Subject: The Cash Is Dead!
Submitted for your perusal.  This article was originally posted by Black 
Unicorn to the Cypherpunks list.
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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!


- -uni- (Dark)

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