From: Mix <mixmaster@remail.obscura.com>Nerthus <no.reply.address@sirius.infonex.com>
Date: Mon, 8 Dec 1997 08:03:14 +0800
To: cypherpunks@cyberpass.net
Subject: Re: Cato forum tomorrow: should money laundering be a crime?
Message-ID: <199712072343.PAA22192@sirius.infonex.com>
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Steve Schear wrote:
>This topic, of course, is near the top of many libertarian e-commerce 
>agendas.  Almost every mainstream news article and regulatory report repeats 
>the littany that Money Laundering, that is the movement of money to disguise 
>it origin (even if there are no predicate offenses) must remain illegal 
>because it damages or is a threat to the world banking and financial system 
>(not just the tax take of governments), but I have yet to see any 
>explanation of how and why.  Anyone care to comment?

Might be a bit of a stretch, but I think this is because money today is 
inherently a liability, that is a debt that someone, somewhere has promised 
to pay back.  Such is the nature of fractional reserve banking and 
debt-based currencies under which the international financial system 
functions.

Thus if the origin of the money (the indebted party) is obscured, it becomes 
increasingly difficult to manage the quality of the world's money supply.  
After all, how can the issuer of the money collect on the debt that 
ultimately backs it when the issuer has no idea who to collect the debt 
from?  Take away the ability to manage debt effectively and the issuer's 
money quickly becomes worthless (be it a commercial bank issuing deposit 
currency as a loan to its customers or a government's central bank issuing 
cash currency to its citizens based on a debt placed upon future generations 
of citizens).

A money's value is measured by the quality of debt backing it.  If the debt 
is defaulted on (whether through obscurity, Chapter 11, etcetera), the money 
loses value, which in turn can have negative systemic repercussions 
throughout the world's financial markets.  The recent Asian currency 
devaluations (South Korea in particular) and the accompanying financial woes 
are a good example of what happens when the debt quality of money devalues.

Nerthus

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