Re: Re: re: re: digital cash

From: Jim McCoy <mccoy@ccwf.cc.utexas.edu>
> [...]
> There will be nothing more liquid than information in an information
> society.  Nothing.

I'm not sure about this.  Liquidity refers to the ease of conversion to
cash.  Some kinds of information may be easily convertible, others may
not.  Even with digital cash the relevant definition of liquidity might
be acceptability or ease of conversion to other currencies.  Digital cash
is easy to copy and so there will always be a risk in accepting it unless
the bank is accessible or it is highly reputable and is known to cover
bad (duplicate) cash.  Communications problems, whether technical or
political, may make such access difficult.  And banks, being unable to
collect assets by force to cover their debts, may be vulnerable to some
kinds of failures that governments are not.

> Seriously, the secret is to remember that the net transcends geopolitical
> boundaries.  All you need is _one_ bank that can/will convert cash to
> digital money and then _everyone in the world who can get an internet
> connection can use it_.

Well, there are some more requirements.  The bank has to be in a setup
where it cannot easily be shut down, or more specifically it does not
experience any reasonable probability of being shut down in the near
future.  The net links have to be reliable, as I mentioned above.

The bank presumably has to convert digital money back to cash as well as
converting in the other direction.  The question is, how do you get your
cash to/from the bank?  Via an anonymous, private, electronic transaction?
If you can do that, you don't need digital money; your cash is already
electronic and private.  But if you have to send your cash the old-
fashioned way then you are still vulnerable to the same government pressures
you have today.

> That is the real danger digital cash poses to
> government authority over the monetary system.  Once I can get my dollars
> or dinars, or donuts exchanged into digital cash it is possible for me to
> do things to it never before dreamed of.  I can take my locally exchanged
> digital-donuts, put them on the net, and send them over to a bank in some
> small island nation with lax banking laws for instant conversion at the
> moments rate to some other international currency and transferal through
> several anonymous accounts, and then zip them over to a network gold server
> that will create a certified bullion deposit for me in a real bank.  

This is the point in these kinds of discussions that I always lose track
of things.  We are dazzled by the picture of monetary flows flashing all
around the world.  What I am always unable to pin down is, what exactly
prevents this kind of thing from being done today?

If you want to invest in gold, you can go down to the coin store and buy
some, right?  Or you can put your money into a gold-investing mutual fund
and use it as a checking account.  If you want yen, or marks, you can invest
in those.

If the point is to do so secretly, why is it easier to mail your paycheck
to the digicash bank in the Bahamas than to mail it to an existing bank
there?

> I can untracably convert my paycheck into a gold deposit in a foreign
> nation while sitting in my living room wearing nothing but my socks. I can
> conduct intricate financial transactions that are completely outside the
> realm of my governement to regulate, imagine what would happen to the
> governement if _everyone_ could hide and launder assets as easy as criminal
> syndicates.  If this does not cause some federal banker an ulcer or two
> then they have no idea what the future will bring them, all the better for
> us... 
> 
> jim

Perhaps my problem is that my financial affairs are too limited to really
benefit from intricate financial transactions.  Investing in a non-dollar-
denominated mutual fund would be a major adventure for me :-).

If avoiding taxes is the major goal, my problem is that by far the bulk of
my taxes are withheld from my paycheck.  I know, Sandy or Duncan said, "What?
You still have a paycheck?" but let's face it, most people do.

It seems to me that the weak point in these bypass-the-government digicash
schemes is the conversion between paper cash and digital cash.  That looks
like the choke point where the government can still keep control.

Hal

Hal <hfinney@shell.portal.com> writes:
> 
> From: Jim McCoy <mccoy@ccwf.cc.utexas.edu>
> > [...]
> > There will be nothing more liquid than information in an information
> > society.  Nothing.
> 
> I'm not sure about this.  Liquidity refers to the ease of conversion to
> cash.  [...]  Even with digital cash the relevant definition of liquidity
> might be acceptability or ease of conversion to other currencies. [...]
> Communications problems, whether technical or political, may make such
> access difficult. [...]

This is true.  Reliable communications is important here and I was kinda of
waving my hand over them and assuming they will be there, but with the
current state of growth of the internet it seems to me that communications
will become more reliable and more widespread every day.

> The bank presumably has to convert digital money back to cash as well as
> converting in the other direction.  The question is, how do you get your
> cash to/from the bank?  Via an anonymous, private, electronic transaction?
> If you can do that, you don't need digital money; your cash is already
> electronic and private.  But if you have to send your cash the old-
> fashioned way then you are still vulnerable to the same government pressures
> you have today.

I can send my money to the bank by checking a little box on a form in the
beneifts division of my employer instructing them to deposit my paycheck in
a specified account in the internet credit union I belong to.  Yes, the
governemtn can still see it going out and can try to do nasty things to it
at the "digital border", but once a path past this boundary is found then
whatever lies beyond this point it outside of thier knowledge or control.  

> This is the point in these kinds of discussions that I always lose track
> of things.  We are dazzled by the picture of monetary flows flashing all
> around the world.  What I am always unable to pin down is, what exactly
> prevents this kind of thing from being done today?
> 
> If you want to invest in gold, you can go down to the coin store and buy
> some, right?  Or you can put your money into a gold-investing mutual fund
> and use it as a checking account.  If you want yen, or marks, you can invest
> in those.

Yes.  Digital cash does give you anythign outright that you were not able
to do before, but it lets you do it securely, anonymously, and untracably
(depending on the system design) from the comfort of your own phone using
equipment and software that a huge number of people have daily access to.  

I can walk down the street and purchase a chunk of gold, but I can't just
get on a plane and head off to switzerland or the bahamas at a moments
notice.  With telecommunication these options are available to anyone with
a phone and a computer and the transaction will be accomplished in seconds
instead of hours/days.

> It seems to me that the weak point in these bypass-the-government digicash
> schemes is the conversion between paper cash and digital cash.  That looks
> like the choke point where the government can still keep control.

Yes and no.  They can try, but it is getting harder for them to do so every
day.  A bank on the internet could also let me transfer some of my deposits
into a checking account that I can access from one of the millions of ATMs
around the globe that are part of the Cirrus or Pulse, or whatever system.
What if your bank card let you deposit money from any ATM location into an
account that instantly forwarded it off to a digital cash repository? Or
let you withdraw digicash funds into a debit Visa card or other such
instrument.  There is so little cash being used by most people now that it
isn't even funny any more; but the options available for converting funds
has prolifereated to the point where it is hard to throw a rock in the US
and not bounce it off something that will give you cash from your ATM card
or credit/debit card.


jim

C'punks,

On Wed, 16 Mar 1994, Hal wrote:

> . . .
> If you want to invest in gold, you can go down to the coin store and buy
> some, right?  Or you can put your money into a gold-investing mutual fund
> and use it as a checking account.  If you want yen, or marks, you can invest
> in those.
> 
> If the point is to do so secretly, why is it easier to mail your paycheck
> to the digicash bank in the Bahamas than to mail it to an existing bank
> there?
> 
> . . . 
> 
> If avoiding taxes is the major goal, my problem is that by far the bulk of
> my taxes are withheld from my paycheck.  I know, Sandy or Duncan said, "What?
> You still have a paycheck?" but let's face it, most people do.
> 
Are you so sure about this?  Yes, most people receive some of their 
income in a paycheck.  Be advised, though, the underground economy is 
vigorous and robust.  Are their any mechanics out there who *don't*  do 
auto repair on the side?  Accountants?  Plumbers?  Programmers?  I also 
find it hard to believe most waiters and waitresses are reporting their 
tips.  I'm sure we could extend this list for hours.  Digital cash 
transactions could easily surpass above ground transfers.  Not everyone 
nor every dollar needs to go via digital channels to (a) make a digital 
bank successful or (b) put a major crimp in the ability to finance 
government.
 
> It seems to me that the weak point in these bypass-the-government digicash
> schemes is the conversion between paper cash and digital cash.  That looks
> like the choke point where the government can still keep control.
 
Don't be so sure, Hal.  There are, and will be, plenty of financial 
transaction that will never, or rarely, need to convert to or from cash.  
When they do, well, that's what ATMs are for.
 
 S a n d y