Harvard professor and economist Ken Rogoff is once again leading the chorus of high-level academics and officials who declare cash is only for criminals. He made his case in a recent Wall Street Journal editorial called the “Sinister Side of Cash.” The solution, he declares, is to simply get rid of anything but the smallest bank notes.
In his vision, drug dealers, human traffickers, and tax cheats are everywhere, but they are reliant on cash. Our benevolent central planners can largely incapacitate them by ridding society of anything larger than a $10 bill.
Kingpins won’t know what to do when a single-engine Cessna full of cocaine requires a Boeing 747 full of $1s, $5s, and $10s to make payment.
Rogoff seems to blame cash, not bad people, for facilitating criminal activity. He writes;
“There is little debate among law-enforcement agencies that paper currency, especially large notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism.”
People worried about meth dealers swapping dangerous drugs for “dirty” cash might get mad enough, and afraid enough, to put up with what Rogoff calls a “less cash” society. While elimination of most cash might make it harder for black marketeers who operate in the small dark corners of society, it will be a bonanza for the undesirables along Wall Street and in Washington DC who are planning to shake down literally everyone.
Getting rid of large bills is a terrific way for them to herd people down a blind alley and pick their pockets. Bankers will grab handfuls of fees and deposits they wouldn’t otherwise get because people can no longer hold or transact with cash. Fed officials can impose negative interest rates, robbing even more of the value from everyone’s savings. And bureaucrats in government can swipe everyone’s ability to transact privately using off-the-grid cash.
At least Rogoff is willing to admit the REAL REASON cash is a problem for central bankers who want to impose negative rates. You just have to read much further down, past the pictures of shady characters and contraband:
“Unfortunately, the existence of cash gums up the works. If you are a saver, you will simply withdraw your funds, turning them into cash, rather than watch them shrink too rapidly. Enormous sums might be withdrawn to avoid these losses, which could make it difficult for banks to make loans – thus defeating the whole purpose of the policy.”
Like all Keynesians, Rogoff doesn’t care much for savers. How dare they withdraw cash to avoid negative yields and other losses!
He wants savers to be treated more like livestock – ready to be milked, shorn, and butchered by smarter policy makers such as himself.
One thing is for sure – many people, criminals, and honest people alike aren’t going to let themselves be herded to financial slaughter.
Officials certainly have control over the supply of cash circulating in society. But they do not control the alternatives, the first and foremost being gold and silver rounds, coins, and bars.
It won’t take long for drug lords to figure out that while an airliner full of small bills is impractical, a briefcase full of small gold bars can work just fine. Nor will all savers stand for paying their bank to hold deposits when they can convert those savings to precious metal instead. It is easy to predict these sorts of unintended consequences – the very reasons why central planners such as Rogoff inevitably fail.