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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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