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IP: [FP] Boiling the frog: Much will depend on 'electronic money'

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Date: Mon, 12 Oct 1998 20:27:18 -0500
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    THE LIBERTARIAN, By Vin Suprynowicz
    Boiling the frog: Much will depend on the new 'electronic money'

EDITORS: A version of this feature first appeared in the October edition of
Las Vegas Magazine.

    An Internet press release (how trendy) from the folks at MasterCard
International, datelined "Purchase, N.Y., July 22, 1998," informs us:

  "MasterCard International hosted today an online forum with thought
leaders from global business, government and research organizations to
discuss lifestyle changes that will occur as smart card technology gains
acceptance over the next five years.

  "Representatives from IBM, Hitachi, British Telecommunications plc, the
U.S. federal government's General Services Administration, The Tower Group
and Emerge Online participated in the roundtable, which was moderated by
Richard Phillimore, Senior Vice President of MasterCard's Chip Card
Business unit.

  "'Five years from now, multi-application smart cards will be an
established technology in the payments business,' Phillimore said. 'As the
benefits of multi-application smart cards are proven in the marketplace,
the conversion from magnetic stripe to chip-based payment cards will be
very rapid. By the year 2010, we expect all of MasterCard's credit and
debit cards and terminals will be chip-based.'

  "Smart cards will deliver increased consumer value and utility to today's
credit cards, Phillimore added. 'Chip technology will enable cardholders to
use their cards for many more purposes, such as electronic ticketing,
loyalty programs, and secure remote shopping -- a true Lifestyle Card that
can be tailored to meet the unique needs and  preferences of a single

  When mentioning those ominous-sounding "loyalty programs," I should point
out, the online MasterCard gang are referring not to government loyalty
oaths of the "am not now and never have been a member of the Communist
Party" variety, but rather a system in which cardholders receive discounts
for "loyally" shopping through one company -- the system probably familiar
to most consumers today via those "discount club cards" issued by your
supermarket, offering you 30 cents off a package of toilet paper if you let
the teller scan your card at the checkout stand.

  Of course, the store gets something back in return for that discount. In
addition to the obvious hope that you'll keep going back to the store whose
discount card you carry (essentially, a surcharge is being applied to
"hoppers" who show no store loyalty), the management can now easily track
how many of its outlets you visit, and what you buy there.

  The initial commercial applications may be innocent enough -- "Let's save
postage by only sending coupons for this new brand of breakfast cereal to
the home addresses of our shoppers who already buy the more expensive
competitor." But you don't have to be the kind who walks stooped over to
avoid the black helicopters to foresee the day when the government
inspectors may arrive, asking to see the electronic profiles of all
customers in a given geographic area who have used the fast-spreading cards
to buy anything from home AIDS test kits to hydroponic "grow lights" to
"High Times" magazine to pistol ammunition.

 It's all stored in the computer, you know. And how long do you think Jack,
your friendly local produce manager, is really going to refuse to let the
FBI access his computer without a court order? About as long as it takes
them to ask for his Social Security number and threaten to call their
friends at the IRS, suggesting Jack may be in need of an immediate tax

  The cheerful little MasterCard press release doesn't take long to broach
the subject of "expanded uses" for the new cards with their embedded memory

  "The panel also addressed the use of smart cards for identification
purposes. Many agreed that identification was the 'killer application' that
would encourage adoption of smart card programs. Kotaro Yamashita, COO of
Financial Services at Hitachi, Ltd. said, 'We see identification
applications issued by governments as being big in many places outside of
Asia, for example Central America.' However, Marty Wagner, Associate
Administrator of the Office of Government wide Policy at the U.S. General
Services Administration (GSA) cautioned that 'National identity card
programs could run into trouble in the U.S. due to privacy concerns.' "

    #   #   #

 The process of accustoming Americans to carrying around cards which can be
used to buy anything from a candy car to a soda pop to a round-trip airline
ticket to London -- but whose embedded chips will also relay to corporate
and government snoops the social security number and other personal
information (and resultant tax obligations) of anyone making that purchase
-- is well underway.

  There's an old folk warning that if you throw a frog in boiling water he
will quickly jump out. But if you put a frog in a pan of cold water and
raise the temperature ever so slowly, the gradual warming will make the
frog doze happily, triggering the soporific response he instinctively
displays when the sun shines on his lily pad ... In fact, the frog will
eventually cook to death, without ever waking up.

 Likewise, some mighty high-powered public relations types are figuring
ways to emphasize the convenience of "electronic cash" - and downplay the
effect it may have in removing any remaining privacy from the way you spend
your pay.

  The goal? To cook the frog, without any ruckus.

  Convenience, convenience, convenience, was the happy spin Time magazine
put on a new "single electronic card that may replace everything in your
wallet," in their issue of April 27, 1998. As the magazine was listing all
the bothersome stuff you now have to lug around - cash, ATM cards, credit
cards, proof of insurance - it made a not-so-subtle swipe at anyone who
would resist the happy consolidation of such burdens:

 "Your ID cards. PRESENT: You lug various bits of your legal identity.
FUTURE: Non-conspiracists could consolidate pertinent info in one place."

  Get that? If you don't want the government tax man to see your bank
balance and a record of how many times you've flown to Zurich or the Cayman
Islands, if you don't want the theater manager to see your alimony payments
or your concealed-carry handgun permit, if you don't want your boss to see
your prescription for post-cancer-surgery drugs, if you don't want EVERYONE
to gain a precise accounting of how much you spent last month at
Frederick's of Hollywood, or renting X-rated videos, or shacked up in a
motel room across town, or purchasing alcoholic beverages, or buying
vaginal contraceptive foam (including which brand you prefer), why, you're
just some loony "conspiracist."

  Also note that "could" ... as though we'll still have any choice.

  But why worry? Digital cash will be great, argues Joshua Cooper Ramo in
the big "Future of Money" piece in the April 27 Time:

  "Think about the $2,000 check you send to your daughter at college for
expenses. How is that money really spent? Books ... or beer? Electronic
cash takes that relatively simple transaction -- passing an allowance --
and makes it into a much more intelligent process. ...

  "Your daughter can store the money any way she wants -- on her laptop, on
a debit card, even (in the not too distant future) on a chip implanted
under her skin. And, perhaps best of all, you can program the money to be
spent only in specific ways. You might instruct some of the digits to go
for books, some for food and some for movies. Unless you pass along a few
digits that can be cashed at the local pub, she'll have to find someone
else to buy the drinks."

  Ha ha. Kind of cute, isn't it? But look again. Isn't the underlying theme
one of "control"? Try substituting a different scenario for Mr. Ramo's. How
about: "Think about the $1,000 Social Security check your agency sends a
retiree in Las Vegas. How is that money really spent? Food and lodging ...
or blackjack, roulette, and Margaritas?"

  If the purpose of government retirement insurance is to make sure old
folks have food and a roof over their head, doesn't the government have an
OBLIGATION to "earmark" portions of those checks so they can only be used
to buy certain things, once the new e-cash technology gives them that
capability? Couldn't we set e-cards to freeze a recipient's account if she
tried to use any of the "money" to pay for a second prescription of pain
pills written by a doctor other than her ASSIGNED doctor, or to buy a
naughty book about how to evade taxes, or how to move money into offshore

  For that matter, what if your boss started earmarking parts of your
electronic paycheck for rent or groceries -- at certain stores that pay for
the consideration -- all "for your own good," you understand? After all,
the kind of soccer moms who elected Bill Clinton can be counted on to favor
almost (start ital)any(end ital) additional Big Brother controls over those
irresponsible men in their lives, frittering away their paychecks on bar
tabs, dirty magazines, power tools, and fancy chrome doo-dads for their
pickup trucks.

    #   #   #

  Donald S. McAlvany, editor of the economic and geopolitical newsletter
"The McAlvany Intelligence Advisor," is a fellow who has been looking into
the move toward trackable "electronic cash" for some time. The lead article
in the July, 1998 edition of his 16-page newsletter is headlined "Toward a
Cashless Society: Implementing an Electronic Currency in America," and
spells out a very different view of these developing trends from the one
embraced by the jovial publicists at Time:

  "The global socialists who dominate America and most of the governments
of the western world today (especially Western Europe) have long had a goal
of moving the world away from the use of cash and into an electronic funds
currency system, wherein virtually all cash in use is 'electronic
currency,' " writes Mr. McAlvany. "If all financial transactions are forced
through an electronic banking system ... the ultimate 'people control'
system could be established. ..."

  Citing George Orwell's classic novel "1984," Mr. McAlvany reminds us:
"Privacy is a major element of freedom, without which people and nations
cannot remain free. Today, we have dozens of privacy-destroying systems
being put in place by governments all over the world. They include video
camera surveillance in public places; electronic eavesdropping on
computers, phones and faxes; dozens of computerized files on each adult
American - compiled from credit card, banking, and tax records; physical
surveillance of homes, in whole areas via satellite, helicopters, and other
aircraft; the growing use of Social Security numbers to extract all kinds
of information on Americans from  business, banking, and government data
cases; photo IDs required at airports; and the push by the Clinton
Administration for a computerized (smart card) national identification card
for all U.S. citizens.

  "But the greatest privacy-destroying system of all, one which would have
made Big Brother's, Adolf Hitler's, Mao's, Lenin's or Stalin's mouths water
is the elimination of cash and the forcing of all citizens into the
computerized banking system for (start ital)all(end ital) transactions.
Ultimately these transactions can be monitored, recorded, profiled, and
used in 'people control.' If all of your personal transactions can be so
tracked, a socialist government bent on identifying, profiling and
controlling its 'politically incorrect' citizens or 'religious fanatics' or
Bible-believing Christians; gun owners; critics of the government; non-tax
compliers, can easily scrutinize and build a profile on such individuals.
It can also, in the absence of a cash-spending alternative, deny the
privilege to buy and sell to those who are politically or religiously

  Since one of the main problems banks may have during the anticipated
computer crisis brought about by the turning of the century is clearing
checks written on other banks -- banks whose computers may not agree with
the home bank's "fix" for the transition from year date 99 to year date 00
-- Mr. McAlvany suggests that crisis might present a perfect opportunity to
effectively require bank customers to change over from paper checks to
"electronic cash."

  "Remember that during the financial crisis of the 1930s, when Franklin
Roosevelt presented the American people with the alternative of a bank
holiday/gold confiscation/Draconian financial controls (start ital)or(end
ital) financial destruction, they willingly chose the former and gave up a
major portion of their financial freedom."

    #   #   #

  The removal of cash, of course, will be advertised as having many
benefits. Since drug dealers buy and sell their product with suitcases full
of hundred-dollar bills, it will be alleged that the switch will end the
drug trade (as though a multi-billion-dollar industry won't promptly hire
both fancy accountants and computer geniuses to figure out how to "go
electronic" without throwing blips on the IRS radar screens -- or as though
they won't just add newly "illegal" hundred-dollar bills to the list of
contraband they now freely move outside official channels.)

  Expect a public relations campaign to expose the "health hazard" of all
those dirty pennies and nickels you have lying around the house. Passed
from hand to hand among AIDS patients and tuberculosis-ridden junkies, how
can you let your children handle such stuff? Instead, buy Sean and Alysson
a new pair of color-coordinated, his-and-hers Kiddie Smart Cards, which
neatly deduct exactly $1.77 from their accounts when they buy lunch at
school, without burdening them down with filthy, wasteful, inconvenient
(and expensive to produce) coins ... coins they might otherwise save up,
after all, to buy dirty magazines, or reefer, or who knows what else?

  Yep, it's all for your health, safety, and convenience. And why would
anyone object ... unless, of course, they had something to (start
ital)hide(end ital). What was your name again? And could I have your
18-digit bank tracking number, please? You (start ital)are(end ital) in
this country legally, aren't you? Not some kind of a federal
fugitive/deadbeat dad? There, that's better. See how easy things are when
you cooperate? Just slide your card through the security/debit slot. Now
pass your wrist over the scanner to make sure your embedded personal chip
has the matching security code. Thank you; you may now move along. We know
you have a choice when you dine out; thank you for patronizing Burger

    #   #   #

A full transcript of the "smart card online forum" session referred to at
the beginning of this essay, as well as a biography and smart card white
paper from each chat participant, can be accessed at

Subscriptions to The McAlvany Intelligence Advisor ("in no way involved in
the tax resistance, militia, or sovereign citizens movements in the U.S.")
run a substantial $115 per year. Send subscription info to P.O. Box 84904,
Phoenix, Ariz. 85071, or telephone 800-528-0559.

Vin Suprynowicz is the assistant editorial page editor of the Las Vegas
Review-Journal. Readers may contact him via e-mail at [email protected] Vin's
twice-weekly newspaper column, "The Libertarian," is syndicated in the
United States and Canada via Mountain Media Syndications, P.O. Box 4422,
Las Vegas Nev. 89127. Watch for Vin's book, "Send in the Waco Killers,"
coming from Huntington Press in early 1999.


Vin Suprynowicz,   [email protected]

Education rears disciples, imitators, and routinists, not pioneers of
new ideas and creative geniuses.  The schools are not nurseries of
progress and improvement, but conservatories of tradition and unvarying
modes of thought. -- Ludwig von Mises

The most difficult struggle of all is the one within ourselves. Let us not
get accustomed and adjusted to these conditions. The one who adjusts ceases
to discriminate between good and evil.  He becomes a slave in body and
soul. Whatever may happen to you, remember always: Don't adjust! Revolt
against the reality! -- Mordechai Anielewicz, Warsaw, 1943

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Robert A. Hettinga <mailto: [email protected]>
Philodox Financial Technology Evangelism <http://www.philodox.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'