03 March 2006


Blogging here at the Waterloo, the crepe and coffee center of SoBo, across the street from the post office near Broadway and Alameda here in Denver, my thoughts run to the issue of privacy.

Privacy has become a word that itself is less clear than it once was, at one extreme is the notion that there are elements of one's personal autonomy into which the state can't pry or compel you. At the other end of the spectrum is your own practical ability to keep secrets about your life. Keeping secrets is a rapidly evolving matter in the information age.

For example, keeping your social security number under wraps is virtually impossible, even when the people you give it to are bound to keep it secret and make good faith efforts to do so. Consider the case of a Metropolitan State Colorado administrator whose laptop was recently stolen. Hardly evil or notable, except that:

A laptop computer containing names and Social Security numbers of 93,000 people who attended Metropolitan State College of Denver from 1996 to 2005[.]

The irony is, in many ways, best security practices would have encouraged the administrator to do exactly what he or she did. Data on a laptop hard drive which is not connected to the internet is safe from hackers. The administrator is someone who had a need to know, with a comfortable lifestyle, who wouldn't dream of selling the information him or herself and sacrificing a professional career and a good university pension for quick money from some meth riddled identity thieves. But, in a slight slip, you can also bet that the laptop didn't have any meaningful password protection.

Of course, there are all sorts of other people who need your social security number: Your employer, your banker (for both borrowing and lending), your broker or mutal fund company, an attorneys' clients and settlement payors, the people for whom an non-corporate independent contractor does substantial work, companies in which you have an ownership interest, and on and on and on.

Cash is the gold standard when it comes to privacy in financial transactions, and no post-barter economy in the world is less cash based than the American economy. Americans pay for everything from parking meters and fries, to groceries and hotel rooms, to automobile down payments and attorneys' fees with credit and debit cards that leave paper trails. What Americans don't pay for with credit and debit cards, they frequently pay for with paper trail creating checks and electronic fund transfers. Checks not guaranteed by banks are a rare exception outside Anglo-American countries, which typically use fund transfers called giros managed by the postal service for the same purpose (which, because they are functionally equivalent to a money order, make the "bad check" and float issues associated with a checking system non-existent). Credit cards are also not as popular outside the U.S. In Japan, for example, cash like electronic cash value card systems, similar to gift certificates or copy machine cards in the U.S., which retain the anonymity of cash, are growing in popularity much more quickly than crediit cards, which are quite unpopular, as a payment system.

Indeed, cash transactions involving more than $10,000 are deemed so suspicious that they must be reported to the government, unless an exception applies, and criminal lawyers who take cash payments are at a serious risk of facing a forfeiture suit alleging that the cash was obtained illegally. (Bankruptcy lawyers, in contrast, often appreciate cash payments, as their clients are uniquely uncreditworthy). The Patriot Act narrowed many of the loopholes that remained in the cash transaction reporting system in the interest of shutting down money laundering (itself a concept foreign to the basic concept behind anonymous cash transactions).

It isn't just government regulation that discourages the use of cash, however. Many retail businesses have a stated policy of not accepting bills larger than $20, and cash registers aren't built to hold large bills. The $100 bill in U.S. currency, the largest in public circulation, is used more abroad than it is domestically. In contrast, in the Eurozone, the largest denomination note is a 500 Euro bill, which is worth at today's exchange rates about $600, making it possible to, for instance, purchase a car with an envelope of cash instead of a suitcase full.

In the United States, almost everyone with a regular hourly or salaried job is paid by check or direct deposit. Cash compensation is pretty much limited to day laborers, baby sitters, tipped employees and small time construction workers. In Japan, in contrast, it is common for even middle managers working for major corporations on a lifetime employment basis to be paid in cash.

The common use of credit in the United States, the consolidation of the provision of credit from vendors offering to keep a tab for customers into professional credit card companies, and improving computer technology, have together conspired to create a credit reporting industry that make an individual's borrowing habits one of the worst kept secrets out there. Anyone with a few bucks, a little information about you, and a claim that they are considering offering your credit can obtain your credit report.

Even entities that are supposedly "tax exempt" and people with no income do not escape the net. Spouses and children with no income must have their names, in the case of children date of birth, and social security numbers disclosed on tax and health insurance forms, even if they have no income. Almost every secular 501(c)(3) organization must file a tax return on Form 990 that is a matter of public record. Private foundation tax returns must be provided to a state attorney general. And, even tax exempt entities must pay withholding taxes.

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