Prime Minister Malcom Turnbull took aim at the giants of the internet this week. Turnbull told the press that the privacy settings of companies like Facebook and Google are protecting ‘terrorists’, ‘drug traffickers’ and ‘people who are exploiting children online’.
Attorney-General George Brandis backed him up. They argue that the government needs a path through the privacy protections of the internet. And if it isn’t given to them, they’ll legislate to take it by force.
No one would argue that paedophiles and terrorists should be protected. Least of all your Editor. If you accept our leaders’ premise that breaking down this encryption will bring such people to justice, then how could you disagree?
Unfortunately, that’s a pretty big ‘if’.
If you’re not familiar, the way ‘end to end encryption’ works means that even the developers can’t read the contents of your messages. That’s a large part of the selling point.
Facebook, who own the encrypted messaging app Whatsapp, have already responded to Turnbull’s demands. They claim there’s no way to decrypt anyone’s messages. Not without removing privacy protections from everyone’s messages.
There’s no denying the dark corners of the internet are host to some horrific stuff. Crime, exploitation, and every kind of discriminatory hate group. But before you lay the blame on the internet, take a look at history.
Terrorism, hate groups, and drug dealers existed long before the internet. Human traffickers and other predators have lurked among us for as long as humans have existed.
The worst side of the internet isn’t a reflection of technology. It’s a reflection of us.
You don’t blame the printing press for the fact that someone printed a racist pamphlet. You blame the racist.
Yes, the internet has made it easier for criminals and hate groups to communicate and work together. Because it’s made it easier for everyone to communicate and work together. Quickly, conveniently and privately.
The vast majority of people using these tools do so innocently. This has been a huge benefit to us all, and will continue to be.
If we destroy those tools, we might make it harder on evil people. But we’ll definitely make it harder on everyone else.
And is the government even right? By stripping away everyone’s privacy, can they purge society of those undesirable elements?
No, they can’t. Firstly, as mentioned, all of those groups existed before the internet. They could survive without it again. But more importantly, our government simply can’t do what it’s promising.
A simple search in Apple’s App Store returns more than 200 results for ‘encrypted messaging’.
Do Turnbull and Brandis expect the developers behind every one of those apps to voluntarily hand over the keys to their privacy encryption? Privacy encryption that is the only unique selling point attracting customers to their apps?
Or perhaps they think that they can force them to, no matter where in the world the developers are headquartered.
Once he’s cleaned up Apple’s store, I wish Turbull the best of luck going after the less-centralised, more chaotic app economy for Android phones.
He’ll need it.
But before Malcom pushes too hard to erode privacy on the internet, he should remember how he came to power. He used private messaging app Wickr to drum up support among Liberal Party MPs for his coup over then Prime Minister Tony Abbot.
Wickr’s greatest selling point is its end to end encryption, and the ability to delete old messages without a trace.
It may be possible for the government to legislate apps like Wickr out of existence. And that might even see a Prime Minister serve out their full term. But the thing about technology is, it keeps offering up new solutions.
If end to end encryption is taken away or broken, the next resort could be the blockchain, for example. The same cutting edge tech that allows bitcoin and other cryptos to be moved and exchanged privately, could form the basis for the next form of private communications.
We’ve only scratched the surface of what’s possible with blockchain technology. The variety of blue-sky predictions for all of its potential uses can be overwhelming.
That’s why investors are flocking to our in-house technology and crypto expert, Sam Volkering, to help them sort the wheat from the chaff. You can find out more about his insights into the fast moving world of cryptos, and how you could profit from them, here.
Perhaps it’s already too late to go after encrypted communications on the internet. The next wave of privacy technology may already be here. If that’s true, our government is a day late and a dollar short — as usual.
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This week in Money Morning
Early this week Greg focused on the end of a financial era, as the US Fed gradually raises interest rates and we enter the next phase in finance. The Fed has been on a very gradual tightening path since 2015. But Greg argues that we’re now seeing the first signs of the economic slowdown this will cause.
And he’s clear on that point. Tightening monetary policy leads to economic slowdown. The only question is when.
The answer depends on the natural rate of interest. The rate that we would have if central banks weren’t artificially holding us to another. But just what is the natural rate of interest, and how does it compare to the official rates in the US and Australia? Greg argued on Monday that, in a market this manipulated, it’s impossible to know. And that has worrying implications. To read why investors should be keeping one eye on the exits, you can find Monday’s article here.
On Tuesday, Greg continued his argument that the Fed will cause an economic slowdown with mistimed interest rate hikes. Greg pointed out that every US recession since the Second World War has been caused by the Fed raising interest rates. After forcing them down for so long, Greg argues it’s inevitable the Fed will blow past the natural interest rate. What happens when they go too high, too fast? Read Greg’s analysis here.
Greg opened Wednesday’s article with a forlorn hope for NSW in the State of Origin decider that night. Ever the contrarian, Greg believed the underdogs in blue had a shot at the win. Your Canadian-born weekend Editor didn’t have a dog in that race. But as the partner of an avid Queensland supporter, I have to admit that I was hoping Greg was wrong. As it happens, Queensland could be relied on to bring home the win.
Greg then looked at where members of the Fed believe the ‘neutral’, or natural, rate of interest is, and their plans for interest rate normalisation and shrinking their balance sheet. Greg argues that these plans are based on a flawed understanding of investor psychology. Psychology that can turn on a dime, much faster than the Fed can react. And when it does, the market may be much more vulnerable to a recession than it currently is. Why? And when could this happen? For Greg’s take, check out Wednesday’s Money Morning here.
On Thursday, crypto analyst Ryan Dinse looked at the many ways that cryptocurrencies could offer a better alternative to the banking system. But many in the finance industry, government and the general public are suspicious of this new technology. Caution towards change may be understandable. But is the banking industry really worth defending? Ryan turned a critical eye on big banks. You can read his arguments in favour of a new alternative here.
And on Friday Terence finished out the week with a look at the value of being able to properly read a chart. Terence argues that, once you can read a chart, you’ll never have to worry about experts, talking heads or doom and gloom headlines. If a story in the mainstream press has you spooked about your portfolio, you can use your charting knowledge to let you know if those fears are unfounded. Terence explained how the right company’s chart could tell you where the whole economy is headed. Find out how in Friday’s article, here.
That was the week in Money Morning. Next week we’ll have more on central banks’ struggle with interest rates, governments struggle with privacy, and all the other stories driving markets. Until then, enjoy your weekend!
Editor, Money Weekend