When The Samourai Falls

The Government, The Godfather, and Gold bars.

This was largely written by "Tinfoil Hat Mike." Hell is coming. The beginning of this post may be triggering to some readers. You’ve been warned.

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Another George Floyd-like situation happened in Ohio about a week ago. Body cams were just released this week and people are certainly upset. This post is not about that. But every time this sort of thing happens it reminds me of Eric Garner. Humanity and police brutality aside, one of the big reasons why Garner’s death still bothers me to this day is because of the reason he was approached by the police to begin with. Per Sheldon Richman via the Future of Freedom Foundation back in 2014:

This was about power. Yes, to an extent the fatal confrontation was about race—although it's no great feat to imagine something similar happening to a low-income white guy. It was also about class. An obviously affluent and likely well-connected person probably need not fear being accosted on the street by the police.

Let's remember what the police accuse Garner of doing: selling cigarettes that had not been subjected to the high taxes imposed in New York City and State: $5.95 in all. (The feds add another buck.) Thus, a pack costs at least $14. As a result, entrepreneurial cigarette smuggling from low-tax states is big business. Whenever the tax goes up, so does the smuggling.

Bold my emphasis.

When one accepts that there is very little difference between the state and the mafia, taxation may start to look a lot different and also explain quite a bit:

• The mafia runs the numbers. The state runs the lottery.

• The mafia extorts for “protection.” The state locks you up if you don’t pay fOr tHe RoAdS.

• Mafia Capos pay tribute to the Don so they can operate. The state grants the small business owner a license to earn a living.

The only real difference in these scenarios is the mafia generally does it without the Sheriff of Nottingham’s involvement. And as Chicago mob boss Al Capone learned the hard way in 1931, the state still expects you to pay Sam your tribute even if the money is dirty. Taxation is everything.

Consider what the homepage of a Bitcoin privacy application known as Samourai Wallet looks like right now:

samouraiwallet.com

The wallet application utilizes mixing technology that helps obfuscate the source of funds on Bitcoin. Naturally, since the government can’t see it, Uncle Sam is convinced the wallet users aren’t paying their tribute. Samourai’s mixing technology is fundamentally similar to the Tornado Cash protocol that was sanctioned by OFAC in 2022. Can these types of tools be used by criminals? Yes. Should that make them illegal? Abso-fucking-lutely- NOT.

Privacy is Normal.

I’ll say it again and again. Privacy is normal.

If one chooses to take the view that every financial transaction on planet earth should have oversight and control granted to whatever administrative bureaucrat is running the show on any given day, then why stop with the flow of currency? Why not communication of any kind? Maybe end-to-end encrypted email services should be banned because bad guys can use them to plan attacks. Maybe the Feds should have access to cameras in every room in your house to make sure you’re not bumping rails at 3 am.

Obviously, these would be ridiculous overreaches if they ever happened but they’re logically similar with the exception of one critical detail; there is no money changing hands when I send my friend an email. But when nominally trackable value is being exchanged, the state believes it should get a portion of it so it can keep funding wars on drugs, terrorism, poverty, the middle class, and whatever else missing Ukraine aid ultimately goes to.

We’re… what… a week removed from tax day? I could understand taxes a bit more if the money was backed by some sort of intrinsic material or commodity - but it isn’t. It literally has value because we’re forced to use it so the Federal Reserve can keep creating more of it to fund Washington’s deficits. Without a captive userbase, that scam doesn’t work. Yet we still pay the toll because Sam needs to repeatedly remind us that Sam is in control and Sam gets a cut of everything.

Tribute! Taxes!

Death and Taxes. If you don’t pay the latter, you get the other. Thus, Eric Garner is dead and Samourai Wallet’s founders were arrested on Wednesday. Following up on Samourai, the FBI released a delightful PSA on Thursday. The main takeaway courtesy of Bitcoin Magazine:

The FBI has issued a public service announcement today, warning Americans against using unregistered and non-Know Your Customer (KYC) cryptocurrency money transmitting services.

What this is essentially insinuating is anonymous crypto usage in America isn’t going to be allowed much longer. It starts with warnings against usage of exchanges that don’t satisfy AML guidelines - collecting your name, DOB, address, social security number, and photo ID to use the platform - it ends with the outright criminalization of financial privacy technology. This is not a concept that should be foreign to any of you who have been here for some time.

August 2022 following Tornado Cash sanctions:

Unfortunately, I think the war is just getting started. I mean this genuinely; simply owning certain cryptocurrencies is starting to carry more than just financial risk. Just by using some of these privacy coins and protocols we could theoretically be considered criminals in the future. If you don’t have the stomach for this, you might consider getting out now.

Shots Fired: US Treasury Sanctions Crypto Mixer "Tornado Cash"

And then with a follow up in December 2022:

Everyone’s individual risk tolerance is different, but we’re all playing the same game. If enough people agree that the reward from being a ‘criminal’ outweighs the risk, the law being broken quickly ceases to matter. Essentially when the law is no longer respected, it is no longer enforceable. If the law is not enforceable, it is no longer a valid law.

In The End, We're All Criminals

What will be the catalyst that turns everyone to criminals? Usage of privacy crypto protocols? No way. Stagflation? Maybe…

I think we’re more likely to see the federal government collapse entirely than the populace uniting around financial privacy. But the effect of Uncle Sam getting crippled by his own default will be the same on crypto privacy regardless. The alternative may be a bit more scary.

Executive Order 6102

It’s easy to look at what just happened to Samourai Wallet and consider it a crypto-specific matter. I can assure you it is not. Crypto does something that the grifter elite don’t like; it gives people an escape vehicle from the debasement con. Gold and Silver can absolutely be put in this category as well. But once upon a time it was illegal to own Gold in the United States beyond a certain (very low) threshold:

President Franklin D Roosevelt passed the order in 1933 as a reaction to the crippling effect of the Great Depression on the U.S. economy. After years of economic turmoil, the American people desperately required relief from the financial disparity induced by the depression. The reason behind the order was to remove constraints on the Federal Reserve in order to print more money during the depression. The order was issued within a month of FDR's inauguration, and all Americans were required to forfeit their gold to the government.

Two years after Uncle Sam locked up Capone for not paying tribute, he “asked” for everyone’s Gold seven months before debasing the dollar by 69%. Fortunately, Gold is legal to own again and is still a terrific escape vehicle from Sam’s currency debasement con. When held physically, Gold even offers an element of anonymity. Provided of course, it’s purchased a certain way…

I see the FBI’s KYC compliant crypto exchange PSA and I raise you this seemingly innocuous news nugget:

Read that headline and then ask yourself this critical question: why would Costco COST 0.00%↑ suddenly enter what is a notoriously brutal business just as the country starts barreling into stagflation? And at the same time that the Feds continue cracking down on crypto privacy protocols and issue warnings about non-KYC compliant crypto?

Here’s where Tinfoil Hat Mike is going with this; the state is going to allow you and I to own both Bitcoin and Gold. They just want to know exactly where it all is so they know where to send the stormtroopers when its time to tax unrealized gains. I know one thing; as a Costco member myself, I can’t get out of there without providing my membership card before a purchase. Of course, my card is linked to my name and address. What a terrific way to amass an enormous database of physical Gold owner identities.

Disclaimer: I’m not an investment advisor or a law expert. I didn’t actually wear a tinfoil hat when I wrote this but I should have. I’m long BTC, ZEC, XAU, XAG, and garden seeds…