THE CURSE OF THE WAR ON CASH

The "war on cash" refers to a set of policies, in the United States and around the world, deploying the power of government agencies to suppress the use of paper currency. The principal aim is to shift transactions to credit card and hank account media that leave an electronic data trail for law enforcement and tax authorities. A secondary aim is to raise the cost of cash storage so as to allow the central bank to push nominal interest rates further below zero.

The phrase "war on cash" is of course intended to be dramatic. Harvard economist Kenneth Rogoff (2017) has objected to it as "a polemical exaggeration" in his response to a critical essay review (Hummel 2017) of his recent book on the topic. What he considers an exaggeration is not the term "war," mind you, but the unqualified term "cash," given that he himself advocates only "a war on big bills" and not a fully "cashless society." Point granted. But this complaint about overly dramatic phrasing is a bit ironic coming from the author of a book entitled The Curse of Cash, not The Disadvantages of High-Denomination Bills (Rogoff 2016a).

Some other writers and officials wage war not only on big bills but also on all cash transactions and on other private payment methods like bitcoin. They do seek a cashless society. They want to drive all transactions into forms that leave an audit trail for the law enforcement and tax authorities. In this respect the phrase "war on cash" is too narrow rather than too broad. It is really a "war on financial privacy." They would welcome us to a financial panopticon.

The phrase "war on cash" suggests a parallel to the "war on drugs" and aptly so. In both wars, traditional civil liberties are shunted aside in the criminalization, surveillance, and prosecution of victimless private activities.

The main indictments of large-denomination currency notes by anti-cash warriors are built on guilt by association: criminals use large notes, so anyone who uses them might be a criminal. It is of course trae that the notes are used by tax evaders, money launderers, terrorists, human traffickers, drag dealers, and any other horrible type of criminals you might like to name.

But large notes are also used by noncriminals. While it is no doubt true that banning high-denomination notes would "make life harder" for criminal enterprises (Sands 2016), it would also, as I have previously written (White 2016), "make life harder for everyone else." The rest of us also find high-denomination notes convenient now and again for completely legal and noncontroversial purposes, like buying automobiles and carrying vacation cash compactly. A serious survey of eurozone currency use finds that "in Italy, Spain and Austria ... almost one-third of the interviewees always or often use cash for purchases between 200 [euro] and 1,000 [euro]" (ECB 2011). A Deutsche Bundesbank webpage (2016) has noted that, in the eurozone, "Cash in circulation has more than quadrupled since euro currency was introduced; it now...