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The Fall of the Free Commerce Empire.


The (Non-Monetary) Value of Cash.
*********************************

Occasionally I notice that many disparate concepts are actually part of a 
whole.  There is a epiphanic quality to this sort of discovery; a 
revelation of grand proportions that brings with it a sense of joy, even 
exhalation.  This discovery differs.  For me there is only sorrow and 
pessimism attached to the connection and interrelation of the concepts 
and events I am about to relay.  Almost as if someone told me that the 
tooth ferry was a fraud after years of blissful ignorance.  (While this 
article is long, and appears at first non-crypto, I hope the list will be 
patient, and read to the end where I believe very important implications 
for anonymous banking and crypto are exposed).

Let me begin with me.  Some of you know me only by my postings, others 
from long running debates with me, a few of you have met me, and a very 
few have something of a personal relationship with me.  I am on 
cypherpunks mostly because I love cash.  Not money mind you; cash.  Cash 
clarifies, it is clean, it lacks strings, it does not impute a dependence 
on institutions, or, to a great extent, on government.  Cash is freedom, 
the ultimate expression of the universality of value, almost worldwide.  
Ann Rand has some wonderful descriptions of cash as power.  The beauty of 
cash is its immense negotiability, its infinite liquidity, and its 
prospect for universal acceptance.

If you doubt the value of currency or the premium placed on it by 
society, just look back through the history of printed money, and even 
the physical manifestation of the Dollar today.  The finest artisans are 
recruited to design national currency.  The finest paper is employed for 
its use.  The artwork on a bill is the stuff of a nation.  Look at the 
U.S. Dollar.  The twenty Dollar bill is a magnificent work of 
representation.  The likeness of Andrew Jackson is etched on the front of 
some of the most expensive paper in the world (manufactured by Crane's) 
with immense skill and care.  The phrase "The United States of America" 
is written thirteen times on the front, once on the back.  The branch of 
the federal reserve bank is printed on the bill along with the statement: 
"Federal Reserve Note" atop.  The rear bears the likeness of the White 
House, (The first tree to the left of center was planted by Andrew 
Jackson I believe, it's the one that the plane crashed into.)  Above the 
President's residence are the words "In God we trust."

Consider the secret lore associated with paper money.  Ever hear of the 
secret Owl above and to the left of the "1" in the upper right hand 
corner of a one dollar bill?  Some people claim it's a spider.  The old 
German twenty Mark notes could be folded just so against a mirror to 
reveal a rather perverse depiction.  Need I even mention the illuminati 
reference?

What are the currency markets but the quantitative description of the 
value of a country?  The stockmarket of nations in effect.  They reflect 
judgments on the policies, economy, stability, and power of a nation.  
They cover all the hallmarks of investment.  What a gauge.

Currency and pseudo-currency (postage for example) are the absolute 
expressions of sovereignty for a nation.  The stink Britain made about 
joining the European Union at first?  Monetary sovereignty.

Think of all the information an alien anthropologist could glean from 
simply looking at the currency of a nation.  I'll tell you one thing that 
would be obvious.  We're all liars.  There is a bald face lie on every 
U.S. bill in common circulation.  If you take a close look, you can find 
it.  Right on every bill, just in the upper right hand corner lie the 
words "This note is legal tender for all debts, public and private."  Not 
anymore it's not.


The Cash is Dead...
*******************

I like to spend cash.  Not just because it's private, and anonymous, 
which it basically is, but because it's free of ties.  I don't have to 
pay interest on it, I don't have to pay someone a yearly fee to spend it, 
I don't have to wait for a machine to tell me if I am allowed to spend a 
particular amount, and if I spend capital, rather than leveraged cash, I 
never spend myself into debt.  There is no balancing of one's "cashbook," 
cash does that all by itself.  I still marvel at the fact that I can walk 
into a store, and if I have the cash, I just hand it, push it, drop it, 
or send it over, and I can leave with something I didn't have moments 
ago.  Ah, what freedom is cash.

Well last week I went to Bloomingdale's.  It's thinking about getting 
cold here in D.C.  Not quite there yet, but it's thinking about it.  
Leaves are turning.  We are about to turn the clock back.  Cold's coming.  
Well I got it into my head that I should buy a trench coat.  Something 
nice and warm with a lining and at least the suggestion of water 
resistance.  I did what any good consumer would do, I shopped around.  I 
looked downtown, went to Burberrys (the company that invented the trench 
coat in World War I and now sells it by license from the crown) and poked 
around.  It still amazes me that I could walk into a place dedicated to 
nothing but trench coats and carry the means to buy one, or fifty, in a 
pocket.  Well I elected to try Bloomies before I made up my mind.  I 
drove to Tyson's Corner, walked into Bloomingdale's and spotted the same 
Burberrys coat that was listed for $850 at a mere $750.  Perfect.  I told 
the clerk I wanted the coat in a 40 Long.  None were available.  But the 
clerk insisted, "I can get it from the other store and have it sent to 
you tomorrow."  Sure, why not.  "Ok, let me have you're account number."  
No, I'll pay cash.

Hold the phone.

Bloomingdale's does not accept cash for purchases requiring an order.
No cash, no COD's.  They wouldn't even order the coat, and allow me to 
return the next day to pick it up.

Why you ask?  Because they have to get the coat from a distributor 
somewhere?  Are there other parties involved?  Nope.  Bloomingdale's was 
going to call up the White Flint Mall Bloomies in Maryland and have them 
send one over.  Somehow this means that they cannot accept cash.  Somehow 
an intercorporate, an interREGIONAL, transfer mandates a credit purchase.

Now I should mention that I have very nice credit.  I carry only American 
Express and have been a member for many years.  (Actually I have a Visa, 
but I never use the thing except the required three times a year to waive 
the yearly fee).  While Bloomies would have taken the card, I was 
irritated.  No longer do I dictate the terms of my purchase, but I must 
pay a credit or debit card company for the pleasure of doing business 
with Bloomies.  No thanks.  "You could apply for our Bloomingdale's 
credit card."  Is sucker written on my forehead?  That's quite all right.  
Feeling particularly obnoxious about it, I drove all the way up to the 
Maryland store just so I could pay cash.

Petty, yes?  Perhaps so.  Consider this:

Earlier this month I was in the market for a new car.  I went to an Acura 
dealer in Virginia.  A friend of mine had purchased his car through this 
dealer (which I will not name except to say that it's Brown's Honda and 
Acura in Alexandria) and was quite happy with their service and the 
friendly Virginia attitude about repair and customers.  Virginia, where 
the air is cleaner, and you're closer to God.  Apparently, as you will 
see, you better be closer to the financial institutions as well.

I arrived at said dealership and proceeded to look at the automobiles, 
price them out and maybe even buy one.  On the front door was a large 
sign that read "Drug dealers most unwelcome."  I suppose I should have 
taken note.  Not that I really care one way or the other, but only 
because it seemed to betray a rather radical right attitude.

I ignored the sign, walked into the showroom and began to play the 
negotiations game with a sales person.  After finding a car on the lot I 
fell in love with, I told them I would like to drive it home as soon as 
they could prep it.  "Absolutely.  Let's go in here and work out the 
details."  All seemed to go fine until we got to the financing part.  
Would I fill out this credit form and sign the credit information waiver 
so my financial arrangements could be checked.  No, not necessary since I 
will be paying cash.

Stop the music.

Now I realize that not everyone pays for cars in cash.  I tend to.  Not 
that I walk into the dealership with a suitcase filled with bills, but 
when I find what I like, a quick trip to the bank is all that's required.  
I pay cash for this reason exactly.  I pay cash because I don't want to 
deal with the headache of finance, leases, payments, loans, and because I 
can.  I particularly LIKE paying cash for such purposes because it is:

1>  Cheaper in states with the right sales tax structures.
2>  Certainly cheaper than financing.
3>  Simpler than leasing.  Often cheaper too after all the fine print in
     most leases
4>  Quicker than any paperwork required for any other transaction.
5>  Non-intrusive to my privacy.

I do not use cash purchases of automobiles to evade taxes.

I also like the concept of buying what you have the money for that day.  
Buying a car with money you saved is much nicer than buying a car with 
money you have to pay back.  I dislike leveraged purchases without a 
liquidation following hard upon.  I also frown on cashiers checks.  Why 
pay for what I can have free?

Well the salesman's eyes got rather wide.  He made some more notes and 
told me he'd be right back, he was going to speak with the manager.  
After about five minutes, he came back all smiles and led me back to "Go 
over the automobile."  He was really quite nice for the next fifteen 
minutes or so, commenting on why I would love the car, showing me some of 
the more obscure features, etc.  I figured my friend had been right on.  
How nice of these people to spend so much time with a person who had 
obviously already made his mind up.  Ah, Virginia, perhaps I should 
consider relocating?  That was before the cops arrived.

No kidding.
The manager called the cops.

I should mention that I was quite well dressed.  I had a meeting earlier 
that morning, and was in suit and tie.  You can imagine my irritation at 
being the subject of an absolutely fabricated potential charge.  The 
police asked to see identification.  (I produced a passport)  Didn't I 
have a driver's license?  (I produced an international driving permit)  
Why didn't I have a Virginia license?  (I don't live in Virginia)  They 
asked the nature of my employment.  (I produced a Bar card)  They asked 
if I always purchased my cars in cash.  (Yes)  Why did I have a hand 
portable cellular phone?  (So I don't have to carry a payphone strapped 
to my back)  They asked if they could search the car I arrived in.  
(Sure, if you have a warrant)  Why was I refusing to let them search 
unless I was hiding something?  (Same reason I pay cash, because I can)  
Well then, they would just get a warrant.  If I made them go through all 
this trouble, boy will they be mad if they find anything.  Am I sure I 
don't want to come clean right now?  (Thanks, I'll wait)  I was just 
making things difficult on myself.  (Well, then you better arrest me for 
buying a car and having a cellular phone).

More police arrive.

[Legal note:  The police are now conducting an investigation.  While I 
believe their probable cause is entirely lacking, there isn't a whole lot 
I can do, if they wish to keep me in "custody," until after the fact.]

Sure enough, a canine unit arrived and sniffed at my locked car.  Getting 
no hit, I waited two more hours while they applied for an "instant" 
search warrant.  The warrant arrived, and after my inspection the police 
had me open the doors and the trunk of the auto, where they found exactly 
nothing.  (The dog slobbered all over my dashboard).  The police declined 
to search an attache case which was in my trunk after I pointed out (in a 
particularly threatening way) that the case contained documents protected 
by attorney client confidentiality.  (The attache case indeed had an 
assortment of legal documents, some of which were actually confidential)  
The dog was, however, allowed to sniff at it.

[Legal note 2:  Because I was not under arrest, because I was not driving 
the auto, and because their probable cause was limited at best, the 
police were wise to ask for consent, and to obtain a warrant before 
searching my automobile.  Were I arrested, the car impounded, or had they 
had any real probable cause to believe drugs or whatever were in the 
automobile, no warrant would have been required.  Had the dog "hit" on my 
car, no warrant would have been required.  Had my car been impounded, the 
police would be free to "inventory" the automobile without a warrant.]

The police were pretty docile AFTER I produced a bar card and made some 
suggestive comments about the legal status of their "investigation" and 
the relevant case law thereon.  I highly doubt someone without a bar card 
and an expensive suit would have faired so well, or that the police would 
have even bothered with a warrant.

They finally left, and after assuring the manager that I would never 
consider doing business with him or his establishment again, I also left.

...Long Live the King.
++++++++++++++++++++++

What does it mean to live in a society where cash is less and less a 
liquid asset, and actually draws suspicion to the user?  What does it 
mean in the context of other regulation?  The regulation of crypto?

First, it means total exposure for all citizens.  If cash as a strictly 
cash transaction is impossible or very difficult to use, the citizenry 
become reliant on checking accounts, debit and credit cards and retail 
credit.  The result is that with a minimum of effort every citizen is 
easy to track by paper trails left behind.  How many times have you heard 
that so and so was found through ATM transaction or credit card records?  
More sinister, no citizen can endeavor to hide these trails without 
falling into one of the four horseman categories so often discussed on 
this list.  Cash already triggers the Drug Lord horseman today in the 
right circumstances.  Many banks have almost offensive rules about large 
cash withdrawals and delays, some banks simply do not allow large cash 
withdrawals in the same day over a certain ceiling amount.

***
"But won't the banking industry save us?  They are pretty conservative 
after all."

No.  The United States banking industry right now is besieged by a new 
and highly intrusive, but very sly, program of regulation.  Amazingly, 
most industry analysts fail to recognize this in its context.  Here's 
why:

1>  The Interstate Banking Bill.

I mentioned before that the interstate banking bill was passed into law 
recently.  It opens the way for banks to break through the geographic 
restrictions set on them in the 1930's, most obviously preventing 
branching across state lines, and today most clearly manifest in the 
inability of out of state ATM's to take deposits for your institution.  
The bill lifts the restrictions.

2>  The Community Reinvestment Act.

The Community Reinvestment Act, in brief, requires banks to declare their 
"community" of operation, and then service this community equally without 
respect to race or geographical distribution.  The concept is designed to 
prevent "redlining," or discrimination in effect by refusing to, or 
preventing loans from being granted to low income areas or minorities.

3>  The Justice Department.

The Justice Department has begun to become involved in the enforcement of 
CRA (most notably in the Chevy Chase case of late) and there has been 
discussion of denying federal perks to banks (FDIC and the like) that do 
not meet the regulations set down by the CRA.

The Interstate Banking Bill opens the way for preemption of most if not 
all of the major banks in this country by the Federal Government.  Many 
banks now can operate with little federal government intervention, and 
instead be subject to only state regulations, or almost only.  These 
banks could never be competitive with interstate banks except in very 
small and limited areas.  The result is to place the bulk of banking in 
the nation under stricter Federal Control.  Unfortunately the large 
banking contingents, which really set the agenda for the industry, are 
all too happy to have an advantage to compete with the non-banking 
lenders now that restrictions specific to banks are lifted.  They are 
blinded by the light so to speak.

Meanwhile, around the corner is sneaking the Community Reinvestment Act 
and the Justice Department as an enforcement mechanism.  I spoke this 
week with Paul Hancock, Chief of the Housing Section of the Civil Rights 
Division of the Justice Department.  What does the Justice Department, 
especially the housing department have to do with banking regulation?  
Good question.  The Justice Department is using the Fair Lending Act to 
enforce Community Reinvestment provisions by bringing actions against 
offending financial institutions.  Mr. Hancock was intimately involved in 
prosecuting the case against Chevy Chase, and while it settled, the 
Justice Department will be "much more actively involved in such cases in 
future."  And the relationship between the Justice Department and the 
Fed?  "Cozy."  The upshot is that the Justice Department and the CRA can 
set the guidelines for banking operation on a STRUCTURAL level.  This 
goes so far as to require banks to open branches here or there.  There 
are obvious merits to the goals of the program, but the prospect for 
socializing the banking system is very disturbing, especially with a 
continued involvement from the Justice Department.

Now the trend is becoming withholding the largess given to banks in the 
form of FDIC and the Fed authorizations for mergers and branching.

Add all this up and you have a Justice Department and a Fed, prosecuting 
and holding back permission to merge and conduct normal banking business 
on the basis of regulations to be determined by the same arms.  This is 
in the context of a highly federalized banking system after the 
Interstate Banking Act kicks in (1996).  Banks are not going to be in a 
position to make waves, just as states cannot resist congressional 
suggestions of speed limits because they withholding of federal highway 
funds would ruin them.  Government largess at work my friends.

***
"But won't the Cypherpunks save the day by employing more libertarian 
applications of digital cash and DC nets?"

I hope so Johnny, but it's an uphill battle.  Here's why:

1>  DigiTel.

Just like the interstate banking bill, digitel preempts another private 
sector.  I won't go into details about digitel, it's been rehashed here 
many a time.  Suffice it to say, the Federal Government is in the 
telephone business.

2>  Clipper.

Clipper is the next major problem.  Again, I won't rehash the problems 
and arguments here, suffice it to say, the Federal Government wants to be 
in the encryption business again, as a monopoly.

3>  The ABS generation and alternative (crippled) digital cash.

Citibank's digital purse, and all the other upshot fancy debit systems 
are not true digital cash.  Unfortunately the market for true digital 
cash will be a limited one because of the technology culture in this 
country.  People here want what I label "idiot boxes."  Americans as a 
whole (the list excepted, especially the foreigners) want to press a 
button and make a transaction.  They want to press the brake pedal and 
have the car stop perfectly on glaze ice.  They want to floor the 
accelerator and have the automatic traction control system figure out 
what to do.  There is no desire to know the function or the process of 
the idiot box, only the form, the result of pressing the button, the 
brake pedal, the accelerator.  No one cares if the supermarket uses 
American Express or the new national debit card, so long as the 
transaction is quick and painless.  They could care less if a blind 
signature or an on-line cash system is used over an in-the-clear modem 
connection to a bank.  If the approval code comes up, end of story.  Look 
at Riggs bank in Washington.  Call up the "telephone banking" line and 
dial in your account number and your ATM PIN NUMBER and you get your 
balance.  All it takes is a tap of one kind or another and a DTMF reader 
and you have account numbers matched with pins.  No one even THOUGHT to 
take any precautions.  Just don't use your cellular phone to do your 
telephone banking.  Of course if someone rips off Riggs this way, they'll 
just ban cellular phones or something.

Considering the advent of TeleCheck, the Digital Purse and everything 
else, not only do Americans have no incentive to pursue real digital 
cash, but they now have no excuse to want cash at all.  Why do you need 
the green paper if you can do the same thing with TeleCheck, you're NYCE 
card or a credit/debit card?  How many people do you honestly think will 
point out that you cannot do exactly the same things?  That these systems 
are not anonymous.  How do you think this will be received?  Probably 
about like I was at the Acura dealer.

4>  Freeh.

This is also a big problem.  Freeh is dangerous because he satisfies the 
need to look tough on crime for any member of congress who is afraid to 
look liberal.  Consider the climate today, and tell me how many of these 
there are.  The ban on crypto, which we all knew was coming, is on the 
way.  We all know clipper will fail basically.  I know I won't use it, 
I'll use PGP.  I know many others of you will too.  Technically it cannot 
succeed, practically it probably won't either, for reasons I won't go 
into.  Suffice it to say, it's a defective product and there are no guns 
to anyone's head... yet.  It will never gain widespread acceptance as the 
program now stands.  If Freeh makes good and "bans" crypto what have you 
got?

A very centralized and even socialized federal banking system with no 
prospect for an electronic commercial system outside of "hands on" 
government control, no "legitimate" use for cash, and a population 
suspicious of anonymous type transactions and private communications at 
all.  I don't see the government as the sole party responsible here.  The 
citizenry is just not interested.  If Digitel is any example, there is 
little to stand in the way of a complete or near complete preemption of 
all transactions within the bounds of this country in the next 15 years.



The Cash is Dead... Long Live the King!

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