As it previously did back in August 2016, the Wall Street Journal gives over the front page of a special section today to anti-cash crusader Kenneth Rogoff. At least this time they also print a counter-point article, by a Wharton professor named James McAndrews. Both artilcles are at this link (probably behind pay wall).
Rogoff's August 2016 effort was the subject of my post at the time, "There's Nothing More Frightening Than Rule By The 'Smart.'" Rogoff -- MIT Economics Ph.D. 1980, former Chief Economist of the IMF, big time professor at Harvard -- is a perfect example of those people who think they are so smart that they should be allowed to re-design the world, while at the same time they are completely incapable of perceiving the downsides and unintended consequences of what they are proposing. Among my comments from last year:
Naturally the visions of these geniuses are all variations of the same thing, namely some kind of government program to more closely monitor and/or control the people. The geniuses know that there is no downside in such programs, first because the programs have been designed by themselves, and second because government programs are administered by all-knowing and perfect government functionaries, who are people like us and can always be trusted to do the right thing.
Getting rid of cash is another instance of government doubling down on failure. It's like increasing penalties for drug crimes (this time we will stamp them out!) or adding yet one more in-kind distribution to fight poverty. In the case of getting rid of cash, the previous effort was the law of "money laundering," which has undoubtedly been the single most abject and total failure of all government efforts to micro-manage the people. (See "The Joke Of Criminalizing Money Laundering.") Somehow, drug dealing, illegal gambling, and an entire $2 trillion per year underground economy continue to exist. This will fix it!
Of course Rogoff leads off with the argument that getting rid of cash will reduce crime and tax evasion. Well, that's open to debate -- and I would bet for the other side. Then there's this next one, which he seems to think is an argument in favor of eliminating cash:
Another advantage of eliminating large bills would be the effect on monetary policy. The Federal Reserve should be able to implement negative nominal interest rates vastly more effectively in the absence of large bills, which could prove quite important as a stimulative tool in the next financial crisis.
That's right -- Rogoff, along with most other sophisticated monetary economists these days, has convinced himself that it's a good idea for a central bank to respond to a financial crisis by making it impossible for retirees to earn any return on savings unless they are willing to invest in equities. Is there any actual evidence for this? None that I know of.
Our counter-pointer Professor McAndrews makes some good points, but also seems to miss many important ones. His main points are (1) 7.5% of U.S. households don't have bank accounts. What about them? (2) There is substantial legitimate non-criminal need for cash; and (3)
The bad guys will figure out ways around this, probably involving drawing legal businesses into criminal activity of helping them launder the revenue. All good points that I don't mean to minimize. Here are a few more that McAndrews doesn't mention, from least to most important:
- The power is out in Puerto Rico, and is likely to be out for a couple of months or more. How are those credit cards working out for you?
- In a cashless world, everything you do is subject to monitoring by the government. Indeed, under the Bank Secrecy Act and its incremental encrustations, the government can monitor all of your bank transactions, and all of your uses of credit cards, behind your back, and instruct your bank not to tell you that you are being monitored. Is there any chance that a government might misuse such snooping powers against its political adversaries? If you don't think so, then you have not been paying attention to what's going on. E.g., from CNN, September 18, "US investigators wiretapped former Trump campaign chairman Paul Manafort under secret court orders before and after the election…. The government snooping continued into early this year, including a period when Manafort was known to talk to President Donald Trump.” Or see the Susan Rice "unmasking" scandal.
- Cash provides a safety valve against ramping up taxation to a higher and higher percentage of GDP. The more they can stamp out the escape to cash, the more leeway the government has to increase the current 35% of GDP or so annual tax take to more like 50% or 60% or even 70%. It's to make a more perfect world! Without a doubt, this is the main objective of the Rogoffs of the world, although they will never state it explicitly.
The good news is that, despite a number of setbacks, Bitcoin seems to be gradually progressing toward greater acceptability. It can't happen fast enough. Meanwhile, you owe it to yourself and your country to use cash as much as possible. It's part of the never-ending fight for freedom.