Harvard Economist Is Trying to Kill Cash

http://www.bloomberg.com/news/articles/2016-09-07/harvard-economist-kenneth-rogoff-is-trying-to-kill-cash?utm_content=business&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social&cmpid%3D=socialflow-twitter-business

by denzil_correa • 10 years ago

38 76 10 years ago

bloomberg.com

awt• 10 years ago

This will go as well as the war on drugs, poverty, terrorism, et al.

ismail• 10 years ago

I remember back in the late 90's listened to a talk which I dismissed as conspiracy. The key points were

1. Moving people away from cash to credit so easier monitoring of society and transactions

2. Moving communications to the "information super highway" with constant listening in

Our grand kids will live in a vastly different society. I fear we may be heading to a reality covered in so many dystopian works of fiction.

The chilling effects of the constant surveillance we currently have.

This was previously posted on HN:

http://www.zerohedge.com/news/2016-09-07/why-you-should-be-p...

PavlovsCat• 10 years ago

Since the goal is total power, our grand kids will live in no society at all. They will be automatons, live in pain/in fear/in despair/not at all, or be Gestapo officers. But they'll be too regressed to even be able to hate their ancestors for their cowardice and hybris, so that's good.

thr0waway1239• 10 years ago

Assuming this article is serious, exactly how do they plan to phase out the higher denomination bills? Is it actually feasible?

"Rogoff says he doesn't want to get rid of cash all at once. First, he would phase out 100s, then 50s, then 20s, leaving smaller bills in circulation for the foreseeable future. "I want to have a less-cash society, not a cashless society," he said."

venomsnake2• 10 years ago

Stop printing them. And remove them from circulation when they enter the financial system. It is easy.

zalepa• 10 years ago

Phasing out bills is definitely feasible. Bills usually pass through a bank fairly often, at which point they can be removed from circulation. In general banknotes have their design changed every 10-20 years, and very old banknotes are no longer legal tender (though they can sometimes be exchanged at the central bank). A regular bank won't accept a deprecated banknote.

The ECB is currently phasing out 500s, first by removing those it can get its hands on from circulation, and after a few years by declaring the rest no longer legal tender.

nommm-nommm2• 10 years ago

I've never had problems spending very old banknotes in the US.

DashRattlesnake2• 10 years ago

In general banknotes have their design changed every 10-20 years, and very old banknotes are no longer legal tender

IIRC, the US has never declared any version of its old currency not-legal-tender, and no-one would have any problem spending any US banknote that in any way resembles the current ones in size or shape.

umanwizard3• 10 years ago

Bills have a pretty short lifetime. Banks can readily exchange them with the government (presumably, for credit in their account with the Fed) and vice versa. The government then destroys then old or mutilated ones. I imagine if the government simply stopped printing physical 100s, the number in circulation would dwindle pretty fast.

Turing_Machine• 10 years ago

Hundreds last a lot longer than ones, though.

https://www.federalreserve.gov/faqs/how-long-is-the-life-spa...

DashRattlesnake2• 10 years ago

Bills have a pretty short lifetime.

It depends on the denomination. I think $1s have a lifetimes of ~18 months, but it goes up from there. I would imagine $100s have useful lifetimes of at least a decade if not more.

umanwizard3• 10 years ago

I have heard that the anti-corruption reasoning is why China's biggest note is 100 CNY (worth less than 20 USD)

dexterdog2• 10 years ago

That's the reason they give. The real reason is control of the masses, not the corrupt few.

SomeStupidPoint• 10 years ago

The list of reasons he thinks it's a good idea reads like a list of reasons I think it's a bad idea. Strange how differently people think we should organize society, though I'm not surprised that someone so involved with the system believes that the system should be given considerably more power.

fixxer• 10 years ago

I've met a lot of academics that think like this. I find them terrifying in their inability to recognize adverse feedback loops. I'll keep my paper, thank you.

adevine• 10 years ago

Reminds me of the Euro. Was blessed as such a grand simplifying project by academics and technocrats in the late 90s, and critics were often dismissed conspiracy theorists.

digi_owl5• 10 years ago

Economists in particular seems to have a willful blindness to feedback loops.

Kiro• 10 years ago

I love living in a country where cash has already been killed. Haven't seen a bill in many years.

k__• 10 years ago

Where is that?

lumberjack• 10 years ago

I'd guess somewhere in North Western Europe. I live in the Netherlands and here cash is rarely used. All merchants of all kinds, including the lowliest street vendors, accept debit cards with is the main form of payment medium. For buying off classifieds I usually just send the money via bank transfer.

sneak2• 10 years ago

Spoken like someone who has never had their accounts extrajudicially frozen.

How do you pay your lawyer when the state or bank decides to steal from you?

ddorian432• 10 years ago

How much do you keep in cash? Enough to pay your lawyer ?

ci5er2• 10 years ago

How do you pay your lawyer when the state or bank decides to steal from you?

In my (limited?) experience, unless the lawyer costs <$5000, you have good friends, or the lawyer likes you an awful lot, you kind of still need to tap your (now frozen) bank account for this use-case.

I do not recommend being in this situation.

dexterdog2• 10 years ago

You could say it's bliss, right?

hal9000xp• 10 years ago

If a government keeps monopoly on money creation and all banking system is tightly regulated by the government but at the same time there is no cash in the economy, then government have ultimate power on everybody (since they can't burn cash in your pocket but they can freeze all your bank accounts anytime) and therefore your freedom at mercy of government bureaucrats.

Hard cash (and now also cryptocurrencies) is only little freedom you (still) have.

kozak2• 10 years ago

In some countries (like where I live) it's hard to come across US Dollar bills other than 100.

umanwizard3• 10 years ago

What country is that?

It matches my experience in Lebanon, but I was only there briefly as a tourist.

kozak2• 10 years ago

I'm in Ukraine, but I guess it applies to any country without a strong own currency.

siberianbear• 10 years ago

I am an American living in Russia. $100 bills are the only American currency I ever see here.

Unlike in the USA, where $100 bills are very rare and sometimes a hassle to actually use because some shops won't accept them or treat them suspiciously.

venomsnake2• 10 years ago

It ia happening in UK already. 50 GBP note is all but outlawed. You cannot get it from ATM, some note machines do not accept it, if you need bigger quantities of it it - you must fill paperwork weighting more than the notes themselves.

I love the 500 eur note, and think we should move to a 1000 soon.

tacostakohashi• 10 years ago

It's pretty similar in the US with $100 notes, actually - they're really not easy to come by or use for legitimate everyday purposes.

ATMs don't issue them, and many shops either won't take them at all, or will take them only after quite a bit of fussing around with their counterfeit detector pen, inspecting them under UV, etc.

monkeyprojects2• 10 years ago

The UK has always been unique like that. A lot of it has to do with there only really being 3-5 large banks so checks were always quickly verified and cashed making avoiding large sums of cash easy.

And once people get out of the habit of carrying large quantities of cash around they rarely go back to it...

4ad2• 10 years ago

I love the 500 eur note, and think we should move to a 1000 soon.

The 500 EUR note is being phased out: http://www.wsj.com/articles/500-euro-banknote-being-phased-o...

Personally, I have never seen one. I only saw a 200 EUR note once, the ATM don't give then, which is a pity.

HarryHirsch• 10 years ago

On the other hand, the Byzantine Empire as all cash, but the fiscus managed to keep tax evasion at reasonable levels by taxing items where they cannot be hid. The main points of taxation was real estate at village level and wholesellers at merchant fairs.

Getting rid of cash would prevent tax evasion, but only for those that cannot afford tax shelters like Panama or the Double Irish with Dutch Sandwich with profit moved to the Cayman Islands.

Senji• 10 years ago

Next step: destroy tax shelters like Panama either through embargoes or with military action.

DanielBMarkham• 10 years ago

We need to go the other way -- introduce larger-denomination bills. Assuming there was a good reason to make the highest bill $100 in 1969, calculating for inflation would allow us to have $500 bills. I'd argue for bringing back the $1000 -- and then indexing it to inflation from here on out.

With negative interest rates on their way in, people and organizations are going to start stockpiling big piles of cash. The least we can do is try to make it more cost-efficient.

adamnemecek• 10 years ago

Law-abiding citizens rarely have need for $100 bills,

Law-abiding citizens rarely have need for Kenneth Rogoff.

pdkl956• 10 years ago

Law-abiding citizens rarely have need for $100 bills

That's a point of view of someone who has never lived near the poverty line or other economically problematic situations. If you deal in cash without a bank account, $100 bills, while not particularly common, are not rare either. Accusing these people of being lawbreakers simply because they have crappy jobs, are bankrupt, pay their rent in cash, etc is highly offensive (and classist).

That suggests the bills are circulating mainly in the underground economy.

So what? Underground does not mean illegal.

If the biggest bill were worth $10, rather than $100, delivering someone a million bucks under the table would require a 220-pound chest rather than a 22-pound briefcase.

No, it would require something like a check or money order, creative accounting, and possibly an offshore bank account or two. Bribery, laundering, and other financial crimes are not generally done with cash; they happen on the books, often through legal means. Did this "Harvard economist" miss the SCOTUS rulings that de facto legalized bribery?

Forcing people to use smaller bills, Rogoff argues, might make crime more conspicuous and less convenient.

No, it merely moves many types of petty crime into barter and alternative economies. The higher-value crimes (usually) don't use cash.

rayiner2• 10 years ago

Did this "Harvard economist" miss the SCOTUS rulings that de facto legalized bribery?

Which one was that?

pdkl956• 10 years ago

McCutcheon v. Federal Election Commission

http://www.scotusblog.com/2014/04/divided-court-strikes-down...

That's one obvious example that specifically allows bribery as long as it is not directly a quid pro quo exchange. Buying access and influence, on the other hand, was “a central feature of democracy—that constituents support candidates who share their beliefs and interests, and candidates who are elected can be expected to be responsive to those concerns.”

tomrod3• 10 years ago

No, it would require something like a check or money order, creative accounting, and possibly an offshore bank account or two. Bribery, laundering, and other financial crimes are not generally done with cash; they happen on the books, often through legal means.

Do you have a source for this? In the US, transactions over a certain limit have a paper trail; many transactions adding up to over that limit raise tons of red flags.

[0] https://en.wikipedia.org/wiki/Know_your_customer

pdkl956• 10 years ago

Red flags only happen if the transaction was illegal. We legalized all kinds of creative accounting when we deregulated entire industries over the last several decades. Reporting requirement haven't stopped offshore accounts and other havens, tricks, and tax avoidance schemes.

The point is that you don't need an anonymous transaction when you payment or bribe is (technically) legal.

tptacek• 10 years ago

It's the flourishes like scare-quoting "Harvard economist" --- Rogoff is not only an economist at Harvard, but a professor of economics at Harvard --- that turn what could have been a solid rebuttal into an ideological screech.

If you want a good critique of Rogoff (something that is easy to generate), Google [brad delong ken rogoff].

pdkl956• 10 years ago

scare-quoting

I believe you're missinterpreting my attempt to quote the title. I probably could have written that part better, maybe?

ci5er2• 10 years ago

I think it's also personal preference/habit. With a credit card, at the end of the week, I always have to check and see what I've done to myself. If I start the week with $500 in $100 bills (the particular amount doesn't matter) in my pocket, and I'm out before the end of the week, it's a sign that I need to take it easy for a day or three. I'm sure I could adjust to having to keep closer track in my head (or on my smart phone), but this is simple and it works for me.

I'm guessing the guy has a bank account, regular direct-deposit income, good credit, shops in places where they take credit cards, and has some financial literacy that helps him keep that all straight. Anyone missing any of these would prefer to have the cash option available to them at least some of the time. (All of which is in agreement with your 'classist' claim against the author.)

pmorici• 10 years ago

For someone who is supposed to be intelligent this proposal sounds dangerously inept. They start from the premise that only bad people use $100 bills w/o providing any evidence the claim is true. Incredibly they then use that to support their thesis that both $20, and $50 bills should be phased out as well.

The assumption that a cashless society would give a central bank more control by making negative interest rates viable is also totally nuts. People would just end up buying things like precious metals, low inflation crypto currencies or anything else that emerged as a defacto store of value. In Baltimore for example there is a strong underground market for name brand laundry detergent and as a result you can barter a jug of it for drugs.

http://nymag.com/news/features/tide-detergent-drugs-2013-1/

digi_owl5• 10 years ago

Do wonder how long it will take for some "mafia bank" to sprout...

dade_• 10 years ago

This sounds great if you are VISA or MasterCard charging a fee for every transaction. The problem with cash is that it is too hard to get 100 and 50 dollar bills. This man clearly doesn't get out. Going for dinner for 80 dollars means carrying 5 $20 bills which is a serious PITA. Groceries, fuel, lightning ear buds, all the same.

jmnicolas2• 10 years ago

What's wrong with carrying 5 bills ? I regularly do.

skylan_q• 10 years ago

Kenneth Rogoff has an interesting résumé: international grandmaster of chess

So is Gary Kasparov, who doesn't even write any of his propaganda in Russian. So was Bobby Fischer, vicious anti-semite.

This shows that he's great at chess. It doesn't show much else.

mulle_nat• 10 years ago

Or maybe it shows they are right, and you just don't get it, because your no good at chess. :)

tomrod3• 10 years ago

Take cash away, people will just use something else for currency. https://en.wikipedia.org/wiki/Commodity_money#Aspects

madeofpalk• 10 years ago

Law-abiding citizens rarely have need for $100 bills

What a bizarre thing to say. While I don't use them frequently, whenever I sell my stuff off, usually I'll receive $100 bills.

People generally don't carry $500+ in cash, so when they go to the bank to withdraw, it'll come in $100 notes.

mcguire• 10 years ago

The day before yesterday, an older gentleman in front of me at Tractor Supply paid with a hundred. As far as I know, baling twine is perfectly legal.

wslh• 10 years ago

Suppressing cash means much less privacy and more state control. Full stop.

binarray2000• 10 years ago

Is that the same Kenneth Rogoff who co-authored a study about "Growth in a Time of Debt" which turned out to be full of faked data? And, curiously, EU/ECB/MMF (the infamous "Troika") and, most prominently, Germany based their "austerity" measures towards South European countries on that very study - which practically and conveniently provided the alibi for their crimes.

"Curiously" only the first sight: This guy is a member of the "Group of Thirty", a group "founded in 1978 by Geoffrey Bell at the initiative of the Rockefeller Foundation" and supported (http://group30.org/about/supporters) by the very profiteers of austerity.

And now he writes about "The Curse of Cash".

Should we believe him this time as well? Do we really know, who's interests he's serving?

mafribe• 10 years ago

   their crimes.

Which crimes have you got in mind? The crime of being outvoted on the ECB board and having to bail out everybody?

jmnicolas2• 10 years ago

I guess you're not Greek then or you would know what crimes. I'm not Greek either but I was shocked at what they did to this country.

Sir_Cmpwn2• 10 years ago

interest rates into negative territory. That's the strange world where you pay to keep money in the bank and get paid to borrow it.

Wow, fuck that. I've already reduced my credit card usage to near zero for privacy-related reasons, but I still use a bank to store my funds. I'll definitely be among those switching exclusively to cash if this sort of thing comes to pass.

4ad2• 10 years ago

Serious question: where do you store your cash?

I am privacy conscious myself, and I am evaluating a cash-only life, but where do you keep all the cash? Still at the bank?

Sir_Cmpwn2• 10 years ago

I have $XXXX in my safe and $XX-XXX in my wallet most of the time. I periodically top up at an ATM, gas stations near me have 0-fee ATMs.

fithisux• 10 years ago

And convert it to what? Cash?

norea-armozel• 10 years ago

Well the only reason why cash exists at all today is because banking is a mess. Especially if you're poor. So banning cash isn't going to help the poor at all as others have noted. Wake me up when the same Harvard economists get off their butts and make a standard that will make banking for the poor as easy as it is for the rich. Until then, I'm all for cash.

Harvard Economist Is Trying to Kill Cash

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