From: merriman@arn.net (David K. Merriman)
Date: Sat, 22 Jul 95 23:11:32 PDT
To: cypherpunks@toad.com
Subject: ObCrypto
Message-ID: <199507230615.BAA05374@arnet.arn.net>
MIME-Version: 1.0
Content-Type: text/plain


From the Aug/Sep 95 edition of PC Techniques magazine, 'End' feature by Jeff
Duntermann

except as noted, any typos or other errors are my own.

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Zhilchistan on the Hudson

Remember central Asian genius Vasily Ovariaidt of Zhilchistan? ("Zhilchistan
Moon," December/January 1994.) In my admittedly goofy idea piece, Ovaraidt
basically took over the the world by exporting /privacy/ instead of yak
hides, and ended up with much of the global economy passing through his
hands - minus, of course, his 1 percent service charge. With income tax
rates in some Western nations way up in the 70 percent range or worse, there
was a /lot/ of reason to work through Zhichistan.
Now hey - why leave such a scheme to a tinpot dictator from the steppes? We
could do it right here, do it better, and make it stick for all time - and
dump the IRS in thr process. Nay, we could /export/ the IRS, and get top
dollar for it from backward countries who think they can prosper by
punishing the industrious.
I'm serious this time. Here's the deal: For maybe the cost of a dozen
stealth bombers, the U.S. could create a satellite-based electronic funds
transfer system that could literally pass every single financial transaction
in the world through its hands every day.
Computability isn't the issue. It's simple arithmetic and bandwidth. The
quality of the hardware  - that is, communications technology - dictates the
success of the systems. Nobody does that better than us.
On the surface, the purpose of a government-owned central system would be
authentification of transactions. (Do you /really/ trust Vassily Ovaraidt?)
If Uncle Sam puts his stamp on it, the transaction is probably real - and
few will twitch at the .05 percent service charge. This can be valuable even
if you're in England and buying a bicycle from the shop across town.
Build it, and they will come running from every corner of the Earth - /if/
we can somehow guarantee that we won't snitch to the home boss. The only way
to do that is to design absolute anonymity into the system from the ground
up, and eliminate our own mechanism - the IRS - for tracking incomes. That's
being discussed right now, on both the Democratic and Republican sides of
the fence, because it's far from clear that American's hate anything - even
poor Bill Clinton - worse than the IRS.
No really new technology is involved. Public key certificate authorization
can do it; see Schneier's /Advanced Cryptography/ [sic]. Money from all over
the world would flood into the system, generating direct benefits from
revenues levied on the the transfer, and then indirect benefits of foreign
cash invested in a U.S. that doesn't snoop.
This system really doesn't favor the rich against the poor. Why? Because it
taxes the /velocity/ of money - and the rich's money moves around a lot more
than the poor's. By that I mean that a guy who buys a chicken at Safeway
pays one tax one time, but a rich guy's money chases all over the world
looking for the highest return. Freed from physical constraints and
regulation, that money could move from one place to another a couple of
times a day, and anonymously drop .05 percent in the government's hands at
each transfer. Want to lower your taxes? Leave your moeny in one place for
longer periods of time.
I would bet that we wouldn't need anything like the 20 percent replacement
Federal sales tax now being discussed; we would be taxing the total cash
flow of most fo the world's supply of rich guys. In fact, after a year or
two, we might not need to levy a federal sales tax on own citizens at all.
Sure, it's devilish. The harder other governments squeezed their people, the
richer America would grow. Whole governments would fall. Freedom and privacy
would be required for a foreign government to compete. In other words, we
would save the world. If I live to see that, I don't much care what else I
/don't/ live to see.
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This is a test (3 UUE lines) of the unconstitutional ITAR - 1/713th
of the PGP executable. See below for getting YOUR chunk! 
------------------ PGP.ZIP Part [015/713] -------------------
M=$<(&L`#*IPP",(G6(,,S,`P](<2RWU96XCW86/JBYV8A\D8@X'HB_9H#&\X
MX'PCUB.,13B"X8`R?^J-:UB.M_`U\>[#)BS&5$0C,Y#^1CS>1`\T1QTXX6!3
M8H,),S$8G>&.WP(8IRA`-M['+`Q%&_C"">5-F%LX@<_Q$;*P'',Q$Z/AA[8M
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for next chunk to export --> http://dcs.ex.ac.uk/~aba/export/