Freedonian citizens and others,

    As many of you know, we have long been pursuing two possible locations, one in NE Africa, and one location which we do not wish to divulge. In the past, these have been referred to as location #1 and location #2, respectively.

    Due to problems with our contacts in the area, along with heightened scrutiny of NE Africa "in the wake of September 11th", I regret to say that we have ceased communications and negotiations in the area. While this may not be permanent, I anticipate that it would be at least 1-2 years before we could continue along that path.

    In better news, communication concerning location #2 is still ongoing, although at a much slower rate than I would like. Also, for those who are unaware, location #2 would be an embassy/diplomatic complex. This is smaller and slightly different from our ideal sovereign area of a few square miles, but this makes success more feasible. Also, the concept of an embassy is not quite as radical, although the uses and purposes of a Freedonian embassy would be somewhat unusual.

    On to a different topic, I would like to express my condolences to the people of Argentina, whose country is currently undergoing massive economic difficulties due to a currency crisis. Argentina serves as a good example of the danger and extreme havoc that governments can have on a nation's economy. It is also a good example of why governments should not be operating systems of money. The actions of the government, including pegged dollarization and extreme fiscal irresponsibility, have impoverished a whole nation and cut nearly every Argentinean's assets in half. The people have demanded some political change, and they have had a succession of presidents from different parties. However, they are still not satisfied, and they shouldn't be. The problem is not the parties, or who heads the government. The problem is the government itself. The best thing Argentina can do now is, at the very least, demand the separation of state and economics.

    Since I am speaking of currencies, many of you have seen the final stage of the Euro introduction, as the paper notes of various nations are replaced with paper Euros. A common currency does make great economic sense, although I would like to reiterate my warning to Europe of the baggage coming with it. Because the Euro is a fiat currency controlled by the one European Central Bank in Frankfurt, and since interest rates are set by the ECB for all the participating EU countries, a curious economic situation arises. Technically speaking, Europe could be subjected to asymmetric economic shocks; in other words some countries, such as Ireland, could be in a state of boom while other countries, like Finland, could be in a recession. Since only one central bank sets one interest rate for all countries, raising interest rates would temper Ireland but drive Finland into depression, while the opposite could ease credit for Finland while sending Ireland into a speculative bubble. Once a situation such as this arises, I believe the crises will prompt those in the EU to come up with a solution: harmonizing the legal, regulatory, and taxation issues which have caused the economic disparities between various EU member countries. This would be done by the drafting of a new EU charter and creating a powerful central EU government.

In the United States, there is a similar pretext. Originally the 13 American colonies decided to join together under a very weak federation whose congress held little to no power, including inability to collect taxes. This federation was established for three main reasons: 1. To provide for a common defense and eliminate the possibility of armed conflict between member states 2. To regulate trade between the states and 3. To establish a common currency. Note the parallels to the purposes and structure of the current European Union. Difficult economic times in the United States led to calls that they needed a strong, central government, and therefore they adopted the present US constitution. Now observe what exists in the United States today: A strong federal government, to which the states are completely subservient. A central government which uses the premises of "interstate commerce" and "general welfare" to give them unrestricted power over the states and the people, save for the bill of rights. The parallels between the United States under the "Articles of Confederation" and the present EU are striking, and over the last few years I have seen the EU develop along the same lines and pieces are falling into place as one would expect. I say all of this only as a caution to the people of Europe. I am afraid what Europe could end up with is yet another layer of government on top of what is already an incredibly bureaucratic and socialist region.

Free trade provides a large economic benefit, but you do not need another level of government to accomplish it. A single currency throughout Europe is also a wonderful economic policy, but you do not need another level of government either. I remind everyone that Europe once effectively had a single currency before WWII and the days of fiat currencies: Gold. And gold comes free of political ambitions.


Yours in Liberty,

John I