Federal Control of Financial Transactions

As regular readers will be aware, Tim May and I have been sparring with each
other about the risks of various control strategies that the world's
governments may deploy.

I thought it might be helpful to make one of his fears concrete so that we
can analyze it.  I trust that I am not putting words in Tim's mouth.

The major concern is the same one mentioned in the Book of Revelations:

"REV 13:16  And he causeth all, both small and great, rich and poor, free 
and bond, to receive a mark in their right hand, or in their foreheads:

REV 13:17  And that no man might buy or sell, save he that had the mark, 
or the name of the beast, or the number of his name."

So the Feds deploy a card (smart or dumb) that has to be used for most
transactions and lets them track everything we do.  Tourists are brought
into the system through the use of temporary cards (or the machine-readable
strip on their passports which already includes a space for a national ID
number.)

How is this most likely to come about?  I consider force majeure to be
unlikely.  It would be rough to get Congress to impose a burden like this on
businesses (who would have to completely wire themselves) in a formal vote.
It is not necessary to do this in any case since they know they can't snag
everyone into the system.  They just want to capture most of the transaction
data.  If they can do it administratively without involving Congress in
controversy, they will use that approach.

Clipper and the Post Office agitprop on the US Card give us a possible
scenario.  The P.O., desperate to find a reason to exist as its core
business drains away to the wires and private carriers, would like to become
the primary digital signature authorizers for the U.S.  It claims to be able
to put millions of "US Cards" in the hands of happy shoppers within months
of the go-ahead.  (Assuming they use FedEx for the actual *shipments* of
course).  The recently attempted "Clipper maneuver" of game strategy
(government preemption by standard setting rather than by direct application
of force) shows us how the US Card system might be actually deployed.  The
government adopts the standard it likes and tries to make it the de facto
standard by requiring it for most official business.  An instant market is
thereby created.  No congressional action required.  

Similarly, the government might try to preempt the market for digital
signature and commercial encryption technology by deciding to make anyone
who wants to use a digital signature system in dealings with the government
use the Post Office or some such agency as the signature authenticator.
Thus bids, purchasing, benefits, and taxes could all require your "US Card"
registered at your local post office.  The government would then hope that
commercial users who would need to use the government's system for tax
filings anyway would also use it for its ordinary dealings with the public.
Then if a health care bill drafting you into a "universal coverage" army is
ever passed, the "US Card" also becomes the Health Security Card you will
have to show to get a job in the US.

Thus, all sorts of authentication transactions would pass through the
powerful and efficient post office data network and the
ex-countercultural/born-again control freaks Inside the Beltway could get
their jollies tracking your employment and purchases.

What's the big hole in this frightening scenario?  Ask yourself one
question.  Why is the Post Office looking around for some useful work these
days?  Didn't they have a monopoly guaranteed by the Federal Government for
more than 100 years?  If they couldn't make a go of it with a pure coercive
monopoly during a time of slower commercial activity, what makes them think
that they can compete *without* a genuine coercive monopoly in a time of
constant change.

Governments have proved over and over again that they can go broke running
"guaranteed" money spinners like state lotteries and such.  They don't stand
a chance in a marketplace that will break the hearts of the brightest people
this planet has ever produced.

What has recent history established?  Governments are weaker.  

Why didn't the Amin mandate Clipper?  No political ability to do so.  Why
are banks and telecoms being deregulated in nearly every country on earth
(in spite of propaganda about "risks" and "public needs"?  Why have exchange
controls (a common feature of life a generation ago) become impossible
almost everywhere on earth?  Is it "free market ideology" that has triumphed
or did the *reality* of markets rather than the *idea* of markets hit
governments on the head.

To those who romanticize the power of the State in the modern world I ask,
why doesn't Clinton impose wage and price controls, exchange controls,
tariffs, and a full-blown industrial policy?  Why doesn't he nationalize the
steel industry, guarantee jobs for all, confiscate all estates above
$100,000, impose 95% income taxes on those making more than $40,000/year,
and all of the other proposals that were popular earlier in this century?  I
doubt that he is restrained because of his deep commitment to human liberty.
He doesn't do it because he can't.  Markets wouldn't put up with it.  His
government would be destroyed (by capital flight.)  

In this connection, I invite everyone to read the excellent profile of Japan
in last week's Economist.  It discusses the current and growing Japanese
commitment to deregulation and what is driving it.  That issue is a keeper
anyway because of an article on commerce on the Internet and (as has been
mentioned before) the use of the word "anarcho-capitalism" in an article
comparing Thailand and Singapore.

Assuming that the government were to attempt to establish a Post Office
mediated digital authentication system, there is no guarantee that it would
work.  Foreign users would presumably use foreign systems to authenticate
their transactions.  Some of these systems might be run by privatized
foreign PTTs or by others.  Note that since banks and credit agencies will
still have to approve the transactions anyway (to make sure you've got the
dough), they may decide to use other systems for signature authentication.
It would not really cost them any more.  Since information is cheap, setting
up a system to use several authentication systems is almost as easy as
setting up a system to use one.  (Particularly since you have to do it
anyway.)  It is difficult to imagine the P.O. being able to compete in the
cutthroat world of credit processing.

Recall that even today, there are companies that pick up and deliver your
mail to the P.O. to speed the process along.  Similarly, expediters may
interpose themselves between the customer and the P.O. to speed
authentication in the even that the P.O. network is slow or inefficient
(likely).  

Here again, Clipper gives us some hints as to how the attempted market
cornering might work out in practice:  The Admin is currently floating
stories about perhaps withdrawing Clipper in favor of "wider discussions"
with the industry.  Clipper is already painfully obsolete and it isn't even
shipping in quantity.

Inefficient government monopolies create marvelous profit opportunities for
markets to arbitrage the gap between cost and price.  In a highly efficient
networked world, it will be very difficult for governments to compete.

DCF

Why Pizza Hut should hire *me* as their spokesman:

"Why does Pizza Hut oppose mandatory, employer-paid health insurance in the
US even though we are forced to pay it in Japan and Germany? 

We support the principle of cultural diversity under which different
societies experiment with different methods of social organization.  Germany
and Japan have chosen one road, we have chosen another.  Pizza Hut would not
voluntarily impose on our US customers the burden of the very high food
costs that the agricultural policies of Germany and Japan impose on their
citizens.  Similarly, we would not choose to impose on our US employees the
burden of bureaucratically designed employment contracts.  

Pizza Hut supports the right of our customers to enjoy the least expensive
and best pizza on earth and the right of our employees to bargain with us
collectively and individually concerning the conditions of their employment."

OK, I will try a new tact of replying to an *existing* message
so no one can accuse me of being off charter.

frissell@panix.com (Duncan Frissell)
>The major concern is the same one mentioned in the Book of Revelations:
>
>"REV 13:16  And he causeth all, both small and great, rich and poor, free 
>and bond, to receive a mark in their right hand, or in their foreheads:
>
>REV 13:17  And that no man might buy or sell, save he that had the mark, 
>or the name of the beast, or the number of his name."

I have been reading some fascinating interpretations of these and 
other prophecies lately. Some interpretations that impress me deeply
claim that the Antichrist ("Beast") will use the international 
communications infrastructure in exactly the way that Duncan is 
implying: enforced identity on all participants to participate in
economic transactions. And he will "cut off" the nations that don't 
participate in his deification. How? Apparently, from what I can
figure, seizing satellite communications control.

Something struck me about Duncan's next comment, though:

>So the Feds deploy a card (smart or dumb) that has to be used for most
>transactions and lets them track everything we do.  Tourists are brought
>into the system through the use of temporary cards (or the machine-readable
>strip on their passports which already includes a space for a national ID
>number.)

Actually, cypherpunks, I am going to become a human lighting rod 
and propose the following (I just haven't received enough eyeball-melting
flames today yet). I think your cause for privacy would actually be
*advanced* by promoting an ID *card* under the following condition:

Anyone can obtain as many ID cards as they want. The *individual* can
maintain the connection that "This is my card". But the government
cannot draw the conclusion "This card belongs to so-and-so". From 
what I can figure, some of your technology like remailers and
codes might be able to support such a scheme (maybe some of the hard
core genious could expound on this).

Now, suppose that the government did all its taxes through the use
of the cards, instead of through *individuals* (as is the case with
the current income tax system). That is, they might tax transactions
on the cards slightly.

The point I want to get at is that one can have a system that supports
"identity-related" transactions without actually allowing the government
to trace to a given identity. The absolute worst case scenario I agree
is as described in the Revelations--having an "identity stamp" on your
forehead or something. But note that the correspondence between humans
and cards is wholly unrestrained. 

Before you accuse me of heresy, consider the system of email address
privacy that was championed earlier by Perry Metzger: you can get any 
account on any system with any alias, and this protects you from people
tracing you. And you can use the system. Would it be an OK compromise
if a government was set up under the same system? I.e. you can get any
cards you want, and you can "use the system", but the government can
never trace you?

I see discussions about tax avoidance and I wonder if people are really
trying to just avoid taxes through privacy. This I think is a very 
dangerous possibility. It seems to me  that governments
have been around as long as people have and while it can get dangerous or
oppressive with some variations of them, it can also get extremely
dangerous *without* them. Do you want privacy, i.e. the government
does not know who you are, but you still participate in a social
system with government? Or do you just want to get rid of governments,
and use "privacy" as the reason? Yikes.

I agree that there is a possibility of a police state using identity 
"stamps" in a negative way. It allows them to correlate activities 
with people and target them. But if they cannot trace people, 
as would be the case with "multiple cards", do they really have any 
power over you? It seems like it could work to me.

It seems to me the real danger is correlating business activities with
individuals, not necessarily so much that those activities
are taxed. Imagine a system like we have today, where you can have
credit cards without actually revealing your identity to anyone.
What if we had credit cards with all kinds of different "names"
(IDs) and could pay the bank secretly? That would be a system
that supported privacy but also supported the ability to interact in
an economy.

I think some attempt should be made to discriminate between 
mere "cards" for transactions that don't enforce identity but still
allow transactions, vs. the requirement that transactions be
traceable to particular human "vessels" (i.e., the Stamp of the Beast).

>Clipper and the Post Office agitprop on the US Card give us a possible
>scenario.  The P.O., desperate to find a reason to exist as its core
>business drains away to the wires and private carriers, would like to become
>the primary digital signature authorizers for the U.S. 

But what if these signatures were not signatures in the sense today of
a one-to-one correspondence of people to signatures, but the indirect
relationship of people-to-email addresses? Wouldn't we want to *encourage*
such a system? I keep seeing this stuff about "digital signatures"--
if people want them, wouldn't you be in favor of getting a strong system
together? Maybe you should consider *supporting* the Post Office proposal
if you can twist in the favor of *privacy*, i.e. allowing anyone to
have multiple signatures as a basic prerequisite of the infrastructure.
Here is an opportunity to impose the Cypherpunk vision of privacy in
the real world, but instead you lambaste it.

>Similarly, the government might try to preempt the market for digital
>signature and commercial encryption technology by deciding to make anyone
>who wants to use a digital signature system in dealings with the government
>use the Post Office or some such agency as the signature authenticator.

Would this necessarily be a "bad thing" if it supported "fluidity of
identity" that I refer to? (Can't remember where I found that phrase;
apologies to whoever invented it.) In fact, wouldn't it be an extremely 
"good thing" for the cause of privacy to have your ideas implemented
in a massive, conservative (and therefore *entrenched*) bureacracy?

>Thus, all sorts of authentication transactions would pass through the
>powerful and efficient post office data network and the
>ex-countercultural/born-again control freaks Inside the Beltway could get
>their jollies tracking your employment and purchases.

Again, if the system allowed "fluidity" it would be FANTASTIC IMHO.

>Assuming that the government were to attempt to establish a Post Office
>mediated digital authentication system, there is no guarantee that it would
>work. 

There is no guarantee that *any* system will *ever* work. But it seems
to me there is an "authentication vacuum" in cyberspace. If you can't
find *something* to support, something you *don't* support will 
inevitably fill the vacuum. By criticizing the *reasonable* approaches
as Orwellian, you may leave no choice but the Orwellian ones.

---

"Someone" on "True Lies"
>6) Oh yeah, the women are unable to do anything except talk on the phone,
>get into catfights, give men blowjobs, and kill people by accident.  The
>only female villain is clever, but the screenplay is sure to point out
>that she has not principle other than the dollar (or yen, pound, mark,
>etc).  This is a very male film, even without getting into that old 60's
>cliche about missiles being penis extensions. 

ug. 

---

>Some words to "Sue":  If you have, in fact, been the subject of stalking,
>physical, net, or cyber, please accept my appologies on behalf of all
>honorable males for failing to properly limit the number/range of these
>monsters.

Well, I do not appreciate threats in my mailbox such as "Go away--I'm not
as gentle as Perry Metzger". I can't believe how torqued-up all you guys
are. This mailing list is like a firing range.

People, you may successfully get me to lose this account for no reason.
I hear that Netcom has an itchy "trigger finger" and frankly, no one
cares if anyone else loses a computer account. And some people have the
audacity to call this "freedom of speech". What could be better?

Just delete my messages if you find them irrelevant. Please, stop
bringing all of mankind's strife with you into cyberspace. It is a
"new baby" that is being stabbed with the sharp knives of your 
paranoia and hatred. I for one refuse to be intimidated by barbarians
in cyberspace.

You who say it is no big deal when an account is yanked, at that
the provider should always have the perogative to do this--do
you think this will ever happen on a global level? What if the 
provider of [x] satellite decides he doesn't like you? Your ideas
do not scale well. In fact, they scale disastrously. IMHO every
account that is yanked is another brick in the wall of the Antichrist's.
It encourages the "ho hum" attitude when a great injustice has
taken place. It is a subtle vice-press encroachment of liberty 
that happened in Nazi Germany as no one was looking--or, as everyone
was.

"Can we change the future"? It may be that in attempting to bring 
about a desired situation of suppressing the Beast we are actually 
playing into his goals. How can we know what to do? Well, for one, 
it seems to me that negative emotions like paranoia and revenge play 
into evil ploys.

bye
nym