No more ‘cashing out’

The war against one of the last traditional bastions of ‘privacy as we once used to know it’ – cash money – has been raging ever since credit and debit cards gained mass traction as instruments of payment in the 1970s.  Since 9/11, attacks on relative, limited and conditional anonymity offered by bank notes have been stepped up in a shrill crescendo under the pretextual justification of “preventing money laundering and terrorist financing.” While this noble and unquestionably laudable purpose can under no imaginable circumstances be achieved by ending the use of cash, what it really does is increase transaction cost for the enjoyment of a modicum of big-brother-free privacy. Given that bank accounts have come to be ‘interest-bearing’ in a laughably nominal sense at best, and given increasing chatter about limiting or abolishing deposit insurance for bank accounts while the Cyprus bailout has opened Pandora’s box on another taboo – participation of bank customers in the losses of a government-regulated and presumably highly supervised financial institution – since those days, lock boxes for cash have become a fairly rational choice. They ceased to be the stuff of conspiracy theorists, drug lords or made men. Cash has become one of the last effective tools for limiting public transparency of the individual. 

Cash is not an instrument of lawlessness, or at least not to the degree special interests seek to paint its public image, no more than the fact that some parents abuse their children makes family an institution of abuse. Every item, every substance can serve some ‘dual use.’ Nor will the abolition of cash stop terrorism financing or money laundering or any of the machinations of evildoers it is said to cure. The sole real target of the exercise is, in fact, the enforcement of near-limitless transparency of basically law-abiding citizens for the purpose of pruning their ability to practice civil disobedience toward a political class that fears nothing more than what George III must have sensed upon receiving the news of a Tea Party in Boston. Cash is an instrument that allows the individual to navigate a certain segment of life without having to keep records and without having to answer questions to anyone. It is a perfect example of the ‘right to be forgotten,’ an interruption of the chain of karma between its origin and its destination, a declaration of independence from society, so long as cash is accepted by counterparties in exchange for goods and services. Even to the extent cash withdrawals or movements across borders need to be disclosed to government authorities, as a practical matter, government intrusion into the private domain ends with this disclosure. There can be numerous legitimate reasons to keep substantial amounts of cash on hand – hedging against the vagaries of an increasingly globally interconnected banking system that exposes any individual institution to risks it did not even consciously take on – see recent experiences in Greece – may actually be among the least compelling motives. One would also not like to be dependent on ATM or credit cards in the wake of a natural disaster that knocks out vital infrastructure – an event far less hypothetical than commonly assumed in an age of climate change. And, ultimately, it is absolutely no one’s business what someone does with his after-tax money, especially when he forgoes the pitiful excuse for interest that banks currently pay on even fairly sizeable deposits. The main reason for the disappearance of interest is that it was the tool of choice to socialize and distribute the losses and cost of regulation and restructuring in the wake of the 2008 financial crisis and Great Depression. But the state cannot have it both ways – eliminate fixed capital income while also abolishing free use of principal in the form of cash. Sooner or later, the issue of just compensation for takings will have to enter public discourse. The issue is not that he who has nothing to hide need not fear disclosure – this would be like denying that justice does err or miscarry in a sizable number of cases. Much rather, disclosure needs to be the exception for significant good cause shown, not the rule, and every citizen ought to be presumed law-abiding by every branch of government unless proven otherwise. The war on cash destroys this presumption of innocence, just like it destroys the presumption of lawful ownership. In fact, a cashless culture would de facto reverse the traditional burden of proof and silently eviscerate the Fourth and Fifth Amendments. It sounds a lot like a proposal to castrate all males to prevent rape. Like with the ‘war on terror’ or the ‘war on drugs,’ the total cost of remedies by far exceeds the soberly assessed harm they are intended to address.

Recent reports suggest that another major quantum leap in the abolition of privacy rights is drawing near, a ‘progress’ that is, as in all previous cases, aided and abetted by technology:

Austro-German technology firm EDAQS (Electronic and Digital Automated Quotation Systems) has completed development of a new variety of bank note equipped with high-encryption RFID (Radio Frequency Identification) chips – a concept that Hitachi had been experimenting with before 2003  in cooperation with the European Central Bank. EDAQS’ new ‘cash’ system called DICE (Dynamic Intelligent Currency Encryption) is said to address all concerns that exist today about conventional bank notes. Smart terminals located in banks or stores will be able to locate a bank note at all times. EDAQS claims DICE protects an owner’s privacy yet allows prevention of cash-based crime since bank notes can be ‘deactivated’ or ‘cancelled’ when they come into the custody or control of an unauthorized party.

I will predict that this would bring our civil as well as our criminal justice system to a grinding halt or at least create unmanageable gridlock since we fortunately are considerable time away from automated adjudication. Since every individual deprived of the functional value of cash in his or her possession is entitled to a full-fledged judicial hearing, with all appurtenant procedural rights, this fact alone, although it would not dominate the thinking of engineers, would reliably derail the harebrained if technically fascinating concept of DICE.

The company’s name, EDAQS, hardly seems surprising, either – edax is Latin for “greedy, gluttonous, rapacious, voracious” – and that is precisely what this innovation would turn out to be in terms of privacy rights and individual liberties.

The company appears to have two major groups of potential clients so far. To no one’s surprise, one is the Russian Central Bank. It is well-known around the world that an unfathomable quantity of counterfeit currency circulates in Russia, and the temptation of being able to identify and cross-reference, not to mention ‘invalidate’ even part of it must be overwhelming to every good bureaucrat. But such ideas would be based on the untenable assumption that targets of surveillance would patiently await this concept to bear fruit. It is an exhilarating notion since it is equally common knowledge that top-quality counterfeit euro- and dollar-bills have appeared in circulation in Russia already before the official release date of their respective ‘high-security’ originals. It bears remembering that some 50% of dollar bills in Russia are estimated – by Pravda – to be forged. The real problem of the Russian Central Bank seems to be that too few enterprising spirits find it worthwhile to forge rubles, while it can hardly expect much benefit from attempts to ‘invalidate’ foreign currencies in circulation. Even more paradoxical seems the identity of EDAQS’ other potential client: the government of the Commonwealth of Australia, a country that is virtually unknown to have problems with cash security. Be the individual motives of monetary institutions as they may, it is predictable that, regardless of advanced encryption, the sole casualty of DICE cash will be one of the last vestiges of privacy, but most assuredly not cash-based or, rather, cash-assisted crime.

‘Trackable bank notes’ have been an enduring dream of governments around the world since the dawn of the digital age, including in places like Saudi Arabia. But how can it matter for any law enforcement purposes to know in what other transactions a particular bank note has changed hands? Unless its owner’s privacy is also hacked, this metadata is just as meaningless for legal purposes – though perhaps not for intelligence-gathering purposes that are not bound by evidentiary and admissibility standards – as is the collection of connection data of telephone calls without recordings of the actual conversations. And that, of course, is precisely what DICE technology is ultimately set up to do. What use is it to know that Joe Sixpack spoke with Terry Terrorist on August 5, 2006 for 4 minutes and 19 seconds unless the content of the conversation is kept somewhere in digital limbo?  If Joe has any sense of humor and does not need to fear impeachment, he will probably claim he spoke with Terry about mending his evildoer ways and tried to convert him to his One and Only True Faith of Peace – which would also explain why it was a rather brief conversation. Citizens may be unduly credulous but they are not stupid to the extent of clinical dementia: there is no such thing as ‘limited surveillance’ unless the limiting factor is technological ability – or principled abstention from its use by keeping cash low-tech. Because here comes the next challenge: a common bank note is personal property, chattel like any other. I own it. I can burn it, light a cigar, fold it neatly into an origami version of an F-16 and watch it soar from my balcony. It is my money, my business, period. What if I choose to nuke my cash reserves? It is said that microwave ovens make RFID chips blow up. Now – are we reaching a point where cash is not only inherently worthless but also a mere ‘license to use,’ by having title to the physical note remain with the issuer – treasury or central bank – and restricting what I can and cannot do with it? Like it turned out to be the case with software? Bitcoin successors will emerge as alternative currencies really quickly – and will be successful. The “convenience” of state blessing for one’s means of payment may be worth a lot. It will not be worth that much to a majority – especially given that data technology will increasingly be able to do away with currency units as a facilitator of settling transactions by handling even the most complex exchanges of assets and services – with potentially unimaginable consequences for any tax system as we know it.

Part of the checks and balances in a civilized society is that government may pass laws to their heart’s content but laws matter only insofar as they can be, and are in fact, enforced. This is why the gold standard was so unpopular with creative politicians of all stripes: it limited their ability to do as they pleased (of course always under the heavy burden of ‘political responsibility,’ that most amusing of oxymorons). The risk that technological advancements pose to individual liberties is that it gradually erodes implicit, factual, tacit, de facto but nonetheless very real limits to the enforceability of laws and regulations. In order to gain recognition of statehood for the Utah Territory, the Mormon Church abandoned in 1890 the most central tenet of their doctrine, the principle of plural marriage. Yet, Washington was far and to this day, there are probably no fewer polygamous families in the Southwest than in the Sultanate of Hejaz and Nejd before it became the Kingdom of Saudi Arabia, and most of them live quietly and privately pursuant to the wisdom of Jean-Pierre Claris de Florian: pour vivre heureux,vivons cachés. There ought to be a healthy balance between laws that are on the books for their own peculiar reasons and are paid ritual lip service every election year (the prohibition of prostitution comes to mind, or, in their days, the crimes of adultery or homosexuality), and laws ‘in action’ (“we mean it, we are not kidding”).  Technology makes this once very healthy gap between theory and practice disappear at frightening speed.

Document validation and identification through paper-embedded RFID technology may raise separate issues that have distinct solutions and may relate to different values. But familiarity with the benefits of a technology reduces vigilance against its hazards for liberty under the influence of one’s experience of its convenience. The nature of cash money as abstract legal tender and physical embodiment of value since the early days of gold and silver coins is at risk of getting lost by this most extreme manifestation of fiat money to date – not only is its valuation based on nothing but consensus of acceptance – no longer does it have intrinsic value independent of governments or central bank whose reserves are a matter of speculative credulity at best – but its value is now to be subject to outright cancellation under whatever ‘lawful procedure’? Right. That will be the day when blizzards rage in hell and porcine aviation becomes a congestive traffic problem.