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Episode 216 – Payments and Panopticism with Raúl Carrillo
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Steve always says the beauty of MMT is “it takes the most convoluted spaghetti diagram and turns it into a straight line.” When it comes to banking, the financial industry, financial technology, and privacy, has the MMT community developed that straight line yet? Today’s guest, Raúl Carrillo, thinks we can get there:
“I don’t think we quite have, but I think the straight line flows right through everything else we’ve done. Just as we don’t want banks to be heavily involved in the public provisioning process… We have to pay just as much attention to Silicon Valley, and then start thinking about what it looks like to actually build a democratic public money system that operates on MMT principles.”
It’s been two years since we’ve had Raúl on the podcast, but the conversation is continuous, and it includes our episodes with Rohan Grey and Brett Scott.
Steve and Raúl discuss Raúl’s recently published white paper, “Seeing Through Money: Democracy, Data Governance, and the Digital Dollar.” It is essentially an intervention in the discussion about the future of money. It includes analysis of the way government agencies use financial technology today and how it is linked to a broader public money story and an MMT story. Currently, banks are intermediaries between the public and the state. In other words, banks are part of the plumbing. But what’s to stop the government from using financial technology for the public purpose and cutting the middlemen?
Today, however, it’s more than just the banks.
“The inclusion of new technological partners in the plumbing changes many, many things. If a Silicon Valley firm – whether it’s a big stablecoin firm like Circle or PayPal – gets a master account at the Fed, we’re living in a different terrain for MMT analysis … I think it’s just very important that we keep an eye on Silicon Valley in this sense and take the time for self-assessment when we talk about what kind of public money systems we’re building.”
The conversation goes into privacy issues where, again, the lines are blurred between the private sector and the government. Or maybe “blurred” is the wrong word. Their lines of communication are not necessarily visible to the public. What has been blurred is, in some cases, the distinction between left and right.
Some take-aways from the episode. Financial surveillance can have extreme consequences. Think of a state with draconian anti-abortion laws. If the government can’t get a hold of your medical records, they can simply track your payments. After the Dobbs ruling, some suggested using cryptocurrency to pay for abortion, but guess what? It turns out blockchain is not private in the way most people think it is. That’s another take-away from the episode.
Whatever the idealized intentions of the early developers of digital currency (remember how it would address the racial wealth gap?) it has mutated into a world of grifters and fraud. As Raúl says, “It’s not a cool party anymore, if it ever was. When you’ve got the cops and the bankers there, it’s time to leave.”
Raúl Carrillo is the Deputy Director of the LPE Project (Law and Political Economy) and an Associate Research Scholar at Yale Law School. He is on the board of Modern Money Network and the chair of Public Money Action.
@RaulACarrillo on Twitter
Macro N Cheese – Episode 216
Payments and Panopticism with Raúl Carrillo
March 18, 2023
[00:00:00] Raúl Carrillo [intro/music]: The corporate sector or the quote, unquote private sector can collect tremendous amounts of data about us and collate and analyze it and use it for predictive value, et cetera. And there are few rules on how it does that. Then, as long as the government gets information from the private sector, rather than collecting it directly, it avoids the set of protections that would otherwise apply to government data collection.
If you think about crypto, I think it’s whack. I think it’s not a cool party anymore, if it ever was. When you’ve got the cops and the bankers there, it’s time to leave.
[00:01:35] Geoff Ginter [intro/music]: Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host Steve Grumbine.
[00:01:43] Steve Grumbine: All right. This is Steve with Macro N Cheese. We’re gonna go back to the Modern Money Network and the Public Money Action with my dear friend Raul Carillo. Raul is the Deputy Director of the LPE Project, which stands for Law and Political Economy and is an associate research scholar at Yale Law School.
His research critically analyzes financial regulation, technology, and innovation, and he’s recently written a tome. We are talking about a tome like the 55 volume master reference library. Nah, I’m just joking. It’s a 78 page white paper that is very interesting and it ties closely with several of the recent interviews we’ve done with guests like Brett Scott and Rohan Grey.
It’s titled Seeing Through Money: Democracy, Data Governance, and the Digital Dollar. Now, in this particular paper, Raul does not touch on necessarily the impacts within the modern monetary theory framework, but we’ll be addressing that today as well. So without further ado, let me bring on my guest. Raul, welcome back. It’s been a while.
[00:02:57] Raúl Carrillo: Yes, thanks for having me again, Steve. It’s been about two years by my count. We did talk a little bit about financial technology last time, so I’m excited to return to the topic of conversation here.
[00:03:09] Grumbine: Absolutely. So my interviews with Brett Scott has really opened up a lot of interesting thought patterns as we watch a mediary get in between consumers and their banks skimming additional data and skimming financial transactions to make money.
There’s so many ways they’ve got their fingers in the cookie jar and the way Brett described it really made this issue come to life. We had Brett come on to do a RP Live and talk about his book Cloud Money, and when I saw that you had written this, especially as it ties back to the digital dollar, I felt like this was a really important spot to start with because of the public money side of this and the fact that the state is now getting involved in this as well. So take us through. What was the rationale? What was the genesis of you writing this paper to begin with?
[00:04:05] Carrillo: So Steve, I’m very glad that you had Brett on. He’s a dear friend. Certainly an ally in this battle, in the “war on cash”. Brett’s book Cloudmoney, I think does a tremendous job of explaining the technology that’s in people’s hands and starting or at least incorporating a user perspective.
And that’s really important to me and that’s why it’s great that you had Brett, because that provides a situation and context for what’s going on with respect to the future of money. And this paper is essentially an intervention in the discussion about that future.
Along the way, it does a lot analysis of the way that government agencies use financial technology today that has a link to a broader public money story and a MMT story. So the intervention is occurring in the context of the digital dollar debate. I know you’ve had Rohan before, and you may have discussed this a bit, but we are at a moment where governments or certain government institutions – in the United States, the Treasury and the Fed – may have the option to send money from their own native computer systems directly to households, individuals, potentially businesses, non-financial firms.
This means cutting the banks out of the public plumbing process. Essentially, it means getting rid of them, potentially as intermediaries, as you mentioned, between the public and the state itself. This is pretty big in the United States. It’s never happened before. It is something that is endemic to our current model.
Randy Wray talks about how you don’t really pay taxes. The bank charges your account and the bank pays taxes. That is something that could go by the wayside. The very mechanics of modern money are going to change with something like a digital dollar system.
If we have the pandemic again, and the government can send out cards just as they did last time, but this time directly to public bank accounts or to a public digital wallet, or to a digital cash wallet, or on a digital cash card, as I suggested, that really changes the way that we do public finance and the way that we instantiate public money in this country.
And that intervention is important, I think, in terms of, as I argue, constructing a space where everyday folks, all of us can make payments and do something as simple as pay for things without generating data that can conceivably be manipulated by powerful institutions.
And I join Brett in that general battle for privacy at both the individual and social levels going forward. And this ties into a broader discussion of the power of public money and where we are at in terms of really a battle between major corporations and government agencies, and then the public maybe is even a third side over what the future looks like.
[00:07:11] Grumbine: One of the things that jumped out at me is this battle for privacy, as you stated, and it’s very clear that there is a huge populist push or what would amount to be a libertarian insurgency. Maybe it’s always been there, but it’s having its day in the sun with the private side of the digital space.
And I know the fears have always been ownership and authority and legal authority and the distributed model versus the consolidated model, centralized model I guess it would be better to say. When you wrote your paper, one of the things I noticed, and this seems to be important across many aspects of public money, and that is legal authority.
Can you break down what you mean when you start addressing legal authority, the United States government has a patent on the US dollar. It’s its own unit of measure. It’s a creature of law, as you all said many times. Does that play into this concept of legal authority? Are we back to stating the obvious that this is a unit of measure as a unit of account, that it’s the property of the United States government?
[00:08:27] Carrillo: So this story that I am trying to tell, Steve is completely simpatico with that story. And in fact, I draw on what I’ve experienced and what I’ve learned through the MMT movement to think of what I see as just another face of the public money issues that we’re discussing.
And I walk through history briefly in the paper. But my essential point in the introduction to this paper, which I hope to expand on in other work later, is that just as governments issue money in order to reap its fiscal value, create a circuit of social provisioning just as much as it’s used to enable commerce.
It’s used as a reporting tool and it’s almost logically by necessity that when you’re creating a unit of account, a unit of measurement, you are collecting data, information, hopefully to get knowledge, hopefully to get understanding, and that is just part of the process of what it means to run a public money system and run a ledger based system unless you did everything in cash and you had no cameras, et cetera.
What we’re talking about is that money systems are necessarily information systems. There is an anthropologist and a political scientist whose work I draw on, not necessarily because I share his politics, but because his work is foundational in the privacy and data governance literature.
In the social sciences more broadly, that thinker’s name is James C. Scott. He still teaches here at Yale, but his major book is called Seeing Like a State, and what that talks about is the way that the state began to record information and collect data in order to build a complex modern economy.
And although it’s unstated in his work, there is a particular through line about money. And in the most obvious instance, it begins in the context of taxation, just as the modern money story often begins in the context of taxation writ large. And Scott talks about how in many societies and places taxation and thus public finance more broadly depends on the creation of standardized patronymic surnames.
For instance, in England, it used to be the case that people were named just after the trade that they did or where they lived, and it didn’t necessarily have a link with their forebears. But you can’t run taxation that way. You need unique identifiers. You can’t have a million different Mary Hills, that doesn’t work when you’re trying to do taxpayer id.
So in order to fund the very government, you institute a new, more complex data collection system, and we see that happen in colonization. Certainly Scott talks about the Spanish conquest of the Philippines in a similar dynamic where there is a different indigenous naming system that has to be overcome in order to establish a monetary circuit.
And he also touches on this in the context of immigration. For example, Jewish immigration from Eastern Europe. And what happened on Ellis Island is not necessarily just being a bunch of mistakes, but enrolling people into a broader social provisioning system under a certain standardized formats.
And that’s just one example of a genesis point, I think, where the MMT story and the public money story ties in with what I’m doing. But you can also look at the development of even more recent complex components of the economy. Within the last two centuries to draw on this, and some of this is a story of privatization.
Some of it is a story of direct implementation of certain services, but today we live in a society where, as you were discussing, the banks and other technology companies stand between members of the state and each other, unless we’re using cash. We’re going through a couple institutions here.
In reality, the average bank account is connected to 15 other technology companies. So we’re talking about going through a whole web of corporate actors when we just transact with each other, unless we’re using good old cold hard cash. And just as the government has delegated a public money function to banks in terms of lending and credit, and attempting to conduct investment.
It has outsourced the technological apparatus for getting money to people, and with that comes the recording machinery. The government relies on credit scores for its own purposes. Just as the credit scoring industry relies on government identifiers, like social security numbers and other data, they share data between each other and to the point about legal authority today, there is little to no substantive federal privacy law in the United States, which means that essentially your protection against unwanted data collection in most jurisdictions is not clicking “I agree” to a service, which is to say, foregoing digital formal finance in this country.
But as soon as you click the data, something called the notice and consent standard, which forms the core of modern privacy law is deemed to be satisfied. You have minimal protection about how data is shared, sorted, scored, stored after that point. And there are some rules around what you can do with formal regulated credit reporting.
It doesn’t touch the data brokers and the companies that fall outside of the traditional collection mechanism. There are a few rules in terms of direct collection of data by the government. Here and there you find smatterings of stronger standards. In California, there’s some enhanced rights to request to delete your information, things like that.
But by and large, we are living in a country where the privacy laws that were written 40, 50 years ago before the advent of mass surveillance and predictive analytics just provide a veneer of protection at this time. So to put it bluntly, the corporate sector or the quote unquote private sector can collect tremendous amounts of data about us and collate and analyze it and use it for predictive value, et cetera.
And there are a few rules on how it does that. Then, as long as the government gets information from the private sector, rather than collecting it directly, it avoids the set of protections that would otherwise apply to government data collection. The most important of these is the fourth Amendment. Essentially, if Facebook and Instagram collect your data, the government is just essentially a walk over to headquarters or a phone call or an email away from getting that very same data in most cases.
So when we talk about the expansion of the monetary system, it is in this context of modern mass surveillance. So whether we’re talking about the expansion of private or public money systems, my argument is that we have to see this dimension because it’s a huge part of what’s going on.
[00:15:44] Grumbine: I’ve had a really deep debate with a friend, and mind you, this is all just talk, but this is the talk that regular people have, and I’m finding it happening more and more often with January 6th. From the right wing perspective, you see a lot of people seeing the unrest in society and the concern about surveillance and privacy, but more importantly, it’s a matter of who the target is and who the person going after the information is and what their intent and some of the more socialist revolutions over a course of time, how frequently the thing people hold onto is the authoritarian draconian measures that were in place.
Post revolution where you’ve got a counter revolutionary force trying to eek back the gains you gained during your revolution and always in a perpetual state of having to protect against the monarchists coming back. So in this particular case, the fear of who is monitoring you and for what purpose and what can they do with it once they have that information really becomes front and center with this.
And as we look at data collection, some groups are out there just trying to make money. But there’s another element here, and it’s the one that I think most people are afraid of, and that is that conflation of government and industry and isolating people and targeting them. Who is the target? Is this surveillance a part of protecting the state? Is it for class interests? Is it for the wealthy? Is it for the capital order? Who is the beneficiary of this surveillance?
[00:17:28] Carrillo: Always asking the most important question, Steve. Qui bono. So the answer, is most of the powerful institutions in the United States benefit from this arrangement. Putting a pin in it. I think the qualification would be there that I don’t think that this mass data collection model actually helps US law enforcement necessarily zoom in on the worst actors.
But by and large, it is helpful for these companies to have access to payments and monetary data in particular because payments data is already in a monetary form. That’s what it is. It’s a record of a transaction, and so whereas clicking a like button on Facebook may give some predictive value about what you do, the payments data actually has a record of what you’ve done.
It’s not just what they think that you might do based on what you like. It’s a much better record of what you actually do and what you actually spend money on. So for any big tech company, this is huge, and that’s why Meta wanted to create its own currency system. That’s why Amazon is so involved in the back of the house. For most every fintech company, the big Silicon Valley companies, as well as the big banks, are interested in this data collection because ostensibly it helps them price things better, whether that’s credit or another financial product.
It helps them with targeted advertising. It helps in a much deeper way. It enriches their basic business model in the sense that they are drawing data, not necessarily just to track people, and not just to track individuals, but to paint a predictive picture of where consumers are going. Now, just as that data is attractive for those reasons to major Silicon Valley companies and to banks, it is also attractive to many public agencies.
The payments data is particularly, again, granular. It’s ubiquitous, it’s necessary, it’s everywhere. It’s present in our interactions, again, with each other, with formal financial institutions, just out in retail with anybody engaging in digital commerce. And we pay the government directly for some things, especially if you’re on benefits or you have public healthcare, Medicaid or whatever it may be.
So this data, because of its omnipresence, because of its predictive value, is helpful to public agencies that are trying to nominally at least stop fraud. So for instance, we’re talking about swiping an EBT card and that data going to fraud alert systems to keep certain people under watch as to whether they’re abusing, quote unquote, the benefit system or not.
We’re also talking about law enforcement. In a more quotidian way, we’re talking about governments collecting data via private companies because they just are starved of funds and can’t do it themselves, or they think they need to achieve a certain function and they’re not capable of doing it themselves. So they will collect data throughout the system via private actors.
Historically, that’s been the credit bureaus. Now it’s these giant data brokers that have been around for a couple decades now, if not more, but operate outside the regulated fair credit reporting system. And some of them may scrape data, some of ’em have agreements with corporations, but just to collect as much information as possible.
And so to a certain extent, it’s not helpful to think about private data collection and public data collection. It is, and they’re important nuances, but it’s also just as important to zoom out and think, wow, this is one major apparatus that benefits powerful institutions across the board, and that is, I think, a scary position to be in. But that’s the reality of where we’re at now.
[00:21:43] Grumbine: As I stated a few minutes ago, the rise of the libertarian right and this red-brown merger. It’s tough because as a class analysis, the working class is not necessarily a clean, easy mass. It’s got elements of awesome, elements of not so awesome and everything in between. And watching that happen, it’s beyond my ability to say whether it’s good or bad.
Only I can see that it’s happening. I guess from that perspective, when you’re designing systems with knowledge of the instability in society at present. Both in the insanity of the Republicans and the fecklessness of the Democrats, what do you see as the temperature for enacting quality measures?
I’m looking around, who’s my champion? Other than my friend Raul, whom I trust. This is such a serious matter. Who are the people that are thinking through this that would ultimately bring forth the recommendations? Then how would that be enacted?
[00:22:58] Carrillo: Yeah, that’s a great set of questions. So just to comment on the politics a little and what I think you’re zooming in on Steve or what may just be relevant to your broader point about what’s happening on the left and right. Privacy and data governance issues, really scramble our conventional political axes or the way that we think about who’s on whose team.
And as you’re indicating, in some instances this can be fraught and in some instances it seems necessary. And the way I try to approach the financial privacy issue in particular is first of all, to recognize that again, this scrambles everything. To make very contingent alliances, but sometimes that is not where I wanna stay and the overlap needs to be small enough such that I’m not violating my principles.
But just in the logic of making the deal, that has to be the case for the other side as well. And to make it a little bit more concrete. Privacy is interesting because it splinters both parties. Not necessarily along populist lines, but it can. So on the Democratic Party side, on one end of the spectrum, you have the squad and some other Congress members from working class districts, et cetera, with significant communities of color who are pro privacy.
To put it bluntly. That includes, again, everybody who you’d imagine would be on the progressive end. I would also put Senator Sherrod Brown in there. In some cases you have a variety of senators from the banking committee who joined that side as well. But Rohan and I work most closely with Representative Stephen Lynch from South Boston, which is a working class district.
Steve is an interesting guy. He just likes walking around his district and taking care of his grandkids and used to be the head of the blue collar caucus and is relatively down to earth insofar as a member of Congress can be. And we’ve worked with Steven closely, and the E Cash bill and the Stable Act are both championed by him.
At the same time, he’s part of a broader ecosystem. So that’s the Democratic side. On the Republican side, as I think you already know and have alluded to, there are many fissures with respect to the power of these digital technology companies and privacy and the role of the state, et cetera.
On the one hand, it must be said that just as on the Democratic side, you have some people who just belong to Silicon Valley or belong to the fintech sector, or as we’re learning through the Sam Bankman-Fried fiasco just belong to crypto, so to speak. And that cuts across both sides of the aisle.
[00:25:55] Grumbine: Sure.
[00:25:55] Carrillo: And then you have natsec hawks on the Republican side, or people who are really zealous about China in a national security sense. They have counterparts on the Dem side, but it’s a significantly huge part of the Republican party. And then you have libertarians who, in this particular case tend to be pro privacy, but we disagree on the role of public sector financial technology, for instance.
Rohan and I have managed, along with all the political actors I just mentioned, plus advocacy groups along the Hill — ranging from people who are focused on racial justice to folks who are focused on privacy in the old internet freedom vein from the nineties, still. Those groups, we’ve all managed to cobble together at least a wave on the Hill.
And there’s a sense that Republicans may split on this, but this is all going forward quickly. And as things happen on the terrain of the big tech fights that are occurring between the FTC and the DOJ and the major tech companies, and as things happen with crypto and the Sam Bankman-Fried shakeout and the impending collapse of Tether, and maybe another, get a third crash in the last year or so…
The ECash alliance also becomes complicated. Privacy as an issue becomes complicated. But what I would do in this situation is continue to look at the people who are pushing both privacy in the sense of data protection and sound data governance, I’d say more broadly, because we do need more than cash – I do believe in a public bank account system, we’re gonna have to have tiered access, trusted access to that data – but people who are pro privacy but nevertheless willing to build public sector technology.
Libertarians may join on one public sector technology, which is cash, but there is a much broader fight to be had, so to speak. And again, the privacy politics can cut a number of ways. Even within the coalition we’ll have people who think the answer is crypto and the people who think that the answer is E cash, but are nevertheless willing to sign on. So that, I hope, paints just a picture of the complicated politics around financial privacy on the Hill.
[00:28:29] Intermission: You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon, like and follow our pages on Facebook and YouTube, and follow us on Periscope, Twitter, Twitch, Rokfin, and Instagram.
[00:29:20] Grumbine: I’m a systems guy, so when I’m looking at systems and I’m thinking about each handoff in the system, every step through that system has to be addressed because each one of those presents a potential area for exploitation. Every step, every handoff has to have something to account for the security at that step.
And by the time these concepts make it to the public, it’s no longer broken down at each handoff, it’s now more of a solution. An overarching solution that hand waves and gives you a cloud to describe what occurred in the system itself. Where are we in terms of identifying the various steps within the system that produce vulnerabilities that people should be aware of?
[00:30:13] Carrillo: So I’m not sure if you’d prefer to talk about security?
[00:30:17] Grumbine: I have a system, and inside the system it might be the banking system itself within the Federal Reserve system, any number of places, but then you’ve got the actual physical devices. The E Cash card originally just used as an example, as an edge device that would be a recipient of these digital dollars. Each step to getting through that process from the actual purchase to being able to save. Where are we in terms of actually designing that system?
[00:30:49] Carrillo: Sure thing. So at this point, I think that we have pretty solid proofs of concept with respect to something like an ECash hardware device. And those exist in the private sector or are being developed in the private sector in a very promising way.
And they also exist in the context of public-private partnerships around the world. There are many jurisdictions outside of the United States that have already started developing this technology over the course of many years. And the most intense example of this is certainly China.
And I don’t buy the Sinophobic narrative, and I don’t want to rattle sabers at all. That’s not my politics. But it is a bit embarrassing that China has made postal banking before the United States. [laughter] And it has done it in a way that puts rather simple technology in people’s hands.
And of course, I wouldn’t follow China on privacy, but they have created devices with offline functionality, which they supply through their postal savings bank. And you can send money long distance with a card with 10 little bumps on it, and you press those buttons and voila, you’ve sent money from one device to another, instantaneously.
And in many other countries, there is something closer to the offline functionality that we’ve proposed in the ECash Act and even the cards that I’ve proposed in this article draft. And that’s because many countries in the global south have to get payments technology to people who don’t have internet access.
So they’ve thought about this a lot more than policymakers have in the United States, even though one in three adults in the US does not have high-speed internet access in the home, and there are entire communities, especially rural communities that don’t have high-speed internet access at all.
That stuff is required to use most of the modern fintech apps, including the sorts of apps that would be included in other visions of the digital dollar system. For example, Kenya’s the most popular example, but let’s just talk about Senegal because I recently met some payments folks from that country at a conference.
Just like in other countries, there are all these devices that essentially allow you to send money in a format that is something like a text message. It operates on a telecom network rather than the internet. And again, this is to reach people who don’t have online access but may have phone access.
And in Senegal, this is financially including people in the system for a first time, it’s establishing a unique identifier, in some places, even that previously didn’t exist. And unfortunately because of the way the consumer law works in Senegal, people have no idea that they’re also signing up for a bank account.
And despite the fact that they’re using those phones to make offline payments, the banks are still settling the transactions in the back of the house. That’s an extreme example of what is going on, I think, everywhere. Folks just don’t know what this looks like, and there’s certainly no way for them to know about the security of the technical design as you were saying.
Even the people who are furthest toward mine and Rohan’s position on this and the ECash coalition’s position on this, they will hold up technologies in Senegal or in Kenya or in other places as examples of great tech that is helping us here. But it’s like, hold on. There are still intermediaries there.
And you have to actually look at systems design, I would say, as well as the legal contracts around these partnerships to know when you are actually still just falling back into a system that is not truly peer-to-peer. And so Rohan and I have turned to open source hardware rather than software as the model for these devices to try to cut out these intermediaries completely.
And that means that transactions are device to device rather than device through a network, through another device, or not a network in the sense that the internet is a network. So it’s that kind of attention to detail that is important in actually getting what we want to achieve rather than not.
And there are all kinds of other applications that apply to the devices and other kinds of rules and standards and protocols that will need to be embedded in the tech, including around how much money you can store on the device, what are the mechanics of actually transmitting the money, how much you can send at a time, security measures for the device itself, et cetera.
But this is extremely important. And to bring it back to the MMT point, I think that if we want to have a strong public fist, we have to think about what that actually looks like in terms of the user interface. We have to win a battle in people’s hands. If you think about crypto, I think it’s wack. I think it’s not a cool party anymore, if it ever was.
When you’ve got the cops and the bankers there, it’s time to leave. [laughter] At least. But there is a certain appeal that people get fascinated by it just playing with it on their phones. And there’s a broader discussion that we can have about the attention economy and whether it’s good that people are living on their phones.
But right now, I think unless MMT starts paying attention to the tech, to the plumbing, we’re gonna lose the broader war about public money. And Rohan talks about how this works in the back of the house and how it’s gonna look like to spend money. Maybe we get something like Bill Mitchell’s overt monetary financing once we replace the existing back of the house machinery with something much more streamlined.
But we also have to think about it in terms of how people are going to interact with it. And if we wanna spend trillions of dollars in the pandemic and just put it in people’s hands, or we want that money to come through a job guarantee program, et cetera, we have to think about the technological layer. It’s always there. It’s always been there. And in some senses, I think MMT as a paradigm, needs to stay on the cutting edge of all this because, what it means to be an MMTer is to stay on the cutting edge.
[00:37:11] Grumbine: That’s what I thought.
[00:37:13] Carrillo: In the last podcast, we talk about just the Silicon Valley invading the banking system and trying to become the public partner in monetary provisioning, and that’s a huge deal. That’s a huge deal because MMT analysis has to account for these non-bank banks acting within the dynamics that we’ve previously identified.
Shadow banking looks a little bit differently, certainly the major principles, but it happens via different business model. That means it’s time to bring Post-Keynesian Institutionalist MMT stories into the next century, in that sense. Minsky wrote a great tome about financial capitalism.
But information, data, surveillance, this is the stuff of the growing economy. We don’t live in an economy where most people get mortgages from banks anymore, for instance. It’s Rocket Mortgage online, and it’s a bunch of fintech apps for certain segments of society who do that sort of thing.
That changes what we say about the financial system. The inclusion of new technological partners in the plumbing changes many, many things. If a Silicon Valley firm, whether it’s a big stablecoin firm like Circle or it’s PayPal gets a master account at the Fed, we’re living in a different terrain for MMT analysis.
Yeah, and I think it’s just very important that we keep an eye on Silicon Valley in this sense and take the time for self-assessment. When we talk about what kind of public money systems we’re building.
[00:38:53] Grumbine: Section three of your paper where you talk about payments and panopticism, and I looked up panopticism. It’s not something I inherently knew. It’s kinda like who’s watching the watchers? It’s the internal monitoring, I guess to some degree.
But what I’m concerned about, you identify some very important things: identity fraud, benefit disqualifications, criminal punishment, remittances, abortion payments, gate money. South Carolina is putting forward a bill right now to make abortion potentially punishable by the death penalty.
And there might be hyperbole, it may have no chance of passing, but just the idea that people are even talking about that post-Roe is of great concern. And if you look at what we did with Russia by cutting them off from the SWIFT system and sanctions with Iran and other countries in South America, the United States has used its control over the monetary system of payment systems as a weapon.
You see a great effort for creating a multipolar world as you watch Russia, China, and other groups desperately doing anything they can to get away from the US dollar. When the US government has absolute power over shutting things down, for whatever reason.
I can cut you off from your benefits. You had an abortion, we saw you paid with your card. Now you’re on death row. I really believe these are things that people are concerned about. Can you take me through your perception of those items?
[00:40:28] Carrillo: Yeah, absolutely. Thanks Steve, and I appreciate you focusing even more on the pointy end of public money here, so to speak. It is the case that, again, if we believe in the MMT story that states create money or legal authorities create money, in some sense.
It might be your local colonial warlord who’s just doing their own thing and has broken away from the state. There are plenty examples of that, and it still occurs with big tech. But if we believe in this public money story about legal authority, creating a currency system that is again, necessarily about gathering the information to run that system.
And it is also a tool for gathering information more broadly for exercising other purposes of the state. And I don’t think there’s any question that we need a monetary data collection system. Again, tax being the good example of, I’m not sure how we run a complex economy without certain kinds of information.
I want that to be collected not violently, but there is a certain sense in which it’s important to collect data, textualize certain functions. We want to distribute benefits, et cetera. And we want people to actually get their money, not like the pandemic operation, which was actually riddled with fintech fraud.
We want people to be able to do certain things in the economy, but we want there to be at least some rules and structure compared to what there is right now. And I do think that that’s especially the case with law enforcement, or at least it starts to look very dark when we talk about law enforcement specifically.
Again, there’s no real fourth amendment application in this context. As a general matter, there is something called third party doctrine, which means the government and government agencies can collect data that you share with a private sector party and deem that to be totally okay and constitutional. And that means that functionally speaking, payments, data, or other financial data is no more than a written request away.
Much of the data is reported as a matter of just the day-to-day operations of law enforcement and financial surveillance. But as you indicated with the abortion case, law enforcement can also zoom in on individual transactions. The abortion case, I think, is a really important one to highlight, as well as sanctions, as well as immigration because all of the drives for privacy in those realms involve a certain different kind of politics.
And I think as you may have indicated in earlier comments, people get really excited or into privacy, or get really angry about the lack of privacy, when privacy evasion seems to have the potential of affecting them. And when we talk about Dobbs, we’re talking about payment surveillance, financial surveillance that impacts all of society in a very deep way.
Some people at the biological level, more than others, of course, but everyone. There was a moment after Dobbs where most of the major abortion funds froze payments because they weren’t sure what to do. Now, the easiest way for law enforcement to track if someone got an abortion or another abortion related procedure or a reproductive procedure that happens to be outlawed or criminalized in some fashion in that jurisdiction is to obtain medical records.
In some cases, it may be operationally a little bit difficult to collect medical records, but you might still be able to get the billing records. And funds have advised people to not carry their phones with them. But if you still play with your card, as you are indicating that information can still be made available via bank, et cetera, and even if it doesn’t list, this was an abortion procedure on the bank statement or the account record, there may be enough data to suggest this was absolutely what was happening with that particular payment.
Right after Dobbs, some people said that we should use crypto to funnel abortion payments and donations, and technologists actually quickly pushed back against that because blockchain is just not private in the way that most people think it is. In fact, the entire point is to create a shared letter, a shared record, and as much as there may be some technological protections built into the system, if you have somebody’s public key, you can associate that with a bunch of other data points and re-identify somebody.
Essentially, to put the matter bluntly, most people pay for crypto using bank deposits, which identify them, or use one of these major exchange apps, which also collect their own data. And the idea that people are going to build their own or run their own computer equipment such that they have privacy at a mass level is just not real.
And certainly somebody who’s all of a sudden getting an abortion in most cases is not going to get teched up to the point where they do that quickly. And so the suggestion here by most abortion or reproductive justice advocates at this point is to use cash or to use a cash-like gift card if necessary to purchase things online.
This is an example of this all coming to a forefront. Now, financial surveillance is even more real in a particular way, whereas when Western Union transactions were being monitored, some people cared and some people didn’t. Certainly people have different thoughts about sanctions, and this definitely complicates any possibility of an alliance or a bipartisan support for a variety of financial privacy measures.
Again, back to the discussion of the terrain. Sometimes Dems wanna be pro security, so to speak, and pro privacy. And they draw a hard line between those two that I don’t think is fair. But they do do that, and Republicans do a similar thing when it comes to their issues.
So I am very worried about law enforcement access to financial data on both the individual level and on the social level. You can collect data about how people pay for transit to add to a heat map that the NYPD has, and in fact, that happens. Why would they just leave all that data there and not collect it and integrate it into their models?
And any time we make an individual decision about privacy, we’re necessarily making a social decision or a decision about privacy that affects society more broadly. Because the point is the data aggregation. In the abortion context, if it starts to happen, it will be about catching individuals, but it will also be because they have done some analytics as to where people might be getting abortions or what the movements, so to speak, look like before one does that.
And abortion is a great example cuz it’s an individual issue, but it’s also a class and group issue and an issue that affects everybody as a whole. And it’s one that raises all these tensions to the forefront. I think.
[00:47:53] Grumbine: Did the Sam Bankman-Fried FTX debacle in any way inform this side of the debate at all? Was there anything that came from that that will help guide future endeavors? Because that’s the private side and the private side showed how easy and susceptible it is to not only massive corruption, but absolute failure. Was there anything that came from that that has served to be an informant on this side of the game?
[00:48:26] Carrillo: I’ll highlight two points here, Steve. The first is that I think this really brought to light just how much of the crypto industry’s rhetoric is just that, if not outright lies in many cases, and you and I and others have been crypto critics for a long time, but at this point it is undeniable that the major players in this industry are just grifters.
And any sort of anarchic dream of a free money system beyond the shadow of banks and Silicon Valley is gone. Facebook’s on the blockchain, JP Morgan’s on the blockchain. People like Sam Bankman-Fried are on the blockchain, and it has nothing to do with at least what people say is the historical impulse of Bitcoin, for example.
We are so far from that that it is ridiculous to talk about crypto in an idealized sense. Or the digital asset space in an idealized sense, given the lack of privacy protections, it’s hard to even argue that Sam Bankman-Fried coins count as cryptocurrency. We are mutated in a totally different thing.
I think this again suggests that there is not just vaporware and nonsense, but extreme amounts of fraud, et cetera, going down in the system. And more importantly, that fraud is tied to Congress, to the political system. There are people on both sides of the aisle who took donations and carried water for Sam Bankman-Fried, and that includes people who are running under the banner of Justice Democrats supporting the digital asset industry.
And there’s yolk on everybody’s face. And there was, in part, a run to get bipartisan legislation cuz everyone was implicated, I think, or sizable segments of each political party were implicated. And so the political economy, I think of crypto has been exposed for what it is, at least in the terms of the major industry.
I still hold respect for folks who are trying to do democratic blockchain enterprises and build things. I’m excited to see the results, but by and large, this industry, it’s just absurd. Now, the second point I want to hit though is that this is an illustrative moment because we are learning how many policy makers want to adopt a law enforcement response to this that is very punitive on everybody versus how many want to use this as a moment to reconstruct regulation in the relationship between blockchain and fintech and the government and just the way that these firms operate.
So I obviously do not think that Sam Bankman-Fried should be just chilling with mommy and daddy and out on his bail and receiving this ridiculous treatment. Again, the whole industry is rife with fraudsters and thieves. At the same time, I think to just take a criminal law enforcement approach to this problem after the crisis is, in a word, cheap.
We can go lock up all these bad actors. It makes great headlines for government agencies and for policymakers, it’s relatively easy. There was rampant fraud. But what are we going to do to tackle the structural problems? Because if the ideas, the traditional notions of criminal punishment are helpful here, that this is going to deter certain kinds of actions by people.
I wouldn’t put my money on that. A few bad apples, so to speak, go to jail. That hasn’t changed predatory financial systems in the past. They might go through what is another crypto winter, et cetera, but they’ll find more ways around the rules and they’ll put a nice face on all of this.
So what are we going to do to challenge the fact that there’s a massive shadow banking system at the center of crypto? That some real people are going to get hurt, especially because crypto has been hawked with this narrative of financial inclusion and closing the racial wealth gap and all these other things that it doesn’t do.
But what are we going to do to make sure that this doesn’t happen again? That it doesn’t blow up in people’s faces, or even that it doesn’t cause problems within the rest of the economy? And criminal law enforcement in and of itself is not financial regulation. So I think it’s important to watch who is interested in actually solving the structural problem versus who just wants to be seen on the right side of this issue by the media. Especially if they’ve taken money previously.
[00:53:08] Grumbine: Virtue signalling!
[00:53:09] Carrillo: Exactly. And in many cases, it’s virtue signaling after. We can see your campaign records.
[00:53:17] Grumbine: Right. My last conversation with Rohan was really fantastic. We did a number of interviews back to back on a couple different platforms, and one of the things that jumped out, and you’ve intimated this earlier: MMT had a moment where we were all one fist on the deficit map and we had the core MMT money story down and we were one fist and we could strike a mighty blow.
When it came to inflation, our fingers stopped making a fist, and we didn’t really have the same unified, solid fist to approach that. It seems like we have even less of a fist as it comes to the future of money and the way money has become to transform in this digital world. What does MMT have to do to retain a leadership cutting edge that you had called out earlier and to build that fist back up, how do we get our fist?
[00:54:21] Carrillo: So a lot of people are doing a lot of different things. To your point, and I don’t wanna speak certainly on behalf of a group that is larger than myself. The way I would characterize the way that things are around tech is that some folks are working on it directly, but the fist is the same fist. It’s just not closed right now.
It’s open and there’s not enough nerve connection between the fingers, et cetera. People aren’t talking to each other. I know, for instance, there are economists out there who are looking at the balance sheets of major Silicon Valley firms who may have MMT training, or at least be sympathetic to MMT.
I need to know that stuff, and I have information that you need so that we can stay ahead. How much energy did MMT get from being ahead on the dotcom bubble? It’s part of our story that what happened during the Clinton administration and subsequently was easily cognizable within an MMT framework, so that’s important on the scholastic side.
Getting involved with tech people who are striking back against crypto or against the excesses of fintech more broadly is even more important. MMT has something to say here, even if you’re not a big tech privacy person or not into it yet, in the sense that if we had a real functioning public money system, a lot of this stuff goes by the wayside.
What is the point of Facebook’s coin that travels quickly and is worth a dollar and shows up in your digital wallet if there is ECash that does the same thing and it doesn’t involve Facebook or a bank looking at your payments or charging fees eventually, or using your data for targeted advertising or whatever it may be?
There is a sense in which public money is a shield as well as a sword against this sort of activity. So there’s this regulatory fight, and then there’s the building fight. Again, I think we want a public money system that is successful, and that again depends upon the unit interface, which means that everybody should be involved.
And even if you’re not an activist or an organizer necessarily, figuring out what it is that people want and people like about these tech apps or these fintech apps about crypto, et cetera, is a popular education process. And we also just need to socialize the idea that we could have a better future. Like public money could work this way too.
A lot of the reason people use Venmo, for example, or even Western Union for that matter, is that there are few robust alternatives. You can do a money order at the post office. But it’s still stuck in the analog age. That process is, for the most part, not caught up to the way things are working in the private sector, but with real public investment or public funding of public money R&D, we could live in a world where public finance both high and low, was just much, much easier.
But that requires an entire cultural effort. That requires just incorporating tech into what we are already doing. But I believe everyone within the movement can do a lot of work on this front because the field is honestly wide open.
[00:57:50] Grumbine: Thank you so much for that. It’s a tough question, but when Rohan posed that, it really struck hard because the inflation story, there was just so many different versions. You had Mosler talking about interest payments, the prices government pays, and then you have others talking about collaring commodities and looking at these ubiquitous things like fuel prices going up, creating it, and then the supply chains.
And you look at the price gouging and the fact that no one was willing to even address price controls. So we’ve got a bunch of things out there that have different angles to view them through. One of the beauties that I’ve always found with MMT is it takes the absolute most convoluted spaghetti diagram and turns it into a straight line.
And one of my favorite tweets Stephanie’s ever put out there was “their way,” and it is like the Gordian knot of squiggles, and then “the MMT way”, which was a red dot to another red dot in a straight line. It seems like we haven’t developed our straight line here yet.
[00:58:51] Carrillo: Yeah, I don’t think we quite have, but I think the straight line flows right through everything else we’ve done. Just as we don’t want banks to be heavily involved in the public provisioning process, and if they are involved, we want them to be involved in a very particular safe way.
At least, you know, we want that. That’s our aspiration. We have to pay just as much attention to Silicon Valley and then just start thinking about what it looks like to actually build a democratic public money system that operates on MMT principles.
[00:59:26] Grumbine: Very good, Raul, thank you so much for joining. We cannot let it be two years between interviews. , I miss you too much. You’re such a great guest. I appreciate you taking the time to be with me today.
[00:59:37] Carrillo: You got it, Steve. Thanks so much.
[00:59:39] Grumbine: No problem. This is Steve Grumbine with my guest Raul Carillo. Raul is the chairman of the board of Public Money Action and a good friend of this program’s. We need your help. Please share these podcasts. Consider becoming a donor, and by all means, please continue to grow and learn as our future depends on each one of us. And with that Steve Grumbine with Macro N Cheese, and we are outta here.
[01:00:12] End credits: Macro N Cheese is produced by Andy Kennedy. Descriptive writing by Virginia Cotts and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.
Bio
Raúl Carrillo is the Deputy Director of the LPE Project and an Associate Research Scholar at Yale Law School. His research critically analyzes financial regulation, technology, and innovation. Current research topics include digital currency design, bank-fintech partnerships, data brokerage, and the racialization of laws combatting illicit flows.
Raúl is a Resident Fellow of the Yale Information Society Project and an Affiliate of the Center for Critical Race + Digital Studies.
Prior to joining the Project, Raúl was Policy Counsel at the Demand Progress Education Fund and a Fellow at the Americans for Financial Reform Education Fund, advising public interest groups, federal agencies, and Congressional offices with respect to developments in the financial technology sector. He previously worked as a Staff Attorney at New Economy Project and as Special Counsel to the Enforcement Director at the Consumer Financial Protection Bureau. He is the Chair of the Board of Directors of Public Money Action, an Advisory Council member of Our Money, an Executive Committee member of the National Jobs For All Network, a Board member of the Demand Progress Education Fund, and an Advisory Board member of the Progressive Talent Pipeline.
Raúl can be reached at raul.carrillo@yale.edu.
https://lpeproject.org/our-team/raul-carrillo/
https://law.yale.edu/raul-carrillo-0
https://modernmoneynetwork.org/participants/raúl-carrillo
https://twitter.com/raulacarrillo?s=21&t=sR0r9w13_cKyM-cpZtHyhg
Background
“Financial technology (fintech) companies partner with U.S. government agencies to provide services to millions of people via thousands of programs. While doing so, they continuously collect data to sort, store, score, share, and sell. Most policymakers, scholars, and industry stakeholders agree this model makes the financial system more inclusive, safe, and accountable, thereby “democratizing finance.” Yet standard operating procedure exacerbates identity fraud, punishment of poor people (especially impoverished people of color), and mass surveillance of the general public without the knowledge, much less consent, of the governed.
We can reconstruct this system. The government is now exploring “Digital Dollars”—money native to government computer systems. Today, commercial banks and fintech companies channel nearly all payments between the government and the public. Some experts argue government agencies should use the Digital Dollar system to simply improve this interface. Other experts argue agencies should bypass private partners and issue Digital Dollars directly to individuals, households, and businesses (perhaps by also offering public bank accounts or digital wallets). However, because of the background laws of digital privacy, both visions would engender unintended social harm.
I take up the challenge of digital privacy and data governance within the Digital Dollar payments system. I first examine the laws and technology that enable the government to engage in mass financial data collection. I then identify the material harms of privacy invasion from the perspectives of consumer law, poverty law, and other bodies of law already defining the lives of precisely the people experts aim to include in a Digital Dollar system.
To mitigate harm, I offer a modular proposal for the U.S. Postal Service to issue new devices for using Digital Dollars. These “smartcards,” similar in size to existing debit cards, would not make payments over the internet. Instead, they would store money on the card hardware. People would use the cards for everyday small-dollar transactions, but the cards would not be capable of generating data that companies and agencies could abuse. By upgrading existing technology, we can build a truly universal and safe “public fintech” system for our exciting digital future.”
From Seeing Through Money: Democracy, Data Governance, and the Digital Dollar by Raúl Carrillo
People
Brett Scott
https://alteredstatesof.money/brett-scott/
https://brettscott.substack.com/p/cloudmoney-cash-cards-crypto-war-for-wallets
Rohan Gray
https://positivemoney.org/rohan-grey/
Bill Mitchell
Hyman Minsky
https://www.levyinstitute.org/about/minsky/
Sam Bankman-Fried
https://www.investopedia.com/who-is-sam-bankman-fried-6830274
The Squad
https://en.wikipedia.org/wiki/The_Squad_(United_States_Congress)
Sherrod Brown
https://www.brown.senate.gov/biography
Stephen Lynch
Modern Money Network
“The Modern Money Network (“MMN”) aims to bring accurate and accessible knowledge of monetary and financial systems to the broader public. Our symposia bring together students, scholars, professionals and members of the public to discuss, debate and refine ideas about money. Our work combines insights from a range of fields, including law, political economy, finance, history, sociology, anthropology, technology and systems theory.” https://modernmoneynetwork.org
Blue Collar Caucus
https://en.wikipedia.org/wiki/Blue_Collar_Caucus
The Law and Political Economy (LPE) Project
Events
January 6 Insurrection
https://www.britannica.com/event/January-6-U-S-Capitol-attack
https://apnews.com/hub/capitol-siege
Dobbs v. Jackson Women’s Health Organization (2022)
Red/Brown Merger
https://www.radicalrightanalysis.com/2020/09/25/1-6-2/
Stable Act (Proposed)
https://www.coincenter.org/the-unintended-consequences-of-the-stable-act/
Concepts
Panopticism
Whereas the panopticon is the model for external surveillance, panopticism is a term introduced by French philosopher Michel Foucault to indicate a kind of internal surveillance. In panopticism, the watcher ceases to be external to the watched.
http://guweb2.gonzaga.edu/faculty/mcreynolds/phil463/informationalism/panopticism.html
The Fourth Amendment to the United States Constitution
“The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”
https://constitution.findlaw.com/amendment4.html
Blockchain
https://www.investopedia.com/terms/b/blockchain.asp
Swift System
https://www.investopedia.com/articles/personal-finance/050515/how-swift-system-works.asp
Third Party Doctrine
“In the 1970s, the Supreme Court handed down Smith v. Maryland and United States v. Miller, two of the most important Fourth Amendment decisions of the 20th century. In these cases, the Court held that people are not entitled to an expectation of privacy in information they voluntarily provide to third parties.”
https://sgp.fas.org/crs/misc/R43586.pdf
Notice and Consent Standard
https://humansofdata.atlan.com/2018/04/informed-consent/
Job Guarantee
The job guarantee is a federal government program to provide a good job to every person who wants one and is a long-pursued goal of the American progressive tradition. In the 1940s, labor unions in the Congress of Industrial Organizations (CIO) demanded a job guarantee. Franklin D. Roosevelt supported the right to a job in his never-realized “Second Bill of Rights.” Later, the 1963 March on Washington demanded a jobs guarantee alongside civil rights, understanding that economic justice was a core component of the fight for racial justice.
https://www.currentaffairs.org/2021/05/pavlina-tcherneva-on-mmt-and-the-jobs-guarantee
https://www.sunrisemovement.org/theory-of-change/what-is-a-federal-jobs-guarantee/
Shadow Banking
“The shadow banking system is a group of financial intermediaries high facilitate the creation of credit across the global financial system, but whose members are not subject to regulatory oversight. These companies are often known as nonbank financial companies (NBFC).”
https://www.investopedia.com/terms/s/shadow-banking-system.asp
Publications
Seeing Through Money: Democracy, Data Governance, and the Digital Dollar by Raúl Carrillo
Seeing Like a State by James C Scott
Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets by Brett Scott
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Show Notes
Transcript
Extras
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Steve always says the beauty of MMT is “it takes the most convoluted spaghetti diagram and turns it into a straight line.” When it comes to banking, the financial industry, financial technology, and privacy, has the MMT community developed that straight line yet? Today’s guest, Raúl Carrillo, thinks we can get there:
“I don’t think we quite have, but I think the straight line flows right through everything else we’ve done. Just as we don’t want banks to be heavily involved in the public provisioning process… We have to pay just as much attention to Silicon Valley, and then start thinking about what it looks like to actually build a democratic public money system that operates on MMT principles.”
It’s been two years since we’ve had Raúl on the podcast, but the conversation is continuous, and it includes our episodes with Rohan Grey and Brett Scott.
Steve and Raúl discuss Raúl’s recently published white paper, “Seeing Through Money: Democracy, Data Governance, and the Digital Dollar.” It is essentially an intervention in the discussion about the future of money. It includes analysis of the way government agencies use financial technology today and how it is linked to a broader public money story and an MMT story. Currently, banks are intermediaries between the public and the state. In other words, banks are part of the plumbing. But what’s to stop the government from using financial technology for the public purpose and cutting the middlemen?
Today, however, it’s more than just the banks.
“The inclusion of new technological partners in the plumbing changes many, many things. If a Silicon Valley firm – whether it’s a big stablecoin firm like Circle or PayPal – gets a master account at the Fed, we’re living in a different terrain for MMT analysis … I think it’s just very important that we keep an eye on Silicon Valley in this sense and take the time for self-assessment when we talk about what kind of public money systems we’re building.”
The conversation goes into privacy issues where, again, the lines are blurred between the private sector and the government. Or maybe “blurred” is the wrong word. Their lines of communication are not necessarily visible to the public. What has been blurred is, in some cases, the distinction between left and right.
Some take-aways from the episode. Financial surveillance can have extreme consequences. Think of a state with draconian anti-abortion laws. If the government can’t get a hold of your medical records, they can simply track your payments. After the Dobbs ruling, some suggested using cryptocurrency to pay for abortion, but guess what? It turns out blockchain is not private in the way most people think it is. That’s another take-away from the episode.
Whatever the idealized intentions of the early developers of digital currency (remember how it would address the racial wealth gap?) it has mutated into a world of grifters and fraud. As Raúl says, “It’s not a cool party anymore, if it ever was. When you’ve got the cops and the bankers there, it’s time to leave.”
Raúl Carrillo is the Deputy Director of the LPE Project (Law and Political Economy) and an Associate Research Scholar at Yale Law School. He is on the board of Modern Money Network and the chair of Public Money Action.
@RaulACarrillo on Twitter
Macro N Cheese – Episode 216
Payments and Panopticism with Raúl Carrillo
March 18, 2023
[00:00:00] Raúl Carrillo [intro/music]: The corporate sector or the quote, unquote private sector can collect tremendous amounts of data about us and collate and analyze it and use it for predictive value, et cetera. And there are few rules on how it does that. Then, as long as the government gets information from the private sector, rather than collecting it directly, it avoids the set of protections that would otherwise apply to government data collection.
If you think about crypto, I think it’s whack. I think it’s not a cool party anymore, if it ever was. When you’ve got the cops and the bankers there, it’s time to leave.
[00:01:35] Geoff Ginter [intro/music]: Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host Steve Grumbine.
[00:01:43] Steve Grumbine: All right. This is Steve with Macro N Cheese. We’re gonna go back to the Modern Money Network and the Public Money Action with my dear friend Raul Carillo. Raul is the Deputy Director of the LPE Project, which stands for Law and Political Economy and is an associate research scholar at Yale Law School.
His research critically analyzes financial regulation, technology, and innovation, and he’s recently written a tome. We are talking about a tome like the 55 volume master reference library. Nah, I’m just joking. It’s a 78 page white paper that is very interesting and it ties closely with several of the recent interviews we’ve done with guests like Brett Scott and Rohan Grey.
It’s titled Seeing Through Money: Democracy, Data Governance, and the Digital Dollar. Now, in this particular paper, Raul does not touch on necessarily the impacts within the modern monetary theory framework, but we’ll be addressing that today as well. So without further ado, let me bring on my guest. Raul, welcome back. It’s been a while.
[00:02:57] Raúl Carrillo: Yes, thanks for having me again, Steve. It’s been about two years by my count. We did talk a little bit about financial technology last time, so I’m excited to return to the topic of conversation here.
[00:03:09] Grumbine: Absolutely. So my interviews with Brett Scott has really opened up a lot of interesting thought patterns as we watch a mediary get in between consumers and their banks skimming additional data and skimming financial transactions to make money.
There’s so many ways they’ve got their fingers in the cookie jar and the way Brett described it really made this issue come to life. We had Brett come on to do a RP Live and talk about his book Cloud Money, and when I saw that you had written this, especially as it ties back to the digital dollar, I felt like this was a really important spot to start with because of the public money side of this and the fact that the state is now getting involved in this as well. So take us through. What was the rationale? What was the genesis of you writing this paper to begin with?
[00:04:05] Carrillo: So Steve, I’m very glad that you had Brett on. He’s a dear friend. Certainly an ally in this battle, in the “war on cash”. Brett’s book Cloudmoney, I think does a tremendous job of explaining the technology that’s in people’s hands and starting or at least incorporating a user perspective.
And that’s really important to me and that’s why it’s great that you had Brett, because that provides a situation and context for what’s going on with respect to the future of money. And this paper is essentially an intervention in the discussion about that future.
Along the way, it does a lot analysis of the way that government agencies use financial technology today that has a link to a broader public money story and a MMT story. So the intervention is occurring in the context of the digital dollar debate. I know you’ve had Rohan before, and you may have discussed this a bit, but we are at a moment where governments or certain government institutions – in the United States, the Treasury and the Fed – may have the option to send money from their own native computer systems directly to households, individuals, potentially businesses, non-financial firms.
This means cutting the banks out of the public plumbing process. Essentially, it means getting rid of them, potentially as intermediaries, as you mentioned, between the public and the state itself. This is pretty big in the United States. It’s never happened before. It is something that is endemic to our current model.
Randy Wray talks about how you don’t really pay taxes. The bank charges your account and the bank pays taxes. That is something that could go by the wayside. The very mechanics of modern money are going to change with something like a digital dollar system.
If we have the pandemic again, and the government can send out cards just as they did last time, but this time directly to public bank accounts or to a public digital wallet, or to a digital cash wallet, or on a digital cash card, as I suggested, that really changes the way that we do public finance and the way that we instantiate public money in this country.
And that intervention is important, I think, in terms of, as I argue, constructing a space where everyday folks, all of us can make payments and do something as simple as pay for things without generating data that can conceivably be manipulated by powerful institutions.
And I join Brett in that general battle for privacy at both the individual and social levels going forward. And this ties into a broader discussion of the power of public money and where we are at in terms of really a battle between major corporations and government agencies, and then the public maybe is even a third side over what the future looks like.
[00:07:11] Grumbine: One of the things that jumped out at me is this battle for privacy, as you stated, and it’s very clear that there is a huge populist push or what would amount to be a libertarian insurgency. Maybe it’s always been there, but it’s having its day in the sun with the private side of the digital space.
And I know the fears have always been ownership and authority and legal authority and the distributed model versus the consolidated model, centralized model I guess it would be better to say. When you wrote your paper, one of the things I noticed, and this seems to be important across many aspects of public money, and that is legal authority.
Can you break down what you mean when you start addressing legal authority, the United States government has a patent on the US dollar. It’s its own unit of measure. It’s a creature of law, as you all said many times. Does that play into this concept of legal authority? Are we back to stating the obvious that this is a unit of measure as a unit of account, that it’s the property of the United States government?
[00:08:27] Carrillo: So this story that I am trying to tell, Steve is completely simpatico with that story. And in fact, I draw on what I’ve experienced and what I’ve learned through the MMT movement to think of what I see as just another face of the public money issues that we’re discussing.
And I walk through history briefly in the paper. But my essential point in the introduction to this paper, which I hope to expand on in other work later, is that just as governments issue money in order to reap its fiscal value, create a circuit of social provisioning just as much as it’s used to enable commerce.
It’s used as a reporting tool and it’s almost logically by necessity that when you’re creating a unit of account, a unit of measurement, you are collecting data, information, hopefully to get knowledge, hopefully to get understanding, and that is just part of the process of what it means to run a public money system and run a ledger based system unless you did everything in cash and you had no cameras, et cetera.
What we’re talking about is that money systems are necessarily information systems. There is an anthropologist and a political scientist whose work I draw on, not necessarily because I share his politics, but because his work is foundational in the privacy and data governance literature.
In the social sciences more broadly, that thinker’s name is James C. Scott. He still teaches here at Yale, but his major book is called Seeing Like a State, and what that talks about is the way that the state began to record information and collect data in order to build a complex modern economy.
And although it’s unstated in his work, there is a particular through line about money. And in the most obvious instance, it begins in the context of taxation, just as the modern money story often begins in the context of taxation writ large. And Scott talks about how in many societies and places taxation and thus public finance more broadly depends on the creation of standardized patronymic surnames.
For instance, in England, it used to be the case that people were named just after the trade that they did or where they lived, and it didn’t necessarily have a link with their forebears. But you can’t run taxation that way. You need unique identifiers. You can’t have a million different Mary Hills, that doesn’t work when you’re trying to do taxpayer id.
So in order to fund the very government, you institute a new, more complex data collection system, and we see that happen in colonization. Certainly Scott talks about the Spanish conquest of the Philippines in a similar dynamic where there is a different indigenous naming system that has to be overcome in order to establish a monetary circuit.
And he also touches on this in the context of immigration. For example, Jewish immigration from Eastern Europe. And what happened on Ellis Island is not necessarily just being a bunch of mistakes, but enrolling people into a broader social provisioning system under a certain standardized formats.
And that’s just one example of a genesis point, I think, where the MMT story and the public money story ties in with what I’m doing. But you can also look at the development of even more recent complex components of the economy. Within the last two centuries to draw on this, and some of this is a story of privatization.
Some of it is a story of direct implementation of certain services, but today we live in a society where, as you were discussing, the banks and other technology companies stand between members of the state and each other, unless we’re using cash. We’re going through a couple institutions here.
In reality, the average bank account is connected to 15 other technology companies. So we’re talking about going through a whole web of corporate actors when we just transact with each other, unless we’re using good old cold hard cash. And just as the government has delegated a public money function to banks in terms of lending and credit, and attempting to conduct investment.
It has outsourced the technological apparatus for getting money to people, and with that comes the recording machinery. The government relies on credit scores for its own purposes. Just as the credit scoring industry relies on government identifiers, like social security numbers and other data, they share data between each other and to the point about legal authority today, there is little to no substantive federal privacy law in the United States, which means that essentially your protection against unwanted data collection in most jurisdictions is not clicking “I agree” to a service, which is to say, foregoing digital formal finance in this country.
But as soon as you click the data, something called the notice and consent standard, which forms the core of modern privacy law is deemed to be satisfied. You have minimal protection about how data is shared, sorted, scored, stored after that point. And there are some rules around what you can do with formal regulated credit reporting.
It doesn’t touch the data brokers and the companies that fall outside of the traditional collection mechanism. There are a few rules in terms of direct collection of data by the government. Here and there you find smatterings of stronger standards. In California, there’s some enhanced rights to request to delete your information, things like that.
But by and large, we are living in a country where the privacy laws that were written 40, 50 years ago before the advent of mass surveillance and predictive analytics just provide a veneer of protection at this time. So to put it bluntly, the corporate sector or the quote unquote private sector can collect tremendous amounts of data about us and collate and analyze it and use it for predictive value, et cetera.
And there are a few rules on how it does that. Then, as long as the government gets information from the private sector, rather than collecting it directly, it avoids the set of protections that would otherwise apply to government data collection. The most important of these is the fourth Amendment. Essentially, if Facebook and Instagram collect your data, the government is just essentially a walk over to headquarters or a phone call or an email away from getting that very same data in most cases.
So when we talk about the expansion of the monetary system, it is in this context of modern mass surveillance. So whether we’re talking about the expansion of private or public money systems, my argument is that we have to see this dimension because it’s a huge part of what’s going on.
[00:15:44] Grumbine: I’ve had a really deep debate with a friend, and mind you, this is all just talk, but this is the talk that regular people have, and I’m finding it happening more and more often with January 6th. From the right wing perspective, you see a lot of people seeing the unrest in society and the concern about surveillance and privacy, but more importantly, it’s a matter of who the target is and who the person going after the information is and what their intent and some of the more socialist revolutions over a course of time, how frequently the thing people hold onto is the authoritarian draconian measures that were in place.
Post revolution where you’ve got a counter revolutionary force trying to eek back the gains you gained during your revolution and always in a perpetual state of having to protect against the monarchists coming back. So in this particular case, the fear of who is monitoring you and for what purpose and what can they do with it once they have that information really becomes front and center with this.
And as we look at data collection, some groups are out there just trying to make money. But there’s another element here, and it’s the one that I think most people are afraid of, and that is that conflation of government and industry and isolating people and targeting them. Who is the target? Is this surveillance a part of protecting the state? Is it for class interests? Is it for the wealthy? Is it for the capital order? Who is the beneficiary of this surveillance?
[00:17:28] Carrillo: Always asking the most important question, Steve. Qui bono. So the answer, is most of the powerful institutions in the United States benefit from this arrangement. Putting a pin in it. I think the qualification would be there that I don’t think that this mass data collection model actually helps US law enforcement necessarily zoom in on the worst actors.
But by and large, it is helpful for these companies to have access to payments and monetary data in particular because payments data is already in a monetary form. That’s what it is. It’s a record of a transaction, and so whereas clicking a like button on Facebook may give some predictive value about what you do, the payments data actually has a record of what you’ve done.
It’s not just what they think that you might do based on what you like. It’s a much better record of what you actually do and what you actually spend money on. So for any big tech company, this is huge, and that’s why Meta wanted to create its own currency system. That’s why Amazon is so involved in the back of the house. For most every fintech company, the big Silicon Valley companies, as well as the big banks, are interested in this data collection because ostensibly it helps them price things better, whether that’s credit or another financial product.
It helps them with targeted advertising. It helps in a much deeper way. It enriches their basic business model in the sense that they are drawing data, not necessarily just to track people, and not just to track individuals, but to paint a predictive picture of where consumers are going. Now, just as that data is attractive for those reasons to major Silicon Valley companies and to banks, it is also attractive to many public agencies.
The payments data is particularly, again, granular. It’s ubiquitous, it’s necessary, it’s everywhere. It’s present in our interactions, again, with each other, with formal financial institutions, just out in retail with anybody engaging in digital commerce. And we pay the government directly for some things, especially if you’re on benefits or you have public healthcare, Medicaid or whatever it may be.
So this data, because of its omnipresence, because of its predictive value, is helpful to public agencies that are trying to nominally at least stop fraud. So for instance, we’re talking about swiping an EBT card and that data going to fraud alert systems to keep certain people under watch as to whether they’re abusing, quote unquote, the benefit system or not.
We’re also talking about law enforcement. In a more quotidian way, we’re talking about governments collecting data via private companies because they just are starved of funds and can’t do it themselves, or they think they need to achieve a certain function and they’re not capable of doing it themselves. So they will collect data throughout the system via private actors.
Historically, that’s been the credit bureaus. Now it’s these giant data brokers that have been around for a couple decades now, if not more, but operate outside the regulated fair credit reporting system. And some of them may scrape data, some of ’em have agreements with corporations, but just to collect as much information as possible.
And so to a certain extent, it’s not helpful to think about private data collection and public data collection. It is, and they’re important nuances, but it’s also just as important to zoom out and think, wow, this is one major apparatus that benefits powerful institutions across the board, and that is, I think, a scary position to be in. But that’s the reality of where we’re at now.
[00:21:43] Grumbine: As I stated a few minutes ago, the rise of the libertarian right and this red-brown merger. It’s tough because as a class analysis, the working class is not necessarily a clean, easy mass. It’s got elements of awesome, elements of not so awesome and everything in between. And watching that happen, it’s beyond my ability to say whether it’s good or bad.
Only I can see that it’s happening. I guess from that perspective, when you’re designing systems with knowledge of the instability in society at present. Both in the insanity of the Republicans and the fecklessness of the Democrats, what do you see as the temperature for enacting quality measures?
I’m looking around, who’s my champion? Other than my friend Raul, whom I trust. This is such a serious matter. Who are the people that are thinking through this that would ultimately bring forth the recommendations? Then how would that be enacted?
[00:22:58] Carrillo: Yeah, that’s a great set of questions. So just to comment on the politics a little and what I think you’re zooming in on Steve or what may just be relevant to your broader point about what’s happening on the left and right. Privacy and data governance issues, really scramble our conventional political axes or the way that we think about who’s on whose team.
And as you’re indicating, in some instances this can be fraught and in some instances it seems necessary. And the way I try to approach the financial privacy issue in particular is first of all, to recognize that again, this scrambles everything. To make very contingent alliances, but sometimes that is not where I wanna stay and the overlap needs to be small enough such that I’m not violating my principles.
But just in the logic of making the deal, that has to be the case for the other side as well. And to make it a little bit more concrete. Privacy is interesting because it splinters both parties. Not necessarily along populist lines, but it can. So on the Democratic Party side, on one end of the spectrum, you have the squad and some other Congress members from working class districts, et cetera, with significant communities of color who are pro privacy.
To put it bluntly. That includes, again, everybody who you’d imagine would be on the progressive end. I would also put Senator Sherrod Brown in there. In some cases you have a variety of senators from the banking committee who joined that side as well. But Rohan and I work most closely with Representative Stephen Lynch from South Boston, which is a working class district.
Steve is an interesting guy. He just likes walking around his district and taking care of his grandkids and used to be the head of the blue collar caucus and is relatively down to earth insofar as a member of Congress can be. And we’ve worked with Steven closely, and the E Cash bill and the Stable Act are both championed by him.
At the same time, he’s part of a broader ecosystem. So that’s the Democratic side. On the Republican side, as I think you already know and have alluded to, there are many fissures with respect to the power of these digital technology companies and privacy and the role of the state, et cetera.
On the one hand, it must be said that just as on the Democratic side, you have some people who just belong to Silicon Valley or belong to the fintech sector, or as we’re learning through the Sam Bankman-Fried fiasco just belong to crypto, so to speak. And that cuts across both sides of the aisle.
[00:25:55] Grumbine: Sure.
[00:25:55] Carrillo: And then you have natsec hawks on the Republican side, or people who are really zealous about China in a national security sense. They have counterparts on the Dem side, but it’s a significantly huge part of the Republican party. And then you have libertarians who, in this particular case tend to be pro privacy, but we disagree on the role of public sector financial technology, for instance.
Rohan and I have managed, along with all the political actors I just mentioned, plus advocacy groups along the Hill — ranging from people who are focused on racial justice to folks who are focused on privacy in the old internet freedom vein from the nineties, still. Those groups, we’ve all managed to cobble together at least a wave on the Hill.
And there’s a sense that Republicans may split on this, but this is all going forward quickly. And as things happen on the terrain of the big tech fights that are occurring between the FTC and the DOJ and the major tech companies, and as things happen with crypto and the Sam Bankman-Fried shakeout and the impending collapse of Tether, and maybe another, get a third crash in the last year or so…
The ECash alliance also becomes complicated. Privacy as an issue becomes complicated. But what I would do in this situation is continue to look at the people who are pushing both privacy in the sense of data protection and sound data governance, I’d say more broadly, because we do need more than cash – I do believe in a public bank account system, we’re gonna have to have tiered access, trusted access to that data – but people who are pro privacy but nevertheless willing to build public sector technology.
Libertarians may join on one public sector technology, which is cash, but there is a much broader fight to be had, so to speak. And again, the privacy politics can cut a number of ways. Even within the coalition we’ll have people who think the answer is crypto and the people who think that the answer is E cash, but are nevertheless willing to sign on. So that, I hope, paints just a picture of the complicated politics around financial privacy on the Hill.
[00:28:29] Intermission: You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon, like and follow our pages on Facebook and YouTube, and follow us on Periscope, Twitter, Twitch, Rokfin, and Instagram.
[00:29:20] Grumbine: I’m a systems guy, so when I’m looking at systems and I’m thinking about each handoff in the system, every step through that system has to be addressed because each one of those presents a potential area for exploitation. Every step, every handoff has to have something to account for the security at that step.
And by the time these concepts make it to the public, it’s no longer broken down at each handoff, it’s now more of a solution. An overarching solution that hand waves and gives you a cloud to describe what occurred in the system itself. Where are we in terms of identifying the various steps within the system that produce vulnerabilities that people should be aware of?
[00:30:13] Carrillo: So I’m not sure if you’d prefer to talk about security?
[00:30:17] Grumbine: I have a system, and inside the system it might be the banking system itself within the Federal Reserve system, any number of places, but then you’ve got the actual physical devices. The E Cash card originally just used as an example, as an edge device that would be a recipient of these digital dollars. Each step to getting through that process from the actual purchase to being able to save. Where are we in terms of actually designing that system?
[00:30:49] Carrillo: Sure thing. So at this point, I think that we have pretty solid proofs of concept with respect to something like an ECash hardware device. And those exist in the private sector or are being developed in the private sector in a very promising way.
And they also exist in the context of public-private partnerships around the world. There are many jurisdictions outside of the United States that have already started developing this technology over the course of many years. And the most intense example of this is certainly China.
And I don’t buy the Sinophobic narrative, and I don’t want to rattle sabers at all. That’s not my politics. But it is a bit embarrassing that China has made postal banking before the United States. [laughter] And it has done it in a way that puts rather simple technology in people’s hands.
And of course, I wouldn’t follow China on privacy, but they have created devices with offline functionality, which they supply through their postal savings bank. And you can send money long distance with a card with 10 little bumps on it, and you press those buttons and voila, you’ve sent money from one device to another, instantaneously.
And in many other countries, there is something closer to the offline functionality that we’ve proposed in the ECash Act and even the cards that I’ve proposed in this article draft. And that’s because many countries in the global south have to get payments technology to people who don’t have internet access.
So they’ve thought about this a lot more than policymakers have in the United States, even though one in three adults in the US does not have high-speed internet access in the home, and there are entire communities, especially rural communities that don’t have high-speed internet access at all.
That stuff is required to use most of the modern fintech apps, including the sorts of apps that would be included in other visions of the digital dollar system. For example, Kenya’s the most popular example, but let’s just talk about Senegal because I recently met some payments folks from that country at a conference.
Just like in other countries, there are all these devices that essentially allow you to send money in a format that is something like a text message. It operates on a telecom network rather than the internet. And again, this is to reach people who don’t have online access but may have phone access.
And in Senegal, this is financially including people in the system for a first time, it’s establishing a unique identifier, in some places, even that previously didn’t exist. And unfortunately because of the way the consumer law works in Senegal, people have no idea that they’re also signing up for a bank account.
And despite the fact that they’re using those phones to make offline payments, the banks are still settling the transactions in the back of the house. That’s an extreme example of what is going on, I think, everywhere. Folks just don’t know what this looks like, and there’s certainly no way for them to know about the security of the technical design as you were saying.
Even the people who are furthest toward mine and Rohan’s position on this and the ECash coalition’s position on this, they will hold up technologies in Senegal or in Kenya or in other places as examples of great tech that is helping us here. But it’s like, hold on. There are still intermediaries there.
And you have to actually look at systems design, I would say, as well as the legal contracts around these partnerships to know when you are actually still just falling back into a system that is not truly peer-to-peer. And so Rohan and I have turned to open source hardware rather than software as the model for these devices to try to cut out these intermediaries completely.
And that means that transactions are device to device rather than device through a network, through another device, or not a network in the sense that the internet is a network. So it’s that kind of attention to detail that is important in actually getting what we want to achieve rather than not.
And there are all kinds of other applications that apply to the devices and other kinds of rules and standards and protocols that will need to be embedded in the tech, including around how much money you can store on the device, what are the mechanics of actually transmitting the money, how much you can send at a time, security measures for the device itself, et cetera.
But this is extremely important. And to bring it back to the MMT point, I think that if we want to have a strong public fist, we have to think about what that actually looks like in terms of the user interface. We have to win a battle in people’s hands. If you think about crypto, I think it’s wack. I think it’s not a cool party anymore, if it ever was.
When you’ve got the cops and the bankers there, it’s time to leave. [laughter] At least. But there is a certain appeal that people get fascinated by it just playing with it on their phones. And there’s a broader discussion that we can have about the attention economy and whether it’s good that people are living on their phones.
But right now, I think unless MMT starts paying attention to the tech, to the plumbing, we’re gonna lose the broader war about public money. And Rohan talks about how this works in the back of the house and how it’s gonna look like to spend money. Maybe we get something like Bill Mitchell’s overt monetary financing once we replace the existing back of the house machinery with something much more streamlined.
But we also have to think about it in terms of how people are going to interact with it. And if we wanna spend trillions of dollars in the pandemic and just put it in people’s hands, or we want that money to come through a job guarantee program, et cetera, we have to think about the technological layer. It’s always there. It’s always been there. And in some senses, I think MMT as a paradigm, needs to stay on the cutting edge of all this because, what it means to be an MMTer is to stay on the cutting edge.
[00:37:11] Grumbine: That’s what I thought.
[00:37:13] Carrillo: In the last podcast, we talk about just the Silicon Valley invading the banking system and trying to become the public partner in monetary provisioning, and that’s a huge deal. That’s a huge deal because MMT analysis has to account for these non-bank banks acting within the dynamics that we’ve previously identified.
Shadow banking looks a little bit differently, certainly the major principles, but it happens via different business model. That means it’s time to bring Post-Keynesian Institutionalist MMT stories into the next century, in that sense. Minsky wrote a great tome about financial capitalism.
But information, data, surveillance, this is the stuff of the growing economy. We don’t live in an economy where most people get mortgages from banks anymore, for instance. It’s Rocket Mortgage online, and it’s a bunch of fintech apps for certain segments of society who do that sort of thing.
That changes what we say about the financial system. The inclusion of new technological partners in the plumbing changes many, many things. If a Silicon Valley firm, whether it’s a big stablecoin firm like Circle or it’s PayPal gets a master account at the Fed, we’re living in a different terrain for MMT analysis.
Yeah, and I think it’s just very important that we keep an eye on Silicon Valley in this sense and take the time for self-assessment. When we talk about what kind of public money systems we’re building.
[00:38:53] Grumbine: Section three of your paper where you talk about payments and panopticism, and I looked up panopticism. It’s not something I inherently knew. It’s kinda like who’s watching the watchers? It’s the internal monitoring, I guess to some degree.
But what I’m concerned about, you identify some very important things: identity fraud, benefit disqualifications, criminal punishment, remittances, abortion payments, gate money. South Carolina is putting forward a bill right now to make abortion potentially punishable by the death penalty.
And there might be hyperbole, it may have no chance of passing, but just the idea that people are even talking about that post-Roe is of great concern. And if you look at what we did with Russia by cutting them off from the SWIFT system and sanctions with Iran and other countries in South America, the United States has used its control over the monetary system of payment systems as a weapon.
You see a great effort for creating a multipolar world as you watch Russia, China, and other groups desperately doing anything they can to get away from the US dollar. When the US government has absolute power over shutting things down, for whatever reason.
I can cut you off from your benefits. You had an abortion, we saw you paid with your card. Now you’re on death row. I really believe these are things that people are concerned about. Can you take me through your perception of those items?
[00:40:28] Carrillo: Yeah, absolutely. Thanks Steve, and I appreciate you focusing even more on the pointy end of public money here, so to speak. It is the case that, again, if we believe in the MMT story that states create money or legal authorities create money, in some sense.
It might be your local colonial warlord who’s just doing their own thing and has broken away from the state. There are plenty examples of that, and it still occurs with big tech. But if we believe in this public money story about legal authority, creating a currency system that is again, necessarily about gathering the information to run that system.
And it is also a tool for gathering information more broadly for exercising other purposes of the state. And I don’t think there’s any question that we need a monetary data collection system. Again, tax being the good example of, I’m not sure how we run a complex economy without certain kinds of information.
I want that to be collected not violently, but there is a certain sense in which it’s important to collect data, textualize certain functions. We want to distribute benefits, et cetera. And we want people to actually get their money, not like the pandemic operation, which was actually riddled with fintech fraud.
We want people to be able to do certain things in the economy, but we want there to be at least some rules and structure compared to what there is right now. And I do think that that’s especially the case with law enforcement, or at least it starts to look very dark when we talk about law enforcement specifically.
Again, there’s no real fourth amendment application in this context. As a general matter, there is something called third party doctrine, which means the government and government agencies can collect data that you share with a private sector party and deem that to be totally okay and constitutional. And that means that functionally speaking, payments, data, or other financial data is no more than a written request away.
Much of the data is reported as a matter of just the day-to-day operations of law enforcement and financial surveillance. But as you indicated with the abortion case, law enforcement can also zoom in on individual transactions. The abortion case, I think, is a really important one to highlight, as well as sanctions, as well as immigration because all of the drives for privacy in those realms involve a certain different kind of politics.
And I think as you may have indicated in earlier comments, people get really excited or into privacy, or get really angry about the lack of privacy, when privacy evasion seems to have the potential of affecting them. And when we talk about Dobbs, we’re talking about payment surveillance, financial surveillance that impacts all of society in a very deep way.
Some people at the biological level, more than others, of course, but everyone. There was a moment after Dobbs where most of the major abortion funds froze payments because they weren’t sure what to do. Now, the easiest way for law enforcement to track if someone got an abortion or another abortion related procedure or a reproductive procedure that happens to be outlawed or criminalized in some fashion in that jurisdiction is to obtain medical records.
In some cases, it may be operationally a little bit difficult to collect medical records, but you might still be able to get the billing records. And funds have advised people to not carry their phones with them. But if you still play with your card, as you are indicating that information can still be made available via bank, et cetera, and even if it doesn’t list, this was an abortion procedure on the bank statement or the account record, there may be enough data to suggest this was absolutely what was happening with that particular payment.
Right after Dobbs, some people said that we should use crypto to funnel abortion payments and donations, and technologists actually quickly pushed back against that because blockchain is just not private in the way that most people think it is. In fact, the entire point is to create a shared letter, a shared record, and as much as there may be some technological protections built into the system, if you have somebody’s public key, you can associate that with a bunch of other data points and re-identify somebody.
Essentially, to put the matter bluntly, most people pay for crypto using bank deposits, which identify them, or use one of these major exchange apps, which also collect their own data. And the idea that people are going to build their own or run their own computer equipment such that they have privacy at a mass level is just not real.
And certainly somebody who’s all of a sudden getting an abortion in most cases is not going to get teched up to the point where they do that quickly. And so the suggestion here by most abortion or reproductive justice advocates at this point is to use cash or to use a cash-like gift card if necessary to purchase things online.
This is an example of this all coming to a forefront. Now, financial surveillance is even more real in a particular way, whereas when Western Union transactions were being monitored, some people cared and some people didn’t. Certainly people have different thoughts about sanctions, and this definitely complicates any possibility of an alliance or a bipartisan support for a variety of financial privacy measures.
Again, back to the discussion of the terrain. Sometimes Dems wanna be pro security, so to speak, and pro privacy. And they draw a hard line between those two that I don’t think is fair. But they do do that, and Republicans do a similar thing when it comes to their issues.
So I am very worried about law enforcement access to financial data on both the individual level and on the social level. You can collect data about how people pay for transit to add to a heat map that the NYPD has, and in fact, that happens. Why would they just leave all that data there and not collect it and integrate it into their models?
And any time we make an individual decision about privacy, we’re necessarily making a social decision or a decision about privacy that affects society more broadly. Because the point is the data aggregation. In the abortion context, if it starts to happen, it will be about catching individuals, but it will also be because they have done some analytics as to where people might be getting abortions or what the movements, so to speak, look like before one does that.
And abortion is a great example cuz it’s an individual issue, but it’s also a class and group issue and an issue that affects everybody as a whole. And it’s one that raises all these tensions to the forefront. I think.
[00:47:53] Grumbine: Did the Sam Bankman-Fried FTX debacle in any way inform this side of the debate at all? Was there anything that came from that that will help guide future endeavors? Because that’s the private side and the private side showed how easy and susceptible it is to not only massive corruption, but absolute failure. Was there anything that came from that that has served to be an informant on this side of the game?
[00:48:26] Carrillo: I’ll highlight two points here, Steve. The first is that I think this really brought to light just how much of the crypto industry’s rhetoric is just that, if not outright lies in many cases, and you and I and others have been crypto critics for a long time, but at this point it is undeniable that the major players in this industry are just grifters.
And any sort of anarchic dream of a free money system beyond the shadow of banks and Silicon Valley is gone. Facebook’s on the blockchain, JP Morgan’s on the blockchain. People like Sam Bankman-Fried are on the blockchain, and it has nothing to do with at least what people say is the historical impulse of Bitcoin, for example.
We are so far from that that it is ridiculous to talk about crypto in an idealized sense. Or the digital asset space in an idealized sense, given the lack of privacy protections, it’s hard to even argue that Sam Bankman-Fried coins count as cryptocurrency. We are mutated in a totally different thing.
I think this again suggests that there is not just vaporware and nonsense, but extreme amounts of fraud, et cetera, going down in the system. And more importantly, that fraud is tied to Congress, to the political system. There are people on both sides of the aisle who took donations and carried water for Sam Bankman-Fried, and that includes people who are running under the banner of Justice Democrats supporting the digital asset industry.
And there’s yolk on everybody’s face. And there was, in part, a run to get bipartisan legislation cuz everyone was implicated, I think, or sizable segments of each political party were implicated. And so the political economy, I think of crypto has been exposed for what it is, at least in the terms of the major industry.
I still hold respect for folks who are trying to do democratic blockchain enterprises and build things. I’m excited to see the results, but by and large, this industry, it’s just absurd. Now, the second point I want to hit though is that this is an illustrative moment because we are learning how many policy makers want to adopt a law enforcement response to this that is very punitive on everybody versus how many want to use this as a moment to reconstruct regulation in the relationship between blockchain and fintech and the government and just the way that these firms operate.
So I obviously do not think that Sam Bankman-Fried should be just chilling with mommy and daddy and out on his bail and receiving this ridiculous treatment. Again, the whole industry is rife with fraudsters and thieves. At the same time, I think to just take a criminal law enforcement approach to this problem after the crisis is, in a word, cheap.
We can go lock up all these bad actors. It makes great headlines for government agencies and for policymakers, it’s relatively easy. There was rampant fraud. But what are we going to do to tackle the structural problems? Because if the ideas, the traditional notions of criminal punishment are helpful here, that this is going to deter certain kinds of actions by people.
I wouldn’t put my money on that. A few bad apples, so to speak, go to jail. That hasn’t changed predatory financial systems in the past. They might go through what is another crypto winter, et cetera, but they’ll find more ways around the rules and they’ll put a nice face on all of this.
So what are we going to do to challenge the fact that there’s a massive shadow banking system at the center of crypto? That some real people are going to get hurt, especially because crypto has been hawked with this narrative of financial inclusion and closing the racial wealth gap and all these other things that it doesn’t do.
But what are we going to do to make sure that this doesn’t happen again? That it doesn’t blow up in people’s faces, or even that it doesn’t cause problems within the rest of the economy? And criminal law enforcement in and of itself is not financial regulation. So I think it’s important to watch who is interested in actually solving the structural problem versus who just wants to be seen on the right side of this issue by the media. Especially if they’ve taken money previously.
[00:53:08] Grumbine: Virtue signalling!
[00:53:09] Carrillo: Exactly. And in many cases, it’s virtue signaling after. We can see your campaign records.
[00:53:17] Grumbine: Right. My last conversation with Rohan was really fantastic. We did a number of interviews back to back on a couple different platforms, and one of the things that jumped out, and you’ve intimated this earlier: MMT had a moment where we were all one fist on the deficit map and we had the core MMT money story down and we were one fist and we could strike a mighty blow.
When it came to inflation, our fingers stopped making a fist, and we didn’t really have the same unified, solid fist to approach that. It seems like we have even less of a fist as it comes to the future of money and the way money has become to transform in this digital world. What does MMT have to do to retain a leadership cutting edge that you had called out earlier and to build that fist back up, how do we get our fist?
[00:54:21] Carrillo: So a lot of people are doing a lot of different things. To your point, and I don’t wanna speak certainly on behalf of a group that is larger than myself. The way I would characterize the way that things are around tech is that some folks are working on it directly, but the fist is the same fist. It’s just not closed right now.
It’s open and there’s not enough nerve connection between the fingers, et cetera. People aren’t talking to each other. I know, for instance, there are economists out there who are looking at the balance sheets of major Silicon Valley firms who may have MMT training, or at least be sympathetic to MMT.
I need to know that stuff, and I have information that you need so that we can stay ahead. How much energy did MMT get from being ahead on the dotcom bubble? It’s part of our story that what happened during the Clinton administration and subsequently was easily cognizable within an MMT framework, so that’s important on the scholastic side.
Getting involved with tech people who are striking back against crypto or against the excesses of fintech more broadly is even more important. MMT has something to say here, even if you’re not a big tech privacy person or not into it yet, in the sense that if we had a real functioning public money system, a lot of this stuff goes by the wayside.
What is the point of Facebook’s coin that travels quickly and is worth a dollar and shows up in your digital wallet if there is ECash that does the same thing and it doesn’t involve Facebook or a bank looking at your payments or charging fees eventually, or using your data for targeted advertising or whatever it may be?
There is a sense in which public money is a shield as well as a sword against this sort of activity. So there’s this regulatory fight, and then there’s the building fight. Again, I think we want a public money system that is successful, and that again depends upon the unit interface, which means that everybody should be involved.
And even if you’re not an activist or an organizer necessarily, figuring out what it is that people want and people like about these tech apps or these fintech apps about crypto, et cetera, is a popular education process. And we also just need to socialize the idea that we could have a better future. Like public money could work this way too.
A lot of the reason people use Venmo, for example, or even Western Union for that matter, is that there are few robust alternatives. You can do a money order at the post office. But it’s still stuck in the analog age. That process is, for the most part, not caught up to the way things are working in the private sector, but with real public investment or public funding of public money R&D, we could live in a world where public finance both high and low, was just much, much easier.
But that requires an entire cultural effort. That requires just incorporating tech into what we are already doing. But I believe everyone within the movement can do a lot of work on this front because the field is honestly wide open.
[00:57:50] Grumbine: Thank you so much for that. It’s a tough question, but when Rohan posed that, it really struck hard because the inflation story, there was just so many different versions. You had Mosler talking about interest payments, the prices government pays, and then you have others talking about collaring commodities and looking at these ubiquitous things like fuel prices going up, creating it, and then the supply chains.
And you look at the price gouging and the fact that no one was willing to even address price controls. So we’ve got a bunch of things out there that have different angles to view them through. One of the beauties that I’ve always found with MMT is it takes the absolute most convoluted spaghetti diagram and turns it into a straight line.
And one of my favorite tweets Stephanie’s ever put out there was “their way,” and it is like the Gordian knot of squiggles, and then “the MMT way”, which was a red dot to another red dot in a straight line. It seems like we haven’t developed our straight line here yet.
[00:58:51] Carrillo: Yeah, I don’t think we quite have, but I think the straight line flows right through everything else we’ve done. Just as we don’t want banks to be heavily involved in the public provisioning process, and if they are involved, we want them to be involved in a very particular safe way.
At least, you know, we want that. That’s our aspiration. We have to pay just as much attention to Silicon Valley and then just start thinking about what it looks like to actually build a democratic public money system that operates on MMT principles.
[00:59:26] Grumbine: Very good, Raul, thank you so much for joining. We cannot let it be two years between interviews. , I miss you too much. You’re such a great guest. I appreciate you taking the time to be with me today.
[00:59:37] Carrillo: You got it, Steve. Thanks so much.
[00:59:39] Grumbine: No problem. This is Steve Grumbine with my guest Raul Carillo. Raul is the chairman of the board of Public Money Action and a good friend of this program’s. We need your help. Please share these podcasts. Consider becoming a donor, and by all means, please continue to grow and learn as our future depends on each one of us. And with that Steve Grumbine with Macro N Cheese, and we are outta here.
[01:00:12] End credits: Macro N Cheese is produced by Andy Kennedy. Descriptive writing by Virginia Cotts and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.
Bio
Raúl Carrillo is the Deputy Director of the LPE Project and an Associate Research Scholar at Yale Law School. His research critically analyzes financial regulation, technology, and innovation. Current research topics include digital currency design, bank-fintech partnerships, data brokerage, and the racialization of laws combatting illicit flows.
Raúl is a Resident Fellow of the Yale Information Society Project and an Affiliate of the Center for Critical Race + Digital Studies.
Prior to joining the Project, Raúl was Policy Counsel at the Demand Progress Education Fund and a Fellow at the Americans for Financial Reform Education Fund, advising public interest groups, federal agencies, and Congressional offices with respect to developments in the financial technology sector. He previously worked as a Staff Attorney at New Economy Project and as Special Counsel to the Enforcement Director at the Consumer Financial Protection Bureau. He is the Chair of the Board of Directors of Public Money Action, an Advisory Council member of Our Money, an Executive Committee member of the National Jobs For All Network, a Board member of the Demand Progress Education Fund, and an Advisory Board member of the Progressive Talent Pipeline.
Raúl can be reached at raul.carrillo@yale.edu.
https://lpeproject.org/our-team/raul-carrillo/
https://law.yale.edu/raul-carrillo-0
https://modernmoneynetwork.org/participants/raúl-carrillo
https://twitter.com/raulacarrillo?s=21&t=sR0r9w13_cKyM-cpZtHyhg
Background
“Financial technology (fintech) companies partner with U.S. government agencies to provide services to millions of people via thousands of programs. While doing so, they continuously collect data to sort, store, score, share, and sell. Most policymakers, scholars, and industry stakeholders agree this model makes the financial system more inclusive, safe, and accountable, thereby “democratizing finance.” Yet standard operating procedure exacerbates identity fraud, punishment of poor people (especially impoverished people of color), and mass surveillance of the general public without the knowledge, much less consent, of the governed.
We can reconstruct this system. The government is now exploring “Digital Dollars”—money native to government computer systems. Today, commercial banks and fintech companies channel nearly all payments between the government and the public. Some experts argue government agencies should use the Digital Dollar system to simply improve this interface. Other experts argue agencies should bypass private partners and issue Digital Dollars directly to individuals, households, and businesses (perhaps by also offering public bank accounts or digital wallets). However, because of the background laws of digital privacy, both visions would engender unintended social harm.
I take up the challenge of digital privacy and data governance within the Digital Dollar payments system. I first examine the laws and technology that enable the government to engage in mass financial data collection. I then identify the material harms of privacy invasion from the perspectives of consumer law, poverty law, and other bodies of law already defining the lives of precisely the people experts aim to include in a Digital Dollar system.
To mitigate harm, I offer a modular proposal for the U.S. Postal Service to issue new devices for using Digital Dollars. These “smartcards,” similar in size to existing debit cards, would not make payments over the internet. Instead, they would store money on the card hardware. People would use the cards for everyday small-dollar transactions, but the cards would not be capable of generating data that companies and agencies could abuse. By upgrading existing technology, we can build a truly universal and safe “public fintech” system for our exciting digital future.”
From Seeing Through Money: Democracy, Data Governance, and the Digital Dollar by Raúl Carrillo
People
Brett Scott
https://alteredstatesof.money/brett-scott/
https://brettscott.substack.com/p/cloudmoney-cash-cards-crypto-war-for-wallets
Rohan Gray
https://positivemoney.org/rohan-grey/
Bill Mitchell
Hyman Minsky
https://www.levyinstitute.org/about/minsky/
Sam Bankman-Fried
https://www.investopedia.com/who-is-sam-bankman-fried-6830274
The Squad
https://en.wikipedia.org/wiki/The_Squad_(United_States_Congress)
Sherrod Brown
https://www.brown.senate.gov/biography
Stephen Lynch
Modern Money Network
“The Modern Money Network (“MMN”) aims to bring accurate and accessible knowledge of monetary and financial systems to the broader public. Our symposia bring together students, scholars, professionals and members of the public to discuss, debate and refine ideas about money. Our work combines insights from a range of fields, including law, political economy, finance, history, sociology, anthropology, technology and systems theory.” https://modernmoneynetwork.org
Blue Collar Caucus
https://en.wikipedia.org/wiki/Blue_Collar_Caucus
The Law and Political Economy (LPE) Project
Events
January 6 Insurrection
https://www.britannica.com/event/January-6-U-S-Capitol-attack
https://apnews.com/hub/capitol-siege
Dobbs v. Jackson Women’s Health Organization (2022)
Red/Brown Merger
https://www.radicalrightanalysis.com/2020/09/25/1-6-2/
Stable Act (Proposed)
https://www.coincenter.org/the-unintended-consequences-of-the-stable-act/
Concepts
Panopticism
Whereas the panopticon is the model for external surveillance, panopticism is a term introduced by French philosopher Michel Foucault to indicate a kind of internal surveillance. In panopticism, the watcher ceases to be external to the watched.
http://guweb2.gonzaga.edu/faculty/mcreynolds/phil463/informationalism/panopticism.html
The Fourth Amendment to the United States Constitution
“The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”
https://constitution.findlaw.com/amendment4.html
Blockchain
https://www.investopedia.com/terms/b/blockchain.asp
Swift System
https://www.investopedia.com/articles/personal-finance/050515/how-swift-system-works.asp
Third Party Doctrine
“In the 1970s, the Supreme Court handed down Smith v. Maryland and United States v. Miller, two of the most important Fourth Amendment decisions of the 20th century. In these cases, the Court held that people are not entitled to an expectation of privacy in information they voluntarily provide to third parties.”
https://sgp.fas.org/crs/misc/R43586.pdf
Notice and Consent Standard
https://humansofdata.atlan.com/2018/04/informed-consent/
Job Guarantee
The job guarantee is a federal government program to provide a good job to every person who wants one and is a long-pursued goal of the American progressive tradition. In the 1940s, labor unions in the Congress of Industrial Organizations (CIO) demanded a job guarantee. Franklin D. Roosevelt supported the right to a job in his never-realized “Second Bill of Rights.” Later, the 1963 March on Washington demanded a jobs guarantee alongside civil rights, understanding that economic justice was a core component of the fight for racial justice.
https://www.currentaffairs.org/2021/05/pavlina-tcherneva-on-mmt-and-the-jobs-guarantee
https://www.sunrisemovement.org/theory-of-change/what-is-a-federal-jobs-guarantee/
Shadow Banking
“The shadow banking system is a group of financial intermediaries high facilitate the creation of credit across the global financial system, but whose members are not subject to regulatory oversight. These companies are often known as nonbank financial companies (NBFC).”
https://www.investopedia.com/terms/s/shadow-banking-system.asp
Publications
Seeing Through Money: Democracy, Data Governance, and the Digital Dollar by Raúl Carrillo
Seeing Like a State by James C Scott
Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets by Brett Scott