effect. The editor of the journal Dr. Gregory Curfman says he was stunned to learn the data was deleted, and it appears that Merck researchers may have done the deed. See Associated Press and Forbes.com for articles and essays on same. If you worried that our short had fully recovered last week, don't. It fell sharply when this news came out today, and should fall again tomorrow.


Publication Note: This issue is our fifty-first.

Gratuitous example of bizarre legislation: The USA house of representatives approved 234 to 197 $56 billion in tax cuts that would keep alive lower rates on dividends and capital gains passed in 2003. The legislation is bizarre because it purports to keep alive economic growth, which has been entirely illusory. Last month, Sen. Olympia Snow, republicritter from Maine blocked the senate finance (cartel) committee from even considering an extension of these tax cuts. Instead, she thinks the Senate should tax cut its way to hurricane relief of the Gulf Coast. It all seems like too little, too late, with far too much bickering. The economy is on fire with hyperinflation, and these twits are fiddling with tax rates.

Gratuitous prediction: gold $555/oz by 31 December 2005.

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