Reading time: 5 – 8 minutes

Stratfor’s website was hacked by Anonymous, customer details including names, addresses and, according to Reuters over 4,000 credit card numbers were copied and distributed to the public while AnonymousSabu tweeted “Over 90,000 Credit cards from LEA, journalists, intelligence community and whitehats leaked and used for over a million dollars in donations”. Being a former Stratfor subscriber I am extremely annoyed. However, I practiced proper privacy hygiene using a ghost address and a disguised credit card so the potential negative effects are likely minimized.

Nevertheless, I am extremely displeased that Stratfor, by not offering to accept BitCoins, has failed to take proactive steps to allow subscribers to protect their privacy and security. Absolutely ridiculous. These Empire cheer-leading neocons know or should know about protocols like BitCoin which have geopolitical significance. Consequently, I canceled my subscription with this liability of an organization. If they decide to accept BitCoins then perhaps I will reconsider a subscription.

Here at HowToVanish we do not take anyone’s time, attention, privacy or security for granted. Did you know the average victim of identity theft spends thousands of dollars and hundreds of hours cleaning up the mess?

But I doubt Stratfor cares much about that potential cost born by their customers. If they did then they would follow our example. You see, for us privacy is a serious business and why all How To Vanish products are available with payment via BitCoins or cash.

HOW TO GET BITCOINS WITH CASH IN AN HOUR

First, you will need a BitCoin wallet to have the bitcoins sent to. This could be with an exchange like Tradehill (used in this example), an online wallet service like Strongcoin or using the free open-source client available at BitCoin.org.

Second, you will need to find a source willing to exchange BitCoins for your cash and BitInstant seems as good as any, will send the bitcoins to your Tradehill account and only charge 5% which is about the same cost American Express charges merchants. BitInstant accepts cash deposits at Bank of America and Chase branches which you can locate at TrustCash with only a zip code.

Third, now that you have located a nearby branch to use with BitInstant you can fill out the order form. For extra anonymity use a temporary email address from a service like Mailinator.com for the contact email. But I do not recommend this for the Tradehill account because Mailinator emails are available to the public so your account could easily be compromised.

Fourth, wander, meander or waddle down to that bank branch and make the cash deposit. If you are too lazy or want another layer of privacy then have someone else run the errand to deposit the cash at the branch so you can avoid the noisy surveillance cameras. About 30-45 minutes after the cash deposit the bitcoins should be in your wallet.

Fifth, now that you have some bitcoins you should spend them! If you are new to How To Vanish then, of course, I would recommend How To Vanish The Book or one of our three new mini-guides that are about 35 pages on the topics of (1) Financial Privacy, (2) Personal Privacy or (3) Political Privacy.

Sixth, to increase the liquidity of your bitcoins I recommend getting at least one American Express Prepaid Card at no cost. Then you can use your bitcoins to buy Moneypaks which can be used to fund the prepaid card and withdraw up to $200 of cash per week at any ATM.

CONCLUSION

Stratfor has shown an extreme level of disregard for the privacy and security of their subscribers by not accepting bitcoins. But this is merely a symptom of a larger problem: governmental interference in the payment market.

All merchants you deal with using credit or debit cards pose a significant risk to your privacy and open the door to identity theft. You may want to ask them to accept bitcoins.

If they refuse then reconsider the value of their goods or services and whether it is worth the liability of your personal and financial information being deposited in a transactional database to be breached at some unknown date in the future and potentially become a massive headache of identity theft. Plus, in the bitcoin economy there are now hundreds of merchants offerings tens of thousands of goods and services.

Now you know how to get bitcoins with cash in about an hour. So go get at least $20-100 worth of bitcoins sent to your Tradehill account and try buying something like one of our privacy products. Once you see how easy, convenient and low cost in time, money and privacy bitcoins are then you will likely become a big fan and begin exerting economic pressure on your merchants to accept them.

Trust me, in this economy merchants will likely be happy to generate sales in any medium of exchange, especially one like BitCoin where the expenses are a lot lower.

RELATED POSTS:

1. BitCoin – The Best Financial Privacy Is Here…Probably
2. Is GoldMoney A Gold-Backed Bitcoin?
3. Cryptographic Protocols – How To Protect Your Wireless Network

Reading time: 8 – 13 minutes

Wise men visited the young Jesus, bringing gifts of gold, frankincense and myrrh.  What if He wanted to sell those gifts later on to buy a donkey, feed the poor, clothe the naked, or buy a house?  How would those first Christmas gifts, and subsequent transactions, be treated under US tax law? If you wouldn’t mind getting some gold or silver (or frankincense and myrrh) for Christmas, or if you are giving them, you might want to be aware of the potential taxes involved.

This article is a follow up to some previous articles on the Liberty Dollar case and the discussion about trading gold or silver coins that followed.  Readers have asked me about the implications of the Kahre case, regarding trading legal tender gold and silver coins as opposed to privately minted gold or silver coins.

Jesus, Wise Men and Taxes

The facts set forth in the biblical account of the gifts of the Magi, along with a few facts and assumptions I throw in for good measure, provide a good hypothetical scenario for understanding the legal and tax consequences of trading goods, like gold, frankincense and myrrh, and legal tender gold or silver coins. For a more thorough understanding of the law regarding trading bullion, you might want to consult Pieces of Eight.

The legal and tax consequences of trading gold and silver are important to privacy. Privacy is freedom and gold and silver as money protect people from violations of fundamental human freedoms.

Transfer #1

…and when they had opened their treasures, they presented unto him gifts; gold, and frankincense, and myrrh.

Matthew 2:11

Here we have wise men giving very expensive gifts to Jesus.  Let’s look at whether Jesus has any income taxes to pay from receiving these gifts and if there might be a gift tax owed by the wise men.

Income Tax Liability Of Jesus

There are no income taxes owed when you receive a gift. Fortunately, Jesus will not have to pay any income taxes on the gifts he received. However, since these wise men came from “the east” we will assume that they are foreigners.  If any of Jesus’ gifts were worth more than $100,000, He will need to fill out Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. Its a good thing the gift is well documented to defend himself in case the IRS thinks Jesus might have unreported income.

Gift Taxes

The GIVER of a gift must pay a tax if they give someone a gift worth more than $13,000.  There is an “exemption amount” that complicates this concept a bit, but for simplicity we will not address it here.  Any one of the gifts worth more than $13,000 would cause the wise man who gave it, if they were subject to US taxes, to owe gift tax at approximately the same rate as his income tax (excluding any exemption amount issues). Maybe that’s why they didn’t stop by to see Herod on the way out of the jurisdiction.

Basis

It will be important to know what Jesus’ basis in the gifts are if he ever decides to sell them in the future.  The basis is generally the amount the GIVER paid for the item.  Lets assume that the wise men picked up their gifts at a store in Bethlehem right before they gave them to Jesus. Their basis (and subsequently Jesus’ basis) is the market value of the goods at the time they were bought (let’s say $285 for an ounce of each, the approximate spot price of gold 13 years ago, since I don’t have the spot price of frankincense and myrrh handy).

Now let us imagine that Mary and Joseph were pretty good parents and saved these gifts to present to Jesus at His Bar Mitzvah which is, in our hypothetical, this year. The day after his Bar Mitzvah, Jesus contemplates buying all kinds of nice things with the gifts the wise men gave him almost 13 years before.

Transfer #2

The gifts from the wise men are spent.

Capital Gains Tax

To calculate the gain, we take the difference between the fair market value of the item when spent, less the basis (essentially the original price paid).  The price of gold has now risen to over $1,600.   Lets also say that the other gifts have had similar gains.

When you recognize a gain on the exchange of an asset (like gold, frankincense or myrrh) for something else (another good, cash, etc.), a capital gains tax will apply.  For most assets, the capital gains tax is 15% of the gain.  Frankincense and myrrh would be taxed at 15%.

Higher Capital Gains Tax On Gold – 28%

Gold is different.  Gold is specifically identified in the tax code, along with antiques, rugs, stamps, art and other collectibles, at a 28% capital gains tax rate. Jesus’ gain on gold, if exchanged for goods worth $1600, would be $1314 per ounce.  Instead of paying 15% of this gain as a tax ($197 per ounce), He will have to pay capital gains tax at a rate of 28% ($367 per ounce).

This highlights a big reason why gold and silver are not regularly used as money, especially while they are appreciating in value.  Capital gains tax makes gold and silver more expensive to use as money than other things that are less suited for being money, like frankincense and myrrh.  He could get 13% more house if he trades frankincense or myrrh instead of gold.

Legal Tender Value Of Gold Coins

Some gold and silver coins are official US legal tender.  Gold Eagles have a face value of $50, even though the value in Federal Reserve Note Dollars is much more.  This has led some people to believe there might be some tax arbitrage.

One such individual was Robert Kahre, who paid his employees and independent contractors with legal tender gold and silver coins.  He recorded the value of the transactions at the legal tender value on the coins, rather than the Federal Reserve Note value.  In other transactions, such as purchasing a house, he declared the value of the coins at their Federal Reserve Note value.

There are numerous issues raised in the case, but if allowable, these types of transactions would have reduced reporting requirements, income taxes and a lot of other taxes for the participants. Kahre was ultimately convicted of tax evasion.

$1 ≠ $1

The state of the law is that a dollar does not equal a dollar.  Thus we have the result of the Kahre case.  It seems ridiculous to say that a dollar does not equal a dollar, but in order to avoid prosecution, it might be a good idea to record your transactions in legal tender gold and silver at the Federal Reserve Note Dollar value instead of the Gold Eagle Dollar value.

If Jesus traded a Gold Eagle for a fish-and-loaves dinner for 5,000, neither Jesus, nor the caterer should record the expense or income at $50.  They should record the transaction somewhere between the fair market value of the coin or the food. The same is true if you trade a house worth $160,000 in Federal Reserve Notes for 100 ounces of gold with a “legal” tender value of $5,000. I’m sure the property tax assessor will tax you on the Federal Reserve Note Dollar instead of the Gold Eagle Dollar.

Challenge?

Some people may not be satisfied with this rule and may attempt to challenge it.  There are certainly many facts that were not favorable to Mr. Kahre.  For example, he paid individuals with gold and silver at one window, and just a few feet away at another window, bought back those gold and silver coins at fair market value for currency or other notes. A different factual scenario may have legitimate legal arguments to support the position and could lead to a different outcome, although I think it is unlikely.

Conclusion

Jesus would not have been taxed for the gifts he received from the Magi unless he traded them later for gains, at which point the tax on his gains in gold would have been significant.  The Wise Men might have been taxed for giving a gift to Jesus. When dealing with legal tender gold and silver coins, it appears that in order to obey one law (the law as enforced in the Kahre case) one would have to disregard another law (the legal tender value of the coins) and report the Federal Reserve Note Dollar value instead. I can’t think of very many other instances of ridiculous outcomes in the law: a dollar is not the same as a dollar. I still prefer the gold ones.

RELATED POSTS:

1. SAR Report Awareness: No More Transaction Reports
2. Liberty Dollar Trial and Coin Value
3. Liberty Dollar II – Did Prosecutor Anne Tompkins Violate Ethics Rules?

Reading time: 5 – 8 minutes

Some people feel like it is useless to protect privacy.  Privacy pessimists already feel the ubiquitous surveillance of almost every action they take.  They envision a near future when every thought, word and deed are detected recorded and archived for later reference by anyone who wants to know.  The advance of technology makes it seem like privacy is dead.

Privacy Is Dead Because Of Technology?

It is true that technology is advancing to track our every move, often without our knowledge. But technology is also advancing to protect privacy in ways that were not available before.  There are already many tools that we can use to protect our private information and most of them are free and easy. Tor, Truecrypt, and GnuPG are three great examples.

Unfortunately, as Julian Assange  alluded to following the release of “The Spy Files,” much of the technological effort is aimed at invading privacy.  But, if privacy is valuable to people, more and more privacy protecting solutions will become available. If privacy is not valuable, then nobody will read this.

The reality is that privacy protecting technology is usually easier to employ than privacy invading technologies.  For example, it is free and only takes a few seconds to encrypt files or emails.  To break into those emails, you need a significant amount of technical skill, time and money.

Privacy Is Dead Because Of Social Norms?

Many also look to the changing social norms that seem to punish people who don’t want to participate in social network surveillance.  Idiots get paid millions to display their stupidity on TV and on the internet.  Governments and advertisers can now track people like the East German Stasi could only dream. But, even Mark Zuckerburg is publicly noting the dangers of social networking. Plus, the Stasi aren’t forcing anyone to use Facebook.

The Law Is Killing Privacy?

The Patriot Act has made constant, warrantless digital searches legal.  Telecommunications are controlled by strict regulation, preventing communication without government permission.  Your bank accounts are under government surveillance. Death by one thousand cuts of privacy invading regulation is a real problem, but the future is not as bleak as it may appear if we look at the bigger picture.

Americans of Japanese descent have much more privacy now than they did during World War II, even though the law allowing them to be imprisoned based on nothing but their heritage is still valid.  Minorities, while still brutalized by law enforcement, are brutalized much less and enjoy much greater freedom than they did under Jim Crow laws.

Encryption Technology Is A Model For Privacy

The most significant protection from unjust law is the technology that has developed to make the law irrelevant.  The history of strong encryption is a good example of this.  Strong encryption was developed and used by the US military several years ago.  At that time, fearing the power of encryption in the hands of the enemies of the US military, it was illegal to export high level encryption technologies to other countries.  It was treated as a munition.

But, other groups outside the US were able to harness the power of mathematics and develop strong encryption on their own.  Now, strong encryption is so ubiquitous it is available for free to anyone with access to the internet.  The law preventing the export of encryption is as useful as a law preventing people from riding their bike in a swimming pool and was severely relaxed in the US.

Many other technologies are rendering other laws irrelevant.  Torrents, Tor, GnuPG and other solutions allow individuals to communicate privately.   Financial transactions can take place with Bitcoin across international borders with no limits on value, no declarations, and no ability to restrict a transfer.

Keeping Privacy Alive

As with most things in life, 80% of the benefits of privacy can be attained with 20% of the effort.  Focusing on just a few of the most effective privacy tools and techniques will go a long way to protecting a material amount of your personal privacy. Giving up does not do any good.

Conclusion

Privacy is alive. We may not be able to unplug completely from the Matrix, but we can have a material amount of privacy by using a few tools that best fit our situation.  All we need is to carve out some areas where we can keep our private files, communicate anonymously and transact anonymously.  Other information, like our favorite color and our favorite food can be uploaded to the Matrix without much harm done to ourselves.  I have no doubt that in some ways there will be privacy battles that are lost in the future.  But at the same time, I have no doubt that many solutions to protecting the most fundamental aspects of human autonomy will be developed.  There is no putting the genie back in the bottle for many of the privacy protecting tools that have been, or will be developed.  Long live privacy!

RELATED POSTS:

1. Governmental Privacy Requirements: Information And Business
2. Avoid Attorney Malpractice, Use Free Encryption Software
3. Protecting Identity Theft Victims: Business Credit Card Holders

Reading time: 5 – 8 minutes

It is no secret that some attorneys will initiate litigation of a weak case hoping that the defendant will settle instead of risking a trial. This is a very calculated move. Understanding the calculation and how privacy can affect the formula in your favor, can help lower the risk and cost of marginal litigation and stop frivolous lawsuits.

Most plaintiff’s attorneys will take a case on contingency. That means that they will not get paid unless the case is a winner, and they will only get paid a percentage of the judgment. If a law firm is going to stay in business, they need to make sure they don’t spend their time pursuing claims that will not recover as much as their costs to litigate.

Most successful attorneys will evaluate a case using the following formula:

Liability x Damages x Recovery > Cost.

As long as the left hand side of the equation is greater than the estimated cost of litigation, there might be some attorney willing to take the case. To stop frivolous lawsuits, the cost of the frivolous lawsuit needs to be greater than the other side of the equation.

Cost

Cost will be different depending on each firm. The higher the left side is relative to the cost, the more likely it is that there will be a lawsuit. Many things could affect the cost of a case, from the size of the law firm taking the case to the difficulty of the subject matter being litigated. Since you really have no control over the “Cost” side of the equation, the best way to stop frivolous lawsuits is to focus on reducing the “Liability x Damages x Recovery” side.

Liability

“Liability” represents how easy it is to show that someone is at fault. The more clear the liability, the more accurately the outcome of a trial can be predicted.

A case where the liability is very clear would be where a drunk driver drives onto the sidewalk and injures an old lady in front of a dozen people. The driver has clearly violated a bunch of laws, gone way beyond any type of acceptable behavior and there were plenty of witnesses. Fault is very clear.

A case where liability might be less clear is if a man was hit on the head by a pebble while fishing at a quiet pond. He thought he saw a woman tossing rocks into the pond earlier, but there was nobody else in the area. Although he had a small bump and bruise, he did not take any pictures of the injury and did not seek medical care. It would be very hard for anyone to prove liability in a case with such little evidence.

Damages

Damages are the amount of money that can be recovered in a lawsuit. Damages often include the medical costs, lost wages, costs to fix or replace damaged property, pain and suffering, among other things. Thus, the worse the injury the higher the damages.

In some cases there might be punitive damages involved. Punitive damages are available when harm is done intentionally or recklessly. Those damages can depend on the financial condition of the defendant.

If the drunk driver is found liable, she will be required to pay for the injuries she caused. She may be subject to punitive damages if she was intentionally trying to run someone over or was extremely intoxicated. If the rick thrower is found liable, she will probably only pay nominal damages for the insult of hitting a poor old man on the head, even if it was intentional.

Privacy is unlikely to be of any benefit to a person who finds themselves at the ugly end of a punitive damages claim. In these cases, the defendant is required to disclose their assets, no matter how well those assets are buried in the back yard. Failing to disclose something that should have been disclosed would be perjury.

Recovery

Even if there is clear liability, and even if the damages are very high, possibly including punitive damages, a key factor is the ability to recover from the defendant. If the person has no ability to pay a judgment, it is worthless to bring an expensive suit. Not being able to pay a judgment is often referred to as being judgment proof.

All attorneys will look at these factors when evaluating the strength of a case. If some factors are exceptionally high, the other factors do not need to be as high for a lawsuit to be worth it. For example, if damages are very high and the potential defendant has plenty of means to pay a judgment, they can be a target for claims where liability is marginal.

Privacy Can Stop Frivolous Lawsuits

Privacy can affect the perception of the ability to recover any judgment. As a result, the liability and/or damages will generally need to be much more clear for a case to be worth it. Before deciding whether to take a case, many attorneys will investigate potential defendants. They might look at the public records for their assets, send investigators to look at their home address, or find out what kind of job they have to see if the “Recovery” factor is high or low. If the potential defendant appears not to have much to their name, an attorney might pass on bringing a marginal claim against them.

Conclusion

If you feel like you might be a target because people are aware that your ability to pay a judgment is high it might be worth it to use a ghost address to protect your true home. It might be worth it to own real estate in the name of a trust or private business entity. Protecting your privacy might help you avoid court costs and attorneys fees to defend or settle marginal litigation and can help stop frivolous lawsuits.

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1. To Stop Junk Mail, Stop Receiving Mail
2. New Mexico LLCs, Effective Asset Protection?
3. Opt Out: Make Prequalified Offers For Credit Cards Stop

Reading time: 4 – 6 minutes

We Are All Going To Die!…Someday

When we die the court system will take control of our financial lives and make one of the most private aspects of our lives public. This loss of financial privacy will happen unless we take one simple step to protect ourselves, our assets and our families with a living trust.

Probate is the Problem With Financial Privacy

When people die they leave behind some stuff (hopefully). Most people have a will, if they have anything at all, to determine who gets all of their neat stuff. To administer this process, for people who do or do not have a will, the courts take control of all the assets, make sure all the money goes to the right people, and make your will a part of the public record. This is called probate.  Anyone particularly interested in learning what your kids got will be able to find out very easily.  Some courts even make the information available online. This is a huge blow to financial privacy.

Living Trust

The only way to avoid having so much of your private financial life displayed for the public is to prepare a living trust. A living trust allows you to maintain control over your assets while you are alive, avoids the public probate process to distribute assets when you die and maintains your financial privacy.

There are some other great benefits as well. Compared to the cost of administering a living trust, probate is expensive. The cost is based on the value of the assets that the probate court deals with, so the more money you have, the more it will cost you.  Probate is also slower.

Don’t Get Hit By A Bus

What happens in the unfortunate event that you are hit by a bus and turned into a vegetable?  Whether or not you have a will, your assets are going to sit around and can’t be touched.  They can’t be used to pay your medical expenses, they can’t be used to pay your mortgage, they can’t be used to pay for the groceries of your stalwart spouse. This can pose a very bad problem when assets exist to pay those costs, but you are incapacitated, covered in bandages and unable to get at those assets.

With a living trust, the unfortunate bus incident will not leave your assets untouchable until you die.  The trustee can use the assets to pay for expenses while you are still alive but unable to manage your own affairs.  This makes sure that the family members who are diligently at your hospital bed side can pay for the things they need, hopefully balloons and get well cards.

Living Trusts Are Common

The cost of having a basic living trust prepared is relative to its complexity.  If your financial situation is simple, they can be quite inexpensive.  If your financial situation is more complex, it will be worth the cost and effort to draft an adequate living trust.  Many attorneys are able to prepare them and make sure they are properly funded.

Conclusion

The legal system still contains several tools that help ordinary individuals protect their financial privacy.  Having a living will is one of the great ways to take advantage of that system.  Living wills provide a private alternative, to public indignity.  Check out the book How To Vanish for more legal tools to help protect your privacy.
 

 

RELATED POSTS:

1. Offshore Asset Protection Trusts And Better Privacy
2. Trust Policy and Privacy
3. Keep Your Home Address To Yourself

Reading time: 6 – 9 minutes

Bitcoin is new. There has never been anything like it before. It is also risky. A lot of things need to happen for it to be successful in the long term.

But many intelligent people have missed the fact that Bitcoin is new. I am not an economist or investor, but I have not seen any economists or investors analyze Bitcoin correctly because they do not fully understand what Bitcoin is.  This is a serious mistake. Failing to analyze based on correct facts can lead to wrong conclusions.

Bitcoin Reduces Privacy Cost

The main benefit of Bitcoin is vastly reduced costs. Bitcoin eliminates many costs, but one of the most important is the cost of providing personal information to participate in the economy; the privacy cost.

Cash and precious metals have the lowest privacy cost of any medium of exchange. But cash and metals are mostly limited to small, in-person transactions.  The world needs something more.

Before Bitcoin, every other financial transaction had an extremely high privacy cost, along with lots of other costs. Checks, credit cards, and bank wires require a significant disclosure of personal information to banks and governments.

Personal Information Is Extremely Valuable

Personal information is valuable. The market values Google and Facebook so highly, in part, because of the enormous amount of personal information they collect. Before Bitcoin, market participants had no choice but to disclose personal information. Bitcoin allows users to protect valuable personal information.

Doug Casey Is Wrong About GoldMoney And Bitcoin

One of the best ways to see how well Bitcoin protects personal information and privacy is to compare it to one of its best competitors, GoldMoney, on those issues. GoldMoney tries to take the private exchange of metals into the information age while protecting personal information by operating in the bank privacy haven of Jersey, in the Channel Islands. Doug Casey is a very smart investor, but he thinks there is little difference between GoldMoney and Bitcoin, except that GoldMoney is better because it is backed by gold. As has been aptly pointed out, Doug Casey is wrong on that issue. There is a huge difference. GoldMoney is not just a gold-backed Bitcoin. GoldMoney costs a lot in terms of personal information and privacy, Bitcoin does not.

GoldMoney Wants Your Location

GoldMoney requires customers to disclose the country where they are located. They only accept customers from about half of the countries in the world. The other half, like residents of Argentina, Egypt or the Netherlands, are prohibited from using GoldMoney.

Of the customers that they accept, some are required to disclose a lot more personal information, depending on the country. GoldMoney follows the know your customer rules so things like name, address, tax identification, photo identification and many other things might be required.  There are other restrictions based on where customers live.  For example, Germans can’t make payments of metal to other people and physical delivery of metal is only available in 40 countries.

Bitcoin does not know or care what country users are from. It can be accessed by any user that can manage to get on the internet. Third party wallet services mean users don’t even have to own a computer to use Bitcoins.

GoldMoney Centralization Makes Them Vulnerable

GoldMoney is centralized. Every transaction is recorded in their system. A rogue employee could reveal those transactions to anyone they wanted. A warrant or subpoena served on GoldMoney could also reveal lots of personal information. The strong bank privacy laws in Jersey, like those in Switzerland, may prove to be no obstacle for a powerful government capable of strong pressure on the centralized organization. Hackers could also compromise the GoldMoney system.

The decentralized Bitcoin network cannot be pressured by any government. The network will route around any such obstacles. No organization exists to subpoena or submit to a warrant search. The public transaction record is pseudonymous and there are plenty of anonymizing services to eliminate personal identification. There are no employees to go roque. Even a rogue developer on the Bitcoin development team must operate in the open source light of day. A hack of Bitcoin would not reveal personal information.

Tax Information

If you have more than a combined $10,000 in foreign financial accounts, including GoldMoney, those accounts must be reported on the FBAR. You need to report your name, birthday, address, where the account is held, the account number and the highest balance during the year, among other information.  I  guess it is so the treasury can send you a birthday card.

There is no information reporting requirement with Bitcoin. Although you need to report income, there is no requirement to disclose your payment addresses, details of transactions, the balance, where you store your Bitcoin wallet, or even that the income was earned in the form of Bitcoins.

Sending And Withdrawing Funds

You cannot fund a GoldMoney holding without first having a bank account. For US citizens, that means a lot of personal information disclosures. If you are going to accept goldgrams for labor, services, sales of products, donations, gifts, or transfers, you must disclose that banking information to GoldMoney, which keeps it on file. If you want to fund your account by buying gold directly, you must do so through a wire transfer. That wire transfer information is disclosed to GoldMoney, to your bank and to SWIFT, the main financial transaction network for most of the world.

Bitcoin does not require a disclosure of any personal banking information. You can accept Bitcoins for labor, services, sales of products, donations, gifts, or transfers without ever opening a bank account. You can even buy Bitcoins from exchangers on the street for cash to get some Bitcoins without notifying your bank or SWIFT.

Conclusion

Gold will always be money. GoldMoney is an excellent service.   But that service is very expensive in terms of personal information and privacy.  The  privacy cost is so high, only a very tiny fraction of the world’s population can even use GoldMoney.  Bitcoin does things that GoldMoney can’t.

Bitcoin is still risky and some people may choose not to use it. It may fizzle into nothing. But, in terms of privacy, its cost is lower than any information age alternative. The value we give to the banking system is at least as much as the value we give to Google or Facebook. We give them that value by giving them our personal information. Individuals have had no private alternative until now.

More privacy is not the only benefit of using Bitcoin. Most people who use it once, even to transfer an immaterial amount, begin to realize how powerful it is.  We will eventually see if the market values those benefits.  Smart economists and savvy investors need to understand those benefits  before they can make an accurate assessment of Bitcoin.

RELATED POSTS:

1. BitCoin – The Best Financial Privacy Is Here…Probably
2. Stratfor Failed To Protect Their Customers By Not Accepting Bitcoin
3. Protecting Identity Theft Victims: Business Credit Card Holders

Reading time: 6 – 10 minutes

A few years ago I ran into Tim Ferris after his speech at a WordCamp in San Francisco. I even told him about my new blog, How To Vanish, and he said the name was awesome.

Tim Ferris is a two time New York Times best selling author of books in two different genres: The Four Hour Work Week and The Four Hour Body. I have bought and read both and would recommend them. Please use my Amazon affiliate links to help support HowToVanish.

Tim is an excellent example of a successful entrepreneur. The type of person who creates massive value for society through great products, keen insight, job creation and profitable ventures.

CALIFORNIA AND AMAZON.COM

California has been perpetually struggling with large budget deficits, cash shortages and systemic financial mismanagement. In early July in an attempt to raise revenue the California legislature passed a bill into law that requires large out of state retailers to collect and remit sales tax to California if they have affiliates in the state. In defensive response Amazon.com canceled its affiliate program with all California domiciled affiliates. This same set of events has happened in other states.

TIM FERRIS’S EXPERIENCE

Kevin Rose, founder of Digg.com, responded, “That sucks man, that is a lot of cash to lose.” to which Tim responded, “It does.”

INCOME STREAM REPLACEMENT COST

Kevin is not joking. Losing a $10,000-$90,000 per month passive income stream is material to anybody. Amazon affiliate payments are great because all you do is put in the bank details and they send the payment automatically each month kind of like a dividend or interest payment.

If Tim were to follow the principles in Four Hour Work Week and replace the lost Amazon income stream with something which does not take much time or attention then what would it take?

Using Google Advisor to find a 1-year CD to yield about $50,000 per month would require about $27,500,000 in principal. Exxon is trading at about $82 per share and paying a dividend of $0.47 per quarter so it would only take about 320,000 shares which would cost about $26,240,000.

AHEAD OF THE CURVE – FIVE FLAG THEORY

Back in October 2010 we wrote about how those people domiciled in Philadelphia need a $300 Business Privilege License to operate their blog. Perhaps California will follow their lead and Tim will have to get a Business Privilege License. Even earlier in March 2010 we wrote, in  Colorado vs. Amazon: Who Wins In A Fight?, about how Amazon cut off Colorado affiliates in the exact same way and what Colorado affiliates could do to protect their income.  Those who followed our advice protected their income streams.

As the politicians continue intentionally exacerbating The Greater Depression more state, local and national governments will continue greedily grabbing after more money. Of all the risks in the economy I think jurisdictional risk is the most potent. Sure, this poses a significant problem to the successful entrepreneur but they are, after all, problem solvers as an ounce of prevention is worth a pound of cure.

Tim Ferris even wrote a great post about this called How To Be Jason Bourne: Multiple Passports, Swiss Banking, and Crossing Borders which includes an introduction to the Five Flag Theory. A theory I devote almost the entire sixth chapter to in The Great Credit Contraction.

But Tim does not like to get political and it appears he has not followed the five flag theory he wrote about. For whatever reason Tim has willfully chosen to be California’s bitch when he does not have to be by allowing his income stream to be castrated. So how is that working out for you?

PROBLEM SOLVING

Pretty easily actually. For a few hundred dollars he could have setup a privacy conscious New Mexico LLC where no income is due if not New Mexico sourced or in another jurisdiction like Oregon where there is no state sales tax. For a few thousand dollars he could have gone international with a Saint Kitts or Hong Kong company, magnifying the positive effects. Considering this would be about one week’s of earnings, take a couple hours to get all setup and the income stream would be protected for years, I think it would have been a pretty wise thing for Tim to do.  It will likely be many years before Amazon cuts off affiliates from these places.

Tim likely pays large amounts of income taxes to California, too. Imagine if he were domiciled somewhere like New Hampshire or Alaska which have neither state sales tax nor state income tax. He and those like him who earn at least $50,000 per year in location independent income really should consider our product State Income Tax Optimization. It is for those people who want to design their lifestyles by choosing where their state tax domicile is when they tired of being someone’s bitch.

CONCLUSION

Fortunately, for the location independent entreprenuer, as opposed to a brick and mortor one, it is somewhat easier to legally plan their affairs and minimize the risk to their business, income and lifestyle. For those new to this way of thinking, to get started you might consider reading more articles around here or our flagship product: How To Vanish The Book.

Ready for round two Tim?

RELATED POSTS:

1. Colorado vs. Amazon: Who Wins In A Fight?

Reading time: 16 – 26 minutes

The Liberty Dollar case has had a huge impact on the world of gold and silver trading, investing, ownership and use. I covered a lot of ground in Part I and Part II, but there is another important aspect of that case that leaves the legal landscape partly shrouded in ominous and threatening clouds. What is the risk of criminal prosecution or criminal conviction to those who make or use gold and silver rounds of “original design”?

Is There A Risk Of Prosecution For Trading With Gold And Silver

To answer that, we have to fully understand the actual law that was broken. We also need to consider the existing law that was not at issue in the Liberty Dollar case, the threats of prosecutors and the effect of potential constitutional challenges to those laws if a prosecution were undertaken.

Mr. von NotHaus Violated Fraud Based Statutes

The Liberty Dollar Trial was about fraud, not a private currency system as prosecutor Anne Tomkins falsely implied. The jury was asked to decide if the elements of fraud and conspiracy to commit fraud were met, nothing else. No other legal basis for the prosecution was ever presented to the jury and implying that there was another legal basis is mis-stating the facts of the case.

Critical Facts of The Case

Liberty Dollar made, sold, and used rounds that had many similarities to official US government coinage. The rounds were minted with a face value but the FRN value of the silver in the coins was less than this face value. Liberty Dollar encouraged exchanging Liberty Dollars with people who were unaware that the underlying FRN value of the silver was less than the denomination minted on its face. Liberty Dollar profited from this difference in value.

Key Elements Of Fraud

To be guilty of fraud, a jury must decide that a person has met all of the elements of that crime. The Jury Verdict Form contains all of the elements that this particular jury decided. The critical parts are summarized here.

Count 1 – Conspiracy

I will not get into Conspiracy because it is not in controversy.

Count 2 – Counterfeit Coin (18 USC 485 and 2)

The core actions that Liberty Dollar must have taken to be guilty of this crime are:

1. To make coins;

2. That resemble official US government issued coins;

3. And use those coins;

4. With intent to defraud.

It is undisputed that Liberty Dollar made and used coins. Their resemblance to official US government issued coins was a question of fact for the jury to decide. As described in detail previously, there were plenty of facts that could lead a reasonable person to believe that Liberty Dollar rounds resembled official US coins.

The final necessary element was the intent to defraud. I personally don’t think Mr. Von NotHaus had the intent to defraud, but intent can only be inferred by surrounding facts and circumstances. Clearly there were several facts that could lead a reasonable person to believe that there was intent to defraud. For example, encouragement to make change with people who did not know that there was a difference between the FRN value of the silver in the round and the face value.

Notice that nothing in this count requires that the coins be of original design.

Count 3 – Current Money (18 USC 486)

The core elements here are:

1. Make and use a silver coin;

2. Intended to be used as current money;

3. Resembling genuine coins of the US OR coins of original design

Again it is undisputed that element 1 was met. Their resemblance to US coins has already been established. The intent can only be supposed from surrounding facts. The fact that Liberty Dollar encouraged merchants to make change with unsuspecting people could be the reasonable basis to find intent to use Liberty Dollars as current money.

It’s important to note the “OR” in Count 3. This means that the statute is violated whether you violate one, the other, or both of these prongs. As I have laid out previously, the “resembling genuine coins of the US” prong could easily stand on its own as having been violated. The “original design” prong is unnecessary for the conviction.

The “resembling genuine coins” prong is essentially a case of fraud. The Liberty Dollar rounds were presented as something that they were not, to the detriment of unsuspecting individuals. It appears the jury thought the case was about fraud as well. At least one person claiming to be a juror in the case left a comment in the original post stating that my previous analysis correctly reflected “what went on in court in the Liberty Dollar Trial.”

Who Was The Victim?

Many have claimed that there were no victims because the underlying value of the silver would eventually (and in hindsight has) become more valuable than the FRN that people gave up to get Liberty Dollars. Even people who mistakenly accepted Liberty Dollars, they claim, would have actually benefited.

This argument defies reason. The FRN price of silver changes. Sometimes it goes up and sometimes it goes down. Although I bet money that it will go up over time, it is impossible to predict the future. Nobody knows for sure if or when the price will change, how much it will change, and in which direction.

What must be understood is that to get someone to unknowingly accept Liberty Dollars instead of FRN is to unknowingly accept the risk that silver would appreciate in value instead of the risk that the FRN will decline in value.   This is a risk unwitting acceptors of Liberty Dollars did not agree to bear.

Risk Has Value

Another problem is that the person who takes the discounted Liberty Dollar could have taken their $10 FRN and bought more silver somewhere else had they been paid in FRN instead of the Liberty Dollar round. Thus if the price of silver rises, they would have been prevented from realizing gains on a larger amount of silver.  Thus people who unknowingly accepted Liberty Dollars instead of FRNs unknowingly suffered real or potential losses.

Tips To Avoid Prosecution For Fraud

So now that it is clear that the elements of fraud were met, what can honest traders do to avoid innocently coming too close to the line of fraud, which I think Mr. Von NotHaus did.   Everyone should talk to a lawyer directly for legal advice, but a general principle is to avoid anything that would give the impression of fraud to investigators and clearly include things that would help eliminate the impression of fraud. Avoid making, using or trading rounds, medallions or tokens that in any way resemble official government currency of any country.

Avoid:

• Using the $ symbol

• Putting the name of a country on it like “USA”

• Putting any word on it that appears on official currency like “Liberty”

• Using denominations that match the same denominations used in the official government coin

• Putting images on them that are similar to images used on official government currency.

• Offering them as change in FRN transactions

Some things that can be helpful are:

• Use fictional characters, like Disney Dollars or Ithaca Hours do

• Display the weight and fineness of the metal rather than a numbered value like $10

• Be extremely clear when using them that they are not official US coins.

Likelihood Of Prosecution

There are a handful of private mints, thousands of coin dealers and millions of people that make, use and trade rounds, medallions and tokens. If they follow many of these guidelines they are probably not at risk of prosecution for fraud.

Prosecution For Fraud Is Legitimate

Libertarian principles allow the use of force to protect against fraud. Dr. Viera concedes, in Pieces of Eight (pg. 1533) that Congress may have the Constitutional authority to legislate the “resembling genuine coin” prong. Since it is clearly shown that people were, or there was an imminent threat of being, defrauded, prosecution under this part of the statute is likely to withstand any philosophical or constitutional challenges.

Prosecution For “Original Design”

Anne Tompkins inferred that she intended to prosecute people under the “original design” prong. She was obviously relying on dicta from a few lower court cases as the broad basis of her threat.

Dicta is not the law. Dicta is a statement in a court ruling that is usually made by a judge in passing with little to no research or analysis. At best she can hope that dicta maybe, possibly, someday becomes the law. Thus she is threatening to fly us head on into the brooding storm clouds of untested areas of law.

What This Threat Of Prosecution Means To Honest People

There are real implications to this kind of threat. First of all is the cost of legal defense. Even a person who is ultimately found innocent will probably incur legal costs in the tens of thousands of dollars. If there are constitutional challenges, which might require multiple appeals, the cost could easily rise to the hundreds of thousands.

Overzealous Prosecutors Regularly Disregard The Intent Behind A Law (To Punish Real Criminals) And Target Anyone Who Accidentally Crosses The Line

While most people find prosecution of people with innocent intent deplorable, overzealous prosecutors have been known to disregard the reason for a law and use their discretion to prosecute anyone who violates the letter of the law, even if the defendant’s intent and actions are otherwise completely innocent.

A good example of that is the prosecution of an Ohio woman under anti-drug laws for buying 2 packages of cold medicine in 1 week, one for two separate members of her family who were ill. The uphill evidentiary battle that defendants face makes it easy for prosecutors to convince juries that a defendant should be convicted in these kinds of cases.

If That Were The Law It Would Be Completely Unworkable

If this dicta were adopted as law, cautious people would have to avoid making or using anything that could potentially be used to barter because such an item could conceivably be used to compete with official government issued currency. That could include millions of rounds, commemorative medallions, or tokens. That is obviously a ridiculous outcome.

There are a few cases where clearly marked tokens such as Chuck E. Cheese tokens or batting cage tokens are outside of the purview of the “original design” prong. Hence prosecution of those special purpose tokens is very unlikely.

A case centered around the “original design” prong would not be about fraud at all. It would be about the right of people to use whatever medium of exchange they choose. Preventing private parties from trading what they want in such a manner is complete tyranny. In Argentina and other places around the world, the people purchase vehicles as a hedge against inflation. Under Anne Tomkins’ erroneous definition of the law, vehicles would be illegal because they compete with the national currency.  Another ridiculous outcome.

18 USC 486 Is Probably Unconstitutional

The arguments supporting the unconstitutionality of the “original design” language are quite strong.

Art. I Section 8, clause 5 of the US Constitution states in part:

“The Congress shall have Power To… coin Money, regulate the Value thereof, and of foreign Coin.” On its face this gives the Congress the power to regulate the value of its own coinage, and that of foreign coins. There is absolutely no mention of the ability of Congress to do anything regarding private coinage.”

Clause 6 continues stating:

[Congress shall have power to...] “provide for the Punishment of counterfeiting the… current Coin of the United States.” This clearly gives Congress the power to punish counterfeiting the coins that they themselves produce, and probably to punish coins resembling genuine US coins. Again, there is absolutely no mention of private coinage. In fact, the definition of private coinage is that it is not the current coin of the US. Therefore Congress has no authority over private coinage at all and neither does any other branch.

The Ninth Amendment to the US Constitution states

“The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people.”

The Tenth Amendment:

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

Since no Congressional power over private coinage is delegated, or even implied, nor is that power reserved to another branch of government, private coinage must be a power and right reserved to the states or the people under the 9th and/or 10th Amendments.

There are many, many, many, many, many, many examples of private coinage used throughout the US, under these same Constitutional provisions, for centuries. See What Has Government Done To Our Money by Murray Rothbard for a full discussion and historical examples.

What Is So Unconstitutional About 18 USC 486?

18 USC 486 states:

Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design, shall be fined under this title or imprisoned not more than five years, or both. (emphasis added)

The constitutionality of the “original design” clause is clearly eviscerated by Dr. Viera in Pieces of Eight pg. 1533 (criticizing 18 USC 486):

“This prohibition [on private coinage] is plainly not grounded in Congress’s power “To provide for the punishment of counterfeiting the current coin of the Unites States” because a person… who makes… coins… of original design is not doing anything with relation to the “current coin of the United States” by definition.”

The power to regulate coins of original design is clearly not within Article I Section 8 clauses 5 or 6. It is thus a clear violation of the Ninth and Tenth Amendments to the US Constitution.

Dicta that claim legitimacy of this language shows that judges have clearly failed to consult legislative history, constitutional authority, American history, or case law dealing with it. Thorough research and analysis would likely reveal the error in these statements of unauthoritative opinion.

The Outcome Of A Constitutional Challenge Is Unknown

Unfortunately, the current state of monetary law in the United States is nonsensical so it’s tough to know how persuasive these constitutional arguments would be to an uneducated judiciary. Thus a constitutional challenge is not guaranteed to have the logical outcome of invalidating the offensive language of the statute.

Someone Else Must Be Convicted Before A Constitutional Challenge Can Be Made

Without getting into some very intricate rules on “redressability,” it is doubtful that anyone could even challenge the clearly unconstitutional parts of 18 USC 486 until someone is convicted under the relevant part of that section. That is because a person can’t appeal a decision unless the outcome would change if they win the appeal. (Allen v. Wright, 468 U.S. 737 (1984)).

Here, Mr. von NotHaus was convicted. His conviction would stand under the fraud prong of the statute alone and does not need the “original design” prong. Even if the “original design” language was declared unconstitutional on appeal, it wouldn’t change the outcome for him. Therefore he is unlikely to be able to challenge its constitutionality.

Another Legal Guinea Pig Is Needed

To challenge the constitutionality of the “original design” prong, another individual will have to be convicted. This time, their conviction must clearly be under the “original design” prong and not at all under the resemblance prong. This means that the constitutionality of this law will probably remain unresolved for many years.

Practicality of Enforcement

When innocent people might be wrongly prosecuted because it looks like they are committing a crime when in fact they aren’t, they must determine how likely it would be for them to be prosecuted for their innocent behavior.  Part of this calculation is determining how likely it is that they would be prosecuted based on the practicality of enforcing the law that could mistakenly be used against them.

Private Mints

A mint, the company actually making rounds, medallions and tokens, is at the most risk of prosecution. Their operation is probably fairly large, easy to find and hard to move.

Fortunately that risk is still very low, even after the von NotHaus conviction. The Sunshine Mint that produced the Liberty Dollars was not a defendant in the case and there have been no prosecutions of the many other private mints throughout the country. Thus prosecution of private minters under the original design prong is unlikely.

Individuals

It would be very difficult and expensive to prosecute individuals for using rounds medallions and tokens in private transactions. It would be incredibly difficult to detect and investigate. Unless people feel they have been defrauded upon accepting them, there is unlikely to be any investigation of individuals for using metal to pay for goods and services.

This is important for the millions of innocent people who will be trading things that are not illegal because they should know the risk of erroneous prosecution. It is extremely low because of these difficulties in detection and investigation of the transactions.

Risk Of Prosecution For Fraud

There are millions of rounds, medallions or tokens existing in the US that follow the guidelines mentioned earlier. To prosecute every maker, holder or user of them would be completely outrageous. It would also be practically impossible to prosecute everyone because it is impossible to monitor that many private transactions effectively, even with dictatorial control. Therefore, someone making or bartering with gold or silver who is following these guidelines has very little risk of mistaken prosecution for fraud.

Conclusion

Barter with metal has not been ruled by a court of law to be illegal. Barter is constitutional, whether it is for chickens, potatoes, FRN, gold or silver rounds or anything else you want. There is a cloud over the issue of bartering with gold or silver rounds, medallions or tokens because of the generalized and remote possibility of being prosecuted if you do. Bartering with metal is so common and widespread it would insanely expensive to systematically investigate and impractical to enforce such a policy. Thus, the threat is not nearly as great as the threat posed to Liberty Dollar. Plus, the “original design” language that smacks of dictatorial control is likely to be overturned because it is probably unconstitutional.  For more ways to protect your right to private exchange of goods and prevent being mistakenly prosecuted, get the book How To Vanish and sign up for the email list.

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Money is one of the biggest ways that we lose privacy. We must report our income and where it comes from for tax purposes.  Our banking records are monitored and our identities vigorously identified.  Employees and employers must reveal vast amounts of information to state and federal labor regulators and tax collectors.

Whenever  information is disclosed, even if it is to bureaucrats, there is a huge risk of abuse, accidental disclosure and fraud.  Plus, the employee-employer relationship has become a cash cow for governments.  Employees and employers are low hanging fruit for taxes, fees and regulations because they are easy to monitor, record, control and collect from.   Both employers and employees must share a piece of their economic pie with state and federal government officials, increasing the costs to businesses and lowering the benefit received by employees.  Governments impose these costs and regulations to take care of employees and employers, whether they want to be taken care of or not.

There is a way for both workers and businesses to free themselves of many of these burdens, reduce costs, keep more money and protect their privacy.  Becoming an independent contractor instead of being an employee, or hiring independent contractors instead of employees, does all of that and reduces the amount of regulation that must be complied with, reduces legal risks, and can reduce taxes for both.   This means there are more resources to share between workers and firms.

Employees Suffer

Even though most of government regulation claims to protect employees, it has had the opposite effect.  The marketplace changes much faster than government regulation. Government regulation is designed for a business world that existed 50 years ago. There is no way that regulation by a slow moving, democratic government that has to make weekend deals just to keep from being shut down can keep pace with a 21st century information age economy.

Healthcare has been designed around a system where employees work at the same company for most of their life.  Today, the average worker will change jobs many times in their lifetime.  Minimum wage and overtime pay was formulated when there was no competition from overseas labor.  Even the way that companies account for and fund their benefits and pensions makes them extremely expensive for employees with diminishing value.  One of the worst parts of all is that employees have little control over the taxes they pay.

Employees Have Little Control Over Their Own Life

There is no doubt that some of these protections benefited employees overall at one time. Some may even be helpful today. But an employee has no choice whether they want to participate in these systems, even if they could get the same benefits elsewhere for less. Employees have no control over their economic life.

Control over your own economic life is valuable, not only in terms of mental health and a feeling of self worth and independence, but also economically.  Something as simple as being able to control more of the taxes you pay can have a dramatic impact on your financial well being.

How A Worker Can Pay $0 In Federal Income Taxes

The Wall Street Journal recently did a case study showing how an independent contractor can earn $150,000 in gross earnings in a year, take a few very common tax deductions, and have a federal income tax liability of $0.

Here’s how it breaks down:

$150,000 income as a self employed independent contractor.

- $7,000 business start up expenses ($10,00 max first year, $5,000 in subsequent years)

- $10,000 legitimate business expenses

- $9,500 Medicare and Social Security tax (half of $19,000 paid)

- $43,100 401k contribution (you deduct both employee and employer portion)

- $10,000 IRA contribution ($5,00 for you, $5,000 for a spouse)

- $10,000 state and local taxes (estimated)

- $10,000 mortgage interest

- $10,000 health insurance premiums

- $6,150 Health Savings account

- $2,500 interest on student loan

- $4,000 kid’s college tuition

- $1,500 tax credits (buy hybrid vehicle, install solar panels, etc.)

- $200 Lifetime Earning Credits (community college class)

= tax liability of $0 on $150,000 income.

Independent Contractors Pay Less Taxes Than Employees

This entire strategy is premised on a very important issue. To take advantage of these huge tax benefits you cannot be a regular employee. You can take advantage of every one of these tax benefits as an independent contractor. A regular employee would pay taxes on close to the full amount of that $150,000 of income.

Employers Pay Extremely High Labor Costs

Employees cost their employers a lot more than their hourly wage.  Unemployment tax, ERISA, and Medicare costs alone are 15% of the total salary paid to employees.  Employers also pay an average of $7,500 per employee in health insurance every year, something required when the firm has 50 or more employees.

High Administrative Costs And Risks For Employers

On top of these direct costs, there are numerous other regulations that must be complied with, even if it does not make economic sense.  Employers are required to give family leave under certain circumstances, have detailed record keeping requirements, and many other things that raise the cost of having employees and decrease profitability, without actually paying workers more.

Employers are also exposed to lots of litigation risk.  Whether it is an employee discrimination suit, failing to comply with regulation, harassment, overtime, even a conscientious employer can find themselves in an expensive, often frivolous, lawsuit. A lot of these costs and regulations are preventing businesses from hiring employees.

Independent Contractors Reduce Labor Costs And Increase Productivity

Businesses can still get the work done that they need to get done without incurring these huge costs by hiring independent contractors instead of employees.  Independent contractors are also easier to train, more productive and provide a lot of flexibility in changing economic times.

IRS Scrutiny

These economic benefits have attracted a lot of workers and firms to try independent contractors instead of employees, but beware. The IRS and the Department of Labor have begun cracking down on those who do it wrong. Doing it wrong could mean having to pay back taxes and interest owed, or even paying penalties or overtime.

Follow The IRS 20 Factor Test

There is a way to do it right. The IRS has a 20 factor test that they use to determine if the worker is an employee or an independent contractor. This list is very fact specific and the weight given to every factor will depend on what other factors may reveal.

Independent Contractor Should Control Their Own Work

One of the most important things to consider is the amount of control that the firm has over the worker.  An independent contractor will have control over their schedule and how they perform the work.  The firm will control what they want the outcome or finished product to be.  Suggestions are permitted but they must be suggestions.  This is becoming much easier with the ability to work remotely over the internet.

Independent Contractor Can Do Work For Others At The Same Time

Another important factor is that the independent contractor is free to do work for others as well.  This can be a critical factor that the IRS or Department of Labor look at.  It is much better if the independent contractor is doing jobs for other clients, or at least advertising in places like Craigslist for other clients.

Independent Contracting Is A Win-Win

Independent contractors allow workers and firms to share more money between themselves.  The government is entitled to much less of the money that flows from firms to independent contractors than employers and employees.  Businesses become more profitable, individuals keep more money and everyone increases their privacy. Independent contractors can also have more control over their tax domicile, a more advanced but much more powerful tax saving strategy.

Conclusion

This is only scratching the surface of how to properly take advantage of this powerful strategy.  Secrets of Independent Contractors, from HowToVanish.com is a simple and complete guide to help businesses and workers properly structure their relationship so they can take advantage of the huge tax savings.

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Three Steps To Handle A Subpoena…

And How To Protect Your Privacy From One

One of the most invasive legal tools in the US is the subpoena. Its not just several pages of headache inducing legalese. It is a court order, demanding you to comply with whatever expensive command is gracing its pages. It might ask you to reveal more about your business than you would like your competitors to know.  It might reveal embarrassing personal information.

A subpoena doesn’t even need to be signed by a judge. A court clerk, prosecutor, or a private attorney can issue a subpoena to gather information.

The worst part is that you don’t even have to be involved in a criminal or civil case to get served with one. All you need is to have possession of some record that is remotely likely to contain information relevant to a case or investigation. In the law we call those kinds of requests “fishing expeditions.”

Not everybody likes fishing, especially the fish. There are ways to protect your privacy and protect the privacy of your customers from an invasive subpoena with a few simple tips.

Types of Subpoenas

There are 3 basic types of subpoenas. One will ask you only to produce records. Another will ask you to appear in person and testify. The third will ask for both. These tips are geared towards the first, producing records, but may help for the other two as well.

How likely are you to be served with a subpoena? Everyone’s situation will be different, but when you look at how many lawsuits are filed every year, and think that there are probably a handful of subpoenas issued for each lawsuit, the chances are pretty high that you or your business will get one at some point. Every year, much more information is gathered from subpoenas than from wire taps.

Who do they send the subpoena to?

It can be directed to you, ordering you to produce records that you possess about yourself or about someone else. It can also be issued to someone else to get records they have about you. Sometimes a third party will notify you if your records have been subpoenaed, but many times, you will not have any notice at all.

What can they get with a subpoena?

Either you or a third party are ordered to produce just about any record that is kept. There is no need for probable cause, all they need is some reasonable belief that there might be evidence in the records requested. Those records include anything like customer orders, invoices, repair reports, subscriber lists, contracts, memos, meeting minutes, and lots of other things.

There are a few things that you don’t have to produce. Privileged material, like communications with your lawyer, remain private. Also, things like emails, text messages and voice mail require a higher standard for law enforcement and opponents to collect. A subpoena can still get a list of the numbers you dialed, the websites you visited and lots of other information that could lead to more evidence anyways.

What do you do if you get a subpoena.

Step 1.

Take the paper and close your door or walk away. Don’t say anything to the person giving it to you, don’t invite them in, don’t read it in front of them, don’t buy them a beer. Just take it and get to a phone.

Step 2.

Call your lawyer. You can challenge a subpoena in court before you have to produce anything. If its too broad or burdensome to comply with or if it seeks privileged material, you might be able to limit what you have to produce and you may even be able to quash it completely. You can even challenge a subpoena received by a third party if any of your own records would be disclosed, assuming you know about the subpoena in time to challenge it. A lawyer can also help make sure you limit the documents you produce to the bare essentials. You don’t want to waste time and money disclosing more than you have to.

Step 3.

Don’t Ignore it.  You could be held in contempt if you do.

Prevent Disclosure of Records From a Subpoena

Keep as few records as possible. If you don’t have it, you don’t have to produce it. The more records you have, the more likely it is that you have something that someone else wants.

Have a clear document retention policy and stick to it. If you are selectively destroying a few records here and there, it might look like you are trying to hide evidence. Never destroy records after a subpoena is issued or even if you think one might have been issued. That is a big no no.

Make Fewer Records Yourself

Since third parties can be compelled to disclose details about you, and since you may not always know this with enough time to challenge the subpoena, you should limit the records that other companies and individuals have about you.

Be as anonymous as possible to other companies that might be making records with your information. Use proxy servers, Tor, VPNs, Startpage, prepaid cell phones, pay for things in cash, and many other techniques from the book How to Vanish. This way, even if third party records are disclosed, they do not immediately identify you.

Retain Less Data

Even if you collect some information about customers or yourself, you can eliminate unnecessary data on a regular basis according to your written data retention policy. Securely delete old files, anonymize marketing data, delete emails, wipe  old hard drives, use encryption to store and send files, and clear your browsing history.  And don’t forget the old fashioned technique of shredding your trash.

Use Offshore Companies

Records of companies outside of US jurisdiction are harder to reach by simple court processes. Some countries, like Panama, are known for flagrantly disregarding US court orders. If you want to protect your records, use foreign companies. You can get email (like Hushmail), VPNs (like Identity Cloaker), and a lot of other services from foreign countries.

Conclusion

All of these measures don’t mean that you will never be served with a subpoena.  It means that if you are lucky you can respond with the glorious “certification of no records. “  But it will still be a win if you can reduce the number of records that you have to produce from millions down to dozens.  It is a lot easier, less expensive and will protect more privacy.   Check out other ways to reduce the records that you make and keep with the book How To Vanish.

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What Liberty Dollar Should Have Learned From The Godfather

Don Corleone doesn’t ask a second favor once he’s been refused the first. Instead, he will make you an offer that you can’t refuse.

The recent conviction of Bernard von Nothaus for making and circulating Liberty Dollars has little to do with tyranny and oppression, and a lot more to do with tactical and practical mistakes made by the Liberty Dollar organization.  Although many would argue that tyranny is the logical and philosophical cause of Liberty Dollar’s trouble, for the most part there are practical ways to exercise liberty, avoid making powerful enemies, and avoid incurring their wrath.

Philosophical Arguments Don’t Address Actual Power

I am not addressing the philosophical or ideological arguments for two reasons. First, the state of monetary law is almost nonsensical. Court opinions, federal statutes and the Constitution are logically inconsistent with one another. As a practical matter it is worthless to try and argue with the reasoning behind arbitrary and capricious rules.

Until a law is changed, it is not recommended to break it, even if you think the source of its power is illegitimate.  I imagine that a lot of characters thought that the source of Don Corleone’s power was illegitimate too.  But that does not change the fact that his power was very real (in the movie) and that such power must be respected.

That power will endure until enough people are convinced otherwise.  So, even though Dr. Vieira clearly reveals the inconsistent and tyrannical nature of current monetary law (See Dr. Vieira’s Pieces of Eight pg. 1532), we will assume for the sake of argument that such laws are legitimate because we must deal with the actual power that they have.

Must Be Persuasive

Second, unlike Libya, the US is still a country where we are free to persuade anyone to change any law or replace any political leader.  Failure to convince enough people is more a function of poor salesmanship than tyranny. Many Austrian economists have historically been unsuccessful at persuading courts, legislatures and neighbors. They are getting better.  In any strategy, including legal strategy, it is important not to dismiss the actual power that your opponent has.  Doing so will limit practical solutions.

Liberty Dollar Fraud

The Liberty Dollar case was about fraud. It was not about using gold or silver in commerce, it wasn’t about protecting government power, or even about using private money. There are all kinds of alternate currencies in circulation in the US. Ithaca Hours, Potomacs, gift certificates, and Chuck E. Cheese tokens can all be used to barter and transact instead of legal tender coins and bills. It is not illegal for a dentist to take payment in chickens or in sacks of potatoes. Liberty Dollar was investigated and indicted because it could, and did, fool some people into thinking it was something that it was not.

Resemblance to Legal Tender Coins

Two of the statutes that the jury thought were violated were 18 USC 485 and 18 USC 486.  In a nutshell, to violate these statutes, someone has to make and use medallions that resemble official US government coin and intend to fool someone into thinking it is official US government coins.  It is very unlikely that well informed Austrian economists, or even Ben Bernanke and friends, were fooled or were intended to be fooled.

Unfortunately, the jury pool and the American public are not always well informed Austrian economists.  Thus the likelihood that someone might be fooled by the Liberty Dollar is much higher, and the intent can only be determined by other actions.  The Department of Justice (DoJ) thought that there were too many elements of the Liberty Dollar design that might confuse an unsuspecting person and that there was intent to fool some people. A unanimous jury of peers agreed.

Notable Similarities Between Liberty Dollar Medallions and US Government Coins

Engraved with a “$” symbol;

Engraved with the word “Dollar”;

“$5 Liberty Dollar” is the same size as a Kennedy 1/2 Dollar;

“Trust In God” engraved on Liberty Dollars;

Engraved with the word “Liberty”;

Several images similar to those commonly used in US coins are engraved on Liberty Dollars;

“USA” is engraved on some Liberty Dollars.

To see all of those similarities, check out the Indictment, paragraphs 35-44.  This was apparently enough to show the resemblance.

Liberty Dollar Indictment

Liberty Dollar Jury Verdict Form

Problems With Liberty Dollar Coin Value

The most serious issue with Liberty Dollars is probably the coin value and the denomination minted on the medallion. The value of the metal in the Liberty Dollar medallions was below what appeared to be the Federal Reserve Note (FRN) value minted on their face. The “$10” medallion contained less than $10 in FRNs of silver at the time they were in circulation. When the value of the silver in the medallion rose above $10, the medallions were recalled, and recast with a “$20” denomination. The same process would occur if the FRN value of the metal again exceeded the minted denomination.

It would not be hard for someone in the lowest quartile of intelligence to be offered a “$10” Liberty Dollar and think that the intrinsic metal value was $10 in FRN and that it might be a legal tender coin. The prosecutors and a unanimous jury agreed.

Some Actions Could Show Intent

A very important element of the indictment is the intent to defraud. There is no criminal trial in the world where anybody knows for certain the intent of anyone else. We can only deduce intent from surrounding circumstances. Therefore, like any jury trial, it is a complete crapshoot as to what the jury is going to think the intent of the defendant is.  The politicians may consider gambling a harmless vice, but it is dangerous when your liberty is on the line.

Liberty Dollar actively encouraged merchants who traded Liberty Dollars to give them to unsuspecting customers as change.  An unsuspecting customer might receive a “$10 Liberty Dollar” medallion instead of $10 in Federal Reserve Notes.  The value of the silver in those medallions was less than $10 FRN,  so the unsuspecting customer would receive less than the value they thought they were receiving.  It appears that such an exchange was viewed by the prosecution, and the jury, as evidence of an intent to defraud.

Banking Is Boring

Another critical error might have been the amount of money that was being made by Liberty Dollar and its affiliates. Banking and bullion are supposed to be boring businesses. It is very difficult to make exciting profits on coin value. Liberty Dollar profits might have drawn attention. There is nothing wrong with finding a way to make enormous profits trading on coin value. You just need to be prepared to explain yourself very well. Liberty Dollar could not explain themselves well enough.

Avoid Trial

Given the unpredictability of a jury, it is advisable to avoid a jury trial in most situations. Only 2% of cases that are filed are ever brought before a jury. The certainty of an agreement is far easier to manage. Since the vast majority of US citizens are unconvinced of the fundamental flaws of our monetary policy, Liberty Dollar would have been wise to avoid a trial as well. They were given a chance to do just that.

The Department of Justice and the Mint issued a warning that they would prosecute the use and distribution of Liberty Dollars in 2006.  Consider this like Don Corleone “politely” asking a favor.  Rather than grant this favor to the very people who have the power to indict you, Liberty Dollar refused this favor, and were quite obnoxious about it, even though their legal counsel advised them to take it seriously.

Certainly Don Corleone would have followed up with an offer they couldn’t refuse.  The DoJ did too.  The offer was an indictment which Liberty Dollar couldn’t refuse.   Had they complied with this “favor” they probably would not have had any legal problems.

What the Case Was Not About

Importantly, this case is not about trading or bartering in silver, gold, chickens or potatoes.  It is not about offering or accepting silver instead of Federal Reserve notes at a store.  It is not about the warehouse receipts for silver or about digital gold or silver transactions at all. It was not about the fact that Liberty Dollar was minting medallions out of silver to distribute into the marketplace. In fact, minting their own medallions was completely unnecessary because there are already many, many kinds of silver medallions that are perfectly legal to own, use, trade, barter with, and utter like Buffalo Silver Rounds, Canadian Silver Maple Leafs, Austrian Philharmonics, and Sunshine Mint medallions.  All of these activities are far from the kinds of things that anyone would prosecute.  Especially if they are taking care not to upset powerful enemies.

Conclusion

Like the Hollywood movie executive, in the Godfather, Liberty Dollar was asked a favor. Mr. Woltz was asked to cast Johnny Fontaine in a movie. Liberty Dollar was asked to stop using their confusing silver medallions. When Woltz refused, he woke up with an unpleasant surprise in his bed. He couldn’t refuse to cast Johnny in the movie. When Liberty Dollar refused the favor, they woke up with an indictment. They couldn’t refuse to stop using Liberty Dollar coins.

In his passion and zeal, Mr. von Nothaus failed to assess the power of his opponent intelligently.  It ended up costing him dearly. Had he gone around using already existing silver rounds and offering them as payment instead of his own minted version, he would have been miles away from any legal trouble. Had he used medallions that contained none of the state regalia, like “USA”, “$10″, and other familiar markings, he probably would have remained free although if he had used actual legal tender like Kahre he still may have had issues.  Had he transacted only with warehouse receipts for silver bullion, he would have avoided legal trouble.  If he had only traded digital silver like with GoldMoney, backed by bullion in the vault, he could have avoided legal issues.  Maybe if he had seen the Godfather a few more times, he would have realized that when you refuse a favor, you are going to get an offer you can’t refuse.

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In one corner we have the vast address lookup databases, pulling in personal information from public records and the entire internet.   In the other corner is you, trying to keep your private address from becoming public knowledge.  If you are a star on a Hollywood star map, or just an average Joe who wants to separate his private and public life, public records of real estate ownership can make it difficult to protect your private address.  The address lookup sites are usually the heavy favorite, but here are a few tips for the underdog to protect privacy and maintain a private address.

Renting A Private Address

Rent.  Renting a house, condo or apartment instead of buying is one of the easiest ways to keep your private information out of public records and out of address lookup sites.  Property ownership records are public record, but rental records are not.

Try to rent directly from the owner of the property, rather than a property management company.  Property management companies keep records of their units and many of them sell their data, including data of their renters.  If you must involve a property management company, smaller ones are less likely to share data.

If you never give out your rental address, use ghost addresses,  order utilities and services in another name, among other things, you will remain very private.

LLCs and Corporations To Hold Real Estate

If you own property in the name of an LLC or corporation, the business entity will be listed in the public real estate ownership records.  Your name will not appear immediately in those public records.  Someone would have to make a separate request to the secretary of state to find out who owns that LLC or corporation.  It is not the most solid privacy protection of your private address, but it adds an extra layer of protection.

In many property ownership databases, it is possible to search for ownership records by owner’s name.  If you own multiple properties in your own name it will be easy to create an asset profile of you.  If you own multiple properties with multiple business entities it will be much harder to create such a profile, especially if each of your business entities exist for the sole purpose of managing one property.

New Mexico is the only state where LLCs are totally anonymous.  That means that if you own property with a New Mexico LLC your name can’t be connected with the property in the public ownership records or the business ownership records.  Plus, you can own real estate with a New Mexico LLC in just about every state in the US without any special filing or permission.

If you want to be very advanced, your New Mexico LLC can be the only owner of your LLC or corporation formed in another state.  That way, when someone queries the ownership of an LLC, all they will get is your New Mexico LLC.  It will be a dead end.

Trusts To Hold Real Estate

Another very private way to own property is through a trust.  Trusts are commonly used by large developers to stealthily buy up several adjacent parcels of land which they will later develop as one, without tipping off the sellers.  They buy each individual parcel with a different trust, established only for the purpose of owning the property and named in a way that doesn’t identify the real buyer.  Disney used this strategy to purchase the land for Disney World.  Imagine the price the last seller on the block could get if they knew who had been buying all of the other houses in the neighborhood.

The most private way to buy real estate using a trust is to transfer the property directly into the trust.  This is usually only possible if you pay full value for the property and do not mortgage it.  Almost every mortgage company will require you to transfer real estate to your own name first before you transfer it to a trust.  This will leave your name in the chain of title forever, so it is not preferable but it may be the best you can do and it is better than nothing.

If You Already Own Real Estate In Your Name

If you like where you currently live and you don’t want to move but your real estate is already in your own name, you can still transfer it to a trust, LLC, corporation, or New Mexico LLC at any time.  This will leave your name in the chain of title, which is searchable, but at least you won’t be the current record owner.

Other Tactics To Prevent Address Lookup

Private ownership and occupancy of real estate is only one part of you game plan to keep your name out of the address lookup databases. You need to round out your skills by mastering other important techniques that you can find in How To Vanish.   Never give out your home address, use ghost addresses,  order utilities and services in another name, be careful when you order pizza.  The address lookup databases have the advantage of being everywhere, but now you have the advantage of knowing how to beat them.

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Sorry David Copperfield. No matter how good a magician you are, there are some assets that you can’t make vanish, and it has nothing to do with genetics. I’m talking about assets that have your name written all over them in the public record.

It is hard to put real estate, vehicles, and other  attention grabbing assets into a private safe somewhere. Even if you did, jealous ex boyfriends, business competitors, and shysters can still look you up and see what you have stashed away.

The reason why your assets can make you so vulnerable is because the law requires that certain records be made available to the public. That includes some records with very revealing information about you and your stuff.  Its a lot like forcing you to go out in public with your fly open.  Many of the websites that publish personal information, like Intelius and Lexis-Nexis, get a lot of their information from these public records.To make it harder for the curious and nefarious to tap juicy assets for personal information, you have to know where you are vulnerable.

The practice guide for California attorneys practicing debt collection has a great list of places to look for personal information in public places to help their clients get a piece of assets from debtors. Those same sources, and one or two others, can be used by anyone for less legitimate purposes. There is some variation by state on who can request certain records and how to do it, but these places are a great start to see how badly you need to keep your assets hidden in plain sight.

Keep Your Assets Hidden In Plain Sight

Phone Directories

Phone directories are the oldest trick in the book. Just about everyone, everywhere has a phone. A number can be a way to contact you even if you don’t want to be contacted. Phone numbers are also a great way to narrow down searches for other assets based on the geographic location of your area code, making the search for your other assets cheaper and easier. In some cases, your phone number can lead right to your front door.

County Assessor

The county assessor keeps track of the value of real estate and some personal property for tax reasons. This is a good way to find the value of any of these kinds of properties. In many cases, the assessor will have ownership information, including the address of the property and a mailing address where the tax bill is sent. If you pay any property tax, some of your information shows up in these records.

County Recorder

The recorder keeps records of all documents that are recorded. This includes real estate transactions, birth certificates, marriage records, death records, and a lot of other documents. Your real estate and an outline of your most important dates will show up in the county recorders office.

County Clerk

Court records, both civil and criminal, are public. If you (or your property) were involved in court proceedings, your information is out there for anyone to see unless you have taken steps to cover it.

Probate Index

Large assets transferred at death and who they are transferred to are all kept in the probate court records. If you or someone in your family has received major assets this way, the whole world can know.

Secretary of State

In most states, the Secretary of State will have a list of all of the business entities formed and who their owners, principal directors or officers, and registered agent are. If you act in any one of those capacities, your name is going to be easy to find. If you own any assets in the name of those business entities, they will easily be traced back to you.

State/County/City Permits and Licenses

Most states have a central location where alcohol permits, concealed weapons permits, building permits, and other business permits and licenses are made public record. If you have any of those kinds of permits, your information is out there for all to see.

DMV

Car ownership can be discovered through a request to the DMV. Often, when there is a car loan outstanding, the ownership information will also reveal a bank where you might have other accounts. A 2 for 1 deal.

Google

A simple Google search can turn up a lot of things that you might have been involved in. Did you act in a play in a community theater? If they post that info in the internet, it can lead right to you. So can coaching a little league team, or anything else you might do. Even Google Street View can confirm that you live in a certain place or drive a certain car. I have successfully used Google Street View to investigate opposing parties in litigation.

Your Website

You may have a website of your own. That website might have information on it that would lead a clever investigator right to your doorstep. Even if you don’t post your address on your site, the ownership information can be looked up on whois.com. If you registered under your own name and address, boom, there you are.

Social Networking

If you post it, they will come. Mark Zuckerberg found out the hard way how dangerous it can be to have some personal information available to the public.  Facebook and other social networking sites are a gold mine for information about your assets.  There are usually ways to make profiles private, but those settings have been known to change overnight with no warning, and their privacy is easy to get around. People have been known to make fake profiles of old friends of a target to connect with an otherwise private profile and get the juicy details of their life.  Even if you don’t reveal any information on purpose, a loose lipped friend may let something slip, the profiles of the people in your network can reveal your location, even the pictures themselves can have GPS coordinates embedded into the code of the picture, which have been used to track people right to their living room.

Shareholder Lists

If you own stock in your own name, it may be possible for another shareholder to get access to the shareholder list of the company and find you. Sometimes, those lists are sold to others. Once a list like that is sold, who knows where the information will end up.

Conclusion

Almost everyone has information in one or more of these public places. You know you do too, don’t lie. If so, your assets are hanging out for all to see. Go ahead and look yourself up in these places to get an idea of how private your assets really are. There are ways to remove almost every one of your major assets from those public records. The book How To Vanish will show you how to do everything you can legally do to remove that information. In future posts, and in a few past posts, I go over specific instructions to remove your personal information from every single one of these sources, without having to sell your assets on the street. Sorry David Blain.  No matter how good a magician you are, there are some assets that

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Financial privacy is a fundamental right which the law does little to protect. In fact, the laws of any country with a central bank and strong bank regulations make financial privacy a very difficult right to exercise.

Central Banks Are Anathema To A Free People

Dissatisfaction with central banks has grown in recent years, as evidenced by the large number of co-sponsors to Dr. Paul’s bill to audit the Fed. Even if the Fed is subjected to an audit, it is only the first of many steps needed to secure more economic freedom and the best financial privacy. That road to financial freedom and financial privacy is a long one. Since the law cannot adequately protect financial privacy, we must find alternative peaceful methods to protect our rights. No matter how dissatisfied we are with central banks, there are few viable legal alternatives.

Financial Privacy Alternative To Central Banks:  Gold and Silver

The most popular alternative has been to buy gold or to buy silver. The reality of using gold or silver has really only been to move savings and investments to gold and silver. Every-day transactions are still conducted in national currencies. I suspect this is due, in part, to the fact that very few merchants or service providers will accept direct payment of gold or silver coins. The premium for coining gold and silver money may also prevent widespread adoption of using gold or silver as common currency.

Another Financial Privacy Alternative To Central Banks: Digital Currencies

Another alternative has been the use of digital currency. Since the 1990′s, many digital currencies have been created, separate from the national currencies of the world.  Some of them were responding to the market need for easier online payment systems, many of them hoped to achieve what regulation and statutory law has not been able to achieve: true financial privacy. Most of those currencies have either vanished like e-gold, subjected themselves to regulation like GoldMoney, or have become a huge part of the system itself like PayPal. Even those digital currencies that continue to exist without regulation or prosecution, such as Pecunix or WebMoney, are at risk of the fates of their brothers because they all share a common attribute which prevents them from becoming a viable alternative to national currencies for transactions large and small.  But many claim that digital currencies will eventually provide a viable alternative to national currencies.

Centralization Has Prevented Digital Currencies From Replacing Central-Bank-Issued Currencies

The fundamental flaw that all prior digital currencies have suffered is centralization. Either all transactions must be verified by a central authority, like WebMoney, or when they are backed by a tangible asset such as GoldMoney, there is a physical location where the assets must be stored. Centralization creates an identifiable target for bureaucrats to attempt to prosecute, subpoena, regulate, impose political pressure, or bring a host of other attacks. Physical storage exposes those stored assets to many of these same risks, plus a risk of regime change, war, natural disaster, or some other threat to the physical location which can lead to reporting, regulation, or confiscation.

E-gold and Liberty Dollar faced prosecution and GoldMoney submitted to regulation.  The fate of UBS bank account holders demonstrates the risk of relying on friendly governments for financial privacy and financial freedom. UBS defied hundreds of years of established constitutional law and revealed the names of account holders because of political pressure. Thus, systems like WebMoney and Pecunix, established entirely outside of the US, are not immune to the problems of centralization. Centralization is not only a risk for digital currencies. Napster was shut down because it relied on a centralized database. Wikileaks was temporarily shut down because its website was hosted on a single server.

A digital currency backed 100% by gold, like GoldMoney, may ultimately be the best model. But no digital currency has yet become widely accepted enough for the average person to use it to buy groceries, gas, a movie ticket, or a cup of coffee. It will take another kind of model to bridge the gap between the current worldwide monetary dictatorship to a world of financial freedom and privacy.

Bitcoin Is The First Decentralized Digital Currency

One of the latest developments in digital currencies, Bitcoin, has solved the centralization problem.  It is a very new development, but it has been gaining ground and may be sufficient to make central banks irrelevant to every day life and thus free mankind from the economic bondage that most of the world has been under for at least the last century.

How Bitcoin Works As The New Best Financial Privacy Alternative

Bitcoin offers a verifiable store of value while maintaining a decentralized structure. It operates peer to peer, meaning there is no centralized authority to issue or verify Bitcoins. Free, open source software allows users to anonymously and securely generate their own Bitcoins and transfer any amount of Bitcoins anonymously and securely. The software specifically limits inflation and, because it is open source, anyone can audit it.

Rather than discuss the details of how Bitcoin works, I would rather focus on something that hasn’t been fully developed elsewhere. There are several economic and legal benefits and risks to any person who decides to use Bitcoin. I think, ultimately, the benefits far outweigh the risks.  If Bitcoin is not the answer, hopefully a similar successor will eventually succeed in securing our financial privacy and thus our financial freedom.

The Biggest Risk To Bitcoin

The biggest risk is the point at which Bitcoin users enter or exit the central bank economy from the Bitcoin economy. This is a risk because this is the point at which regulation by government is most likely to be created, most likely to be enforced, and most likely to have some effect. This would probably have the largest effect because many people are deterred from an activity if they would be breaking a law.  If enough people were deterred, Bitcoin would be spread to fewer users.  Without a sufficient user base, the success of Bitcoin is limited.

Another reason why regulation at the point of entry or exit from the national currency economy might be effective is due to the enhanced visibility of transactions at that point.  Once transactions are conducted within the Bitcoin economy, they are very difficult to detect, audit, subpoena, and control.

So far there have been no real efforts to regulate Bitcoin.  People can already exchange Dollars, and other national currencies for Bitcoins. The risk is currently very low that anyone who engages in the business of exchanging national currencies for Bitcoins within jurisdiction of US federal law will be subject to regulation as a Money Service Business. There are many other alternate currencies that circulate regularly throughout the US with no such regulation.

Disney is not listed as a registered Money Service Business for selling Disney Dollars. Washington D.C. area businesses trade in a local currency called Potomacs to support local businesses, but nobody is registered as an MSB to exchange those. Even virtual currencies like those used in World of Warcraft or Second Life, which regularly are exchanged for national currencies, have never given rise to registration requirements. But, none of those currencies ever posed a threat to the power of the money printing press that central banks now enjoy.

Even if at some future time, government decides to force Bitcoin exchangers to register, there will likely be many legal ways to avoid having to register as a Money Service Business when exchanging Bitcoins for a national currency.

Bitcoin Benefits

Here are some of the major benefits of Bitcoin that make it capable of replacing national currencies in many transactions and providing true financial privacy.

Open Source – This means that anyone can look at the source code and see what the program is doing to make sure that it is doing what the creators say it is doing. This is like Dr. Paul’s bill to audit the Fed on steroids.

Strong Encryption – Bitcoin uses stronger encryption than the world wide banking system so it is much safer from identity thieves, hackers, and other kinds of fraud or physical theft than banks.

Free – Anyone can get a Bitcoin account, or as many Bitcoin accounts as they want, absolutely free. Plus, transactions are absolutely free. This is a huge advantage over PayPal, credit cards, bank transfers and even most other digital currencies like GoldMoney, Pecunix and WebMoney.

Easy – It is an extremely easy system to use. If you can use email, you can use Bitcoin.

P2P – Each transaction is made directly with the other person. There is no third party like a bank that you must rely on for the transaction or that even knows about the transaction. Third parties like Paypal and banks will interfere with transactions between two consenting parties because of banking regulation.

Easily Exchanged For National Currencies – There are already many people around the world that will exchange cash for Bitcoins. Many will exchange in person, through the mail or in many other ways.  You can even get an anonymous credit card and load it with cash using Bitcoin payments.

Some Already Accepting Bitcoins – There are many merchants and service providers around the world already accepting Bitcoins. Simple solutions already exist for merchants to integrate Bitcoin into daily transactions so it is likely that many more will do so. HowToVanish.com accepts them and I accept them in exchange for legal services.

Unlikely To Be Regulated – Bitcoins might be treated as an imaginary currency, more  like a novelty currency like Disney Dollars, Chuck E. Cheese Tokens, Linden Dollars, Monopoly money or Potomacs.  Bitcoins don’t resemble any US minted currency so they aren’t likely to violate laws like Liberty Dollars.  Alan Greenspan is also quoted as cautioning against regulating private digital currencies in the September 8, 1997 edition of Forbes Magazine.

Impossible For Authoritarian Governments To Control – Because Bitcoin is a simple, open-source program, capable of being encrypted, and accessible through proxy servers, it will  exist anywhere the internet can exist. If an authoritarian government like Cuba or China made it illegal for citizens to access or use, the account of every citizen would still exist unharmed and be accessible outside of that country. It would also be practically impossible to enforce such a ban because, like music file sharing, it would be almost impossible to detect and prosecute.

Impossible To Audit – Much like cash, you will still need to pay taxes on all income, etc. earned in Bitcoins, but there will be no way for anyone to verify what you have claimed because accounts and transactions can be completely anonymous.

Privacy – Encryption, anonymization, and world wide access means that Bitcoin does what the law does not do: protect financial privacy.

Capable Of Off-Line Payment – If a transaction needs to occur off-line, an account for the amount to be transferred can be set up and the entire account number and password can be given to the person rather than an electronic transfer.

Micro Transactions – Because each transaction is free and extremely easy, it will be a vehicle for transactions in very small amounts and micropayments worth fractions of a cent.

Convenient Apps – Smartphone apps could make use of Bitcoins in every day transactions extremely easy. Bitcoins could be sent by text message, email, or through a smartphone app that will generate a barcode and read a barcode. The cost to a major corporation like Starbucks to implement is almost zero. The cost to a Girl Scout to use when selling cookies is almost zero.

Almost No Inflation Risk – Bitcoin is a fiat currency. Unlike the Federal Reserve, the limit of Bitcoins is hard coded into the software at 21 million. If any programmer were to try to increase that number and inflate the supply, she would have to convince a majority of other users to accept that inflated supply before it became effective.

Diffuse Inflation Risk – Even though inflation is extremely unlikely, assuming for the sake of argument that it happened, the benefits would be spread out equally among the entire network of Bitcoin generators. And, anyone with a computer can generate Bitcoins so theft by inflation would be greatly diminished.

Instantaneous Transactions – Bitcoin transactions take place instantaneously. There is no need to wait for the next non-holiday business day, no need to deal with the bank hours across multiple time zones, no need to wait a few days for a check to clear.

Generate Your Own Bitcoins – If you want to, you can let the Bitcoin program run in the background on your own computer and be compensated in Bitcoins for providing computing power to the network.

No Central Organization – Decentralization is what makes Bitcoin different from all digital currency predecessors. It is this main difference that makes it capable of competing with national currencies and capable of ending the Fed. Bitcoin has no organization, no central server, and nothing to attack. You can shut down thousands of individual computers where the program is installed but it will still continue. If someone has their computer, or even their account compromised, they can download it again for free, and access any other accounts that they have that weren’t compromised. Even though a centralized Napster was shut down, its decentralized peer to peer file sharing successors have been more successful because of their decentralized natures. They have had a multi-billion dollar effect. Bitcoin is comparable to the successors to Napster and will have a similar effect.

World Class Cryptography – This is the second element that makes Bitcoin such an important revolution in money. The program to create, authenticate, prevent double spending, prevent counterfeiting and protect the Bitcoin network is being developed in an open source format by many of the world’s top cryptographers.

Legally Conduct Hawala Transactions – The Bitcoin network is a worldwide hawala network and anyone who has an account will have access to it. There are now fewer cultural or geographic boundaries to hawala transactions.

Money Supply Mimics Gold – The creation of the supply of Bitcoins mimics the discovery and supply of gold as money throughout history.

No Chargebacks – Credit cards and Paypal often charge back purchases, taking money from your account without notice or explanation. This cannot happen with Bitcoin.

Free Market Solutions – Many of the risks that arise from using Bitcoin are likely to be solved by a world wide free market of users.  For example, there is some risk that when you pay someone for goods or services, they will take the money, claim that they weren’t paid, and run away into oblivion.  This kind of fraud is easily prevented by using a trusted escrow that will undoubtedly arise in the marketplace.  A free market in escrow companies will likely charge less than the monopolistic rates of 2-3% or more that PayPal or a credit card will charge.  The benefits of segregating transaction verification from the authorization to use the monetary unit should be apparent.

Bitcoin Risks

Here are a few of the risks to consider.

New – Bitcoin is still very new. There may be bugs that are discovered in the software or something else that goes horribly wrong. It is probably very risky to store much value in Bitcoins for the near future. At the same time, like most high risk investments, if Bitcoin takes off, value stored in terms of Bitcoins could radically appreciate in value.

Not Widely Adopted – Even if there are no bugs and if Bitcoin continues to exist for a long time, if Bitcoin is not widely adopted it will not be very liquid. This will limit its use for buying groceries, buying gas, paying bills, paying rent, or any other everyday transaction. The less accepted the currency is, the more you will have to rely on the central bank controlled monetary system. GoldMoney and many other digital currencies have similarly failed to gain a sufficient user base to replace national currencies for most every-day transactions.

It May Become Illegal For Someone To Use It – Prior digital currencies and applications like Napster were doomed to be regulated as soon as they became wide spread. If Bitcoin becomes widely adopted, there is a chance that legislators or law enforcement will target users. Regulators may attempt to require registration of people exchanging Bitcoins for national currency or even force Bitcoin users to track and report their transactions. An outright ban on its use may even be possible.  Even though possible, I think attempts to regulate and prosecute people under these laws will be as effective as the copyright prosecution of people who shared music. Grandmothers and grade-schoolers will be prosecuted while there will be almost no deterring effect on the public.

Fiat Currency – Bitcoins are created from work, offering computer power, but they are still a fiat currency. It is fiat not because some government has declared that it has value, but because a Bitcoin does not have any intrinsic value and its value is unrelated to the value of any physical quantity.  The price of a Bitcoin is still based on faith that someone else will accept it as payment and so could become worthless.

Transactions Are Final – If a mistake is made in a transaction, if you accidentally send too much money, if you mis-type a decimal place, there are no ways to stop, cancel or refund the money without a separate transaction. Users bear that risk.

Trust – Since there is no third-party audit trail, users will have to trust that the other party will recognize a transaction. It will be almost impossible to get money back from unscrupulous fraudsters that will receive funds, not perform their obligations under the contract, and claim that they never received any funds.

Subject To All US Taxes – There is no income tax benefit to earning income in Bitcoins, rather than US dollars. Since there is an active market trading them for US dollars, there will probably be income tax liability generated for Bitcoin income, and other taxes.

Banking Industry Enemies – The banking industry was able to siphon off billions of dollars from tax payers without much of a peep from the public. This same behemoth is one of the principal competitors of Bitcoin. This competitor has deep pockets and a lot of the public influence. I do not underestimate their ability to crush good ideas in the short term.

Could Be Regulated – Bitcoins, transactions in Bitcoins, or simply entering or exiting the Bitcoin economy is likely to be officially regulated in some way. This has been the principal weapon that the banking industry has used to decimate competitors. I expect there to be some attempt to regulate or control Bitcoins, against the advice of Alan Greenspan, if they become widely used.

Inflation/Deflation – Bitcoins are still in an inflationary state, but once they reach their maximum of 21 million they will be in deflation. Although Bitcoins are easily divisible to a very small fraction, it is unclear whether the ability to make small payments will continue without major changes.

Very Small Bitcoin Economy – The entire Bitcoin economy is currently slightly more that $1 million. That is extremely tiny and so it may be subject to severe manipulation by deep pockets.

Stigma – Many people with dictatorial tendencies will repeat the epithet that only criminals would need the privacy of Bitcoin.  Many honest people might even be fooled by the rhetoric.  If enough people are fooled, the public disfavor could prevent its wide spread use and prevent the effectiveness of Bitcoin.

Conclusion

Financial privacy as a fundamental freedom is impossible when a central bank dictates the value of the money in your pocket and forces you to disclose information whenever you transact in the economy.  Bitcoin is in its infancy, but offers the first real chance of providing financial privacy and freedom to a large group of people.  Investing in Bitcoin is a risky financial endeavor, but it will become less risky if more people sign up for a free Bitcoin account, start accepting Bitcoins in exchange for their own labor, services, merchandise and other things.  Some may even offer a discount for payment in Bitcoins.   Asking to pay with Bitcoins may also help stimulate Bitcoin growth.  The signers of the Declaration of Independence risked their entire fortunes and their lives to favor freedom over authoritarianism, I am willing to risk a few dollars.  Feel free to share your thoughts or experiences using Bitcoins in the comments.

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Reading time: 9 – 15 minutes

There are millions of things that can be done to protect privacy.  Some are better than others.  For better privacy, it helps to understand the big picture.  Like the laws of physics, there are laws that apply to privacy.  Every action taken in conformity with these laws will provide better privacy and help you understand which actions are best for you.  This simple formula will help you conceptualize how privacy works, what affects it, and how to better calculate and manage your risks.

The level of privacy you have is equal to the cost for others to acquire your personal information divided by the value of your information to others.   The more information that is easily available about you, or the more valuable it is the less privacy you have.

Cost Of Obtaining Information

There are several components to this side of the equation.   The cost to acquire information is everything that it might take to discover any piece of information about you.  This might be the time it takes to look something up or figure something out.  It might be the cost in terms of money to employ tools or technologies or to access certain databases.  It might be the expertise needed to discover patterns in mined data or to use advanced surveillance techniques.  It might even be the cost in terms of legal risk to someone illegally trying to get your information like hacking into a secured computer network or pretexting.  As you increase any of these sub-components of this variable, you increase your privacy.

Value Of Your Information

For most people there must be some incentive to get your information.  If there is no monetary, political, or other incentive, gathering protected information becomes a very expensive hobby.  Wikileaks does not publish the secret notes that 7th grade girls pass to each other in class.  They publish the secret notes that government officials pass which conflict with their public statements because there is more political value to do so.

Some information can guide profitable decisions and actions.  Your shopping habits are very valuable to marketers and businesses.  Knowing that, they can reduce their costs of providing you with products that you want, when you want them, where you want them and at the price you want them.  Reduced cost and probably increased revenue = increased profit.

Information about your personal wealth can guide profitable identity fraud or extortion.  Higher wealth means higher potential credit limits means more return for the same work done to steal a wealthy person’s identity than an average person.  The wealthier the victim, the more money extortionists can bleed out of them at a profit.   Higher wealth means that litigants will be able to demand more money in legitimate lawsuits and even demand more to avoid the hassle of a baseless lawsuit.

The higher your public profile, the higher the value of your information, whether you have money or not.   If you’re an A-list celebrity, the spokesperson for a contumacious website, or if your circumstances make you a very public person, your information increases in value.

You can manipulate the value of your information to a certain extent by protecting the information that would lead someone to believe that you are a high value target.

Level Of Privacy

Your level of privacy is the level of risk that you face of injury, either psychological, physical or economic, from your information being known to someone else.  You may even have different levels of privacy for different types of information.  Although your favorite color might be posted publicly on your blog, Facebook profile and tattooed on your arm, you probably wouldn’t do that with your pin numbers.  In either case, you are facing a certain amount of risk that your information will be used against you.

Interaction Of These Variables

As you raise the cost to acquire your information (the numerator on the left side of the equation) you increase your level of privacy (the right side of the equation).  That is true no matter what your value as a target.

You can raise the cost of obtaining your information by increasing the amount of time someone needs to find it, the amount of money they need to find it, the amount of expertise they need to find it or by increasing the legal risk of breaking the law to get your information, or any combination of these.

If you lower the cost in these categories, your level of privacy will go down.

As you increase the value of your information as a target, you reduce the level of privacy.  This would happen if you increase in wealth, raise your public profile, or if more of your personal information reflects its potential value.  As the value of of your information goes down, your privacy will increase.

Optimum Level Of Privacy

Everyone has different tastes.  Everyone manages risk differently.  Privacy allows you to manage your risks by giving you control over your personal information. Some people benefit from more disclosure, like most Hollywood starlets.  Disclosure of personal information is risky for others, like an informant on potential war crimes. Everyone has their own optimum level of privacy which they feel most comfortable with.

Different Strokes For Different Folks

Everyone wants to be able to manage their own risks.  If they are forced to take more or less risks than they are inherently prepared to take, they are uncomfortable.  I see this all the time when it comes to the risk of serious bodily injury.   Some people ride a motorcycle with no helmet, wearing t-shirts and shorts.  Others wear a helmet, chaps and a leather jacket.  Others stay away from motorcycles altogether.  None of them are inherently wrong, but nobody wants to be forced to take more or less risk than they are comfortable with.

Unless something drastic happens, a non-helmet wearing biker is not likely to give up riding as the next logical step to taking less risk.  She will probably start wearing a helmet, and maybe long pants and boots.  The ultra-cautious non-rider has already reduced most of her risk, but maybe she wants to reduce it even more by driving an SUV instead of a 1979 Datsun station wagon, or wearing a helmet while she drives.

Default Level of Privacy Low

The recent trend has been to reduce privacy by default.  Data is regularly collected, archived, shared, sold and even stolen, reducing the cost to obtain it.  And people have been more than willing to voluntarily give away a lot of their information.  Plus, the ability to aggregate and analyze large amounts of information has made the value of everyone’s information go up.  This has vastly reduced the level of privacy of most people.

This was mostly the result of people not knowing how much of their information was being collected, what was done with it, and a poor analysis of the likelihood of harm.  In many ways, it is like everyone has been forced or tricked into riding around without helmets.

How To Vanish Gives You Control

The purpose of How To Vanish is to give you control over your personal information so that you can manage the risks yourself.  Every tip and technique is designed to show you different ways to increase the time, money, expertise, or legal risk needed in order to acquire your information.  There are also a lot of things that show you how to reduce your perceived value as a target.

Some people will choose to do the small things to reduce their risk a little bit, like putting on a  helmet and other protective gear to ride.  Others will do a bit more, like avoid riding altogether.  And some will go as far as they can, like getting an SUV wearing a helmet when you drive it.

No Silver Bullet Solution

Once you let an idea escape your head, either by writing it down or sharing it with someone, you are risking disclosure.  Maybe someone will find the file where you put it, maybe the person you told will share it.  No matter what you do to protect that information, there is a risk that someone will be willing to pay the price in time, money, expertise, or legal risk to acquire it.  The captain of the Titanic tried to hide that boat on the bottom of the Atlantic, but James Cameron comes along and he is willing to pay the price to go find that information.  The best you can do is to protect your privacy in a way that makes you comfortable.

Level Of Privacy = Optimum Level Of Privacy?

For many people, their current level of privacy is not equal to their optimum level of privacy.  I would bet that 99% of those people are currently below their optimum level.  Where do you think you are?

You Can Increase Your Privacy

Encrypting some of your files with TrueCrypt increases the cost in time, money and expertise needed to discover the contents of those files.  Buying things with cash or using electronic gold accounts increases the cost in time, money, and expertise to discover and track your financial transactions.  Using a VPN like Witopia, Cryptohippie or Identity Cloaker increases the cost in time, money, expertise and legal processes to determine what you have been doing online.  Using multiple jurisdictions for any communication, transaction, or activity increases the cost in time and money, often by increasing the number of legal proceedings, to monitor and discover those activities.  Some of these tactics may not be sufficient for your desired level of privacy, others will be too much.  But all of them increase the privacy of someone and everyone can increase their privacy in some important ways.  How To Vanish the book shows the most important steps to take at any level to get the most privacy for the least cost.

RELATED POSTS:

1. Offshore Asset Protection Trusts And Better Privacy
2. 3 Better Privacy Secrets Banks Don’t Want You To Know
3. LLCs as a Privacy Curtain

Reading time: 4 – 6 minutes

Tighter credit and vast consumer databases has made it more profitable for banks to spy on you, especially if they are giving you credit. Better privacy is becoming essential for your financial privacy.  Banks are looking much deeper into your private financial transactions to decide whether to lend to you or not. The tools that they use are invasive, unnerving, and dangerous. Here are 3 secret metrics that they use to determine credit, how to prevent banks from being able to spy on you, and what to do to have better privacy if you still want credit.

1. Better Privacy For Rent Payments

Rent can be a very private transaction with no public paper trail. This is not the case when you deal with a large property management company. Credit bureaus are now collecting data from large property managers and gathering it in their own transactional databases. If your property manager knows something about you, so do the credit agencies. This usually means social security number, name, how much you pay, your payment history and where you live, even your emergency contact.

Most of this information is bought and sold just like most other database records. So if you think your address is unlisted, but you rent a property with a property manager, think again.

There are at least two ways to get better privacy to prevent this. The first is to deal directly with the owner, not with a property manager. At least use a small mom and pop property manager because they are less likely to have a sophisticated database of renters that they share with other companies. The second is to use a business entity to rent the property. An LLC can be formed and all dealings with the property manager will be under that name. If you live in a state where an LLC is expensive to form, you can almost always use an out of state LLC to rent a property without having to register it as a foreign LLC. You can use an anonymous New Mexico LLC, which has a $75, one-time fee and no annual requirements. The only recurring costs will be to maintain a registered agent.

2. Better Privacy In Bank Deposit Behavior

Banks obviously maintain records on their own customers. Banks are now using that deposit history to determine your income and credit worthiness.

To preserve a good history, yet protect better privacy, you may want to set up recurring, regular transfers with a separate account in a separate bank where you will get a loan. It can either be in your personal name or business name. A regular history of deposits and withdrawals can preserve a solid foundation for credit from that bank.

3. Value Of Your Assets

Banks now estimate your balance sheet. They want to see how many assets you have to determine if you are a credit risk or not. If you were to default on any loans, or declare bankruptcy, they want to know that there are some assets there to get.

To prevent banks and other credit institutions from being able to see your assets, use business entities and trusts to hold major assets, like large investment portfolios, real estate, machinery or equipment, cars or large collections.

Better Privacy Strategy To Get Credit When Needed

Using any of these strategies to protect your privacy may impact a lender’s willingness to give you credit. You can still get credit if you can satisfy the bank’s fears. If you are using business entities and trusts to hold your assets, you will not have as many large assets in your own name. This can look a bit risky to a potential lender. Any individual asset can be offered as collateral for a specific loan. In those cases, your ownership of the asset is still not public, yet you have satisfied the lender’s need for security. Also, in case the bank presses the issue, they will be limited to the collateral that was offered in case of a default. Otherwise, they might be able to go after any asset of their choosing, rather than the asset of your choosing.

Conclusion

Banks and credit agencies are going to try and spy on their customers.  That is their nature.  You can limit their ability to spy on you and have better privacy by avoiding property management companies, using business entities to rent, using multiple bank accounts, and holding major assets in trusts or LLCs.   Let us know if you have any other creative and legal ways to keep the banks from spying on you when you don’t want them to.  You might also consider taking other steps to protect your bank privacy, bank offshore, or deal as much in cash as possible.

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1. Offshore Asset Protection Trusts And Better Privacy
2. Bank Privacy Part I
3. The Sweet Sound Of Cash

Reading time: 5 – 8 minutes

New Mexico is more than just the home of high desert and alien enthusiasts, its also the place to get better privacy.  New Mexico LLCs are one of the only places where you can register a business entity without revealing the name of the members (an owner of an LLC is called a member) to the state or to the public.  That anonymity can be a powerful piece in an asset protection plan.  But what are the draw backs and how can a New Mexico LLC be used effectively?  Asset protection is a highly complex area, but here are some of the main considerations.

Bad News First About Better Privacy: Increased Cost

One drawback to using New Mexico LLCs is that if you conduct business in other states, you will still have to register in those other states.  That can increase fees and costs of operating, like having an agent for service of process in NM and elsewhere.

Fortunately, there is only a one-time fee of $75 to register in New Mexico and the cost of an agent for service of process is about $100 per year, so those costs are almost immaterial.  If possible, think about making the New Mexico LLC the sole member of a separate LLC formed in another state, rather than registering as a foreign LLC.  A foreign LLC will usually require an individual as the public record member.  If the New Mexico LLC is the public record member, the person who is behind it has better privacy.

Draw Back #2: Strong State Statutes

Other states, like Nevada, Delaware, and several others, have stronger legal protection for LLCs against judgments.  It is much harder for the court to force  a liquidation of assets in those states.  In New Mexico, it is easier for the assets of the LLC to be liquidated to satisfy a judgment.

In most states, the liquidation protections given to LLCs does not usually extend to single member LLCs. Many LLCs formed for better privacy are single member LLCs,  so the liquidation protection wouldn’t apply no matter what the state is.

Now For The Good Stuff

New Mexico LLCs are good for asset protection because they prevent legal action. The better privacy that they offer create a larger hurdle to jump before even starting any legal proceedings.

Better Privacy To Prevent Lawsuits

To understand how New Mexico LLCs protect assets, you have to step into the mind of a good plaintiff’s attorney.  They are running a business like everybody else and are looking for the best return on investment they can get.  Their return on an investment in a case is a function of how strong their case is, and how many assets there are to satisfy a judgment if they win.  Assets usually include things like insurance policies and the unencumbered personal assets of the potential defendant.  Most good attorneys will do some investigation into the assets of a potential defendant before taking a case.

Even if a case is a slam dunk winner, if the potential defendant is broke and insolvent, it will do the attorney no good to take it because she will never get paid.  The more assets the potential defendant has, the less slam dunk the case has to be for the attorney to have an acceptable ROI.

Using New Mexico LLCs, you can adjust the balance of the equation so that you have fewer public assets available to satisfy potential judgments.  This means that in the equation, the facts of the case must be stronger and stronger before a good attorney takes the case.

Proper Procedural Steps

If a case has already been filed, the only way that your personal assets will be discovered in some states is if punitive damages are involved.  This means that the opposing party is seeking more money in compensation than the harm you actually caused to teach you a lesson.  If no punitive damages are sought, it is unlikely that they will be able to force you to reveal your financial condition.

Even if you are forced to reveal your financial condition, having your assets in an LLC creates other procedural steps to attach those assets.  Protecting your assets is not about hindering, delaying, or defrauding creditors, it is simply about making sure that the proper procedural steps are taken before a creditor can reach your assets, like showing the proper level of proof.

The procedural steps can often increase the cost of attaching those assets.  The increased cost reduces the potential value to the plaintiff and often gives defendants a better bargaining position to negotiate a favorable settlement.

LLC Interests in Bankruptcy

In  a personal bankruptcy, sometimes listing an interest in an LLC makes more work for a trustee.  The trustee does not always look closely at the entity and may not include that in the Bankruptcy estate.  Thus, any assets held by the LLC would not be used to satisfy claims of creditors and would remain under control of the member of the LLC.

Actions Against The LLC

If you own an asset, such as a piece of real estate, with an entity, you can protect your personal assets from being used to satisfy judgments, or be in play during negotiations, for litigation arising on the property.  Personal property of a member will not be used to pay off a liability of a properly formed and functioning LLC. Plaintiffs also have a tendency to name everyone who might possibly be involved in causing a harm, regardless of who was actually at fault, because the injured person doesn’t always know who was at fault.  Not having your name in any way associated with the property will prevent you from being named as a defendant if you are not in fact liable for any harm.

Conclusion

There is no magic bullet for asset protection.  Every structure is unique and depends on the unique situation.  New Mexico LLCs provide better privacy which can prevent a lot of asset protection problems before they start.  They are extremely inexpensive and it might be a good idea to have 5 or 10 formed and ready to use when needed.

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2. Offshore Asset Protection Trusts And Better Privacy
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Reading time: 4 – 7 minutes

The US legal system is not always friendly to people who have money. There is a real threat of an out of control jury award, high punitive damages claims, and questionable cases commenced to try and force a settlement by a wealthy defendant for less than it would cost to successfully defend the suit.

Plus there are threats by identity thieves and con-artists who target the wealthy. Some have predicted a rise in violence, extortion and kidnapping against the wealthy as has been common in the bordering country of Mexico.

Others worry that the economic situation which has worsened the problems I have already mentioned and also threaten any wealth denominated in US dollars.  A collapsed currency and a devalued dollar will not bode well for anyone who holds US based investments, regardless of their fears of personal security.

All of these threats face even moderately wealthy Americans, especially if they have not diversified internationally. International diversification can include investing in assets not denominated in dollars, holding assets outside of the US, overseas entities, and even foreign citizenship. Offshore asset protection trusts can be a great part of any internationally diversified portfolio and provide better privacy.

Better Privacy Doesn’t Mean Fraud

When we talk about asset protection, we don’t mean “hiding assets” or anything like that. All assets that must be reported for tax purposes should be. “Hiding” assets from creditors, hindering, delaying and defrauding creditors are all illegal and could lead to a court forcing you to repatriate your wealth or be jailed for contempt of court.  But offshore asset protection trusts can still increase privacy and protect from creditors legitimately.

Offshore Asset Protection Trusts And Tax Optimization

Offshore trusts can be structured to maximize gift, estate and income tax benefits. Often, they are exempt from income taxes because they are offshore trusts. If drafted correctly, beneficiaries can receive distributions income tax free or at least at the rate of the beneficiary rather than the trust creator. Plus, offshore trusts can be structured to avoid estate taxes.  Plus, gift taxes, often paid when funding a trust,  can be minimized.

Offshore Asset Protection Trusts: Protection From Actual And Potential Creditors

When a creditor pursues a trust creator there is one thing at issue which determines if the creditor can reach those assets. That is, does the creator still have control. If they do, even if it is minor control, the creditor has a right to attach those assets.

Courts are now sending trust creators to jail for contempt for failing to pay creditors from their offshore asset protection trusts if they retain any amount of control over the assets.  On the other hand, if the trust creator has no control, the creditor will not be able to reach those assets through a judgment.

Better Protection of Trust Beneficiaries

Beneficiaries can also be protected from potential creditors by doing two things.  Give the trustee the power to make discretionary distributions.  If the beneficiary has gotten themselves into trouble, the trustee can withhold payment until the trouble has passed.

The other thing that can be done is to let the trustee make payments for the benefit of the beneficiary, rather than to the beneficiary themselves. This way, even if the beneficiary gets into trouble, the trustee can still pay the weekly rent at the Bellagio, pay for the rental Ferrari, and pay the tab at all the buffets in town.

Jurisdictional Considerations For Your Offshore Asset Protection Trust

Even if the trust creator controls an asset held in an offshore asset protection trust, the jurisdiction chosen may provide some added protection by local law which makes attachment procedurally expensive. For example, some local trust laws do not recognize US judgments. Thus a creditor will have to re-litigate in the local jurisdiction to get a court to order a distribution. This can encourage lower settlements.

Plus, many havens of offshore asset protection trusts will have favorable statutes of limitations for fraudulent transfers. US law generally leaves 4 years for fraud and 10 years for bankruptcy. Many trust havens will only have a 1 or 2 year statute of limitations period.

How Do Offshore Asset Protection Trusts Provide Better Privacy?

First, most offshore asset protection trusts are not named after the trust creator or beneficiaries. Thus any major assets owned are not publicly linked to any person who could be the target of unjust litigation or fraud. Plus, trust fund babies are sometimes negatively stereotyped.  Financial statements remain private to protect the anonymity of beneficiaries and trust creators.

Yet another benefit is that assets that are transferred by a trust are not subject to probate proceedings, which are public.   If an asset that is transferred at death must go through probate, all of the information is public.

Conclusion

Offshore asset protection trusts are certainly the Escalade of asset protection.  As such, they are not cheap.  But, if you have significant assets, they might be the best way to protect the financial privacy, financial well being and even the physical safety of you and your family.  Other tools include Using New Mexico LLCs, using a ghost address, another privacy tools and resources.

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Reading time: 6 – 10 minutes

I have been fascinated recently with the Washington Post intelligence analysis by William Arkin and Dana Priest. Both are well known journalists who have covered the military and intelligence communities for many years. Realizing that something had changed after 9/11, they dedicated two years to investigating what the intelligence community had evolved into.

They first dug up the location of as many Top Secret facilities, both government and private, as possible. Then took somewhat of a guided tour, gaining access to several high ranking officials inside the Top Secret intelligence community to explain and clarify what each agency does and how they do it.

What They Discovered

Almost everyone is amazed when they see the creatures the government had created not only in size and scope, but in the amount of waste, redundancy, cost and ineffectiveness. There are 45 different government agencies with 1,271 subdivisions, all involved with intelligence. More than 2,000 private companies with government contracts provide some service to Top Secret agencies. In total, there are over 850,000 people nationwide who have Top Secret clearance working on intelligence gathering, analysis, support, implementation, etc. The massive size and scope of the intelligence community is larger than it ever was during the cold war and is directed as much at targets within the US as at targets abroad for the first time. They really have spared no expense. The US intelligence community has effectively become the “fourth branch of government.”

The Post is clearly more shocked about the size and inefficiency of the creatures which have been created. I am more concerned with how dangerous these creatures inherently are and how difficult they are to control by their very nature.

The Real Danger Of The Intelligence Community

The Washington Post fails to point out the most dangerous part of this scientific marvel that has been created. The judicial branch cannot act as a check on the intelligence community because judicial review is not required for almost any intelligence operations. Subsequent prosecution for any illegal conduct is nearly impossible because of the Top Secret nature of the evidence. The legislative branch requires no accountability or measures of success to check and balance the intelligence community with funding restrictions. The directors of these agencies, appointed by the executive branch and confirmed by the legislative branch, have admitted that the system is beyond their control. Like a more dangerous version of Jurassic Park, these intelligence agencies are vicious creatures which have been animated, have escaped from their cages, and are taking over the park.

The intelligence community was so preoccupied with whether or not they could build such a surveillance system, they didn’t stop to think if they should. The fourth branch of government is the most dangerous branch regardless of whether this surveillance and dataveillance of citizens is justified or not and whether it is effective or not. The sheer power and scope of this system allows unprecedented power over the lives of individuals. Should someone in any of these agencies want to exert control, no matter what the reason, the lack of accountability and lack of supervision makes it possible.

Intelligence Analysis Is Dangerous To Innocent Citizens

This kind of organization, without control or accountability, attracts sociopaths. Even if the intelligence agencies are benevolent in purpose, and even if their function is benevolent for a period of time, they will become infested with voracious velociraptors. Imagine the Corleone family having just one database administrator in their pocket.  The inherent goal of anyone gathering this data is to manipulate it, find patterns, and prove those patterns to be correct. These vast collectors of information don’t want to be fed, they want to hunt.

There will be no way for innocent people to protect themselves from being devoured alive because US law prohibits citizens from protecting much of their important financial and personal data. For example, the census is a mandatory disclosure of information. It is likely possible to re-identify 87% of the census responders who thought they were anonymous. Where disclosure of data is not required by law, private companies, which are regulated by government entities, are coerced into divulging information about their customers upon request by the government with a national security letter.

Geography Irrelevant For Intelligence Analysis

The Post focuses on whether the intelligence community is too big to be effective, a legitimate concern. They also focus on the geography of the intelligence community. Geography is irrelevant when it comes to dataveillance and data aggregation and analysis. The most important information tracked by these intelligence agencies is digital. Digital info exists simultaneously in as many places as you want it to exist. Your bank accounts and financial accounts are just a bunch of digits in an electronic database. Your identity is just a few characters and numbers in an electronic database. These velociraptors do not need geography to feed on your data and they don’t need geography to hunt you.

How You Can Escape The Park (Sort Of)

Since Top secret America is most concerned with data and information, one of the most effective ways to avoid being devoured by the dinosaurs that have taken control of the park is to control the data and information that is traceable to you with Freenet.  Freenet is an open source (that means free) peer to peer network which allows you to post information to the network completely anonymously and acquire information from the network completely anonymously. It will cost anyone, including the intelligence community, millions of dollars per person to link information with identity on Freenet. It will only cost users of Freenet a few minutes in time to anonymize that data.

There are even more robust tools in Freenet which allow you to create a network among only trusted individuals.  This creates even more protection against the intrusive eyes of an out of control ministry of information.  It is one of the ways that Chinese, Iranian and other citizens of closed societies are able to communicate ideas and information without retaliation from their most vicious predators. This prevents any tracking of information to you unless a warrant is served to search an individual computer.

Conclusion

The Washington Post has done an excellent job discovering the scope and size of the intelligence community that poses a greater threat to Americans than Hitler, Russia, or Osama ever did. If defeating the threat of Hitler, Russia, or Osama was made easier by using Freenet, would you use it?  Surveillance of citizens by government, surveillance of customers by corporations, private transactional databases, government transactional databases and other forms of search without a warrant are dangerous to a free society.  Also, be sure to check out the new Privacy Tools and Resources page posted on How To  Vanish that contains several intriguing videos about your privacy.

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Reading time: 4 – 6 minutes

Identity theft is the new black for organized crime.  In the information age,  information is valuable.    Protecting identity theft victims can be difficult because of the amount of information that is passed and stored on a daily basis.  Transactional databases which hold all of your private personal information are ubiquitous and not very secure.  Another part of the problem is that most of us are very attached to our identity.   Unless you are Jason Bourne, you probably only have one.  Protecting identity theft target information does not only  include getting a good paper shredder and a good locking briefcase.  It can be done by creating a separate legal identity and then getting a credit card under that identity.

Protecting Identity Theft Victims Step One:  Get A Legal Business Entity

Anyone who owns a car, house, or other large asset, or if you are an entreprenuer or even if you just have a side business selling lemonade on the side of the road, it is a good idea to operate under a recognized legal entity.  You will want to speak with an attorney about which legal entity is best for your situation and how to be sure to operate it correctly, but some of the most common are corporations, LLCs and partnerships.  These act as  a legal barrier between some of your own personal information and liability and the outside world.  The legal entity is your first line of defense because it adds one more layer of protection between yourself and anyone interested in your assets and information, much like anonymous browsing protects your internet searches.  Operating under a legal entity can also help you to maintain the status of independent contractor, a valuable tool of privacy and tax savings.

Another big consideration when operating under a legal entity is the state where you set up your legal entity.  Considerations like cost to form, cost to maintain, laws affecting how you are operating, and the tax effects of different states can all impact your decision.  Operating as a legal entity instead of in your own name can allow you to employ tax strategies which could potentially save you an incredible amount of money.

Protecting Identity Theft Victims Step Two:  Get A Business Credit Card

Once you are properly operating as a business entity, you can apply to most credit card companies for a business credit card.  Business credit card holders share business  information that is stored in the transactional databases rather than their own, personal information. Even if that information is compromised, it is much easier to kill a business entity and start over with a new one than it is to fake your own death and start over with a new identity that you steal from a hobo.  You can also feel a little bit like Jason Bourne by carefully crafting how your business entity’s identity appears to others, and using the most adventagious identity at the right time.

Conclusion

Protecting identity theft victims before identity theft occurs can include a lot of different strategies.  From using cash, to using anonymous web surfing, using a ghost address or using business entities and business credit cards, you can place one more protection between your information and organized crime.  If you want to form a complete strategy to protect your personal and financial privacy, you can get the book How To Vanish.

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