Saturday, May 2, 2009

Book Review: The End of Money and the Struggle for Financial Privacy

Timothy Terrell of Liberty University published an excellent book review in The Quarterly Journal of Austrian Economics (Summer 1999) of Richard Rahn's The End of Money and the Struggle for Financial Privacy (1999).

Terrell writes:
"Two key technologies give the impetus to Rahn’s encouraging predictions. Only in the last five years have they both come into common use, and Rahn believes that they now will force major reductions in the size and scope of civil government."

"The first development was public-key cryptography, which appeared in the mid-1970s. Public-key cryptography is now easy to use, and allows secure transmissions over telephone lines. Rahn, in a primer on public-key cryptography, shows that it is relatively simple to make a code that is practically unbreakable even by governments."

"The second development was the Internet (which Vice President Gore apparently intends us to believe was his brainchild). In combination with strong public key cryptography, the Internet essentially allows any two modem-equipped computers in the world to trade information that is inaccessible by any government."

"Because of these complementary technologies, it is possible for digital money substitutes to be created (publicly or privately) and exchanged worldwide without the knowledge or consent of government regulators. Paper currency will become obsolete as privacy-seekers turn to secure, instantaneous digital transactions."
"International private exchange of money substitutes over the telephone allows businessmen to avoid some taxes and government regulations, which are typically geographically constrained. Many services, such as software development, architectural design, legal services, and banking services, can be provided from a distance over the Internet and service providers can move to free-market jurisdictions to avoid taxes."
Terrell rightly understands that laws against money laundering also reduce the financial privacy of non-criminals. Terrell states:
"Because financial privacy is absolutely essential to liberty, it is refreshing to see Rahn hopeful about the restoration of privacy to individuals worldwide. Governments have enjoyed the ability to monitor the slightest detail of electronic financial transactions, and in some places have legally required reporting of large cash transactions. The well-worn excuse that government snooping is necessary to suppress organized crime and money laundering is spurious, Rahn shows. Suppressing organized crime through money laundering statutes is ineffective, and any small benefit that may accrue is not worth the certain loss of privacy for non-criminals."

"Rahn opposes money laundering statutes and encryption controls of all sorts, declaring that, in any event, any attempt to limit financial privacy will soon become an absurdity."
From the Other Reviews:

"Richard Rahn is that rare, rare bird, an economist who can explain arcane matters in easy-to-understand language. Get the latest dope, in plain language, on the world banking and currency crisis, the techniques and importance of "foreign" bank accounts, and how modern technology may spell the ultimate demise to intrusive and totalitarian governments." -- Henry G. Manne, founder of the Law and Economics Center, and former Dean of George Mason University Law School

"Richard Rahn persuasively argues how the coming digital money revolution will make lower tax rates and radical tax simplification inevitable." -- Jack Kemp, Co-Founder of Empower America

"The End of Money is a call to arms to defend individual liberty. Than demonstrates how inextricably linked financial privacy is to our fundamental freedoms, and why we must fight for it." -- Mack F. Mattingly, former US Senator and Ambassador

For further reading:
"Report on Financial Privacy, Law Enforcement and Terrorism", Task Force on Information Exchange and Financial Privacy, March 25, 2002
"Don't Sacrifice Financial Privacy to the War on Terrorism", Veronique de Rugy, Cato Institute, October 25, 2001

"The Counter-Money Laundering Act: An Attack on Privacy and Civil Liberties", Scott C. Rayder, The Heritage Foundation, August 31, 2000
"Laundering Digital Money", Kristen May, June 1, 2000
"The Future of Money and Financial Privacy", Richard Rahn, The Future of Financial Privacy, December 31, 1999

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