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.  Ayn 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 reverse 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

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.


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 your 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 fared 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.


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


"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 serve, or preventing loans from being granted to, low income areas or

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 the 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, your 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!

- Black Unicorn 

Table of Contents

Etext ©1995 Robert Szarka
Last Update: 03 Feb 1995