From: "Black Unicorn" <unicorn@schloss.li>
Date: Sun, 15 Nov 1998 05:11:46 +0800
To: <dbs@philodox.com>
Subject: RE: DBS, Privacy, Money Laundering nonsense.
In-Reply-To: <000001be1005$2f0dff80$0100a8c0@P180.Workgroup>
Message-ID: <001001be1010$5fda8470$1c86e5cf@svb.schloss.li>
MIME-Version: 1.0
Content-Type: text/plain



> >Oops. Looks like you weren't watching your >'s :-). You're actually
> >responding to Unicorn, not me. *He* was responding to something
> Todd Boyle
> >said (well, probably trolled, given his past behavior :-)) on
> the DBS list.
>
> I don't altogether enjoy living in the world I've created.  My
> intent in posting my ideas is so that they'll either be verified,
> or be neutralized or corrected by enzymes on your excellent list!  <G>
>
> But I'm still stuck on these points:

Ok let's work on them:

>  * Thieves exist in large numbers, throughout the world including my
>      own immediate area.  Many more potential thieves in line,
> behind them.
>
>  * If thieves could hide the money they stole, there would be substantial
>     increase in frequency and severity of theft; mostly fraud, employee
>     embezzlement, and white collar theft but also blatant scams and
>     grift that is impractical today.

You miss the point entirely.  Thieves CAN hide the money they stole today.
It's not even particularly hard.  See my previous post for an idea of how
hard it is to detect a thief hiding his money.

>We're already seeing annual
> increases
>     in embezzlement in the Seattle area from 10-50% over the last
> 10 years,
>     getting similar to the rates around Los Angeles, for example.

And so...?

Classic logical flaw.  After the fact, therefore because of the fact.

High tech is available now that wasn't before
The rate of embezzlement is higher
therefore high tech is to blame.

Clearly, therefore:

Merlyn waved his hands
the moon passed before the sun
therefore Merlyn caused the moon to pass before the sun.

I'll wager the percentage of embezzlement in your area has increased in
rough proportion to the growth of the local economy.  Check for me and get
back to us.

>  * Reducing trackability of money increases the severity and frequency
>     of collusive crimes.  Large-scale political corruption, kickbacks
>     and monopolies in the commercial sector, and a whole range of
>     outright criminal blackmail become harder to prosecute.  With
>     DBS you wouldn't be able to prove a damned thing.

You could hardly reduce the trackability of money anymore today.  A 500
million dollar fraud transferred through the world financial system hides in
about 20 trillion in funds which move every day.  That FinCEN actually can
detect crime via its network is a fantasy.  I've just been over the math
which demonstrates how difficult a task it really is.  Review it.  Crimes
are discovered and caught by good police work.  The fact that the
constitution makes "good police work" that much harder is a price to live
with in a free society.  Choose your poison.  Clearly technologies like
wiretaps and funds tracking are sold as investigatory tactics which result
in new cases being brought, but (at least in the case of money laundering)
this just isn't the case.  It's simply not supported by the numbers.  What
you don't hear today is how many cases get dropped because of lack of
evidence with plain ole banking today.  It's painfully easy to make money
vanish.

Given that a police state has the lowest incidence of crime you need to make
a fundamental decision about what kind of world you want to live in.  A
story for your consideration in the meantime:

The AIDS rate in Cuba is a fraction of the AIDS rate in the rest of the
world.  This despite the fact that prostitution is rampant, and Cuba is a
third (even fourth) world country.  Why is this so?  Because Castro ordered
all HIV+ citizens into HIV camps and isolated them from the rest of the
population immediately, like "civilized" countries used to do with Scarlet
and Yellow fever before people infected with a life threatening disease
became a minority group worthy of political protection.

So is it worth the price?

Perhaps you view the threat of DBS as so significant that it requires
dramatic, even draconian measures to prevent its adoption.  Unfortunately,
you have painted yourself into a corner because DBS and cash are identical
except with respect to medium of exchange.

>  * The biggest single financial problem I have is mandatory levies
>      (tax, utilities, monopolies) by the corrupt government. Your
>      DBS will make this much worse by making it even easier to
>      channel cash to politicians.

Then, by your argument, we should ban Cash as well.  What if I told you that
a new technology would allow armed robbers unprecedented mobility, the
ability to escape the scene of a crime in an instant, and provided them with
the ability to traverse long distances in making their escape while
protected from scrutiny.  What if this same technology gave them the means
to conceal from the view of any law enforcement the proceeds of their heist
and could make their path entirely untraceable to police?

Well, I suppose automobiles are going to have to go.

>  * Fraud, embezzlement and corruption are in riotous equilibrium.  DBS
>      reduces pressure on laundering, requiring other measures that hit
>      my civil liberties somewhere else (physical IDs, cops, etc.)

Again, there is no pressure on laundering today.  It's a trivial exercise.
Money laundering regulation has bred a cadre of professional launderers.
Even by the best numbers the authorities seize less than 0.006% of illicit
funds and spend 20000 times what they seize to seize it.

>  * Untraceable money *obviously* reduces tax collections.  What the IRS
>      fails to collect from tax dodgers, eventually, I must pay more.

Vote with your feet.  (I don't really agree with this assessment, but
regardless, if you believe it, reduce your tax burden by expatriating).
Again, taxes in countries with less financial regulation (almost all of the
non-U.S. countries) are typically less, if not substantially less than in
the U.S.  How do you explain this if your point is true?

> You seem to have a subconscious belief that DBS will shrink the government
> sector.  This is a false assumption.  The government long ago achieved the
> power to tax *as much as it wants*.  There is no natural immunity in our
> culture or legal system.

Again, then move.  I don't really care what DBS does to the government
sector.  I only care what it does to the costs of transactions.  I handle
the political and regulatory issues by moving.  (You might take John
Walker's example.  He bailed primarily to avoid the "bullshit factor" not
the tax).

> The public sector has stabilized at 25% or 35% of the GNP, which is
> apparently the maximum the animal can tolerate without falling over dead
> (people striking, quitting work, and business moving overseas.)

Uh, all those conditions are present today.

> Gimmicks like DBS will certainly not reduce the public sector in our
> lifetimes. It will require an evolution in individual awareness and
> behavior.

Again, see above.

> In mean time, managing the out-of-control government sector is your civic
> duty, to your less intelligent wives, pensioners, and children and
> neighbors. The preferred way to manage the governmt is the democratic
> process, and public discourse and debate such as this list.

Again, vote with your feet.  I'm too busy for civil disobedience, voting in
sham elections, and the two party system.  Grass roots political activism
changes nothing in my experience.  Even if it did, I still just don't have
the time.  I prefer supporting political processes that are forward looking
and interested in DBS.  These do exist.

> Breaking ranks and disobeying the law breeds further breakdown in
> obedience of the whole legal framework.

Which laws?  Those of the United States?  Well get cracking, the U.S. has
195 countries to invade, overthrow and pacify to harmonize foreign ideas
about how things should be done with the much more enlightened and effective
crime preventing methods prevailing in the United States today.  Stop
laughing, the integrity of the whole legal framework is at stake.

Actually, after some reflection I think that you're right.  Now if only we
could get all those blacks back in line we could get some real law and order
done.  How did we allow their civil disobedience to gain them anything?  Are
we going to _reward_ that kind of behavior?  It's a threat to the entire
system.  Now where did I put my sheets?

> There are lots of dumber and more
> dangerous elements in the population.  The system is already *quite*
> unfair to them.  When the superintelligent can steal through high-tech
> money schemes, and the wealthy classes violate their own legal framework,
> why shouldn't the thief just come and steal our cars, or fuck
> your daughter?

I see.  So DBS is going to be responsible for an increase in property and
violent crimes?  DBS will cause the poor to rise up because "Da Man" has
more power now?

Of course this is silliness of the highest degree.  The tendency to
overstate the power of DBS in here seems to be an affliction of both sides
now.  It's a technology, not a way of life.  Get over it.

> Frankly, we need laws, a lot more than we need DBS.

I won't even comment on the need for yet more regulation other than to say
that healthcare in e.g. Switzerland is a fraction of the cost of health care
in e.g. the United States because physicians don't have to carry $10 million
dollars in liability insurance.

> Now, what is your solution to prevent the use of DBS in large-scale
> financial fraud, political payoffs, etc.?   Or is that outside your
> scope, and such problems should be solved by wiretaps, surveillance or
> what?

What's your solution to prevent the use of cash and international wire
transfers in large-scale financial fraud, political payoffs, etc.?  Or is
that outside your scope?

> Don't tell me these problems are minor or will just disappear!

I'm telling you they already exist.  What are you going to do about it?
You're an accountant.  You should have answers for these things.

> Do you
> know how much money is already wasted on audits and law enforcement in
> this country?  Auditing is already hideously expensive, and the only
> solid facts in the entire audit process are the goddamn bank statements.

I think you might find that the cost of auditing is directly linked to the
likelihood of a civil suit against the auditors in the United States.
Address tort reform if you want to impact that.  You're a CPA, get cracking.

These aren't issues that are specific to DBS, they are endemic to the
current system

> You need a coherent argument on this problem.  You need measures within
> the DBS technology itself, to address the need.  Opponents of DBS will
> raise all these demagogic arguments.  You'll be hooted off the podium.

In the U.S. perhaps.  I'm not a resident there anymore so I could care less.
Any DBS system can be made to comply with country laws based on internet
address location or the front end dealer's compliance requirements.  The
underwriter in the system passes the responsibility for compliance to the
local issuer, which is as it should be.  What's the big deal?  You think a
global system has to comply with the highest level of regulation of any of
the participating actors...?  Of course that's nonsense.  The United States,
much as it might like to be, is not the final authority on world financial
regulation and is unlikely to be any time in the near future (thank god).

Opponents of DBS may raise all these arguments but they, and you, still have
not addressed the basic point that all these things are already possible
with cash.  Will they ban cash, and if so when and by what means?

> I fear you'll end up damaging the reputation of legitimate forms of
> peer-to-peer electronic payments, which are badly needed in the economy.

I'm unconcerned about "legitimate forms of peer-to-peer electronic payments"
because I am unaware of any.  Even mondex isn't truly peer to peer.

The silliness quotient of this discussion exceeded my tolerance level after
the "evils of civil disobedience" discussion.  (I also don't read
cypherpunks anymore so I won't see replies not copied to me personally).