When I read Resistance Money, I once again encountered the recognition of U.S. currency as a private, censorship resistant means of exchange:

It is axiomatic that the creators of bitcoin gave us digital cash. It is plainly stated in the title of the white paper.

When I was young money was cash currency, in the form of dollar bills or coins. While working in my dad’s pharmacy everyone paid in cash, or, for a select few trusted customers, by personal check. Credit cards existed, but were rarely used.

In the neighborhoods where I grew up in New York City, every store expected you to pay in cash. When you were a teenager and got your first job, it was in all likelihood “off the books”, meaning that you would be paid your salary in cash. Your employer got this cash from his customers, and he didn’t declare these funds as income to the IRS. It wasn’t a big secret. Everyone knew it, including the government. Back then, economic analyses would often contain estimates of the underground economy. Although this unseen circular economy still exists, it is monitored and discouraged far more than it used to be, through sales tax audits, Labor Department enforcement, and, of course, KYC/AML regulations.

Practicing law in the latter decades of the twentieth century, I think I was exposed to these two economies more than most people. I should explain that I was not a Harvard Law School graduate working for a fancy white shoe law firm. I was way lower on the food chain, and my clients weren’t too fancy either.

My clients may not have been fancy, but they weren’t dumb. Well, some of them were dumb, but that’s for another discussion. Anyway, my first job as a lawyer was for a small neighborhood law firm, where we handled every possible type of case you could imagine. We had a lot of not very corporate type clients who operated very lucrative businesses. They were typically retail, wholesale, or manufacturing enterprises. These clients knew, better than most at the time, that although the dollar was a very good means of exchange, it was a very poor store of value. This was two decades after the Nixon Shock, and money printing was already in full force These clients were cash rich, but they couldn’t very well put this undeclared income in a bank. They needed a better way to store the energy of their hard work. Gold was an option, since on New Years Day of 1974 Executive Order 6102 was repealed. Some clients told me they bought Krugerrands or American Eagles, but the real gold bugs were few and far between. Their most common store of value was real estate, either multi-family residential or commercial.

As a new lawyer, I started handling these real estate transactions. I noticed right away that the sales prices were very low. These buildings were worth more than they were being sold for. I discovered that during the closing, there came a point at the end, right before the deed transfer, when the lawyers would all be asked to leave the room. I learned that in our absence, the balance of the “real” purchase price was paid by the buyer to the seller in cash. The incentives for both parties were obvious. The buyer got to invest his undeclared dollars in an income producing asset, and the seller could avoid paying most or all of the owed capital gains tax. I cannot overstate how common this practice was. I never heard of a single claim of cheating or other impropriety.

I was responsible for many Family Court cases back then. Once again, I saw evidence that the underground economy was acknowledged and tolerated, if not accepted. In family disputes, the non custodial parent, who was invariably the father back then, would have to pay child support to his former partner, who had physical custody of the kids. The support payment was set as a prescribed percentage of the paying parent’s take home salary. Often, the custodial parent would discover that in addition to his declared job, for which pay stubs and tax forms were provided to the court, the suspected deadbeat dad would also be working a second job off the books. This could be proven with photographic evidence, witness testimony, or by a “means assessment”, by determining that the dad’s declared income could not support his lifestyle. If proven, the judge wouldn’t call the IRS or the state tax authorities. The court didn’t care that he was a tax cheat. Rather, under New York law, the judge could simply “impute” additional income, and order him to pay more money. Case closed.

As time passed, I eventually took over the criminal defense practice at the firm. As you might guess, my exposure to the underground economy deepened. The truth is that a large percentage of my client base had no checking account or credit cards. Most of my cases were drug sales and possession. The failed “War On Drugs” was being waged on all fronts. New York had the Rockefeller Drug Laws, perhaps the most draconian narcotics laws in the country. The stakes were high. I made a big chunk of my living defending those prosecuted under these statutes. Lawyers like me were mostly paid in cash. I assume the partners in the firm declared every dime of the fees I brought in to the government (nice try, fed).

This type of practice presents security concerns. Like bitcoin, transacting in cash requires a good deal of personal responsibility. Responsibility for securing your money, and responsibility for your own physical safety. Five dollar wrench attacks weren’t invented for bitcoin. Taking precautions became second nature. Meeting new clients in crowded public places rather than your office, getting paid in courthouse corridors, etc. It has been a while since I have been in that world. I don’t know if things have changed. During my last year of practice I began getting paid fees through venmo and cash app.

It’s easy to see why the dollar was, and still is, used by those wanting a private, censorship resistant transaction. These are the main reasons:

It is also undeniable that the freedoms of U.S. citizens were being eroded over time.

Long before I started practicing, the government began to gradually obstruct a person’s ability to freely and privately transact in cash. It started with The Bank Secrecy Act, which was enacted in 1970.

As a result of this legislation, banks were asked to report suspicious transactions of over $10,000, which is worth about $81,000 in today’s buying power. The government relied on the judgment of the individual bank representative to determine what constituted a suspicious transaction. The original intent of the legislation was to target really large transactions, well beyond the reach of most people. The average price of a brand new, right out of the showroom luxury car cost around $5000 in 1970. Economy cars? Around $2000. Try walking into a car dealer today and buying a car with cash under the $10,000 reporting limit.

Over the years there have been attempts to raise the limit, but they have all failed. The noose of government control over cash transactions has gradually tightened, fueled solely by the degrading dollar. Our frog-like selves didn’t notice the increase in water temperature.

Meanwhile, enforcement measures were stepped up. The Money Laundering Control Act was passed in 1986. Prior to that, banks were worried that their depositor’s privacy rights would be violated if they released information on transactions. This act put an end to that worry, shielding the banks from liability for reporting innocent transactions, and broadened the definition of a transaction. Ten years later, Suspicious Activity Reports (SARs) needed to be filed.

This is all depressing, but the fact remains that the U.S. dollar is still the most used currency in the world for criminal transactions.

Not only that, but you can still walk into a drugstore, buy an Amazon gift card with a $100 bill, then go home and buy some bitcoin on robosats. They haven’t plugged up all the holes yet.