Harvard Economist Demands Ban On Big Bills To Make It “Harder On The Bad Guys”

Monday, February 8, 2016
By Paul Martin

by Tyler Durden
ZeroHedge.com
02/08/2016

Last week, we were dismayed – although not entirely surprised – to learn that Germany’s Social Democrats have proposed a €5,000 limit on cash transactions and the elimination of the €500 note.

The rationale: if you’re paying in cash for something that costs more than €5,000, you’re probably a terrorist or a “foreign criminal.”

Of course that’s nonsense but it’s a reflection of a changing world.

Angela Merkel’s junior coalition partners are hardly the first officials to suggest that cash should be phased out. In fact, the “ban cash” calls have been getting louder for at least a year as everyone from Citi’s Willem Buiter to economist Ken Rogoff to Norway’s largest bank to Bloomberg’s editorial staff demands the abolition of the barbarous paper fiat relic that serves as a check on central bankers’ ability to go “full Krugman.”

You’re reminded that cash – as worthless as it may ultimately be – does serve a purpose.

It’s a check on Keynesian insanity in that it sets a very real lower bound on interest rates. If rates are too punitive (that is, if they’re too negative), savers will simply pull their cash out of the bank and put it under the mattress. That’s inconvenient for policy makers who have been thus far unable to resuscitate global growth and trade.

Put simply: if you ban cash, you can centrally plan the the entire economy by forcing people to spend. You either spend it, or watch as deeply negative rates eat away at your savings.

Of course policy makers and the influential economists who inform their decisions won’t tell you that. They’ll say it’s all an effort to fight crime. On Monday we get the latest cash ban call, this time from Peter Sands, the former chief executive officer of Standard Chartered who’s now an academic at Harvard Kennedy School. “High denomination banknotes such as the 500-euro ($556) note and the $100 bill should be eliminated to make it harder for criminals, terrorists, tax evaders and corrupt officials to transfer funds,” Bloomberg writes, referencing a new paper by Sands entitled “Making it Harder for the Bad Guys.”

The Rest…HERE

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