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Archive for February 19th, 2010

Here are a few interesting links to keep you informed about the fiscal crisis in Greece.

Richard Rahn has a nice comparison in the Washington TimesĀ of Poland’s good policy and Greece’s profligacy.

Reuters has a story about some new reforms in Greece, including a very Orwellian proposal to track everyone’s purchases by banning cash transactions above 1,500 euro.

And the Associated Press has a story about gas shortages because bureaucrats at the Customs office went on strike to protest a proposal by the government to give them only one (rather than two) extra month(s) of pay per year.

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Demagogues such as Senator Carl Levin, as well as many other politicians and journalists, often assert that low-tax jurisdictions are havens for dirty money and terrorist financing. From a theoretical perspective, this does not make sense. So-called tax havens have a big incentive to avoid scandal since they are much more vulnerable to reputational risk. Just imagine what would happened, after all, if the 9-11 terrorists had used a bank in the Bahamas instead of a bank in Florida. Critics of low-tax jurisdictions automatically would have assumed that the bank was complicit and the entire financial services industry in the Bahamas would have been crippled – or even destroyed. But because the terrorists used American banks (as well as banks in high-tax European nations and the Middle East), there was not a knee-jerk reaction. People understood that the bank tellers and managers had no way of knowing that the flight school students were actually lunatics.

But this does not stop the anti-tax haven smear campaign. Low-tax jurisdictions are viewed as a threat by politicians since it is much harder to impose bad tax policy in a world where tax competition is allowed to flourish. This is why tax havens are attacked whenever something bad happens. If there is a terrorist attack, blame tax havens. If there is a financial crisis, blame tax havens.

With this in mind, a new report from the University of Basel’s Institute of Governance did some real research and came up with a list of nations where there actually is a high risk of money laundering and terrorist financing. As the map below indicates, only one so-called tax haven is among the 28 countries listed, and that nation was in the lowest-risk category.

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On the one-year anniversary of Obama’s stimulus scam, I appeared on the Fox Business Network to explain why squandering $800 billion was bad for the economy.

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